First Financial Holdings, Inc. Announces Second Quarter Earnings

CHARLESTON, S.C., July 26, 2013 (GLOBE NEWSWIRE) -- First Financial Holdings, Inc. ("First Financial") (Nasdaq:FFCH), the holding company for First Federal Bank ("First Federal"), announced today net income available to common shareholders of $6.9 million for the three months ended June 30, 2013, compared with $4.3 million for the three months ended March 31, 2013 and $11.6 million for the three months ended June 30, 2012. Diluted net income per common share was $0.42 for the quarter ended June 30, 2013, compared with $0.26 for the prior quarter and $0.70 for the same quarter last year. The quarter ended June 30, 2012 included a $9.0 million after-tax gain on the acquisition of Plantation Federal Bank ("Plantation") and a $3.1 million after-tax net charge related to repositioning the balance sheet.

For the six months ended June 30, 2013, net income available to common shareholders was $11.2 million, compared with $12.4 million for the same period of 2012. Diluted net income per common share was $0.68, compared with $0.75 for the first six months of 2012.

Quarterly Results of Operations

First Financial reported net income of $7.9 million for the three months ended June 30, 2013, compared with $5.3 million for the three months ended March 31, 2013 and $12.6 million for the three months ended June 30, 2012.

Net interest income

Net interest margin, on a fully tax-equivalent basis, was 4.37% for the quarter ended June 30, 2013, compared with 4.51% for the quarter ended March 31, 2013 and 4.08% for the quarter ended June 30, 2012. The decrease in net interest margin was a result of a shift in the mix of earning assets from loans to lower yielding investment securities and overnight funds. The increase over the same quarter last year was principally caused by the improved performance on a Cape Fear loan pool as well as a lower cost of funds due to maturing time deposits being replaced with core deposits and the continued funding mix shift from borrowings.

Net interest income for the quarter ended June 30, 2013 was $32.1 million, a decrease of $1.0 million or 3.0% from the prior quarter and essentially unchanged from the same quarter last year. The decrease from the linked quarter was primarily due to a $19.6 million decline in average earning assets and the reduction in net interest margin. The decrease from the same quarter last year was principally caused by a $185.5 million decline in average earning assets, partially offset by the higher net interest margin.

Provision for loan losses

After determining what First Financial believes is an adequate allowance for loan losses based on the estimated risk inherent in the loan portfolio, the provision for loan losses is calculated based on the net effect of the change in the allowance for loan losses and net charge-offs. The provision for loan losses was $822 thousand for the quarter ended June 30, 2013, which included $438 thousand due to recognizing impairment on certain Plantation loan pools which have lower cash flows than originally projected. The decreases were principally due to continued reductions in the historical loss trends as well as improvements in classified loan levels and other credit metrics through June 30, 2013. 

Noninterest income

Noninterest income totaled $14.7 million for the quarter ended June 30, 2013, a decrease of $1.1 million or 7.2% from the prior quarter and a decrease of $17.8 million or 54.8% from the same quarter last year. Noninterest income for the quarter ended March 31, 2013 included a $1.3 million release on the FDIC true-up liability as higher projected losses will reduce the amount that First Federal might have to potentially remit to the FDIC based on the initial purchase bid. The June 30, 2012 quarter included a $14.6 million gain on the acquisition of Plantation and a $3.5 million gain on the sale of investment securities related to a balance sheet repositioning initiative. Excluding the impact of these items from the March 31, 2013 and June 30, 2012 quarters, noninterest income for the June 30, 2013 quarter was essentially unchanged from both prior periods. While noninterest income for the June 30, 2013 quarter was consistent with the same quarter last year, a decrease in service charges on deposit accounts ($317 thousand) was offset by bank owned life insurance income ($392 thousand), as these policies were purchased during the second half of 2012.

Noninterest expense

Noninterest expense totaled $34.1 million for the quarter ended June 30, 2013, a decrease of $1.0 million or 2.9% from the prior quarter and a decrease of $5.2 million or 13.2% from the same quarter last year. The June 30, 2012 quarter included an $8.5 million termination charge on the prepayment of FHLB advances as part of a balance sheet repositioning initiative. Excluding the termination charge, noninterest expenses for the June 30, 2013 quarter increased $3.4 million or 10.9% over the same quarter last year. The decrease from the prior quarter was primarily the result of a decline in other real estate owned ($1.5 million) and other smaller variances, partially offset by an increase in other expense ($1.2 million). The decrease in other real estate owned ("OREO") was the result of lower write-downs on OREO properties and higher gains on the sale of OREO properties in the current quarter. The increase in other expense was principally the result of losses related to sold investor loans. 

The increase in noninterest expense over the same quarter of the prior year was principally caused by the $3.5 million in FDIC indemnification asset impairment, as the impairment was not projected until the third quarter of 2012, as well as higher salaries and employee benefits ($921 thousand), partially offset by lower occupancy costs ($834 thousand) and OREO ($675 thousand). The increase in salaries and employee benefits was principally caused by reinstating several employee benefits at the beginning of 2013. The decrease in occupancy costs was primarily the result of expenses associated with closing four unprofitable branches during the second quarter of 2012. The decrease in OREO was due to lower write-downs on OREO properties and higher gains on the sale of OREO properties in the current quarter.

Income Taxes

The income tax expense for the three months ended June 30, 2013 totaled $4.0 million, an increase of $1.4 million or 53.8% over the linked quarter and a decrease of $3.7 million or 47.5% from the same quarter last year. The variances from both prior periods were the result of the change in pre-tax income. The effective tax rate for the three months ended June 30, 2013 was 33.87%, compared with 33.36% and 38.00% for the quarters ended March 31, 2013 and June 30, 2012, respectively. The decrease in the effective tax rate from the prior year was principally due to higher tax-exempt income resulting from purchasing bank owned life insurance during the second half of 2012.

Year-to-Date Results of Operations

First Financial reported net income of $13.2 million for the six months ended June 30, 2013, compared with $14.3 million for the same period of 2012. 

Net interest income

Net interest margin, on a fully tax-equivalent basis, was 4.44% for six months ended June 30, 2013, compared with 3.96% for the same period of 2012. The increase was principally caused by the improved performance on a Cape Fear loan pool, accretion and amortization of purchase accounting adjustments related to the Plantation acquisition, a lower cost of funds as maturing time deposits have been replaced with core deposits and the continued funding mix shift from borrowings, as well as higher yields on investments due to accelerated accretion on called investment securities. 

Net interest income for the six months ended June 30, 2013 was $65.3 million, an increase of $5.3 million or 8.9% over the same period of 2012. The increase was primarily the result of improved performance on a Cape Fear loan pool as well as the Plantation and Liberty transactions and the balance sheet repositioning during 2012, partially offset by lower average earning assets.

Provision for loan losses

The provision for loan losses was $6.8 million for the first six months of 2013, compared with $11.4 million for the same period of 2012. As of June 30, 2013, the provision for loan losses included $1.7 million due to recognizing impairment on certain Plantation loan pools which have lower cash flows than originally projected, which was recorded as an increase to the allowance for loan losses. Excluding the impact of the Plantation pools, the provision for loan losses for the first six months of 2013 was $5.1 million, a decrease of $6.3 million or 55.5% from the same period of 2012. The decrease was principally due to continued reductions in the historical loss trends as well as improvements in classified loan levels and other credit metrics through June 30, 2013. 

Noninterest income

Noninterest income totaled $30.5 million for the first six months of 2013, compared with $45.7 million for the same period of 2012. Excluding the FDIC true-up liability in 2013 and the gains on the Plantation acquisition and the sale of investment securities in 2012, as discussed above, noninterest income for the first six months of 2013 totaled $29.2 million, an increase of $1.6 million or 5.8% over the same period of 2012. The increase was principally the result of higher mortgage and other loan income ($941 thousand) due to expanding the corresponding lending channel during 2012 and higher bank owned life insurance ($765 thousand) as these policies were purchased during the second half of 2012.

Noninterest expense

Noninterest expense totaled $69.2 million for the first six months of 2013, essentially unchanged from the same period of 2012. Excluding the termination charge recorded during 2012 as discussed above, noninterest expenses for the first six months of 2013 increased $9.8 million or 16.4% over the same period of 2012. The increase was principally the result of the impact of the Plantation and Liberty transactions, which occurred in the second quarter of 2012, and the FDIC indemnification asset impairment ($7.4 million), which did not begin until the third quarter of 2012, partially offset by lower occupancy costs ($887 thousand) and FDIC insurance and regulatory fees ($682 thousand). The decrease in occupancy costs was primarily the result of closing four unprofitable branches during the second quarter of 2012. The decrease in FDIC insurance and regulatory fees was the result of becoming a Federal Reserve member bank during 2012.

Income Taxes

The income tax expense for the first six months of 2013 totaled $6.7 million, a decrease of $5.3 million or 44.2% from the same period last year. The decrease was primarily the result of lower pre-tax income and recognizing a $2.1 million tax expense associated with writing down the state deferred tax asset related to a difference in applicable South Carolina tax laws for banks versus thrifts upon First Federal's conversion to a state-chartered commercial bank in 2012. The effective tax rate for the first six months of 2013 was 33.67%, compared with 45.49% for the same period of 2012. The decrease in the effective tax rate was principally due to higher tax-exempt income resulting from purchasing bank owned life insurance during the second half of 2012 and the above mentioned state deferred tax write-down during 2012. 

Balance Sheet

Total assets at June 30, 2013 were $3.2 billion, essentially unchanged from March 31, 2013 and a decrease of $133.9 million or 4.1% from June 30, 2012. While total assets were essentially unchanged from March 31, 2013, decreases in total investment securities, total loans, and the FDIC indemnification asset were substantially offset by increases in interest-bearing deposits with banks. The decrease in total assets from June 30, 2012 was principally due to declines in total loans, loans held for sale, the FDIC indemnification asset, and other assets, partially offset by higher interest-bearing deposits with banks, investment securities, and bank owned life insurance.

Investment securities at June 30, 2013 totaled $321.8 million, a decrease of $26.9 million or 7.71% from March 31, 2013 and an increase of $28.4 million or 9.7% over June 30, 2012. The decrease from March 31, 2013 was the result of normal principal reductions and cash flows from called securities. The increase over June 30, 2012 was primarily the result of securities purchased after repositioning the balance sheet during the second quarter of 2012, partially offset by normal portfolio cash flows. 

Total loans at June 30, 2013 decreased $60.3 million or 2.4% from March 31, 2013 and decreased $216.3 million or 8.2% from June 30, 2012. The decreases were the result of reductions in the commercial and consumer loan categories due to several large payoffs and paydowns on commercial real estate and commercial land loans, higher loss claims on the Plantation portfolio, and normal cash flows. The decline in the commercial loan portfolio is consistent with a strategy to reduce problem and criticized loan balances, both legacy as well as those in acquired portfolios.   

First Federal's credit quality metrics at June 30, 2013 reflect improved performance from both the linked quarter and the same quarter last year. Delinquent loans at June 30, 2013 totaled $8.3 million, a decrease of $5.5 million or 39.7% from March 31, 2013 and a decrease of $2.8 million or 25.3% from June 30, 2012. The decreases were driven by lower delinquent commercial loans due to continued collection efforts. Total delinquent loans at June 30, 2013 included $635 thousand in acquired covered loans, as compared with $3.4 million and $2.9 million at March 31, 2013 and June 30, 2012, respectively. 

Nonperforming assets at June 30, 2013 totaled $59.5 million, a decrease of $5.5 million or 8.5% from March 31, 2013 and a decrease of $18.6 million or 23.8% from June 30, 2012. The decreases were principally the result of reductions in nonperforming residential and commercial loans as well as OREO sales outpacing new foreclosures. Acquired covered nonperforming loans totaled $7.5 million at June 30, 2013, compared with $8.8 million and $10.4 million at March 31, 2013 and June 30, 2012, respectively. Acquired covered OREO totaled $6.7 million at June 30, 2013, compared with $9.7 million and $20.0 million at March 31, 2013 and June 30, 2012, respectively. 

Net charge-offs for the quarter ended June 30, 2013 totaled $6.1 million, essentially unchanged from the prior quarter and a decrease of $612 thousand or 9.2% from the same quarter last year. The June 30, 2013 quarter included charge-offs totaling $1.0 million on acquired loans.

The allowance for loan losses was 1.79% of total loans at June 30, 2013, compared with 1.92% of total loans at March 31, 2013 and 1.85% of total loans at June 30, 2012. The decreases in the allowance ratio from both prior periods were due to the continued improvement in historical loss factors and improved credit metrics over the past twelve months. The decrease in the allowance ratio from June 30, 2012 was partially offset by the effect of recording a $6.1 million reserve as of June 30, 2013 related to estimated higher losses on acquired Plantation loans. Of this amount, $4.4 million was related to acquired covered loans and was recorded as an increase to the FDIC indemnification asset. The allowance for loan losses at June 30, 2013 was 1.93% of loans excluding acquired covered loans, and represented 1.1 times coverage of the non-covered nonperforming loans. 

The FDIC indemnification asset at June 30, 2013 was $47.8 million, a decrease of $11.1 million or 18.8% from March 31, 2013 and a decrease of $29.5 million or 38.1% from June 30, 2012. The decreases were due to the receipt of claims reimbursement from the FDIC, and recognizing a potential impairment on the FDIC indemnification asset related to the Cape Fear acquired portfolio, partially offset by recognizing potential additional claims to the FDIC related to the Plantation loss share agreement and normal accretion. 

Bank owned life insurance totaled $51.4 million at June 30, 2013, essentially unchanged from March 31, 2013 and an increase of $41.4 million over June 30, 2012. The increase was the result of establishing a bank owned life insurance program on certain corporate officers as part of a strategy to offset the costs of existing employee benefit plans. 

Other assets totaled $80.7 million at June 30, 2013, an increase of $6.2 million or 8.3% over March 31, 2013 and a decrease of $22.4 million or 21.7% from June 30, 2012. The increase over March 31, 2013 was principally the result of a $13.7 million increase in tax assets due to adjusting the timing of deductions related to the FDIC indemnification asset based on the findings of a recent tax audit, and a $3.1 million increase in the value of mortgage servicing rights due to changes in market interest rates, partially offset by a $3.2 million decline in OREO as sales of properties continue to outpace foreclosures, and miscellaneous reductions in other asset categories. The decrease from June 30, 2012 was due to a $15.1 million decline in OREO and miscellaneous reductions in other asset categories, partially offset by a $6.6 million increase in mortgage servicing rights due to higher levels of originations sold in the secondary market as well as recent changes in market interest rates.

Core deposits, which include checking, savings, and money market accounts, totaled $1.7 billion at June 30, 2013, essentially unchanged from March 31, 2013 and an increase of $110.8 million or 7.0% over June 30, 2012. The increase was primarily the result of the introduction of new retail deposit products and sales processes during 2012.  Time deposits at June 30, 2013 totaled $840.6 million, a decrease of $62.8 million or 7.0% from March 31, 2013 and a decrease of $269.1 million or 24.3% from June 30, 2012. The decreases were due to a strategy to focus on core transaction accounts and to reduce high rate retail and wholesale time deposits as they matured. 

Shareholders' equity at June 30, 2013 was $308.0 million, an increase of $3.3 million or 1.1% over March 31, 2013 and an increase of $20.8 million or 7.2% over June 30, 2012. The increases were due to the effect of net operating results, partially offset by paying off the warrants associated with the former TARP preferred stock. First Financial remained well capitalized at June 30, 2013 with total risk-based capital of 17.09%, Tier 1 risk-based capital of 15.81%, and Tier 1 leverage capital of 10.95%. The tangible common equity to tangible common assets ratio increased to 7.46% at June 30, 2013, compared with 7.23% at March 31, 2013 and 6.47% at June 30, 2012. First Federal's regulatory capital ratios are in excess of "well-capitalized" minimums. 

About First Financial

First Financial Holdings, Inc. ("First Financial") (Nasdaq:FFCH) is a Charleston, South Carolina financial services provider with $3.2 billion in total assets as of June 30, 2013. First Financial offers integrated financial solutions, including personal, business, and wealth management services. First Federal Bank ("First Federal"), which was founded in 1934 and is the primary subsidiary of First Financial, serves individuals and businesses throughout coastal South Carolina, Florence, and Greenville, South Carolina, and Wilmington, North Carolina. First Financial subsidiaries include: First Federal; First Southeast Investor Services, Inc., a registered broker-dealer; and First Southeast 401(k) Fiduciaries, Inc., a registered investment advisor. 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 accounting principles generally accepted in the United States of America ("GAAP"), this press release includes non-GAAP financial measures such as the efficiency ratio, the tangible common equity to tangible assets ratio, tangible common book value per share, pre-tax pre-provision earnings, and adjusted net interest margin. 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 as well as period-to-period comparisons. 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 in 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 readers' 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. 

Please 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 from those anticipated by the forward-looking statements. 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 allowance for loan losses, write-down assets, change First Federal'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; regulatory changes, including new or revised rules and regulations implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act; and closing conditions related to the proposed merger with SCBT. 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 that are filed 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, the reader 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 forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
 
FIRST FINANCIAL HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
           
  As of and for the Quarters Ended
(dollars in thousands) June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
Average for the Quarter          
Assets  $ 3,181,212  $ 3,200,485  $ 3,216,018  $ 3,283,512  $ 3,339,705
Investment securities  338,023  316,426  283,929  291,223  443,181
Loans   2,446,789  2,481,410  2,545,956  2,608,522  2,564,789
Allowance for loan losses  46,567  44,375  45,997  48,329  50,547
Deposits  2,560,845  2,576,968  2,594,112  2,664,207  2,596,642
Borrowings  280,208  280,229  282,122  294,796  428,505
Shareholders' equity  305,565  301,921  296,851  290,047  285,672
           
Performance Metrics          
Return on average assets1 1.00% 0.67% 0.97% 0.81% 1.52%
Return on average shareholders' equity1  10.37   7.06   10.48   9.14   17.72 
Net interest margin (FTE)2  4.37   4.51   4.69   4.35   4.08 
Net interest margin, adjusted (non-GAAP)3  3.89   3.99   4.15   4.29   4.08 
Efficiency ratio (non-GAAP)1,3  72.45   73.04   67.69   69.19   66.05 
Pre-tax pre-provision earnings (non-GAAP)3  $ 12,765   $ 13,855   $ 15,905   $ 14,716   $ 24,993 
           
Capital Ratios          
Equity to assets 9.72% 9.47% 9.32% 9.01% 8.69%
Tangible common equity to tangible assets (non-GAAP)3  7.46   7.23   7.07   6.77   6.47 
Book value per common share  $ 14.68   $ 14.50   $ 14.20   $ 13.77   $ 13.45 
Tangible book value per common share (non-GAAP)3  14.25   14.04   13.71   13.25   12.91 
Dividends  0.05   0.05   0.05   0.05   0.05 
Shares outstanding, end of period (000s)  16,558   16,533   16,527   16,527   16,527 
Tier 1 leverage capital ratio 10.95% 10.72% 10.54% 10.12% 9.79%
Tier 1 risk-based capital ratio  15.81   15.30   14.89   14.42   13.89 
Total risk-based capital ratio  17.09   16.58   16.16   15.70   15.16 
Tier 1 leverage capital ratio (First Federal)  10.58   10.24   9.97   9.47   9.06 
Tier 1 risk-based capital ratio (First Federal)  15.29   14.63   14.10   13.50   12.86 
Total risk-based capital ratio (First Federal)  16.57   15.92   15.37   14.78   14.13 
           
Asset Quality Metrics          
Allowance for loan losses as a percent of loans 1.79% 1.92% 1.77% 1.80% 1.85%
Allowance for loan losses as a percent of nonperforming loans  93.23   97.42   89.30   94.53   97.72 
Nonperforming loans as a percent of loans  1.92   1.97   1.98   1.90   1.90 
Nonperforming assets as a percent of loans and other repossessed assets acquired  2.45   2.61   2.70   2.72   2.94 
Nonperforming assets as a percent of total assets  1.88   2.02   2.11   2.18   2.36 
Net loans charged-off as a percent of average loans1  0.99   0.98   0.99   1.07   1.04 
Net loans charged-off  $ 6,061   $ 6,063   $ 6,333   $ 6,981   $ 6,673 
           
Asset Quality Metrics Excluding Acquired Covered Loans          
Allowance for loan losses as a percent of legacy loans 1.93% 2.08% 1.94% 1.99% 2.06%
Allowance for loan losses as a percent of legacy nonperforming loans  111.13   118.82   108.23   118.82   123.30 
Nonperforming loans as a percent of legacy loans  1.74   1.75   1.79   1.67   1.67 
Nonperforming assets as a percent of legacy loans and other repossessed assets acquired  2.02   2.04   2.17   1.97   2.01 
Nonperforming assets as a percent of total assets  1.43   1.45   1.54   1.42   1.45 
 
1  Represents an annualized rate.
2  Net interest margin is presented on an annual basis and includes taxable equivalent adjustments to interest income based on a federal tax rate of 35%.
3 See Non-GAAP Reconciliation table for details.
 
 
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
               
  For the Quarters Ended Six Months Ended
(in thousands, except per share data) June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012 June 30, 2013 June 30, 2012
               
INTEREST INCOME        
Interest and fees on loans  $ 35,906  $ 36,993  $ 38,927  $ 37,104  $ 35,643  $ 72,899  $ 68,119
Interest and dividends on investment securities              
Taxable  1,788 1,931  2,207  2,429  3,118 3,719  6,648
Tax-exempt  235 294  312  342  420 529  757
Other  127 111  103  139  162 238  178
Total interest income  38,056  39,329  41,549  40,014  39,343  77,385  75,702
INTEREST EXPENSE              
Interest on deposits  2,864 3,172  3,388  3,747  3,981 6,036  7,932
Interest on borrowed money  3,044 3,019  3,072  3,070  3,649 6,063  7,805
Total interest expense  5,908  6,191  6,460  6,817  7,630  12,099  15,737
NET INTEREST INCOME  32,148  33,138  35,089  33,197  31,713  65,286  59,965
Provision for loan losses  822 5,972  4,161  4,533  4,697 6,794  11,442
Net interest income after provision for  loan losses  31,326  27,166  30,928  28,664  27,016  58,492  48,523
NONINTEREST INCOME              
Service charges on deposit accounts  7,241 7,263  7,900  7,772  7,558 14,504  14,860
Mortgage and other loan income  4,313 4,435  5,987  4,061  4,372 8,748  7,807
Trust and plan administration income  1,119 1,067  1,219  1,117  1,078 2,186  2,159
Brokerage fees  849 714  810  655  875 1,563  1,539
Bank owned life insurance income  392 373  382  241  --- 765  ---
Other income  858 932  680  513  699 1,790  1,468
Other-than-temporary impairment losses on  investment securities  (176) (268)  (144)  (145)  (145) (444)  (214)
FDIC true-up liability release  ---  1,321  ---  ---  ---  1,321  ---
(Loss) gain on acquisition  ---  ---  (661)  ---  14,550  ---  14,550
Gain on sale or call of investment securities  107  ---  ---  334  3,543  107  3,543
Total noninterest income  14,703  15,837  16,173  14,548  32,530  30,540  45,712
NONINTEREST EXPENSE              
Salaries and employee benefits  16,133 16,335  16,020  15,621  15,212 32,468  30,354
Occupancy costs  2,099 2,214  2,214  2,333  2,933 4,313  5,200
Furniture and equipment  2,392 2,068  2,033  2,132  1,893 4,460  3,702
Other real estate owned, net  (541) 924  18  1,030  134 383  664
FDIC insurance and regulatory fees  541 531  646  693  761 1,072  1,754
Professional services  1,835 2,070  1,838  1,980  1,875 3,905  3,340
Advertising and marketing  720 866  714  964  966 1,586  1,619
Other loan expense  1,297 1,372  2,283  1,620  1,283 2,669  2,634
Intangible amortization  448 512  512  512  368 960  458
FDIC indemnification asset impairment  3,565 3,806  3,423  563  --- 7,371  ---
Other expense  5,597 4,422  5,656  5,581  5,300 10,019  9,709
FHLB prepayment termination charge  --- ---  ---  ---  8,525  ---  8,525
Total noninterest expense  34,086  35,120  35,357  33,029  39,250  69,206  67,959
Income before income taxes  11,943  7,883  11,744  10,183  20,296  19,826  26,276
Income tax expense  4,045 2,630  3,921  3,516  7,712 6,675  11,953
NET INCOME  7,898  5,253  7,823  6,667  12,584  13,151  14,323
Preferred stock dividends  812  813  812  813  812  1,625  1,625
Accretion on preferred stock discount  168  165  163  160  158  333  314
NET INCOME AVAILABLE TO  COMMON SHAREHOLDERS  $ 6,918  $ 4,275  $ 6,848  $ 5,694  $ 11,614  $ 11,193  $ 12,384
               
Net income per common share              
Basic  $ 0.42  $ 0.26  $ 0.41  $ 0.34  $ 0.70  $ 0.68  $ 0.75
Diluted  0.42  0.26  0.41  0.34  0.70  0.68  0.75
               
Average common shares outstanding              
Basic  16,546  16,529  16,527  16,527  16,527  16,537  16,527
Diluted  16,567  16,547  16,531  16,529  16,528  16,560  16,528
 
FIRST FINANCIAL HOLDINGS, INC.
NET INTEREST MARGIN ANALYSIS (Unaudited)
                   
  For the Quarters Ended      
  June 30, 2013 March 31, 2013 Change in
 (dollars in thousands) Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Basis Points
Earning assets                  
Interest-bearing deposits with banks  $ 83,011  $ 53 0.26%  $ 62,441  $ 29 0.19%  $ 20,570  $ 24  7 
Investment securities1  339,105  2,023  2.54   316,426  2,225  3.02   22,679  (202)  (48) 
Total loans2  2,446,789  32,032  5.25   2,481,410  32,764  5.33   (34,621)  (732)  (8) 
Loans held for sale  34,228  300  3.50   45,546  380  3.34   (11,318)  (80)  16 
FDIC indemnification asset  53,919  74  0.55   70,794  82  0.47   (16,875)  (8)  8 
Total earning assets  2,957,052  34,482  4.69   2,976,617  35,480  4.83   (19,565)  (998)  (14) 
Interest-bearing liabilities                  
Deposits  2,132,389  2,864  0.54   2,180,739  3,172  0.59   (48,350)  (308)  (5) 
Borrowings  280,207  3,044  4.35   280,229  3,019  4.35   (22)  25  --- 
Total interest-bearing liabilities  2,412,596  5,908  0.98   2,460,968  6,191  1.02   (48,372)  (283)  (4) 
                   
Net interest income    $ 28,574      $ 29,289      $ (715)  
                   
Net interest margin, adjusted     3.89%     3.99%      (10) 
                   
Effect of incremental accretion    3,574  0.48     3,849  0.52     (275)  (4) 
                   
Net interest margin    $ 32,148 4.37%    $ 33,138 4.51%    $ (990)  (14) 
 
Interest income used in the average rate calculation includes the tax equivalent adjustments of $127 thousand and $158 thousand for the quarters ended June 30 and March 31, 2013, respectively, calculated based on a federal tax rate of 35%.
2 Average loans include nonaccrual loans. Loan fees, which are not material for any of the periods, have been included in loan interest income for the rate calculation.
 
  For the Six Months Ended      
  June 30, 2013 June 30, 2012 Change in
(dollars in thousands) Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Basis Points
Earning Assets                  
Interest-bearing deposits with banks  $ 72,783  $ 82 0.23%  $ 9,337  $ 20 0.43%  $ 63,446  $ 62  (20) 
Investment securities1  327,828  4,248  2.77   466,769  7,405  3.35   (138,941)  (3,157)  (58) 
Total loans2  2,464,058  64,797  5.29   2,471,834  67,250  5.46   (7,776)  (2,453)  (17) 
Loans held for sale  39,856  679  3.41   47,870  869  3.63   (8,014)  (190)  (22) 
FDIC indemnification asset  62,310  156  0.50   59,295  158  0.54   3,015  (2)  (4) 
Total Earning Assets  2,966,835  69,962  4.76   3,055,105  75,702  5.00   (88,270)  (5,740)  (24) 
Interest-bearing liabilities                  
Deposits  2,156,431  6,036  0.56   2,099,651  7,932  0.76   56,780  (1,896)  (20) 
Borrowings  280,218  6,063  4.35   520,477  7,805  3.01   (240,259)  (1,742)  134 
Total interest-bearing liabilities  2,436,649  12,099  1.00   2,620,128  15,737  1.21   (183,479)  (3,638)  (21) 
                   
Net interest income    $ 57,863      $ 59,965      $ (2,102)  
                   
Net interest margin, adjusted     3.94%     3.96%      (2) 
                   
Effect of incremental accretion    7,423  0.50     ---   ---     7,423  50 
                   
Net interest margin    $ 65,286 4.44%    $ 59,965 3.96%    $ 5,321  48 
 
Interest income used in the average rate calculation includes the tax equivalent adjustment of $285 thousand, and $408 thousand for the six months ended  June 30, 2013 and 2012, respectively, calculated based on a federal tax rate of 35%.
2 Average loans include nonaccrual loans. Loan fees, which are not material for any of the periods, have been included in loan interest income for the rate calculation.
                   
 
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
           
(in thousands) June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
           
ASSETS          
Cash and due from banks  $ 56,001  $ 49,190  $ 60,290  $ 50,749  $ 62,831
Interest-bearing deposits with banks  107,124  80,110  57,161  35,668  7,270
Total cash and cash equivalents  163,125  129,300  117,451  86,417  70,101
Investment securities          
Securities available for sale, at fair value  288,092  314,597  253,798  236,048  244,059
Securities held to maturity, at amortized cost  14,467  14,869  15,555  17,331  20,014
Nonmarketable securities   19,245  19,245  20,914  23,254  29,327
Total investment securities  321,804  348,711  290,267  276,633  293,400
Loans          
Residential  1,029,838  1,038,140  1,031,613  1,080,406  1,099,486
Commercial  620,235  663,733  681,119  721,587  758,604
Consumer  766,097  774,550  782,672  772,376  774,405
Total loans  2,416,170  2,476,423  2,495,404  2,574,369  2,632,495
Less: Allowance for loan losses  43,227  47,427  44,179  46,351  48,799
Total loans, net  2,372,943  2,428,996  2,451,225  2,528,018  2,583,696
Loans held for sale  41,679  33,752  55,201  53,761  72,402
FDIC indemnification asset  47,822  58,917  80,268  75,017  77,311
Premises and equipment, net  83,682  83,924  85,378  83,916  85,285
Bank owned life insurance  51,389  50,997  50,624  50,241  10,000
Other intangible assets  7,165  7,573  8,025  8,478  8,931
Other assets  80,681  74,477  77,119  83,006  103,048
Total assets  $ 3,170,290  $ 3,216,647  $ 3,215,558  $ 3,245,487  $ 3,304,174
           
LIABILITIES          
Deposits          
Noninterest-bearing checking  $ 439,177  $ 431,003  $ 388,259  $ 382,077  $ 359,352
Interest-bearing checking  520,667  509,295  511,647  507,262  502,731
Savings and money market  744,468  756,818  743,970  730,365  731,428
Retail time deposits  760,568  807,667  845,391  869,544  934,245
Wholesale time deposits  79,988  95,737  106,066  127,509  175,446
Total deposits  2,544,868  2,600,520  2,595,333  2,616,757  2,703,202
Advances from FHLB  233,000  233,000  233,000  253,000  233,000
Long-term debt  47,204  47,204  47,204  47,204  47,204
Other liabilities  37,184  31,234  40,380  36,026  33,504
Total liabilities  2,862,256  2,911,958  2,915,917  2,952,987  3,016,910
           
SHAREHOLDERS' EQUITY          
Preferred stock  1  1  1  1  1
Common stock  224  215  215  215  215
Additional paid-in capital  196,252  197,099  196,819  196,612  196,409
Treasury stock, at cost  (103,563)  (103,563)  (103,563)  (103,563)  (103,563)
Retained earnings  218,392  212,302  208,853  202,832  198,100
Accumulated other comprehensive loss  (3,272)  (1,365)  (2,684)  (3,597)  (3,898)
Total shareholders' equity  308,034  304,689  299,641  292,500  287,264
Total liabilities and shareholders' equity  $ 3,170,290  $ 3,216,647  $ 3,215,558  $ 3,245,487  $ 3,304,174
 
 
FIRST FINANCIAL HOLDINGS, INC.
 LOANS 
(in thousands) June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
Residential loans          
Residential 1-4 family  $ 965,434  $ 963,053  $ 956,355  $ 1,008,130  $ 1,023,800
Residential construction 19,254 26,176 22,519 19,660 19,613
Residential land 45,150 48,911 52,739 52,616 56,073
Total residential loans 1,029,838 1,038,140 1,031,613 1,080,406 1,099,486
           
Commercial loans          
Commercial business 116,787 130,169 118,379 125,345 107,804
Commercial real estate 443,708 467,890 491,567 520,135 555,588
Commercial construction 2,470 1,092 1,064 1,801 17,201
Commercial land 57,270 64,582 70,109 74,306 78,011
Total commercial loans 620,235 663,733 681,119 721,587 758,604
           
Consumer loans          
Home equity 359,618 373,108 384,664 380,000 388,534
Manufactured housing 284,926 282,114 280,100 277,744 276,607
Marine 81,604 79,328 75,736 69,314 59,643
Other consumer 39,949 40,000 42,172 45,318 49,621
Total consumer loans 766,097 774,550 782,672 772,376 774,405
Total loans 2,416,170 2,476,423 2,495,404 2,574,369 2,632,495
Less: Allowance for loan losses 43,227 47,427 44,179 46,351 48,799
Total loans, net  $ 2,372,943  $ 2,428,996  $ 2,451,225  $ 2,528,018  $ 2,583,696
 
 
FIRST FINANCIAL HOLDINGS, INC.
DELINQUENT LOANS
                     
  June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
(dollars in thousands)  $   % of Portfolio   $   % of Portfolio   $   % of Portfolio   $   % of Portfolio   $   % of Portfolio 
Residential loans                    
Residential 1-4 family  $ 1,712 0.18%  $ 1,433 0.15%  $ 2,800 0.29%  $ 2,361 0.23%  $ 1,244 0.12%
Residential construction  --- ---   284  1.08   --- ---   --- ---   --- --- 
Residential land  --- ---   725  1.48   47  0.09   157  0.30   475  0.85 
Total residential loans  1,712  0.17   2,442  0.24   2,847  0.28   2,518  0.23   1,719  0.16 
                     
Commercial loans                    
Commercial business  390  0.33   1,255  0.96   847  0.72   582  0.46   903  0.84 
Commercial real estate  1,396  0.31   4,252  0.91   3,492  0.71   2,397  0.46   3,014  0.54 
Commercial land  1,088  1.90   1,540  2.38   1,573  2.24   318  0.43   675  0.87 
Total commercial loans  2,874  0.46   7,047  1.06   5,912  0.87   3,297  0.46   4,592  0.61 
                     
Consumer loans                    
Home equity  1,509  0.42   2,758  0.74   4,414  1.15   2,204  0.58   2,017  0.52 
Manufactured housing  1,948  0.68   1,162  0.41   3,241  1.16   2,506  0.90   1,835  0.66 
Marine  99  0.12   154  0.19   284  0.37   227  0.33   300  0.50 
Other consumer  140  0.35   177  0.44   384  0.91   742  1.64   626  1.26 
Total consumer loans  3,696  0.48   4,251  0.55   8,323  1.06   5,679  0.74   4,778  0.62 
Total delinquent loans  $ 8,282 0.34%  $ 13,740 0.55%  $ 17,082 0.68%  $ 11,494 0.45%  $ 11,089 0.42%
 
 
 
FIRST FINANCIAL HOLDINGS, INC.
 NONPERFORMING ASSETS 
                     
  June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
(dollars in thousands)  $   % of Portfolio   $   % of Portfolio   $   % of Portfolio   $   % of Portfolio   $   % of Portfolio 
Residential loans                    
Residential 1-4 family  $ 7,321 0.76%  $ 7,693 0.80%  $ 7,137 0.75%  $ 10,881 1.08%  $ 10,460 1.02%
Residential land  980  2.17   576  1.18   785  1.49   1,558  2.96   1,423  2.54 
Total residential loans  8,301  0.80   8,269  0.80   7,922  0.77   12,439  1.15   11,883  1.08 
                     
Commercial loans                    
Commercial business  1,258  1.08   1,813  1.39   1,460  1.23   1,407  1.12   1,198  1.11 
Commercial real estate  16,856  3.80   18,213  3.89   18,386  3.74   15,853  3.05   15,918  2.87 
Commercial construction  ---  ---   ---  ---   247  23.21   247  13.71   261  1.52 
Commercial land  2,828  4.94   3,845  5.95   4,058  5.79   2,990  4.02   4,577  5.87 
Total commercial loans  20,942  3.38   23,871  3.60   24,151  3.55   20,497  2.84   21,954  2.89 
                     
Consumer loans                    
Home equity  9,640  2.68   9,295  2.49   10,049  2.61   10,145  2.67   10,636  2.74 
Manufactured housing  3,398  1.19   3,085  1.09   3,355  1.20   2,221  0.80   2,197  0.79 
Marine  87  0.11   125  0.16   139  0.18   90  0.13   29  0.05 
Other consumer  256  0.64   265  0.66   275  0.65   228  0.50   306  0.62 
Total consumer loans  13,381  1.75   12,770  1.65   13,818  1.77   12,684  1.64   13,168  1.70 
Total nonaccrual loans  42,624  1.76   44,910  1.81   45,891  1.84   45,620  1.77   47,005  1.79 
Loans 90+ days still accruing  ---    6    43    74    75  
Restructured loans, still accruing  3,743    3,768    3,536    3,340    2,857  
Total nonperforming loans  46,367 1.92%  48,684 1.97%  49,470 1.98%  49,034 1.90%  49,937 1.90%
Nonperforming loans held for sale  ---    ---    ---    ---    ---  
Other repossessed assets acquired  13,133    16,310    18,338    21,580    28,191  
Total nonperforming assets  $ 59,500    $ 64,994    $ 67,808    $ 70,614    $ 78,128  
 
 
 
FIRST FINANCIAL HOLDINGS, INC.
 NET CHARGE-OFFS 
                     
  June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
(dollars in thousands)  $  % of Portfolio1  $  % of Portfolio1  $  % of Portfolio1  $  % of Portfolio1  $  % of Portfolio1
Residential loans                    
Residential 1-4 family  $ 1,034 0.43%  $ 1,215 0.50%  $ 2,756 1.10%  $ 294 0.12%  $ 1,070 0.42%
Residential land  97  0.82   (144) (1.13)  257  1.89   403  2.91   78  0.59 
Total residential loans  1,131  0.44   1,071  0.41   3,013  1.13   697  0.26   1,148  0.42 
                     
Commercial loans                    
Commercial business  892  2.86   268  0.90   126  0.42   924  3.22   334  1.34 
Commercial real estate2  1,912  1.70   2,089  1.74   588  0.46   1,994  1.47   714  0.54 
Commercial construction  (1)  (0.18)  5  1.67   (1)  (0.41)  11  0.56   (2)  (0.05)
Commercial land3  525  3.47   21  0.13   89  0.48   1,037  5.43   723  4.00 
Total commercial loans  3,328  2.09   2,383  1.43   802  0.46   3,966  2.14   1,769  0.99 
                     
Consumer loans                    
Home equity  954  1.04   1,346  1.42   1,343  1.44   1,125  1.17   2,580  2.71 
Manufactured housing  518  0.73   1,019  1.45   899  1.29   778  1.12   666  0.97 
Marine  26  0.13   74  0.38   (19)  (0.11)  146  0.88   82  0.60 
Other consumer  104  1.02   170  1.64   295  2.51   269  2.22   428  3.48 
Total consumer loans  1,602  0.83   2,609  1.34   2,518  1.31   2,318  1.20   3,756  1.98 
Total net charge-offs  $ 6,061 0.99%  $ 6,063 0.98%  $ 6,333 0.99%  $ 6,981 1.07%  $ 6,673 1.04%
 
1 Represents an annualized rate
2 Includes SOP charge-offs in excess of nonaccretable yield of $275 thousand at June 30, 2013.
3 Includes SOP charge-offs in excess of nonaccretable yield of $758 thousand at June 30, 2013.
 
FIRST FINANCIAL HOLDINGS, INC.
NON-GAAP RECONCILIATION (Unaudited)
           
  As of and for the Quarters Ended
(dollars in thousands, except per share data) June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
Efficiency Ratio          
Net interest income (A)  $ 32,148   $ 33,138   $ 35,089   $ 33,197   $ 31,713 
Taxable equivalent adjustment (B)  127   158   168   184   226 
Noninterest income (C)  14,703   15,837   16,173   14,548   32,530 
(Loss) gain on acquisition (D)  ---   ---   (661)  ---   14,550 
Net securities (losses) gains (E)  (69)  (268)  (144)  189   3,398 
FDIC true-up liability release (F)  ---   1,321   ---   ---   --- 
Noninterest expense (G)  34,086   35,120   35,357   33,029   39,250 
FHLB prepayment termination charge (H) ---  ---   ---   ---   8,525 
Efficiency Ratio: (G-H)/(A+B+C-D-E-F) (non-GAAP) 72.45% 73.04% 67.69% 69.19% 66.05%
           
Tangible Assets and Tangible Common Equity          
Total assets  $ 3,170,290   $ 3,216,647   $ 3,215,558   $ 3,245,487   $ 3,304,174 
Other intangible assets  (7,165)  (7,573)  (8,025)  (8,478)  (8,931)
Tangible assets (non-GAAP)  $ 3,163,125   $ 3,209,074   $ 3,207,533   $ 3,237,009   $ 3,295,243 
           
Total shareholders' equity  $ 308,034   $ 304,689   $ 299,641   $ 292,500   $ 287,264 
Preferred stock  (65,000)  (65,000)  (65,000)  (65,000)  (65,000)
Other intangible assets  (7,165)  (7,573)  (8,025)  (8,478)  (8,931)
Tangible common equity (non-GAAP)  $ 235,869   $ 232,116   $ 226,616   $ 219,022   $ 213,333 
           
Shares outstanding, end of period (000s)  16,558   16,533   16,527   16,527   16,527 
           
Tangible common equity to tangible assets (non-GAAP) 7.46% 7.23% 7.07% 6.77% 6.47%
Book value per common share  $ 14.68   $ 14.50   $ 14.20   $ 13.77   $ 13.45 
Tangible book value per common share (non-GAAP)  14.25   14.04   13.71   13.25   12.91 
           
Pre-tax Pre-provision Earnings          
Income before income taxes  $ 11,943   $ 7,883   $ 11,744   $ 10,183   $ 20,296 
Provision for loan losses  822   5,972   4,161   4,533   4,697 
Pre-tax pre-provision earnings (non-GAAP)  $ 12,765   $ 13,855   $ 15,905   $ 14,716   $ 24,993 
           
Impact of Improved Performance of Cape Fear Loan Pool          
Net interest income  $ 32,148   $ 33,138   $ 35,089   $ 33,197   $ 31,713 
Tax equivalent adjustment  127   158   168   184   226 
Net interest income on taxable equivalent basis (A)  32,275   33,296   35,257   33,381   31,939 
Effect of Cape Fear incremental accretion  (3,574)  (3,849)  (4,048)  (472)  --- 
Net interest income, adjusted (B) (non-GAAP)  $ 28,701   $ 29,447   $ 31,209   $ 32,909   $ 31,939 
           
Average earning assets (C)  $ 2,957,052   $ 2,976,617   $ 2,994,982   $ 3,061,432   $ 3,142,597 
Net interest margin (A)/(C)1 4.37% 4.51% 4.69% 4.35% 4.08%
Net interest margin, adjusted (B)/(C) (non-GAAP)1 3.89% 3.99% 4.15% 4.29% 4.08%
 
1 Represents an annualized rate; calculation is approximate due to differences in industry standards for annualizing underlying average earning assets.
CONTACT: First Financial Holdings, Inc.         Investor Relations         (843) 529-5931         investorrelations@firstfinancialholdings.com

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