First Financial Holdings, Inc Reports Second Quarter Results and Quarterly Dividend Payment

CHARLESTON, SC – April 24, 2009 – 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”), today reported results for the second quarter of its fiscal year ended September 30, 2009.  Net Income for the quarter ended March 31, 2009 was $3.1 million compared to a $6.5 million loss for the quarter ended December 31, 2008 and $7.5 million earned on the comparative quarter ended March 31, 2008.  Basic and diluted earnings per common share available to common shareholders were $0.19 for the current quarter, compared to basic and diluted earnings per common share of $0.65 and $0.64, respectively, for the quarter ended March 31, 2008. 
 
 President and Chief Executive Officer A. Thomas Hood commented, “We are pleased with our overall earnings given our higher level of charge-offs and loan loss provisions.  We are very committed to working in cooperation with our retail and business customers during this time of economic uncertainty and while many challenges face our industry.  On February 18, 2009 the Company announced a moratorium on single-family foreclosures in an effort to work closely with customers at risk of losing their homes.  First Federal continues to provide housing solutions to homeowners in our markets through our partnership with several non-profit agencies.  Our foreclosure clinics are helpful to both our customers and to customers of many other financial institutions.” 

 Hood continued, “Our loan loss provisions were significant for the quarter ended March 31, 2009, and these higher provisions strengthen our ability to navigate through this unprecedented and uncertain economic cycle.” Hood noted, “The Company recognized a provision for loan losses of $12.8 million for the quarter ended March 31, 2009 compared to $20.5 million for the quarter ended December 31, 2008, and $3.6 million for the quarter ended March 31, 2008.  The increase in the provision during the quarter ended March 31, 2009 compared to the comparable quarter in 2008  is attributable to significant increases in non-accrual loans and net charge-offs, overall loan growth and uncertainties in the markets served by the Company.”  Non-accrual loans were $54.8 million at March 31, 2009 compared to $35.1 million for the linked quarter and $12.8 million for the quarter ended March 31, 2008.  The Company increased its allowance for loan losses as a percent of total loans from 175 basis points during the quarter ended December 31, 2008 to 199 basis points during the quarter ended March 31, 2009.  Problem assets, which include problem loans as well as real estate owned, as a percentage of total assets was 1.91% at March 31, 2009 compared with 1.33% at December 31, 2008 and 0.60% at March 31, 2008. 

The Company’s loan loss reserve coverage of non-performing loans was 86.6% at March 31, 2009 compared to 118.0% at December 31, 2008 and 138.8% at March 31, 2008.  Annualized net loan charge-offs as a percentage of net loans totaled 1.14% for the quarter ended March 31, 2009 compared with 0.49% for the quarter ended December 31, 2008 and 0.43% for the comparable quarter one year ago.

During the quarter ended March 31, 2009, mortgage banking income was $2.7 million compared to $1.8 million for quarter ended December 31, 2008 and $3.0 million for the comparative quarter ended March 31, 2008.  As in the past quarters, the Company has certain economic hedging strategies in place to protect the value of our capitalized mortgage servicing asset from interest rate risk.

Insurance revenues, including contingent income, for the quarter ended March 31, 2009 were $7.0 million compared to $5.2 million for the linked quarter and $6.8 million for the comparable quarter one year ago.  In prior years, contingent revenues were typically distributed by the insurance companies during the March quarter.  A number of insurance carriers are now providing guidance allowing contingent income to be recognized each quarter. 

Our net interest margin was up significantly at 3.64% for the quarter ended March 31, 2009 compared to a net interest margin of 3.48% for the quarter ended December 31, 2008 and 3.35% for the quarter ended March 31, 2008.  Hood noted, “We continue to see improvement in our margin as a result of lower interest rates on both deposits and borrowings.  Rates in our markets have declined since last quarter but they are still higher than wholesale rates.”  Net interest income increased to $27.0 million for the quarter ended March 31, 2009, an increase of $1.9 million or 7.6% from $25.1 million for the linked quarter and an increase of $4.8 million or 21.8% for the comparative quarter ended March 31, 2008.  The increase was as a result of improvement in our net interest margin along with loan and investment portfolio growth.  In total, average earning assets increased $137 million or 4.8% to $3.0 billion for the quarter ended March 31, 2009 compared to $2.9 billion for the linked quarter and 13.2% or $349 million for the comparative quarter ended March 31, 2008.

Non-interest income totaled $14.6 million for the second quarter of fiscal 2009, a decrease of $3.2 million from $17.8 million for the quarter ended March 31, 2008.  This decrease is primarily attributable to lower levels of service charges and fees on deposit accounts. The company also recognized other than temporary impairment (“OTTI”) on three collateralized debt obligations (“CDOs”) and one collateralized mortgage obligation (“CMO”).  The Company has determined that approximately $857 thousand of the contractual cash flows will not be received due to credit-related factors, and accordingly this amount has been realized in current earnings.

 Total revenues, defined as net interest income plus total other income, excluding credit-related OTTI, gains on sales of investments and gains on disposition of assets, increased to $42.4 million, for the quarter ended March 31, 2009, an increase of $3.2 million or 8.1% from $39.2 million during the comparable quarter ended March 31, 2008.  
 
Total non-interest expenses for the quarter ended March 31, 2009 totaled $23.8 million, a slight decrease of $218 thousand or 0.9% from $24.1 million for the comparable quarter one year ago and a decrease of $2.8 million, or 10.3% from $26.6 million for the linked quarter ended December 31, 2008.  In January 2009, the Company announced several significant cost savings initiatives, including decreases in salaries and employee benefits, which resulted in the decrease in non-interest expenses for the current quarter.  Prior to the announcement of those initiatives, the Company began construction on a new financial service center at Centre Pointe in North Charleston and on April 6, 2009 we relocated our existing Mall Drive financial center to the new facility.  First Federal’s Federal Deposit Insurance Corporation (“FDIC”) insurance premium increased during the quarter ended March 31, 2009, which is attributed to the FDIC’s new assessment rate that was effective for all FDIC insured institutions on January 1, 2009.

On April 10, 2009, First Federal announced that it entered into an agreement with the FDIC to assume all of the deposits (excluding certain brokered deposits) and certain assets of Cape Fear Bank, a full service community bank headquartered in Wilmington, North Carolina.   With this acquisition, First Federal will now operate 66 retail banking centers in North and South Carolina. Commenting on the acquisition, Hood noted, “We are delighted to welcome Cape Fear Bank customers to the First Federal family of financial services companies.  First Federal has served customers’ financial needs since 1934 with a deep commitment to building strong relationships with its custom
ers, employees and communities.”   

The Company also announced today that its Board of Directors has declared a regular quarterly cash dividend of five cents ($0.05) per share.  The dividend is payable May 22, 2009, to stockholders of record as of May 8, 2009.  Hood concluded, “Our board of directors carefully evaluates the level of our dividend.  Given the continuing weakness in the economy in our markets, and the critical need to preserve our strong capital base through the recession, we believe this conservative approach is the appropriate action at this time.” 

On December 5, 2008, the Company issued 65,000 shares of its preferred stock to the U.S. Treasury in return for $65 million in cash pursuant to the Treasury’s Capital Purchase Program.  This program is designed to make capital available to the nation’s healthiest and strongest financial institutions.  To date, we have used this capital to mitigate foreclosures in our markets, and to expand our loan and investment portfolios.  The Company paid a dividend of $632 thousand to the U. S. Treasury for their investment during the second quarter of 2009.

As of March 31, 2009, First Financial’s total assets were $3.2 billion, loans receivable totaled $2.3 billion and deposits were $2.0 billion.  Total stockholders’ equity was $254 million and book value per common share totaled $16.18 at March 31, 2009.  First Federal’s capital ratio (i.e., equity divided by assets) was 7.1% at March 31, 2009, compared to 5.9% and 7.0% at December 31, 2008 and March 31, 2008, respectively.  Tangible equity to assets was 7.1% at March 31, 2009, compared to 6.9% and 7.1% at December 31, 2008 and March 31, 2008, respectively. First Financial’s tangible common equity ratio (i.e., tangible equity divided by assets) was 4.9% at March 31, 2009, compared to 4.0% and 5.7% at December 31, 2008 and March 31, 2008, respectively. As of March 31, 2009, First Federal remained categorized “well capitalized” under regulatory standards.   
       
First Financial

First Financial is the holding company for First Federal Savings and Loan Association of Charleston (“First Federal”), which operates 66 offices located in the Charleston metropolitan area, Horry, Georgetown, Florence and Beaufort counties in South Carolina and in Brunswick, New Hanover and Pender counties in coastal North Carolina offering banking and trust services.  The Company also provides insurance and brokerage services through First Southeast Insurance Services, The Kimbrell Insurance Group and First Southeast Investor Services.

NOTE:  A. Thomas Hood, President and CEO of the Company, and R. Wayne Hall, Executive Vice President and CFO, will discuss these results in a conference call at 2:00 PM (EDT), April 24, 2009.  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 website at www.firstfinancialholdings.com or contact Dorothy B. Wright, Vice President-Investor Relations and Corporate Secretary, (843) 529-5931.