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