FIRST FINANCIAL SERVICE CORP. (KY) 
By ELIZABETHTOWN, Ky., Aug. 15, 2011 /PRNewswire/ -- First Financial Service Corporation (the Company, NASDAQ: FFKY) today announced a diluted net loss per common share of $(2.57), or $(12.2 million) for the quarter ended June 30, 2011, compared to a diluted net loss per common share of $(0.07), or $(.3 million) for the quarter ended June 30, 2010. Diluted net loss per common share for the six months ended June 30, 2011, was $(3.06), compared to diluted net income per common share of $0.04 for the six months ended June 30, 2010.
"We continue to dedicate a significant amount of resources in working the problem assets through the system," stated Chief Executive Officer, B. Keith Johnson. "We had over half of our non-performing assets appraised, including our high end residential development loans and related other real estate owned during the quarter. The lower values on the appraisals contributed to $13.0 million in provision expense and $4.9 million in write downs on other real estate owned for the year. The charges are a necessary step in the process of working through this credit cycle. 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 following table provides information with respect to non-performing assets for the periods indicated.
(Dollars in
thousands) 6/30/2011 3/31/2011 12/31/2010 12/31/2009
--------- --------- ---------- ----------
Restructured loans $30,901 $18,751 $3,906 $9,812
Non-accrual loans 24,040 44,899 42,169 28,186
------ ------ ------ ------
Total non-performing
loans 54,941 63,650 46,075 37,998
Real estate acquired
through foreclosure 26,459 24,908 25,807 8,428
Other repossessed
assets 34 39 40 103
--- --- --- ---
Total non-performing
assets $81,434 $88,597 $71,922 $46,529
======= ======= ======= =======
Non-performing loans
to total loans 6.87% 7.42% 5.22% 3.82%
Non-performing
assets to total
assets 6.56% 6.89% 5.45% 3.85%
The Company's non-performing assets declined $7.1 million from March 31, 2011 and increased $9.5 million from December 31, 2010. During the second quarter, $14.6 million in charge-offs and $4.6 million in write downs in real estate acquired through foreclosure were recorded further reducing the Company's non-performing assets. Over half of the total non-performing assets have been re-appraised during the first six months of the year, including substantially all the high end residential developments. The high end residential developments are where the larger write downs have occurred. Offsetting the decline in non-performing assets from these write downs, was an increase in restructured loans. The Company entered into loan modifications that suspended principal payments for a certain period on three loan relationships totaling $23.3 million during the six months ended June 30, 2011, which caused them to be reclassified as restructured loans. Based on recent appraisal valuations and cash flow analysis, $2.1 million impairment has been recorded against these three credit relationships. The percentage of non-performing assets to total assets was 6.56% at June 30, 2011, 6.89% at March 31, 2011, and 5.45% at December 31, 2010.
Balance sheet changes through the second quarter of 2011 include a decrease in total assets of $77.4 million to $1.2 billion. The securities portfolio increased $85.4 million as the Company continued to invest a portion of its overnight liquidity. Loans receivable, net of unearned fees declined $82.5 million to $799.4 million at June 30, 2011 compared to December 31, 2010. Total deposits declined $46.7 million from a $26.6 million decrease in certificates of deposit and a $15.1 decrease in money market accounts.
Net interest margin decreased to 2.88% for the six months ended June 30, 2011 compared to 3.05% for the year ended December 31, 2010, compared to 3.18% for the same period in 2010. The decline is mostly attributed to the Bank's increased liquidity efforts, the decline in loan balances, as well as the increase in the amount of non-performing loans.
Provision for loan loss expense increased by $6.2 million to $9.5 million for the three months ended June 30, 2011, compared to the same period ended June 30, 2010. Provision for loan loss increased $8.0 million to $12.9 million for the six months ended June 30, 2011, compared to the same six month period in 2010. Annualized net charge-offs as a percentage of average total loans increased to 4.21% for the six months ended June 30, 2011 as the Company had net charge-offs of $17.9 million during the period. The Company charged off $9.9 million of its specific reserves on its collateral dependent loans. The decline in the specific reserves resulted in a decline in the allowance for loan losses as a percent of total loans. The allowance for loan losses as a percent of total loans was 2.22% for June 30, 2011 compared to 2.57% at December 31, 2010.
Non-interest income decreased $4.3 million for the three months ended and $4.5 million for the six months ended June 30, 2011 compared to the same period in 2010. The decline was related to a $4.7 million increase for the three months ended and a $4.9 million increase for the six months ended June 30, 2011 in loss on sale and write downs on real estate acquired through foreclosure.
Non-interest expense increased $1.3 million to $9.9 million for the three months ended June 30, 2011 compared to the same period ended in 2010. For the six month respective periods non-interest expense increased $2.4 million to $19.3 million. The increase in non-interest expense was largely driven by an increase in FDIC insurance premiums, real estate acquired through foreclosure expense, and legal and loan expense arising from loan workouts.
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
MORE
FIRST FINANCIAL SERVICE CORPORATION
Consolidated Balance Sheets
(Unaudited)
December
June 30, 31,
(Dollars in thousands, except per share
data) 2011 2010
---- ----
ASSETS:
Cash and due from banks $14,284 $14,840
Interest bearing deposits 60,904 151,336
Total cash and cash equivalents 75,188 166,176
Securities available-for-sale 281,562 196,029
Securities held-to-maturity, fair
value of $22 Jun (2011)
and $126 Dec (2010) 22 124
Total securities 281,584 196,153
-
Loans held for sale 5,708 6,388
Loans, net of unearned fees 799,415 881,934
Allowance for loan losses (17,708) (22,665)
------- -------
Net loans 787,415 865,657
-
Federal Home Loan Bank stock 4,805 4,909
Cash surrender value of life insurance 9,525 9,354
Premises and equipment, net 31,418 31,988
Real estate owned:
Acquired through foreclosure 26,459 25,807
Held for development 45 45
Other repossessed assets 34 40
Core deposit intangible 841 994
Accrued interest receivable 7,949 6,404
Accrued income taxes 6,030 2,161
Deferred income taxes - 2,982
Prepaid FDIC Insurance 2,643 4,449
Other assets 8,160 2,388
TOTAL ASSETS $1,242,096 $1,319,507
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing $74,305 $73,566
Interest bearing 1,052,877 1,100,342
------ ---
Total deposits 1,127,182 1,173,908
------ ---
Advances from Federal Home Loan Bank 27,805 52,532
Subordinated debentures 18,000 18,000
Accrued interest payable 1,170 594
Accounts payable and other liabilities 3,971 3,162
Deferred income taxes 2,937 -
---
TOTAL LIABILITIES 1,181,065 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 19,862 19,835
Common stock, $1 par value per share;
authorized 35,000,000 shares; issued
and
outstanding, 4,739,921 shares Jun
(2011), and 4,726,329
shares Dec (2010) 4,740 4,726
Additional paid-in capital 35,338 35,201
Retained earnings 1,763 16,264
Accumulated other comprehensive loss (672) (4,715)
---- ------
TOTAL STOCKHOLDERS' EQUITY 61,031 71,311
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,242,096 $1,319,507
========== ==========
FIRST FINANCIAL SERVICE CORPORATION
Consolidated Statements of Income
(Unaudited)
Three Months Ended
(Dollars in thousands, except per
share data) June 30,
2011 2010
---- ----
Interest and Dividend Income:
Loans, including fees $11,692 $14,267
Taxable securities 1,703 878
Tax exempt securities 265 202
Total interest income 13,660 15,347
Interest Expense:
Deposits 4,674 4,890
Short-term borrowings - 11
Federal Home Loan Bank advances 280 596
Subordinated debentures 350 331
Total interest expense 5,304 5,828
Net interest income 8,356 9,519
Provision for loan losses 9,517 3,274
Net interest income after provision
for loan losses (1,161) 6,245
------ -----
Non-interest Income:
Customer service fees on deposit
accounts 1,554 1,739
Gain on sale of mortgage loans 291 415
Gain on sale of investments 162 -
Loss on sale of investments (38) -
Other than temporary impairment loss:
Total other-than-temporary
impairment losses (67) (11)
Portion of loss recognized in other
comprehensive
income/(loss) (before taxes) - -
Net impairment losses recognized in
earnings (67) (11)
--- ---
Loss on sale and write downs on real
estate acquired
through foreclosure (4,651) (438)
Brokerage commissions 108 107
Other income 476 369
Total non-interest income (2,165) 2,181
-----
Non-interest Expense:
Employee compensation and benefits 3,958 3,905
Office occupancy expense and
equipment 832 768
Marketing and advertising 164 225
Outside services and data processing 1,056 668
Bank franchise tax 342 566
FDIC insurance premiums 906 694
Amortization of core deposit
intangible 76 88
Real estate acquired through
foreclosure expense 646 458
Other expense 1,936 1,262
Total non-interest expense 9,916 8,634
Income/(loss) before income taxes (13,242) (208)
Income taxes/(benefits) (1,338) (146)
------ ----
Net Income/(Loss) (11,904) (62)
Less:
Dividends on preferred stock (250) (250)
Accretion on preferred stock 13) (13)
--- ---
Net income (loss) attributable to
common shareholders $(12,167) $(325)
======== =====
Shares applicable to basic income per
common share 4,739,700 4,718,021
Basic income (loss) per common share $(2.57) $(0.07)
====== ======
Shares applicable to diluted income
per common share 4,739,700 4,718,021
Diluted income (loss) per common
share $(2.57) $(0.07)
====== ======
Cash dividends declared per common
share $- $-
=== ===
Six Months Ended
(Dollars in thousands, except per
share data) June 30,
2011 2010
---- ----
Interest and Dividend Income:
Loans, including fees $24,035 $28,314
Taxable securities 3,269 1,371
Tax exempt securities 522 373
Total interest income 27,826 30,058
Interest Expense:
Deposits 9,588 9,759
Short-term borrowings - 32
Federal Home Loan Bank advances 575 1,189
Subordinated debentures 691 658
Total interest expense 10,854 11,638
Net interest income 16,972 18,420
Provision for loan losses 12,982 5,026
Net interest income after provision
for loan losses 3,990 13,394
----- ------
Non-interest Income:
Customer service fees on deposit
accounts 2,999 3,264
Gain on sale of mortgage loans 556 714
Gain on sale of investments 231 -
Loss on sale of investments (38) (23)
Other than temporary impairment loss:
Total other-than-temporary
impairment losses (104) (183)
Portion of loss recognized in other
comprehensive
income/(loss) (before taxes) - -
Net impairment losses recognized in
earnings (104) (183)
---- ----
Loss on sale and write downs on real
estate acquired
through foreclosure (4,886) (464)
Brokerage commissions 215 200
Other income 855 811
Total non-interest income (172) 4,319
----
Non-interest Expense:
Employee compensation and benefits 8,287 7,995
Office occupancy expense and
equipment 1,643 1,572
Marketing and advertising 389 450
Outside services and data processing 1,853 1,398
Bank franchise tax 656 916
FDIC insurance premiums 1,876 1,354
Amortization of core deposit
intangible 153 152
Real estate acquired through
foreclosure expense 1,028 614
Other expense 3,437 2,457
Total non-interest expense 19,322 16,908
Income/(loss) before income taxes (15,504) 805
Income taxes/(benefits) (1,530) 112
------
Net Income/(Loss) (13,974) 693
Less:
Dividends on preferred stock (500) (500)
Accretion on preferred stock (27) (27)
--- ---
Net income (loss) attributable to
common shareholders $(14,501) $166
======== ====
Shares applicable to basic income per
common share 4,737,761 4,716,755
Basic income (loss) per common share $(3.06) $0.04
====== =====
Shares applicable to diluted income
per common share 4,737,761 4,716,755
Diluted income (loss) per common
share $(3.06) $0.04
====== =====
Cash dividends declared per common
share $- $-
=== ===
FIRST FINANCIAL SERVICE CORPORATION
Unaudited Selected Ratios and Other Data
As of and For the
Three Months Ended
June 30,
Selected Data 2011 2010
------------- ---- ----
Performance Ratios
Return on average
assets (3.75)% (.02)%
Return on average
equity (70.30)% (0.29)%
Average equity to
average assets 5.34% 6.89%
Net interest margin 2.84% 3.23%
Efficiency ratio from
continuing operations 160.17% 73.79%
Book value per common
share
Average Balance Sheet
Data
Average total assets $1,272,286 $1,260,999
Average interest
earning assets 1,199,749 1,194,662
Average loans 842,611 964,428
Average interest-
bearing deposits 1,081,480 1,031,210
Average total deposits 1,156,998 1,098,865
Average total
stockholders' equity 67,914 86,838
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 2011 2010
------------- ---- ----
Performance Ratios
Return on average
assets (2.19)% 0.11%
Return on average
equity (38.76)% 1.62%
Average equity to
average assets 5.66% 6.93%
Net interest margin 2.88% 3.18%
Efficiency ratio from
continuing operations 115.01% 74.36%
Book value per common
share $8.69 $14.14
Average Balance Sheet
Data
Average total assets $1,285,243 $1,247,178
Average interest
earning assets 1,208,797 1,180,936
Average loans 859,876 976,537
Average interest-
bearing deposits 1,087,174 1,018,382
Average total deposits 1,163,326 1,085,248
Average total
stockholders' equity 72,699 86,489
Asset Quality Ratios
Non-performing loans
as a percent of total
loans (1) 6.87% 3.94%
Non-performing assets
as a percent of total
assets 6.56% 4.18%
Allowance for loan
losses as a percent of
total loans (1) 2.22% 2.23%
Allowance for loan
losses as a percent of
non-performing loans 32% 57%
Annualized net charge-
offs to total loans
(1) 4.21% 0.38%
(1) Excludes loans held for sale.
SOURCE First Financial Service Corporation
