Attached files
| file | filename |
|---|---|
| 8-K - FIRST FINANCIAL SERVICE CORP | v200707_8k.htm |
|
FOR
IMMEDIATE RELEASE
|
|
|
November
2, 2010
|
For
More Information Contact:
|
|
Steven
M. Zagar
|
|
|
Chief
Financial Officer
|
|
|
First
Financial Service Corporation
|
|
|
(270)
765-2131
|
First
Financial Service Corporation
Announces
Quarterly Results
Elizabethtown,
Kentucky, November 2, 2010 – First Financial Service Corporation (the Company,
NASDAQ: FFKY) today announced net loss per common share of $(0.58) for the
quarter ended September 30, 2010, compared to diluted net income per share of
$0.07 for the quarter ended September 30, 2009. Diluted net loss per
common share for the nine months ended September 30, 2010, was $(0.55), compared
to diluted net income per share of $0.27 for the nine months ended September 30,
2009.
“The
Company’s performance this quarter was disrupted by higher provisions for loan
losses and an increase in non-performing assets,” stated Chief Executive
Officer, B. Keith Johnson. “We believe the level of non-performing
assets has peaked this quarter. Non-performing assets to total assets
increased to 5.84% for the quarter ended September 30, 2010, compared to 4.19%
for the quarter ended June 30, 2010, due primarily to four high-end residential
development projects, aggregating $27.5 million in loans, located in Jefferson
and Oldham Counties, Kentucky. These four projects coupled with three
other residential development projects in that area account for $33.8 million or
46% of the bank’s nonperforming assets. The primary weakness in the residential
development portfolio is concentrated in the Louisville metropolitan
area. A total of $50.7 million or 70% of our non-performing assets
consist of residential housing and residential housing development
loans. In our markets surrounding the Ft.
Knox military base, residential activity remains robust as a result of the
increase in 3,200 civilian families relocating to Ft. Knox with the Base
Realignment and Closure Act. The Army’s Human Resource Command is
being relocated to the Ft. Knox military base, resulting in a substantial
economic benefit to this area. This quarter was also impacted by a
larger credit loss associated with our private pooled trust preferred securities
held in our investment portfolio. The loss was triggered by the
continued deterioration of the financial service companies acting as collateral
behind the pools.
Although
we had a disappointing quarter in our loan portfolio, the strength of our core
franchise will contribute to our ability to navigate through this economic
recovery. Net operating income (excluding the increase in provisions for loan
loss, FDIC insurance costs and other recessionary charges) has continued its
positive growth pattern while total deposits increased $38.9 million, or 3.7%
for the first nine months of 2010. This continues the momentum from
2009 where we achieved a record growth year in the amount of $274 million, or a
35.3% increase in total deposits over 2008. Growth in deposits,
coupled with positive signs of economic growth in our home markets, which is
fueled by the Ft. Knox base realignment, will provide a sound basis for our
Company as the local economy recovers. Recognizing that we are still
not immune to economic concerns, the opportunity for deposits helps us strive
towards our long range financial objectives. These objectives include
building additional core customer relationships, maintaining sufficient
liquidity and capital levels, improving shareholder value and remediating our
problem assets.”
Balance
sheet changes during the first nine months of 2010 include an increase in total
assets of $39.3 million to $1.25 billion. This increase was due to
building our investment portfolio to $165 million, an increase of $117.9 million
since December 31, 2009. This increase was mainly off-set by a
decline in gross loans of $74.8 million and a decrease in cash and cash
equivalents of $9.5 million.
Commercial
loans were $642.7 million at September 30, 2010, a decrease of $62.6 million, or
8.9%, from December 31, 2009. The decline in the Company’s commercial
loan portfolio is a result of pay-offs on several large commercial
relationships. The decline is also due to moving several
relationships from the loan portfolio into other real estate owned.
Total
deposits were $1.09 billion at September 30, 2010, an increase of $38.9 million
from December 31, 2009. The increase was the result of
deposit promotions held in February, April and May. Competition for
deposits remains very competitive in all of the markets we serve.
The
percentage of non-performing loans to total loans increased to 6.53% at
September 30, 2010 compared to 3.82% at December 31, 2009 and 3.94%
linked-quarter. The increase was attributed to several large
commercial real estate loans reaching non-accrual status in the third quarter
2010 as well as gross loans declining during the year from pay-offs and
transfers to other real estate owned. Annualized net charge-offs as a
percentage of average total loans increased to 1.24% for the nine months ended
September 30, 2010, compared to 0.52% for the nine months ended September 30,
2009. The increase was primarily caused by charging down previously
recorded specific reserves on non-performing loans whose condition worsened
during the third quarter of 2010.
Average
earning assets increased by $181.9 million as of September 30, 2010, compared to
the same period in 2009. Despite the large increase in earning
assets, the Company’s net interest margin realized decline of 55 basis
points. Net interest margin decreased to 3.14% for the quarter ended
September 30, 2010, compared to 3.69% for the same period in
2009. The decline is mostly attributed to the Bank’s increased
liquidity efforts by placing assets into lowering yielding investments other
than loans. The decrease is also partially attributed to the increase
in the amount of non-accrual loans. 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 and the change to the mix of earning assets had a
negative impact on net interest income, which decreased $291,000 and $16,000 for
the three and nine months ended September 30, 2010, compared to the respective
periods ended September 30, 2009.
Provision
for loan loss expense increased by $3.8 million to $6.3 million for the three
months ended September 30, 2010, compared to the same period ended September 30,
2009. For the nine months ended September 30, 2010, provision for
loan loss expense increased by $4.9 million to $11.4 million compared to the
nine months ended September 30, 2009. During the nine months ended
September 30, 2010, the Company continued its efforts to ensure the adequacy of
the allowance by adding specific reserves to several large commercial real
estate relationships based on updated appraisals received by the
Bank. As economic conditions continue to impact our loan portfolio,
management’s emphasis is to aggressively review credit quality and the adequacy
of the allowance for loan losses. As a result of this provisioning,
allowance for loan losses as a percent of total loans increased to 2.18% from
1.78% at December 31, 2009.
Non-interest
income increased $85,000 for the three months ended September 30, 2010, compared
to the three months ended September 30, 2009. Customer service fees
on deposit accounts decreased $79,000 for the third quarter 2010 compared to the
same quarter in 2009. Gain on sale of mortgage loans increased
$213,000 due to continued refinancing activity at historically low
rates. The increase in non-interest income for the quarter was
off-set by an increase of $69,000 for loss on the sale and write-downs of other
real estate owned and an increase of $345,000 of other-than-temporary credit
losses on trust preferred security investments. Additionally, other
non-interest income increased $338,000 for the third quarter compared to same
quarter in 2009. The increase in other non-interest income was mainly
due gain on the sale of other real estate owned.
For the
nine months ended September 30, 2010, non-interest income increased $309,000,
compared to the nine months ended September 30, 2009. Customer
service fees on deposit accounts increased $63,000 for 2010 compared to the same
period in 2009. Gain on sale of mortgage loans increased
$395,000. Other income increased $251,000 year-to-date in 2010
compared to year-to-date 2009. The increase in other income was
mainly attributable to gains on sale of other real estate owned. The
increase in non-interest income was off-set by an increase in
other-than-temporary impairment losses of $129,000 on trust preferred security
investments and by an increase of $283,000 in write-downs on other real estate
owned during 2010.
Non-interest
expense increased $686,000 to $8.7 million for the three months ended September
30, 2010, compared to the same period ended September 30,
2009. Employee compensation and benefits expense increased $134,000
and other real estate owned expense increased $178,000. The increase
in non-interest expenses was off-set by decreases in outside services and data
processing of $171,000, office occupancy expense and equipment of $53,000 and
amortization of core deposit intangible of $23,000. Other
non-interest expense was higher in the third quarter of 2010 by $111,000
compared to the third quarter of 2009.
Non-interest
expense for the year was up $1,366,000 due to higher FDIC Insurance premiums of
$588,000, higher bank franchise taxes of $704,000 and an increase in other real
estate owned expense of $550,000 for 2010 compared to the same period in 2009.
Other non-interest expense was also higher for the first nine months of 2010 by
$177,000 compared to the first nine months of 2009. Employee
compensation and benefits expense decreased $22,000. The increase in
non-interest expenses was also off-set by decreases in outside services and data
processing of $361,000, marketing and advertising of $60,000, office occupancy
expense and equipment of $137,000 and amortization of core deposit intangible of
$73,000.
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 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
|
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J.J.B.
Hilliard, W.L. Lyons Company, Inc.
|
Howe
Barnes Investments, Inc.
|
|
Stifel
Nicolaus & Company
|
Knight
Securities, LP
|
MORE
FIRST
FINANCIAL SERVICE CORPORATION
Consolidated
Balance Sheets
(Unaudited)
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September 30,
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December 31,
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|||||||
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(Dollars in thousands, except share data)
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2010
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2009
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||||||
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ASSETS:
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||||||||
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Cash
and due from banks
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$ | 12,591 | $ | 21,253 | ||||
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Interest
bearing deposits
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76,407 | 77,280 | ||||||
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Total
cash and cash equivalents
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88,998 | 98,533 | ||||||
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Securities
available-for-sale
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164,750 | 45,764 | ||||||
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Securities
held-to-maturity, fair value of $131 Sept 2010
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||||||||
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and
$1,176 Dec 2009
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128 | 1,167 | ||||||
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Total
securities
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164,878 | 46,931 | ||||||
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Loans
held for sale
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13,213 | 8,183 | ||||||
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Loans,
net of unearned fees
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920,095 | 994,926 | ||||||
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Allowance
for loan losses
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(20,091 | ) | (17,719 | ) | ||||
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Net
loans
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913,217 | 985,390 | ||||||
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Federal
Home Loan Bank stock
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5,015 | 8,515 | ||||||
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Cash
surrender value of life insurance
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9,266 | 9,008 | ||||||
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Premises
and equipment, net
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32,317 | 31,965 | ||||||
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Real
estate owned:
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||||||||
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Acquired
through foreclosure
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12,781 | 8,428 | ||||||
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Held
for development
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45 | 45 | ||||||
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Other
repossessed assets
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48 | 103 | ||||||
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Core
deposit intangible
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1,071 | 1,300 | ||||||
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Accrued
interest receivable
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6,248 | 5,658 | ||||||
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Accrued
income taxes
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3,754 | - | ||||||
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Deferred
income taxes
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3,377 | 4,515 | ||||||
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Prepaid
FDIC premium
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5,163 | 7,022 | ||||||
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Other
assets
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2,651 | 2,091 | ||||||
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TOTAL
ASSETS
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$ | 1,248,829 | $ | 1,209,504 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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||||||||
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LIABILITIES:
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||||||||
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Deposits:
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||||||||
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Non-interest
bearing
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$ | 70,288 | $ | 63,950 | ||||
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Interest
bearing
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1,018,438 | 985,865 | ||||||
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Total
deposits
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1,088,726 | 1,049,815 | ||||||
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Short-term
borrowings
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345 | 1,500 | ||||||
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Advances
from Federal Home Loan Bank
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52,564 | 52,745 | ||||||
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Subordinated
debentures
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18,000 | 18,000 | ||||||
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Accrued
interest payable
|
246 | 360 | ||||||
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Accounts
payable and other liabilities
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3,956 | 1,952 | ||||||
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TOTAL
LIABILITIES
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1,163,837 | 1,124,372 | ||||||
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Commitments
and contingent liabilities
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- | - | ||||||
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STOCKHOLDERS'
EQUITY:
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||||||||
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Serial
preferred stock, $1 par value per share;
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||||||||
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authorized
5,000,000 shares; issued and outstanding, 20,000
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||||||||
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shares
with a liquidation preference of $20,000
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19,822 | 19,781 | ||||||
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Common
stock, $1 par value per share;
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||||||||
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authorized
10,000,000 shares; issued and
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||||||||
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outstanding,
4,726,075 shares Sept 2010, and 4,709,839
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||||||||
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shares
Dec 2009
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4,726 | 4,710 | ||||||
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Additional
paid-in capital
|
35,171 | 34,984 | ||||||
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Retained
earnings
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24,128 | 26,720 | ||||||
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Accumulated
other comprehensive income/(loss)
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1,145 | (1,063 | ) | |||||
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TOTAL
STOCKHOLDERS' EQUITY
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84,992 | 85,132 | ||||||
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TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 1,248,829 | $ | 1,209,504 | ||||
FIRST
FINANCIAL SERVICE CORPORATION
Consolidated
Statements of Operations
(Unaudited)
|
Three Months Ended
|
Nine Months Ended
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|||||||||||||||
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(Dollars in thousands, except per share data)
|
September 30,
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September 30,
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||||||||||||||
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2010
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2009
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2010
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2009
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Interest
and Dividend Income:
|
||||||||||||||||
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Loans,
including fees
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$ | 13,543 | $ | 14,410 | $ | 41,857 | $ | 42,509 | ||||||||
|
Taxable
securities
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1,117 | 312 | 2,488 | 925 | ||||||||||||
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Tax
exempt securities
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255 | 137 | 628 | 361 | ||||||||||||
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Total
interest income
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14,915 | 14,859 | 44,973 | 43,795 | ||||||||||||
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Interest
Expense:
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||||||||||||||||
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Deposits
|
4,883 | 4,513 | 14,642 | 13,359 | ||||||||||||
|
Short-term
borrowings
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6 | 27 | 38 | 117 | ||||||||||||
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Federal
Home Loan Bank advances
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599 | 601 | 1,788 | 1,798 | ||||||||||||
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Subordinated
debentures
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331 | 331 | 989 | 989 | ||||||||||||
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Total
interest expense
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5,819 | 5,472 | 17,457 | 16,263 | ||||||||||||
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Net
interest income
|
9,096 | 9,387 | 27,516 | 27,532 | ||||||||||||
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Provision
for loan losses
|
6,327 | 2,482 | 11,353 | 6,441 | ||||||||||||
|
Net
interest income after provision for loan losses
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2,769 | 6,905 | 16,163 | 21,091 | ||||||||||||
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Non-interest
Income:
|
||||||||||||||||
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Customer
service fees on deposit accounts
|
1,671 | 1,750 | 4,935 | 4,872 | ||||||||||||
|
Gain
on sale of mortgage loans
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513 | 300 | 1,227 | 832 | ||||||||||||
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Gain/(loss)
on sale of investments
|
7 | - | (16 | ) | - | |||||||||||
|
Net
impairment losses recognized in earnings
|
(649 | ) | (304 | ) | (832 | ) | (703 | ) | ||||||||
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Loss
on sale and write downs of real estate acquired
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||||||||||||||||
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through
foreclosure
|
(374 | ) | (305 | ) | (838 | ) | (555 | ) | ||||||||
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Brokerage
commissions
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109 | 89 | 309 | 281 | ||||||||||||
|
Other
income
|
703 | 365 | 1,514 | 1,263 | ||||||||||||
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Total
non-interest income
|
1,980 | 1,895 | 6,299 | 5,990 | ||||||||||||
|
Non-interest
Expense:
|
||||||||||||||||
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Employee
compensation and benefits
|
4,176 | 4,042 | 12,171 | 12,193 | ||||||||||||
|
Office
occupancy expense and equipment
|
779 | 832 | 2,351 | 2,488 | ||||||||||||
|
Marketing
and advertising
|
225 | 225 | 675 | 735 | ||||||||||||
|
Outside
services and data processing
|
622 | 793 | 2,020 | 2,381 | ||||||||||||
|
Bank
franchise tax
|
566 | 257 | 1,482 | 778 | ||||||||||||
|
FDIC
insurance premiums
|
615 | 414 | 1,969 | 1,381 | ||||||||||||
|
Amortization
of core deposit intangible
|
77 | 100 | 229 | 302 | ||||||||||||
|
Real
estate acquired through foreclosure expense
|
302 | 124 | 916 | 366 | ||||||||||||
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Other
expense
|
1,352 | 1,241 | 3,809 | 3,632 | ||||||||||||
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Total
non-interest expense
|
8,714 | 8,028 | 25,622 | 24,256 | ||||||||||||
|
Income/(loss)
before income taxes
|
(3,965 | ) | 772 | (3,160 | ) | 2,825 | ||||||||||
|
Income
taxes/(benefits)
|
(1,472 | ) | 196 | (1,359 | ) | 773 | ||||||||||
|
Net
Income/(loss)
|
(2,493 | ) | 576 | (1,801 | ) | 2,052 | ||||||||||
|
Less:
|
||||||||||||||||
|
Dividends
on preferred stock
|
(250 | ) | (250 | ) | (750 | ) | (730 | ) | ||||||||
|
Accretion
on preferred stock
|
(14 | ) | (14 | ) | (41 | ) | (39 | ) | ||||||||
|
Net
income/(loss) available to common shareholders
|
$ | (2,757 | ) | $ | 312 | $ | (2,592 | ) | $ | 1,283 | ||||||
|
Shares
applicable to basic income per common share
|
4,724,043 | 4,704,289 | 4,719,513 | 4,689,917 | ||||||||||||
|
Basic
income/(loss) per common share
|
$ | (0.58 | ) | $ | 0.07 | $ | (0.55 | ) | $ | 0.27 | ||||||
|
Shares
applicable to diluted income per common share
|
4,724,043 | 4,734,037 | 4,719,513 | 4,703,432 | ||||||||||||
|
Diluted
income/(loss) per common share
|
$ | (0.58 | ) | $ | 0.07 | $ | (0.55 | ) | $ | 0.27 | ||||||
|
Cash
dividends declared per common share
|
$ | - | $ | 0.05 | $ | - | $ | 0.43 | ||||||||
FIRST
FINANCIAL SERVICE CORPORATION
Unaudited
Selected Ratios and Other Data
|
As of and For the
|
As of and For the
|
|||||||||||||||
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
|||||||||||||||
|
Selected Data
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Performance
Ratios
|
||||||||||||||||
|
Return
on average assets
|
(0.79 | )% | 0.11 | % | (0.19 | )% | 0.16 | % | ||||||||
|
Return
on average equity
|
(11.63 | )% | 1.32 | % | (2.79 | )% | 1.85 | % | ||||||||
|
Average
equity to average assets
|
6.82 | % | 8.49 | % | 6.90 | % | 8.65 | % | ||||||||
|
Net
interest margin
|
3.07 | % | 3.64 | % | 3.14 | % | 3.69 | % | ||||||||
|
Efficiency
ratio from continuing operations
|
78.67 | % | 71.16 | % | 75.77 | % | 72.36 | % | ||||||||
|
Book
value per common share
|
$ | 13.79 | $ | 15.80 | ||||||||||||
|
Average
Balance Sheet Data
|
||||||||||||||||
|
Average
total assets
|
$ | 1,257,297 | $ | 1,104,012 | $ | 1,250,551 | $ | 1,074,926 | ||||||||
|
Average
interest earning assets
|
1,193,590 | 1,030,908 | 1,186,402 | 1,004,492 | ||||||||||||
|
Average
loans
|
944,861 | 984,468 | 965,978 | 963,728 | ||||||||||||
|
Average
interest-bearing deposits
|
1,027,610 | 820,602 | 1,021,458 | 784,067 | ||||||||||||
|
Average
total deposits
|
1,097,281 | 878,778 | 1,089,259 | 841,297 | ||||||||||||
|
Average
total stockholders' equity
|
85,761 | 93,730 | 86,246 | 92,933 | ||||||||||||
|
Asset
Quality Ratios
|
||||||||||||||||
|
Non-performing
loans as a percent of total loans (1)
|
6.53 | % | 3.55 | % | ||||||||||||
|
Non-performing
assets as a percent of total assets
|
5.84 | % | 4.39 | % | ||||||||||||
|
Allowance
for loan losses as a percent of total loans (1)
|
2.18 | % | 1.65 | % | ||||||||||||
|
Allowance
for loan losses as a percent of
|
||||||||||||||||
|
non-performing
loans
|
33 | % | 46 | % | ||||||||||||
|
Annualized
net charge-offs to total loans (1)
|
1.24 | % | 0.52 | % | ||||||||||||
(1) Excludes loans held for sale.