FIRST FINANCIAL SERVICE CORP. (KY) 
By ELIZABETHTOWN, Ky., July 29 /PRNewswire-FirstCall/ -- First Financial Service Corporation (the Company, Nasdaq: FFKY) today announced net loss per common share of $(0.07) for the quarter ended June 30, 2010, compared to diluted net income per share of $0.10 for the quarter ended June 30, 2009. Diluted net income per common share for the six months ended June 30, 2010, was $0.04, compared to $0.21 for the six months ended June 30, 2009.
"Commitment to our core franchise continues to be one of our main objectives in this challenging economic environment," stated Chief Executive Officer, B. Keith Johnson. "This commitment allowed us to cultivate additional relationships across all of our markets generating a $29 million, or 3% increase in total deposits for the first six months of 2010, continuing the momentum from 2009 of a $274 million, or 33% increase in total deposits over 2008. Growth in deposits, coupled with positive signs of economic growth in our home markets, which is fueled by the Ft. Knox base realignment, will provide a sound basis for our Company as the local economy recovers. Recognizing that we are still not immune to economic concerns, the opportunity for deposits helps us strive towards our long range financial objectives. These objectives include building additional core customer relationships, maintaining sufficient liquidity and capital levels, improving shareholder value and remediating our problem assets.
The strength of our core franchise will contribute to our ability to profitably navigate through this recession, which has been challenging for many of our land development and commercial real estate customers leading to deterioration in our overall credit quality. Classified loans as a percent of total loans was 7.97% at June 30, 2010 compared to 6.73% at December 31, 2009, and 6.20% for June 30, 2009. Non-performing loans as a percent of total loans was 3.94% at June 30, 2010, an increase from 3.82% at December 31, 2009 and 2.69% for June 30, 2009. Our annualized net charge offs as a percent of total loans were 0.38% as of June 30, 2010, an improvement from 0.54% for the year ended December 31, 2009 and 0.68% for the six months ended June 30, 2009. We continued our efforts to ensure the adequacy of the allowance for the quarter by increasing the allowance for loan loss to 2.23% of total loans at June 30, 2010, from 1.78% at December 31, 2009 and 1.46% at June 30, 2009. The increase in reserves improves our coverage ratio of allowance for loan loss as a percent of non-performing loans which stood at 57% at June 30, 2010 compared to 47% at December 31, 2009. Although we believe the current level of our allowance for loan losses is adequate, there is no assurance that future regulatory and economic pressures will not require additional increases to the allowance."
Balance sheet changes during the first half of 2010 include an increase in total assets of $29.7 million to $1.24 billion. This increase was due to building our investment portfolio to $145 million, an increase of $98.2 million since December 31, 2009. This increase was mainly off-set by a decline in gross loans of $54.3 million and a decrease in cash and cash equivalents of $23.8 million.
Commercial loans were $658.0 million at June 30, 2010, a decrease of $47.3 million, or 6.7%, from December 31, 2009. The decline in the Company's commercial loan portfolio is a result of pay-offs on several large commercial relationships.
Total deposits were $1.08 billion at June 30, 2010, an increase of $29.5 million from December 31, 2009. The increase was the result of deposit promotions held in February, April and May. Competition for deposits remains very competitive in all of the markets we serve.
The percentage of non-performing loans to total loans increased to 3.94% at June 30, 2010 compared to 3.82% at December 31, 2009. The increase was primarily attributed to gross loans declining during the second quarter. Annualized net charge-offs as a percentage of average total loans decreased to 0.38% for the six months ended June 30, 2010, compared to 0.68% for the six months ended June 30, 2009.
Average earning assets increased by $189.7 million as of June 30, 2010, compared to the same period in 2009. Despite the large increase in earning assets, the Company's net interest margin realized decline of 53 basis points. Net interest margin decreased to 3.18% for the quarter ended June 30, 2010, compared to 3.71% for the same period in 2009. The decline is mostly attributed to the Bank's increased liquidity efforts by placing assets into lowering yielding investments other than loans. The current Federal Funds rate remains in a range of 0.00% to 0.25%. Correspondingly, variable rate loans that are tied to the federal prime rate have been repriced downward in relation to the prime rate. However, interest rates paid on customer deposits have not adjusted downward proportionately with the declining interest yields on loans and investments. Sixty-one percent of deposits are time deposits that reprice over a longer period of time. The increase in the volume of earning assets and the change to the mix of earning assets had a modest impact on net interest income, which increased $263,000 and $275,000 for the three and six months ended June 30, 2010, compared to the respective periods ended June 30, 2009.
Provision for loan loss expense increased by $1.4 million to $3.3 million for the three months ended June 30, 2010, compared to the same period ended June 30, 2009. For the six months ended June 30, 2010, provision for loan loss expense increased by $1.1 million to $5.0 million compared to the six months ended June 30, 2008. During the first half of 2010, the Company continued its efforts to ensure the adequacy of the allowance by adding specific reserves to several large commercial real estate relationships based on updated appraisals received by the Bank. As economic conditions continue to impact our loan portfolio, management's emphasis will be to proactively review credit quality and the adequacy of the allowance for loan losses. As a result of this provisioning, allowance for loan losses as a percent of total loans increased to 2.23% from 1.78% at December 31, 2009.
Non-interest income increased $91,000 for the three months ended June 30, 2010, compared to the three months ended June 30, 2009. Customer service fees on deposit accounts increased $94,000 for the second quarter 2010 compared to the same quarter in 2009. Gain on sale of mortgage loans increased $60,000 due to continued refinancing activity. The increase in non-interest income for the quarter was also reflective of an increase of $205,000 for loss on the sale and write-downs of other real estate owned and a decrease of $234,000 of other-than-temporary credit losses on trust preferred security investments. Additionally, other non-interest income decreased $100,000 for the second quarter compared to same quarter in 2009. The decrease in other non-interest income was due to a decline in loan fees associated with our mortgage loan operations.
For the six months ended June 30, 2010, non-interest income increased $226,000, compared to the six months ended June 30, 2009. Customer service fees on deposit accounts increased $142,000 for 2010 compared to the same period in 2009. Gain on sale of mortgage loans increased $182,000. Other income decreased $86,000 year-to-date in 2010 compared to year-to-date 2009. The decrease in other income is attributable to a decline in fees associated with our mortgage loan operations. The increase in non-interest income was also reflective of a decrease in other-than-temporary impairment losses of $217,000 on trust preferred security investments and by an increase of $214,000 in write-downs on other real estate owned during 2010.
Non-interest expense increased $190,000 to $8.6 million for the three months ended June 30, 2010, compared to the same period ended June 30, 2009. Employee compensation and benefits expense decreased $244,000 due to lower benefits expenses. The increase in non-interest expenses were also off-set by decreases in outside services and data processing of $127,000, marketing and advertising of $20,000, office occupancy expense and equipment of $40,000 and amortization of core deposit intangible of $13,000. Other non-interest expense was higher in the second quarter of 2010 by $419,000 compared to the second quarter of 2009. The increase in non-interest expense was due to $375,000 of back taxes being paid on a commercial real estate property taken into other real estate owned during the period.
Non-interest expense for the year was up $681,000 due to higher FDIC Insurance premiums of $387,000 and higher bank franchise taxes of $395,000 for 2010 compared to the same period in 2009. Other non-interest expense was also higher for the first six months of 2010 by $439,000 compared to the first six months of 2009. The increase in non-interest expense was due to $375,000 of back taxes being paid on a commercial real estate property taken into other real estate owned during the period. Employee compensation and benefits expense decreased $156,000 due to lower benefits expenses. The increase in non-interest expenses were also off-set by decreases in outside services and data processing of $190,000, marketing and advertising of $60,000, office occupancy expense and equipment of $84,000 and amortization of core deposit intangible of $50,000.
First Financial Service Corporation is the parent bank holding company of First Federal Savings Bank of Elizabethtown, which was chartered in 1923. The Bank serves the needs and caters to the economic strengths of the local communities in which it operates and strives to provide a high level of personal and professional customer service. The Bank offers a variety of financial services to its retail and commercial banking customers. These services include personal and corporate banking services, and personal investment financial counseling services. Today, the Bank serves eight contiguous counties encompassing Central Kentucky and the Louisville Metropolitan area, including Southern Indiana, through its 22 full-service banking centers and a commercial private banking center.
This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties that could cause actual results to differ materially from historical income and those presently anticipated or projected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date of this release. Such risks and uncertainties include those detailed in the Company's filings with the Securities and Exchange Commission, risks of adversely changing results of operations, risks related to the Company's acquisition strategy, risk of loans and investments, including the effect of the change of the local economic conditions, risks associated with the adverse effects of the changes in interest rates, and competition for the Company's customers by other providers of financial services, all of which are difficult to predict and many of which are beyond the control of the Company.
First Financial Service Corporation's stock is traded on the Nasdaq Global Market under the symbol "FFKY." Market makers for the stock are:
Keefe, Bruyette & Woods, Inc. FTN Midwest Securities
J.J.B. Hilliard, W.L. Lyons
Company, Inc. Howe Barnes Investments, Inc.
Stifel Nicolaus & Company Knight Securities, LP
FIRST FINANCIAL SERVICE CORPORATION
Consolidated Balance Sheets
(Unaudited)
December
June 30, 31,
(Dollars in thousands, except share
data) 2010 2009
---- ----
ASSETS:
Cash and due from banks $14,060 $21,253
Interest bearing deposits 60,685 77,280
------ ------
Total cash and cash equivalents 74,745 98,533
------ ------
Securities available-for-sale 144,761 45,764
Securities held-to-maturity, fair
value of $381 Jun (2010)
and $1,176 Dec (2009) 378 1,167
--- -----
Total securities 145,139 46,931
------- ------
Loans held for sale 14,997 8,183
Loans, net of unearned fees 940,631 994,926
Allowance for loan losses (20,953) (17,719)
------- -------
Net loans 934,675 985,390
------- -------
Federal Home Loan Bank stock 8,515 8,515
Cash surrender value of life insurance 9,181 9,008
Premises and equipment, net 32,325 31,965
Real estate owned:
Acquired through foreclosure 14,703 8,428
Held for development 45 45
Other repossessed assets 151 103
Core deposit intangible 1,148 1,300
Accrued interest receivable 5,907 5,658
Deferred income taxes 3,969 4,515
Prepaid FDIC premium 5,747 7,022
Other assets 2,959 2,091
----- -----
TOTAL ASSETS $1,239,209 $1,209,504
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing $70,204 $63,950
Interest bearing 1,009,081 985,865
--------- -------
Total deposits 1,079,285 1,049,815
--------- ---------
Short-term borrowings 595 1,500
Advances from Federal Home Loan Bank 52,596 52,745
Subordinated debentures 18,000 18,000
Accrued interest payable 289 360
Accounts payable and other liabilities 1,936 1,952
----- -----
TOTAL LIABILITIES 1,152,701 1,124,372
--------- ---------
Commitments and contingent liabilities - -
STOCKHOLDERS' EQUITY:
Serial preferred stock, $1 par value
per share;
authorized 5,000,000 shares; issued and
outstanding, 20,000
shares with a liquidation preference of
$20,000 19,808 19,781
Common stock, $1 par value per share;
authorized 10,000,000 shares; issued
and
outstanding, 4,718,334 shares Jun
(2010), and 4,709,839
shares Dec (2009) 4,718 4,710
Additional paid-in capital 35,099 34,984
Retained earnings 26,886 26,720
Accumulated other comprehensive loss (3) (1,063)
--- ------
TOTAL STOCKHOLDERS' EQUITY 86,508 85,132
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,239,209 $1,209,504
========== ==========
FIRST FINANCIAL SERVICE CORPORATION
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
(Dollars in thousands,
except per share data) June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Interest and Dividend
Income:
Loans, including fees $14,267 $14,155 $28,314 $28,099
Taxable securities 878 305 1,371 613
Tax exempt securities 202 118 373 224
--- --- --- ---
15,347 14,578 30,058 28,936
Total interest income ------ ------ ------ ------
Interest Expense:
Deposits 4,890 4,346 9,759 8,846
Short-term borrowings 11 47 32 90
Federal Home Loan Bank
advances 596 600 1,189 1,197
Subordinated debentures 331 329 658 658
--- --- --- ---
Total interest expense 5,828 5,322 11,638 10,791
----- ----- ------ ------
Net interest income 9,519 9,256 18,420 18,145
Provision for loan
losses 3,274 1,913 5,026 3,958
----- ----- ----- -----
Net interest income
after provision for
loan losses 6,245 7,343 13,394 14,187
----- ----- ------ ------
Non-interest Income:
Customer service fees
on deposit accounts 1,739 1,645 3,264 3,122
Gain on sale of
mortgage loans 415 355 714 532
Loss on sale of
investments - - (23) -
Net impairment losses
recognized in earnings (11) (245) (183) (400)
Loss on sale and write
downs of real estate
acquired
through foreclosure (438) (233) (464) (250)
Brokerage commissions 107 99 200 192
Other income 369 469 811 897
--- --- --- ---
Total non-interest
income 2,181 2,090 4,319 4,093
----- ----- ----- -----
Non-interest Expense:
Employee compensation
and benefits 3,905 4,149 7,995 8,151
Office occupancy
expense and equipment 768 808 1,572 1,656
Marketing and
advertising 225 245 450 510
Outside services and
data processing 668 795 1,398 1,588
Bank franchise tax 566 257 916 521
FDIC insurance premiums 694 788 1,354 967
Amortization of core
deposit intangible 88 101 152 202
Other expense 1,720 1,301 3,071 2,632
----- ----- ----- -----
Total non-interest
expense 8,634 8,444 16,908 16,227
----- ----- ------ ------
Income/(loss) before
income taxes (208) 989 805 2,053
Income taxes/(benefits) (146) 274 112 577
---- --- --- ---
Net Income/(loss) (62) 715 693 1,476
Less:
Dividends on preferred
stock (250) (213) (500) (480)
Accretion on preferred
stock (13) (14) (27) (25)
--- --- --- ---
Net income/(loss)
available to common
shareholders $(325) $488 $166 $971
===== ==== ==== ====
Shares applicable to
basic income per
common share 4,718,021 4,687,983 4,716,755 4,682,683
Basic income/(loss)
per common share $(0.07) $0.10 $0.04 $0.21
====== ===== ===== =====
Shares applicable to
diluted income per
common share 4,718,021 4,726,226 4,716,755 4,685,686
Diluted income/(loss)
per common share $(0.07) $0.10 $0.04 $0.21
====== ===== ===== =====
Cash dividends declared
per common share $- $0.19 $- $0.38
=== ===== === =====
FIRST FINANCIAL SERVICE CORPORATION
Unaudited Selected Ratios and Other Data
As of and For the
Three Months Ended
June 30,
--------
Selected Data 2010 2009
------------- ---- ----
Performance Ratios
Return on average assets (.02)% 0.18%
Return on average equity (0.29)% 2.10%
Average equity to average assets 6.89% 8.64%
Net interest margin 3.23% 3.70%
Efficiency ratio from continuing
operations 73.79% 74.42%
Book value per common share
Average Balance Sheet Data
Average total assets $1,260,999 $1,081,033
Average interest earning assets 1,194,662 1,009,231
Average loans 964,428 967,067
Average interest-bearing deposits 1,031,210 770,843
Average total deposits 1,098,865 830,239
Average total stockholders' equity 86,838 93,358
Asset Quality Ratios
Non-performing loans as a percent
of total loans (1)
Non-performing assets as a
percent of total assets
Allowance for loan losses as a
percent of total loans (1)
Allowance for loan losses as a
percent of
non-performing loans
Annualized net charge-offs to
total loans (1)
__________________________________
As of and For the
Six Months Ended
June 30,
--------
Selected Data 2010 2009
------------- ---- ----
Performance Ratios
Return on average assets 0.11% 0.18%
Return on average equity 1.62% 2.12%
Average equity to average assets 6.93% 8.73%
Net interest margin 3.18% 3.71%
Efficiency ratio from continuing
operations 74.36% 72.97%
Book value per common share $14.14 $15.60
Average Balance Sheet Data
Average total assets $1,247,178 $1,060,382
Average interest earning assets 1,180,936 991,283
Average loans 976,537 953,357
Average interest-bearing deposits 1,018,382 765,798
Average total deposits 1,085,248 822,555
Average total stockholders' equity 86,489 92,535
Asset Quality Ratios
Non-performing loans as a percent
of total loans (1) 3.94% 2.69%
Non-performing assets as a
percent of total assets 4.18% 3.85%
Allowance for loan losses as a
percent of total loans (1) 2.23% 1.46%
Allowance for loan losses as a
percent of
non-performing loans 57% 54%
Annualized net charge-offs to
total loans (1) 0.38% 0.68%
__________________________________
(1) Excludes loans held for sale.
SOURCE First Financial Service Corporation
