SOURCE: First Financial Service Corporation

July 21, 2005 17:05 ET

First Financial Service Corporation Announces Second Quarter Results

ELIZABETHTOWN, KY -- (MARKET WIRE) -- July 21, 2005 -- First Financial Service Corporation (the Company) (NASDAQ: FFKY) today announced diluted net income per share for the second quarter ended June 30, 2005 of $0.63, an increase of 19% from $0.53 for the second quarter ended June 30, 2004. Return on equity was 14.8% for the second quarter and return on assets was 1.22%.

Diluted net income per share for the six months ended June 30, 2005, was $1.22, an increase of 20% from $1.02 for the six months ended June 30, 2004. For the six months ended June 30, 2005, return on equity was 14.6% and return on assets was 1.20%.

"We are pleased to report another solid quarter of earnings to our shareholders," noted President and Chief Executive Officer, B. Keith Johnson. "We have been able to increase our profitability while absorbing the additional operating and staffing cost of our retail and commercial expansion efforts. We believe our investment in these initiatives along with our continued commitment to superior customer service will enhance our existing market share and effectively support our expansion into the Louisville metropolitan market."

The Company's emphasis on commercial lending generated a 4% compound annual growth rate in the total loan portfolio and a 35% compound annual growth rate in commercial loans over the past four years. Commercial loans were $361 million at June 30, 2005, an increase of $50 million from June 30, 2004, and an increase of $14 million from December 31, 2004. The loan growth in the first six months of 2005 has been slower than recent quarters due to scheduled and accelerated payoffs in the Company's portfolio in conjunction with aggressive fixed rate pricing among market participants. While the Company expects its recent loan growth trends to continue, the commercial loan growth for 2005 is expected to slow from the 27% growth in the commercial portfolio experienced during 2004.

The growth in the Company's commercial loan portfolio, coupled with the rising interest rate environment, has favorably impacted the level of interest income generated by the Company. Net interest margin increased to 3.88% for the six months ended June 30, 2005, compared to 3.76% for the same six months ended a year ago. This has resulted in an $890,000 increase in net interest income to $6.8 million for the second quarter ended June 30, 2005, and a $1.8 million increase in net interest income to $13.4 million for the six months ended June 30, 2005, compared to the respective periods in 2004. The increasing interest rate environment positively impacted net interest margin due to the growth in the adjustable rate commercial loans coupled with the decrease in residential fixed rate loans in the Company's loan portfolio. Net interest margin has increased in each of the last six quarters and is likely to continue to benefit from continued increases in the Prime lending rate. However, the flattening of the yield curve will likely slow the increases in net interest margin over future quarters.

The Company's asset quality remains favorable. Net charge-offs as a percent of total loans was 0.03% for the six months ended June 30, 2005, compared to 0.13% for the same period a year ago. The allowance for loan losses as a percent of total loans, increased to 1.10% at June 30, 2005, compared to 1.07% at December 31, 2004. The percentage of non-performing loans to total loans was 0.80% at June 30, 2005, compared to 0.87% at December 31, 2004.

Provision for loan loss expense decreased $218,000 to $41,000 for the quarter ended June 30, 2005, compared to $259,000 for the quarter ended June 30, 2004. For the six months ended June 30, 2005, provision for loan loss expense decreased $333,000 to $316,000, compared to $649,000 for the same six months ended a year ago. The decrease in the provision was related to the softer expansion in the commercial loan portfolio for the year, as compared to a year ago, as well as a decrease in net charge offs of $304,000 to $90,000 for the six months ended June 30, 2005 compared to $394,000 the prior year.

Non-interest income decreased $285,000 to $2.0 million for the quarter ended June 30, 2005. For the six months ended, non-interest income decreased $34,000 to $4.0 million. The Company recorded a $143,000 gain on the sale of a lot during the second quarter of 2005, compared to a $371,000 gain on the sale of land and lots for the same period in 2004, resulting in a $228,000 decrease in non-interest income for the second quarter. Also contributing to the decrease in non-interest income for the second quarter was a $76,000 decrease in the gain on sale of mortgage loans to $168,000 for the quarter ended June 30, 2005. The six months ended June 30, 2005, includes a $143,000 gain on the sale of lots as well as a $381,000 gain on the sale of investment securities. This compares to a $376,000 gain on the sale of lots and land for the six months ended June 30, 2004. Gain on the sale of mortgage loans decreased $110,000 to $351,000 for the six months ended June 30, 2005, compared to $462,000 for the six months ended June 30, 2004. The decrease was the result of slower home mortgage re-financing activity for 2005.

Non-interest expense increased $261,000, to $5.3 million for the quarter ended June 30, 2005, and $966,000 to $10.4 million for the six months ended June 30, 2005, compared to the same periods a year ago. The primary contributing factors to this increase were the additional operating and employee compensation expenses related to the recent expansion efforts. Twenty-one retail staff positions were added for the expansion into the Louisville metropolitan market, coupled with expanded facilities in Hardin County and Bullitt County, Kentucky. Additional increases in staff have taken place during 2004 and 2005 to continue the transformation towards a stronger retail sales culture and to provide expanded products and services to our retail and commercial customers. The Company's efficiency ratio was 60% for the six months ended June 30, 2005 and 2004, indicating an operationally efficient financial institution.

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, trust and estate planning, and personal investment financial counseling services. Today, the Bank serves Central Kentucky through its 14 full-service banking centers.

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 National Market under the symbol "FFKY." Market makers for the stock are:

J.J.B. Hilliard, W.L. Lyons Company, Inc.     Keefe, Bruyette & Woods, Inc.

Stifel Nicolaus & Company                     Goldman, Sachs & Company

First Tennessee Securities                    Knight Securities, LP

Spear, Leeds & Kellogg                        Sandler O'Neill

Howe Barnes Investments, Inc.

                   FIRST FINANCIAL SERVICE CORPORATION
         Consolidated Statements of Financial Condition (Unaudited)


(Dollars in thousands,                               June 30,  December 31,
  except share data)                                   2005          2004
                                                       ----          ----

           ASSETS
Cash and due from banks                               $ 18,139    $ 27,910
Federal funds sold                                       8,000       8,000
                                                      --------    --------
    Cash and cash equivalents                           26,139      35,910
                                                      --------    --------

Securities available-for-sale                           42,124      21,928
Securities held-to-maturity, fair value
  of $33,578 Jun (2005)
  and $34,557 Dec (2004)                                34,102      34,915
                                                      --------    --------
     Total securities                                   76,226      56,843
                                                      --------    --------

Loans held for sale                                        763       1,219
Loans receivable, net of unearned fees                 608,168     604,698
Allowance for loan losses                               (6,714)     (6,489)
                                                      --------    --------
      Net loans receivable                             602,217     599,428
                                                      --------    --------

Federal Home Loan Bank stock                             7,005       6,845
Cash surrender value of life insurance                   7,494       7,353
Premises and equipment, net                             18,568      17,469
Real estate owned:
  Acquired through foreclosure                           1,034         681
  Held for development                                     337         389
Other repossessed assets                                    38          40
Goodwill                                                 8,384       8,384
Accrued interest receivable                              2,529       2,487
Other assets                                             1,878       1,817
                                                      --------    --------

                  TOTAL ASSETS                       $ 751,849   $ 737,646
                                                     ==========  =========

                  LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
  Non-interest bearing                                $ 43,239    $ 38,441
  Interest bearing                                     555,262     547,945
                                                      --------    --------
      Total deposits                                   598,501     586,386
                                                      --------    --------

Advances from Federal Home Loan Bank                    78,452      78,904
Subordinated debentures                                 10,000      10,000
Accrued interest payable                                   378         413
Accounts payable and other liabilities                   1,159         637
Deferred income taxes                                    1,325       1,505
                                                      --------    --------

                  TOTAL LIABILITIES                    689,815     677,845
                                                      --------    --------

STOCKHOLDERS' EQUITY:
 Serial preferred stock, 5,000,000 shares
  authorized and unissued                                    -           -
Common stock, $1 par value per share;
 authorized 10,000,000 shares; issued and
 outstanding, 3,626,188 shares Jun (2005),
 and 3,645,438 shares Dec (2004)                         3,626       3,645
Additional paid-in capital                               7,730       8,226
Retained earnings                                       50,272      47,174
Accumulated other comprehensive
    income, net of tax                                     406         756
                                                      --------    --------

         TOTAL STOCKHOLDERS' EQUITY                     62,034      59,801
                                                      --------    --------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 751,849   $ 737,646
                                                     ==========  =========


                       FIRST FINANCIAL SERVICE CORPORATION
                  Consolidated Statements of Income (Unaudited)


(Dollars in thousands,             Three Months Ended    Six Months Ended
 except per share data)                June 30,              June 30,
                                     2005      2004       2005       2004
                                     ----      ----       ----       ----
Interest Income:
  Interest and
   fees on loans                  $ 10,272   $ 9,021   $ 20,226   $ 18,129
  Interest and dividends
   on investments and deposits         755       419      1,431        862
                                 --------- ---------  ---------  ---------
          Total interest income     11,027     9,440     21,657     18,991
                                 --------- ---------  ---------  ---------

Interest Expense:
  Deposits                           3,146     2,528      6,039      5,253
  Federal Home Loan Bank
   advances                            951       923      1,895      1,851
  Subordinated debentures              175       124        332        248
                                 --------- ---------  ---------  ---------
          Total interest expense     4,272     3,575      8,266      7,352
                                 --------- ---------  ---------  ---------

Net interest income                  6,755     5,865     13,391     11,639
Provision for loan losses               41       259        316        648
                                 --------- ---------  ---------  ---------
Net interest income after
 provision for loan losses           6,714     5,606     13,075     10,991
                                 --------- ---------  ---------  ---------

Non-interest Income:
  Customer service fees on
   deposit accounts                  1,319     1,268      2,439      2,403
  Gain on sale of
   mortgage loans                      168       244        351        462
  Brokerage commissions                 78        92        157        186
  Gain on sale of real
   estate held for development         143       371        143        376
  Gain on sale of investments            -         -        381          -
  Other income                         268       286        527        605
                                 --------- ---------  ---------  ---------
          Total non-interest
           income                    1,976     2,261      3,998      4,032
                                 --------- ---------  ---------  ---------

Non-interest Expense:
  Employee compensation and
   benefits                          2,856     2,657      5,634      5,055
  Office occupancy
   expense and equipment               503       482        998        891
  Marketing and advertising            195       213        383        352
  Outside services and
   data processing                     630       551      1,227      1,065
  Bank franchise tax                   195       207        398        419
  Other expense                        897       906      1,781      1,673
                                 --------- ---------  ---------  ---------
          Total non-interest
           expense                   5,276     5,016     10,421      9,455
                                 --------- ---------  ---------  ---------

Income before income taxes           3,414     2,851      6,652      5,568
Income taxes                         1,120       925      2,172      1,803
                                 --------- ---------  ---------  ---------
Net Income                         $ 2,294   $ 1,926    $ 4,480    $ 3,765
                                 ========= =========  =========  =========

Shares applicable to basic
 income per share                3,641,688 3,645,438  3,644,081  3,671,152
Basic income per share              $ 0.63    $ 0.53     $ 1.23     $ 1.03
                                 ========= =========  =========  =========

Shares applicable
 to diluted income per share     3,658,611 3,659,274  3,662,276  3,688,193
Diluted income per share            $ 0.63    $ 0.53     $ 1.22     $ 1.02
                                 ========= =========  =========  =========

Contact Information

  • For More Information Contact:
    Gregory Schreacke
    Chief Financial Officer
    First Financial Service Corporation
    (270) 765-2131