Net interest margin increases for the sixth consecutive quarter
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
- Net 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.
- Non-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.
- Other 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.
- Regulatory 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 (2012) 8,859 22,286 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 STOCKHOLDERS' EQUITY $ 850,156 $ 1,007,062
FIRST FINANCIAL SERVICE CORPORATION Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended (Amounts in thousands, except per share data) September 30, September 30, 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 income 8,061 9,822 24,812 32,444 Interest Expense: Deposits 1,561 2,952 5,471 10,341 Federal Home Loan Bank advances 133 216 397 783 Subordinated debentures 340 421 1,022 1,103 Total interest expense 2,034 3,589 6,890 12,227 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 provision for loan losses 6,527 3,562 19,247 15,619 Non-interest Income: Customer service fees on deposit accounts 1,444 1,339 3,942 4,121 Gain on sale of mortgage loans 230 505 818 1,200 Gain on sale of investments 235 2,054 1,078 3,363 Loss on sale of investments (223) (350) (839) (653) Other than temporary impairment loss: Total other-than-temporary impairment losses - - - (26) Portion of loss recognized in other comprehensive income/(loss) (before taxes) - - - - Net impairment losses recognized in earnings - - - (26) Loss on sale and write downs on real estate acquired through foreclosure (365) (1,587) (1,957) (5,169) Gain on branch divesture - 3,124 - 3,124 Gain on sale of premises and equipment - - - 322 Gain on sale on real estate acquired through foreclosure 1,632 630 1,839 1,243 Gain on sale of real estate held for development - - - 175 Brokerage commissions 127 109 384 316 Other income 466 632 1,421 1,660 Total non-interest income 3,546 6,456 6,686 9,676 Non-interest Expense: Employee compensation and benefits 3,955 3,609 11,505 11,284 Office occupancy expense and equipment 653 777 2,051 2,327 Marketing and advertising 99 113 273 281 Outside services and data processing 900 853 2,704 2,557 Bank franchise tax 315 402 708 1,146 FDIC insurance premiums 460 663 1,654 1,760 Amortization of intangible assets - - - 127 Real estate acquired through foreclosure expense 452 638 1,270 3,314 Loan expense 485 568 1,092 1,732 FHLB advance perpayment penalty - 1,548 - 1,548 Other expense 1,286 1,682 4,211 4,482 Total non-interest expense 8,605 10,853 25,468 30,558 Income (Loss) before income taxes 1,468 (835) 465 (5,263) 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 stock (14) (14) (41) (41) Net income (loss) attributable to common shareholders $ 1,203 $ (1,015) $ (328) $ (5,971) Shares applicable to basic income (loss) per common share 4,860,115 4,772,987 4,816,538 4,766,898 Basic income (loss) per common share $ 0.25 $ (0.21) $ (0.07) $ (1.25) Shares applicable to diluted income (loss) per common share 4,905,542 4,772,987 4,816,538 4,766,898 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 (5) Balance Interest Yield/Cost (5) ASSETS Interest earning assets: U.S. Government and federal agency $ - $ - -% $ 13,174 $ 63 1.90% Mortgage-backed securities 235,530 1,173 1.98% 280,664 1,328 1.88% State and political subdivision securities (1) 14,251 188 5.23% 13,529 242 7.10% Trust Preferred Securities - - -% 1,040 9 3.43% Corporate bonds 56,013 400 2.83% 14,109 84 2.36% Loans (2) (3) (4) 488,494 6,308 5.12% 590,418 8,082 5.43% FHLB stock 4,430 47 4.21% 4,805 49 4.05% Interest bearing deposits 17,150 9 0.21% 69,444 47 0.27% Total interest earning assets 815,868 8,125 3.95% 987,183 9,904 3.98% Less: Allowance for loan losses (15,871) (16,507) Non-interest earning assets 74,394 90,665 Total assets $ 874,391 $ 1,061,341 LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing liabilities: Savings accounts $ 89,356 $ 40 0.18% $ 83,542 $ 66 0.31% NOW and money market accounts 243,533 82 0.13% 280,913 317 0.45% Certificates of deposit and other time deposits 365,675 1,439 1.56% 521,093 2,569 1.96% FHLB advances 32,750 133 1.61% 21,300 216 4.02% Subordinated debentures 18,000 340 7.49% 18,000 421 9.28% Total interest bearing liabilities 749,314 2,034 1.08% 924,848 3,589 1.54% Non-interest bearing liabilities: Non-interest bearing deposits 80,523 79,266 Other liabilities 11,759 8,467 Total liabilities 841,596 1,012,581 Stockholders' equity 32,795 48,760 Total liabilities and stockholders' equity $ 874,391 $ 1,061,341 Net interest income $ 6,091 $ 6,315 Net interest spread 2.87% 2.44% Net interest margin 2.96% 2.54% (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 (5) Balance Interest Yield/Cost (5) ASSETS Interest earning assets: U.S. Government and federal agency $ 2,548 $ 28 1.47% $ 18,749 $ 293 2.09% Mortgage-backed securities 256,138 3,414 1.78% 290,143 4,297 1.98% State and political subdivision securities (1) 14,803 609 5.50% 15,600 783 6.71% Trust Preferred Securities - - -% 1,050 38 4.84% Corporate bonds 52,579 1,051 2.67% 4,840 85 2.35% Loans (2) (3) (4) 503,227 19,729 5.24% 659,961 26,911 5.45% FHLB stock 4,513 145 4.30% 4,805 152 4.23% Interest bearing deposits 24,184 43 0.24% 87,051 151 0.23% Total interest earning assets 857,992 25,019 3.90% 1,082,199 32,710 4.04% Less: Allowance for loan losses (16,348) (17,415) Non-interest earning assets 78,918 92,218 Total assets $ 920,562 $ 1,157,002 LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing liabilities: Savings accounts $ 89,083 $ 147 0.22% $ 92,174 $ 209 0.30% NOW and money market accounts 262,660 437 0.22% 296,952 1,155 0.52% Certificates of deposit and other time deposits 401,583 4,887 1.63% 588,119 8,977 2.04% FHLB advances 19,695 397 2.70% 25,607 783 4.09% Subordinated debentures 18,000 1,022 7.59% 18,000 1,103 8.19% Total interest bearing liabilities 791,021 6,890 1.16% 1,020,852 12,227 1.60% Non-interest bearing liabilities: Non-interest bearing deposits 79,836 79,230 Other liabilities 11,071 6,061 Total liabilities 881,928 1,106,143 Stockholders' equity 38,634 50,859 Total liabilities and stockholders' equity $ 920,562 $ 1,157,002 Net interest income $ 18,129 $ 20,483 Net interest spread 2.74% 2.44% Net interest margin 2.83% 2.53% (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 estate 3,124 361 3,670 3,351 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 estate 73 64 187 166 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 divestiture - 201 - (468) Balance at end of period, net $ 12,224 $ 17,824 $ 12,224 $ 17,824 Allowance for loan losses to total loans (1) (2) 2.57% 3.19% 2.57% 3.19% 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 30, June 30, March 31, December 31, September 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 accrual 4,837 - - - - Past due 90 days still on accrual 2,238 - 1,950 - - Loans on non-accrual status 6,511 9,215 9,596 11,702 15,565 Total non-performing loans 21,513 17,854 20,645 21,455 31,716 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 loans 38 - 16 - - Ratios: Non-performing loans to total loans (includes loans held for sale in probable branch divestiture and probable loan sale for 2012) 4.52% 3.64% 4.08% 4.09% 5.53% Non-performing assets to total loans (includes loans held for sale in probable branch divestiture and probable loan sale for 2012) 6.38% 6.54% 7.98% 8.34% 10.53%
SOURCE First Financial Service Corporation
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