Current Report Filing (8-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8‑K

CURRENT REPORT Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934



Date of report (Date of earliest event reported)		August 5, 2014

First Security Group, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Tennessee

(State or Other Jurisdiction of Incorporation)



000-49747		58-2461486
(Commission File Number)		(IRS Employer Identification No.)



531 Broad Street, Chattanooga, Tennessee		37402
(Address of Principal Executive Offices)		(Zip Code)

(423) 266-2000

(Registrant's telephone number, including area code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

A copy of First Security's press release summarizing its financial results for the second quarter of 2014 is attached as Exhibit 99.1. Summarized financial highlights and consolidated financial statements are attached as Exhibit 99.2 and 99.3, respectively. The publication date of the press release is August 5, 2014.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits



Exhibit No.		Description
99.1		Second Quarter 2014 Earnings Release dated August 5, 2014. ¹
99.2		Financial Highlights. ¹
99.3		Consolidated Balance Sheet and Consolidated Statement of Operations. ¹
¹The information provided in the attached press release shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST SECURITY GROUP, INC.

Dated: August 5, 2014



By:	/s/ John R. Haddock
Name:	John R. Haddock
Title:	Executive Vice President and Chief Financial Officer

Exhibit Index



Exhibit No.		Description
99.1		Second Quarter 2014 Earnings Release dated August 5, 2014.
99.2		Financial Highlights
99.3		Consolidated Balance Sheet and Consolidated Statement of Operations

First Security Group Announces Return to Profitability

Strong Loan Growth Continues

CHATTANOOGA, TN, August 5, 2014 - First Security Group, Inc. (NASDAQ: FSGI) (“First Security” or “FSG”) today reported net income for the second quarter of 2014 of $613 thousand, or $0.01 per basic and diluted share, as compared to a loss of $45 thousand in the first quarter of 2014, or $0.00 per basic and diluted share. Loans increased by $54.7 million, or 9.0% (36.2% annualized), since March 31, 2014 and $117.5 million, or 21.7%, since June 30, 2013.

“We are pleased to have achieved core profitability in the second quarter. We believe that we have reached an inflection point in our recovery and that barring any unforeseen events, First Security is on a path to healthy profitability built on a strong, and improving, balance sheet,” said Michael Kramer, First Security’s President and Chief Executive Officer. “Our loan growth, combined with improvements in our deposit mix and enhancements to our non-interest income, are all on positive trajectories to produce both sustainable and increasing profitability .”

The below discussion of First Security’s results of operations and financial condition is supplemented by the accompanying financial highlights.

Net Interest Income

For the second quarter of 2014, net interest income improved by $620 thousand, or 9.0%, to $7.5 million compared to $6.9 million for the first quarter of 2014. Interest income on loans, including fees, increased by $656 thousand while total interest income increased by only $514 thousand due to reduction in the investment security portfolio. During the first and second quarters of 2014, First Security sold approximately $64.5 million of lower yielding investment securities to redeploy into loans. Total interest expense improved by $106 thousand through reductions in the cost of deposits partially offset by the increase in total deposits. For the second quarter of 2014, the net interest margin improved by 9 basis points to 3.30% compared to 3.21% in the first quarter of 2014.

Loans

Loans totaled $659.5 million as of June 30, 2014, a $54.7 million increase, or 9.0% (36.2% annualized), from the March 31, 2014 total of $604.9 million, and a $76.4 million increase, or 13.1% (26.1% annualized), from the December 31, 2013 total of $583.1 million. The main categories of loan growth during the first six months of 2014 included: commercial real estate by $49.6 million, or 18.9%; construction and land development by $12.8 million, or 32.2%; and commercial loans by $10.6 million, or 19.2%. The growth in commercial real estate is primarily reflective of First Security's Tri-Net Direct line of business, which provides interim and long-term financing to professional developers and private investors of commercial real estate on long-term leases to tenants that are investment grade or have investment grade attributes.

Deposits

During the second quarter, First Security continued to improve its deposit mix to reduce the overall cost of deposits from 0.65% for the first quarter of 2014 to 0.59% for the second quarter of 2014. Average pure deposits, defined as transaction accounts, for the second quarter of 2014 accounted for 54.1% of average total deposits as compared to 53.0% for the first quarter of 2014. As of June 30, 2014, pure deposits totaled $485.2 million which is $29.8

million greater than the average balance during the second quarter as solid growth was achieved late in the second quarter. Average core deposits, defined as transaction accounts plus retail CDs, remained steady at 74.0% of average total deposits during the second quarter. Brokered deposits increased by a net $14.5 million from March 31, 2014 to June 30, 2014 to $87.0 million. This increase includes $17.7 million of customer deposits placed and reciprocated through FSG's CDARS® and Insured Cash Sweep® products.

Non-Interest Income

Non-interest income totaled $3.0 million for the second quarter of 2014 compared to $2.6 million for the first quarter of 2014. FSG reported $450 thousand in net gains on sales of loans during the second quarter as compared to $22 thousand in the first quarter of 2014. This represents the aggregate gains from First Security’s SBA lending department as well as gains from $12.5 million of the $33.6 million of commercial real estate loans that were transferred to held-for-sale as of March 31, 2014. First Security expects to sell the remaining $21.1 million during the third quarter of 2014. Additionally, income from mortgage banking increased by $99 thousand to $279 thousand in the second quarter of 2014.

“Since the low water mark for loan balances on September 30, 2013, we have increased our loan portfolio by nearly $125 million in the last nine months,” said John Haddock, First Security’s EVP and Chief Financial Officer. “In addition to the loan growth, we realized $450 thousand in gains from loan sales during the quarter. Given the specialized nature of these loans, and our embedded capacity, we believe these gains will prove to be recurring over time.”

Non-Interest Expense

Non-interest expense decreased by $344 thousand to $10.1 million for the second quarter of 2014 as compared to the first quarter of 2014. Total non-performing asset costs, including write-downs, net gains or losses and associated expenses, declined by $295 thousand in the second quarter of 2014. As of June 30, 2014, full-time equivalent employees declined to 264 as compared to 275 as of March 31, 2014 and 327 as of June 30, 2013. Salary expense remained consistent in the second quarter as compared to the first quarter.

Asset Quality

First Security recorded a $270 thousand negative provision to adjust the allowance for loan losses to First Security’s current estimate of $9.4 million as of June 30, 2014. The ratio of the allowance to total loans declined from 1.52% as of March 31, 2014 to 1.43% as of June 30, 2014. Total non-accrual loans declined by $1.1 million, or 18.8%, to $4.9 million as of June 30, 2014 compared to March 31, 2014. NPAs to total assets as of June 30, 2014 improved to 1.35% compared to 1.42% as of March 31, 2014.

Capital

Stockholders’ equity as of June 30, 2014 totaled $86.6 million, a $1.9 million increase from March 31, 2014. As of June 30, 2014, book value per share increased to $1.30 per share compared to $1.27 per share as of March 31, 2014.

“The recent announcement of the $600 million Volkswagen expansion in Chattanooga that includes an estimated 2,000 direct and 3,600 indirect jobs as well as the South’s first automotive research and development center speaks volumes to the economic activity and growth potential within our east Tennessee markets,” said CEO Kramer. “We believe that we are uniquely positioned to build a successful community bank that provides solid returns to its shareholders while serving the banking needs of its communities.”

About First Security Group, Inc.

First Security Group, Inc. is a bank holding company headquartered in Chattanooga, Tennessee, with $1.0 billion in assets. Founded in 1999, First Security’s community bank subsidiary, FSGBank, N.A. has 26 full-service banking offices along the interstate corridors of eastern and middle Tennessee and northern Georgia. FSGBank provides retail and commercial banking services, trust and investment management, mortgage banking, financial planning, internet banking (www.FSGBank.com).

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America (GAAP). First Security’s management uses these “non-GAAP” measures in its analysis of First Security’s performance. Non-GAAP measures typically adjust GAAP performance measures to exclude the effects of charges, expenses and gains related to the consummation of mergers and acquisitions, and costs related to the integration of merged entities. These non- GAAP measures may also exclude other significant gains, losses or expenses that are unusual in nature and not expected to recur. Since these items and their impact on First Security’s performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important for a proper understanding of the operating results of First Security’s core business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Forward-Looking Statements

This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1993) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economy; and other factors, including risk factors, referred to from time to time in filings made by First Security with the Securities and Exchange Commission. First Security undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

Public companies, from time to time, become aware of rumors concerning their business. Investors are cautioned that in this age of instant communication and internet access, it may be important to avoid relying on rumors and unsubstantiated information. First Security complies with Federal and State law applicable to disclosure of information. Investors may be at significant risk in relying on unsubstantiated information from other sources.

FOR FURTHER INFORMATION:

John R. Haddock, EVP & CFO

Tel: (423) 308-2075

E-mail: jhaddock@FSGBank.com

First Security Group, Inc. and Subsidiary

Consolidated Financial Highlights

(unaudited)



	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			Year-to-Date
	2014			2014			2013			2013			2013			June 30, 2014			June 30, 2013
	(in thousands, except per share amounts and full-time equivalent employees)
Earnings:
Net interest income	$	7,545		$	6,925		$	6,478		$	6,165		$	5,486		$	14,470		$	10,726
Credit for loan and lease losses	$	(270	)	$	(972	)	$	(955	)	$	(1,632	)	$	(826	)	$	(1,242	)	$	(148	)
Non-interest income¹	$	3,030		$	2,635		$	2,188		$	2,292		$	2,190		$	5,665		$	4,204
Non-interest expense¹	$	10,101		$	10,445		$	10,150		$	11,197		$	12,578		$	20,546		$	26,414
Income tax provision (benefit)	$	131		$	132		$	119		$	322		$	(83	)	$	263		$	36
Dividends and accretion on preferred stock	$	—		$	—		$	—		$	—		$	(858	)	$	—		$	(1,381	)
Effect of exchange on preferred stock to common stock	$	—		$	—		$	—		$	—		$	26,179		$	—		$	26,179
Net income available (loss allocated) to common stockholders	$	613		$	(45	)	$	(648	)	$	(1,430	)	$	21,328		$	568		$	13,426

Per Share Data:
Net income available (loss allocated) to common stockholders, basic	$	0.01		$	0.00		$	(0.01	)	$	(0.02	)	$	0.39		$	0.01		$	0.47
Net income available (loss allocated) to common stockholders, diluted	$	0.01		$	0.00		$	(0.01	)	$	(0.02	)	$	0.39		$	0.01		$	0.47
Book value per common share	$	1.30		$	1.27		$	1.26		$	1.25		$	1.39		$	1.30		$	1.39

Performance Ratios:
Return on average assets	0.24		%	(0.02		)%	(0.26		)%	(0.56		)%	7.97		%	0.06		%	1.26		%
Return on average common equity	2.86		%	(0.21		)%	(3.08		)%	(7.21		)%	95.78		%	0.67		%	23.61		%
Efficiency ratio	95.52		%	109.26%			117.12%			132.40%			163.86%			102.04		%	176.92		%
Non-interest income to net interest income and non-interest income	28.65		%	27.56%			25.25%			27.10%			28.53%			28.14		%	28.16		%

Capital:
Total equity to total assets	8.55		%	8.63%			8.56%			8.24%			8.12%			8.55		%	8.12		%

Liquidity, Yields and Rates:
Interest-bearing cash - average balance	$	8,997		$	13,653		$	34,075		$	68,964		$	122,499		$	11,312		$	161,343
Investment securities - average balance	247,459			272,563			330,094			329,385			322,747			259,941			268,872
Loans - average balance	673,175			604,298			550,749			529,406			547,499			638,927			550,010
Average Earning Assets	$	929,631		$	890,514		$	914,918		$	927,755		$	992,745		$	910,180		$	980,225
Pure deposits² - average balance	$	455,407		$	446,820		$	452,495		$	454,379		$	431,988		$	451,138		$	420,824
Core deposits³ - average balance	622,636			624,365			640,177			653,044			648,373			623,496			643,482
Customer deposits⁴ - average balance	757,704			773,336			801,827			829,926			847,007			765,477			843,596



	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			Year-to-Date
	2014			2014			2013			2013			2013			June 30, 2014			June 30, 2013
	(in thousands, except per share amounts and full-time equivalent employees)
Brokered deposits - average balance	84,021			70,204			84,143			90,323			111,801			77,150			138,245
Total deposits - average balance	$	841,725		$	843,540		$	885,970		$	920,249		$	958,808		$	842,627		$	981,841
Total loans to total deposits	76.01		%	71.85		%	68.02		%	58.76		%	56.59		%	76.01		%	56.59		%
Yield on earning assets	3.86		%	3.85		%	3.53		%	3.57		%	3.20		%	3.86		%	3.26		%
Rate on customer deposits (including impact of non-interest bearing DDAs)	0.37		%	0.41		%	0.48		%	0.56		%	0.63		%	0.39		%	0.66		%
Cost of deposits	0.59		%	0.65		%	0.74		%	0.84		%	0.94		%	0.62		%	0.99		%
Rate on interest-bearing funding	0.68		%	0.78		%	0.73		%	1.01		%	1.11		%	0.72		%	1.15		%
Net interest margin, taxable equivalent	3.30		%	3.21		%	2.89		%	2.71		%	2.27		%	3.26		%	2.26		%

Non-Interest Income:
Service Charges on Deposits	$	769		$	741		$	800		$	798		$	763		$	1,510		$	1,500
POS Fees	439			401			420			401			398			840			769
BOLI	235			351			239			238			241			586			484
Mortgage Banking Income	279			180			208			420			211			459			507
Trust	235			200			188			193			187			435			334
Other	376			369			165			242			236			745			456
Net Gains on Sales of Loans	450			22			—			—			—			472			—
Net Gains on AFS sales	247			371			168			—			154			618			154
Total Non-Interest Income	$	3,030		$	2,635		$	2,188		$	2,292		$	2,190		$	5,665		$	4,204

Non-Interest Expense:
Salaries and Benefits	$	5,225		$	5,274		$	5,503		$	5,807		$	5,665		$	10,499		$	11,274
Occupancy	776			820			799			891			794			1,596			1,612
Furniture and Fixtures	520			557			544			656			595			1,077			1,144
Professional Fees	690			599			417			533			706			1,289			1,307
FDIC insurance assessments	336			311			150			150			1,000			647			2,000
Write-downs on OREO and repossessions	76			309			375			374			309			385			1,623
Losses (Gains) on OREO, repossessions and fixed assets, net	(15		)	10			57			(116		)	(153		)	(5		)	(294		)
Non-performing asset expenses, net	184			221			450			488			1,142			405			3,018
Data processing	506			588			517			628			503			1,094			1,069
Communications	147			150			172			141			142			297			270
Debit card fees	232			258			181			207			201			490			419
Intangible asset amortization	49			48			57			67			71			97			145
Printing and supplies	150			207			121			213			176			357			314
Advertising	135			134			65			89			59			269			156
Insurance	303			325			251			523			946			628			1,351
Other	787			634			491			546			422			1,421			1,006
Total Non-Interest Expense	$	10,101		$	10,445		$	10,150		$	11,197		$	12,578		$	20,546		$	26,414

Asset Quality:
Net (recoveries) charge-offs	$	(470	)	$	228		$	(754	)	$	(32	)	$	374		$	(242	)	$	1,352



	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			Year-to-Date
	2014			2014			2013			2013			2013			June 30, 2014			June 30, 2013
	(in thousands, except per share amounts and full-time equivalent employees)
Net loan (recoveries) charged-offs to average loans, annualized	(0.14		)%	0.15		%	(0.55		)%	(0.02		)%	0.27		%	(0.08		)%	0.50		%
Non-accrual loans	$	4,891		$	6,027		$	7,203		$	6,803		$	8,628		$	4,891		$	8,628
Other real estate owned and repossessed assets, net	$	7,725		$	7,075		$	8,213		$	8,678		$	10,549		$	7,725		$	10,549
Loans 90 days past due	$	1,083		$	854		$	928		$	509		$	332		$	1,083		$	332
Non-performing assets (NPA)	$	13,699		$	13,956		$	16,344		$	15,990		$	19,509		$	13,699		$	19,509
NPA to total assets	1.35		%	1.42		%	1.67		%	1.58		%	1.83		%	1.35		%	1.83		%
Non-performing loans (NPL)	$	5,974		$	6,881		$	8,131		$	7,312		$	8,960		$	5,974		$	8,960
NPL to total loans	0.91		%	1.14		%	1.39		%	1.37		%	1.65		%	0.91		%	1.65		%
Allowance for loan and lease losses to total loans	1.43		%	1.52		%	1.80		%	2.00		%	2.27		%	1.43		%	2.27		%
Allowance for loan and lease losses to NPL	157.35		%	133.70		%	129.14		%	146.33		%	137.28		%	157.35		%	137.28		%

Period End Balances:
Loans, excluding HFS	$	659,539		$	604,859		$	583,097		$	534,627		$	542,019		$	659,539		$	542,019
Allowance for loan and lease losses	$	9,400		$	9,200		$	10,500		$	10,700		$	12,300		$	9,400		$	12,300
Intangible assets	$	233		$	282		$	330		$	388		$	455		$	233		$	455
Assets	$	1,012,685		$	980,505		$	977,574		$	1,011,855		$	1,066,649		$	1,012,685		$	1,066,649
Total deposits	$	867,709		$	841,832		$	857,268		$	909,848		$	957,811		$	867,709		$	957,811
Common stockholders' equity	$	86,566		$	84,654		$	83,649		$	83,388		$	86,654		$	86,566		$	86,654
Total stockholders' equity	$	86,566		$	84,654		$	83,649		$	83,388		$	86,654		$	86,566		$	86,654
Common stock market capitalization	$	144,594		$	138,601		$	153,187		$	138,534		$	135,469		$	144,594		$	135,469
Full-time equivalent employees	264			275			285			313			327			264			327
Common shares outstanding	66,633			66,635			66,603			66,603			62,428			66,633			62,428

Average Balances:
Loans, including HFS	$	673,175		$	604,298		$	550,749		$	529,406		$	547,499		$	638,927		$	550,010
Intangible assets	$	265		$	313		$	363		$	405		$	476		$	289		$	537
Earning assets	$	929,631		$	890,514		$	914,918		$	927,755		$	992,745		$	910,180		$	980,225
Assets	$	1,006,143		$	967,624		$	993,447		$	1,016,919		$	1,070,895		$	986,988		$	1,062,181
Deposits	$	841,725		$	843,540		$	885,970		$	920,249		$	958,808		$	842,627		$	981,841
Common stockholders' equity	$	85,613		$	84,340		$	84,125		$	79,382		$	89,069		$	84,979		$	56,870
Total stockholders' equity	$	85,613		$	84,340		$	84,125		$	79,382		$	92,658		$	84,979		$	56,870
Common shares outstanding, basic - wtd	65,731			65,726			66,603			62,600			55,174			65,728			28,542
Common shares outstanding, diluted - wtd	65,737			65,726			66,603			62,600			55,176			65,732			28,565

¹ Certain amounts were reclassified between non-interest income and non-interest expense to conform with the current presentation.
² Pure deposits are all transaction-based accounts, including non-interest bearing DDAs, interest bearing DDAs, money market accounts and savings accounts.
³ Core deposits are Pure deposits plus customer certificates of deposits less than $100,000.
⁴ Customer deposits excluded brokered deposits.

First Security Group, Inc. and Subsidiary

Consolidated Financial Highlights

Non-GAAP Reconciliation Table

(unaudited)



	2nd Quarter		1st Quarter		4th Quarter		3rd Quarter		2nd Quarter			Year-to-Date
	2014		2014		2013		2013		2013			June 30, 2014		June 30, 2013
	(in thousands, except per share data)

Total stockholders' equity	$	86,566	$	84,654	$	83,649	$	83,388	$	86,654		$	86,566	$	86,654
Effect of preferred stock	—		—		—		—		—			—		(32,660		)
Common stockholders' equity	$	86,566	$	84,654	$	83,649	$	83,388	$	86,654		$	86,566	$	53,994

Average total stockholders' equity	$	85,613	$	84,340	$	84,125	$	79,382	$	92,658		$	84,979	$	56,870
Effect of average preferred stock	—		—		—		—		(3,589		)	—		(36,175		)
Average common stockholders' equity	$	85,613	$	84,340	$	84,125	$	79,382	$	89,069		$	84,979	$	20,695

First Security Group, Inc. and Subsidiary

Consolidated Balance Sheets



	June 30, 2014			December 31, 2013			June 30, 2013
(in thousands, except share data)	(unaudited)						(unaudited)
ASSETS
Cash & Due from Banks	$	8,880		$	10,742		$	11,757
Interest Bearing Deposits in Banks	16,498			10,126			101,495
Cash and Cash Equivalents	25,378			20,868			113,252
Securities Available-for-Sale	102,429			172,830			337,322
Securities Held-to-Maturity, at amortized cost (fair value - $132,695)	130,709			132,568			—
Loans Held for Sale	28,547			220			3,785
Loans	659,539			583,097			542,019
Less: Allowance for Loan and Lease Losses	9,400			10,500			12,300
Net Loans	650,139			572,597			529,719
Premises and Equipment, net	26,510			27,888			29,014
Bank Owned Life Insurance	28,835			28,346			27,961
Other Real Estate Owned	7,717			8,201			10,533
Other Assets	12,421			14,056			15,063
TOTAL ASSETS	$	1,012,685		$	977,574		$	1,066,649

LIABILITIES
Deposits
Noninterest-Bearing Demand	$	149,588		$	144,365		$	138,543
Interest-Bearing Demand	102,106			95,559			90,854
Savings and Money Market Accounts	233,502			206,125			206,539
Certificates of Deposit of less than $100 thousand	163,486			182,408			215,098
Certificates of Deposit of $100 thousand or more	131,991			153,750			196,896
Brokered Deposits	87,036			75,062			109,881
Total Deposits	867,709			857,269			957,811
Federal Funds Purchased and Securities Sold
under Agreements to Repurchase	15,911			12,520			14,067
Other Borrowings	38,075			20,000			—
Other Liabilities	4,424			4,137			8,117
Total Liabilities	926,119			893,926			979,995
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value 150,000,000 shares authorized; 66,632,601 shares issued as of June 30, 2014; 66,602,601 shares issued as of December 31, 2013, 62,428,367 shares issued as of June 30, 2013	764			764			723
Paid-In Surplus	197,197			196,536			191,629
Common Stock Warrants	—			—			—
Accumulated Deficit	(103,474		)	(104,042		)	(101,965		)
Accumulated Other Comprehensive Income	(7,921		)	(9,610		)	(3,733		)
Total Stockholders' Equity	86,566			83,648			86,654
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,012,685		$	977,574		$	1,066,649

First Security Group, Inc. and Subsidiary

Consolidated Statements of Operations

(unaudited)



	Three Months Ended						Six Months Ended
	June 30						June 30
(in thousands, except per share data)	2014			2013			2014			2013
INTEREST INCOME
Loans, including fees	$	7,672		$	6,406		$	14,688		$	13,076
Investment Securities – taxable	936			1,009			1,996			1,821
Investment Securities – non-taxable	198			231			438			437
Other	37			139			50			260
Total Interest Income	8,843			7,785			17,172			15,594
INTEREST EXPENSE
Interest Bearing Demand Deposits	48			77			95			152
Savings Deposits and Money Market Accounts	144			218			274			440
Certificates of Deposit of less than $100 thousand	262			520			571			1,084
Certificates of Deposit of $100 thousand or more	243			527			547			1,083
Brokered Deposits	531			941			1,097			2,078
Other	70			16			118			31
Total Interest Expense	1,298			2,299			2,702			4,868
NET INTEREST INCOME	7,545			5,486			14,470			10,726
Credit for Loan and Lease Losses	(270		)	(826		)	(1,242		)	(148		)
NET INTEREST INCOME AFTER CREDIT FOR LOAN AND LEASE LOSSES	7,815			6,312			15,712			10,874
NONINTEREST INCOME
Service Charges on Deposit Accounts	769			763			1,510			1,500
Mortgage Banking Income	279			211			459			507
Gain on Sales of Securities Available-for-Sale	247			154			618			154
Gain on Sales of Loans	450			—			472			—
Other	1,285			1,062			2,606			2,043
Total Noninterest Income	3,030			2,190			5,665			4,204
NONINTEREST EXPENSES
Salaries and Employee Benefits	5,225			5,665			10,499			11,274
Expense on Premises and Fixed Assets, net of rental income	1,296			1,389			2,673			2,756
Other	3,580			5,524			7,374			12,384
Total Noninterest Expenses	10,101			12,578			20,546			26,414
INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT)	744			(4,076		)	831			(11,336		)
Income Tax Provision (Benefit)	131			(83		)	263			36
NET INCOME (LOSS)	613			(3,993		)	568			(11,372		)
Preferred Stock Dividends	—			(517		)	—			(929		)
Accretion on Preferred Stock Discount	—			(341		)	—			(452		)
Effect of Exchange of Preferred Stock to Common Stock	—			26,179			—			26,179
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	613		$	21,328		$	568		$	13,426
NET INCOME PER SHARE:
Net Income Per Share – Basic	$	0.01		$	0.39		$	0.01		$	0.47
Net Income Per Share – Diluted	$	0.01		$	0.39		$	0.01		$	0.47
Dividends Declared Per Common Share	$	—		$	—		$	—		$	—