First Financial Service Corporation Reports Net Income of $1.2 million or $0.25 per share

  First Financial Service Corporation Reports Net Income of $1.2 million or
                               $0.25 per share

Net interest margin increases for the sixth consecutive quarter

PR Newswire

ELIZABETHTOWN, Ky., Nov. 12, 2013

ELIZABETHTOWN, Ky., Nov. 12, 2013 /PRNewswire/ --First Financial Service
Corporation (the Company, NASDAQ: FFKY) today reported net income to common
stockholders of $1.2 million for the quarter ended September 30, 2013, an
improvement from the net loss to common stockholders of $1.0 million for the
same quarter in 2012. Net income per diluted common share was $0.25 for the
quarter ended September 30, 2013, compared to a net loss per diluted common
share of $0.21 for the same quarter in 2012.

First Financial also reported a net loss of $328,000 for the nine months ended
September 30, 2013, an improvement from the net loss to common stockholders of
$6.0 million for the same nine-month period in 2012. The net loss per diluted
common share was $0.07 for the nine months ended September 30, 2013, compared
to a net loss per diluted common share of $1.25 for the nine months ended
September 30, 2013.

"We continue to execute on improving the overall profitability and risk
profile of the Company," said President, Greg Schreacke. "Non-performing
assets improved for the sixth consecutive quarter, net interest margin trends
remain favorable, and capital ratios continue to improve with the net income
posted for the quarter. More importantly, serving our customers remains at
the heart of everything we do. New loan production for portfolio loans
exceeded $30 million for the third consecutive quarter, though net loan growth
declined 3.0% for the quarter. Retail and commercial checking continue to
grow with a 5% increase in deposits for the year."

THIRD QUARTER 2013 HIGHLIGHTS

  oNet interest margin improved to 2.96% for the quarter ended September 30,
    2013, up from 2.87% last quarter and 2.54% for the quarter ended September
    30, 2012.
  oNon-performing assets, excluding restructured loans that are accruing and
    paying as agreed, declined by $1.7 million or 5.0%, to $30.4 million from
    June 30, 2013 and $30.0 million or 49.7% from September 30, 2012. This
    represents the sixth consecutive quarterly reduction in non-performing
    assets, excluding restructured loans that are accruing and paying as
    agreed.
  oOther real estate owned has decreased $13.4 million or 60.2% to $8.9
    million for the quarter ended September 30, 2013 compared to $22.3 for the
    quarter ended December 31, 2012. Related expenses have declined 61.7% for
    the nine months ended September 30, 2013 to $1.3 million when compared to
    $3.3 million for the same period last year. Also, a gain of $1.5 million
    was realized during the quarter on a piece of commercial real estate
    property that was sold.
  oRegulatory capital ratios continue to improve at the bank level. The tier
    I leverage ratio was 7.80%, the tier I risk-based ratio was 11.83% and the
    total risk-based ratio was 13.09% for the quarter ended September 30, 2013
    compared to 6.50%, 10.61%, and 11.88% respectively for the quarter ended
    September 30, 2012.

"Third quarter 2013 noninterest expenses were relatively flat with a slight
increase of approximately $41,000 over the second quarter. Noninterest income
in the second quarter of 2013 improved by $1.9 million and included a $1.5
million gain on the sale of one other real estate owned property," said Chief
Financial Officer, Frank Perez. "Noninterest income also benefited from
increased overdraft and mortgage fee income."

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)
                                                  September 30,  December 31,
(Dollars in thousands, except per share data)     2013            2012
ASSETS:
Cash and due from banks                           $   13,441    $   12,598
Interest bearing deposits                         18,076          50,505
 Total cash and cash equivalents               31,517          63,103
Securities available-for-sale                     290,183         354,131
Loans held for sale                               1,068           3,887
Loans, net of unearned fees                       476,031         524,835
Allowance for loan losses                         (12,224)        (17,265)
 Net loans                                  463,807         507,570
Federal Home Loan Bank stock                      4,430           4,805
Cash surrender value of life insurance            10,336          10,060
Premises and equipment, net                       25,907          27,048
Real estate owned:
 Acquired through foreclosure, net of
valuation
 allowance of $721 Sept (2013) and $500 Dec   8,859           22,286
(2012)
Other repossessed assets                          16              34
Accrued interest receivable                       2,283           2,690
Accrued income taxes                              2,907           2,928
Low-income housing investments                    7,039           7,061
Other assets                                      1,804           1,459
                    TOTAL ASSETS                  $  850,156     $ 1,007,062
                    LIABILITIES AND STOCKHOLDERS'
                    EQUITY
LIABILITIES:
Deposits:
 Non-interest bearing                            $   80,308    $   75,842
 Interest bearing                                666,570         846,778
 Total deposits                              746,878         922,620
Advances from Federal Home Loan Bank              38,424          12,596
Subordinated debentures                           18,000          18,000
Accrued interest payable                          4,137           3,121
Accrued senior preferred dividend                 3,219           2,469
Accounts payable and other liabilities            4,977           3,884
                    TOTAL LIABILITIES             815,635         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 $23.2 million Sept (2013),
and
 $22.5 million Dec (2012)                      19,984          19,943
Common stock, $1 par value per share;
 authorized 35,000,000 shares; issued and
 outstanding, 4,861,523 shares Sept (2013), and
4,775,114
 shares Dec (2012)                             4,861           4,775
Additional paid-in capital                        36,137          35,782
Accumulated deficit                               (17,726)        (17,398)
Accumulated other comprehensive income           (8,735)         1,270
                    TOTAL STOCKHOLDERS' EQUITY    34,521          44,372
                    TOTAL LIABILITIES AND         $  850,156     $ 1,007,062
                    STOCKHOLDERS' EQUITY



                        FIRST FINANCIAL SERVICE
                        CORPORATION
                        Consolidated Statements of
                        Operations
                        (Unaudited)
                                  Three Months Ended    Nine Months Ended
(Amounts in thousands, except per September 30,          September 30,
share data)
                                  2013       2012        2013       2012
Interest and Dividend
Income:
 Loans, including fees           $       $         $        $  
                                  6,308      8,082      19,729    26,911
 Taxable securities              1,700      1,666       4,898      5,303
 Tax exempt securities           53         74          185        230
                 Total interest   8,061      9,822       24,812     32,444
                 income
Interest
Expense:
 Deposits                        1,561      2,952       5,471      10,341
 Federal Home Loan Bank          133        216         397        783
advances
 Subordinated debentures         340        421         1,022      1,103
                 Total interest   2,034      3,589       6,890      12,227
                 expense
Net interest income               6,027      6,233       17,922     20,217
Provision for loan losses         (500)      2,671       (1,325)    4,598
Net interest income after         6,527      3,562       19,247     15,619
provision for loan losses
Non-interest
Income:
 Customer service fees on        1,444      1,339       3,942      4,121
deposit accounts
 Gain on sale of mortgage loans  230        505         818        1,200
 Gain on sale                    235        2,054       1,078      3,363
of investments
 Loss on sale                    (223)      (350)       (839)      (653)
of 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                     (365)      (1,587)     (1,957)    (5,169)
foreclosure
 Gain on branch                  -          3,124       -          3,124
divesture
 Gain on sale of premises and    -          -           -          322
equipment
 Gain on sale on real estate     1,632      630         1,839      1,243
acquired through foreclosure
 Gain on sale of real estate     -          -           -          175
held for development
 Brokerage commissions           127        109         384        316
 Other income                    466        632         1,421      1,660
                 Total
                 non-interest     3,546      6,456       6,686      9,676
                 income
Non-interest
Expense:
 Employee compensation and       3,955      3,609       11,505     11,284
benefits
 Office occupancy expense and    653        777         2,051      2,327
equipment
 Marketing and advertising       99         113         273        281
 Outside services and data       900        853         2,704      2,557
processing
 Bank franchise tax              315        402         708        1,146
 FDIC insurance premiums         460        663         1,654      1,760
 Amortization of intangible      -          -           -          127
assets
 Real estate acquired through    452        638         1,270      3,314
foreclosure expense
 Loan expense                    485        568         1,092      1,732
 FHLB advance perpayment         -          1,548       -          1,548
penalty
 Other expense                   1,286      1,682       4,211      4,482
                 Total
                 non-interest     8,605      10,853      25,468     30,558
                 expense
Income (Loss) before income       1,468      (835)       465        (5,263)
taxes
Income tax expense/(benefit)      1          (84)        2          (83)
Net Income (Loss)                 1,467      (751)       463        (5,180)
Less:
 Dividends on preferred stock   (250)      (250)       (750)      (750)
 Accretion on preferred         (14)       (14)        (41)       (41)
stock
Net income (loss) attributable to $       $         $      $  
common shareholders               1,203      (1,015)     (328)      (5,971)
Shares applicable to basic income 4,860,115  4,772,987   4,816,538  4,766,898
(loss) per common share
Basic income (loss) per common    $       $        $       $   
share                             0.25      (0.21)      (0.07)    (1.25)
Shares applicable to diluted      4,905,542  4,772,987   4,816,538  4,766,898
income (loss) per common share
Diluted income (loss) per common  $       $        $       $   
share                             0.25      (0.21)      (0.07)    (1.25)
Cash dividends declared per       $      $       $      $    
common share                        -       -         -       -



                   Quarter Ended September 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  $     $     -%          $       $     1.90%
and federal agency    -   -               13,174   63
 Mortgage-backed  235,530  1,173    1.98%       280,664   1,328    1.88%
securities
 State and
political
subdivision
 securities     14,251   188      5.23%       13,529    242      7.10%
(1)
 Trust Preferred  -        -        -%          1,040     9        3.43%
Securities
 Corporate bonds  56,013   400      2.83%       14,109    84       2.36%
 Loans (2) (3)    488,494  6,308    5.12%       590,418   8,082    5.43%
(4)
 FHLB stock       4,430    47       4.21%       4,805     49       4.05%
 Interest bearing 17,150   9        0.21%       69,444    47       0.27%
deposits
 Total interest 815,868  8,125    3.95%       987,183   9,904    3.98%
earning assets
Less: Allowance   (15,871)                      (16,507)
for loan losses
Non-interest       74,394                        90,665
earning assets
 Total assets   $                            $
                   874,391                      1,061,341
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Interest bearing
liabilities:
 Savings          $      $     0.18%       $       $     0.31%
accounts           89,356   40                 83,542   66
 NOW and money
market
 accounts        243,533  82       0.13%       280,913   317      0.45%
 Certificates of
deposit and
 other time     365,675  1,439    1.56%       521,093   2,569    1.96%
deposits
 FHLB advances    32,750   133      1.61%       21,300    216      4.02%
 Subordinated     18,000   340      7.49%       18,000    421      9.28%
debentures
 Total interest
bearing            749,314  2,034    1.08%       924,848   3,589    1.54%
liabilities
Non-interest
bearing
liabilities:
 Non-interest     80,523                        79,266
bearing deposits
 Other            11,759                        8,467
liabilities
 Total           841,596                       1,012,581
liabilities
Stockholders'      32,795                        48,760
equity
 Total
liabilities and
 stockholders'   $                            $
equity             874,391                      1,061,341
Net interest                $                            $ 
income                      6,091                          6,315
Net interest                         2.87%                          2.44%
spread
Net interest                         2.96%                          2.54%
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



                           Nine Months Ended September 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           28     1.47%       18,749     293      2.09%
federal agency    2,548

Mortgage-backed   256,138  3,414    1.78%       290,143    4,297    1.98%
securities
 State and
political
subdivision
 securities    14,803   609      5.50%       15,600     783      6.71%
(1)
 Trust
Preferred         -        -        -%          1,050      38       4.84%
Securities
 Corporate       52,579   1,051    2.67%       4,840      85       2.35%
bonds
 Loans (2) (3)   503,227  19,729   5.24%       659,961    26,911   5.45%
(4)
 FHLB stock      4,513    145      4.30%       4,805      152      4.23%
 Interest        24,184   43       0.24%       87,051     151      0.23%
bearing deposits
 Total
interest earning  857,992  25,019   3.90%       1,082,199  32,710   4.04%
assets
Less: Allowance  (16,348)                      (17,415)
for loan losses
Non-interest      78,918                        92,218
earning assets
                  $                          $
 Total assets                               1,157,002
                  920,562
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Interest bearing
liabilities:
 Savings         $     $                 $       $  
accounts                 147     0.22%       92,174     209      0.30%
                  89,083
 NOW and money
market
 accounts       262,660  437      0.22%       296,952    1,155    0.52%
 Certificates
of deposit and
 other time    401,583  4,887    1.63%       588,119    8,977    2.04%
deposits
 FHLB advances   19,695   397      2.70%       25,607     783      4.09%
 Subordinated    18,000   1,022    7.59%       18,000     1,103    8.19%
debentures
 Total
interest bearing  791,021  6,890    1.16%       1,020,852  12,227   1.60%
liabilities
Non-interest
bearing
liabilities:
 Non-interest    79,836                        79,230
bearing deposits
 Other           11,071                        6,061
liabilities
 Total          881,928                       1,106,143
liabilities
Stockholders'     38,634                        50,859
equity
 Total
liabilities and
 stockholders'  $                          $
equity                                         1,157,002
                  920,562
Net interest               $                              $ 20,483
income                     18,129
Net interest                        2.74%                           2.44%
spread
Net interest                        2.83%                           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  Nine Months Ended
                                        September 30,       September 30,
(Dollars in thousands)                  2013      2012      2013      2012
Balance at beginning of period          $ 15,947  $ 15,300  $ 17,265  $ 17,181
Loans charged-off:
 Residential mortgage                  73        -         73        62
 Consumer & home equity                156       110       311       386
 Commercial & commercial real          3,124     361       3,670     3,351
estate
Total charge-offs                       3,353     471       4,054     3,799
Recoveries:
 Residential mortgage                  13        -         17        1
 Consumer & home equity                44        59        134       145
 Commercial & commercial real          73        64        187       166
estate
Total recoveries                        130       123       338       312
Net loans charged-off                   3,223     348       3,716     3,487
Provision for loan losses               (500)     2,671     (1,325)   4,598
Balance at end of period                12,224    17,623    12,224    18,292
Less: Allowance allocated to loans held
for
 sale in probable branch       -         201       -         (468)
divestiture
Balance at end of period, net           $ 12,224  $ 17,824  $ 12,224  $ 17,824
Allowance for loan losses to total      2.57%     3.19%     2.57%     3.19%
loans (1) (2)
Annualized net charge-offs to average
 loans outstanding                     2.62%     0.23%     0.99%     0.71%
Allowance for loan losses to
 total non-performing loans (2)        57%       58%       57%       58%
(1) Includes loans held for sale in probable
 branch divestiture and probable loan sale for 2012
(2) Includes allowance allocated to loans held for sale
 in probable branch divestiture for 2012



                          September        March  December   September
                          30,       June     31,      31,        30,
                                     30,
(Dollars in thousands)    2013       2013     2013      2012       2012
Restructured on           $      $     $       $      $    
non-accrual status        7,927      8,639   9,099    9,753      16,151
Restructured past due
90 days still on          4,837      -        -         -          -
accrual
Past due 90 days still    2,238      -        1,950     -          -
on accrual
Loans on non-accrual      6,511      9,215    9,596     11,702     15,565
status
 Total non-performing    21,513     17,854   20,645    21,455     31,716
loans
Real estate acquired
through
 foreclosure             8,859      14,169   19,705    22,286     28,649
Other repossessed assets  16         37       32        34         24
 Total non-performing    $       $     $       $       $    
assets                    30,388     32,060   40,382    43,775     60,389
Interest income that
would have
 been earned on          $      $     $       $      $     
non-performing loans      1,127        946  1,094    1,163      1,729
Interest income
recognized
 on non-performing       38         -        16        -          -
loans
Ratios: Non-performing
loans
 to total
loans (includes loans
held for sale in
 probable
branch divestiture and
probable
 loan sale   4.52%      3.64%    4.08%     4.09%      5.53%
for 2012)

Non-performing assets
 to total
loans (includes loans
held for sale in
 probable
branch divestiture and
probable
 loan sale   6.38%      6.54%    7.98%     8.34%      10.53%
for 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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