First Financial Holdings, Inc.Announces Third Quarter Fiscal 2010 Results and Quarterly Dividend Payment

CHARLESTON, SC – July 26, 2010 – First Financial Holdings, Inc. (“First Financial” or the “Company”) (NASDAQ GSM: FFCH), the holding company for First Federal Savings and Loan Association of Charleston (“First Federal” or the “Association”), today reported results for the third quarter of its fiscal year ending September 30, 2010.  The net loss for the quarter ended June 30, 2010 was ($12.0) million compared to net income before extraordinary item of $5.2 million from the comparative quarter ended June 30, 2009.  Basic and diluted loss per share was ($0.73) for the current quarter, compared to $0.44 income per basic and diluted share before the extraordinary item for the quarter ended June 30, 2009.  Including the preferred stock dividend and related accretion, the net loss to common shareholders was ($13.0) million, or ($0.79) per diluted share, for the third quarter, compared to net income of $33.1 million, or $2.83 per diluted share, for the third quarter one year ago.  Net loss and diluted loss per share for the nine months ended June 30, 2010 totaled ($35.6) million or ($2.16) compared with a net income before extraordinary item of $1.7 million or $0.15 per diluted share, for the nine months ended June 30, 2009.

President and Chief Executive Officer R. Wayne Hall commented, “As planned, we completed our targeted reviews of commercial real estate and business loans greater than $1 million this quarter.  As in previous quarters, our earnings continued to be reduced by our provision for loan losses.  We are encouraged by the decline in delinquencies and net charge-offs during the third quarter and by signs of stabilization in real estate values.”  On July 8, 2010, the Company announced asset quality and operating results estimates.  The Company recognized a provision for loan losses of $36.4 million for the quarter ended June 30, 2010 compared to $45.9 million for the quarter ended March 31, 2010, and $12.4 million for the quarter ended June 30, 2009.  Hall explained, “Losses incurred during the quarter as a result of both our regular ongoing loan review and our targeted reviews have been charged-off or reserved.”  The allowance for loan losses was 3.36% of gross loans at June 30, 2010.  Problem assets, which include non-accrual loans, accruing loans 90 days or more past due and real estate owned, as a percentage of total assets were 4.35% at June 30, 2010 compared with 4.37% at March 31, 2010 and 2.20% at June 30, 2009. 
   
Compared with the quarter ended March 31, 2010, the net interest margin remained flat at 3.92% for the quarter ended June 30, 2010.  Net interest income for the quarter ended June 30, 2010 was $31.2 million, decreasing slightly from $31.5 million for the linked quarter ended March 31, 2010.  Total deposits also remained relatively stable at $2.45 billion at June 30, 2010 compared to $2.44 billion at March 31, 2010. 
 
Mortgage banking income was $2.4 million for the third quarter of fiscal 2010, an increase of $369 thousand or 17.8% from the linked quarter ended March 31, 2010 and an increase of $1.5 million or 147.2% from the comparative quarter ended June 30, 2009.  The linked and comparable quarter increases are the result of increases in the volume of loans sold due to the lower mortgage rate environment combined with the positive impact of the hedging strategies utilized to protect the value of our capitalized mortgage servicing asset from interest rate risk.  

During the quarter ended June 30, 2010, the Company recognized a credit-related other than temporary impairment (“OTTI”) charge totaling $311 thousand on seven collateralized debt obligation (“CDO”) investments.  This was down considerably from credit-related OTTI charges of $1.8 million for the linked quarter as there has been some stabilization in the CDO market.  In addition, we have a recovery in value through Other Comprehensive Income from one significant corporate security previously charged off as OTTI.  Total CDOs, comprised of financial institution trust preferred securities, were $4.0 million or less than 1.0% of our total investment portfolio at June 30, 2010. 
   
Core other income, excluding impairment on investment securities and gains on disposition of assets, was $17.5 million for the third quarter of fiscal 2010 compared to $15.7 million for the second quarter of fiscal 2010 and $13.3 million for the quarter ended June 30, 2009.  The linked quarter difference was primarily attributable to a one-time $1.5 million final settlement received from the Federal Deposit Insurance Corporation (“FDIC”) in conjunction with the Cape Fear Bank acquisition. Total revenues, defined as net interest income plus core other income was $48.8 million for the quarter ended June 30, 2010, a slight decrease from $48.9 million during the comparable quarter ended June 30, 2009. 

Insurance revenues for the quarter ended June 30, 2010 were $6.3 million compared to $6.5 million for the comparable quarter one year ago.  Insurance revenues have been under stress as a result of current market conditions.  However, this segment continues to be a strong contributor to our total non-interest income. 

Total other expense increased by $735 thousand, or 2.4%, to $31.6 million for the quarter ended June 30, 2010 compared to $30.9 million for the quarter ended March 31, 2010.  Decreases in salaries and benefits, occupancy and marketing were offset by increases attributable to higher legal and professional fees during the quarter as compared to the prior quarter, and premium deficiency reserve increases for our reinsurance subsidiary.

The Company also announced today that its Board of Directors has declared a regular quarterly cash dividend of $0.05 per share.  The dividend is payable August 27, 2010 to stockholders of record as of August 13, 2010. 

“As we finish fiscal 2010 and move into fiscal 2011, our priorities will continue to be the resolution of our problem assets and a return to profitability.  We are also focused on the roll-out of our Business Banking model in fiscal 2011 and enhancing overall efficiencies throughout the organization.” Hall stated.

Hall concluded, “During the coming weeks, we will be evaluating the impact of The Financial Reform and Consumer Protection Act on our operations.  Our board of directors, officers and staff remain focused on executing our strategies and delivering long-term value to our clients and stakeholders.”

As of June 30, 2010, First Financial’s total assets were $3.3 billion, net loans receivable totaled $2.5 billion and deposits were $2.4 billion.  Stockholders’ equity was $323.8 million and book value per common share totaled $15.66 at June 30, 2010.  Our consolidated equity-to-assets ratio was 9.7% at June 30, 2010, compared to 9.9% and 8.1% at March 31, 2010 and June 30, 2009, respectively.  On May 21, 2010 First Financial contributed $30 million of holding company funds to First Federal as regulatory capital.  As of June 30, 2010, First Federal remained categorized as “well capitalized” under regulatory standards. First Federal’s total risk based capital ratio was 12.46% at June 30, 2010, compared to 11.10% and 10.80% at March 31, 2010 and June 30, 2009, respectively.   

As a participant in the Treasury’s Capital Purchase Program, the Company continues to use this capital to help borrowers avoid foreclosure in our markets, and to expand our loan and investment portfolios.  The Company paid a dividend of $813 thousand to the U.S. Treasury for its investment during the third quarter of fiscal 2010. 
      
First Federal operates 65 offices located in the Charleston metropolitan area, Horry, Georgetown, Florence and Beaufort
counties in South Carolina and Brunswick, New Hanover and Pender counties in coastal North Carolina offering banking, trust and pension administration services.  The Company also provides insurance and brokerage services through First Southeast Insurance Services, The Kimbrell Insurance Group and First Southeast Investor Services. In addition, the Company provides retirement plan consulting and administrative services through First Southeast 401(k) Fiduciaries, Inc.

NOTE:  R. Wayne Hall, President and CEO of the Company, and Blaise B. Bettendorf, Executive Vice President and CFO, will discuss these results in a conference call at 2:00 PM (EDT), July 26, 2010.  The call can be accessed via a webcast available on First Financial’s website at www.firstfinancialholdings.com.

For additional information about First Financial, please visit our web site at www.firstfinancialholdings.com or contact Dorothy B. Wright, Senior Vice President-Investor Relations and Corporate Secretary, (843) 529-5931 or (843) 729-7005.