1st Financial Services Corporation Reports First Quarter Earnings

HENDERSONVILLE, N.C., May 18 /PRNewswire-FirstCall/ -- 1st Financial Services
Corporation (OTC Bulletin Board: FFIS), parent company of Mountain 1st Bank &
Trust Company reported earnings of $375 thousand or $0.02 per diluted share
for the first quarter of 2009. This compares with $789 thousand or $0.15 per
diluted share earned during the same period in 2008. Pre-provision, pre-tax
income, a non-GAAP measure the Company uses to provide a more representative
comparison of operational performance rose significantly increasing $808
thousand or 42.4% to $2.7 million as compared with $1.9 million during the
first quarter of 2008. Pre-provision, pre-tax income for the first quarter of
2009 totaled $2.7 million with provision for loan losses amounting to $2.3
million while income tax expense totaled $34 thousand resulting in earnings of
$375 thousand. For the same period in 2008, pre-provision, pre-tax income
amounted to $1.9 million as provision for loan losses totaled $685 thousand
while income tax expense totaled $432 thousand resulting in net income of $789
thousand. At March 31, 2009, the Bank's assets totaled $716.9 million,
representing an increase of $9.7 million or 1.4%, as compared with total
assets of $707.1 million at December 31, 2008. Loans and deposits totaled
$589.7 million and $589.4 million, respectively at March 31, 2009. This
compares with $584.0 million and $591.0 million, respectively, at December 31,
2008.

Greg Gibson, CEO stated, "We are pleased that 1st Financial recorded a profit
during the first quarter and are very happy with the significant expansion in
pre-provision, pre-tax earnings produced by the Company. However, we still
remain in the worst economy in generations and as a result, a larger provision
for loan losses during the first quarter adversely impacted the Company's
performance during the period. Management is actively working with stressed
borrowers to strengthen their financial position and improve their ability to
meet their obligations to the Bank. For those credits which are deemed
severely distressed or non-performing, management is actively seeking to
liquidate these loans through their sale to third parties or through the
liquidation of collateral securing these credits. We believe that taking what
we deem to be aggressive but prudent steps to liquidate any troubled assets as
quickly as possible should place the Company in a favorable position to
benefit from an improvement in the economy once this occurs."

Gibson added, "The banking industry has experienced extreme challenges over
the past two years. To date, 1st Financial has been successful in navigating
the hurdles presented by the prevailing economic environment and has been able
to make what we believe to be significant strides toward positioning the
Company to perform well upon the waning of the current recession. We expect
economic challenges to persist for at least the remainder of 2009 and probably
into 2010, but believe that the actions currently being taken by the Company
will continue to strengthen our balance sheet and position us well when
economic conditions improve."

This Press Release and its exhibits may contain statements relating to our
financial condition, results of operations, plans, strategies, trends,
projections of results of specific activities or investments, expectations or
beliefs about future events or results, and other statements that are not
descriptions of historical facts. Those statements may be forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements may be identified
by terms such as "may," "will," "should," "could," "expects," "plans,"
"intends," "anticipates," "believes," "estimates," "predicts," "forecasts,"
"potential" "opportunity," or "continue," or similar terms or the negative of
these terms, or other statements concerning opinions or judgments of our
management about future events. Forward-looking information is inherently
subject to risks and uncertainties, and actual results could differ materially
from those currently anticipated due to a number of factors, which include,
but are not limited to, factors discussed in our Annual Report on Form 10-K
and in other reports we file with the Securities and Exchange Commission from
time to time. Other factors that could influence the accuracy of those
forward-looking statements include, but are not limited to: (a) the financial
success or changing strategies of our customers; (b) customer acceptance of
our services, products and fee structure; (c) changes in competitive pressures
among depository and other financial institutions or in our ability to compete
effectively against larger financial institutions in our banking market; (d)
actions of government regulators, or changes in laws, regulations or
accounting standards, that adversely affect our business; (e) our ability to
manage our growth and to underwrite increasing volumes of loans; (f) the
impact on our profits of increased staffing and expenses resulting from
expansion; (g) changes in the interest rate environment and the level of
market interest rates that reduce our net interest margin and/or the volumes
and values of loans we make and securities we hold; (h) weather and similar
conditions that affect our customers in the markets we serve; (i) changes in
general economic or business conditions and the real estate market in our
banking market (particularly changes that affect our loan portfolio, the
abilities of our borrowers to repay their loans, and the values of loan
collateral); and (j) other developments or changes in our business that we do
not expect. Although our management believes that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. All forward-looking
statements attributable to us are expressly qualified in their entirety by the
cautionary statements in this paragraph. We have no obligation, and do not
intend, to update these forward-looking statements.

About 1st Financial Services Corporation
Formed in May 2008, 1st Financial Services Corporation is the parent company
of Mountain 1st Bank & Trust Company, and is currently traded on the Over The
Counter Bulletin Board under the symbol FFIS. Established in mid 2004,
Mountain 1st Bank and Trust is one of the fastest growing and most successful
de novo community banks in the southeast. With over $700 million in assets,
Mountain 1st Bank and Trust's more than 170 employees serve ten counties in
western North Carolina through fifteen full service branches. For more
information, visit www.mountain1st.com.

1st Financial Services Corporation Selected Financial Highlights

Amount Percent
For the Three Months Ended March 31, Increase/ Increase/
2009 2008 (Decrease) (Decrease)
----------------- -----------------
Selected Income (dollars in thousands except
Statement Data share and per share data)
and Ratios
(unaudited)

Net interest income $5,517 $5,057 $460 9.10%
Provision for
loan losses 2,305 685 1,620 236.50%
Noninterest income 1,591 1,358 233 17.16%
Noninterest expense 4,394 4,509 -115 -2.55%
-------------- ---------------

Income before income
taxes 409 1,221 -812 -66.50%
Income tax expense 34 432 -398 -92.13%
-------------- ---------------

Net income 375 789 -414 -52.47%
Accretion of preferred
stock 49 - 49 n/a
Preferred dividends
accrued 205 - 205 n/a
-------------- ---------------

Net income available to
common stockholders $121 $789 -668 -84.66%
============= ===============

Net interest margin 3.25% 3.36% -0.11% -3.21%
Return on average assets 0.21% 0.50% -0.29% -57.66%
Return on average equity 2.59% 6.72% -5.73% -85.25%
Efficiency ratio 61.82% 70.29% -8.47% -12.05%
Net charge-offs to
average total loans,
excluding held for sale 0.27% 0.00% 0.27% n/a
Nonperforming assets to
period end loans and
other real estate 2.39% 0.25% 2.14% 857.23%
Nonperforming assets to
total assets 1.95% 0.20% 1.75% 876.90%
Net income per share:
Basic $0.02 $0.16 -0.1 -84.66%
Diluted $0.02 $0.15 -0.12 -83.87%
Weighted average shares
outstanding:
Basic 4,997,027 4,997,027 0 0.00%
Diluted 4,997,320 5,256,327 -259,007 -4.93%

Amount Percent
As of As of Increase/ Increase/
31-Mar-09 31-Dec-08 (Decrease) (Decrease)
------------ -----------

Selected Balance Sheet
Data (unaudited)
(dollars in thousands
except share and per
share data)

Total assets $716,881 $707,136 $9,745 1.38%
Loans, including loans
held for sale 589,687 584,033 5,654 0.97%
Allowance for loan
losses 9,766 9,013 753 8.35%
Deposits 589,375 591,014 -1,639 -0.28%
Federal funds purchased
and securities sold
under agreements to
repurchase 966 1,372 -406 -29.59%
Borrowings 59,000 48,000 11,000 22.92%
Shareholders' equity 63,110 62,570 540 0.86%
Book value per common
share $9.55 $9.44 0.1 1.06%

SOURCE 1st Financial Services Corporation

Greg Gibson, Chief Executive Officer, +1-828-243-5175, or Roger Mobley, Chief
Financial Officer, +1-828-697-3106, both of 1st Financial Services
Corporation