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

CHARLESTON, SC – July 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 third quarter of its fiscal year ended September 30, 2009. Net income for the quarter ended June 30, 2009 was $34.0 million compared to $3.1 million for the quarter ended March 31, 2009 and $5.9 million for the comparative quarter ended June 30, 2008. Basic and diluted earnings per common share available to common shareholders were $2.83 for the quarter ended June 30, 2009, compared to basic and diluted earnings per common share of $0.51 for the quarter ended June 30, 2008. Net income and diluted earnings per share for the nine months ended June 30, 2009 totaled $30.6 million, or $2.43 per diluted share, compared to $16.3 million, or $1.40 per diluted share, for the nine months ended June 30, 2008. Included in the results during this quarter and fiscal year to date was an after tax extraordinary gain of $28.9 million related to the difference between the purchase price and the acquisition-date fair value of the assets purchased and liabilities assumed in the Federal Deposit Insurance Corporation (“FDIC”) assisted acquisition of the former Cape Fear Bank in Wilmington, North Carolina. Basic and diluted earnings per common share before the extraordinary gain were $0.44 for the current quarter.

President and Chief Executive Officer A. Thomas Hood commented, “We are extremely pleased with our recent acquisition of the assets and assumption of liabilities of the former Cape Fear Bank. Many of Cape Fear’s employees continue as employees of First Federal. We are very pleased with the staff’s ability and enthusiasm to serve present and attract new customers to the bank. We expect to complete our systems conversion in mid-August 2009, giving our new customers additional products and services and significantly expanded convenience.”

Under our agreement with the FDIC, First Federal received deposits, cash, marketable securities, loans and real estate owned (“REO”). The loans and REO are covered by a loss share agreement between the FDIC and First Federal. The terms of the agreement state on losses up to $110.0 million, First Federal will assume the first $31.5 million and the FDIC will reimburse First Federal for 80 percent of the losses between $31.5 million and $110.0 million. If losses exceed $110.0 million, the FDIC will reimburse First Federal for 95 percent of the losses. The reimbursable losses from the FDIC are based on the book value of the relevant loans and foreclosed assets as determined by the FDIC as of the date of the acquisition, April 10, 2009.

Hood continued, “We are also very pleased with our performance this quarter, especially given the current economic conditions and regulatory environment. We remain committed to working with our customers and communities to find the best solutions to the challenges they face during this time of economic uncertainty. In fact, since April 1, 2009, we have hosted seven foreclosure clinics in the Charleston, Myrtle Beach, Wilmington, Bluffton, Florence and Georgetown markets. Through these clinics, we help to provide housingto homeowners in our markets through our partnership with several nonprofit agencies. These clinics are open to all homeowners in danger of foreclosure.”

Hood commented, “Our loan loss provisions were significant for the quarter ended June 30, 2009, and these higher provisions continue to strengthen our ability to navigate through this unprecedented and uncertain economic cycle.” Hood noted, “The Company recognized a provision for loan losses of $12.4 million for the quarter ended June 30, 2009 compared to $12.8 million for the quarter ended March 31, 2009, and $4.9 million for the quarter ended June 30, 2008. The increase in the provision during the quarter ended June 30, 2009 compared to the same quarter in 2008 is attributable to significant increases in non-accrual loans and net charge-offs, and continued uncertainties in the markets served by the Company.” Non-accrual loans were $66.3 million at June 30, 2009 compared to $54.8 million for the linked quarter and $16.6 million for the quarter ended June 30, 2008. The Company increased its allowance for loan losses as a percent of total loans from 199 basis points during the quarter ended March 31, 2009 to 205 basis points during the quarter ended June 30, 2009. Problem assets, which include problem loans as well as REO, as a percentage of total assets was 2.20% at June 30, 2009 compared with 1.91% at March 31, 2009 and 0.76% at June 30, 2008.

The Company’s loan loss reserve coverage of non-performing loans was 82.0% at June 30, 2009 compared to 86.6% at March 31, 2009 and 126.3% at June 30, 2008. Annualized net loan charge-offs as a percentage of net loans totaled 1.43% for the quarter ended June 30, 2009 compared with 1.14% for the quarter ended March 31, 2009 and 0.32% for the comparable quarter one year ago.

During the quarter ended June 30, 2009, mortgage banking income was $1.0 million compared to $2.7 million for the quarter ended March 31, 2009 and $1.8 million for the comparative quarter ended June 30, 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, however those strategies were not as effective as they have been in the past.
Insurance revenues for the quarter ended June 30, 2009 were $6.5 million compared to $7.0 million for the linked quarter and $7.4 million for the comparable quarter one year ago. Commissions on insurance continue to decline as a result of general economic conditions and competitive pricing pressures.

Our net interest margin increased significantly to 4.16% for the quarter ended June 30, 2009 compared to 3.64% for the quarter ended March 31, 2009 and 3.56% for the comparative quarter ended June 30, 2008. Hood noted, “The improvement in the net interest margin was primarily attributable to the accounting treatment of the deposits assumed and loans acquired from the former Cape Fear Bank and to lower funding costs. Although we will likely peak in the fourth quarter, we anticipate a positive impact on the net interest margin for the next four quarters as a result of this transaction.” Net interest income increased to $35.5 million for the quarter ended June 30, 2009, an increase of $8.5 million or 31.5% from $27.0 million for the linked quarter and an increase of $11.5 million or 48.0% from $24.0 million for the comparative quarter one year ago. The increase was the result of the improvement in our net interest margin. In total, average earning assets increased 13.3% to $3.4 billion for the quarter ended June 30, 2009 compared to $3.0 billion for the linked quarter and $2.7 billion, or 25.9%, for the comparative quarter ended June 30, 2008.

Non-interest income totaled $13.0 million for the third quarter of fiscal 2009, a decrease of $1.6 million from $14.6 million for the quarter ended March 31, 2009 and a decrease of $3.2 million from $16.2 million for the comparable quarter ended June 30, 2008. This decrease, compared to one year ago, is primarily attributable to lower commissions on insurance, lower mortgage banking income and lower levels of service charges and fees on deposit accounts. The Company also recognized a credit-related other than temporary impairment (“OTTI”) loss on five collateralized debt obligations (“CDOs”) comprised of bank trust preferred securities and one private label collateralized mortgage obligation (“CMO”). Total CDOs comprised of bank trust preferreds is $7.5 million or 1.2% of our total investment portfolio.

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 $48.1 million, for the quarter ended June 30, 2009, a
n increase of $7.9 million or 19.6% from $40.2 million during the comparable quarter ended June 30, 2008.

Total non-interest expenses for the quarter ended June 30, 2009 totaled $28.1 million, an increase of $2.5 million or 10.1% from $25.6 million for the comparable quarter one year ago and an increase of $4.3 million, or 18.0% from $23.8 million for the linked quarter ended March 31, 2009. Despite the January 2009 announcement of several significant cost savings initiatives, including decreases in salaries and employee benefits; non-interest expenses increased during the current quarter as a result of the Cape Fear acquisition and the increased FDIC assessment incurred by all financial institutions which hold insured deposits. In addition, our efficiency ratio for the first nine months of fiscal 2009 improved to 59.3% from 65.1% for the comparable period in fiscal 2008.

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 August 21, 2009, to stockholders of record as of August 7, 2009. Hood concluded, “Our board of directors continues to carefully evaluate the level of our dividend. Given the critical need to preserve our strong capital base through these uncertain economic times, we continue to believe a conservative approach is the most 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 $813 thousand to the U. S. Treasury for their investment during the third quarter of fiscal 2009.

As of June 30, 2009, the Company’s total assets were $3.6 billion, loans receivable totaled $2.6 billion and deposits were $2.3 billion. Total stockholders’ equity was $293 million and book value per common share totaled $19.49 at June 30, 2009. First Federal’s capital ratio (i.e., equity divided by assets) was 7.3% at June 30, 2009, compared to 7.1% and 7.2% at March 31, 2009 and June 30, 2008, respectively. Tangible equity to assets was 7.3% at June 30, 2009, compared to 7.1% and 7.2% at March 31, 2009 and June 30, 2008, respectively. First Financial’s tangible common equity ratio (i.e., tangible equity divided by assets) was 5.4% at June 30, 2009, compared to 4.8% and 5.1% at March 31, 2009 and June 30, 2008, respectively. As of June 30, 2009, First Federal remained categorized as “well capitalized” under regulatory standards.

First Federal Savings and Loan Association of Charleston

The Company is the holding company for First Federal Savings and Loan Association of Charleston, which operates 64 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), July 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.