First Financial Service Corporation Reports Improved Credit Quality for the Fifth Consecutive Quarter

 First Financial Service Corporation Reports Improved Credit Quality for the
                          Fifth Consecutive Quarter

Net interest margin improves by 21 basis points compared to the March 2013
quarter

Non-performing assets improve 20.6% compared to the March 2013 quarter

PR Newswire

ELIZABETHTOWN, Ky., Aug. 9, 2013

ELIZABETHTOWN, Ky., Aug.9, 2013 /PRNewswire/ --First Financial Service
Corporation (the Company, NASDAQ: FFKY) today reported a net loss to common
stockholders of $1.4 million for the quarter ended June 30, 2013, an
improvement from the net loss to common stockholders of $4.4 million for the
same quarter in 2012. The net loss per diluted common share was $0.29 for the
quarter ended June 30, 2013, compared to a net loss per diluted common share
of $0.92 for the same quarter in 2012, an improvement of 68%.

First Financial also reported a net loss of $1.5 million for the six months
ended June 30, 2013, an improvement from the net loss to common stockholders
of $5.0 million for the same six-month period in 2012. The net loss per
diluted common share was $0.32 for the six months ended June 30, 2013,
compared to a net loss per diluted common share of $1.04 for the six months
ended June 30, 2012, an improvement of 69%.

"We continue to see significant progress in credit trends with an improvement
in the overall loan portfolio," said President, Greg Schreacke. "This is
extremely important to us as we continue to shift our focus from dealing with
problem assets to positioning the Company for profitable performance. While
net loans declined 3.2% from the previous quarter mainly due to normal pay
downs in the loan portfolio and continued reduction in non-performing loans,
new loan production is accelerating. The Company generated $38 million in new
loans during the second quarter following $34 million in the first quarter of
2013 and $26 million in quarter ended December 31, 2012."

SECOND QUARTER 2013 HIGHLIGHTS

  oNon-performing assets, excluding restructured loans that are accruing and
    paying as agreed, declined by $8.3 million or 20.6%, to $32.1 million from
    March 31, 2013 and $42.6 million or 57.0% from June 30, 2012. This
    represents the fifth consecutive quarterly reduction in non-performing
    assets, excluding restructured loans that are accruing and paying as
    agreed.
  oAllowance for loan losses to total non-performing loans, excluding
    restructured loans that are accruing and paying as agreed, was 89.3% at
    June 30, 2013 compared to 42.0% for the same quarter last year.
  oAnnualized net charge-offs were 0.06% at June 30, 2013 compared to 1.37%
    for the same quarter last year.
  oOther real estate expenses have declined 69.4% for the six months ended
    June 30, 2013 to $800,000 when compared to $2.7 million for the same
    period last year.
  oNet interest margin improved to 2.87% for the quarter ended June 30, 2013,
    up from 2.66% last quarter and 2.42% for the quarter ended June 30, 2012.
    The yield on interest earning assets improved by 12 basis points and the
    cost of interest bearing liabilities improved by 9 basis points when
    compared to the quarter ended March 31, 2013.
  oRegulatory capital ratios continue to improve at the bank level. The tier
    I leverage ratio was 7.27%, the tier I risk-based ratio was 11.09%, and
    the total risk-based ratio was 12.36% for the quarter ended June 30, 2013
    compared to 5.73%, 9.42%, and 10.68% respectively for the quarter ended
    June 30, 2012.

"The improvement to the net interest margin is consistent with our
expectations," said Chief Financial Officer, Frank Perez. "The combination of
improved net interest margin and better asset quality are key factors as we
move forward and put our challenges behind us."

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. Currently, the Bank serves six
contiguous counties in central Kentucky through its 17 full-service banking
centers.

This release includes forward-looking statements. The words "expect,"
"anticipate," "goal," "objective," "intend," "plan," "believe," "should,"
"seek," "estimate" and similar expressions identify forward-looking
statements, but other statements not limited to historical information may
also be considered forward-looking. All forward-looking statements are subject
to risks, uncertainties and other factors that may cause our actual results to
differ materially from any results expressed or implied by such
forward-looking statements. Such risks and uncertainties include, without
limitation, (i) events or conditions that adversely affect the financial
condition of borrowers; (ii) continuation of the current historically low
short-term interest rate environment; (iii) our ability to attract performing
loans; (iv) changes in loan underwriting, credit review or loss reserve
policies resulting from economic conditions, regulatory oversight or
regulatory developments; (v) the effectiveness of our efforts to improve,
resolve or liquidate lower-quality assets; (vi) increased competition from
other financial institutions; (vii) greater than anticipated adverse
conditions in the national or local economies, particularly in commercial and
residential real estate markets; (viii) rapid fluctuations or unanticipated
changes in interest rates; (ix) events that would cause us to conclude that
there was impairment of any asset, including intangible assets; (x) events
that further reduce the value of, or increase expenses associated with, other
real estate owned; (xi) our ability to comply with regulatory capital
requirements; and (xiii) changes in state and federal legislation, regulations
or policies applicable to banks and other financial service providers,
including implementation of the Dodd-Frank Wall Street Reform and Consumer
Protection Act. A more detailed description of these and other risks and
uncertainties is contained in our most recent annual report on Form 10-K and
our most recent quarterly report on Form 10-Q filed with the Securities and
Exchange Commission. Many of the risks and uncertainties described above are
beyond our ability to control or predict, and therefore readers are cautioned
not to put undue reliance on the forward-looking statements made in this
release. First Financial Service Corporation disclaims any obligation to
update or revise any forward-looking statements made in this release, whether
as a result of new information, future events or otherwise, unless required by
law.





FIRST FINANCIAL SERVICE CORPORATION
Consolidated Balance Sheets
(Unaudited)
                                                    June 30,     December 31,
(Dollars in thousands, except per share data)       2013          2012
ASSETS:
Cash and due from banks                             $   11,947  $   12,598
Interest bearing deposits                           15,978        50,505
 Total cash and cash equivalents                 27,925        63,103
Securities available-for-sale                       309,132       354,131
Loans held for sale                                 3,595         3,887
Loans, net of unearned fees                         490,586       524,835
Allowance for loan losses                           (15,947)      (17,265)
 Net loans                                    474,639       507,570
Federal Home Loan Bank stock                        4,430         4,805
Cash surrender value of life insurance              10,244        10,060
Premises and equipment, net                         26,742        27,048
Real estate owned:
 Acquired through foreclosure, net of valuation
 allowance of $721 Jun (2013) and $500 Dec      14,169        22,286
(2012)
Other repossessed assets                            37            34
Accrued interest receivable                         2,390         2,690
Accrued income taxes                                2,907         2,928
Low-income housing investments                      6,821         7,061
Other assets                                        1,487         1,459
                     TOTAL ASSETS                   $  884,518   $ 1,007,062
                     LIABILITIES AND STOCKHOLDERS'
                     EQUITY
LIABILITIES:
Deposits:
 Non-interest bearing                              $   80,584  $   75,842
 Interest bearing                                  717,793       846,778
 Total deposits                                798,377       922,620
Advances from Federal Home Loan Bank                22,526        12,596
Subordinated debentures                             18,000        18,000
Accrued interest payable                            3,798         3,121
Accrued senior preferred dividend                   2,969         2,469
Accounts payable and other liabilities              4,246         3,884
                     TOTAL LIABILITIES              849,916       962,690
Commitments and contingent liabilities             -             -
STOCKHOLDERS' EQUITY:
Senior preferred stock, $1 par value per share;
 authorized 5,000,000 shares; issued and
 outstanding, 20,000 shares with a liquidation
 preference of $23.0 million Jun (2013), and
 $22.5 million Dec (2012)                        19,970        19,943
Common stock, $1 par value per share;
 authorized 35,000,000 shares; issued and
 outstanding, 4,855,890 shares Jun (2013), and
4,775,114
 shares Dec (2012)                               4,856         4,775
Additional paid-in capital                          35,990        35,782
Accumulated deficit                                 (18,929)      (17,398)
Accumulated other comprehensive income             (7,285)       1,270
                     TOTAL STOCKHOLDERS' EQUITY     34,602        44,372
                     TOTAL LIABILITIES AND          $  884,518   $ 1,007,062
                     STOCKHOLDERS' EQUITY





                      FIRST FINANCIAL
                     SERVICE CORPORATION
                     Consolidated Statements of
                     Operations
                          
                          (Unaudited)
                                      Three Months Ended  Six Months
                                                           Ended
(Amounts in thousands, except per     June 30,             June 30,
share data)
                                      2013      2012       2013      2012
 Loans, including fees               $      $        $       $  
                                      6,603     8,868     13,421   18,829
 Taxable securities                  1,541     1,726      3,198     3,436
 Tax exempt securities               67        144        132       357
           Total
           interest                   8,211     10,738     16,751    22,622
           income
Interest Expense:
 Deposits                            1,774     3,444      3,910     7,389
 Federal Home Loan Bank              132       283        264       567
advances
 Subordinated                        341       341        682       682
debentures
           Total interest             2,247     4,068      4,856     8,638
           expense
Net interest income                   5,964     6,670      11,895    13,984
Provision for loan                    212       915        (825)     1,927
losses
Net interest income after provision   5,752     5,755      12,720    12,057
for loan losses
Non-interest Income:
 Customer service fees on deposit    1,307     1,399      2,498     2,782
accounts
 Gain on sale of                     161       384        588       695
mortgage loans
 Gain on sale of                     334       598        843       1,309
investments
 Loss on sale of                     (334)     (303)      (616)     (303)
investments
 Other than temporary
impairment loss:
 Total other-than-temporary      -         -          -         (26)
impairment losses
 Portion of loss recognized in
other comprehensive
 income/(loss)               -         -          -         -
(before taxes)
 Net impairment losses           -         -          -         (26)
recognized in earnings
 Loss on sale and write downs on
real estate acquired
 through                         (532)     (2,016)    (1,592)   (3,582)
foreclosure
 Gain on sale of                     -         322        -         322
premises and equipment
 Gain on sale on real estate         150       210        207       613
acquired through foreclosure
 Gain on sale of real estate held    -         -          -         175
for development
 Brokerage commissions               139       112        257       207
 Other income                        461       617        955       1,028
           Total
           non-interest               1,686     1,323      3,140     3,220
           income
Non-interest Expense:
 Employee compensation               3,757     3,822      7,550     7,675
and benefits
 Office occupancy expense and        690       782        1,398     1,550
equipment
 Marketing and                       74        135        174       168
advertising
 Outside services and                941       893        1,804     1,704
data processing
 Bank franchise tax                  315       402        630       744
 FDIC insurance                      505       682        1,194     1,097
premiums
 Amortization of                     -         62         -         127
intangible assets
 Real estate acquired through        524       2,336      818       2,676
foreclosure expense
 Loan expense                        385       656        607       1,164
 Other expense                       1,372     1,446      2,688     2,800
           Total
           non-interest               8,563     11,216     16,863    19,705
           expense
Loss before income taxes              (1,125)   (4,138)    (1,003)   (4,428)
Income tax                            1         1          1         1
expense/(benefit)
Net Loss                             (1,126)   (4,139)    (1,004)   (4,429)
Less:
 Dividends on                       (250)     (250)      (500)     (500)
preferred stock
 Accretion on                       (13)      (13)       (27)      (27)
preferred stock
Net loss attributable to common       $       $        $      $  
shareholders                          (1,389)  (4,402)    (1,531)   (4,956)
Shares applicable to basic loss per   4,806,444 4,767,464  4,797,259 4,764,240
common share
Basic loss per common                 $      $       $      $   
share                                 (0.29)    (0.92)     (0.32)   (1.04)
Shares applicable to diluted loss per 4,806,444 4,767,464  4,797,259 4,764,240
common share
Diluted loss per common               $      $       $      $   
share                                 (0.29)    (0.92)     (0.32)   (1.04)
Cash dividends declared per common    $     $      $     $    
share                                  -       -          -      -





                   Quarter Ended June 30,
                            2013                           2012
(Dollars in
thousands)
                   Average          Average     Average           Average
                   Balance  Interest Yield/Cost  Balance   Interest Yield/Cost
                                     (5)                            (5)
ASSETS
Interest earning
assets:
 U.S. Government  $     $     -%          $       $     2.03%
and federal agency    -   -               19,399   98
 Mortgage-backed  244,501  1,031    1.69%       309,475   1,498    1.94%
securities
 State and
political
subdivision
 securities     15,501   248      6.42%       13,755    218      6.36%
(1)
 Trust Preferred  -        -        -%          1,032     16       6.22%
Securities
 Corporate bonds  59,231   377      2.55%       412       1        0.97%
 Loans (2) (3)    499,079  6,603    5.31%       662,340   8,868    5.37%
(4)
 FHLB stock       4,430    47       4.26%       4,805     56       4.67%
 Interest bearing 24,982   16       0.26%       107,296   57       0.21%
deposits
 Total interest 847,724  8,322    3.94%       1,118,514 10,812   3.88%
earning assets
Less: Allowance   (16,156)                      (17,759)
for loan losses
Non-interest       78,642                        92,289
earning assets
 Total assets   $                            $
                   910,210                      1,193,044
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Interest bearing
liabilities:
 Savings          $      $     0.23%       $       $     0.29%
accounts           91,122   52                 98,445   72
 NOW and money
market
 accounts        265,784  153      0.23%       305,064   390      0.51%
 Certificates of
deposit and
 other time     390,885  1,569    1.61%       605,531   2,983    1.98%
deposits
 FHLB advances    13,762   132      3.85%       27,678    282      4.09%
 Subordinated     18,000   341      7.60%       18,000    341      7.60%
debentures
 Total interest
bearing            779,553  2,247    1.16%       1,054,718 4,068    1.55%
liabilities
Non-interest
bearing
liabilities:
 Non-interest     80,433                        82,698
bearing deposits
 Other            11,060                        5,069
liabilities
 Total           871,046                       1,142,485
liabilities
Stockholders'      39,164                        50,559
equity
 Total
liabilities and
 stockholders'   $                            $
equity             910,210                      1,193,044
Net interest                $                            $ 
income                      6,075                          6,744
Net interest                         2.78%                          2.33%
spread
Net interest                         2.87%                          2.42%
margin
(1) Taxable equivalent yields are calculated assuming a 34% federal income tax
rate.
(2) Includes loan fees, immaterial in amount, in both interest income and the
calculation of yield on loans.
(3) Calculations include non-accruing loans in the average loan amounts
outstanding.
(4) Includes loans held for sale.
(5) Annualized





                  Six Months Ended June 30,
                           2013                            2012
(Dollars in
thousands)
                  Average          Average     Average            Average
                  Balance  Interest Yield/Cost  Balance    Interest Yield/Cost
                                    (5)                             (5)
ASSETS
Interest earning
assets:
 U.S. Government $     $                 $       $  
and federal              28     1.48%       21,537     230      2.15%
agency            3,822
 Mortgage-backed 266,443  2,241    1.70%       294,883    2,969    2.03%
securities
 State and
political
subdivision
 securities    15,078   421      5.63%       16,636     541      6.56%
(1)
 Trust Preferred -        -        -%          1,055      29       5.54%
Securities
 Corporate       50,862   651      2.58%       206        1        0.98%
bonds
 Loans (2) (3)   510,593  13,421   5.30%       694,733    18,829   5.47%
(4)
 FHLB stock      4,555    98       4.34%       4,805      103      4.32%
 Interest        27,701   34       0.25%       95,855     104      0.22%
bearing deposits
 Total
interest earning  879,054  16,894   3.88%       1,129,710  22,806   4.07%
assets
Less: Allowance  (16,587)                      (17,868)
for loan losses
Non-interest      81,181                        92,995
earning assets
                  $                          $
 Total assets                               1,204,837
                  943,648
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Interest bearing
liabilities:
 Savings         $     $                 $       $  
accounts                 107     0.24%       96,491     143      0.30%
                  88,947
 NOW and money
market
 accounts       272,224  355      0.26%       304,972    838      0.55%
 Certificates of
deposit and
 other time    419,536  3,448    1.66%       621,632    6,408    2.08%
deposits
 FHLB advances   13,168   264      4.04%       27,761     567      4.12%
 Subordinated    18,000   682      7.64%       18,000     682      7.64%
debentures
 Total interest
bearing           811,875  4,856    1.21%       1,068,856  8,638    1.63%
liabilities
Non-interest
bearing
liabilities:
 Non-interest    79,492                        79,215
bearing deposits
 Other           10,727                        4,858
liabilities
 Total          902,094                       1,152,929
liabilities
Stockholders'     41,554                        51,908
equity
 Total
liabilities and
 stockholders'  $                          $
equity                                         1,204,837
                  943,648
Net interest               $                              $ 14,168
income                     12,038
Net interest                        2.67%                           2.44%
spread
Net interest                        2.76%                           2.53%
margin
(1) Taxable equivalent yields are calculated assuming a 34% federal income tax
rate.
(2) Includes loan fees, immaterial in amount, in both interest income and the
calculation of yield on loans.
(3) Calculations include non-accruing loans in the average loan amounts
outstanding.
(4) Includes loans held for sale.
(5) Annualized





                                        Three Months Ended  Six Months Ended
                                        June 30,            June 30,
(Dollars in thousands)                  2013      2012      2013      2012
Balance at beginning of period          $ 15,812  $ 17,329  $ 17,265  $ 17,181
Loans charged-off:
 Residential mortgage                  -         31        -         62
 Consumer & home equity                92        158       155       276
 Commercial & commercial real estate   61        2,190     546       2,990
Total charge-offs                       153       2,379     701       3,328
Recoveries:
 Residential mortgage                  4         -         4         1
 Consumer & home equity                48        42        90        86
 Commercial & commercial real estate   24        75        114       102
Total recoveries                        76        117       208       189
Net loans charged-off                   77        2,262     493       3,139
Provision for loan losses               212       915       (825)     1,927
Balance at end of period                15,947    15,982    15,947    15,969
Less: Allowance allocated to loans held
for
 sale in probable branch       -         (682)     -         (669)
divestiture
Balance at end of period, net           $ 15,947  $ 15,300  $ 15,947  $ 15,300
Allowance for loan losses to total      3.25%     2.50%     3.25%     2.50%
loans (1) (2)
Annualized net charge-offs to average
 loans outstanding                     0.06%     1.37%     0.19%     0.91%
Allowance for loan losses to
 total non-performing loans (2)        89%       42%       89%       42%
(1) Includes loans held for sale in probablebranch divestiture and probable
loan sale for 2012
(2) Includes allowance allocated to loans held for sale in probable branch
divestiture for 2012





                              June     March    December   September June 30,
                              30,     31,     31,        30,
(Dollars in thousands)        2013     2013     2012       2012      2012
Restructured on non-accrual   $     $     $  9,753  $      $   
status                         8,639  9,099              16,151    21,844
Past due 90 days still on     -        1,950    -          -         -
accrual
Loans on non-accrual status   9,215    9,596    11,702     15,565    16,217
 Total non-performing loans  17,854   20,645   21,455     31,716    38,061
Real estate acquired through
 foreclosure                 14,169   19,705   22,286     28,649    36,529
Other repossessed assets      37       32       34         24        30
 Total non-performing assets $     $     $ 43,775   $      $   
                              32,060   40,382              60,389    74,620
Ratios: Non-performing loans
 to total loans
(includes loans held for sale
in
 probable branch
divestiture and probable
 loan sale for   3.64%    4.08%    4.09%      5.53%     5.97%
2012)
 Non-performing
assets
 to total loans
(includes loans held for sale
in
 probable branch
divestiture and probable
 loan sale for   6.54%    7.98%    8.34%      10.53%    11.71%
2012)



SOURCE First Financial Service Corporation

Website: http://www.ffsbky.com
Contact: Frank Perez, Chief Financial Officer, First Financial Service
Corporation, (270) 765-2131
 
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