Personal Business Customer Service


Second Quarter 2016

August 15, 2016


With the first half of 2016 behind us, we continue to focus on providing long‐term value for you, our shareholders. This quarter we have made significant progress in laying the groundwork for our future success. A significant component of those efforts is the development and finalization of a five year strategic plan that will position us for growth and success. We are now transitioning our focus to the execution of the strategic plan.

As shared in prior letters, First Security is going through a period of transformation as we have hired a number of new leaders. With these new leaders we have refocused our strategy in 2016 to better develop the entire customer relationship and that strategy has resulted in solid deposit growth. We have also been in a period of redesigning many loan processes and building a credit administration function that will add certain disciplines to help “stay ahead” of any potential loan challenges and ultimately deliver loan products in a sound, swift manner.

In addition to focusing on deposit growth, we are working hard to shift our deposit mix by reducing our reliance on certificates of deposit (the higher costing deposit source) and wholesale funding sources (i.e. Federal Home Loan Bank borrowings). Our bankers have worked hard to grow the right deposit balances and their efforts are paying off. Average deposits have increased by $30 million in the first 6 months of 2016, and 45% of that increase has been in non‐interest bearing deposits. Further, Federal Home Loan Bank borrowings have declined $25 million during the first half of 2016. As of June 30, 2016, certificates of deposit represented approximately 48% of our total deposits down from roughly 50% at year‐end 2015. Non‐interest bearing deposits at the end of June 2016 were 18%, up from 15% at yearend 2015. We have much more work to do but are proud of these results during the first half of 2016.

Net income for the second quarter of 2016 was $935,000, slightly lower than the second quarter of 2015. Earnings per share for the quarter were $0.39, down $0.04 over the same period in 2015. As previously noted, we are using this year to make significant changes to our organization, and we are pleased that with those efforts, we are able to maintain performance comparable to prior periods. Our second quarter 2016 financial report for First Security is enclosed. Financial highlights of the second quarter follow.

  • Assets at quarter end total $599 million, up $30 million from the end of the second quarter of 2015.
  • Loans and Deposits – Net loans are up 4% from the second quarter of 2015, while deposits increased $46 million or 11%. Most of the deposit increase was in the noninterest bearing deposit category while the smallest increase was in certificates of deposit.
  • Tangible book value increased $1.53 or 7% on a year over year basis.
  • Net interest margin increased to 3.59% for the second quarter, compared to 3.53% for the second quarter of 2015.
  • Non-interest income was down 3% for the quarter as compared to 2015. The reduction was primarily due to lower service charges on deposits and net income on bank owned life insurance policies.
  • Non-interest expense was up 13% for the quarter as compared to 2015. This is primarily due to higher personnel costs, as well as professional services and data processing expenses, necessary investments as we transform our operations.
  • Non-performing loans to total loans were 0.65% at the end of the quarter, down from 0.79% at year‐end 2015

Your Board of Directors has declared a dividend of $0.17 per share, our 52nd consecutive dividend, to all shareholders of record as of August 15, 2016.

We are excited about our plans for the future, and the opportunities available to us. We are working hard to transform our company and our culture.

We welcome any opportunity to provide you with banking products and services to meet your needs. You may contact Mike via phone or email at 270-663-4668 or mbeckwith@firstsecurity.net.

Thank you for your continued investment in us.


Michael F. Beckwith                                                                            Lee A. Mitchell
President and CEO                                                                            Chairman of the Board

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