First Federal Savings Bank in Elizabethtown, Ky., is planning to sell four more of its branches as part of its ongoing effort to beef up its capital levels.

The bank's parent, First Financial Service Corporation (FFKY), announced late Tuesday that it is selling its four Louisville, Ky., branches to the $369 million-asset First Security Bank in Owensboro, Ky. Combined with its deal announced in February to sell its four Indiana branches, the sale would move the $1.2 billion-asset First Federal significantly closer to its minimum capital levels established by regulators in recent enforcement order.

"This transaction is another positive step toward addressing our company's capital needs," said Gregory S. Schreacke, First Federal's president, said in a news release. "We believe it places the company in a better position to meet the conditions of the regulatory consent order in a manner that is beneficial to the current shareholders."

A wave of defaults on construction loans -- the company lost $22 million last year -- have eaten away at First Federal's capital reserves. Under its order with state and federal regulators, First Security must boost its core capital ratio to 9% of assets and its total risk-based ratio to 12% of assets by June 30. The two deals combined increase its core capital ratio from 5.99% to 8.70% and its total risk-based capital from 10.70% t0 13%.

The buyer, First Security, is paying $3.6 million for the four branches and $217 million of deposits. The price works out to a 2% premium on $160 million of the deposits and a 1% premium on the rest.

The deal also includes $74 million of performing loans, for which First Security will assume at a 1% discount.

The sale is expected to close next quarter.

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