8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

July 20, 2006

(Date of earliest event reported)

First Financial Service Corporation

(Exact name of registrant as specified in its charter)

Securities and Exchange Commission File Number: 0-18832

KENTUCKY	61-1168311
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

2323 Ring Road, Elizabethtown, Kentucky, 42701

(Address of principal executive offices) (Zip Code)

Registrant’s telephone, including area code:  (270) 765-2131

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02:  Results of Operations and Financial Condition

On July 20, 2006, First Financial Service Corporation issued a press release announcing its second quarter 2006 results.  A copy of the press release as well as supplemental information is furnished with this report as Exhibit 99.1, and is incorporated herein by reference.

The information in this report is being furnished, not filed, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and pursuant to Item 2.02 of Form 8-K will not be incorporated by reference into any filing under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

Item 9.01:  Financial Statements and Exhibits

Attached is the press release for the second quarter results.

(d)Exhibits

Exhibit Number	Description
99.1	Press release dated July 20, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FIRST FINANCIAL SERVICE CORPORATION
Date: July 24, 2006	By:	/s/ Gregory S. Schreacke
		Gregory S. Schreacke
		Executive Vice President
		Chief Financial Officer & Chief Accounting Officer

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

July 20, 2006	For More Information Contact:
	Gregory Schreacke
	Chief Financial Officer
	First Financial Service Corporation
	(270) 765-2131

First Financial Service Corporation

Announces Second Quarter Results

Elizabethtown, Kentucky, July 20, 2006 — First Financial Service Corporation (the Company, Nasdaq: FFKY) today announced diluted net income per share of $0.69 for the quarter ended June 30, 2006, an increase of 21% from $0.57 for the quarter ended June 30, 2005.  Return on equity was 16.3% for the quarter and return on assets was 1.4%.

Diluted net income per share for the six months ended June 30, 2006 was $1.27, an increase of 14% from $1.11 for the six months ended June 30, 2005.  For the six months ended June 30, 2006, return on equity was 15.4% and return on assets was 1.3%.

“We are pleased to report another record quarter of earnings per share for the Company,” commented President and Chief Executive Officer, B. Keith Johnson.  “Our consistent financial results enabled us to be recognized by U.S. Banker as 47th among the top 200 publicly traded community banks in the United States based on a three-year average return on stockholders’ equity.  Return on stockholders’ equity continued to expand to 16.3% during the second quarter and was 15.4% for the six months ended June 30, 2006.  Our success is a direct reflection of the dedication our associates have to growing our franchise and their commitment to providing superior customer service to our customers.”

The Company’s retail branch network continues to generate encouraging results.  Total deposits have grown at a 6% compound annual growth rate over the past four years.  Total deposits were $615 million at June 30, 2006, which included an increase of $42 million in commercial and retail deposits for the first six months this year.  The development of the retail branch network into the Metro Louisville market also yielded positive results.  The Company has a combined $42 million in deposits in its two new full-service facilities in the Metro Louisville market experiencing a 39% increase in deposits for the first six months of 2006 following a 71% increase in deposits for the year of 2005.  The Company opened these new facilities in the second quarter of 2004 to support its growing customer base in this market.  Twenty-one percent of the Company’s loan portfolio resides in the Metro Louisville market.

The Company’s emphasis on commercial lending generated a 7% compound annual growth rate in the total loan portfolio and a 31% compound annual growth rate in commercial loans over the past four years.  Commercial loans were $429 million at June 30, 2006, an increase of $26 million from December 31, 2005.

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 4.07% for the six months ended June 30, 2006, compared to 3.88% for the same period a year ago.  This has resulted in a $616,000 increase in net interest income to $7.4 million for the three months ended June 30, 2006, and a $1.2 million increase in net interest income to $14.6 million for the six months ended June 30, 2006, compared to the respective three and six month periods in 2005.  The increasing short-term interest rate environment positively impacted net interest margin due to the adjustable rate commercial loans in the Company’s loan portfolio.  However, the net interest margin is likely to compress in future quarters as short-term interest rates peak and the cost of deposits continue to rise.  The cost of deposits typically lag the increase in adjustable loan rates due to certificates of deposit which mature over a longer period of time than immediately adjustable loan rates.

The Company’s asset quality remains favorable.  Net charge-offs as a percent of average total loans were 0.02% for the six months ended June 30, 2006 and June 30, 2005.  The allowance for loan losses as a percent of total loans,

decreased to 1.11% at June 30, 2006 compared to 1.15% at December 31, 2005.  The percentage of non-performing loans to total loans was 0.83% at June 30, 2006, compared to 0.97% at December 31, 2005.

Provision for loan loss expense decreased $32,000 to $9,000 for the three months ended June 30, 2006, and $219,000 to $97,000 for the six months ended June 30, 2006 compared to the same periods ended June 30, 2005.  The decrease in provision for loan loss expense for the periods was due to higher provisions during the first six months of 2005 resulting from loan downgrades during the first quarter of 2005.  In addition, improvements in the Company’s security and position of certain classified loans during 2006, resulted in a reduction in the SFAS 114 reserve allocated to the loans, which decreased provision for loan loss expense for the three and six month periods ended June 30, 2006.

Non-interest income increased $100,000 to $2.1 million for the three months ended June 30, 2006.  Non-interest income decreased $210,000 to $3.8 million for the six months ended June 30, 2006.  During the first six months ended June 30, 2005, a $381,000 gain was recorded on the sale of investment securities and a $143,000 gain was recorded on the sale of lots.  No gains on the sale of investments or lots were recorded for the six months ended June 30, 2006.  Customer service fees on deposit accounts increased $77,000 and $188,000 for the respective three and six months ended June 30, 2006, compared to the respective periods during 2005.

Non-interest expense increased $38,000, or 1% to $5.3 million for the quarter ended June 30, 2006, compared to the same quarter ended June 20, 2005.  For the six months ended June 30, 2006, non-interest expense increased $302,000, or 3% to $10.7 million, compared to the six months ended June 30, 2005.  The primary contributing factors to this increase were the additional operating and employee compensation expenses related to the recent expansion efforts.  The Company’s efficiency ratio was 58% for the six months ended June 30, 2006, compared to 60% for the six months ended June 30, 2005.

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 Global 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.

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News Release

First Financial Service Corporation

July 20, 2006

Page Three

FIRST FINANCIAL SERVICE CORPORATION
Consolidated Balance Sheets (Unaudited)

	June 30,			December 31,
	2006			2005
	(Dollars in thousands, except share data)
ASSETS
Cash and due from banks	$	17,676		$	20,451
Securities available-for-sale	26,833			28,324
Securities held-to-maturity, fair value of $27,843 Jun (2006) and $32,434 Dec (2005)	28,712			33,231
Total securities	55,545			61,555
Loans held for sale	1,038			597
Loans, net of unearned fees	664,969			642,520
Allowance for loan losses	(7,408		)	(7,377		)
Net loans receivable	658,599			635,740
Federal Home Loan Bank stock	7,400			7,194
Cash surrender value of life insurance	7,784			7,637
Premises and equipment, net	20,374			19,134
Real estate owned:
Acquired through foreclosure	844			1,022
Held for development	337			337
Other repossessed assets	104			119
Goodwill	8,384			8,384
Accrued interest receivable	3,162			3,051
Other assets	1,644			1,889
TOTAL ASSETS	$	781,853		$	766,513
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest bearing	$	43,726		$	39,145
NOW demand	72,718			76,848
Savings	88,886			99,879
Money market	58,159			66,175
Certificates of deposit	351,509			309,059
Total deposits	614,998			591,106
Federal funds purchased	7,000			19,500
Advances from Federal Home Loan Bank	78,297			78,375
Subordinated debentures	10,000			10,000
Accrued interest payable	444			389
Accounts payable and other liabilities	1,877			1,023
Deferred income taxes	1,208			1,379
TOTAL LIABILITIES	713,824			701,772
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, 3,984,230 shares Jun (2006), and 3,983,530 shares Dec (2005)	3,984			3,984
Additional paid-in capital	16,449			16,409
Retained earnings	47,871			44,291
Accumulated other comprehensive income, net of tax	(275		)	57
TOTAL STOCKHOLDERS’ EQUITY	68,029			64,741
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	781,853		$	766,513

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News Release

First Financial Service Corporation

July 20, 2006

Page Four

FIRST FINANCIAL SERVICE CORPORATION
Consolidated Statements of Income (Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2006		2005		2006		2005
	(Dollars in thousands, except per share data)
Interest Income:
Interest and fees on loans	$	12,287	$	10,272	$	24,002	$	20,226
Interest and dividends on investments and deposits	824		755		1,601		1,431
Total interest income	13,111		11,027		25,603		21,657
Interest Expense:
Deposits	4,561		3,146		8,606		6,039
Federal funds purchased	15		—		88		—
Federal Home Loan Bank advances	941		951		1,874		1,895
Subordinated debentures	223		175		429		332
Total interest expense	5,740		4,272		10,997		8,266
Net interest income	7,371		6,755		14,606		13,391
Provision for loan losses	9		41		97		316
Net interest income after provision for loan losses	7,362		6,714		14,509		13,075
Non-interest Income:
Customer service fees on deposit accounts	1,396		1,319		2,627		2,439
Gain on sale of mortgage loans	240		168		403		351
Brokerage commissions	88		78		171		157
Gain on sale of real estate held for development	—		143		—		143
Gain on sale of investments	—		—		—		381
Other income	352		268		587		527
Total non-interest income	2,076		1,976		3,788		3,998
Non-interest Expense:
Employee compensation and benefits	2,817		2,856		5,794		5,634
Office occupancy expense and equipment	514		503		1,067		998
Marketing and advertising	214		195		419		383
Outside services and data processing	641		630		1,257		1,227
Bank franchise tax	224		195		443		398
Other expense	904		897		1,743		1,781
Total non-interest expense	5,314		5,276		10,723		10,421
Income before income taxes	4,124		3,414		7,574		6,652
Income taxes	1,369		1,120		2,481		2,172
Net Income	$	2,755	$	2,294	$	5,093	$	4,480
(1) Shares applicable to basic income per share	3,983,880		4,005,857		3,983,730		4,008,489
(1) Basic income per share	$	0.69	$	0.57	$	1.28	$	1.12
(1) Shares applicable to diluted income per share	4,019,962		4,024,472		4,018,035		4,028,504
(1) Diluted income per share	$	0.69	$	0.57	$	1.27	$	1.11

(1)Adjusted to reflect the impact of the stock dividend declared September 22, 2005.

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News Release

First Financial Service Corporation

July 20, 2006

Page Five

FIRST FINANCIAL SERVICE CORPORATION
Unaudited Selected Ratios and Other Data

	As of and For the						As of and For the
	Three Months Ended						Six Months Ended
	June 30,						June 30,
Selected Data	2006			2005			2006			2005
Performance Ratios
Return on average assets	1.41		%	1.22		%	1.32		%	1.21		%
Return on average equity	16.31		%	14.84		%	15.35		%	14.70		%
Average equity to average assets	8.66		%	8.24		%	8.61		%	8.22		%
Net interest margin	4.05		%	3.86		%	4.07		%	3.88		%
Efficiency ratio from continuing operations	56.25		%	60.43		%	58.30		%	59.93		%
Book value per share							$	17.08		$	15.55
Average Balance Sheet Data
Total assets	$	782,478		$	752,342		$	777,270		$	747,889
Interest earning assets	734,227			701,944			727,579			697,088
Loans	654,893			605,217			649,486			603,199
Interest-bearing deposits	577,052			557,308			570,546			553,930
Total deposits	620,950			598,100			613,704			594,047
Total stockholders’ equity	67,751			62,000			66,900			61,473
Asset Quality Ratios
Non-performing loans as a percent of total loans (1)							0.83		%	0.80		%
Non-performing assets as a percent of total loans (1)							0.97		%	0.98		%
Allowance for loan losses as a percent of total loans (1)							1.11		%	1.10		%
Allowance for loan losses as a percent of
non-performing loans							134		%	138		%
Annualized net charge-offs to total loans (1)							0.02		%	0.02		%

(1) Excludes loans held for sale.

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