Statement of Operations / Balance Sheet / Statistics and Ratios

 

October 30, 2007

Dear Valued Shareholder:                       3rd Quarter 2007 Report

We are pleased to announce our financial performance for the third quarter, an improvement of 3.7% in earnings compared to the third quarter of 2006. Enclosed is detailed information about our third quarter and the first nine months performance of this year.

Net income for the third quarter totaled $230,287 compared to $221,991 for the same period in 2006. On a year to date basis, net income was $676,690 for 2007 compared to $695,885 for 2006.

Assets totaled $138.5 million at September 30, 2007, which was $3.9 million less than one year ago. The investment portfolio declined $11.3 million as proceeds were used to continue our strategy to decrease higher costing liabilities.  Loan growth continued to be strong, increasing $8.5 million or 9.3% over the past 12 months. During the first nine months of 2007 our yield on average earning assets improved by 56 basis points versus the same period last year. Our cost of funds increased only 33 basis points during this same period, resulting in the net interest margin improving 23 basis points to 3.00% for the current year.

Total equity increased $4.4 million from September 30, 2006 to $13.4 million as of September 30, 2007. Approximately $3.5 million of this increase was due primarily to the additional capital provided by the rights offering which was completed in the third quarter of this year.

We are also pleased to announce a dividend of $.09 per share payable to shareholders of record as of October 18, 2007.  Your dividend check is enclosed, or for those shareholders who participate in direct deposit of your dividend check, your money is already in your account.  We continue to encourage you to sign up for direct deposit of your dividend check. This allows you to receive your money earlier and help the bank save costs at the same time.  A direct deposit enrollment form is enclosed for your convenience.  Simply complete the information and mail it back to us in the postage paid envelope and we will do the rest.

Stock prices for the financial institutions sector across the United States are down over 11% for banks up to $250 million in asset size. However our stock price continues to be strong with the last several trades continuing at $30.00 per share. Good demand for our stock continues thanks to loyal shareholders like you.

As promised, we are utilizing the money recently raised in our rights offering to expand. You may have seen our recent announcement concerning an agreement to purchase a small banking institution in Warrick County, Indiana.  This transaction, once approved, will allow us to expand into selected markets in Indiana.  The first market that we have selected is Evansville, Indiana. Once receiving approval for that expansion, we will be opening an office and recruiting a team of top banking professionals from that area. We are excited about entering into a new market that holds great potential for your company. 

Your company has a number of great enhancements in products and services that we will be introducing in the next few months.   We are investing money now to position ourselves for future growth and expansion.

Thank you for the banking business you currently utilize with First Security.  We hope to see your participation increase as new products and services are soon introduced. If by chance you are one of the few shareholders that have yet to experience our excellent customer service as well as some of our new products, then I personally invite you to give us an opportunity to serve you.

Also, as your CEO, I am as close as a phone call away.  Feel free to call me or come by and visit me with any questions or suggestions you may have. Thank you for being a shareholder of First Security, Inc.

                               
M. Lynn Cooper                    Tab Quisenberry
President and CEO         Chairman of the Board