First Financial Holdings, Inc. Announces First Quarter Fiscal 2011 Net Income

CHARLESTON, S.C., Jan. 26, 2011 (GLOBE NEWSWIRE) -- First Financial Holdings, Inc. (Nasdaq:FFCH) ("First Financial"), the holding company for First Federal Savings and Loan Association of Charleston ("First Federal"), today announced net income of $1.2 million for the three months ended December 31, 2010, compared with net losses of $(1.2) million for the three months ended September 30, 2010 and $(4.5) million for the three months ended December 31, 2009. After the effect of the preferred stock dividend and related accretion, First Financial reported net income available to common shareholders of $210 thousand for the three months ended December 31, 2010, compared with net losses available to common shareholders of $(2.1) million and $(5.5) million for the three months ended September 30, 2010 and December 31, 2009, respectively. Diluted net income per common share was $0.01 for the current quarter, compared with diluted net loss per common share of $(0.13) for the prior quarter and $(0.33) for the same quarter last year. 

"We are encouraged by the improved results for the quarter," said R. Wayne Hall, president and chief executive officer. "We reported lower charge-offs in the first fiscal quarter, and we continue to be focused on reducing the level of our nonperforming assets in order to maintain profitability. Our capital levels remain strong and we continue to explore opportunities evolving in our markets."

First Quarter Fiscal 2011 Highlights:
  • Net interest margin remained strong for the current quarter at 3.83%, compared with 3.91% for the quarter ended September 30, 2010.
  • Total loans increased $19.0 million or 0.7% over September 30, 2010 to $2.6 billion at December 31, 2010. Loan originations and renewals for the three months ended December 31, 2010 totaled $199.7 million, an increase of $25.9 million or 14.9% over the linked quarter.
  • Core deposits, which include checking, savings, and money market accounts, totaled $1.1 billion at December 31, 2010, a decrease of $12.0 million or 1.1% from September 30, 2010. Time deposits totaled $1.3 billion at December 31, 2010, an increase of $6.6 million or 0.5% over September 30, 2010.
  • The allowance for loan losses totaled $88.3 million at December 31, 2010 or 3.42% of total loans, compared with $86.9 million or 3.39% of total loans at September 30, 2010. The provision for loan losses totaled $10.5 million for the current quarter, a decrease of $7.1 million or 40.4% from the prior quarter. Net charge-offs totaled $9.0 million, a decrease of $8.6 million from the linked quarter. 
  • Delinquent loans totaled $37.2 million at December 31, 2010 or 1.44% of total loans, compared with $30.3 million or 1.18% of total loans at September 30, 2010. Nonperforming loans totaled $156.6 million at December 31, 2010 or 6.06% of total loans, as compared with $141.2 million or 5.51% of total loans at September 30, 2010.
  • First Federal remains categorized as "well-capitalized" under regulatory standards with total risk-based capital of 12.69% and Tier 1 risk-based capital of 11.42% at December 31, 2010.

Balance Sheet

Total assets at December 31, 2010 were $3.3 billion, a slight decrease of $21.7 million or 0.7% from September 30, 2010 and a decrease of $174.8 million or 5.0% from December 31, 2009. The decline from the same period last year was primarily the result of reductions in investment securities due to prepayments and declines in the loan portfolios due to lower loan demand from creditworthy borrowers, transfers of nonperforming loans to real estate owned ("REO"), and charge-offs during the year.  

Investment securities, primarily mortgage-backed securities, totaled $435.5 million at December 31, 2010, a decrease of $37.9 million or 8.0% from September 30, 2010 and a decrease of $111.9 million or 20.4% from December 31, 2009. The declines were primarily the result of high prepayment levels on higher yielding securities and the challenge in finding replacement securities with acceptable risk profiles and yields. As a result, the cash flows from maturities and prepayments were used to paydown advances from the FHLB and other borrowings rather than fully reinvesting these proceeds in other securities.

The following table summarizes the loan portfolio by major categories.
           
LOANS (in thousands) December 31, 2010 September 30, 2010 June 30, 2010 March 31, 2010 December 31, 2009
Residential loans          
 Residential 1-4 Family  $ 887,924  $ 836,644  $ 810,180  $ 778,747  $ 767,923
 Residential construction 15,639 14,436 12,016 16,926 14,502
 Residential land 53,772 56,344 57,977 61,893 65,606
 Total residential loans 957,335 907,424 880,173 857,566 848,031
           
Commercial loans          
 Commercial business 91,129 92,650 111,826 115,417 123,543
 Commercial real estate 590,816 598,547 593,894 593,128 591,787
 Commercial construction 23,895 28,449 40,102 60,561 69,865
 Commercial land 133,899 143,366 164,671 188,838 214,023
Total commercial loans 839,739 863,012 910,493 957,944 999,218
           
Consumer loans          
 Home equity 396,010 397,632 404,140 406,872 405,701
 Manufactured housing 269,555 269,857 264,815 256,193 250,646
 Marine 62,830 65,901 68,393 70,506 73,536
 Other consumer 57,898 60,522 62,805 63,134 67,070
Total consumer loans 786,293 793,912 800,153 796,705 796,953
Total loans 2,583,367 2,564,348 2,590,819 2,612,215 2,644,202
Less: Allowance for loan losses 88,349 86,871 86,945 82,731 73,534
Net loans  $ 2,495,018  $ 2,477,477  $ 2,503,874  $ 2,529,484  $ 2,570,668

Total loans at December 31, 2010 increased $19.0 million or 0.7% over September 30, 2010 and decreased $60.8 million or 2.3% from December 31, 2009. Increases in residential 1-4 family loans, which resulted from the strategic decision to retain substantially all 15-year residential mortgage loan originations in the portfolio, were offset by declines in most other loan categories. The decline in total loans was primarily the result of lower loan demand from creditworthy borrowers, transfers of nonperforming loans to REO, and charge-offs in most other loan categories, as well as paydowns as a result of normal borrower activity. 

Loan originations and renewals totaled $199.7 million during the three months ended December 31, 2010, compared with $173.8 million in the linked quarter and $165.9 million during the same quarter last year. While First Federal remains focused on originating new commercial business loans, the increases in total loans was primarily the result of higher residential mortgage volume due to the current low interest rate environment. 

The following table summarizes deposits by major categories.
           
DEPOSITS (in thousands) December 31, 2010 September 30, 2010 June 30, 2010 March 31, 2010 December 31, 2009
Noninterest-bearing $ 220,861 $ 223,915 $ 223,058 $ 220,375 $ 216,221
Interest-bearing 405,727 390,310 385,738 366,935 341,248
Savings 169,770 167,381 163,468 163,451 153,674
Money market 317,002 343,769 346,535 345,752 359,509
Total core deposits 1,113,360 1,125,375 1,118,799 1,096,513 1,070,652
           
Retail CDs < $100,000 542,605 556,669 564,482 579,544 586,482
Retail CDs >/- $100,000 445,755 438,031 413,011 387,135 361,323
Total Retail CDs 988,360 994,700 977,493 966,679 947,805
           
CDARs 87,728 69,280 135,306 157,205 77,213
Brokered CDs 220,164 225,708 232,059 233,633 197,757
Total Wholesale CDs 307,892 294,988 367,365 390,838 274,970
Total Time Deposits 1,296,252 1,289,688 1,344,858 1,357,517 1,222,775
           
Total deposits $2,409,612 $2,415,063 $2,463,657 $2,454,030 $2,293,427

Core deposits at December 31, 2010 decreased $12.0 million or 1.1% from September 30, 2010 and increased $42.7 million or 4.0% over December 31, 2009. The decrease from the prior quarter was due in part to calendar year-end seasonal changes in customer activity, with the majority of the decline occurring in the money market category. The increase over the same period last year was primarily the result of several marketing initiatives and campaigns during the last twelve months to attract and retain core deposits. Time deposits at December 31, 2010 increased slightly by $6.6 million or 0.5% over September 30, 2010 and increased $73.5 million or 6.0% over December 31, 2009. The increases in time deposits during the last year were primarily the result of a strategy to shift the funding mix to achieve global asset/liability objectives. Wholesale CDs totaled 12.8% of total deposits at December 31, 2010, compared with 12.2% at September 30, 2010 and 12.0% at December 31, 2009.

Advances from the FHLB at December 31, 2010 decreased $11.1 million or 2.2% from September 30, 2010 to $497.1 million and decreased $68.5 million or 12.1% from December 31, 2009. The decreases were primarily the result of using cash flow from the investment securities and loan portfolios to paydown advances, as well as the shift in funding mix to core and time deposits. First Financial maintains a strong liquidity position, with substantial on- and off-balance sheet liquidity sources and a stable funding base comprised of approximately 73% deposits, 16% borrowings, 10% equity, and 1% short-term liabilities. 

Shareholders' equity totaled $315.3 million at December 31, 2010, essentially unchanged from September 30, 2010 and a decrease of $39.1 million or 11.0% from December 31, 2009. The decrease was primarily the result of net losses incurred during the last year. First Federal's regulatory capital ratios continue to be above "well-capitalized" minimums, as evidenced by the key capital ratios and additional capital information presented in the following table.
             
    For the Quarter Ended
    December 31,  2010 September 30, 2010 June 30, 2010 March 31, 2010 December 31, 2009
First Financial:            
Equity to assets   9.55% 9.58% 9.74% 9.91% 10.20%
Tangible common equity to tangible assets (non-GAAP)  6.51   6.55   6.71   6.93   7.30 
Book value per common share    $ 15.15   $ 15.32   $ 15.66   $ 16.34   $ 17.52 
Tangible common book value per share (non-GAAP)  12.86   13.02   13.34   14.02   15.19 
Dividends paid per common share, authorized    0.05   0.05   0.05   0.05   0.05 
Common shares outstanding, end of period (000s)    16,527   16,527   16,527   16,527   16,526 
             
First Federal: Regulatory Minimum for "Well- Capitalized"          
Leverage capital ratio 4.00% 8.58% 8.47% 8.46% 7.74% 7.67%
Tier 1 risk-based capital ratio  6.00   11.42   11.27   11.19   9.83   9.78 
Total risk-based capital ratio  10.00   12.69   12.55   12.46   11.10   11.05 

Credit Quality

First Federal's loan portfolio is affected by numerous factors, including the economic environment in the markets it serves. First Federal carefully monitors its loans in an effort to identify and mitigate any potential credit quality issues and losses in a proactive manner. The following tables highlight several of the significant qualitative aspects of the loan portfolio to illustrate the overall level of quality and risk inherent in the portfolio.
                     
DELINQUENT LOANS December 31, 2010 September 30, 2010 June 30, 2010 March 31, 2010 December 31, 2009
(30-89 days past due) (in thousands)  $   % of Portfolio   $   % of Portfolio   $   % of Portfolio   $   % of Portfolio   $   % of Portfolio 
Residential loans                    
 Residential 1-4 Family  $ 6,712  0.76%  $ 3,486  0.42%  $ 5,244  0.65%  $ 8,214  1.05%  $ 6,076  0.79%
 Residential construction  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---
 Residential land  432  0.80  302  0.54  799  1.38  791  1.28  2,799  4.27
 Total residential loans  7,144  0.75  3,788  0.42  6,043  0.69  9,005  1.05  8,875  1.05
                     
Commercial loans                    
 Commercial business  3,476  3.81  2,140  2.31  2,355  2.11  4,315  3.74  4,909  3.97
 Commercial real estate  10,600  1.79  8,920  1.49  7,441  1.25  13,381  2.26  12,249  2.07
 Commercial construction  635  2.66  1,981  6.96  ---  ---  1,602  2.65  947  1.36
 Commercial land  5,348  3.99  3,428  2.39  1,192  0.72  2,314  1.23  4,662  2.18
Total commercial loans  20,059  2.39  16,469  1.91  10,988  1.21  21,612  2.26  22,767  2.28
                     
Consumer loans                    
 Home equity  4,355  1.10  4,625  1.16  4,661  1.15  4,477  1.10  4,609  1.14
 Manufactured housing  4,043  1.50  3,207  1.19  2,992  1.13  3,806  1.49  3,697  1.47
 Marine  707  1.13  462  0.70  425  0.62  981  1.39  1,754  2.39
 Other consumer  905  1.56  1,765  2.92  527  0.84  594  0.94  1,172  1.75
Total consumer loans  10,010  1.27  10,059  1.27  8,605  1.08  9,858  1.24  11,232  1.41
Total delinquent loans  $ 37,213  1.44%  $ 30,316  1.18%  $ 25,636  0.99%  $ 40,475  1.55%  $ 42,874  1.62%

Total delinquencies at December 31, 2010 increased $6.9 million or 22.8% over the prior quarter. The increase in the residential 1-4 family category was primarily related to one large borrower with a $1.6 million loan, which has adequate collateral to mitigate any potential loss. Increases in the commercial business and commercial real estate categories were related to one loan totaling $1.8 million, which is supported by income-producing collateral, as well as numerous smaller dollar loans. These commercial and small business loans have started to show signs of weakness and are being actively monitored for resolution. The increase in delinquent commercial land loans was primarily the result of one loan totaling $1.8 million, which matured while negotiations with the borrowers continue. 

Total delinquent loans at December 31, 2010 also included $4.2 million in loans covered under a purchase and assumption "loss-share" agreement with the Federal Deposit Insurance Corporation ("FDIC"), as compared with $5.0 million at September 30, 2010. 

                     
  December 31, 2010 September 30, 2010 June 30, 2010 March 31, 2010 December 31, 2009
NONPERFORMING ASSETS (in thousands)  $   % of Portfolio   $   % of Portfolio   $   % of Portfolio   $   % of Portfolio   $   % of Portfolio 
Residential loans                    
 Residential 1-4 Family  $ 20,371  2.29%  $ 17,350  2.07%  $ 17,898  2.21%  $ 13,763  1.77%  $ 15,759  2.05%
 Residential construction  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---
 Residential land  4,997  9.29  4,872  8.65  5,527  9.53  5,922  9.57  5,485  8.36
 Total residential loans  25,368  2.65  22,222  2.45  23,425  2.66  19,685  2.30  21,244  2.51
                     
Commercial loans                    
 Commercial business  9,769  10.72  6,951  7.50  6,789  6.07  7,563  6.55  5,238  4.24
 Commercial real estate  57,724  9.77  48,973  8.18  35,560  5.99  34,583  5.83  28,637  4.84
 Commercial construction  4,484  18.77  5,704  20.05  5,738  14.31  7,127  11.77  3,706  5.30
 Commercial land  43,824  32.73  46,109  32.16  50,269  30.53  55,719  29.51  40,164  18.77
Total commercial loans  115,801  13.79  107,737  12.48  98,356  10.80  104,992  10.96  77,745  7.78
                     
Consumer loans                    
 Home equity  9,450  2.39  6,969  1.75  6,937  1.72  7,773  1.91  6,626  1.63
 Manufactured housing  3,609  1.34  2,909  1.08  3,189  1.20  2,899  1.13  2,715  1.08
 Marine  67  0.11  188  0.29  135  0.20  166  0.24  259  0.35
 Other consumer  555  0.96  206  0.34  16  0.03  143  0.23  153  0.23
Total consumer loans  13,681  1.74  10,272  1.29  10,277  1.28  10,981  1.38  9,753  1.22
 Total nonaccrual loans  154,850  5.99  140,231  5.47  132,058  5.10  135,658  5.19  108,742  4.11
Loans 90+ days still accruing  204    175    170    104    124  
Restructured Loans, still accruing  1,578    750    ------    ------    ------  
Total nonperforming loans  156,632  6.06%  141,156  5.51%  132,228  5.10%  135,762  5.20%  108,866  4.12%
Other repossessed assets acquired  19,660    11,950    12,543    11,957    20,864  
Total nonperfoming assets  $176,292    $153,106    $144,771    $147,719    $129,730  
                     
                     

Total nonperforming assets at December 31, 2010 increased $23.2 million or 15.1% over the linked quarter.  The increase in nonperforming loans over the linked quarter included $9.3 million of predominantly commercial loans determined to be impaired and moved to nonperforming status prior to becoming 90 days past due. Three loans accounted for 47% of this total. Additionally, 30 loans totaling $6.1 million were matured in excess of 90 days and were moved to nonperforming status while negotiations with the borrowers continue toward renewal or alternate resolution. The remaining net increase from the linked quarter was related primarily to a higher number of relatively small loans migrating from delinquency to nonperforming. Reductions offsetting the new nonperforming loans include $3.2 million in charged-off loans, $8.0 million in transfers to REO, and $5.3 million in paydowns as a result of normal borrower activity.   

The nonperforming loans at December 31, 2010 included $13.7 million in loans covered under a purchase and assumption "loss-share" agreement with the FDIC, as compared with $14.7 million at September 30, 2010. 

  December 31, 2010 September 30, 2010 June 30, 2010 March 31, 2010 December 31, 2009
NET CHARGE-OFFS (in thousands)  $   % of Portfolio*   $   % of Portfolio*   $   % of Portfolio*   $   % of Portfolio*   $   % of Portfolio* 
Residential loans                    
 Residential 1-4 Family  $ 612  0.28%  $ 2,311  1.12%  $ 1,673  0.84%  $ 2,715  1.40%  $ 59  0.03%
 Residential construction  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---
 Residential land  735  5.34  1,297  9.08  975  6.51  1,127  7.07  1,781  10.08
 Total residential loans  1,347  0.58  3,608  1.61  2,648  1.22  3,842  1.80  1,840  0.87
                     
Commercial loans                    
 Commercial business  264  1.15  1,789  7.00  3,868  13.62  1,656  5.54  1,046  3.33
 Commercial real estate  237  0.16  3,402  2.28  5,267  3.55  8,085  5.46  1,807  1.21
 Commercial construction  314  4.80  270  3.15  2,051  16.30  1,094  6.71  3,114  16.60
 Commercial land  2,127  6.14  4,175  10.84  12,165  27.53  17,017  33.79  7,796  14.31
Total commercial loans  2,942  1.38  9,636  4.35  23,351  10.00  27,852  11.38  13,763  5.42
                     
Consumer loans                    
 Home equity  2,974  3.00  2,669  2.66  4,379  4.32  3,017  2.97  2,432  2.42
 Manufactured housing  834  1.24  1,145  1.71  950  1.46  638  1.01  763  1.23
 Marine  184  1.14  195  1.16  401  2.31  621  3.45  608  3.24
 Other consumer  724  4.89  399  2.59  430  2.73  748  4.60  860  4.99
Total consumer loans  4,716  2.39  4,408  2.21  6,160  3.09  5,024  2.52  4,663  2.35
Total net charge-offs  $ 9,005  1.38%  $ 17,652  2.71%  $ 32,159  4.91%  $ 36,718  5.55%  $ 20,266  3.02%

The decrease in net charge-offs for the quarter ended December 31, 2010 from the prior quarter was primarily the result of lower credit writedowns in the residential 1-4 family and all commercial loan categories as there were fewer loans requiring valuation adjustments on the underlying collateral.

The allowance for loan losses totaled $88.3 million or 3.42% of total loans at December 31, 2010, compared with $86.9 million or 3.39% of total loans at September 30, 2010 and $73.5 million or 2.78% of total loans at December 31, 2009. The increases in the allowance for loan losses were primarily the result of higher levels of nonperforming loans, evaluation of the fair value of the underlying collateral supporting these loans, and higher loss migration rates. 

Quarterly Results of Operations

First Financial reported net income of $1.2 million for the three months ended December 31, 2010, compared with net losses of $(1.2) million for the three months ended September 30, 2010 and $(4.5) million for the three months ended December 31, 2009.  Total revenue, which consists of net interest income and noninterest income, totaled $46.1 million for the three months ended December 31, 2010, compared with $49.9 million for the three months ended September 30, 2010 and $50.0 million for the three months ended December 31, 2009. Pre-tax, pre-provision earnings decreased to $12.3 million for the quarter ended December 31, 2010, compared with $15.2 million and $14.6 million for the quarters ended September 30, 2010 and December 31, 2009, respectively. The decreases were primarily the result of declines in total revenues as discussed below. 

Net interest income

Net interest margin, on a fully tax-equivalent basis, was 3.83% for the quarter ended December 31, 2010, compared with 3.91% for the prior quarter and 3.96% for the same quarter last year. While First Financial realized a seven basis point reduction in cost of funds due to repricing of deposits and borrowed funds, a 15 basis point decrease in the average yield on assets resulted in a net decrease in net interest margin from the prior quarter. The decline from the same quarter last year was also a result of the reduction in the yield on assets exceeding the decline in cost of funds. First Financial continues to reprice deposits as market competition will support, and earning assets continue to reprice and be replaced with lower yielding assets. 

Net interest income for the quarter ended December 31, 2010 was $30.3 million, a decrease of $590 thousand or 1.9% from the prior quarter and a decrease of $2.6 million or 8.0% from the same quarter last year. The decreases were primarily the result of the lower net interest margin, combined with a decrease in average earning assets. The decreases in average earning assets were primarily the result of a decline in loan balances due to lower loan demand from creditworthy borrowers and loan charge-offs, as well as using cash flow from investment securities to paydown borrowings. 

Provision for loan losses

After determining what First Financial believes is an adequate allowance for loan losses based on the risk in the portfolio, the provision for loan losses is calculated based on the net effect of the quarterly change in the allowance for loan losses and net charge-offs. The provision for loan losses was $10.5 million for the quarter ended December 31, 2010, compared with $17.6 million for the linked quarter and $25.3 million for the same quarter last year. The decreases were primarily the result of lower net charge-offs and some stabilization in the level of impaired loans requiring specific reserves, combined with no significant additional valuation adjustments required as a result of updated appraisals. 

Noninterest income

Noninterest income totaled $15.8 million for the quarter ended December 31, 2010, a decrease of $3.2 million or 16.9% from the prior quarter and a decrease of $1.3 million or 7.6% from the same quarter last year. The decrease from the prior quarter was primarily the result of lower mortgage and other loan income and a seasonal reduction in insurance revenue. The decrease in mortgage and other loan income was primarily the result of a reduction in pricing on the loans sold during the current quarter. The decrease in noninterest income from the same quarter of last year was primarily the result of lower other income due to a $1.2 million gain on the donation of a branch location recorded during the quarter ended December 31, 2009.

Noninterest expense

Noninterest expense totaled $33.8 million for the quarter ended December 31, 2010, a decrease of $925 thousand or 2.7% from the linked quarter and an increase of $1.2 million or 3.7% over the same quarter last year. As compared with the linked quarter, the decrease in noninterest expense was primarily the result of lower REO expenses, partially offset by increases in salaries and employee benefits and professional services. The $1.5 million decrease in REO expenses was primarily the result of fewer writedowns on REO properties to reflect further fair value declines for the underlying properties during the current quarter, combined with lower net losses on sales of REO properties. The $701 thousand increase in salaries and employee benefits was primarily the result of fiscal year end accrual and other adjustments resulting in a net credit recorded in the September 30, 2010 quarter and higher group insurance expense related to the level and timing of claims, partially offset by lower incentives and commissions paid in the current quarter.  Professional services increased $486 thousand, primarily as a result of using external resources to assist in the implementation of several strategic initiatives including loss-share management, REO management, and compensation studies. The net decrease in the other noninterest expense categories was primarily the result of various expense management initiatives implemented throughout First Financial. 

The increase in noninterest expense over the same quarter last year was primarily the result of higher salaries and employee benefits and professional services, partially offset by lower other expense. The $1.5 million increase in salaries and employee benefits was primarily the result of new positions added during 2010 in wealth management, correspondent lending, mortgage originations, operations and administrative areas. The increase in professional services was primarily the result of the outsourced services related to the aforementioned implementation of several strategic initiatives. The decrease in other expense was primarily the result of a $1.2 million contribution in conjunction with the donation of a branch location recorded during the quarter ended December 31, 2009.

Conference Call

R. Wayne Hall, president and CEO; Blaise B. Bettendorf, EVP and CFO; and Joseph W. Amy, EVP and CCO; will review the quarter's results in a conference call at 2:00 PM (ET), January 26, 2011. The live audio webcast is available on First Financial's website at www.firstfinancialholdings.com and will be available for 90 days.

About First Financial

First Financial Holdings, Inc. ("First Financial") (Nasdaq:FFCH) is a premier financial services provider offering integrated financial solutions, including personal, business, wealth management, and insurance. First Financial serves individuals and businesses throughout coastal South Carolina, as well as the Florence, Columbia, and upstate regions of South Carolina and Burlington, and Wilmington, North Carolina. First Financial subsidiaries include: First Federal Savings and Loan Association of Charleston ("First Federal"); First Southeast Insurance Services, Inc., an insurance agency; Kimbrell Insurance Group, Inc., a managing general insurance agency; First Southeast 401(k) Fiduciaries, Inc., a registered investment advisor; and First Southeast Investor Services, Inc., a registered broker-dealer. First Federal is the largest financial institution headquartered in the Charleston, South Carolina metropolitan area and the third largest financial institution headquartered in South Carolina, based on asset size. Additional information about First Financial is available at www.firstfinancialholdings.com.

Non-GAAP Financial Information

In addition to results presented in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release includes non-GAAP financial measures such as the tangible common equity to tangible assets ratio, tangible common book value per share, the efficiency ratio, and pre-tax pre-provision earnings. First Financial believes these non-GAAP financial measures provide additional information that is useful to investors in understanding its underlying performance, business, and performance trends and such measures help facilitate performance comparisons with others in the banking industry. Non-GAAP measures have inherent limitations, are not required to be uniformly applied, and are not audited. Readers should be aware of these limitations and should be cautious to their use of such measures. To mitigate these limitations, First Financial has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that its performance is properly reflected to facilitate consistent period-to-period comparisons. Although management believes the above non-GAAP financial measures enhance investors' understanding of First Financial's business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures. 

First Financial believes the exclusion of goodwill and other intangible assets facilitates the comparison of results for ongoing business operations. The tangible common equity ("TCE") ratio and tangible common book value per share ("TBV") have become a focus of some investors, analysts and banking regulators. Management believes these measures may assist in analyzing First Financial's capital position absent the effects of intangible assets and preferred stock. Because TCE and TBV are not formally defined by GAAP or codified in the federal banking regulations, these measures are considered to be non-GAAP financial measures.  However, analysts and banking regulators may assess First Financial's capital adequacy using TCE or TBV, therefore, management believes that it is useful to provide investors the ability to assess its capital adequacy on the same basis. 

In accordance with industry standards, certain designated net interest income amounts are presented on a taxable equivalent basis, including the calculation used in the efficiency ratio. 

First Financial believes that pre-tax, pre-provision earnings are a useful measure in assessing its core operating performance, particularly during times of economic stress. This measurement, as defined by management, represents total revenue (net interest income plus noninterest income) less noninterest expense. As recent results for the banking industry demonstrate, credit writedowns, loan charge-offs, and related provisions for loan losses can vary significantly from period to period, making a measure that helps isolate the impact of credit costs on profitability important to investors. 

Refer to the Selected Financial Information Table and the Non-GAAP Reconciliation Table later in this release for additional information.

Forward-Looking Statements 

Statements in this release that are not statements of historical fact, including without limitation, statements that include terms such as "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook," or similar expressions or future conditional verbs such as "may," "will," "should," "would," or "could" constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements regarding First Financial's future financial and operating results, plans, objectives, expectations and intentions involve risks and uncertainties, many of which are beyond First Financial's control or are subject to change. No forward-looking statement is a guarantee of future performance and actual results could differ materially. Factors that could cause or contribute to such differences include, but are not limited to, the general business environment, general economic conditions nationally and in the States of North and South Carolina, interest rates, the North and South Carolina real estate markets, the demand for mortgage loans, the credit risk of lending activities, including changes in the level and trend of delinquent and nonperforming loans and charge-offs, changes in First Federal's allowance for loan losses and provision for loan losses that may be affected by deterioration in the housing and real estate markets; results of examinations by banking regulators, including the possibility that any such regulatory authority may, among other things, require First Federal to increase its reserve for loan losses, writedown assets, change First Financial's regulatory capital position or affect its ability to borrow funds or maintain or increase deposits, which could adversely affect liquidity and earnings; First Financial's ability to control operating costs and expenses, First Financial's ability to successfully integrate any assets, liabilities, customers, systems, and management personnel acquired or may in the future acquire into its operations and its ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto, competitive conditions between banks and non-bank financial services providers, and regulatory changes including the Dodd-Frank Wall Street Reform and Consumer Protection Act. Other risks are also detailed in First Financial's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and current reports on Form 8-K filings with the Securities and Exchange Commission ("SEC"), which are available at the SEC's website www.sec.gov . Other factors not currently anticipated may also materially and adversely affect First Financial's results of operations, financial position, and cash flows. There can be no assurance that future results will meet expectations. While First Financial believes that the forward-looking statements in this release are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. First Financial does not undertake, and expressly disclaims any obligation to update or alter any statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
           
           
(in thousands) December 31, 2010 September 30,  2010 June 30, 2010 March 31, 2010 December 31, 2009
    (audited)      
ASSETS          
Cash and due from banks  $ 48,521  $ 49,821  $ 53,575  $ 54,488  $ 58,241
Interest-bearing deposits with banks  7,905  10,726  8,433  7,599  8,188
 Total cash and cash equivalents  56,426  60,547  62,008  62,087  66,429
Investment securities:          
Securities available for sale, at fair value  372,277  407,976  413,617  446,414  478,768
Securities held to maturity, at amortized cost  21,948  22,529  22,512  22,496  22,481
Nonmarketable securities - FHLB stock  41,273  42,867  46,141  46,141  46,141
 Total investment securities  435,498  473,372  482,270  515,051  547,390
Loans  2,583,367  2,564,348  2,590,819  2,612,215  2,644,202
Less: Allowance for loan losses  88,349  86,871  86,945  82,731  73,534
 Net loans  2,495,018  2,477,477  2,503,874  2,529,484  2,570,668
Loans held for sale  28,528  28,400  15,030  12,681  22,903
Premises and equipment, net  82,847  83,413  83,529  83,417  80,113
Goodwill  28,260  28,260  28,260  28,024  28,025
Other intangible assets, net  9,515  9,754  9,997  10,228  10,470
FDIC indemnification asset, net  68,326  67,583  66,794  65,461  64,130
Other assets  96,920  94,209  72,582  74,434  86,020
Total assets  $ 3,301,338  $ 3,323,015  $ 3,324,344  $ 3,380,867  $ 3,476,148
           
LIABILITIES          
Deposits:          
Noninterest-bearing  $ 220,861  $ 223,915  $ 223,058  $ 220,375  $ 216,221
Interest-bearing  2,188,751  2,191,148  2,240,599  2,233,655  2,077,206
 Total deposits  2,409,612  2,415,063  2,463,657  2,454,030  2,293,427
Advances from FHLB  497,106  508,235  478,364  530,493  565,622
Other short-term borrowings  812  812  813  812  181,812
Long-term debt  46,392  46,392  46,392  46,392  46,392
Other liabilities  32,094  34,323  11,321  14,139  34,441
Total liabilities  2,986,016  3,004,825  3,000,547  3,045,866  3,121,694
           
SHAREHOLDERS' EQUITY          
Preferred stock  1  1  1  1  1
Common stock  215  215  215  215  214
Additional paid-in capital  195,090  194,767  195,175  194,821  194,654
Treasury stock, at cost  (103,563)  (103,563)  (103,563)  (103,563)  (103,563)
Retained earnings  221,304  221,920  224,871  238,708  259,511
Accumulated other comprehensive income  2,275  4,850  7,098  4,819  3,637
Total shareholders' equity  315,322  318,190  323,797  335,001  354,454
Total liabilities and shareholders' equity  $ 3,301,338  $ 3,323,015  $ 3,324,344  $ 3,380,867  $ 3,476,148

 
           
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
           
           
  Three Months Ended
(in thousands, except share data) December 31, 2010 September 30, 2010 June 30, 2010 March 31, 2010 December 31, 2009
           
INTEREST INCOME          
Interest and fees on loans  $ 36,366  $ 36,752  $ 37,485  $ 38,267  $ 40,018
Interest and dividends on investments  5,023  5,562  5,882  6,132  6,964
Other  695  810  914  1,017  1,118
Total interest income  42,084  43,124  44,281  45,416  48,100
INTEREST EXPENSE          
Interest on deposits  7,600  8,042  8,189  7,835  8,718
Interest on borrowed money  4,224  4,232  4,863  6,085  6,494
Total interest expense  11,824  12,274  13,052  13,920  15,212
NET INTEREST INCOME  30,260  30,850  31,229  31,496  32,888
Provision for loan losses  10,483  17,579  36,373  45,915  25,327
Net interest income (loss) after provision for loan losses  19,777  13,271  (5,144)  (14,419)  7,561
NONINTEREST INCOME          
Service charges on deposit accounts  6,278  6,446  6,645  6,183  6,300
Insurance  5,291  6,273  6,298  7,507  5,429
Mortgage and other loan income  2,636  4,382  2,469  2,104  2,439
Trust and plan administration  1,177  1,087  1,016  1,040  1,269
Brokerage fees  514  591  644  550  496
Other  476  510  1,944  797  1,698
Net securities losses  (534)  (230)  (311)  (1,818)  (494)
Total noninterest income  15,838  19,059  18,705  16,363  17,137
           
NONINTEREST EXPENSE          
Salaries and employee benefits  19,287  18,586  18,894  18,697  17,780
Occupancy costs  2,370  2,516  2,308  2,442  2,447
Furniture and equipment  2,003  2,373  2,256  2,052  2,139
Real estate owned expenses, net  1,254  2,723  925  1,915  1,560
FDIC insurance and regulatory fees  1,180  1,274  1,112  1,345  941
Professional services  1,567  1,081  1,454  859  767
Advertising and marketing  612  951  707  821  786
Other loan expense  773  514  335  403  417
Intangible asset amortization  239  243  231  243  243
Other expense  4,507  4,456  4,881  4,519  5,514
Total noninterest expense  33,792  34,717  33,103  33,296  32,594
Income (loss) before income taxes  1,823  (2,387)  (19,542)  (31,352)  (7,896)
Income tax expense (benefit)  656  (1,215)  (7,513)  (12,296)  (3,364)
NET INCOME (LOSS)  $ 1,167  $ (1,172)  $ (12,029)  $ (19,056)  $ (4,532)
Preferred stock dividends  813  813  813  813  813
Accretion on preferred stock discount  144  142  140  138  136
NET INCOME (LOSS) AVAILABLE TO COMMON  SHAREHOLDERS  $ 210  $ (2,127)  $ (12,982)  $ (20,007)  $ (5,481)
           
Net income (loss) per common share:          
Basic  $ 0.01  $ (0.13)  $ (0.79)  $ (1.21)  $ (0.33)
Diluted  $ 0.01  $ (0.13)  $ (0.79)  $ (1.21)  $ (0.33)
           
Average common shares outstanding:          
Basic  16,527  16,527  16,527  16,526  16,464
Diluted  16,529  16,527  16,527  16,526  16,464
           
FIRST FINANCIAL HOLDINGS, INC.          
SELECTED FINANCIAL INFORMATION (Unaudited) For the Quarter Ended
(in thousands, except ratios) December 31, 2010 September 30,  2010 June 30, 2010 March 31, 2010 December 31, 2009
Average for the Quarter          
Total assets  $ 3,323,825  $ 3,316,098  $ 3,358,635  $ 3,429,172  $ 3,487,674
Earning assets  3,152,332  3,140,295  3,192,199  3,256,664  3,310,293
Loans  2,614,918  2,602,059  2,617,584  2,645,741  2,684,929
Deposits  2,424,807  2,450,148  2,466,284  2,334,035  2,312,129
Interest-bearing liabilities  2,740,685  2,743,785  2,790,884  2,854,834  2,859,012
Shareholders' equity  318,202  321,379  330,829  346,194  356,897
           
Performance Metrics          
Return on average assets 0.04% (0.14)% (1.43)% (2.22)% (0.52)%
Return on average shareholders' equity 0.37 (1.46) (14.54) (22.02) (5.08)
Net interest margin (FTE) (1)  3.83  3.91  3.94  3.94  3.96
Efficiency ratio (non-GAAP)  72.22  69.04  65.69  66.83  64.29
Pre-tax pre-provision earnings (non-GAAP)  $ 12,306  $ 15,192  $ 16,831  $ 14,563  $ 17,431
           
Credit Quality Metrics          
Allowance for loan losses as a percent of loans 3.42% 3.39% 3.36% 3.17% 2.78%
Allowance for loan losses as a percent of nonperforming loans 56.41  61.54  65.75  60.94  67.55
Nonperforming loans as a percent of loans 6.06  5.51  5.10  5.20  4.12
Nonperforming assets as a percent of loans and other  repossessed assets acquired 6.77  5.94  5.56  5.63  4.87
Nonperforming assets as a percent of total assets 5.34  4.61  4.35  4.37  3.73
Net loans charged-off as a percent of average loans (annualized) 1.38  2.71  4.91  5.55  3.02
Net loans charged-off  $ 9,005  $ 17,652  $ 32,159  $ 36,718  $ 20,266
           
(1) Net interest margin is presented on an annual basis, includes taxable equivalent adjustments to interest income and is based on a federal tax rate of 35%.
           
FIRST FINANCIAL HOLDINGS, INC.          
Non-GAAP Reconciliation (Unaudited) For the Quarter Ended
(in thousands, except per share data) December 31, 2010 September 30, 2010 June 30, 2010 March 31, 2010 December 31, 2009
Efficiency Ratio          
Net interest income (A)  $ 30,260  $ 30,850  $ 31,229  $ 31,496  $ 32,888
Taxable equivalent adjustment (B)  157  149  148  148  183
Noninterest income (C)  15,838  19,059  18,705  16,363  17,137
Net securities losses (D)  (534)  (230)  (311)  (1,818)  (494)
Noninterest expense (E)  33,792  34,717  33,103  33,296  32,594
Efficiency Ratio: E/(A+B+C-D) (non-GAAP) 72.22% 69.04% 65.69% 66.83% 64.29%
           
Tangible Assets and Tangible Common Equity          
Total assets  $ 3,301,338  $ 3,323,015  $ 3,324,344  $ 3,380,867  $ 3,476,148
Goodwill  (28,260)  (28,260)  (28,260)  (28,024)  (28,025)
Other intangible assets, net  (9,515)  (9,754)  (9,997)  (10,228)  (10,470)
 Tangible assets (non-GAAP)  $ 3,263,563  $ 3,285,001  $ 3,286,087  $ 3,342,615  $ 3,437,653
           
Total shareholders' equity  $ 315,322  $ 318,190  $ 323,797  $ 335,001  $ 354,454
Preferred stock  (65,000)  (65,000)  (65,000)  (65,000)  (65,000)
Goodwill  (28,260)  (28,260)  (28,260)  (28,024)  (28,025)
Other intangible assets, net  (9,515)  (9,754)  (9,997)  (10,228)  (10,470)
 Tangible common equity (non-GAAP)  $ 212,547  $ 215,176  $ 220,540  $ 231,749  $ 250,959
           
Shares outstanding, end of period (000s)  16,527  16,527  16,527  16,527  16,526
           
Tangible common equity to tangible assets (non-GAAP) 6.51% 6.55% 6.71% 6.93% 7.30%
Tangible common book value per share (non-GAAP)  $ 12.86  $ 13.02  $ 13.34  $ 14.02  $ 15.19
           
Pre-tax pre-provision earnings          
Income (loss) before income taxes  $ 1,823  $ (2,387)  $ (19,542)  $ (31,352)  $ (7,896)
Provision for loan losses  10,483  17,579  36,373  45,915  25,327
 Pre-tax pre-provision earnings (non-GAAP)  $ 12,306  $ 15,192  $ 16,831  $ 14,563  $ 17,431
           
CONTACT: Dorothy B. Wright         Senior Vice President         Investor Relations and Corporate Secretary         (843) 529-5931 or (843) 729-7005         dwright@firstfinancialholdings.com

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