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 17, 2008

(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 Identification No.)
of incorporation or organization)

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 17, 2008, First Financial Service Corporation issued a press release announcing its second quarter 2008 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 17, 2008

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 21, 2008	By:  /s/	Steven M. Zagar
		Steven M. Zagar
		Chief Financial Offcer &
		Principal Accounting Officer

2

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE
July 17, 2008	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, July 17, 2008 — First Financial Service Corporation (the Company, Nasdaq: FFKY) today announced diluted net income per share of $0.45 for the quarter ended June 30, 2008, compared to $0.53 for the quarter ended June 30, 2007.  Diluted net income per share for the six months ended June 30, 2008, was $0.85, compared to $1.01 for the six months ended June 30, 2007.

During the second quarter, the Company completed the acquisition of FSB Bancshares, Inc. and its wholly owned subsidiary, The Farmers State Bank located in Southern Indiana.  The Farmers State Bank had approximately $63 million in total assets and $56 million in deposits with offices in Harrison and Floyd County, Indiana.  These counties are adjacent to First Financial Service Corporation’s Kentucky counties of Meade and Jefferson.  The branches of The Farmers State Bank are branches of First Financial Service Corporation’s wholly owned subsidiary First Federal Savings Bank.  Operating results of FSB Bancshares, Inc. have been included in the consolidated financial statements since June 25, 2008, the date of the acquisition.  The acquisition is anticipated to be accretive to the Company’s earnings during the first full year of the combined operations.

“Despite harsh economic conditions that continue to impact the financial services industry, our loan portfolio increased $63.4 million for the quarter and $74.1 million for the year,” noted Chief Executive Officer, B. Keith Johnson.  “The growth originated in our established markets with $48.8 million being contributed from our recent acquisition of The Farmers State Bank.  Although we are encouraged by the growth we experienced in the second quarter, an increase in provision for loan loss expense during the period contributed to a decline in net income.  The increase in provision for loan losses was related to loan portfolio growth, charge-off of a commercial real estate loan and a specific reserve on another large commercial real estate relationship classified during the quarter.  Also contributing to the decline in net income for the quarter was an increase in our non-interest expense due to branch expansion efforts.  Our efficiency ratio increased to 65% for the second quarter of 2008 from 60% in the comparable period in 2007.  The Company’s expansion plans will continue in the next quarter as we plan to open our twentieth banking center, which will expand our current footprint in Bullitt County, Kentucky.  Finally, a $216,000 write-down was taken during the quarter on investment securities that were other-than-temporarily impaired.”

The retail branch network boosted total deposits to $785 million at June 30, 2008, an increase of $80.1 million for the quarter and $95.8 million for the year, including $56.3 million from the acquisition.  Our acquisition of The Farmers State Bank has broadened our retail branch network in the Louisville Metropolitan Area, which now extends into Southern Indiana.  Additional sites within the Louisville market are under development with our next location scheduled to open in the second quarter of 2009.  Competition for deposits continues to be challenging in all of the markets we serve.  This intense competition could add to additional margin compression even as the interest rate environment stabilizes over the second half of the year.

The Company continues to emphasize commercial lending, which has resulted in a 9% compound annual growth rate in the total loan portfolio and a 12% compound annual growth rate in commercial loans since the beginning of 2004.  Commercial loans were $584.2 million at June 30, 2008, an increase of $21.5 million, or 4%, for the second quarter and $39.3 million, or 7% for the year.  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 $47.6 million for the quarter ended June 30, 2008, compared to June 30, 2007.  Despite the increase in earning assets, the Company’s net interest margin realized a decline of nine basis points.  Net interest margin decreased to 3.86% for the six months ended June 30, 2008, compared to 3.95% for the same period in 2007.  The Federal Reserve has decreased the Federal Funds rate by 225 basis points since January of 2008.  Variable rate loans that are tied to the

federal prime rate immediately repriced downward with these rate cuts.  However, interest rates paid on customer deposits have not adjusted downward proportionately with the declining interest yields on loans and investments.  58% 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 $345,000 and $513,000 for the three and six months ended June 30, 2008, compared to the respective periods ended June 30, 2007.

Subordinated debentures increased from $10.0 million to $18.0 million at June 30, 2008. On June 24, 2008 the Corporation issued $8.0 million of fixed rate subordinated debentures. The proceeds of the offering were used to finance the purchase of Farmers State Bank.

The percentage of non-performing loans to total loans increased to 1.81% at June 30, 2008, compared to 1.04% at June 30, 2007.  Annualized net charge-offs as a percent of average total loans were 0.10% for the quarter ended June 30, 2008, compared to 0.02% for June 30, 2007.

Provision for loan loss expense increased $387,000 to $514,000 for the three months ended June 30, 2008, compared to the same period ended June 30, 2007.  For the six months ended June 30, 2008, provision for loan loss expense increased $890,000 to $1,098,000 compared to the six months ended June 30, 2007.  The increase in provision for loan loss expense for the respective periods was related to growth in the loan portfolio, as well as from the specific reserve set aside for loans classified during the first and second quarter of 2008.  The Company recorded a lower provision for loan loss expense during the first quarter of 2007, based on improved performance of one of the Company’s credit relationships.  The Company believes provision for loan losses has returned to a more normalized level as experienced prior to 2006.

Non-interest income increased $101,000 for the three months ended June 30, 2008, compared the three months ended June 30, 2007.  Customer service fees on deposit accounts increased $143,000 for the second quarter 2008 compared to the same quarter in 2007.  Brokerage commissions, gain on sale of mortgage loans and other income also increased for the quarter.  For the six months ended June 30, 2008 non-interest income increased $110,000, compared to the six months ended June 30, 2007.  Non-interest income in 2007 included a $227,000 gain on the sale of real estate held for development with no such gain recorded in 2008.  This real estate was held for development through the Company’s wholly owned subsidiary, First Federal Office Park, LLC.  Only one other property remains for sale in this development.  Non-interest income also included a $216,000 write-down of other-than-temporary impaired investment securities.  Excluding the prior period gain on the sale of real estate and write-down of other-than-temporary impaired investment securities, non-interest income increased $553,000 for the first six months of 2008 compared to the same period in 2007.

Non-interest expense increased $716,000 to $6.5 million for the three months ended June 30, 2008, compared to the same three months ended June 30, 2007.  Contributing to the increase in non-interest expense for the quarter was a $375,000 increase in employee compensation expense.  The increase reflects growth in the overall staffing level from 271 full-time equivalent employees at June 30, 2007 to 318 at June 30, 2008.  Thirty-one associates were added as a result of the acquisition and twenty-five associates have been added to support our recent expansion efforts. Also contributing to the increase to non-interest expense were increases in office occupancy expense and equipment, FDIC insurance premiums and information systems.  For the six months ended June 30, 2008, non-interest expense increased $1.0 million compared to the same six months ended June 30, 2007.   The increase was partially offset by the one-time write-off of $229,000 in unamortized issuance costs of our trust preferred securities in the first quarter of 2007.  Excluding the prior period write-off, non-interest expense increased $1.3 million for the first six months of 2008 compared to the same period in 2007.

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 19 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

MORE

FIRST FINANCIAL SERVICE CORPORATION

Consolidated Balance Sheets

(Unaudited)

			June 30,			December 31,
(Dollars in thousands, except share data)			2008			2007
ASSETS:
Cash and due from banks			$	28,744		$	14,948
Federal funds sold			6,950			—
Cash and cash equivalents			35,694			14,948
Securities available-for-sale			19,980			22,004
Securities held-to-maturity, fair value of $8,308 (Jun 2008) and $17,624 (Dec 2007)			8,283			17,681
Total securities			28,263			39,685
Loans held for sale			3,186			780
Loans, net of unearned fees			841,356			767,256
Allowance for loan losses			(8,917		)	(7,922		)
Net loans			835,625			760,114
Federal Home Loan Bank stock			8,409			7,621
Cash surrender value of life insurance			8,470			8,290
Premises and equipment, net			29,446			26,335
Real estate owned:
Acquired through foreclosure			3,459			1,749
Held for development			45			45
Other repossessed assets			52			52
Goodwill			12,262			8,384
Core deposit intangible			1,910			—
Accrued interest receivable			4,249			4,324
Other assets			1,783			1,144
		TOTAL ASSETS	$	969,667		$	872,691
	LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest bearing			$	77,124		$	46,978
Interest bearing			707,962			642,265
Total deposits			785,086			689,243
Short-term borrowings			33,000			42,800
Advances from Federal Home Loan Bank			53,015			53,083
Subordinated debentures			18,000			10,000
Accrued interest payable			487			1,093
Accounts payable and other liabilities			2,525			1,789
Deferred income taxes			1,862			1,223
	TOTAL LIABILITIES		893,975			799,231
Commitments and contingent liabilities			—			—
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, 4,664,235 shares (Jun 2008), and 4,661,083 shares (Dec 2007)			4,664			4,661
Additional paid-in capital			34,018			33,886
Retained earnings			37,435			35,225
Accumulated other comprehensive loss			(425		)	(312		)
	TOTAL STOCKHOLDERS’ EQUITY		75,692			73,460
	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	969,667		$	872,691

FIRST FINANCIAL SERVICE CORPORATION

Consolidated Statements of Income

(Unaudited)

	Three Months Ended					Six Months Ended
(Dollars in thousands, except per share data)	June 30,					June 30,
	2008			2007		2008			2007
Interest and Dividend Income:
Loans, including fees	$	13,348		$	14,364	$	27,380		$	28,305
Taxable securities	309			536		693			1,148
Tax exempt securities	105			107		205			215
Total interest income	13,762			15,007		28,278			29,668
Interest Expense:
Deposits	4,808			6,440		10,494			12,387
Short-term borrowings	183			413		505			988
Federal Home Loan Bank advances	601			341		1,197			676
Subordinated debentures	167			154		334			382
Total interest expense	5,759			7,348		12,530			14,433
Net interest income	8,003			7,659		15,748			15,235
Provision for loan losses	514			127		1,098			208
Net interest income after provision for loan losses	7,489			7,532		14,650			15,027
Non-interest Income:
Customer service fees on deposit accounts	1,632			1,489		3,048			2,763
Gain on sale of mortgage loans	239			166		387			292
Gain on sale of real estate held for development	—			—		—			227
Losses on securities transactions	(216		)	—		(216		)	—
Brokerage commissions	125			106		243			202
Other income	360			278		632			500
Total non-interest income	2,140			2,039		4,094			3,984
Non-interest Expense:
Employee compensation and benefits	3,480			3,105		6,898			6,229
Office occupancy expense and equipment	679			596		1,332			1,162
Marketing and advertising	209			217		423			449
Outside services and data processing	766			670		1,483			1,336
Bank franchise tax	253			234		503			465
Write off of issuance cost of Trust Preferred Securities	—			—		—			229
Other expense	1,130			979		2,213			1,946
Total non-interest expense	6,517			5,801		12,852			11,816
Income before income taxes	3,112			3,770		5,892			7,195
Income taxes	1,013			1,226		1,910			2,334
Net Income	$	2,099		$	2,544	$	3,982		$	4,861
(1) Shares applicable to basic income per share	4,664,235			4,736,315		4,663,784			4,767,824
(1) Basic income per share	$	0.45		$	0.54	$	0.85		$	1.02
(1) Shares applicable to diluted income per share	4,692,565			4,783,131		4,695,358			4,821,215
(1) Diluted income per share	$	0.45		$	0.53	$	0.85		$	1.01
Cash dividends declared per share	$	0.190		$	0.173	$	0.380		$	0.346

(1)  Adjusted to reflect the impact of the 10% stock dividend declared August 16, 2007.

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	2008			2007			2008			2007
Performance Ratios
Return on average assets	0.94		%	1.22		%	0.90		%	1.17		%
Return on average equity	11.14		%	14.10		%	10.65		%	13.55		%
Average equity to average assets	8.40		%	8.62		%	8.46		%	8.65		%
Net interest margin	3.88		%	3.93		%	3.86		%	3.95		%
Efficiency ratio from continuing operations	64.25		%	59.82		%	64.77		%	61.48		%
Book value per share							$	16.23		$	15.27
Average Balance Sheet Data
Average total assets	$	902,889		$	839,470		$	889,087		$	837,026
Average interest earning assets	834,872			787,260			826,719			784,354
Average loans	797,436			729,017			785,939			724,400
Average interest-bearing deposits	661,799			647,332			650,537			639,332
Average total deposits	721,399			692,216			707,504			683,373
Average total stockholders’ equity	75,837			72,393			75,192			72,368
Asset Quality Ratios
Non-performing loans as a percent of total loans (1)							1.81		%	1.04		%
Non-performing assets as a percent of total loans (1)							2.23		%	1.12		%
Allowance for loan losses as a percent of total loans (1)							1.06		%	1.07		%
Allowance for loan losses as a percent of non-performing loans							59		%	103		%
Annualized net charge-offs to total loans (1)							0.10		%	0.02		%

(1) Excludes loans held for sale.