First Financial Service Corp. has agreed to sell four of its branches in Indiana as the Elizabethtown, Ky., company works to increase its capital ratios to meet a consent order.
Under the agreement, the banking unit of First Savings Financial Group Inc. in Clarksville, Ind., will assume certain deposits, loans and other assets at First Federal Savings Bank of Elizabethtown branches in Corydon, Elizabeth, Lanesville and Georgetown, Ind.
First Savings will pay a 3.65% premium on certain assumed deposits that totaled $99.7 million at Dec. 31. It will also acquire $17.5 million in government, corporate, other financial institution deposits and municipal deposits and certain loans as long as the loans are still performing at the closing date.
The loans to be acquired totaled about $35.4 million at Dec. 31 with 83.5% of the portfolio in one-to-four family residential mortgages and the rest consisting of consumer, commercial business and commercial real estate loans. These loans will be purchased at a discount of 0.8% based on the actual level of the loans at closing.
The $537 million-asset First Savings Bank will not assume any brokered deposits.
Larry W. Myers, First Savings' president and chief executive, said that the deal would increase the bank's market share in Harrison County in Indiana to roughly 31% and that the deal should be accretive to earnings in the first year. First Savings currently controls roughly 18% of the deposits in the county, according to Federal Deposit Insurance Corp. data.
The deal is expected to close in the third quarter. First Savings expects to close the Corydon and Georgetown branches and consolidate them into existing branches.
First Financial said in a separate press release on Thursday that the deal would result in a one-time gain of about $3.4 million. The $1.2 billion-asset company has struggled with credit problems, reporting a loss of $22.2 million through the first nine months of 2011.
Gregory S. Schreacke, president of First Financial, said that the deal should help the bank meet a consent order, which requires the bank to maintain a Tier 1 leverage ratio of 9%. The deal is expected to increase the bank's Tier 1 leverage ratio from 5.87% at Dec. 31 to 6.75%.
In April, the Federal Reserve required that First Financial serve as a source of strength for its bank, which has been under a consent order with the Federal Deposit Insurance Corp. for more than a year. First Savings currently has a dozen branches in southern Indiana while First Financial has 22 branches in Kentucky and Indiana.