ý
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
|
THE
SECURITIES EXCHANGE ACT OF 1934
|
|
For
the fiscal year ended December 31, 2004
|
|
OR
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|
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
|
THE
SECURITIES EXCHANGE ACT OF 1934
|
|
For
the transition period from to
|
Tennessee
|
58-2461486
|
(State
of Incorporation)
|
(I.R.S.
Employer Identification No.)
|
817
Broad Street, Chattanooga, TN
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37402
|
(Address
of principal executive offices)
|
(Zip
Code)
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3
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|||
Item
1.
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3
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Item
2.
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17
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Item
3.
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19
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Item
4.
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19
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||
20
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|||
Item
5.
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20
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||
Item
6.
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20
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||
Item
7.
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22
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||
Item
7A.
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47
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||
Item
8.
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48
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||
Item
9.
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95
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||
Item
9A.
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95
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||
Item
9B.
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95
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||
96
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|||
Item
10.
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96
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||
Item
11.
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99
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||
Item
12.
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101
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Item
13.
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104
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Item
14.
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105
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||
106
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|||
Item
15.
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106
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· |
the
effects of future economic conditions;
|
· |
governmental
monetary and fiscal policies, as well as legislative and regulatory
changes;
|
· |
the
risks of changes in interest rates on the level and composition of
deposits, loan demand, and the values of loan collateral, securities, and
interest sensitive assets and liabilities;
|
· |
the
effects of the war on terrorism, and more specifically the United States
led war in Iraq;
|
· |
interest
rate and credit risks;
|
· |
the
effects of competition from other commercial banks, thrifts, mortgage
banking firms, consumer finance companies, credit unions, securities
brokerage firms, insurance companies, money market and other mutual funds,
and other financial institutions operating in First Security’s market area
and elsewhere, including institutions operating regionally, nationally,
and internationally, together with such competitors offering banking
products and services by mail, telephone and the
Internet;
|
· |
the
effect of any mergers, acquisitions or other transactions to which First
Security or its subsidiaries may from time to time be a party, including,
without limitation, First Security’s ability to successfully integrate any
businesses that it acquires; and
|
· |
the
failure of assumptions underlying the establishment of reserves for
possible loan losses.
|
Item
1.
|
Business
|
Market
|
Number
of Branches
|
Our
Market Deposits
|
Total
Market Deposits
|
Ranking
|
Market
Share Percentage (%)
|
|||||||||||
(Dollars in Millions)
|
||||||||||||||||
Tennessee
|
||||||||||||||||
Hamilton
County
|
7
|
$
|
151
|
$
|
4,642
|
6
|
3.3
|
%
|
||||||||
Jefferson
County
|
2
|
40
|
402
|
6
|
10.0
|
|||||||||||
Knox
County
|
2
|
20
|
5,894
|
16
|
0.4
|
|||||||||||
Loudon
County
|
2
|
22
|
556
|
7
|
4.1
|
|||||||||||
McMinn
County
|
1
|
21
|
690
|
8
|
3.1
|
|||||||||||
Monroe
County
|
5
|
76
|
479
|
5
|
15.9
|
|||||||||||
Union
County
|
2
|
36
|
110
|
2
|
32.8
|
Market
|
Number
of Branches
|
Our
Market Deposits
|
Total
Market Deposits
|
Ranking
|
Market
Share Percentage (%)
|
|||||||||||
(Dollars in Millions)
|
||||||||||||||||
Georgia
|
||||||||||||||||
Catoosa
County
|
1
|
2
|
778
|
10
|
0.2
|
|||||||||||
Whitfield
County
|
5
|
190
|
1,420
|
3
|
13.4
|
|||||||||||
Consolidated
|
27
|
$
|
558
|
$
|
14,971
|
6
|
3.7
|
%
|
Type
|
Dollar
Amount
|
Percentage
of Portfolio
|
|||||
(In
Thousands)
|
|||||||
Commercial
- Leases
|
$
|
60,228
|
10.2
|
%
|
|||
Commercial
- Loans
|
116,490
|
19.7
|
%
|
||||
Consumer
|
70,891
|
11.9
|
%
|
||||
Real
Estate - Construction
|
77,804
|
13.1
|
%
|
||||
Real
Estate - Mortgage
|
264,606
|
44.7
|
%
|
||||
Other
|
2,338
|
0.4
|
%
|
||||
Total
|
$
|
592,357
|
100.0
|
%
|
· |
acquiring
direct or indirect ownership or control of any voting shares of any bank
if, after the acquisition, the bank holding company will directly or
indirectly own or control more than 5% of the bank’s voting
shares;
|
· |
acquiring
all or substantially all of the assets of any bank;
or
|
· |
merging
or consolidating with any other bank holding
company.
|
· |
the
bank holding company has registered securities under Section 12 of
the Securities Act of 1934; or
|
· |
no
other person owns a greater percentage of that class of voting securities
immediately after the transaction.
|
· |
Banking
or managing or controlling banks; and
|
· |
Any
activity that the Federal Reserve determines to be so closely related to
banking as to be a proper incident to the business of
banking.
|
· |
Factoring
accounts receivable;
|
· |
Making,
acquiring, brokering or servicing loans and usual related
activities;
|
· |
Leasing
personal or real property;
|
· |
Operating
a non-bank depository institution, such as a savings
association;
|
· |
Trust
company functions;
|
· |
Financial
and investment advisory activities;
|
· |
Conducting
discount securities brokerage activities;
|
· |
Underwriting
and dealing in government obligations and money market
instruments;
|
· |
Providing
specified management consulting and counseling
activities;
|
· |
Performing
selected data processing services and support
services;
|
· |
Acting
as agent or broker in selling credit life insurance and other types of
insurance in connection with credit transactions;
and
|
· |
Performing
selected insurance underwriting activities.
|
· |
Lending,
trust and other banking activities;
|
· |
Insuring,
guaranteeing, or indemnifying against loss or harm, or providing and
issuing annuities, and acting as principal, agent, or broker for these
purposes, in any state;
|
· |
Providing
financial, investment, or advisory
services;
|
· |
Issuing
or selling instruments representing interests in pools of assets
permissible for a bank to hold directly;
|
· |
Underwriting,
dealing in or making a market in
securities;
|
· |
Other
activities that the Federal Reserve may determine to be so closely related
to banking or managing or controlling banks as to be a proper incident to
managing or controlling banks;
|
· |
Foreign
activities permitted outside of the United States if the Federal Reserve
has determined them to be usual in connection with banking operations
abroad;
|
· |
Merchant
banking through securities or insurance affiliates;
and
|
· |
Insurance
company portfolio investments.
|
· |
Truth-In-Lending
Act, governing disclosures of credit terms to consumer borrowers;
|
· |
Home
Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to determine
whether a financial institution is fulfilling its obligation to help meet
the housing needs of the community it serves;
|
· |
Equal
Credit Opportunity Act, prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending
credit;
|
· |
Fair
Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies;
|
· |
Fair
Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies;
|
· |
Servicemembers
Civil Relief Act, which amended the Soldiers’ and Sailors’ Civil Relief
Act of 1940, governing the repayment terms of, and property rights
underlying, secured obligations of persons in military service; and
|
· |
the
rules and regulations of the various federal agencies charged with the
responsibility of implementing these federal
laws.
|
· |
The
Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures
for complying with administrative subpoenas of financial records;
and
|
· |
The
Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve to implement that act, which govern automatic deposits to and
withdrawals from deposit accounts and customers’ rights and liabilities
arising from the use of automated teller machines and other electronic
banking services.
|
· |
a
bank’s loans or extensions of credit to
affiliates;
|
· |
a
bank’s investment in affiliates;
|
· |
assets
a bank may purchase from affiliates, except for real and personal property
exempted by the Federal Reserve;
|
· |
loans
or extensions of credit to third parties collateralized by the securities
or obligations of affiliates; and
|
· |
a
bank’s guarantee, acceptance or letter of credit issued on behalf of an
affiliate.
|
· |
requirements
for financial institutions to develop policies and procedures to identify
potential identity theft and, upon the request of a consumer, place a
fraud alert in the consumer’s credit file stating that the consumer may be
the victim of identity theft or other
fraud;
|
· |
consumer
notice requirements for lenders that use consumer report information in
connection with risk-based credit pricing
programs;
|
· |
for
entities that furnish information to consumer reporting agencies (which
would include FSGBank)
,
requirements
to implement procedures and policies regarding the accuracy and integrity
of the furnished information, and regarding the correction of previously
furnished information that is later determined to be inaccurate;
and
|
· |
a
requirement for mortgage lenders to disclose credit scores to
consumers.
|
Item
2.
|
Properties
|
Office
Address
|
Date
Opened
|
Owned/Leased
|
Lease
Expiration Date
|
Square
Footage
|
Use
of Office
|
401
South Thornton Avenue
Dalton,
Whitfield County, Georgia
|
September
17, 1999
1
|
Owned
|
-
|
16,438
2
|
Branch
3
|
1237
Cleveland Road
Dalton,
Whitfield County, Georgia
|
September
17, 1999
1
|
Owned
|
-
|
3,300
|
Branch
3
|
761
New Highway 68
Sweetwater
,
Monroe County
,
Tennessee
|
June
26, 2000
4
|
Owned
|
-
|
3,000
|
Branch
|
1740
Gunbarrel Road
Chattanooga,
Hamilton County, Tennessee
|
July
3, 2000
|
Leased
|
May
24, 2010
5
|
3,400
|
Branch
|
4227
Ringgold Road
East
Ridge, Hamilton County, Tennessee
|
July
28, 2000
|
Leased
|
July
20, 2010
5
|
3,400
|
Branch
|
835
South Congress Parkway
Athens,
McMinn County, Tennessee
|
November
6, 2000
|
Owned
|
-
|
1,400
|
Branch
6
|
4535
Highway 58
Chattanooga,
Hamilton County, Tennessee
|
May
7, 2001
|
Owned
|
-
|
3,400
|
Branch
|
820
Ridgeway Avenue
Signal
Mountain, Hamilton County, Tennessee
|
May
29, 2001
|
Owned
|
-
|
2,500
|
Branch
|
2709
Chattanooga Road, Suite 5
Rocky
Face, Whitfield County, Georgia
|
June
4, 2001
|
Leased
|
September
30, 2005
7
|
2,400
|
Branch
3
|
1409
Cowart Street
Chattanooga,
Hamilton County, Tennessee
|
October
22, 2001
|
Building
Owned
Land
Leased
|
December
31, 2010
8
|
1,000
|
Branch
|
9217
Lee Highway
Ooltewah,
Hamilton County, Tennessee
|
July
8, 2002
|
Owned
|
-
|
3,400
|
Branch
|
Office
Address
|
Date
Opened
|
Owned/Leased
|
Lease
Expiration Date
|
Square
Footage
|
Use
of Office
|
2905
Maynardville Highway
Maynardville,
Union County, Tennessee
|
July
20, 2002
9
|
Owned
10
|
-
|
12,197
2
|
Branch
|
216
Maynardville Highway
Maynardville,
Union County, Tennessee
|
July
20, 2002
9
|
Leased
|
March
16, 1993
11
|
2,000
|
Branch
|
109
Northshore Drive, Suite 300
Knoxville,
Knox County, Tennessee
|
March
14, 2003
|
Leased
|
March
1, 2008
12
|
4,282
|
Loan
Production
13
|
2918
East Walnut Avenue
Dalton,
Whitfield County, Georgia
|
March
31, 2003
14
|
Owned
|
-
|
10,337
2
|
Branch
3
|
715
South Thornton Avenue
Dalton,
Whitfield County, Georgia
|
March
31, 2003
14
|
Building
Owned
Land
Leased
|
March
31, 2031
8
|
4,181
|
Branch
3
|
109
Northshore Drive, Suite 100
Knoxville,
Knox County, Tennessee
|
May
20, 2003
|
Leased
|
July
1, 2006
12
|
550
|
Branch
|
2270
Highway 72 N
Loudon,
Loudon County, Tennessee
|
June
30, 2003
|
Owned
|
-
|
1,860
|
Branch
15
|
35
Poplar Springs Road
Ringgold,
Catoosa County, Georgia
|
July
14, 2003
|
Owned
|
-
|
3,400
|
Branch
16
|
167
West Broadway Boulevard
Jefferson
City, Jefferson County, Tennessee
|
October
14, 2003
|
Owned
|
-
|
3,743
|
Branch
|
705
East Broadway
Lenoir
City, Loudon County, Tennessee
|
October
27, 2003
|
Owned
|
-
|
3,610
|
Branch
|
301
North Main Street
Sweetwater,
Monroe County, Tennessee
|
December
4, 2003
17
|
Owned
|
-
|
4,650
|
Branch
|
215
Warren Street
Madisonville,
Monroe County, Tennessee
|
December
4, 2003
17
|
Owned
|
-
|
8,456
2
|
Branch
|
405
Highway 165
Tellico
Plains, Monroe County, Tennessee
|
December
4, 2003
17
|
Owned
|
-
|
3,565
|
Branch
|
155
North Campbell Station Road
Knoxville,
Knox County, Tennessee
|
March
2, 2004
|
Building
Owned
Land
Leased
|
April
1, 2024
18
|
3,743
|
Branch
|
4215
Highway 411
Madisonville,
Monroe County, Tennessee
|
March
15, 2004
|
Owned
|
-
|
472
|
Branch
|
1013
South Highway 92
Dandridge,
Jefferson County, Tennessee
|
April
5, 2004
19
|
Owned
|
-
|
3,500
|
Branch
|
307
Lovell Road
Knoxville,
Knox County, Tennessee
|
August
16, 2004
|
Building
Owned
Land
Leased
|
December
31, 2013
20
|
3,500
|
Branch
|
1111
Northshore Drive, Suite S600
Knoxville,
Knox County, Tennessee
|
October
1, 2004
21
|
Leased
|
March
31, 2012
|
9,867
|
Loan
& Leasing
22
|
1810
Ailor Avenue, Center City Offices’ Building One
Knoxville,
Knox County, Tennessee
|
October
1, 2004
21
|
Leased
|
October
1, 2005
23
|
1,780
|
Leasing
24
|
665
Oak Leaf Office Lane, Suite E
Memphis,
Shelby County, Tennessee
|
October
1, 2004
21
|
Leased
|
June
30, 2006
8
|
930
|
Leasing
25
|
1249
Murray Avenue
Dalton,
Whitfield County, Georgia
|
November
18, 2004
|
Leased
|
August
31, 2005
26
|
2,400
|
Branch
27
|
430
Fields Avenue, Suite Number B-1
Dalton,
Whitfield County, Georgia
|
December
16, 2004
|
Leased
|
August
31, 2005
26
|
712
|
Branch
27
|
1
|
Date
we acquired this branch from Colonial Bank.
|
2
|
Previously
served as the headquarters of an independent community
bank.
|
3
|
This
branch operates under the trade name Dalton Whitfield
Bank.
|
4
|
Date
we acquired this branch through our acquisition of First Central Bank of
Monroe County.
|
5
|
This
lease has two successive five-year renewal options, as well as options to
purchase the facility in the fifth and tenth years of the original
lease.
|
6
|
This
branch is a modular facility. In 2005, we plan to replace this modular
facility with a brick and mortar facility of approximately 3,400 square
feet.
|
7
|
This
lease has a five-year renewal option.
|
8
|
This
lease has two successive five-year renewal
options.
|
9
|
Date
we acquired, or assumed the lease on, this facility through our
acquisition of First State Bank.
|
10
|
To
purchase the land, on January 5, 1995, the predecessor institution
entered, and we assumed, a 240-month mortgage, which matures on January 5,
2015.
|
11
|
This
lease had one fifteen-year renewal option, which was exercised by the
predecessor institution. In 1999, the State of Tennessee advised First
State Bank that this branch was in the path of the future project to widen
Highway 33. As a result, First State Bank purchased a vacant lot in close
proximity so that it may relocate this branch. To date, the highway
widening project has not commenced and neither has construction on a
replacement branch.
|
12
|
This
lease has four successive three-year renewal
options.
|
1
3
|
On
January 18, 2005, we relocated our offices to 1111 Northshore Drive, Suite
S600, Knoxville, Knox County, Tennessee, which had previously been
occupied by National Bank of Commerce and is adjacent to Kenesaw Leasing,
Inc., which we acquired effective October 1, 2004. We are actively seeking
a tenant to sublease this office.
|
14
|
Date
we acquired this branch through our acquisition of Premier National Bank
of Dalton.
|
15
|
This
branch is a modular facility.
|
16
|
This
branch operates under the trade name Catoosa Community
Bank.
|
17
|
Date
we acquired this branch from National Bank of
Commerce.
|
18
|
This
lease has four successive five-year renewal
options.
|
19
|
Date
we opened a 1,860 square foot modular facility. On November 16, 2004, we
opened the permanent brick and mortar facility on the same property site.
The modular facility is vacant and we anticipate moving it to Varnell,
Whitfield County, Georgia.
|
20
|
This
lease has six successive five-year renewal
options.
|
21
|
Date
we assumed this lease through our acquisitions of Kenesaw Leasing, Inc.
& J&S Leasing, Inc.
|
22
|
This
is an office of Kenesaw Leasing, Inc. and a corporate and loan production
office of FSGBank. On January 18, 2005, we moved FSGBank’s corporate and
loan production offices located at 109 Northshore Drive, Suite 300,
Knoxville, Knox County, Tennessee to this
location.
|
23
|
This
lease has one twelve-month renewal option.
|
24
|
This
is an office of J&S Leasing, Inc.
|
25
|
This
is an office of Kenesaw Leasing, Inc.
|
26
|
This
lease has two successive one-year renewal
options.
|
27
|
This
branch operates under the trade name Primer Banco
Seguro.
|
Item
3.
|
Legal
Proceedings
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
Item
6.
|
Selected
Financial Data
|
First
Security
|
||||||||||||||||
Fiscal
Year Ended December 31,
|
||||||||||||||||
2004
|
2003
|
2002
|
2001
|
2000
|
||||||||||||
Income
Statement Data:
1
|
(in
thousands, except per share data)
|
|||||||||||||||
Gross
interest income
|
$
|
37,771
|
$
|
31,554
|
$
|
25,621
|
$
|
20,793
|
$
|
11,824
|
||||||
Gross
interest expense
|
8,759
|
8,897
|
8,417
|
9,783
|
5,510
|
|||||||||||
Net
interest income
|
29,012
|
22,657
|
17,204
|
11,010
|
6,314
|
|||||||||||
Provision
for loan losses
|
3,399
|
2,122
|
1,948
|
2,496
|
811
|
|||||||||||
Net
interest income
after provision for loan
losses
|
25,613
|
20,535
|
15,256
|
8,514 |
5,503
|
|||||||||||
Noninterest
income
|
6,351
|
5,318
|
3,819
|
2,743
|
1,088
|
|||||||||||
Noninterest
expense
3,
4
|
27,117
|
22,278
|
14,915
|
11,004
|
7,504
|
|||||||||||
Income
before income taxes
3,
4
|
4,847
|
3,575
|
4,160
|
253
|
(913
|
)
|
||||||||||
Income
tax provision (benefit)
|
1,365
|
1,119
|
1,558
|
235
|
(347
|
)
|
||||||||||
Income
before extraordinary item
3,
4
|
3,482
|
2,456
|
2,602
|
18
|
(566
|
)
|
||||||||||
Extraordinary
gain on business combination,
net
of tax
2
|
785
|
-
|
-
|
-
|
-
|
|||||||||||
Net
income (loss)
3,
4
|
$
|
4,267
|
$
|
2,456
|
$
|
2,602
|
$
|
18
|
$
|
(566
|
)
|
|||||
Per
Common Share:
1
|
||||||||||||||||
Net
income before extraordinary items - basic
|
$
|
0.28
|
$
|
0.20
|
$
|
0.28
|
$
|
0.00
|
$
|
(0.11
|
)
|
|||||
Net
income - basic
|
0.34
|
0.20
|
0.28
|
0.00
|
(0.11
|
)
|
||||||||||
Net
income before extraordinary items - diluted
|
0.27
|
0.20
|
0.27
|
0.00
|
(0.11
|
)
|
||||||||||
Net
income - diluted
|
0.33
|
0.20
|
0.27
|
0.00
|
(0.11
|
)
|
||||||||||
Cash
dividends declared
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|||||||||||
Tangible
book value (shareholders’ equity)
|
5.60
|
5.25
|
5.44
|
4.59
|
4.05
|
|||||||||||
Book
value (shareholders’ equity)
|
6.80
|
6.49
|
6.23
|
6.54
|
6.21
|
|||||||||||
At
Period End:
1
|
||||||||||||||||
Loans
|
$
|
592,357
|
$
|
478,013
|
$
|
348,582
|
$
|
291,043
|
$
|
152,913
|
||||||
Earning
assets
|
702,985
|
575,996
|
436,774
|
328,330
|
177,461
|
|||||||||||
Total
assets
|
766,691
|
644,765
|
472,924
|
361,866
|
199,552
|
|||||||||||
Deposits
|
640,526
|
540,304
|
384,483
|
293,877
|
162,514
|
|||||||||||
Shareholders’
equity
|
86,445
|
82,438
|
67,933
|
39,265
|
30,594
|
|||||||||||
Shares
outstanding - basic
5
|
12,705
|
12,702
|
10,914
|
7,205
|
5,912
|
|||||||||||
Shares
outstanding - diluted
5
|
12,915
|
12,809
|
11,029
|
7,322
|
5,912
|
|||||||||||
Average
Balances:
1
|
||||||||||||||||
Loans
|
$
|
514,479
|
$
|
422,332
|
$
|
311,774
|
$
|
221,624
|
$
|
107,483
|
||||||
Earning
assets
|
610,585
|
530,777
|
384,483
|
254,739
|
132,377
|
|||||||||||
Total
assets
|
676,381
|
578,258
|
415,810
|
279,377
|
150,308
|
|||||||||||
Deposits
|
588,547
|
496,654
|
337,198
|
233,007
|
114,239
|
|||||||||||
Shareholders’
equity
|
83,630
|
78,284
|
56,039
|
33,292
|
30,754
|
|||||||||||
Shares
outstanding - basic
5
|
12,705
|
12,190
|
9,415
|
6,270
|
5,912
|
|||||||||||
Shares
outstanding - diluted
5
|
12,912
|
12,328
|
9,533
|
6,378
|
5,912
|
|||||||||||
Key
Ratios:
1
|
||||||||||||||||
Return
on average assets
|
0.63
|
%
|
0.42
|
%
|
0.63
|
%
|
0.01
|
%
|
(0.38
|
%)
|
||||||
Return
on average shareholders’ equity
|
5.10
|
%
|
3.14
|
%
|
4.64
|
%
|
0.05
|
%
|
(1.84
|
%)
|
||||||
Net
interest margin, taxable equivalent
|
4.83
|
%
|
4.34
|
%
|
4.53
|
%
|
4.32
|
%
|
4.77
|
%
|
||||||
Efficiency
ratio
6
|
76.68
|
%
|
79.64
|
%
|
70.95
|
%
|
76.50
|
%
|
101.40
|
%
|
||||||
Dividend
payout ratio
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||||
Average
equity to average assets
|
12.36
|
%
|
13.54
|
%
|
13.48
|
%
|
11.92
|
%
|
15.30
|
%
|
||||||
Nonperforming
assets to total assets
|
0.59
|
%
|
0.45
|
%
|
0.16
|
%
|
0.17
|
%
|
0.06
|
%
|
||||||
Nonperforming
assets to loan loss reserve
|
54.78
|
%
|
54.33
|
%
|
14.10
|
%
|
15.77
|
%
|
5.66
|
%
|
1 |
Data
includes the consolidated financial statements of First Security Group,
Inc., including the following from their date of acquisition: First State
Bank in July 2002; Premier National Bank in March 2003; National Bank of
Commerce’s branch offices located in Madisonville, Sweetwater and Tellico
Plains, Tennessee in December 2003; and Kennesaw Leasing, Inc. and J&S
Leasing, Inc. in October 2004.
|
2 |
The
extraordinary gain was recognized in conjunction with the Company’s
acquisition of Kennesaw Leasing, Inc. and J&S Leasing, Inc. effective
October 1, 2004. See “Note 2—Business Combinations” in the accompanying
notes to the consolidated financial statements for further
discussion.
|
3 |
Includes
goodwill amortization of $481 thousand and $443 thousand in 2001 and 2000,
respectively. Effective January 1, 2002, the Company adopted the
provisions of Statement of Financial Accounting Standards (“SFAS”), No.
142, “Goodwill and other Intangible Assets,” which requires that goodwill
no longer be amortized and instead be tested for impairment at least
annually.
|
4 |
Includes
amortization expense of $797 thousand, $550 thousand, and $102 thousand
for core deposit intangibles in 2004, 2003, and 2002, respectively. Core
deposit intangibles represent premiums paid for acquisitions of core
deposits and are amortized on an accelerated basis over 10 years.
|
5 |
All
share data has been retroactively adjusted for the 12 for 10 stock split
to shareholders of record on December 10, 2004. See “Note 10—Common Stock
Data” in the accompanying notes to the consolidated financial statements
for further discussion.
|
6 |
Noninterest
Expense divided by the sum of Net Interest Income and Noninterest
Income.
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
Condensed
Consolidated Statements of Income
|
||||||||||||||||||||||||||||
For
the Years Ended December 31,
|
||||||||||||||||||||||||||||
Change
|
Change
|
Change
|
||||||||||||||||||||||||||
From
Prior
|
From
Prior
|
From
Prior
|
||||||||||||||||||||||||||
2004
|
Year
|
% |
2003
|
Year
|
% |
2002
|
Year
|
% | ||||||||||||||||||||
(Dollar
amounts in thousands)
|
||||||||||||||||||||||||||||
Interest
income
|
$
|
37,771
|
$
|
6,217
|
19.7
|
%
|
$
|
31,554
|
$
|
5,933
|
23.2
|
%
|
$
|
25,621
|
$
|
4,828
|
23.2
|
%
|
||||||||||
Interest
expense
|
8,759
|
(138
|
)
|
-1.6
|
%
|
8,897
|
480
|
5.7
|
%
|
8,417
|
(1,366
|
)
|
-14.0
|
%
|
||||||||||||||
Net
interest income
|
29,012
|
6,355
|
28.1
|
%
|
22,657
|
5,453
|
31.7
|
%
|
17,204
|
6,194
|
56.3
|
%
|
||||||||||||||||
Provision
for loan losses
|
3,399
|
1,277
|
60.2
|
%
|
2,122
|
174
|
8.9
|
%
|
1,948
|
(548
|
)
|
-22.0
|
%
|
|||||||||||||||
Net interest income after provision for loan losses | 25,613 | 5,078 | 24.7 | % | 20,535 | 5,279 | 34.6 | % | 15,256 | 6,742 | 79.2 | % | ||||||||||||||||
Noninterest
income
|
6,351
|
1,033
|
19.4
|
%
|
5,318
|
1,499
|
39.3
|
%
|
3,819
|
1,076
|
39.2
|
%
|
||||||||||||||||
Noninterest
expense
|
27,117
|
4,839
|
21.7
|
%
|
22,278
|
7,363
|
49.4
|
%
|
14,915
|
3,911
|
35.5
|
%
|
||||||||||||||||
Income
before income taxes
|
4,847
|
1,272
|
35.6
|
%
|
3,575
|
(585
|
)
|
-14.1
|
%
|
4,160
|
3,907
|
1544.3
|
%
|
|||||||||||||||
Income
tax provision
|
1,365
|
246
|
22.0
|
%
|
1,119
|
(439
|
)
|
-28.2
|
%
|
1,558
|
1,323
|
563.0
|
%
|
|||||||||||||||
Income
before extraordinary item
|
3,482
|
1,026
|
41.8
|
%
|
2,456
|
(146
|
)
|
-5.6
|
%
|
2,602
|
2,584
|
14355.6
|
%
|
|||||||||||||||
Extraordinary
gain on business combination, net of income tax
|
785
|
785
|
100.0
|
%
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Net
income
|
$
|
4,267
|
$
|
1,811
|
73.7
|
%
|
$
|
2,456
|
$
|
(146
|
)
|
-5.6
|
%
|
$
|
2,602
|
$
|
2,584
|
14355.6
|
%
|
For
the Years Ended December 31,
|
||||||||||||||||||||||||||||
2004
|
2003
|
2002
|
||||||||||||||||||||||||||
Average
|
Income/
|
Yield/
|
Average
|
Income/
|
Yield/
|
Average
|
Income/
|
Yield/
|
||||||||||||||||||||
Balance
|
Expense
|
Rate
|
Balance
|
Expense
|
Rate
|
Balance
|
Expense
|
Rate
|
||||||||||||||||||||
(Dollar
amounts in thousands)
|
||||||||||||||||||||||||||||
(Fully
tax equivalent basis)
|
||||||||||||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||||||
Earning
assets:
|
||||||||||||||||||||||||||||
Loans,
net of unearned income
|
$
|
514,479
|
$
|
34,327
|
6.67
|
%
|
$
|
422,332
|
$
|
28,689
|
6.79
|
%
|
$
|
311,774
|
$
|
23,144
|
7.42
|
%
|
||||||||||
Investment
securities
|
86,220
|
3,590
|
4.16
|
%
|
71,790
|
2,707
|
3.77
|
%
|
46,848
|
2,214
|
4.73
|
%
|
||||||||||||||||
Other
earning assets
|
9,886
|
332
|
3.36
|
%
|
36,655
|
520
|
1.42
|
%
|
25,861
|
470
|
1.82
|
%
|
||||||||||||||||
Total
earning assets
|
610,585
|
38,249
|
6.26
|
%
|
530,777
|
31,916
|
6.01
|
%
|
384,483
|
25,828
|
6.72
|
%
|
||||||||||||||||
Allowance
for loan losses
|
(6,044
|
)
|
(6,170
|
)
|
(4,198
|
)
|
||||||||||||||||||||||
Intangible
assets
|
15,296
|
11,507
|
7,202
|
|||||||||||||||||||||||||
Cash
& due from banks
|
21,259
|
17,263
|
13,253
|
|||||||||||||||||||||||||
Premises
& equipment
|
25,514
|
18,997
|
10,949
|
|||||||||||||||||||||||||
Other
assets
|
9,771
|
5,884
|
4,121
|
|||||||||||||||||||||||||
Total
assets
|
$
|
676,381
|
$
|
578,258
|
$
|
415,810
|
||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||||||||||||||||||||||
Interest
bearing liabilities:
|
||||||||||||||||||||||||||||
NOW
accounts
|
$
|
52,104
|
183
|
0.35
|
%
|
$
|
36,362
|
121
|
0.33
|
%
|
$
|
24,431
|
249
|
1.02
|
%
|
|||||||||||||
Money
market accounts
|
100,952
|
1,030
|
1.02
|
%
|
92,685
|
1,154
|
1.25
|
%
|
68,855
|
1,412
|
2.05
|
%
|
||||||||||||||||
Savings
deposits
|
32,789
|
114
|
0.35
|
%
|
23,120
|
151
|
0.65
|
%
|
13,228
|
171
|
1.29
|
%
|
||||||||||||||||
Time
deposits < $100
|
162,221
|
3,988
|
2.46
|
%
|
145,903
|
4,136
|
2.83
|
%
|
106,661
|
3,665
|
3.44
|
%
|
||||||||||||||||
Time
deposits > $100
|
96,433
|
2,522
|
2.62
|
%
|
92,635
|
2,749
|
2.97
|
%
|
66,218
|
2,450
|
3.70
|
%
|
||||||||||||||||
Brokered
CD’s
|
7,466
|
263
|
3.52
|
%
|
1,956
|
114
|
5.83
|
%
|
-
|
-
|
-
|
|||||||||||||||||
Federal
funds purchased
|
4,686
|
88
|
1.88
|
%
|
356
|
4
|
1.12
|
%
|
1,277
|
24
|
1.88
|
%
|
||||||||||||||||
Repurchase
agreements
|
13,672
|
88
|
0.64
|
%
|
12,796
|
115
|
0.90
|
%
|
12,193
|
179
|
1.47
|
%
|
||||||||||||||||
Other
borrowings
|
10,494
|
483
|
4.60
|
%
|
8,399
|
351
|
4.18
|
%
|
6,165
|
267
|
4.33
|
%
|
||||||||||||||||
Total
interest bearing liabilities
|
480,817
|
8,759
|
1.82
|
%
|
414,212
|
8,895
|
2.15
|
%
|
299,028
|
8,417
|
2.81
|
%
|
||||||||||||||||
Net
interest spread
|
$
|
29,490
|
4.44
|
%
|
$
|
23,021
|
3.86
|
%
|
$
|
17,411
|
3.91
|
%
|
||||||||||||||||
Noninterest
bearing demand deposits
|
107,730
|
82,442
|
57,805
|
|||||||||||||||||||||||||
Accrued
expenses and other liabilities
|
4,204
|
3,320
|
2,938
|
|||||||||||||||||||||||||
Shareholders’
equity
|
83,849
|
77,782
|
55,657
|
|||||||||||||||||||||||||
Accumulated
other comp income
|
(219
|
)
|
502
|
382
|
||||||||||||||||||||||||
Total
liabilities and shareholders’ equity
|
$
|
676,381
|
$
|
578,258
|
$
|
415,810
|
||||||||||||||||||||||
Impact
of noninterest bearing sources and other changes in balance
sheet composition
|
0.39
|
%
|
0.48
|
%
|
0.62
|
%
|
||||||||||||||||||||||
Net
interest margin
|
4.83
|
%
|
4.34
|
%
|
4.53
|
%
|
||||||||||||||||||||||
2004
compared to 2003
|
2003
compared to 2002
|
||||||||||||||||||
increase
(decrease) in
|
increase
(decrease) in
|
||||||||||||||||||
interest
income and expense
|
interest
income and expense
|
||||||||||||||||||
due
to changes in:
|
due
to changes in:
|
||||||||||||||||||
Volume
|
Rate
|
Total
|
Volume
|
Rate
|
Total
|
||||||||||||||
(Dollar
amounts in thousands)
|
|||||||||||||||||||
Earning
assets:
|
|||||||||||||||||||
Loans,
net of unearned income
|
$
|
6,255
|
$
|
(617
|
)
|
$
|
5,638
|
$
|
7,510
|
$
|
(1,965
|
)
|
$
|
5,545
|
|||||
Investment
securities
|
543
|
340
|
883
|
940
|
(447
|
)
|
493
|
||||||||||||
Other
earning assets
|
(380
|
)
|
192
|
(188
|
)
|
153
|
(103
|
)
|
50
|
||||||||||
Total
earning assets
|
6,418
|
(85
|
)
|
6,333
|
8,603
|
(2,515
|
)
|
6,088
|
|||||||||||
Interest
bearing liabilities:
|
|||||||||||||||||||
NOW
accounts
|
52
|
10
|
62
|
40
|
(168
|
)
|
(128
|
)
|
|||||||||||
Money
market accounts
|
108
|
(232
|
)
|
(124
|
)
|
297
|
(555
|
)
|
(258
|
)
|
|||||||||
Savings
deposits
|
62
|
(99
|
)
|
(37
|
)
|
65
|
(85
|
)
|
(20
|
)
|
|||||||||
Time
deposits < $100
|
463
|
(611
|
)
|
(148
|
)
|
1,147
|
(619
|
)
|
528
|
||||||||||
Time
deposits > $100
|
113
|
(340
|
)
|
(227
|
)
|
822
|
(466
|
)
|
356
|
||||||||||
Brokered
CD’s
|
321
|
(172
|
)
|
149
|
-
|
-
|
-
|
||||||||||||
Federal
funds purchased
|
49
|
35
|
84
|
-
|
(20
|
)
|
(20
|
)
|
|||||||||||
Repurchase
agreements
|
8
|
(35
|
)
|
(27
|
)
|
5
|
(69
|
)
|
(64
|
)
|
|||||||||
Other
borrowings
|
88
|
44
|
132
|
93
|
(9
|
)
|
84
|
||||||||||||
Total
interest bearing liabilities
|
1,264
|
(1,400
|
)
|
(136
|
)
|
2,469
|
(1,991
|
)
|
478
|
||||||||||
Increase
(decrease) in net interest income
|
$
|
5,154
|
$
|
1,315
|
$
|
6,469
|
$
|
6,134
|
$
|
(524
|
)
|
$
|
5,610
|
||||||
1. |
Significant
Classified Loans: Significant classified loans generally those loans with
a risk rating of substandard and a total exposure exceeding $500,000, as
well as all loans with a risk rating of doubtful. For this loan group,
management estimates the specific potential losses based upon an
individual analysis of the relationship risks, the borrower’s cash flow,
the borrower’s management and any underlying secondary sources of
repayment. If management believes or an outside third party’s valuation
indicates that the value of the secondary sources of repayment is less
than the balance of the total corporate exposure, then a specific reserve
is established. The definition of both substandard and doubtful risk
ratings are outlined in item 2 below.
|
2. |
Other
Classified and Criticized Loans: We reserve for loan pools that are
criticized and classified, but are not considered “significant”, as
described in item 1 above, using flat percentages depending on the pool’s
risk rating and the geographic risk assessment. For this group, we analyze
the geographic loan pools as follows:
|
|
i.
|
Loans
with Risk Ratings of Special Mention: We reserve for special mention loans
using a flat percentage between 3.5% and 5% of the loan balance. The flat
percentage is 5% for those loans or local economies that we consider to
have moderate to high risk characteristics; and, the flat percentage is
3.5% for those loans or local economies considered to have the same risk
factors measured as low to moderate. The special mention risk rating is
considered a criticized loan and is not considered as severe as a
classified loan risk rating. Special mention loans are loans that must be
followed closely because of identified potential weaknesses, which if not
checked and corrected, could result in an unacceptable increase in credit
risk at some future date. As of December 31, 2004, we had $11.4 million of
special mention loans compared to $13.3 million as of December 31, 2003.
These loans may be characterized by:
|
ii.
|
Loans
with Risk Ratings of Substandard: We reserve for substandard loans that
are generally less than $500,000 using a flat percentage between 11% and
15% of the loan balance. We used a flat percentage of 15% for those loans
or economies that we considered to have a moderate to high risk
characteristics; and, the flat percentage was 11% for those loans or
economies considered to have the same risk factors measured as low to
moderate. We generally consider substandard loans to possess three times
the risk of special mention loans. Substandard loans are loans that
reflect significant deficiencies with specifically identified and well
defined weaknesses due to severely adverse trends of a financial,
economic, or managerial nature. As of December 31, 2004, First Security
had $26.5 million of substandard loans compared to $12.6 million as of
December 31, 2003. The significant increase in substandard loans was a
result of the acquisition of the Kenesaw Leasing and J&S Leasing
portfolios. Substandard leases represented $13.2 million of the $26.5
million in substandard loans at December 31, 2004. We have assigned
specific reserves of $725 thousand for those substandard leases. For
substandard loans, a protracted work-out is likely due to the following
factors, in addition to those listed for special mention
loans:
|
|
iii.
|
Loans
with Risk Ratings of Doubtful: We analyze doubtful loans individually to
determine our best estimate of loss based upon the most recent assessment
of all available sources of repayment. The amount of the estimated loss is
then specifically reserved in a separate component of the allowance of
loan loss reserve. Doubtful loans are loans where the collection or
liquidation in full of principal and/or interest is highly questionable or
improbable. Doubtful loans must be placed on non-accrual, and the
principal balance charged down to estimated collectable value, or a full
or partial reserve must be allocated. As of December 31, 2004, First
Security had $1.4 million of doubtful loans compared to $1.9 million as of
December 31, 2003, and $3 thousand as of December 31, 2002. In
addition to the characteristics listed for substandard loans, the
following characteristics apply:
|
|
iv.
|
Loans
with Risk Ratings of Loss: We reserve loss loans at 100% of the loan
balance pursuant to our loan policy. Loss loans are loans of such limited
value that they do not merit continuance as an acceptable asset, and
therefore must be charged off in full in the fiscal quarter this grade is
assigned. As of December 31, 2004, December 31, 2003 and December 31,
2002, First Security did not have any loans risk rated as
loss.
|
3. |
Unclassified
and Uncriticized Loans, excluding Leases: In our analysis of these loan
pools, we establish our reserves using our historical net charge-off base
rate adjusted for eight risk factors. We calculate the net charge-off base
rate as FSGBank’s net charge-off average rate for the prior four years. In
other words, for our December 31, 2004 analysis we used the Bank’s 2001
through 2004 average net charge-off rate of 0.43% for the bank’s pool of
unclassified and uncriticized loans. Next, we adjusted the net charge-off
base rate to reflect the effect of any current conditions for possible
loss. To calculate the adjustments, we considered the following eight risk
factors, which are also referenced in the Comptroller’s Handbook for
National Bank Examiners.
|
· |
Changes
in lending policies and procedures, underwriting standards, collection,
charge off and recovery practices.
|
· |
Changes
in national and local economic and business
conditions.
|
· |
Changes
in the nature and volume of the portfolio.
|
· |
Changes
in the experience, ability, and depth of lending management
staff.
|
· |
Changes
in the severity of credit quality
indicators.
|
· |
Changes
in the quality of the bank’s loan review
system.
|
· |
The
extension and effect of or changes in credit
concentrations.
|
· |
The
effect of external factors such as competition, legal and regulatory
factors.
|
4. |
Unclassified
and Uncriticized Leases
|
For
the Years ended December 31,
|
||||||||||||||||
Percent
|
Percent
|
|||||||||||||||
2004
|
Change
|
2003
|
Change
|
2002
|
||||||||||||
(Dollar
amounts in thousands)
|
||||||||||||||||
NSF
Fees
|
$
|
2,903
|
75.7
|
%
|
$
|
1,652
|
27.0
|
%
|
$
|
1,301
|
||||||
Service
charges on deposit accounts
|
970
|
32.9
|
%
|
730
|
31.1
|
%
|
557
|
|||||||||
Mortgage
loan and related fees
|
1,344
|
-37.7
|
%
|
2,157
|
63.9
|
%
|
1,316
|
|||||||||
Net
gain on sales of available for sale securities
|
84
|
250.0
|
%
|
24
|
-72.1
|
%
|
86
|
|||||||||
Other
income
|
1,050
|
39.1
|
%
|
755
|
35.1
|
%
|
559
|
|||||||||
Total
noninterest income
|
$
|
6,351
|
19.4
|
%
|
$
|
5,318
|
39.3
|
%
|
$
|
3,819
|
For
the Years ended December 31,
|
||||||||||||||||
Percent
|
Percent
|
|||||||||||||||
2004
|
Change
|
2003
|
Change
|
2002
|
||||||||||||
(Dollar
amounts in thousands)
|
||||||||||||||||
Salaries
& Benefits
|
$
|
14,776
|
23.0
|
%
|
$
|
12,014
|
44.8
|
%
|
$
|
8,299
|
||||||
Occupancy
|
2,033
|
33.5
|
%
|
1,523
|
41.0
|
%
|
1,080
|
|||||||||
Furniture
and Equipment
|
2,229
|
34.6
|
%
|
1,656
|
51.0
|
%
|
1,097
|
|||||||||
Professional
Fees
|
1,129
|
18.3
|
%
|
954
|
0.9
|
%
|
946
|
|||||||||
Data
Processing
|
1,167
|
-1.4
|
%
|
1,184
|
56.0
|
%
|
759
|
|||||||||
Printing
& Supplies
|
597
|
3.7
|
%
|
576
|
52.8
|
%
|
377
|
|||||||||
Communications
|
531
|
14.4
|
%
|
464
|
42.8
|
%
|
325
|
|||||||||
Advertising
|
498
|
15.6
|
%
|
431
|
39.9
|
%
|
308
|
|||||||||
Intangible
Asset Amortization
|
797
|
44.9
|
%
|
550
|
439.2
|
%
|
102
|
|||||||||
Other
Expense
|
3,360
|
14.8
|
%
|
2,926
|
80.4
|
%
|
1,622
|
|||||||||
Total
Noninterest Expense
|
$
|
27,117
|
21.7
|
%
|
$
|
22,278
|
49.4
|
%
|
$
|
14,915
|
||||||
2005
|
2006
|
2007
|
2008
|
2009
|
||||||||||||
(amounts
in thousands)
|
||||||||||||||||
Core
Deposit Intangible Amortization Expense
|
$
|
596
|
$
|
453
|
$
|
350
|
$
|
273
|
$
|
216
|
||||||
License
Fee Agreement Amortization Expense
|
50
|
50
|
50
|
50
|
50
|
|||||||||||
Total
Amortization Expense
|
$
|
646
|
$
|
503
|
$
|
400
|
$
|
323
|
$
|
266
|
As
of December 31,
|
|||||||||||||||||||
2004
|
%
Change
|
2003
|
%
Change
|
2002
|
%
Change
|
||||||||||||||
(Dollars
amounts in thousands)
|
|||||||||||||||||||
Commercial
- leases, net of unearned
|
$
|
60,228
|
100.0
|
%
|
$
|
-
|
-
|
$
|
-
|
-
|
|||||||||
Commercial
- loans
|
116,490
|
1.0
|
%
|
115,347
|
6.1
|
%
|
108,761
|
11.4
|
%
|
||||||||||
Real
estate - construction
|
77,804
|
82.9
|
%
|
42,539
|
48.2
|
%
|
28,701
|
51.7
|
%
|
||||||||||
Real
estate - mortgage
|
264,606
|
9.4
|
%
|
241,985
|
66.7
|
%
|
145,203
|
26.5
|
%
|
||||||||||
Installment
loans to individuals
|
70,891
|
-7.0
|
%
|
76,203
|
17.6
|
%
|
64,771
|
8.7
|
%
|
||||||||||
Other
|
2,338
|
20.6
|
%
|
1,939
|
69.2
|
%
|
1,146
|
684.9
|
%
|
||||||||||
Total
loans
|
$
|
592,357
|
23.9
|
%
|
$
|
478,013
|
37.1
|
%
|
$
|
348,582
|
19.8
|
%
|
|||||||
As
of December 31,
|
|||||||||||||||||||
%
of
|
%
of
|
%
of
|
|||||||||||||||||
2004
|
Loans
|
2003
|
Loans
|
2002
|
Loans
|
||||||||||||||
(Dollar
amounts in thousands)
|
|||||||||||||||||||
Secured
by Real Estate:
|
|||||||||||||||||||
Construction
and Land Development
|
$
|
77,804
|
13.1
|
%
|
$
|
42,539
|
8.9
|
%
|
$
|
28,701
|
8.2
|
%
|
|||||||
Farmland
|
14,797
|
2.5
|
%
|
2,659
|
0.6
|
%
|
2,123
|
0.6
|
%
|
||||||||||
Home
Equity Lines of Credit
|
67,761
|
11.4
|
%
|
50,082
|
10.4
|
%
|
31,813
|
9.1
|
%
|
||||||||||
Residential
First Liens
|
68,588
|
11.6
|
%
|
72,045
|
15.0
|
%
|
53,528
|
15.4
|
%
|
||||||||||
Residential
Jr. Liens
|
3,418
|
0.6
|
%
|
4,140
|
0.9
|
%
|
2,582
|
0.7
|
%
|
||||||||||
Multi-family
Residential
|
9,960
|
1.7
|
%
|
11,431
|
2.4
|
%
|
7,550
|
2.2
|
%
|
||||||||||
Non-farm
and Non-Residential
|
100,082
|
16.9
|
%
|
101,628
|
21.3
|
%
|
47,607
|
13.7
|
%
|
||||||||||
Total
Real-Estate
|
342,410
|
57.8
|
%
|
284,524
|
59.5
|
%
|
173,904
|
49.9
|
%
|
||||||||||
Other
Loans:
|
|||||||||||||||||||
Commercial
- leases, net of unearned
|
60,228
|
10.2
|
%
|
-
|
-
|
-
|
-
|
||||||||||||
Commercial
and Industrial
|
116,490
|
19.7
|
%
|
115,347
|
24.2
|
%
|
108,228
|
31.0
|
%
|
||||||||||
Agricultural
Production
|
1,942
|
0.3
|
%
|
1,728
|
0.4
|
%
|
533
|
0.2
|
%
|
||||||||||
Credit
Cards and Other Revolving Credit
|
1,718
|
0.3
|
%
|
1,071
|
0.2
|
%
|
717
|
0.2
|
%
|
||||||||||
Consumer
Installment Loans
|
69,173
|
11.7
|
%
|
75,132
|
15.7
|
%
|
64,054
|
18.4
|
%
|
||||||||||
Other
|
396
|
0.0
|
%
|
211
|
0.0
|
%
|
1,146
|
0.3
|
%
|
||||||||||
Total
Other Loans
|
249,947
|
42.2
|
%
|
193,489
|
40.5
|
%
|
174,678
|
50.1
|
%
|
||||||||||
Total
Loans
|
$
|
592,357
|
100.0
|
%
|
$
|
478,013
|
100.0
|
%
|
$
|
348,582
|
100.0
|
%
|
|||||||
As
of December 31, 2004
|
||||||||||||||||
Over
three
|
One
year
|
|||||||||||||||
Less
than
|
months
to
|
to
|
Over
five
|
|||||||||||||
three
months
|
twelve
months
|
five
years
|
years
|
Total
|
||||||||||||
(Dollar
amounts in thousands)
|
||||||||||||||||
Closed
end 1-4 Family residential
|
$
|
17,738
|
$
|
7,333
|
$
|
42,172
|
$
|
1,345
|
$
|
68,588
|
||||||
All
other loans
|
256,601
|
52,484
|
182.938
|
31,746
|
523,769
|
|||||||||||
Total
|
$
|
274,339
|
$
|
59,817
|
$
|
225,110
|
$
|
33,091
|
$
|
592,357
|
||||||
For
the years ended December 31,
|
||||||||||
2004
|
2003
|
2002
|
||||||||
(Dollar
amounts in thousands)
|
||||||||||
Allowance
for loan losses -
|
||||||||||
Beginning
of period
|
$
|
5,827
|
$
|
5,362
|
$
|
3,825
|
||||
Provision
for loan losses
|
3,399
|
2,122
|
1,948
|
|||||||
Additions
due to business combinations
|
2,011
|
1,011
|
377
|
|||||||
Sub-total
|
11,237
|
8,495
|
6,150
|
|||||||
Charged
off loans:
|
||||||||||
Commercial
- leases
|
-
|
-
|
-
|
|||||||
Commercial
- loans
|
1,698
|
2,188
|
414
|
|||||||
Real
estate - construction
|
45
|
-
|
-
|
|||||||
Real
estate - residential mortgage
|
328
|
11
|
22
|
|||||||
Consumer
and other
|
1,356
|
1,001
|
432
|
|||||||
Total
charged off
|
3,427
|
3,200
|
868
|
|||||||
Recoveries
of charged-off loans:
|
||||||||||
Commercial
- leases
|
26
|
-
|
-
|
|||||||
Commercial
- loans
|
385
|
387
|
54
|
|||||||
Real
estate - construction
|
-
|
-
|
-
|
|||||||
Real
estate - residential mortgage
|
-
|
-
|
-
|
|||||||
Consumer
|
91
|
145
|
26
|
|||||||
Total
recoveries
|
502
|
532
|
80
|
|||||||
Net
charged-off loans
|
2,925
|
2,668
|
788
|
|||||||
Allowance
for loan losses - end of period
|
$
|
8,312
|
$
|
5,827
|
$
|
5,362
|
||||
Total
loans - end of period
|
$
|
592,357
|
$
|
478,013
|
$
|
348,582
|
||||
Average
loans
|
$
|
514,479
|
$
|
422,332
|
$
|
311,774
|
||||
As
a percentage of average loans:
|
||||||||||
Net
loans charged-off
|
0.57
|
%
|
0.63
|
%
|
0.25
|
%
|
||||
Provision
for loan losses
|
0.66
|
%
|
0.50
|
%
|
0.62
|
%
|
||||
Allowance
for loan losses as a percentage of:
|
||||||||||
Year
end loans
|
1.40
|
%
|
1.22
|
%
|
1.54
|
%
|
||||
Non-performing
assets
|
182.56
|
%
|
200.03
|
%
|
709.26
|
%
|
December
31,
|
|||||||||||||||||||
2004
|
2003
|
2002
|
|||||||||||||||||
Percent
of
|
Percent
of
|
Percent
of
|
|||||||||||||||||
loans
in each
|
loans
in each
|
loans
in each
|
|||||||||||||||||
category
to
|
category
to
|
category
to
|
|||||||||||||||||
Amount
|
total
loans
|
Amount
|
total
loans
|
Amount
|
total
loans
|
||||||||||||||
(Dollar
amounts in thousands)
|
|||||||||||||||||||
Commercial
- leases
|
$
|
1,202
|
10.2
|
%
|
$
|
-
|
0.0
|
%
|
$
|
-
|
0.0
|
%
|
|||||||
Commercial
- loans
|
2,244
|
20.0
|
%
|
2,379
|
24.6
|
%
|
2,446
|
31.2
|
%
|
||||||||||
Real
estate - construction
|
700
|
13.1
|
%
|
262
|
8.9
|
%
|
271
|
8.2
|
%
|
||||||||||
Real
estate - mortgage
|
3,432
|
44.7
|
%
|
2,187
|
50.6
|
%
|
1,650
|
41.7
|
%
|
||||||||||
Consumer
|
728
|
12.0
|
%
|
712
|
15.9
|
%
|
672
|
18.6
|
%
|
||||||||||
Unallocated
and charter condition
|
6
|
0.0
|
%
|
287
|
0.0
|
%
|
323
|
0.3
|
%
|
||||||||||
Total
|
$
|
8,312
|
100.0
|
%
|
$
|
5,827
|
100.0
|
%
|
$
|
5,362
|
100.0
|
%
|
|||||||
As
of December 31,
|
|||||||||||||
2004
|
2003
|
2002
|
|||||||||||
(
Dollar
amounts in thousands)
|
|||||||||||||
Nonaccrual
loans
|
$
|
985
|
$
|
183
|
$
|
667
|
|||||||
Loans
past due 90 days and still accruing
|
1,230
|
2,194
|
89
|
||||||||||
Total
nonperforming loans
|
2,215
|
2,377
|
756
|
||||||||||
Other
real estate owned
|
2,338
|
536
|
-
|
||||||||||
Total
nonperforming assets
|
$
|
4,553
|
$
|
2,913
|
$
|
756
|
|||||||
Nonperforming
loans as a percentage of total loans
|
0.37
|
%
|
0.50
|
%
|
0.22
|
%
|
|||||||
Nonperforming
assets as a percentage of total assets
|
0.59
|
%
|
0.45
|
%
|
0.16
|
%
|
Less
than
|
One
year to
|
Five
years to
|
More
than
|
||||||||||
Investment
Security Type
|
one
year
|
five
years
|
ten
years
|
ten
years
|
|||||||||
(Dollar
amounts in thousands)
|
|||||||||||||
Municipal
- tax exempt
|
$
|
1,026
|
$
|
2,585
|
$
|
11,640
|
$
|
11,597
|
|||||
Municipal
- taxable
|
252
|
-
|
-
|
-
|
|||||||||
Agency
bonds
|
9,897
|
20,639
|
-
|
-
|
|||||||||
Agency
issued remics
|
5,829
|
24,433
|
-
|
-
|
|||||||||
Agency
issued pools
|
136
|
19,726
|
-
|
1,111
|
|||||||||
Asset
backed & CMO
|
-
|
980
|
-
|
-
|
|||||||||
Total
|
$
|
17,140
|
$
|
68,363
|
$
|
11,640
|
$
|
12,708
|
|||||
Tax
equivalent yield
|
2.96
|
%
|
3.97
|
%
|
5.30
|
%
|
5.73
|
%
|
(Dollar
amounts in thousands)
|
Book
Value
|
Market
Value
|
|||||
Fannie
Mae
|
$
|
25,094
|
$
|
25,155
|
|||
Federal
Home Loan Mortgage Corporation
|
$
|
24,898
|
$
|
24,911
|
|||
Federal
Home Loan Bank (FHLB)
|
$
|
10,849
|
$
|
10,918
|
Date
|
Type
|
|
Principal
|
Term
|
Rate
|
Maturity
|
1/8/2002
|
Fixed
Rate Advance
|
|
500,000
|
36
months
|
4.48%
|
1/7/05
|
1/8/2002
|
Fixed
Rate Advance
|
|
500,000
|
48
months
|
5.04%
|
1/6/06
|
1/10/2002
|
Fixed
Rate Advance
|
|
500,000
|
36
months
|
4.45%
|
1/10/05
|
1/10/2002
|
Fixed
Rate Advance
|
|
500,000
|
48
months
|
5.00%
|
1/10/06
|
1/15/2002
|
Fixed
Rate Advance
|
|
500,000
|
36
months
|
4.22%
|
1/14/05
|
1/15/2002
|
Fixed
Rate Advance
|
|
500,000
|
48
months
|
4.77%
|
1/13/06
|
1/17/2002
|
Fixed
Rate Advance
|
|
500,000
|
36
months
|
4.37%
|
1/14/05
|
1/17/2002
|
Fixed
Rate Advance
|
|
500,000
|
48
months
|
4.90%
|
1/17/06
|
$4,000,000
|
Aggregate
composite rate
|
4.65
|
%
|
||
36
month composite rate
|
4.38
|
%
|
||
48
month composite rate
|
4.93
|
%
|
As
of December 31, 2004
|
|||||||||||||||||||
Over
Five
|
|||||||||||||||||||
Years
and
|
|||||||||||||||||||
One
through
|
Four
through
|
One
through
|
Non-rate
|
||||||||||||||||
Immediate
|
Three
Months
|
Twelve
Months
|
Five
Years
|
Sensitive
|
Total
|
||||||||||||||
(Dollar
amounts in thousands)
|
|||||||||||||||||||
Interest
Earning Assets:
|
|||||||||||||||||||
Interest
bearing deposits
|
$
|
510
|
$
|
-
|
$
|
-
|
$
|
95
|
$
|
-
|
$
|
605
|
|||||||
Federal
Funds Sold
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Securities
|
-
|
9,806
|
7,863
|
50,398
|
41,956
|
110,023
|
|||||||||||||
Mortgage
loans held for sale
|
-
|
6,073
|
-
|
-
|
-
|
6,073
|
|||||||||||||
Loans
|
-
|
260,902
|
59,387
|
201,838
|
64,157
|
586,284
|
|||||||||||||
Total
interest earning assets
|
510
|
276,781
|
67,250
|
252,331
|
106,113
|
702,985
|
|||||||||||||
Interest
Bearing Liabilities:
|
|||||||||||||||||||
Demand
deposits
|
-
|
2,995
|
2,995
|
48,464
|
-
|
54,454
|
|||||||||||||
MMDA
deposits
|
-
|
14,331
|
14,331
|
85,989
|
-
|
114,651
|
|||||||||||||
Savings
deposits
|
-
|
3,269
|
3,269
|
26,153
|
-
|
32,691
|
|||||||||||||
Time
deposits
|
-
|
63,989
|
144,236
|
121,180
|
-
|
329,405
|
|||||||||||||
Fed
Funds Purchased/Repos
|
23,255
|
-
|
-
|
-
|
-
|
23,255
|
|||||||||||||
Other
borrowings
|
-
|
2,000
|
-
|
2,000
|
150
|
4,150
|
|||||||||||||
Total
interest bearing liabilities
|
23,255
|
86,584
|
164,831
|
283,786
|
150
|
558,606
|
|||||||||||||
Non-interest
bearing sources of funds
|
-
|
-
|
-
|
-
|
144,379
|
144,379
|
|||||||||||||
Interest
sensitivity gap
|
$
|
(22,745
|
)
|
$
|
190,197
|
$
|
(97,581
|
)
|
$
|
(31,455
|
)
|
$
|
(38,416
|
)
|
$
|
-
|
|||
Cumulative
sensitivity gap
|
$
|
(22,745
|
)
|
$
|
167,452
|
$
|
69,871
|
$
|
38,416
|
$
|
-
|
$
|
-
|
||||||
Total
|
Less
than One Year
|
One
to Three Years
|
Three
to Five Years
|
More
than Five Years
|
|||||||||||||||
(Dollar
amounts in thousands)
|
|||||||||||||||||||
Certificates
of deposit
|
(1
|
)
|
$
|
329,405
|
$
|
208,225
|
$
|
105,629
|
$
|
15,551
|
$
|
-
|
|||||||
Federal
funds purchased and securities sold
under
agreements to repurchase
|
(2
|
)
|
23,255
|
23,255
|
-
|
-
|
-
|
||||||||||||
FHLB
borrowings
|
(3
|
)
|
4,000
|
2,000
|
2,000
|
-
|
-
|
||||||||||||
Operating
lease obligations
|
(4
|
)
|
5,928
|
1,001
|
1,286
|
1,071
|
2,570
|
||||||||||||
Purchase
obligations - investment securities
|
(5
|
)
|
235
|
235
|
-
|
-
|
-
|
||||||||||||
Note
payable
|
(6
|
)
|
150
|
10
|
23
|
27
|
90
|
||||||||||||
Total
|
$
|
362,973
|
$
|
234,726
|
$
|
108,938
|
$
|
16,649
|
$
|
2,660
|
1
|
Certificates
of deposit give customers rights to early withdrawal. Early withdrawals
may be subject to penalties. The penalty amount depends on the remaining
time to maturity at the time of early withdrawal. For more information
regarding certificates of deposit, see “Note 7—Deposits” in the
Consolidated Financial Statements and “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operation - Deposits and
Other Borrowings.”
|
2
|
We
expect securities repurchase agreements to be re-issued and, as such, do
not necessarily represent an immediate need for cash. For more information
regarding securities repurchase agreements, see “Note 8—Securities Sold
Under Agreements to Repurchase” in the Consolidated Financial
Statements.”
|
3
|
For
more information regarding FHLB borrowings, see “Note 9—Other Borrowings”
in the Consolidated. Financial Statements and “Item 7.-Management’s
Discussion and Analysis of Financial Condition and Results of Financial
Statements and " Item 2.-Properties"
|
4
|
Operating
lease obligations include existing and future property and equipment
non-cancelable lease commitments. For more information regarding operating
lease obligations, see “Note 11—Leases” in the Consolidated Financial
Statements and " Item 2.-Properties"
|
5
|
In
December 2004 we purchased one municipal investment security with a
settlement date in January 2005. For more information regarding investment
securities, see “Note 3—Securities” in the Consolidated Financial
Statements and “Item 7.-Management’s Discussion and Analysis of Financial
Condition and Results of Operation - Investment Securities and Other
Earning Assets.”
|
6
|
This
note payable is a mortgage on the land of our branch facility located at
2905 Maynardville Highway, Maynardville, Tennessee. For more information
regarding this location, see
“Item 2—Properties.”
|
Well
|
Adequately
|
First
|
||||||
December
31, 2004
|
Capitalized
|
Capitalized
|
Security
|
FSGBank
|
||||
Tier
I capital to risk adjusted assets
|
6.0%
|
4.0%
|
11.2%
|
10.0%
|
||||
Total
capital to risk adjusted assets
|
10.0%
|
8.0%
|
12.4%
|
11.2%
|
||||
Leverage
ratio
|
5.0%
|
4.0%
|
9.9%
|
8.8%
|
Well
|
Adequately
|
First
|
||||||
December
31, 2003
|
Capitalized
|
Capitalized
|
Security
|
FSGBank
|
||||
Tier
I capital to risk adjusted assets
|
6.0%
|
4.0%
|
13.1%
|
11.5%
|
||||
Total
capital to risk adjusted assets
|
10.0%
|
8.0%
|
14.3%
|
12.6%
|
||||
Leverage
ratio
|
5.0%
|
4.0%
|
11.0%
|
9.6%
|
||||
Item
7A
.
|
Quantitative
and Qualitative Disclosures about Market
Risk
|
(Dollar
amounts in thousands)
|
Down
200 BP
|
Current
|
Up
200 BP
|
|||||||
Net
interest income
|
$
|
26,076
|
$
|
29,012
|
$
|
31,960
|
||||
$
change net interest income
|
(2,936
|
)
|
-
|
2,948
|
||||||
%
change net interest income
|
-10.12
|
%
|
0.00
|
%
|
10.16
|
%
|
Item
8
.
|
Financial
Statements and Supplementary Data
|
CERTIFIED PUBLIC ACCOUNTANTS
|
Joseph
Decosimo and Company, PLLC
Suite
1100 - Two Union Square
Chattanooga,
Tennessee 37402
www.decosimo.com
|
2004
|
2003
|
||||||
(in
thousands)
|
|||||||
ASSETS
|
|||||||
Cash
and Due from Banks
|
$
|
15,935
|
$
|
25,662
|
|||
Federal
Funds Sold and Securities Purchased
Under
Agreements to Resell
|
-
|
6,972
|
|||||
Cash
and Cash Equivalents
|
15,935
|
32,634
|
|||||
Interest-Bearing
Deposits in Banks
|
605
|
4,512
|
|||||
Securities
Available for Sale
|
110,023
|
86,499
|
|||||
Loans
Held for Sale
|
6,073
|
3,011
|
|||||
Loans
|
586,284
|
475,002
|
|||||
Total
Loans
|
592,357
|
478,013
|
|||||
Less:
Allowance for Loan Losses
|
8,312
|
5,827
|
|||||
584,045
|
472,186
|
||||||
Premises
and Equipment, net
|
26,295
|
24,517
|
|||||
Goodwill
|
12,430
|
12,556
|
|||||
Core
Deposit and License Fee Intangibles
|
2,844
|
3,148
|
|||||
Other
Assets
|
14,514
|
8,713
|
|||||
TOTAL
ASSETS
|
$
|
766,691
|
$
|
644,765
|
|
|
|
Retained
|
Accumulated
Other
|
Deferred
Compensation
|
Total
|
Total
|
||||||||||||||||||
|
Common
Stock
|
Paid-In
|
Earnings
|
Comprehensive
|
on
Restricted
|
Stockholders'
|
Comprehensive
|
||||||||||||||||||
|
Shares
|
Amount
|
Surplus
|
(Deficit)
|
Income
|
Stock
|
Equity
|
Income
|
|||||||||||||||||
BALANCE
-
December
31, 2001
|
7,205
|
$
|
50
|
$
|
40,054
|
$
|
(1,063
|
)
|
$
|
224
|
$
|
-
|
$
|
39,265
|
|||||||||||
Issuance
of Common Stock
|
3,709
|
26
|
25,669
|
25,695
|
|
||||||||||||||||||||
Comprehensive
Income-
|
|||||||||||||||||||||||||
Net
Income
|
2,602
|
2,602
|
$
|
2,602
|
|||||||||||||||||||||
Change
in Net Unrealized Gain on
Securities
Available for Sale, net of tax
|
371
|
371
|
371
|
||||||||||||||||||||||
Total
Comprehensive Income
|
$
|
2,973
|
|||||||||||||||||||||||
BALANCE
-
December 31, 2002
|
10,914
|
76
|
65,723
|
1,539
|
595
|
-
|
67,933
|
||||||||||||||||||
Issuance
of Common Stock
|
1,788
|
12
|
12,235
|
(33
|
)
|
12,214
|
|||||||||||||||||||
Comprehensive
Income -
|
|||||||||||||||||||||||||
Net
Income
|
2,456
|
2,456
|
$
|
2,456
|
|||||||||||||||||||||
Change
in Net Unrealized Loss on
Securities
Available for Sale, net of tax
|
(165
|
)
|
(165
|
)
|
(165
|
)
|
|||||||||||||||||||
Total
Comprehensive Income
|
$
|
2,291
|
|||||||||||||||||||||||
BALANCE
-
December 31, 2003
|
12,702
|
88
|
77,958
|
3,995
|
430
|
(33
|
)
|
82,438
|
· |
the
Company's loan loss experience;
|
· |
the
amount of past due and nonperforming loans;
|
· |
specific
known risks;
|
· |
the
status and amount of past due and nonperforming
assets;
|
· |
underlying
estimated values of collateral securing
loans;
|
· |
current
economic conditions; and
|
· |
other
factors which management believes affect the allowance for potential
credit losses.
|
(in
thousands)
|
||||
Cash
and Due from Banks
|
$
|
473
|
||
Leases
|
60,579
|
|||
Less:
Allowance for Lease Losses
|
2,011
|
|||
Net
Leases
|
58,568
|
|||
Premises
and Equipment, net
|
76
|
|||
Other
Assets
|
4,039
|
|||
Total
Assets Acquired
|
63,156
|
|||
Line
of Credit - NBC
|
(41,724
|
)
|
||
Other
Liabilities
|
(7,166
|
)
|
||
Total
Liabilities Assumed
|
(48,890
|
)
|
||
Net
Assets Acquired
|
$
|
14,266
|
(in
thousands)
|
||||
Cash
and Due from Banks
|
$
|
4,851
|
||
Federal
Funds Sold and Securities Purchased
Under
Agreements to Resell
|
9,520
|
|||
Cash
and Cash Equivalents
|
14,371
|
|||
Securities
Available for Sale
|
8,929
|
|||
Loans
|
57,714
|
|||
Less:
Allowance for Loan Losses
|
850
|
|||
Net
Loans
|
56,864
|
|||
Premises
and Equipment, net
|
4,265
|
|||
Core
Deposit Intangible
|
1,301
|
|||
Goodwill
(Nondeductible)
|
3,541
|
|||
Other
Assets
|
999
|
|||
Total
Assets Acquired
|
90,270
|
|||
Deposits
|
(73,821
|
)
|
||
FHLB
Advance
|
(3,000
|
)
|
||
Other
Liabilities
|
(1,714
|
)
|
||
Total
Liabilities Assumed
|
(78,535
|
)
|
||
Net
Assets Acquired
|
$
|
11,735
|
Year Ended December 31, | |||||||
2003
|
2002
|
||||||
(in
thousands, except per share data)
|
|||||||
Interest
Income
|
$
|
32,391
|
$
|
32,654
|
|||
Interest
Expense
|
9,209
|
11,242
|
|||||
Net
Interest Income
|
23,182
|
21,412
|
|||||
Provision
for Loan Losses
|
2,143
|
2,221
|
|||||
Net
Interest Income After Provision for Loan Losses
|
21,039
|
19,191
|
|||||
Noninterest
Income
|
5,425
|
4,543
|
|||||
Noninterest
Expense
|
23,054
|
19,286
|
|||||
Income
Before Income Taxes
|
3,410
|
4,448
|
|||||
Income
Tax Provision
|
1,163
|
1,846
|
|||||
Net
Income
|
$
|
2,247
|
$
|
2,602
|
|||
Net
Income Per Share
|
|||||||
Basic
and Diluted
|
$
|
0.18
|
$
|
0.23
|
Gross
|
Gross
|
||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||
Cost
|
Gains
|
Losses
|
Value
|
||||||||||
(in
thousands)
|
|||||||||||||
Securities
Available-for-Sale
|
|||||||||||||
December
31, 2004
|
|||||||||||||
Debt
Securities -
|
|||||||||||||
Federal
Agencies
|
$
|
30,536
|
$
|
61
|
$
|
43
|
$
|
30,554
|
|||||
Mortgage-Backed
|
52,215
|
201
|
297
|
52,119
|
|||||||||
Municipals
|
27,100
|
323
|
73
|
27,350
|
|||||||||
$
|
109,851
|
$
|
585
|
$
|
413
|
$
|
110,023
|
||||||
December
31, 2003
|
|||||||||||||
Debt
Securities -
|
|||||||||||||
Federal
Agencies
|
$
|
27,346
|
$
|
280
|
$
|
8
|
$
|
27,618
|
|||||
Mortgage-Backed
|
36,618
|
249
|
120
|
36,747
|
|||||||||
Municipals
|
21,883
|
368
|
117
|
22,134
|
|||||||||
$
|
85,847
|
$
|
897
|
$
|
245
|
$
|
86,499
|
Amortized
|
Fair
|
||||||
Cost
|
Value
|
||||||
(in
thousands)
|
|||||||
Within
1 Year
|
$
|
17,004
|
$
|
17,019
|
|||
Over
1 Year through 5 Years
|
48,638
|
48,545
|
|||||
5
Years to 10 Years
|
11,640
|
11,723
|
|||||
Over
10 Years
|
11,596
|
11,682
|
|||||
88,878
|
88,969
|
||||||
Mortgage-Backed
Securities
|
20,973
|
21,054
|
|||||
$
|
109,851
|
$
|
110,023
|
Less
Than 12 Months
|
12
months or Greater
|
||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||
December
31, 2004
|
(in
thousands)
|
||||||||||||
Federal
Agencies
|
$
|
19,771
|
$
|
43
|
$
|
-
|
$
|
-
|
|||||
Mortgage-Backed
|
31,002
|
209
|
5,178
|
88
|
|||||||||
Municipals
|
6,579
|
73
|
-
|
-
|
|||||||||
December 31, 2003 | |||||||||||||
Federal
Agencies
|
$
|
1,024
|
$
|
8
|
$
|
-
|
$
|
-
|
|||||
Mortgage-Backed
|
13,609
|
120
|
-
|
-
|
|||||||||
Municipals
|
1,899
|
12
|
145
|
105
|
December
31,
|
|
|||
|
|
2004
|
|
|
|
|
(in
thousands)
|
||
Lease
payments receivable
|
$
|
67,894
|
||
Estimated
residual value of leased assets
|
3,220
|
|||
Gross
investment
|
71,114
|
|||
Unearned
income
|
(10,886
|
)
|
||
Net
investment
|
$
|
60,228
|
Year
|
|
Amount
|
|||
(in
thousands)
|
|||||
2005
|
$
26,669
|
||||
2006
|
$
19,269
|
||||
2007
|
$
12,176
|
||||
2008
|
$
5,746
|
||||
2009
|
$
2,592
|
||||
2010
and After
|
$
1,442
|
Year
Ended
|
Year
Ended
|
Year
Ended
|
||||||||
December
31, 2004
|
December
31, 2003
|
December
31, 2002
|
||||||||
(in
thousands)
|
||||||||||
Allowance
for Loan Losses - beginning of year
|
$
|
5,827
|
$
|
5,362
|
$
|
3,825
|
||||
Additions
due to Business Combinations
|
2,011
|
1,011
|
377
|
|||||||
Provision
Expense for Loan Losses
|
3,399
|
2,122
|
1,948
|
|||||||
Loans
Charged Off
|
(3,427
|
)
|
(3,200
|
)
|
(868
|
)
|
||||
Loan
Loss Recoveries
|
502
|
532
|
80
|
|||||||
Allowance
for Loan Losses - end of year
|
$
|
8,312
|
$
|
5,827
|
$
|
5,362
|
December
31,
|
|||||||
2004
|
2003
|
||||||
(in
thousands)
|
|||||||
Land
|
$
|
7,355
|
$
|
6,998
|
|||
Buildings
and Improvements
|
14,815
|
11,770
|
|||||
Equipment
|
8,954
|
8,429
|
|||||
31,124
|
27,197
|
||||||
Accumulated
Depreciation
|
(4,829
|
)
|
(2,680
|
)
|
|||
$
|
26,295
|
$
|
24,517
|
(in
thousands)
|
||||
2005
|
$
|
208,225
|
||
2006
|
75,535
|
|||
2007
|
30,094
|
|||
2008
|
8,757
|
|||
2009
and thereafter
|
6,794
|
|||
$
|
329,405
|
Amount
(in
thousands)
|
Rate
|
||||||
2005
|
$
|
2,000
|
4.4
|
%
|
|||
2006
|
2,000
|
4.9
|
%
|
||||
$
|
4,000
|
Year
Ended December 31, 2004
|
Year
Ended December 31, 2003
|
Year
Ended December 31, 2002
|
||||||||
(in
thousands)
|
||||||||||
Numerator:
|
||||||||||
Net
Income for Calculating Diluted
Net
Income per Share
|
$
|
4,267
|
$
|
2,456
|
$
|
2,602
|
||||
Denominator:
|
||||||||||
Weighted-Average
Common Shares for
Calculating
Basic Net Income per Share
|
12,705
|
12,190
|
9,415
|
|||||||
Effect
of Dilutive Securities:
|
||||||||||
Stock
Options (as determined by application of
the
treasury stock method)
|
207
|
138
|
118
|
|||||||
Weighted-Average
Common Shares for
Calculating
Diluted Net Income per Share
|
12,912
|
12,328
|
9,533
|
|||||||
Basic
Net Income per Share
|
$
|
0.34
|
$
|
0.20
|
$
|
0.28
|
||||
Diluted
Net Income per Share
|
$
|
0.33
|
$
|
0.20
|
$
|
0.27
|
(in
thousands)
|
||||
Year
Ending
|
||||
December
31, 2005
|
$
|
1,001
|
||
December
31, 2006
|
681
|
|||
December
31, 2007
|
605
|
|||
December
31, 2008
|
532
|
|||
December
31, 2009
|
539
|
|||
Thereafter
|
2,570
|
|||
$
|
5,928
|
December
31,
|
|||||||
2004
|
2003
|
||||||
(in
thousands)
|
|||||||
Deferred
Tax Assets
|
|||||||
Organization
and Start-up Costs
|
$
|
15
|
$
|
56
|
|||
Allowance
for Loan Losses
|
1,839
|
2,281
|
|||||
Deferred
Loan Fees
|
147
|
132
|
|||||
Other
|
13
|
-
|
|||||
2,014
|
2,469
|
||||||
Deferred
Tax Liabilities
|
|||||||
Securities
Available-for-Sale
|
59
|
222
|
|||||
Gain
on Business Combination
|
481
|
-
|
|||||
Premises
and Equipment
|
1,438
|
1,271
|
|||||
Goodwill
and Core Deposit Intangibles
|
469
|
882
|
|||||
Other
|
50
|
123
|
|||||
2,497
|
2,498
|
||||||
Net
Deferred Tax Liability
|
$
|
(483
|
)
|
$
|
(29
|
)
|
Full Years
|
Vested
|
|||
|
Of
Employment
|
Percentage
|
||
Less
than 1
|
0%
|
|||
1
|
33%
|
|||
2
|
66%
|
|||
3
or more
|
100%
|
Options
Outstanding
|
Options
Exercisable
|
||||
Exercise
Price Range
|
Number
of Shares(in thousands)
|
Weighted
Average Remaining Contractual Life
|
Weighted
Average Exercise Price
|
Number
Exercisable(in thousands)
|
Weighted
Average Exercise Price
|
$5.34
- $8.33
|
1,043
|
7.57
years
|
$
6.66
|
586
|
$
6.05
|
December
31,
|
||||||||||
2004
|
2003
|
2002
|
||||||||
Dividend
Yield
|
1.00
|
%
|
1.00
|
%
|
1.00
|
%
|
||||
Average
Risk-Free Interest Rate
|
3.98
|
%
|
3.50
|
%
|
3.58
|
%
|
||||
Expected
Life
|
7
years
|
7
years
|
7
years
|
|||||||
Expected
Volatility
|
13
|
%
|
14
|
%
|
15
|
%
|
December
31, 2004
|
December
31, 2003
|
||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
||||||||||
Amount
|
Value
|
Amount
|
Value
|
||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||
Financial
Assets
|
|||||||||||||
Cash
and Cash Equivalents
|
$
|
15,935
|
$
|
15,935
|
$
|
32,634
|
$
|
32,634
|
|||||
Interest-Bearing
Deposits in Banks
|
$
|
605
|
$
|
605
|
$
|
4,512
|
$
|
4,512
|
|||||
Securities
Available-for-Sale
|
$
|
110,023
|
$
|
110,023
|
$
|
86,499
|
$
|
86,499
|
|||||
Loans
Held for Sale
|
$
|
6,073
|
$
|
6,073
|
$
|
3,011
|
$
|
3,011
|
|||||
Loans
|
$
|
586,284
|
$
|
592,238
|
$
|
475,002
|
$
|
487,003
|
|||||
Allowance
for Loan and Lease Losses
|
$
|
8,312
|
$
|
8,312
|
$
|
5,827
|
$
|
5,827
|
|||||
Financial
Liabilities
|
|||||||||||||
Deposits
|
$
|
640,526
|
$
|
643,865
|
$
|
540,304
|
$
|
543,384
|
|||||
Federal
Funds Purchased and Securities Sold Under Agreements to
Repurchase
|
$
|
23,255
|
$
|
23,255
|
$
|
12,069
|
$
|
12,069
|
|||||
Other
Borrowings
|
$
|
4,150
|
$
|
4,150
|
$
|
6,159
|
$
|
6,159
|
· |
Cash
and Cash Equivalents - The carrying amounts of cash and cash equivalents
approximate fair value.
|
· |
Interest-Bearing
Deposits in Banks - The carrying amounts of interest-bearing deposits in
banks approximate fair value.
|
· |
Securities
- Fair values for securities are based on quoted market
prices.
|
· |
Loans
Held for Sale - The carrying amount of loans held for sale approximate
fair value.
|
· |
Loans
- For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. Fair
values for certain mortgage loans and other consumer loans is estimated
using the quoted market prices for securities backed by similar loans,
adjusted for differences in loan characteristics. The fair value of other
types of loans and leases is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers of similar credit ratings quality. Fair values for impaired
loans and leases are estimated using discounted cash flow analysis or
underlying collateral values, where
applicable.
|
· |
Deposit
Liabilities - The fair value of demand deposits, savings accounts and
certain money market deposits is the amount payable on demand at the
reporting date. The fair value for fixed-rate certificates of deposit is
estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time
deposits.
|
· |
Federal
Funds Purchased and Securities Sold Under Agreements to
Repurchase
-
These borrowings generally mature in 90 days or less and, accordingly, the
carrying amount reported in the balance sheet approximates fair
value.
|
· |
Other
Borrowings - Other borrowings carrying amount reported in the balance
sheet approximates fair value.
|
December
31,
|
December
31,
|
||||||
2004
|
2003
|
||||||
(in
thousands)
|
|||||||
Commitments
to Extend Credit
|
$
|
178,396
|
$
|
120,915
|
|||
Standby
Letters of Credit
|
$
|
6,329
|
$
|
4,198
|
Year
Ended
|
Year
Ended
|
Year
Ended
|
||||||||
December
31, 2004
|
December
31,
2003
|
December
31, 2002
|
||||||||
(in
thousands)
|
||||||||||
Noninterest
Income -
|
||||||||||
Fees
Related to Mortgage Loans Sold
|
$
|
1,344
|
$
|
2,157
|
$
|
1,316
|
||||
Noninterest
Expense -
|
||||||||||
Professional
Fees
|
$
|
1,129
|
$
|
954
|
$
|
946
|
||||
Computer
Fees
|
$
|
1,167
|
$
|
1,184
|
$
|
759
|
||||
Printing
and Supplies
|
$
|
597
|
$
|
643
|
$
|
377
|
||||
Advertising
|
$
|
498
|
$
|
431
|
$
|
308
|
||||
Telephone
|
$
|
531
|
$
|
464
|
$
|
325
|
||||
Core
Deposit Intangible Amortization
|
$
|
797
|
$
|
550
|
$
|
102
|
First
Quarter
2003
|
Second
Quarter
2003
|
Third
Quarter
2003
|
Fourth
Quarter
2003
|
||||||||||
(in
thousands, except per share data)
|
|||||||||||||
Interest
Income
|
$
|
6,795
|
$
|
8,091
|
$
|
8,238
|
$
|
8,430
|
|||||
Interest
Expense
|
2,072
|
2,492
|
2,283
|
2,050
|
|||||||||
Net
Interest Income
|
4,723
|
5,599
|
5,955
|
6,380
|
|||||||||
Provision
for Loan Losses
|
752
|
381
|
366
|
623
|
|||||||||
Net
Interest Income After Provision
for
Loan Losses
|
3,971
|
5,218
|
5,589
|
5,757
|
|||||||||
Noninterest
Income
|
1,120
|
1,406
|
1,470
|
1,322
|
|||||||||
Noninterest
Expense
|
4,604
|
5,643
|
5,883
|
6,148
|
|||||||||
Income
Before Income Tax Provision
|
487
|
981
|
1,176
|
931
|
|||||||||
Income
Tax Provision
|
151
|
410
|
432
|
126
|
|||||||||
Net
Income
|
$
|
336
|
$
|
571
|
$
|
744
|
$
|
805
|
|||||
Net
Income Per Share *
|
|||||||||||||
Basic
|
$
|
0.03
|
$
|
0.05
|
$
|
0.06
|
$
|
0.06
|
|||||
Diluted
|
$
|
0.03
|
$
|
0.04
|
$
|
0.06
|
$
|
0.06
|
|||||
Shares
Outstanding
|
|||||||||||||
Basic
|
10,943
|
12,596
|
12,596
|
12,600
|
|||||||||
Diluted
|
11,058
|
12,709
|
12,726
|
12,800
|
* |
The
sum of the 2004 and 2003 quarterly earnings per share may differ from the
annual earnings per share because of the differences in the weighted
average number of common shares outstanding and common shares used in the
quarterly and annual computation as well as differences in
rounding.
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
Item
9A.
|
Controls
and Procedures
|
Item
9B
.
|
Other
Information
|
Item
10.
|
Directors
and Executive Officers of the
Registrant
|
Name
(Age)
|
Director
Since
|
Position
with the First Security and
Business
Experience
|
||
Lloyd
L. Montgomery, III (51)
|
2002
|
Banker;
Chief Operating Officer and Executive Vice President of First Security
since March 2002; Chief Operating Officer and Executive Vice President of
FSGBank since September 2003; Chairman of the Board of First State Bank
from July 2002 to September 2003 when it merged with FSGBank; involved
in
business ventures and real estate development from January 2000 to March
2002; and assisted with the First American/merger from November 1999 to
January 2000.
|
||
Hugh
J. Moser, III (57)
|
2003
|
Agriculture
Distributor; President of Tennessee Valley Resources, Inc. since
1983.
|
||
H.
Patrick Wood (76)
|
2002
|
Real
Estate Manager and Developer; Chairman of Lawler-Wood Group since
1975.
|
||
Name
(Age)
|
Officer
Since
|
Position
with First Security and
Business
Experience
|
||
Rodger
B. Holley (57)
|
1999
|
Chairman
of the Board, Chief Executive Officer and President of First Security
since February 1999; Chairman of the Board, Chief Executive Officer and
President of FSGBank since June 2000; and Director of Dalton Whitfield
Bank from September 1999 to September 2003 when it merged with
FSGBank.
|
Name
(Age)
|
Officer
Since
|
Position
with First Security and
Business
Experience
|
||
Lloyd
L. Montgomery, III (51)
|
2002
|
Chief
Operating Officer and Executive Vice President of First Security since
March 2002; Chief Operating Officer and Executive Vice President of
FSGBank since September 2003; Chairman of the Board of First State Bank
from July 2002 to September 2003 when it merged with FSGBank; involved in
business ventures and real estate development from January 2000 to March
2002; and assisted with the F
irst
American/merger
from
November 1999 to January 2000.
|
||
William
L. Lusk, Jr. (36)
|
1999
|
Secretary,
Chief Financial Officer and Executive Vice President of First Security
since April 1999; Secretary, Chief Financial Officer and Executive Vice
President of FSGBank since June 2000; Secretary, Chief Financial Officer
and Executive Vice President of Dalton Whitfield Bank from September 1999
to September 2003 when it merged with FSGBank; and Chief Financial Officer
and Executive Vice President of First State Bank from July 2002 to
September 2003 when it merged with FSGBank.
|
Item
11.
|
Executive
Compensation
|
Annual
Compensation
(1)
|
Long-Term
Compensation
|
|||||||||||||||
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Securities
Underlying Options/SARs (#) (2)
|
All
Other Compensation ($) (3)
|
|||||||||||
Rodger
B. Holley
|
2004
|
$
|
291,667
|
$
|
250
|
18,000
|
$
|
15,864
|
||||||||
Chief
Executive Officer
|
2003
|
$
|
265,417
|
$
|
250
|
48,000
|
$
|
12,000
|
||||||||
2002
|
$
|
200,208
|
$
|
50,250
|
0
|
$
|
6,727
|
|||||||||
Lloyd
L. Montgomery, III
|
2004
|
$
|
192,708
|
$
|
250
|
9,000
|
$
|
11,507
|
||||||||
Chief
Operating Officer
|
2003
|
$
|
179,167
|
$
|
250
|
21,000
|
$
|
10,765
|
||||||||
2002
|
$
|
130,625
|
$
|
50,250
|
69,600
|
$
|
3,713
|
|||||||||
William
L. Lusk, Jr.
|
2004
|
$
|
161,458
|
$
|
5,300
|
9,000
|
$
|
9,641
|
||||||||
Chief
Financial Officer
|
2003
|
$
|
150,625
|
$
|
250
|
18,000
|
$
|
9,053
|
||||||||
2002
|
$
|
129,167
|
$
|
25,250
|
0
|
$
|
5,456
|
(1) |
We
have omitted information on “perks” and other personal benefits with an
aggregate value below the minimum amount required for disclosure under the
Securities and Exchange Commission
Regulations.
|
(2) |
Issued
pursuant to First Security’s 1999 Long-Term Incentive
Plan.
|
(3) |
Consists
of First Security’s contributions to the indicated person’s 401(k) plan
for the year indicated.
|
|
Number
of Securities Underlying Options
|
Percent
of Total Options Granted to Employees
|
Expiration
|
Potential
Realizable Value at
Assumed
Annual Rates of Stock
Price
Appreciation for Option Term
|
||
Name |
Granted
(#)
|
During
2004
|
Exercise
Price ($)
|
Date
|
5%
|
10%
|
Rodger
B. Holley
|
18,000
|
11.05%
|
$8.33
|
1/28/2014
|
$94,296
|
$238,966
|
Lloyd
L. Montgomery, III
|
9,000
|
5.52%
|
$8.33
|
1/28/2014
|
$47,148
|
$119,483
|
William
L. Lusk, Jr.
|
9,000
|
5.52%
|
$8.33
|
1/28/2014
|
$47,148
|
$119,483
|
Number
of
Securities
Underlying Unexercised Options At December 31, 2004
(#)
|
Value
of Unexercised In-the-Money Options At December 31, 2004
($)
|
|
Name
|
Exercisable(E)/Unexercisable
(U)
|
Exercisable
(E)/Unexercisable (U)
|
Rodger
B. Holley
|
135,072
(E) / 56,592 (U)
|
$373,219
(E) / $53,519 (U)
|
Lloyd
L. Montgomery, III
|
63,439
(E) / 54,281 (U)
|
$88,066
(E) / $62,835 (U)
|
William
L. Lusk, Jr.
|
67,032
(E) / 23,472 (U)
|
$188,901
(E) / $20,062 (U)
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
Name
|
Number
of
Shares
|
Percent
of
Class
|
Nature
of Beneficial Ownership
|
Item
13.
|
Certain
Relationships and Related
Transactions
|
Item
14.
|
Principal
Accountant Fees and Services
|
2004
|
2003
|
||||||
Audit
Fees
|
$
|
167,500
|
$
|
120,000
|
|||
Audit-Related
Fees
1
|
157,877
|
104,575
|
|||||
Tax
Fees - Preparation and Compliance
2
|
69,980
|
60,965
|
|||||
Sub
total
|
395,357
|
285,540
|
|||||
Tax
Fees - Other
3
|
55,025
|
30,635
|
|||||
All
Other Fees
4
|
20,000
|
13,525
|
|||||
Sub
total
|
75,025
|
44,160
|
|||||
Total
Fees
|
$
|
470,382
|
$
|
329,700
|
(1) |
Audit-related
fees consisted of assurance and other services that are related to the
performance of the audit or quarterly review of First Security’s financial
statements. Such fees include audits and due diligence procedures related
to acquisitions, audit of First Security’s benefit plan, and accounting
consultation related to the aforementioned items.
|
(2) |
Tax
Fees - Preparation and Compliance consist of the aggregate fees billed for
professional services rendered by Joseph Decosimo and Company, PLLC, for
tax return preparation and compliance
|
(3) |
Tax
Fees - Other consist primarily of tax research and consultation related to
acquisitions as well as tax planning and other tax
advice.
|
(4) |
Other
fees consist primarily of fees billed for consultation with management
regarding the appropriate accounting treatment of debt and equity
financing.
|
Item
15.
|
Exhibits
and Financial Statement Schedules
|
(a)
|
(1)
|
List
of All Financial Statements. The following consolidated financial
statements and report of independent certified public accountants of First
Security are included in this Annual Report on Form
10-K:
|
· |
Report
of Independent Registered Public Accounting
Firm.
|
· |
Consolidated
Balance Sheets as of December 31, 2004 and
2003.
|
· |
Consolidated
Statements of Operations for the Years Ended December 31, 2004, 2003
and 2002.
|
· |
Consolidated
Statements of Shareholders’ Equity for the Years ended December 31,
2004, 2003 and 2002.
|
· |
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2004, 2003
and 2002.
|
· |
Notes
to Consolidated Financial Statements.
|
(a)
|
(2)
|
The
financial statement schedules are either included in the financial
statements or are not applicable.
|
(a)
|
(3)
|
Exhibits
Required by Item 601. The following exhibits are attached hereto or
incorporated by reference herein (numbered to correspond to Item 601(a) of
Regulation S-K, as promulgated by the Securities and Exchange Commission):
|
Number |
Description
|
2.1
|
Assignment
and Assumption Agreement, dated October 21, 2004, by and among Warren E.
Payne, FSGBank, N.A and National Bank of Commerce. (Incorporated by
reference from Exhibit 2.1 to First Security’s Current Report on Form 8-K
dated October 21, 2004 (File No.
000-49747).)
|
2.2
|
Stock
Purchase Agreement, dated October 21, 2004, by and between National Bank
of Commerce and Warren E. Payne. (Incorporated by reference from Exhibit
2.2 to First Security’s Current Report on Form 8-K dated October 21, 2004
(File No. 000-49747).)
|
3.1
|
Articles
of Incorporation of First Security. (Incorporated by reference from
Exhibit 3.1 to First Security’s Registration Statement on Form S-1 dated
April 20, 2001, File No. 333-59338 (the “Form
S-1”).)
|
3.2 |
Bylaws
of First Security. (Incorporated by reference from Exhibit 3.2 to the Form
S-1).
|
10.1*
|
First
Security’s Second Amended and Restated 1999 Long-Term Incentive Plan.
(Incorporated by reference from Exhibit 10.1 to the Form
S-1.)
|
10.2*
|
First
Security’s 2002 Long-Term Incentive Plan. (Incorporated by reference from
Appendix A to First Security’s Proxy Statement filed August 16,
2002.)
|
Number |
Description
|
10.3*
|
First
Amendment to First Security’s 2002 Long-Term Incentive Plan. (Incorporated
by reference from Appendix B to First Security’s Proxy Statement filed
April 16, 2004.)
|
10.4*
|
Form
of Incentive Stock Option Award under the Second Amended and Restated 1999
Long-Term Incentive Plan.
|
10.5*
|
Form
of Incentive Stock Option Award under the 2002 Long-Term Incentive
Plan.
|
10.6*
|
Form
of Non-qualified Stock Option Award under the 2002 Long-Term Incentive
Plan.
|
10.7*
|
Form
of Restricted Stock Award under the 2002 Long-Term Incentive
Plan.
|
10.8*
|
Employment
Agreement Dated as of May 16, 2003 by and between First Security Group,
Inc. and Rodger B. Holley. (Incorporated by reference from Exhibit 10.1 to
First Security’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2003 (File No. 000-49747).)
|
10.9*
|
Employment
Agreement Dated as of May 16, 2003 by and between First Security Group,
Inc. and Lloyd L. Montgomery, III. (Incorporated by reference from Exhibit
10.2 to First Security’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003 (File No. 000-49747).)
|
10.10*
|
Employment
Agreement Dated as of May 16, 2003 by and between First Security Group,
Inc. and William L. Lusk, Jr. (Incorporated by reference from Exhibit 10.3
to First Security’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003 (File No. 000-49747).)
|
14.1
|
First
Security’s Code of Business Conduct and Ethics. (Incorporated by reference
from Exhibit 10.14 to First Security’s Current Report on Form 8-K dated
September 28, 2004 (File No. 000-49747).)
|
21.1
|
Subsidiaries
of the Registrant. (Incorporated by reference from Exhibit 21.1 to First
Security’s Annual Report on Form 10-K for the year ended December 31, 2003
(File No. 000-49747).)
|
23.1 |
Consent
of Joseph Decosimo and Company, PLLC
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
and
Exchange
Act
of 1934.
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
and Exchange Act of 1934.
|
32.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities
Exchange Act of 1934.
|
32.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities
Exchange Act of 1934.
|
FIRST
SECURITY GROUP, INC.
|
||||
BY:
|
/s/
Rodger B. Holley
|
|||
Rodger
B. Holley
|
||||
President
and Chief Executive Officer
|
||||
DATE:
March 14, 2005
|
||||
Number |
Description
|
2.1
|
Assignment
and Assumption Agreement, dated October 21, 2004, by and among Warren E.
Payne, FSGBank, N.A and National Bank of Commerce. (Incorporated by
reference from Exhibit 2.1 to First Security’s Current Report on Form 8-K
dated October 21, 2004 (File No.
000-49747).)
|
2.2
|
Stock
Purchase Agreement, dated October 21, 2004, by and between National Bank
of Commerce and Warren E. Payne. (Incorporated by reference from Exhibit
2.2 to First Security’s Current Report on Form 8-K dated October 21, 2004
(File No. 000-49747).)
|
3.1
|
Articles
of Incorporation of First Security. (Incorporated by reference from
Exhibit 3.1 to First Security’s Registration Statement on Form S-1 dated
April 20, 2001, File No. 333-59338 (the “Form
S-1”).)
|
3.2 |
Bylaws
of First Security. (Incorporated by reference from Exhibit 3.2 to the Form
S-1).
|
10.1*
|
First
Security’s Second Amended and Restated 1999 Long-Term Incentive Plan.
(Incorporated by reference from Exhibit 10.1 to the Form
S-1.)
|
10.2*
|
First
Security’s 2002 Long-Term Incentive Plan. (Incorporated by reference from
Appendix A to First Security’s Proxy Statement filed August 16,
2002.)
|
10.3*
|
First
Amendment to First Security’s 2002 Long-Term Incentive Plan. (Incorporated
by reference from Appendix B to First Security’s Proxy Statement filed
April 16, 2004.)
|
10.4*
|
Form
of Incentive Stock Option Award under the Second Amended and Restated 1999
Long-Term Incentive Plan.
|
10.5*
|
Form
of Incentive Stock Option Award under the 2002 Long-Term Incentive
Plan.
|
10.6*
|
Form
of Non-qualified Stock Option Award under the 2002 Long-Term Incentive
Plan.
|
10.7*
|
Form
of Restricted Stock Award under the 2002 Long-Term Incentive
Plan.
|
10.8*
|
Employment
Agreement Dated as of May 16, 2003 by and between First Security Group,
Inc. and Rodger B. Holley. (Incorporated by reference from Exhibit 10.1 to
First Security’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2003 (File No. 000-49747).)
|
10.9*
|
Employment
Agreement Dated as of May 16, 2003 by and between First Security Group,
Inc. and Lloyd L. Montgomery, III. (Incorporated by reference from Exhibit
10.2 to First Security’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003 (File No. 000-49747).)
|
10.10*
|
Employment
Agreement Dated as of May 16, 2003 by and between First Security Group,
Inc. and William L. Lusk, Jr. (Incorporated by reference from Exhibit 10.3
to First Security’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003 (File No. 000-49747).)
|
14.1
|
First
Security’s Code of Business Conduct and Ethics. (Incorporated by reference
from Exhibit 10.14 to First Security’s Current Report on Form 8-K dated
September 28, 2004 (File No. 000-49747).)
|
21.1
|
Subsidiaries
of the Registrant. (Incorporated by reference from Exhibit 21.1 to First
Security’s Annual Report on Form 10-K for the year ended December 31, 2003
(File No. 000-49747).)
|
23.1 |
Consent
of Joseph Decosimo and Company, PLLC
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
and
Exchange
Act
of 1934.
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
and Exchange Act of 1934.
|
32.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities
Exchange Act of 1934.
|
32.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities
Exchange Act of 1934.
|
Years
of Service
After
Date of Grant
|
Percent
of Option Shares Vested
|
|||
|
|
FIRST
SECURITY GROUP, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
OPTIONEE:
|
|||
Name:
|
|||
Address:
|
|||
Date:
|
[
]
|
Cash
Only
:
by delivering a check to First Security Group, Inc. for
$__________.
|
[
]
|
Cash
and Shares
:
by delivering a check to First Security Group, Inc. for $__________ for
the part of the exercise price. I will pay the balance of the exercise
price by delivering to the Company a stock certificate with my endorsement
for shares of Company common stock ("Stock") that I have owned for at
least six months. If the number of shares of Stock represented by such
stock certificate exceeds the number needed to pay the exercise price, the
Company will issue me a new stock certificate for the
excess.
|
[
]
|
Shares
Only
:
by delivering to the Company a stock certificate with my endorsement for
shares of Stock that I have owned for at least six months. If the number
of shares of Stock represented by such stock certificate exceeds the
number needed to pay the exercise price, the Company will issue me a new
stock certificate for the excess.
|
[
]
|
Cash
From Broker
:
by delivering the purchase price from __________________, a broker, dealer
or other "creditor" as defined by Regulation T issued by the Board of
Governors of the Federal Reserve System (the "Broker"). I authorize the
Company to issue a stock certificate in the number of shares indicated
above in the name of the Broker in accordance with instructions received
by the Company from the Broker and to deliver such stock certificate
directly to the Broker (or to any other party specified in the
instructions from the Broker) upon receiving the exercise price from the
Broker.
|
[
]
|
Non-Qualified
Stock Option
. I
hereby designate and agree that ____ shares of Stock being acquired
pursuant to this Notice of Exercise of Option to Purchase Common Stock of
First Security Group, Inc. (the "Notice") as having been acquired through
the exercise of a Non-Qualified Stock Option. All other shares of Stock,
if any, being acquired pursuant to this Notice shall be deemed to have
been acquired by me as an Incentive Stock Option.
|
Very
truly yours,
|
||
Years
of Service
|
||||
After
Date of Grant
|
Percent
of Option Shares Vested
|
FIRST
SECURITY GROUP, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
OPTIONEE:
|
|||
Name:
|
|||
Address:
|
|||
Date:
|
[
]
|
Cash
Only
:
by delivering a check to First Security Group, Inc. for
$__________.
|
[
]
|
Cash
and Shares
:
by delivering a check to First Security Group, Inc. for $__________ for
the part of the exercise price. I will pay the balance of the exercise
price by delivering to the Company a stock certificate with my endorsement
for shares of Company common stock ("Stock") that I have owned for at
least six months. If the number of shares of Stock represented by such
stock certificate exceeds the number needed to pay the exercise price, the
Company will issue me a new stock certificate for the
excess.
|
[
]
|
Shares
Only
:
by delivering to the Company a stock certificate with my endorsement for
shares of Stock that I have owned for at least six months. If the number
of shares of Stock represented by such stock certificate exceeds the
number needed to pay the exercise price, the Company will issue me a new
stock certificate for the excess.
|
[
]
|
Cash
From Broker
:
by delivering the purchase price from __________________, a broker, dealer
or other "creditor" as defined by Regulation T issued by the Board of
Governors of the Federal Reserve System (the "Broker"). I authorize the
Company to issue a stock certificate in the number of shares indicated
above in the name of the Broker in accordance with instructions received
by the Company from the Broker and to deliver such stock certificate
directly to the Broker (or to any other party specified in the
instructions from the Broker) upon receiving the exercise price from the
Broker.
|
[
]
|
Non-Qualified
Stock Option
. I
hereby designate and agree that ____ shares of Stock being acquired
pursuant to this Notice of Exercise of Option to Purchase Common Stock of
First Security Group, Inc. (the "Notice") as having been acquired through
the exercise of a Non-Qualified Stock Option. All other shares of Stock,
if any, being acquired pursuant to this Notice shall be deemed to have
been acquired by me as an Incentive Stock Option.
|
Very
truly yours,
|
||
Years
of Service
|
||||
After
Date of Grant
|
Percent
of Option Shares Vested
|
FIRST SECURITY GROUP, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
OPTIONEE:
|
|||
Name:
|
|||
Address:
|
|||
Date:
|
[
]
|
Cash
Only
:
by delivering a check to First Security Group, Inc. for
$__________.
|
[
]
|
Cash
and Shares
:
by delivering a check to First Security Group, Inc. for $__________ for
the part of the exercise price. I will pay the balance of the exercise
price by delivering to the Company a stock certificate with my endorsement
for shares of Company common stock ("Stock") that I have owned for at
least six months. If the number of shares of Stock represented by such
stock certificate exceeds the number needed to pay the exercise price, the
Company will issue me a new stock certificate for the
excess.
|
[
]
|
Shares
Only
:
by delivering to the Company a stock certificate with my endorsement for
shares of Stock that I have owned for at least six months. If the number
of shares of Stock represented by such stock certificate exceeds the
number needed to pay the exercise price, the Company will issue me a new
stock certificate for the excess.
|
[
]
|
Cash
From Broker
:
by delivering the purchase price from __________________, a broker, dealer
or other "creditor" as defined by Regulation T issued by the Board of
Governors of the Federal Reserve System (the "Broker"). I authorize the
Company to issue a stock certificate in the number of shares indicated
above in the name of the Broker in accordance with instructions received
by the Company from the Broker and to deliver such stock certificate
directly to the Broker (or to any other party specified in the
instructions from the Broker) upon receiving the exercise price from the
Broker.
|
Very
truly yours,
|
||
A.
|
Grant
Date
:
.
|
B.
|
Restricted
Shares
:
______________ shares of the Company’s common stock (“Common Stock”), $.01
par value per share.
|
C.
|
Vesting
Schedule
:
The Restricted Shares shall vest or be forfeited back to the Company, as
the case may be, according to the Vesting Schedule attached hereto as
Schedule
1
hereto (the “Vesting Schedule”). The Restricted Shares which have become
vested pursuant to the Vesting Schedule are herein referred to as the
“Vested Restricted Shares.”
|
FIRST
SECURITY GROUP, INC.
|
|||
By:
|
|||
Title:
|
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND FORFEITURE PROVISIONS WHICH ALSO APPLY TO THE TRANSFEREE AS SET FORTH IN A RESTRICTED STOCK AWARD, DATED _________________, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY. |
I.
|
The
Restricted Shares shall become vested in accordance with the following
Vesting Schedule:
|
Percentage
of Restricted Shares
|
||||
Months
of Vesting Service
|
which
are Vested Restricted Shares
|
II. |
The
Director shall receive credit for one Month of Vesting Service for each
full consecutive calendar month beginning ___________________ and ending
on the date the Director is neither a director of the Company nor of any
wholly-owned subsidiary of the Company, regardless of the reason. Except
as provided in Paragraph III below, the Restricted Shares shall be
forfeited if they have not become vested at the time the Director is
neither a director of the Company nor of any wholly-owned subsidiary of
the Company, regardless of the reason.
|
III. |
The
Restricted Shares also shall become Vested Restricted Shares if the
Director ceases to serve upon the Board of Directors of the Company or the
board of directors of any wholly-owned subsidiary prior to end of
_______________________ by reason of his death or
Disability.
|
Date:
|
Signed:
|
|||
Print
Name:
|
DECOSIMO
CERTIFIED PUBLIC ACCOUNTANTS
|
Joseph
Decosimo and Company, PLLC
Suite
1100 - Two Union Square
Chattanooga,
Tennessee 37402
www.decosimo.com
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e))for the registrant
and we have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluations; and
|
c)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting.
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation, to the registrant’s auditors and the audit
committee of registrant’s board of directors (or persons performing the
equivalent function):
|
/s/
Rodger B. Holley
|
||
Rodger
B. Holley
|
||
Chief
Executive Officer
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and we have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluations; and
|
c)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting.
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation, to the registrant’s auditors and the audit
committee of registrant’s board of directors (or persons performing the
equivalent function):
|
a)
|
all
significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls;
and
|
b) |
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal
controls.
|
/s/
William L. Lusk, Jr.
|
|
|
William L.
Lusk, Jr.
|
||
Chief
Financial Officer
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
March
14, 2005
|
/s/
William L. Lusk, Jr.
|
||
William
L. Lusk, Jr.
|
|||
Secretary,
Chief Financial Officer &
|
|||
Executive
Vice President
|