ELIZABETHTOWN, Ky., May 1, 2009 /PRNewswire-FirstCall via COMTEX/ ----First Financial Service Corporation (the Company, Nasdaq: FFKY) today announced diluted net income per common share of $0.10 for the quarter ended March 31, 2009, compared to $0.40 for the quarter ended March 31, 2008. The first quarter earnings decline was driven by a higher provision for loan losses, margin compression, higher operating expenses and impairment losses on securities. Earnings available to common shareholders were also impacted by dividends paid on preferred shares.

After careful consideration, the Company elected to participate in the U.S. Treasury's voluntary Capital Purchase Program (CPP) in which First Financial Service Corporation issued $20 million in senior preferred shares to the U.S. Treasury. This transaction closed during January 2009 and details of the transaction can be found in a Securities and Exchange Commission filing dated January 12, 2009.

"Participation in CPP has strengthened our balance sheet to maintain our well-capitalized status in terms of regulatory guidelines," stated Chief Executive Officer, B. Keith Johnson. "This will assist the Bank in weathering the uncertain economic climate and enable us to take advantage of potential growth opportunities as they arise. During the first quarter of 2009, we were able to continue extending loans to new and existing customers from CPP proceeds. This is evident based on the strong loan growth achieved during the most recent quarter."

"Our first quarter financial performance however, does reflect our continued efforts to manage risks in our loan portfolio. The Company recorded a large provision expense related partially to growth realized in the portfolio, but mainly due to increased general and specific reserves that were necessary for probable incurred credit loss resulting from continued deterioration in asset quality. It is likely provision expense will remain elevated throughout the year to compensate for weak economic conditions impacting some of our customer relationships as well as depressed residential and commercial real estate values. 2009 will continue to be a challenging time for our financial institution as we manage the overall level of our credit quality. Like all banks, our Company will also face increased FDIC insurance premiums as well as generally higher operating expenses during the year as we add additional banking centers. The new banking centers will be critical to enable the Company to continue its organic growth in our existing markets. Despite these unprecedented economic challenges, First Financial is committed to making prudent decisions to build long-term value for our shareholders, customers and associates."

Total deposits were $821.5 million at March 31, 2009, an increase of $46.1 million from the fourth quarter of 2008. After our acquisition of Farmers State Bank in 2008, our retail branch network has broadened to fifteen in the Louisville Metropolitan Area, which now extends into Southern Indiana. As previously noted, additional sites within the Louisville market are under development with our next location scheduled to open early in the third quarter of 2009. Competition for deposits remains competitive in all of the markets we serve. This intense competition and any additional actions taken by the Federal Open Markets Committee (FOMC) could add to additional margin compression as the interest rate environment continues to be uncertain.

The demand for commercial lending continues to be strong in all markets we serve. Commercial loans were $666.2 million at March 31, 2009, an increase of $28.6 million, or 4.50%, from the fourth quarter 2008. The growth in the Company's commercial loan portfolio has favorably impacted the level of interest income generated by the Company. Average earning assets increased by $154.8 million as of March 31, 2009, compared to March 31, 2008. Despite the increase in earning assets, the Company's net interest margin realized a modest decline of ten basis points. Net interest margin decreased to 3.73% for the quarter ended March 31, 2009, compared to 3.83% for the same period in 2008. The current Federal Funds rate remains in a range of 0.00% to 0.25%. Correspondingly, variable rate loans that are tied to the federal prime rate have been repriced downward in relation to the prime rate. However, interest rates paid on customer deposits have not adjusted downward proportionately with the declining interest yields on loans and investments. Sixty percent of deposits are time deposits that reprice over a longer period of time. The increase in the volume of earning assets did have a positive impact on net interest income, which increased $1,144,000 for the three months ended March 31, 2009, compared to the respective period ended March 31, 2008.

The percentage of non-performing loans to total loans increased to 2.30% at March 31, 2009 compared to 1.86% at December 31, 2008 and 0.71% at March 31, 2008. Annualized net charge-offs as a percent of average total loans increased to 0.23% for the quarter ended March 31, 2009, compared to 0.07% for December 31, 2008 and 0.06% for the quarter ended March 31, 2008. Net charge-offs were higher in the current period due to increased charge-offs in the consumer and commercial real estate loan portfolios.

Provision for loan loss expense increased $1,461,000 for the three months ended March 31, 2009, compared to the same period ended March 31, 2008. The increase for the first quarter of 2009 was related to growth in the loan portfolio and from the specific reserves set aside for loans classified during 2009. Provision expense was also higher due to increasing the general reserve factors for commercial real estate loans during the quarter as the level of classified loans has increased sharply. As economic conditions continue to deteriorate, management's emphasis will be to proactively review credit quality and the adequacy of the allowance for loan losses. Although resulting in substantial provisioning in the second half of 2008 and continuing into 2009, we believe that this proactive approach will put the Company in a better position to withstand the uncertainty over the next few quarters.

Non-interest income increased $49,000 for the three months ended March 31, 2009, compared the three months ended March 31, 2008. Customer service fees on deposit accounts increased $61,000 for the first quarter 2009 compared to the same quarter in 2008. Gain on sale of mortgage loans increased $29,000, while brokerage commissions decreased $25,000, for the current quarter compared to same quarter in the prior year. Other income increased $156,000 for the quarter ended March 31, 2009 compared to the quarter ended March 31, 2008. The increase in other income is attributable to a gain on sale of other real estate owned recorded during the quarter. The increase in non-interest income was offset by other-than-temporary impairment losses of $155,000 on two pooled trust preferred security investments.

Non-interest expense increased $1.4 million to $7.8 million for the three months ended March 31, 2009, compared to the same three months ended March 31, 2008. Contributing to the increase in non-interest expense for the quarter was a $584,000 increase in employee compensation expense. Twenty employees were added in the second quarter of 2008 as a result of the Farmers State Bank acquisition. Further contributing to the increase to non-interest expense were increases in office occupancy expense and equipment, information systems and outside services, amortization for core deposit intangible and marketing and advertising. FDIC insurance premiums also increased $89,000 for the quarter ended March 31, 2009 compared to the quarter ended March 31, 2008. The FDIC increased insurance premiums for the first quarter 2009 for all financial institutions. The Company will most likely be subject to higher premiums beginning in the second quarter 2009 along with any special assessments imposed by the FDIC on all financial institutions. Additionally, other expenses increased $338,000 for the quarter ended March 31, 2009 over the same period in 2008. The increase was related to higher interchange expenses, postage and courier, loss on NOW accounts and maintenance and repair on other real estate owned.

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 seven contiguous counties encompassing Central Kentucky and the Louisville Metropolitan area, including Southern Indiana, through its 20 full-service banking centers and a commercial private banking center.

This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties that could cause actual results to differ materially from historical income and those presently anticipated or projected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date of this release. Such risks and uncertainties include those detailed in the Company's filings with the Securities and Exchange Commission, risks of adversely changing results of operations, risks related to the Company's acquisition strategy, risk of loans and investments, including the effect of the change of the local economic conditions, risks associated with the adverse effects of the changes in interest rates, and competition for the Company's customers by other providers of financial services, all of which are difficult to predict and many of which are beyond the control of the Company.

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 share data)              2009          2008
   
   ASSETS:
   Cash and due from banks                             $15,198       $17,310
   Interest bearing deposits                             2,839         3,595
   Total cash and cash equivalents                  18,037        20,905
   
   Securities available-for-sale                        15,673        15,775
   Securities held-to-maturity, fair value of
   $6,123 Mar (2009) and $6,846 Dec (2008)              6,097         7,022
   Total securities                                21,770        22,797
   
   Loans held for sale                                  10,728         9,567
   Loans, net of unearned fees                         943,336       903,434
   Allowance for loan losses                           (15,072)      (13,565)
   Net loans                                     938,992       899,436
   
   Federal Home Loan Bank stock                          8,515         8,515
   Cash surrender value of life insurance                8,745         8,654
   Premises and equipment, net                          30,635        30,068
   Real estate owned:
   Acquired through foreclosure                        5,348         5,925
   Held for development                                   45            45
   Other repossessed assets                                 92            91
   Goodwill                                             11,931        11,931
   Core deposit intangible                               1,602         1,703
   Accrued interest receivable                           3,999         4,379
   Deferred income taxes                                 1,090         1,147
   Other assets                                          2,393         1,451
   
   TOTAL ASSETS                                   $1,053,194    $1,017,047
   
   LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES:
   Deposits:
   Non-interest bearing                              $57,499       $55,668
   Interest bearing                                  764,019       719,731
   Total deposits                                821,518       775,399
   
   Short-term borrowings                                65,000        94,869
   Advances from Federal Home Loan Bank                 52,841        52,947
   Subordinated debentures                              18,000        18,000
   Accrued interest payable                                279           288
   Accounts payable and other liabilities                2,718         2,592
   
   TOTAL LIABILITIES                                 960,356       944,095
   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 Mar (2009)              19,740             -
   Common stock, $1 par value per share;
   authorized 10,000,000 shares; issued and
   outstanding, 4,679,504 shares Mar (2009), and
   4,668,030  shares Dec (2008)                         4,680         4,668
   Additional paid-in capital                           34,578        34,145
   Retained earnings                                    36,069        36,476
   Accumulated other comprehensive loss                 (2,229)       (2,337)
   
   TOTAL STOCKHOLDERS' EQUITY                         92,838        72,952
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $1,053,194    $1,017,047
   
   
   
   FIRST FINANCIAL SERVICE CORPORATION
   Consolidated Statements of Income
   (Unaudited)
   
   Three Months Ended
   (Dollars in thousands, except per share data)                 March 31,
   2009       2008
   Interest and Dividend Income:
   Loans, including fees                                 $13,944    $14,032
   Taxable securities                                        308        384
   Tax exempt securities                                     106        100
   Total interest income                              14,358     14,516
   
   Interest Expense:
   Deposits                                                4,500      5,686
   Short-term borrowings                                      43        322
   Federal Home Loan Bank advances                           597        596
   Subordinated debentures                                   329        167
   Total interest expense                              5,469      6,771
   
   Net interest income                                       8,889      7,745
   Provision for loan losses                                 2,045        584
   Net interest income after provision for loan losses       6,844      7,161
   
   Non-interest Income:
   Customer service fees on deposit accounts               1,477      1,416
   Gain on sale of mortgage loans                            177        148
   Total other-than-temporary impairment losses         (1,183)         -
   Portion of loss recognized in other comprehensive
   income (before taxes)                                1,028          -
   Net impairment losses recognized in earnings           (155)         -
   Write down on real estate acquired through
   foreclosure                                              (17)         -
   Brokerage commissions                                      93        118
   Other income                                              428        272
   Total non-interest income                           2,003      1,954
   
   Non-interest Expense:
   Employee compensation and benefits                      4,002      3,418
   Office occupancy expense and equipment                    848        653
   Marketing and advertising                                 265        214
   Outside services and data processing                      793        717
   Bank franchise tax                                        264        250
   FDIC insurance premiums                                   179         90
   Amortization of core deposit intangible                   101          -
   Other expense                                           1,331        993
   Total non-interest expense                          7,783      6,335
   
   Income before income taxes                                1,064      2,780
   Income taxes                                                303        897
   Net Income                                                  761      1,883
   Less:
   Dividends on preferred stock                            (267)         -
   Accretion on preferred stock                             (11)         -
   Net income available to common shareholders                $483     $1,883
   
   Shares applicable to basic income per share           4,676,587  4,663,447
   Basic income per share                                    $0.10      $0.40
   
   Shares applicable to diluted income per share         4,676,690  4,697,876
   Diluted income per share                                  $0.10      $0.40
   
   Cash dividends declared per share                        $0.190     $0.190
   
   
   
   FIRST FINANCIAL SERVICE CORPORATION
   Unaudited Selected Ratios and Other Data
   
   As of and For the
   Three Months Ended
   March 31,
   Selected Data                                          2009      2008
   
   Performance Ratios
   
   Return on average assets                               0.30%     0.87%
   
   Return on average equity                               3.37%    10.16%
   
   Average equity to average assets                       8.82%     8.52%
   
   Net interest margin                                    3.73%     3.83%
   
   Efficiency ratio from continuing operations           71.46%    65.31%
   
   Book value per share                                 $15.62    $16.01
   
   Average Balance Sheet Data
   
   Average total assets                             $1,039,731  $875,286
   
   Average interest earning assets                     973,336   818,565
   
   Average loans                                       939,647   774,443
   
   Average interest-bearing deposits                   760,753   639,274
   
   Average total deposits                              814,870   693,609
   
   Average total stockholders' equity                   91,711    74,547
   
   Asset Quality Ratios
   
   Non-performing loans as a percent of total
   loans (1)                                             2.30%     0.71%
   
   Non-performing assets as a percent of total
   loans (1)                                             2.87%     1.11%
   
   Allowance for loan losses as a percent of total
   loans (1)                                             1.60%     1.08%
   
   Allowance for loan losses as a percent of
   non-performing loans                                    70%      151%
   
   Net charge-offs to total loans (1)                     0.23%     0.06%
   
   (1) Excludes loans held for sale.
   
   
   
   
   

SOURCE First Financial Service Corporation

http://www.ffsbky.com
   

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