Third Quarter 2014

November 14, 2014



It is with much excitement that we share with you our third quarter results. Our continued focus on executing our strategic plan has provided us with the ability to accomplish record results. Your Company has continued to grow its customer base through all of its markets that has contributed to higher net interest income and non-interest income, all while maintaining our non-interest expense at levels similar to prior periods.

Both third quarter and year to date net income reflect record results. The largest contributor in achieving these records is our loan growth. Our loans increased over 17% compared to prior year, when many financial institutions are having difficulty maintaining their loan balances. This growth can be attributed to growth generated by our loan officers in the markets we serve.

Highlights of the quarter include:

  • Earnings- Third quarter earnings were up $717,000 or 270% as compared to the third quarter of 2013 and were up $328,000 or 50% over the most recent prior quarter. This is the highest quarterly earnings in our company’s history. On a year to date basis, the Company recorded net income of $2 million during the first nine months of 2014 as compared to $814,000 during the same year to date period in 2013, a 150% increase. This is the highest first nine months earnings on record for the company. Net income for the first nine months of 2014 was almost double net income recorded for all of 2013.
  • Basic earnings per share - For the first nine months of 2014, earnings per share were $1.12 as compared to $1.03 per share for the same period in 2013. This is significant in that a substantial amount of new capital was raised during early 2014; however net income has grown so significantly that the Company is able to report a 9% increase in basic earnings per share. Comparing the third quarter of 2014 as compared to the third quarter of 2013 results in an increase of $0.11 per share or 33%.

  • Cash Dividend - A dividend was declared in the amount of $.16 per share, our 45th consecutive dividend. The dividend is payable to shareholders of record November 14, 2014. Your dividend check is enclosed or has been electronically posted to your account.

  • Asset Quality – Nonperforming assets to total assets were 0.84% as of the end of the third quarter of 2014 compared to 1.19% as of the end of the third quarter of 2013, a 29% improvement. The Company remains proud of its strong credit quality, better than many of its peers. During this same year over year period our allowance for loan losses has grown to 1.07% of loans, up 6% from a year ago, recognizing that along with our strong loan growth, adequate reserves are necessary when building a strong bank.

  • Expansion – The Company is actively pursuing many opportunities to help further grow shareholder value. These opportunities may result in an expansion within our existing footprint or in newer markets. We also continue to look for ways to deliver more and better products and services to our client base.
  • New Branch - We closed on the purchase of a former bank branch location in the Wellington area in Lexington, KY in the Southern part of the city. This location is scheduled to open in early 2015 and will be our second Lexington location. We have experienced great success with our existing Lexington location in the Hamburg area and hope to duplicate that success at our Wellington location.

  • Capital – On September 30, 2014, we successfully completed a $1.7 million follow on offering of our Common Stock. We invited all shareholders to contact us if they were interested in purchasing more stock and we were excited to be able to make Common Stock available to all who contacted us.

Our third quarter 2014 financial report of First Security is enclosed. Financial highlights below reflect third quarter results as compared to the second quarter of 2014 as well as our financial results for the first nine months of 2014 as compared to the first nine months of 2013:

                                                Compared to Prior Quarter    Compared to First Nine Months, 2013

Loans                                    Up $20 million or 5%                 Up $61 million or 17%

Deposits                              Up $3.5 million or 1%                Up $17 million or 4%

Stockholders’ Equity      Up $2.5 million or 5%                Up $32 million or 133%

Net Income                        Up $328 thousand or 50%        Up $1.2 million or 150%

Non-Interest Income     Up $145 thousand or 14%        Up $571 thousand or 23%

Non-Interest Expense   Up $17 thousand or <1%          Up $299 thousand or 3%

Net Interest Income       Up $338 thousand or 9%          Up $1.7 million or 17%

Other areas of note include improvement to net interest margin and return on assets.

Recently, the transfer agent for our Common Stock changed from Registrar & Transfer Company to Computershare. We are excited about this change, as Computershare is a well-respected transfer agent firm with deep resources to help both the Company and our shareholders. Please note that additional communications may be sent via Computershare.

Some have inquired about buying or selling shares of our Common Stock. Please remember that stock-trading activity for First Security (symbol FIIT) can be accessed at www.otcmarkets.com. Further, being an over the counter stock means that your broker or investment adviser has a process in place to assist you in either buying or selling Common Stock.

This year has developed just as we outlined to you during our 2013-year end shareholder letter. You may recall that we invested in three new locations in the past year or so and those locations are showing nice profitability. We anticipate closing out 2014 with a strong fourth quarter and will continue to look for ways to invest for the future and increase shareholder value consistent with our strategic plan. As always, please feel free to contact us should you have any questions, suggestions, or comments. We thank you for your investment and welcome any opportunity to provide you with banking products and services to meet your needs.



M. Lynn Cooper                                                                                 James T. “Tab” Quisenberry

President and CEO                                                                            Chairman of the Board



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