FIRST FINANCIAL SERVICE CORP. (KY) 
By ELIZABETHTOWN, Ky., May 19, 2011 /PRNewswire/ -- First Financial Service Corporation (the Company, NASDAQ: FFKY) today announced a diluted net loss per common share of $(0.49), or ($2,334,000) for the quarter ended March 31, 2011, compared to diluted net income per common share of $0.10, or $491,000 for the quarter ended March 31, 2010.
"We are disappointed with our quarterly performance as our problem assets continued to have a significant impact on earnings," stated Chief Executive Officer, B. Keith Johnson. "Our results were impacted by a $2.5 million pre-tax provision on one of our non-performing subdivision development loans due to an updated appraisal received May 5, 2011. We continue to dedicate a significant amount of resources in working the problem assets through the system. Our focus for 2011 will be to continue to bring resolution to our problem loans, drive improvements in operational efficiency, and build upon the sustained success of our retail franchise. We are confident our efforts will get us through this credit cycle."
The Company entered into loan modifications that suspended principal payments for a certain period on two loan relationships totaling $13.5 million during the quarter ended March 31, 2011, which caused them to be reclassified as restructured loans. As a result, the percentage of non-performing assets to total assets increased to 6.89% at March 31, 2011 compared to 5.45% at December 31, 2010, and 3.85% from 2009.
The following table provides information with respect to non-performing assets for the periods indicated.
(Dollar in thousands) 3/31/2011 12/31/2010 9/30/2010 12/31/2009
--------- ---------- --------- ----------
Restructured loans $18,751 $3,906 $2,008 $9,812
Non-accrual loans 44,899 42,169 58,054 28,186
------ ------ ------ ------
Total non-performing
loans 63,650 46,075 60,062 37,998
Real estate acquired
through foreclosure 24,908 25,807 12,781 8,428
Other repossessed assets 39 40 48 103
--- --- --- ---
Total non-performing
assets $88,597 $71,922 $72,891 $46,529
======= ======= ======= =======
Non-performing loans to
total loans 7.42% 5.22% 6.53% 3.82%
Non-performing assets to
total assets 6.89% 5.45% 5.84% 3.85%
The Company's non-performing assets are largely comprised of residential housing development loans and other real estate acquired through foreclosure in Jefferson and Oldham Counties. Six relationships totaling $42.9 million make up over 48% of our non-performing assets. These high-end subdivisions, while showing initial progress, have stalled due to the recession. At March 31, 2011, substantially all of the loan portfolio concentration in these counties has been classified as impaired. Most of the remaining concentration related to the housing industry is located outside of Jefferson and Oldham counties. These are smaller subdivision development projects, having stronger guarantors that generally have a sufficient amount of business activity.
We anticipate that economic activity currently surrounding the Company's market will enhance our local market's ability to work through this recessionary cycle. Two primary economic developments are influencing our core market. Most of our geographic market surrounds the Ft. Knox military base, which has undergone a major transformation as a result of the 2005 Base Realignment and Closure Act. The Ft. Knox transformation will result in a net increase in employment of 6,500 to the area including 3,500 new civilian families with the Human Resource Command Center. Additionally, on April 13, 2011, the Commonwealth of Kentucky Cabinet for Economic Development announced that UFLEX Ltd., from Noida, India will locate its first U.S. packaging plan in Hardin County, Kentucky. This initial $90 million investment will bring 125 jobs to the area with its first phase and ultimately double the investment to $180 million and 250 jobs.
Balance sheet changes during the first quarter of 2011 include a decrease in total assets of $33.3 million to $1.3 billion. The securities portfolio increased $47.4 million as the Company continued to invest a portion of its overnight liquidity. Loans receivable, net of unearned fees declined $23.6 million to $858.4 million at March 31, 2011 compared to December 31, 2010. Total deposits declined $7.1 million primarily due to a $5.7 million decline in certificates of deposit.
Net interest margin decreased to 2.91% at March 31, 2011 compared to 3.05% for the year ended December 31, 2010, compared to 3.12% for the same period in 2010. The decline is mostly attributed to the Bank's increased liquidity efforts as well as the increase in the amount of non-performing assets.
Provision for loan loss expense increased by $1.7 million to $3.5 million for the three months ended March 31, 2011, compared to the same period ended March 31, 2010. Annualized net charge-offs as a percentage of average total loans increased to 0.71% for the three months ended March 31, 2011 as the Company had net charge-offs of $1.5 million during the quarter, largely related to specific reserves on collateral dependent loans. The allowance for loan losses as a percent of total loans was 2.86% at March 31, 2011 and December 31, 2010.
For the quarter ended March 31, 2011, non-interest income decreased $145,000 to $2.0 million, compared to the quarter ended a year ago.
Non-interest expense increased $1.1 million to $9.4 million for the three months ended March 31, 2011 compared to the same period ended in 2010. Employee compensation and benefits expense increased $239,000 for the quarter due to higher insurance claims under the self funded insurance plan. FDIC insurance premiums increased $310,000 due to the higher FDIC insurance rate from the Bank's regulatory rating. Expense related to real estate acquired through foreclosure increased $227,000 due to the higher level of properties in this portfolio at March 31, 2011.
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. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date made. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of First Federal Savings Bank. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. Adverse conditions in the commercial real estate markets, as well as a delay or failure of recovery in the residential real estate markets, could cause additional credit losses and deterioration in asset values. First Financial Service Corporation's results also be adversely affected by further deterioration in business and economic conditions both generally and in the markets we serve; changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in its investment securities portfolio; legal and regulatory developments; increased competition from both banks and non-banks; changes in customer behavior and preferences; effects of critical accounting policies and judgments; and management's ability to effectively manage credit risk, residual value risk, market risk, operational risk, interest rate risk, and liquidity risk.
For discussion of these and other risks that may cause actual results to differ from expectations, refer to First Financial Service Corporation's Annual Report on Form 10-K for the year ended December 31, 2010, as amended by Form 10-K/A filed May 13, 2011 with the Securities and Exchange Commission, including the section entitled "Risk Factors," and all subsequent filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and First Financial Service Corporation undertakes no obligation to update them in light of new information or future events.
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)
March 31, December 31,
(Dollars in thousands, except per share
data) 2011 2010
---- ----
ASSETS:
Cash and due from banks $9,759 $14,840
Interest bearing deposits 101,170 151,336
------- -------
Total cash and cash equivalents 110,929 166,176
------- -------
Securities available-for-sale 243,395 196,029
Securities held-to-maturity, fair
value of $122 Mar (2011)
and $126 Dec (2010) 120 124
--- ---
Total securities 243,515 196,153
------- -------
Loans held for sale 4,055 6,388
Loans, net of unearned fees 858,350 881,934
Allowance for loan losses (24,591) (22,665)
------- -------
Net loans 837,814 865,657
------- -------
Federal Home Loan Bank stock 4,909 4,909
Cash surrender value of life insurance 9,439 9,354
Premises and equipment, net 31,773 31,988
Real estate owned:
Acquired through foreclosure 24,908 25,807
Held for development 45 45
Other repossessed assets 39 40
Core deposit intangible 917 994
Accrued interest receivable 7,727 6,404
Accrued income taxes 3,005 2,161
Deferred income taxes 1,801 2,982
Prepaid FDIC Insurance 3,516 4,449
Other assets 5,844 2,388
----- -----
TOTAL ASSETS $1,286,181 $1,319,507
==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES:
Deposits:
Non-interest bearing $71,869 $73,566
Interest bearing 1,094,919 1,100,342
--------- ---------
Total deposits 1,166,788 1,173,908
--------- ---------
Advances from Federal Home Loan Bank 27,500 52,532
Subordinated debentures 18,000 18,000
Accrued interest payable 835 594
Accounts payable and other liabilities 2,930 3,162
----- -----
TOTAL LIABILITIES 1,216,053 1,248,196
---------
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 19,849 19,835
Common stock, $1 par value per share;
authorized 35,000,000 shares; issued and
outstanding, 4,739,622 shares Mar
(2011), and 4,726,329
shares Dec (2010) 4,740 4,726
Additional paid-in capital 35,290 35,201
Retained earnings 13,930 16,264
Accumulated other comprehensive loss (3,681) (4,715)
------ ------
TOTAL STOCKHOLDERS' EQUITY 70,128 71,311
------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,286,181 $1,319,507
==========
FIRST FINANCIAL SERVICE CORPORATION
Consolidated Statements of Income
(Unaudited)
Three Months Ended
(Dollars in thousands, except per
share data) March 31,
2011 2010
---- ----
Interest and Dividend Income:
Loans, including fees $12,343 $14,047
Taxable securities 1,566 493
Tax exempt securities 257 171
--- ---
Total interest income 14,166 14,711
------
Interest Expense:
Deposits 4,914 4,869
Short-term borrowings - 21
Federal Home Loan Bank advances 295 593
Subordinated debentures 341 327
--- ---
Total interest expense 5,550 5,810
-----
Net interest income 8,616 8,901
Provision for loan losses 3,465 1,752
----- -----
Net interest income after provision
for loan losses 5,151 7,149
----- -----
Non-interest Income:
Customer service fees on deposit
accounts 1,445 1,525
Gain on sale of mortgage loans 265 299
Gain on sale of investments 69 -
Loss on sale of investments - (23)
Other than temporary impairment loss:
Total other-than-temporary
impairment losses (37) (172)
Portion of loss recognized in other
comprehensive
income/(loss) (before taxes) - -
--- ---
Net impairment losses recognized in
earnings (37) (172)
--- ----
Loss on sale and write downs on real
estate acquired
through foreclosure (235) (26)
Brokerage commissions 107 93
Other income 379 442
--- ---
Total non-interest
income 1,993 2,138
-----
Non-interest Expense:
Employee compensation and benefits 4,329 4,090
Office occupancy expense and
equipment 811 804
Marketing and advertising 225 225
Outside services and data processing 797 730
Bank franchise tax 314 350
FDIC insurance premiums 970 660
Amortization of core deposit
intangible 77 64
Real estate acquired through
foreclosure expense 382 155
Other expense 1,501 1,196
----- -----
Total non-interest
expense 9,406 8,274
-----
Income/(loss) before income taxes (2,262) 1,013
Income taxes/(benefits) (192) 258
---- ---
Net Income/(Loss) (2,070) 755
Less:
Dividends on preferred stock (250) (250)
Accretion on preferred stock (14) (14)
--- ---
Net income (loss) attributable to
common shareholders $(2,334) $491
======= ====
Shares applicable to basic income per
common share 4,736,287 4,715,721
Basic income (loss) per common share $(0.49) $0.10
====== =====
Shares applicable to diluted income
per common share 4,736,287 4,715,721
Diluted income (loss) per common
share $(0.49) $0.10
====== =====
Cash dividends declared per common
share $- $-
=== ===
FIRST FINANCIAL SERVICE CORPORATION
Unaudited Selected Ratios and Other Data
As of and For the
Three Months Ended
March 31,
---------
Selected Data 2011 2010
------------- ---- ----
Performance Ratios
Return on average assets (0.73)% 0.16%
Return on average equity (12.22)% 2.31%
Average equity to average
assets 5.97% 6.98%
Net interest margin 2.91% 3.12%
Efficiency ratio from
continuing operations 88.66% 74.95%
Book value per common share $10.61 $14.01
Average Balance Sheet Data
Average total assets $1,298,200 $1,233,356
Average interest earning
assets 1,217,845 1,167,210
Average loans 877,140 988,646
Average interest-bearing
deposits 1,092,868 1,005,553
Average total deposits 1,169,653 1,071,631
Average total stockholders'
equity 77,485 86,139
Asset Quality Ratios
Non-performing loans as a
percent of total loans (1) 7.42% 3.43%
Non-performing assets as a
percent of total assets 6.89% 3.46%
Allowance for loan losses as a
percent of total loans (1) 2.86% 1.95%
Allowance for loan losses as a
percent of
non-performing loans 39% 57%
Annualized net charge-offs to
total loans (1) 0.71% 0.27%
__________________________________
(1) Excludes loans held for
sale.
SOURCE First Financial Service Corporation
