<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-17122
FIRST FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0866076
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
34 Broad Street, Charleston, South Carolina 29401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 529-5800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the
latest practicable date.
Class Outstanding Shares at
Common Stock January 31, 1995
$.01 Par Value 6,278,135
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FIRST FINANCIAL HOLDINGS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Consolidated Statements of Financial Condition 1
at December 31, 1994 and September 30, 1994
Consolidated Statements of Income for the Three 2
Months Ended December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the 3
Three Months Ended December 31, 1994 and 1993
Notes to Financial Statements 4-7
Management's Discussion and Analysis of Results 8-21
of Operations and Financial Condition
PART II - OTHER INFORMATION
EXHIBITS 22-23
SIGNATURES 24
SCHEDULES OMITTED
All schedules other than those indicated above are omitted
because of the absence of the conditions under which they are
required or because the information is included in the Financial
Statements and related notes.
<PAGE>
<TABLE>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, September 30,
1994 1994
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 32,555 $ 23,568
Investments held to maturity (market value of $66,136 and $66,974) 67,893 67,997
Investments available for sale, at fair value 38,144 37,897
Investment in capital stock of Federal Home Loan Bank, at cost 11,982 11,982
Loans receivable, net 982,039 960,532
Mortgage-backed securities held to maturity (market value of $21,485
and $22,291) 21,664 22,483
Mortgage-backed securities available for sale, at fair value 83,373 83,137
Accrued interest receivable 8,620 7,862
Office properties and equipment, net 14,391 14,229
Real estate and other assets acquired in settlement of loans 5,105 6,124
Other assets 6,888 8,459
Total assets $1,272,654 $1,244,270
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit accounts $1,070,376 $1,062,995
Advances from Federal Home Loan Bank 71,806 46,406
Securities sold under agreements to repurchase 14,777 13,098
Long-term debt 19,763 19,763
Advances by borrowers for taxes and insurance 2,622 5,864
Outstanding checks 6,777 6,080
Other 3,931 7,392
Total liabilities 1,190,052 1,161,598
Stockholders' equity:
Serial preferred stock, authorized 3,000,000 shares--
none issued
Common stock, $.01 par value, authorized 12,000,000 shares,
issued and outstanding 6,835,307 and 6,822,574 shares at
December 31, 1994 and September 30, 1994, respectively 68 68
Additional paid-in capital 23,320 23,237
Retained income, substantially restricted 68,418 67,098
Unrealized net gain (loss) on securities available for sale,
net of income tax (4,345) (2,872)
Treasury stock at cost, 558,214 shares at December 31, 1994 and
September 30, 1994 (4,859) (4,859)
Total stockholders' equity 82,602 82,672
Total liabilities and stockholders' equity $1,272,654 $1,244,270
The accompanying notes are an integral part of the statements.
</TABLE>
<PAGE>
<TABLE>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
December 31,
1994 1993
(Amounts in thousands,
except per share amounts)
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest on loans and mortgage-backed securities $ 20,570 $ 20,625
Interest and dividends on investments 1,313 891
Other 469 589
Total interest income 22,352 22,105
INTEREST EXPENSE
Interest on deposits:
NOW accounts 507 462
Money market accounts 1,285 1,097
Certificate and other accounts 9,114 8,402
Interest on deposits 10,906 9,961
Interest on borrowed money 1,374 1,539
Total interest expense 12,280 11,500
NET INTEREST INCOME 10,072 10,605
Provision for loan losses 107 585
Net interest income after provision for loan losses 9,965 10,020
OTHER INCOME
Net gain (loss) on sale of loans - 263
Loan servicing fees 328 361
Service charges and fees on deposit accounts 974 868
Real estate operations, net (90) (206)
Other 711 796
Total other income 1,923 2,082
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and employee benefits 4,406 4,046
Occupancy costs 755 631
Marketing 306 243
Depreciation, amortization, rental and maintenance
of equipment 590 563
FDIC insurance premiums 620 690
Other 1,699 1,847
Total general and administrative expenses 8,376 8,020
Income before income taxes 3,512 4,082
Income tax expense 1,315 1,057
NET INCOME $ 2,197 $ 3,025
NET INCOME PER COMMON SHARE $ .35 $ .47
Cash dividends $ .14 $ .12
Weighted average shares outstanding 6,271 6,417
The accompanying notes are an integral part of the statements.
</TABLE>
<PAGE>
<TABLE>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
December 31,
1994 1993
(Amounts in thousands)
(Unaudited)
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 2,197 $ 3,025
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 437 410
Gain on sale of loans, net (263)
Loss on sale of property and equipment, net 4 3
Gain on sale of real estate owned, net (72) (195)
Amortization of unearned discounts/premiums on
investments (5) (16)
Decrease in deferred loan fees and discounts (119) (239)
Decrease in receivables and prepaid expenses 829 260
Provision for loan losses 107 585
Write downs of real estate acquired in settlement of loans 60 215
FHLB stock dividends (147)
Proceeds from sales of loans held for sale 30,379
Origination of loans held for sale (31,094)
Decrease in accounts payable and accrued expenses (2,005) (965)
Amortization of purchase accounting adjustments 59 (85)
Net cash provided by operating activities 1,492 1,873
INVESTING ACTIVITIES
Proceeds from maturity of investments held to maturity 5,099 5,502
Proceeds, at par, of redemption of mutual funds available for sale 5,000
Principal collected on investments 51 9
Purchases of investments available for sale (898)
Purchases of investments held to maturity (5,043) (13,446)
Purchases of mutual funds available for sale (4,000)
(Increase) decrease in loans, net (19,454) 2,963
Increase in credit card receivables (1,041) (1,024)
Purchases of loans and loan participations (813)
Repayments on mortgage-backed securities 2,369 16,179
Purchases of mortgage-backed securities available for sale (3,579)
Proceeds from the sales of real estate owned 959 1,606
Net purchase of office properties and equipment (603) (260)
Net cash provided by investing activities (22,953) 12,529
FINANCING ACTIVITIES
Net increase (decrease) in deposit accounts 7,405 (7,166)
Proceeds from FHLB advances 71,900
Repayment of FHLB advances (46,500) (17,999)
Increase (decrease) of securities sold under agreements to repurchase 1,679 (12)
Decrease in funds held for others (3,242) (4,036)
Proceeds from sale of common stock 83 76
Dividends paid (877) (770)
Net cash used in financing activities 30,448 (29,907)
Net increase (decrease) in cash and cash equivalents 8,987 (15,505)
Cash and cash equivalents at beginning of period 23,568 48,141
Cash and cash equivalents at end of period $32,555 $32,636
Supplemental disclosures:
Cash paid during the period for:
Interest $15,504 $ 14,659
Income taxes 408 1,721
Loans foreclosed or in-substance foreclosed 367 1,110
Loans securitized into mortgage-backed securities - -
Unrealized net gain (loss) on securities available for sale,
net of income tax or benefit (1,473) (551)
The accompanying notes are an integral part of the statements.
</TABLE>
<PAGE>
FIRST FINANCIAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Consolidation
The unaudited consolidated financial statements include the
accounts of First Financial Holdings, Inc. ("the Company") and
its wholly-owned subsidiaries, First Federal Savings and Loan
Association of Charleston and Peoples Federal Savings and Loan
Association of Conway and all of their subsidiaries. All
significant intercompany items related to the consolidated
subsidiaries have been eliminated.
Earnings per Share
Earnings per share are computed by dividing earnings by the
weighted average number of shares outstanding during the period.
The weighted average shares outstanding amounted to 6,270,525 for
the quarter ended December 31, 1994 as compared to 6,416,868 for
the quarter ended December 31, 1993.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and all
investments payable on demand or with original terms of three
months or less.
Investments in Debt Securities
The Company's investments in debt securities principally
consist of U.S. Treasury securities and mortgage-backed
securities purchased by the Company or created when the Company
exchanges pools of loans for mortgage-backed securities. The
Company adopted Statement of Financial Accounting Standards
("SFAS") 115 as of September 30, 1993. In accordance with SFAS
115, the Company classifies its investments in debt securities as
held to maturity securities, trading securities and available for
sale securities as applicable.
Securities are designated as held to maturity if the Company
has the positive intent and the ability to hold the securities to
maturity. Held to maturity securities are carried at amortized
cost, adjusted for the amortization of any related premiums or
the accretion of any related discounts into interest income using
a methodology which approximates a level yield of interest over
the estimated remaining period until maturity. Unrealized losses
on held to maturity securities, reflecting a decline in value
judged by the Company to be other than temporary, are charged to
income.
Debt and equity securities that are bought and held
principally for the purpose of selling in the near term are
reported as trading securities. Trading securities are carried
at fair value with unrealized holding gains and losses included
in earnings.
The Company classifies securities as available for sale when
at the time of purchase it determines that such securities may be
sold at a future date or if the Company does not have the intent
or ability to hold such securities to maturity.
Securities designated as available for sale are recorded at
market value. Changes in the market value of debt securities
available for sale are included in shareholders' equity as
unrealized holding gains or losses net of the related tax effect.
Unrealized losses on available for sale securities, reflecting a
decline in value judged to be other than temporary, are charged
to income in the Consolidated Statements of Income. Realized
gains or losses on available for sale securities are computed on
the specific identification basis.
Securities Sold Under Agreements to Repurchase
The Company enters into sales of securities under agreements
to repurchase (reverse repurchase agreements). Fixed coupon
reverse repurchase agreements are treated as financings and the
obligations to repurchase securities sold are reflected as a
liability in the Consolidated Statements of Financial Condition.
The securities underlying the agreements remain in the asset
accounts.
Allowance for Possible Loan Losses
The Company provides for loan losses on the allowance method.
Accordingly, all loan losses are charged to related allowances
and all recoveries are credited to the allowances. Additions to
the allowance for loan losses are provided by charges to
operations based on various factors which, in management's
judgment, deserve current recognition in estimating losses. Such
factors considered by management include the fair value of the
underlying collateral, growth and composition of the loan
portfolios, the relationship of the allowance for loan losses to
outstanding loans, loss experience, delinquency trends, and
economic conditions. Management evaluates the carrying value of
loans periodically and the allowances are adjusted accordingly.
While management uses the best information available to make
evaluations, future adjustments to the allowances may be
necessary if economic conditions differ substantially from the
assumptions used in making the evaluations. Allowances for loan
losses are subject to periodic evaluation by various regulatory
authorities and may be subject to adjustment upon their
examination.
Office Properties and Equipment
Office properties and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is
provided generally on the straight-line method over the estimated
life of the related asset for financial reporting purposes.
Estimated lives range up to thirty years for buildings and
improvements and up to ten years for furniture, fixtures and
equipment. Maintenance and repairs are charged to expense as
incurred. Improvements which extend the useful lives of the
respective assets are capitalized. Accelerated depreciation is
utilized on certain assets for income tax purposes.
Real Estate
Real estate acquired through foreclosure is initially
recorded at the lower of cost or estimated fair value.
Subsequent to the date of acquisition, it is carried at the lower
of cost or fair value, adjusted for net selling costs. Fair
values of real estate owned are reviewed regularly and writedowns
are recorded when it is determined that the carrying value of
real estate exceeds the fair value. Costs relating to the
development and improvement of such property are capitalized,
whereas those costs relating to holding the property are charged
to expense.
The Company records loans as in-substance foreclosures, if
the borrower has little or no equity in the collateral based upon
its current fair value; proceeds for repayment of the loan can be
expected to be generated only through the operation or sale of
the collateral; and the borrower has effectively abandoned
control of the collateral or has continued to retain control of
the collateral but, because of the current financial status of
the borrower, it is doubtful the borrower will be able to repay
the loan in the foreseeable future. In-substance foreclosures
are included in real estate acquired through foreclosure in the
accompanying Consolidated Statements of Financial Condition and
are accounted for as real estate acquired through foreclosure.
Loans Receivable and Loans Held for Sale
The Company's real estate loan portfolio consists primarily
of long-term loans secured by first mortgages on single-family
residences, other residential property, commercial property and
land. The adjustable-rate mortgage loan is the Company's primary
loan offering for portfolio lending purposes. The Company's
consumer loans include lines of credit, mobile home loans, auto
loans, marine loans and loans on various other types of consumer
products. The Company also makes shorter term commercial
business loans on a secured and unsecured basis.
Fees are charged for originating loans at the time the loan
is granted. Loan origination fees received, if any, are offset
by the deferral of certain direct expenses associated with loans
originated. The net fees or costs are recognized as yield
adjustments by applying the interest method.
Interest on loans is accrued and credited to income based on
the principal amount and contract rate on the loan. The accrual
of interest is discontinued when, in the opinion of management,
there is an indication that the borrower may be unable to meet
future payments as they become due, generally when a loan is
ninety days past due. When interest accrual is discontinued, all
unpaid accrued interest is reversed. While a loan is on non-
accrual status, interest is recognized only as cash is received.
Loans are returned to accrual status only when the loan is
reinstated and ultimate collectibility of future interest is no
longer in doubt.
Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of cost or estimated
market value in the aggregate. Net unrealized losses are
provided for in a valuation allowance by charges to operations.
Income Taxes
Effective October 1, 1992, the Company prospectively adopted
SFAS 109, "Accounting for Income Taxes", which requires an asset
and liability approach to accounting for income taxes. Under
SFAS 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Financial statements for prior years
reflect income taxes recorded under the deferred method required
by previous accounting standards.
Reclassifications
Certain amounts previously presented in the consolidated
financial statements for prior periods have been reclassified to
conform to current classifications. All such reclassifications
had no effect on the prior period's net income or retained
earnings as previously reported.
<PAGE>
FIRST FINANCIAL HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
BASIS OF CONSOLIDATIONS AND PRESENTATION
The unaudited consolidated financial statements include the
accounts of First Financial Holdings, Inc., ("First Financial, or
the Company") and its wholly-owned subsidiaries, First Federal
Savings and Loan Association of Charleston ("First Federal") and
Peoples Federal Savings and Loan Association of Conway ("Peoples
Federal") (together, the "Associations"). All significant
intercompany items related to the consolidated subsidiaries have
been eliminated.
GENERAL
The Company recorded net income of $2.2 million, or $.35 per
share, for the first quarter of fiscal 1995, compared with $3.0
million, or $.47 per share earned in the first quarter of fiscal
1994. A major component of the variance in net income for the
comparable periods was an increase in the effective tax rate in
the December 1994 quarter due to the elimination of net operating
loss carryforwards at Peoples Federal. The effective tax rate
for the December 1994 quarter was 37.4% compared to 25.9% in the
December 1993 quarter. Income before taxes for the December 1994
quarter was $3.5 million compared with $4.1 million for the
December 1993 quarter.
Beginning in the March quarter of fiscal 1994, the Federal
Reserve Board of Governors (the "Fed") took actions to increase
short-term interest rates in response to signs of increased
economic activity and possible future increases in inflation. By
the end of fiscal 1994, market interest rates had increased 200
basis points or more. Such actions by the Fed have continued in
fiscal 1995. In November 1994, the Fed increased the Federal
Funds rate by 3/4 of 1%. The Fed took action again on February 1,
1995, increasing the Federal Funds rate by 1/2 of 1%. During the
quarter ending December 31, 1994, the Company experienced an
increase in its average cost of funds of 26 basis points while
its average yield on earning assets remained at the same level as
the December 1993 quarter. During the quarter ending December
31, 1993 - before Fed intervention started - the gross interest
margin was 3.30%. During the most recent quarter, the gross
margin declined to 3.04%, with total net interest income also
declining by $533 thousand compared with the comparable quarter
in fiscal 1994.
On January 30, 1995, the Company announced a stock repurchase
program to acquire up to approximately 250,000 shares of the
Company's common stock, which represents approximately 4.0% of
the Company's outstanding common stock. The repurchase plan is
expected to be completed by September 30, 1995.
BALANCE SHEET ANALYSIS
Consolidated assets of the Company totaled $1.27 billion at
December 31, 1994 compared to $1.24 billion at September 30,
1994. During the quarter assets increased $28.4 million
principally as a result of net growth of $21.5 million in loans
receivable.
Cash and Investment Securities
Cash, deposits in transit and interest-bearing deposits
increased $9.0 million during the three months and totaled $32.6
million at December 31, 1994. Investments held to maturity
declined by $104 thousand while investments available for sale
increased $247 thousand. The Company's investments and other
interest-earning deposits continue to be comprised primarily of
U. S. Government and agency securities, Federal Home Loan Bank
("FHLB") of Atlanta stock and overnight deposits in the FHLB of
Atlanta. During the quarter purchases of investments held to
maturity totaled $5.0 million while purchases of investments
available for sale totaled $898 thousand. Maturities of
investments totaled $5.1 million during the quarter.
Loans and Mortgage-backed Securities
Loans receivable totaled $982.0 million at December 31, 1994
compared to $960.5 million at September 30, 1994. Mortgage-
backed securities declined $583 thousand in the current quarter
to total $105.0 million at December 31, 1994.
The principal use of the Company's funds is the origination
of mortgage and other loans. The Company originated $38.0
million (net of refinances) in mortgage loans, $9.1 million in
consumer loans and $5.0 million in commercial business loans
during the three months ending December 31, 1994. Purchases of
adjustable-rate mortgage-backed securities available for sale
totaled $3.6 million in the three months ending December 31,
1994. The Company did not originate any loans for sale during
the current quarter.
Due to present market conditions, the Company has
substantially reduced originations of loans made on
nonresidential properties and placed greater emphasis on single-
family lending. This policy is expected to over time reduce the
Company's exposure to commercial real estate. The following
table summarizes the composition of the Company's gross loan
portfolio (amounts in thousands):
<TABLE>
Dec. 31, Sept. 30, Dec. 31,
1994 1994 1993
<S> <C> <C> <C>
Residential (1-4 family) $ 604,077 $ 582,783 $ 540,269
Other residential 58,732 59,309 61,399
Acquisition and development 6,220 7,674 11,575
Other land and lots 15,632 15,313 14,263
Commercial real estate 191,244 191,976 215,796
Home equity lines of credit 46,680 47,389 50,418
Consumer 65,354 64,204 64,482
Commercial business 24,079 24,962 27,587
Mortgage-backed securities 105,036 105,620 89,151
Total gross loans $1,117,054 $1,099,230 $1,074,940
</TABLE>
As the above table indicates, gross loan and mortgage-backed
securities balances increased $17.8 million during the current
quarter principally due to the Company's retention of all single-
family loans originated during the quarter.
The Company originates virtually all loans in its primary
market area located in the coastal region of South Carolina.
Less than 1% of total gross loans are secured by property or
collateral located outside South Carolina. In an effort to
expand mortgage lending operations and improve earning asset
growth the company expects to begin originating mortgage loans in
other markets in South Carolina within the next six months. The
Company will utilize its existing mortgage loan products and
programs which management believes will be competitive in these
markets.
Outstanding commitments to originate mortgage loans and to
fund the undisbursed portion of construction loans amounted to
$27.2 million at December 31, 1994, compared to $29.2 million at
September 30, 1994. Unused lines of credit on equity loans,
consumer loans, credit cards and commercial loans totaled $84.5
million as of December 31, 1994 compared to $84.8 million at
September 30, 1994.
Asset Quality
The following table summarizes the Company's problem assets
for the periods indicated (amounts in thousands):
<TABLE>
Dec. 31, Sept. 30, Dec. 31,
1994 1994 1993
<S> <C> <C> <C>
Non-accrual loans $ 2,643 $ 1,620 $ 3,215
Loans 90 days or more
past due (1) 4,656 740 3,483
Renegotiated loans 11,888 13,129 9,055
In-substance foreclosures 2,438 2,834 4,254
Real estate and other
assets acquired in
settlement of loans 2,666 3,290 4,439
Total $24,291 $21,613 $24,446
As a percent of net loans
and real estate owned 2.46% 2.24% 2.52%
As a percent of total assets 1.91% 1.74% 1.99%
(1) The Company continues to accrue interest on these loans.
</TABLE>
Problem assets increased $2.7 million during the first three
months of fiscal 1995, primarily due to increased levels of loans
on non-accrual or loans 90 days or more past due.
Non-accruing loans and loans contractually delinquent 90 days
or more are comprised of the following types of loans (amounts in
thousands):
<TABLE>
Dec. 31, Sept. 30, Dec. 31,
1994 1994 1993
<S> <C> <C> <C>
Residential (1-4 family) $1,951 $1,452 $ 892
Other residential 2,989 1,522
Acquisition and development
loans 353
Other land and lots 715 302 325
Commercial real estate 820 285 2,371
Home equity lines of credit 17 54
Consumer 113 123 361
Commercial business 694 198 820
Total $7,299 $2,360 $6,698
</TABLE>
Loans on non-accrual and loans 90 days or more delinquent
totaled $7.3 million at December 31, 1994, increasing $4.9
million during the first quarter of fiscal 1995. Approximately
$3.0 of the increase relates to two loans secured by a
multifamily project in Charleston, South Carolina. The borrower
has experienced cash flow problems and the loans have become
seriously delinquent. Subsequent to quarter end, on January 31,
1995, the loans were no longer ninety days delinquent.
Renegotiated loans declined $1.2 million during the current
three months. A $1.2 million resort development loan
renegotiated in 1983 was repaid during the current quarter.
Real estate and other assets acquired in settlement of loans
and in-substance foreclosures declined by $1.0 million during the
current quarter. The Company continues to be successful in
disposing of real estate once it obtains title to the collateral.
Allowance for Loan Losses
The allowance for loan losses represents a reserve for
potential losses existing in the loan portfolio. The adequacy of
the allowance for loan losses is evaluated at least quarterly
based, among other factors, on a continuous review of the
Company's loan portfolio, with particular emphasis on adversely
classified loans.
The following table sets forth the allocation of the
Company's allowance for loan losses (excluding mortgage-backed
securities) at December 31, 1994 and September 30, 1994 (amounts
in thousands). The allocation of the allowance for loan losses
set forth in the table should not be interpreted as an indication
that charge-offs will necessarily occur in these amounts or
proportions or that the allocation indicates future charge-off
trends.
<TABLE>
December 31, 1994 September 30, 1994
Gross % of Gross % of
Loan Allowance Loan Allowance
Allowance Balance to Balance Allowance Balance to Balance
<S> <C> <C> <C> <C> <C> <C>
Residential loans:
1-4 family $ 2,053 $ 604,077 .34% $ 1,825 $582,783 .31%
Other 1,501 58,732 2.56 1,582 59,309 2.67
Acquisition and
development loans 306 6,220 4.92 382 7,674 4.98
Other land and lot loans 687 15,632 4.39 1,009 15,313 6.59
Commercial real
estate 4,424 191,244 2.31 4,276 191,976 2.23
Commercial business 793 24,079 3.29 750 24,962 3.00
Consumer loans 925 112,034 .83 904 111,593 .81
Total $10,689 $1,012,018 1.06% $10,728 $993,610 1.08%
</TABLE>
The following table provides a summary of activity in the
allowance for loan losses for the first quarter of fiscal 1995
(amounts in thousands).
<TABLE>
Balance Balance
Sept. 30 Charge- Dec. 31
1994 Additions offs Recoveries 1994
<S> <C> <C> <C> <C>
Real estate $ 9,074 $ 134 $ 31 $ 8,971
Commercial business 750 $ 18 3 28 793
Consumer 904 89 111 43 925
Total $10,728 $ 107 $ 248 $102 $10,689
</TABLE>
Deposits
Retail deposits are the primary source of funding for the
Company for lending purposes and as a customer base for providing
additional financial services. The Company's total deposits
increased $7.4 million during the three months ending
December 31, 1994.
First Financial's deposit composition at the indicated dates
is as follows (amounts in thousands):
<TABLE>
December 31, 1994 September 30, 1994 December 31, 1993
% of % of % of
Balance Total Balance Total Balance Total
<S> <C> <C> <C> <C> <C> <C>
Checking accounts $ 114,569 10.70% $ 112,270 10.56% $ 109,317 10.47%
Passbook, statement and
other accounts 141,627 13.23 150,693 14.18 158,497 15.18
Money market funds 141,160 13.19 140,511 13.22 150,394 14.41
Certificate accounts 673,020 62.88 659,521 62.04 625,743 59.94
Total deposits $1,070,376 100.00% $1,062,995 100.00% $1,043,951 100.00%
</TABLE>
Checking and other transaction account balances have
increased as the Company has emphasized growth in these types of
products. The Company continues to face moderate
disintermediation of balances of short-term deposit accounts
because of the current level of deposit account interest rates
versus overall market interest rates. The Company utilized
brokered certificates of deposit programs during the quarter.
Such deposits comprised $17.4 million of total deposits at
December 31, 1994 while there were no comparable brokered
deposits at September 30, 1994 or December 31, 1993.
Borrowings
Primarily as a result of growth in loans receivable during
the quarter and the utilization of FHLB advances as a primary
source of funds, total borrowings increased $27.1 million to
total $106.3 million as of December 31, 1994. Approximately $70.4
million in FHLB advances mature within one year from December 31,
1994.
Stockholders' Equity
Stockholders' equity declined slightly during the first
quarter of fiscal 1995 to total $82.6 million at December 31,
1994. This decline was principally a result of reductions of
$1.5 million for unrealized net losses on securities available
for sale and cash dividends of $877 thousand, offset partially by
net income for the three months of $2.2 million. The Company's
capital ratio, total capital to total assets, was 6.49% at
December 31, 1994, compared to 6.64% at September 30, 1994.
During the quarter, the Company increased its cash dividends to
$.14 per share compared with $.12 per share in the earlier
period.
Regulatory Capital
Under current Office of Thrift Supervision ("OTS")
regulations, savings associations must satisfy three minimum
capital requirements: core capital, tangible capital and risk-
based capital. Savings associations must meet all of the
standards in order to comply with the capital requirements. At
December 31, 1994, both subsidiaries were categorized as "well
capitalized" under the Prompt Corrective Action regulations
adopted by the OTS pursuant to the Federal deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"). To remain in
this status, the Associations must maintain core and risk-based
capital ratios of at least 4.0% and 8.0%, respectively.
On November 28, 1994, the OTS announced its decision to
reverse immediately its August 1993 interim policy requiring
associations to include unrealized gains and losses, net of
income taxes, on available for sale debt securities in regulatory
capital. Under the revised OTS policy, the Associations have
added back any unrealized losses, and deducted any unrealized
gains, net of income taxes, on available for sale securities
reported as a separate component of equity capital pursuant to
SFAS 115. Available for sale equity securities have been valued
at the lower of cost or fair value for regulatory capital
purposes. This revised policy is consistent with the policies of
other federal banking agencies. The OTS policy allows an option
to adopt the revised policy at December 31, 1994, March 31, 1995
or June 30, 1995. Both Associations adopted the policy, which
had a positive effect on regulatory capital computations, at
December 31, 1994.
The following table summarizes the capital requirements for
First Federal and Peoples Federal as well as their capital
positions at December 31 1994:
<TABLE>
First Federal Peoples Federal
Percent of Percent of
Amount Assets Amount Assets
(Amounts in thousands)
<S> <C> <C> <C> <C>
Tangible capital $71,287 7.63% $26,781 7.98%
Tangible capital requirement 14,008 1.50 5,033 1.50
Excess $57,279 6.13% $21,748 6.48%
Core capital $71,287 7.63% $26,781 7.98%
Core capital requirement 28,017 3.00 10,066 3.00
Excess $43,270 4.63% $16,715 4.98%
Risk-based capital(a) $77,468 12.14% 26,781 15.44%
Minimum risk-based capital requirement(a) 51,034 8.00 13,878 8.00
Excess(a) $26,434 4.14% $12,903 7.44%
____________________________
(a) Based on total risk-weighted assets.
</TABLE>
For a complete discussion of capital issues, refer to
"Capital Requirements" and "Dividend Limitations" in the
Company's 10K for the fiscal year ending September 30, 1994.
LIQUIDITY AND ASSET AND LIABILITY MANAGEMENT
Liquidity
The Associations are subject to federal regulations which
require the maintenance of a daily average balance of liquid
assets equal to 5.00% of net withdrawable savings and borrowings
payable in one year. First Federal had an average liquidity
ratio of 7.30% for the current three months compared to 9.78% for
the comparable period in fiscal 1994. Peoples Federal's average
liquidity ratio was 10.37% during the present three months
compared with 8.63% in the prior period.
The Associations' primary sources of funds consist of retail
deposits, borrowings from the FHLB, principal repayments on loans
and mortgage-backed securities, securities sold under agreements
to repurchase and the sale of loans. Each of the Association's
sources of liquidity are subject to various uncertainties beyond
the control of the Associations. As a measure of protection, the
Association's have back-up sources of funds available, including
excess FHLB borrowing capacity and excess liquidity in securities
available for sale.
During the current quarter the Company experienced a net cash
outflow from investing activities of $23.0 million, consisting
principally of loans originated for investment and mortgage-
backed securities purchased, offset by principal payments on
loans and mortgage-backed securities. In addition the Company
experienced cash inflows of $1.5 million from operating
activities and $30.4 million from financing activities.
Financing activities consisted principally of $25.4 million in
FHLB advances, $7.4 million of increased deposit balances and
$1.7 million in net additions to reverse repurchase agreements.
Parent Company Liquidity
As a holding company, First Financial conducts its business
through its subsidiaries. First Financial issued $20.3 million
in senior notes of the Company in September 1992 principally for
the purpose of acquiring Peoples Federal. Potential sources for
First Financial's payment of principal and interest on the notes
include: (i) dividends from First Federal and Peoples Federal;
(ii) payments from existing cash reserves and sales of marketable
investment securities; and (iii) interest on investment assets.
The Company has agreed to prepay, at a price of 100% of the
principal plus accrued interest to the date of prepayment, up to
$1.0 million of the notes tendered by noteholders for prepayment
during the period of issuance through September 1, 1993, and
thereafter in any twelve month period ending September 1, subject
to certain limitations.
As of December 31, 1994, First Financial had cash reserves
and marketable securities of $6.3 million. Cash reserves and
marketable securities may also be utilized for the stock
repurchase program recently announced in January 1995, whereby
the Company may repurchase approximately $250,000 shares of
common stock.
First Federal's and Peoples Federal's ability to pay
dividends and make other capital contributions to First Financial
is restricted by regulation and may require regulatory approval.
First Federal's and Peoples Federal's ability to make
distributions may also depend on each institution's ability to
meet minimum regulatory capital requirements in effect during the
period. For a complete discussion of capital distribution
regulations, refer to "Dividend Limitations" in the Company's 10K
for the fiscal year ending September 30, 1994.
Asset/Liability Management
The Company's Asset and Liability Committees establish
policies and monitor results to control interest rate
sensitivity. Although the Company utilizes measures such as
static gap, which is simply the measurement of the difference
between interest-sensitive assets and interest-sensitive
liabilities repricing for a particular time period, just as
important a process is the evaluation of how particular assets
and liabilities are impacted by changes in interest rates or
selected indices as they reprice. Asset/liability modeling is
performed by the Company to assess varying interest rate and
balance mix assumptions. These projections enable the Company to
adjust its strategies to lessen the impact of significant
interest rate fluctuations.
The following table is a summary of First Financial's one
year gap at indicated dates (amounts in thousands):
<TABLE>
December 31, September 30, December 31,
1994 1994 1993
<S> <C> <C> <C>
Interest-earning assets maturing or
repricing within one year $864,404 $842,471 $792,614
Interest-bearing liabilities maturing or
repricing within one year 731,366 681,467 664,182
Cumulative gap $133,038 $161,004 $128,432
Gap as a percent of
total assets 10.45% 12.94% 10.44%
</TABLE>
First Financial has continued its emphasis on the origination
of adjustable-rate and other short-term loans in order to reduce
interest rate risk. The Company's one year positive gap as a
percent of total assets declined from 12.94% to 10.45% during the
current three months. A positive gap indicates that cumulative
interest-sensitive assets exceed cumulative interest-sensitive
liabilities and suggests that net interest income would increase
if market rates increased. A negative gap would suggest the
reverse. Because adjustments to interest rates on adjustable-
rate loans and mortgage-backed securities tend to lag changes in
market rates, the benefit attributed to a positive gap will be
experienced over a longer period of time depending on how fast
the indices rise and the frequency of repricing of the assets.
The Company also has a significant portion of its adjustable loan
portfolio indexed to various cost of funds indices, which tend to
lag the market to a greater extent than treasury-related indices.
COMPARISON OF OPERATING RESULTS
QUARTERS ENDING DECEMBER 31, 1994 AND 1993
Net Interest Income
First Financial's net interest income for the three months
ending December 31, 1994 was $10.1 million compared with $10.6
million for the comparable quarter in fiscal 1994. The gross
interest margin declined from 3.30% in the prior quarter to 3.04%
in the current quarter and reflects an increase in the Company's
average cost of funds.
Average yields on earning assets were 7.29% in both periods.
Interest rates paid on deposits and borrowings increased from one
year ago resulting in a increase of .26%, or 26 basis points, in
the cost of funds. Management anticipates that average asset
yields will slowly improve as certain of the indices used to
reprice adjustable-rate mortgage loans, consumer and commercial
business loans are expected to increase further in future months.
Management, however, also expects the cost of deposits and
borrowings may increase due to increases in market interest
rates, thus creating a potential for further contraction of the
gross interest margin. The following table summarizes rates,
yields and average earning asset and costing liability balances
for the respective quarters (amounts in thousands):
<TABLE>
Quarter Ending December 31,
1994 1993
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
<S> <C> <C> <C> <C>
Loans and mortgage-backed securities $1,091,918 7.47% $1,069,037 7.65%
Other interest-earning assets 123,774 5.71 134,220 4.37
Total interest-earning assets $1,215,692 7.29% $1,203,257 7.29%
Deposits $1,057,769 4.09 $1,048,144 3.77
Borrowings 88,084 6.19 94,795 6.44
Total interest-bearing liabilities $1,145,853 4.25% $1,142,939 3.99%
Gross interest margin 3.04% 3.30%
Net interest margin 3.31% 3.53%
</TABLE>
The following rate/volume analysis depicts the increase
(decrease) in net interest income attributable to interest rate
and volume fluctuations compared to the prior period (amounts in
thousands):
<TABLE>
Quarter Ending December 31
1994 versus 1993
Volume Rate Total
<S> <C> <C> <C>
Interest income:
Loans and mortgage-backed
securities $ 436 $(491) $ (55)
Investments and other
interest-earning assets (122) 424 302
Total interest income 314 (67) 247
Interest expense:
Deposit accounts 92 853 945
Borrowings (107) (58) (165)
Total interest expense (15) 795 780
Net interest income $ 329 $(862) $(533)
</TABLE>
Total interest income for the current quarter of $22.4
million represents growth of $247 thousand from the comparative
quarter in fiscal 1994. Average balances of earning assets
increased $12.4 million during the current quarter compared to
the December 1993 quarter. Average yields on loans and mortgage-
backed securities declined by 18 basis points. Approximately 72%
of the Company's gross loan portfolio, including mortgage-backed
securities, is comprised of adjustable-rate loans, with a
majority of such loans repricing to cost of funds or treasury-
based indices. The majority of such loan reprice on an annual
basis. Both the timing of annual rate adjustments and the lagged
nature of cost of funds indices have contributed to lower yields
on loans and mortgage-backed securities.
The average yield on all other earning assets increased from
4.37% in the prior quarter to 5.71% in the current quarter. The
average yield increased 134 basis points in the current quarter
as short-term interest rates increased substantially from year-
ago levels.
Total interest expense increased $780 thousand during the
current quarter, with average interest-bearing liability balances
increasing by $2.9 million. The average cost of deposits
increased 25 basis points while the average cost of borrowings
declined 32 basis points. The Company's overall cost of funds
increased 26 basis points to 4.25% from 3.99% in the prior
period.
Provision for Loan Losses
During the current quarter, First Financial's provision for
loan losses totaled $107 thousand, compared to $585 thousand
during the same period in the previous year. Net charge-offs for
the current quarter totaled $146 thousand compared with $113
thousand in the comparable quarter in fiscal 1994. Total loan
loss reserves as of December 31, 1994 and 1993 were $10.7 million
and $11.2 million, respectively. Loan loss reserves as a
percentage of the total net loan portfolio, excluding mortgage-
backed securities, were 1.09% and 1.17% at December 31, 1994 and
1993, respectively.
Other Income
Net gains on the sale of mortgage loans totaled $263 thousand
during the December 31, 1993 quarter. Sales of fixed-rate
residential loans originated for sale totaled $30.4 million in
the prior quarter. There were no loan sales during the current
quarter in keeping with management's strategy to include
originations of higher-yielding fixed-rate mortgage loans in the
loan portfolio.
Loan servicing fee income declined $33 thousand in the
current quarter, primarily as a result of decreases in balances
of loans serviced and respective servicing fees. Fees on deposit
accounts increased $106 thousand during the current quarter,
reflecting increased balances in checking and other transaction
accounts at the Company and the implementation of new service
charges.
Real estate operations, net, produced losses of $90 thousand
and $206 thousand in the quarters ending December 31, 1994 and
1993, respectively. Real estate and in-substance foreclosed
balances have declined $3.6 million, or 41.3% since December 31,
1993.
General and Administrative Expenses
General and administrative expenses increased $356 thousand
during the current quarter. General and administrative expenses
as a percentage of average assets increased from 2.58% in the
December 31, 1993 quarter to 2.66% in the current quarter.
Salaries and benefits increased $360 thousand, principally as a
result of annual merit increases, higher benefit costs and the
effect of more fixed salary costs being recognized in the current
period due to lower loan origination volume. Full-time
equivalent employees declined from 520 as of December 31, 1993 to
510 at December 31, 1994.
FDIC insurance premiums were $70 thousand less in the
current quarter compared to the prior period. Although deposit
balances have increased, both subsidiaries are now assessed at
the lowest premium rate currently in effect under the FDIC risk-
based assessment plan. Peoples Federal had been subject to a
higher assessment rate until January 1, 1994.
Other expenses increased moderately in the current quarter
and were primarily attributable to higher costs related to
increased numbers of deposit accounts serviced, increased
occupancy costs related to the leasing of additional space at
First Federal's Operations Center for the consolidation of all
back-office functions of this subsidiary and increased marketing
efforts by both subsidiaries. These increases were offset by
other initiatives of the Company which have contributed to
holding many expenses at or below prior quarter levels.
Income Tax Expense
During the current quarter, the Company's effective tax rate
was 37.4% compared to 25.9% in the comparable quarter. The
actual tax provision of $1.3 million resulted in an increase of
$258 thousand from the prior period. The increased effective rate
is attributable to the elimination of net operating losses at
Peoples Federal.
IMPACT OF REGULATORY AND ACCOUNTING ISSUES
For a comprehensive discussion of regulatory issues, refer to
"Regulation of the Associations" in the Company's 10K for the
fiscal year ending September 30, 1994.
As noted in the Company's 10K for fiscal 1994, the Federal
Deposit Insurance Corporation ("FDIC") is expected to reduce the
deposit insurance assessment rates for the Bank Insurance Fund
("BIF") later this year. The FDIC is not expected to make any
change in the Savings Association Insurance Fund until the fund
is recapitalized. Current projections show this will not occur
until 2002. Savings industry leaders have commented to the FDIC
that thrift institutions will be placed at a less competitive
position than BIF-insured institutions when BIF rates are
lowered.
The OTS along with other banking agencies issued a final
rule, effective January 17, 1995, to implement the portions of
section 305 of FDICIA that require the agencies to revise their
risk-based capital standards for insured depository institutions
to ensure that those standards take adequate account of
concentration of credit risk and the risks of nontraditional
activities. The final rule amends the risk-based capital
standards by explicitly identifying concentration of credit risk
and certain risks arising from nontraditional activities, as well
as an institution's ability to manage these risks, as important
factors in assessing an institution's overall capital adequacy.
<PAGE>
FIRST FINANCIAL HOLDINGS, INC.
OTHER INFORMATION
Item 1 - Legal Proceedings
Periodically, there are various claims and lawsuits involving
the Associations and their subsidiaries mainly as defendants,
such as claims to enforce liens, condemnation proceedings on
properties in which the Associations hold security interests,
claims involving the making and servicing of real property loans
and other issues incident to the Association's business. In the
opinion of management and the Company's legal counsel, no
material loss is expected from any of such pending claims or
lawsuits.
Item 2 - Changes in Securities
Not applicable.
Item 3 - Defaults upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
The following proposals were submitted to the Company's
stockholders at the annual meeting on January 26, 1995. The
proposals were approved by a vote of the stockholders.
Proposal I: Election of Directors
Gary C. Banks, Jr.
Joseph A. Baroody
Paul G. Campbell, Jr.
Herman B. Speissegger, Jr.
Proposal II: Ratification of First Financial's 1994 Outside
Directors Stock Option-for-Fees Plan
Proposal III: Ratification of First Financial's 1994 Stock
Purchase Plan
Item 5 - Other Information
None
Item 6 - Exhibits and Report on Form 8-K.
Exhibits
No. 3. Amended Bylaws
There were no reports on Form 8-K filed during the quarter
ending December 31, 1994.
<PAGE>
FIRST FINANCIAL HOLDINGS, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
First Financial Holdings, Inc.
Date: February 13, 1995 By: /s/ A. Thomas Hood
A. Thomas Hood
Executive Vice President
Treasurer
Principal Financial Officer
Duly Authorized Representative
BYLAWS
OF
FIRST FINANCIAL HOLDINGS, INC.
ARTICLE I
Home Office
The home office of First Financial Holdings, Inc. (herein the
"Corporation") shall be at 34 Broad Street in the City of Charleston, in
the State of South Carolina. The Corporation may also have offices at such
other places within or without the State of South Carolina as the board of
directors shall from time to time determine.
ARTICLE II
Stockholders
SECTION 1. Place of Meetings. All annual and special meetings
of stockholders shall be held at the home office of the Corporation or at
such other place within or without the State in which the home office of
the Corporation is located as the board of directors may determine and as
designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meeting of the shareholders of the
Corporation for the election of directors and for the transaction of any
other business of the Corporation shall be held annually at such date and
time as the board of directors may determine.
SECTION 3. Special Meetings. Special meetings of the
stockholders for any purpose or purposes may be called at any time by the
majority of the board of directors or by a committee of the board of
directors in accordance with the provisions of the Corporation's
Certificate of Incorporation.
SECTION 4. Conduct of Meetings. Annual and special meetings
shall be conducted in accordance with the rules and procedures established
by the board of directors. The board of directors shall designate, when
present, either the chairman or the vice chairman of the board, or the
president to preside at such meetings.
SECTION 5. Notice of Meetings. Written notice stating the
place, day and hour of the meeting and the purpose or purposes for which
the meeting is called shall be mailed by the secretary or the officer
performing his duties, not less than ten days nor more than sixty days
before the meeting to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the stockholder at his
address as it appears on the stock transfer books or records of the
Corporation as of the record date prescribed in Section 6 of this Article
II, with postage thereon prepaid. If a stockholder be present at a
meeting, or in writing waive notice thereof before or after the meeting,
notice of the meeting to such stockholder shall be unnecessary. When any
stockholders' meeting, either annual or special, is adjourned for thirty
days, notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for less than thirty days or of the
business to be transacted at such adjourned meeting, other than an
announcement at the meeting at which such adjournment is taken.
SECTION 6. Fixing of Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders, or any adjournment thereof, or stockholders entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the board of directors shall fix
in advance a date as the record date for any such determination of
stockholders. Such date in any case shall be not more than sixty days, and
in case of a meeting of stockholders, not less than ten days prior to the
date on which the particular action, requiring such determination of
stockholders, is to be taken. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided
in this section, such determination shall apply to any adjournment thereof.
SECTION 7. Voting Lists. The officer or agent having charge of
the stock transfer books for shares of the Corporation shall make, at least
ten days before each meeting of shareholders, a complete record of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of
shares held by each. The record, for a period of ten days before such
meeting, shall be kept on file at the principal office of the Corporation,
and shall be subject to inspection by any shareholder for any purpose
germane to the meeting at any time during usual business hours. Such
record shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any stockholder for any
purpose germane to the meeting during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to who are
the stockholders entitled to examine such record or transfer books or to
vote at any meeting of stockholders.
SECTION 8. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority
of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. The stockholders
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
SECTION 9. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the stockholder or by
his duly authorized attorney in fact. Proxies solicited on behalf of the
management shall be voted as directed by the stockholder or, in the absence
of such direction, as determined by a majority of the board of directors.
No proxy shall be valid after eleven months from the date of its execution
unless otherwise provided in the proxy.
SECTION 10. Voting. At each election for directors every
stockholder entitled to vote at such election shall be entitled to one vote
for each share of stock held by him. Unless otherwise provided in the
Certificate of Incorporation, by Statute, or by these Bylaws, a majority of
those votes cast by stockholders at a lawful meeting shall be sufficient to
pass on a transaction or matter.
SECTION 11. Voting of Shares in the Name of Two or More Persons.
When ownership of stock stands in the name of two or more persons, in the
absence of written directions to the Corporation to the contrary, at any
meeting of the stockholders of the Corporation any one or more of such
stockholders may cast, in person or by proxy, all votes to which such
ownership is entitled. In the event an attempt is made to cast conflicting
votes, in person or by proxy, by the several persons in whose name shares
of stock stand, the vote or votes to which these persons are entitled shall
be cast as directed by a majority of those holding such stock and present
in person or by proxy at such meeting, but no votes shall be cast for such
stock if a majority cannot agree.
SECTION 12. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by any officer,
agent or proxy as the bylaws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation
may determine. Shares held by an administrator, executor, guardian or
conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a
trustee may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without a transfer of such
shares into his name. Shares standing in the name of a receiver may be
voted by such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer thereof into
his name if authority to do so is contained in an appropriate order of the
court or other public authority by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Neither treasury shares of its own stock held by the Corporation,
nor shares held by another corporation, if a majority of the shares
entitled to vote for the election of directors of such other corporation
are held by the Corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares at any given time for
purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any meeting
of stockholders, the board of directors may appoint any persons, other than
nominees for office, as inspectors of election to act at such meeting or
any adjournment thereof. The number of inspectors shall be either one or
three. If the board of directors so appoints either one or three
inspectors, that appointment shall not be altered at the meeting. If
inspectors of election are not so appointed, the chairman of the board or
the president may make such appointment at the meeting. In case any person
appointed as inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment by the board of directors in advance
of the meeting or at the meeting by the chairman or the vice chairman of
the board or the president.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares of stock and
the voting power of each share, the shares of stock represented at the
meeting, the existence of a quorum, the authenticity, validity and effect
of proxies; receiving votes, ballots or consents; hearing and determining
all challenges and questions in any way arising in connection with the
right to vote; counting and tabulating all votes or consents; determining
the result; and such acts as may be proper to conduct the election or vote
with fairness to all stockholders.
SECTION 14. Nominating Committee. The board of directors shall
act as a nominating committee for selecting the management nominees for
election as directors. Except in the case of a nominee substituted as a
result of the death or other incapacity of a management nominee, the
nominating committee shall deliver written nominations to the secretary at
least twenty days prior to the date of the annual meeting. Provided such
committee makes such nominations, no nominations for directors except those
made by the nominating committee shall be voted upon at the annual meeting
unless other nominations by stockholders are made in writing and delivered
to the secretary of the Corporation in accordance with the provisions of
the Corporation's Certificate of Incorporation.
SECTION 15. New Business. Any new business to be taken up at
the annual meeting shall be stated in writing and filed with the secretary
of the Corporation in accordance with the provisions of the Corporation's
Certificate of Incorporation. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports
of officers, directors and committees, but in connection with such reports
no new business shall be acted upon at such annual meeting unless stated
and filed as provided in the Corporation's Certificate of Incorporation.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the
Corporation shall be under the direction of its board of directors. The
board of directors shall annually elect a chairman of the board and a
president from among its members and may, at its discretion, also elect a
vice chairman of the board. The board shall designate, when present,
either the chairman or the vice chairman of the board or the president to
preside at its meetings.
SECTION 2. Number, Term and Election. The board of directors
shall initially consist of ten (10) members and shall be divided into three
classes as nearly equal in number as possible. The members of each class
shall be elected for a term of three years and until their successors are
elected or qualified. The board of directors shall be classified in
accordance with the provisions of the Corporation's Certificate of
Incorporation. The board of directors may increase the number of members
of the board of directors but in no event shall the number of directors be
increased in excess of fifteen.
SECTION 3. Qualification. Each director shall at all times be
the beneficial owner of not less than 100 shares of capital stock of the
Corporation.
SECTION 4. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, the annual meeting of stockholders. The
board of directors may provide, by resolution, the time and place for the
holding of additional regular meetings without other notice than such
resolution.
SECTION 5. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman or the vice
chairman of the board or the president, or by one-third of the directors.
The persons authorized to call special meetings of the board of directors
may fix any place in the State of South Carolina as the place for holding
any special meeting of the board of directors called by such persons.
Members of the board of directors may participate in special
meetings by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Such participation shall constitute presence in person but
directors will not receive any compensation for participation in meetings
by conference telephone.
SECTION 6. Notice. Written notice of any special meeting shall
be given to each director at least two days previous thereto delivered
personally or by telegram or at least five days previous thereto delivered
by mail at the address at which the director is most likely to be reached.
Such notice shall be deemed to be delivered when deposited in the United
States mail so addressed, with postage thereon prepaid if mailed or when
delivered to the telegraph company if sent by telegram. Any director may
waive notice of any meeting by a writing filed with the secretary. The
attendance of a director at a meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted
at, nor the purpose of, any meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
SECTION 7. Quorum. A majority of the number of directors fixed
by Section 2 of this Article III shall constitute a quorum for the
transaction of business at any meeting of the board of directors, but if
less than such majority is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time. Notice of any
adjourned meeting shall be given in the same manner as prescribed by
Section 6 of this Article III.
SECTION 8. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the
act of the board of directors, unless a greater number is prescribed by
these Bylaws, the Certificate of Incorporation, or the laws of Delaware.
SECTION 9. Action Without a Meeting. Any action required or
permitted to be taken by the board of directors at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors.
SECTION 10. Resignation. Any director may resign at any time by
sending a written notice of such resignation to the home office of the
Corporation addressed to the chairman or the vice chairman of the board or
the president. Unless otherwise specified herein such resignation shall
take effect upon receipt thereof by the chairman or the vice chairman
of the board or the president.
SECTION 11. Vacancies. Any vacancy occurring in the board of
directors shall be filled in accordance with the provisions of the
Corporation's Certificate of Incorporation. Any directorship to be filled
by reason of an increase in the number of directors may be filled by the
affirmative vote of two-thirds of the directors then in office. The term
of such director shall be in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 12. Removal of Directors. Any director or the entire
board of directors may be removed only in accordance with the provisions of
the Corporation's Certificate of Incorporation.
SECTION 13. Compensation. Directors, as such, may receive a
stated fee for their services. By resolution of the board of directors, a
reasonable fixed sum, and reasonable expenses of attendance, if any, may be
allowed for actual attendance at each regular or special meeting of the
board of directors. Members of either standing or special committees may
be allowed such compensation for actual attendance at committee meetings as
the board of directors may determine. Nothing herein shall be construed to
preclude any director from serving the Corporation in any other capacity
and receiving remuneration therefor.
SECTION 14. Presumption of Assent. A director of the
Corporation who is present at a meeting of the board of directors at which
action on any corporate matter is taken shall be presumed to have assented
to the action taken unless his dissent or abstention shall be entered in
the minutes of the meeting or unless he shall file his written dissent to
such action with the person acting as the secretary of the meeting before
the adjournment thereof or shall forward such dissent by registered mail to
the secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who votes in
favor of such action.
SECTION 15. Advisory Directors. The board of directors may by
resolution appoint advisory directors to the board, and shall have such
authority and receive such compensation and reimbursement as the board of
directors shall provide. Advisory directors or directors emeriti shall not
have the authority to participate by vote in the transaction of business.
SECTION 16. Age Limitation. No person shall be eligible for
election, reelection, appointment, or reappointment to the board of
directors if such person is then more than 70 years of age. No director
shall serve beyond the annual meeting of the Corporation immediately
following his attainment of 70 years of age. This limitation shall not
apply to a person serving as an advisory director of the Corporation.
ARTICLE IV
Committees of the Board of Directors
The board of directors may, by resolution passed by a majority of
the whole board, designate one or more committees, as they may determine to
be necessary or appropriate for the conduct of the business of the
Corporation, and may prescribe the duties, constitution and procedures
thereof. Each committee shall consist of one or more directors of the
Corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee.
The board of directors shall have power, by the affirmative vote
of a majority of the authorized number of directors, at any time to change
the members of, to fill vacancies in, and to discharge any committee of the
board. Any member of any such committee may resign at any time by giving
notice to the Corporation; provided, however, that notice to the board, the
chairman of the board, the chief executive officer, the chairman of such
committee, or the secretary shall be deemed to constitute notice to the
Corporation. Such resignation shall take effect upon receipt of such
notice or at any later time specified therein; and, unless otherwise
specified therein, acceptance of such resignation shall not be necessary to
make it effective. Any member of any such committee may be removed at any
time, either with or without cause, by the affirmative vote of a majority
of the authorized number of directors at any meeting of the board called
for that purpose.
ARTICLE V
Officers
SECTION 1. Positions. The officers of the Corporation shall be
a president, one or more vice presidents, a secretary and a treasurer, each
of whom shall be elected by the board of directors. The board of directors
may also designate the chairman or the vice chairman of the board as an
officer of the Corporation. The president shall be the chief executive
officer unless the board of directors designates the chairman or the vice
chairman of the board as chief executive officer. The president shall be a
director of the Corporation. The offices of the secretary and treasurer
may be held by the same person and a vice president may also be either the
secretary or the treasurer. The board of directors may designate one or
more vice presidents as executive vice president or senior vice president.
The board of directors may also elect or authorize the appointment of such
other officers as the business of the Corporation may require. The
officers shall have such authority and perform such duties as the board of
directors may from time to time authorize or determine. In the absence of
action by the board of directors, the officers shall have such powers and
duties as generally pertain to their respective offices.
SECTION 2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the board of directors at the
first meeting of the board of directors held after each annual meeting of
the shareholders. If the election of officers is not held at such meeting,
such election shall be held as soon thereafter as possible. Each officer
shall hold office until his successor shall have been duly elected and
qualified or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided. Election or appointment of an
officer, employee or agent shall not of itself create contract rights. The
board of directors may authorize the Corporation to enter into an
employment contract with any officer in accordance with state law; but no
such contract shall impair the right of the board of directors to remove
any officer at any time in accordance with Section 3 of this Article V.
SECTION 3. Removal. Any officer may be removed by vote of
two-thirds of the board of directors whenever, in its judgment, the best
interests of the Corporation will be served thereby, but such removal,
other than for cause, shall be without prejudice to the contract rights, if
any, of the person so removed.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall
be fixed from time to time by the board of directors and no officer shall
be prevented from receiving such salary by reason of the fact that he is
also a director of the Corporation.
ARTICLE VI
Contracts, Loans, Checks and Deposits
SECTION 1. Contracts. To the extent permitted by applicable
law, and except as otherwise prescribed by the Corporation's Certificate of
Incorporation or these Bylaws with respect to certificates for shares, the
board of directors may authorize any officer, employee, or agent of the
Corporation to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation. Such authority
may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name
unless authorized by the board of directors. Such authority may be general
or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation shall be signed by one or more
officers, employees or agents of the Corporation in such manner as shall
from time to time be determined by resolution of the board of directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in any of its duly authorized depositories as the board of
directors may select.
ARTICLE VII
Certificates for Shares and Their Transfer
SECTION 1. Certificates for Shares. The shares of the
Corporation shall be represented by certificates signed by the chairman or
the vice chairman of the board of directors or by the president or a vice
president and by the treasurer or by the secretary of the Corporation,
and may be sealed with the seal of the Corporation or a facsimile thereof.
Any or all of the signatures upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent, or registered by a registrar,
other than the Corporation itself or an employee of the Corporation. If any
officer who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before the certificate is
issued, it may be issued by the Corporation with the same effect as if he
were such officer at the date of its issue.
SECTION 2. Form of Share Certificates. All certificates
representing shares issued by the Corporation shall set forth upon the face
or back that the Corporation will furnish to any shareholder upon request
and without charge a full statement of the designations, preferences,
limitations, and relative rights of the shares of each class authorized to
be issued, the variations in the relative rights and preferences between
the shares of each such series so far as the same have been fixed and
determined, and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series.
Each certificate representing shares shall state upon the face
thereof: that the Corporation is organized under the laws of the State of
Delaware; the name of the person to whom issued; the number and class of
shares; the date of issue; the designation of the series, if any, which
such certificate represents; the par value of each share represented by
such certificate, or a statement that the shares are without par value.
Other matters in regard to the form of the certificates shall be determined
by the board of directors.
SECTION 3. Payment for Shares. No certificate shall be issued
for any shares until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for
the issuance of shares shall be paid in accordance with the provisions of
the Corporation's Certificate of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital
stock of the Corporation shall be made only on its stock transfer books.
Authority for such transfer shall be given only by the holder of record
thereof or by his legal representative, who shall furnish proper evidence
of such authority, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Corporation. Such transfer shall
be made only on surrender for cancellation of the certificate for such
shares. The person in whose name shares of capital stock stand on the
books of the Corporation shall be deemed by the Corporation to be the owner
thereof for all purposes.
SECTION 6. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by Section 7 of Article II or
the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
SECTION 7. Lost Certificates. The board of directors may direct
a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen, or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen, or destroyed. When authorizing
such issue of a new certificate, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen, or
destroyed.
SECTION 8. Beneficial Owners. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in
such shares on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VIII
Fiscal Year; Annual Audit
The fiscal year of the Corporation shall end on the last day of
September of each year. The Corporation shall be subject to an annual
audit as of the end of its fiscal year by independent public accountants
appointed by and responsible to the board of directors.
ARTICLE IX
Dividends
Subject to the provisions of the Certificate of Incorporation and
applicable law, the board of directors may, at any regular or special
meeting, declare dividends on the Corporation's outstanding capital stock.
Dividends may be paid in cash, in property or in the Corporation's own
stock.
ARTICLE X
Corporate Seal
The corporate seal of the Corporation shall be in such form as
the board of directors shall prescribe.
ARTICLE XI
Amendments
In accordance with the Corporation's Certificate of
Incorporation, these Bylaws may be repealed, altered, amended or rescinded
by the stockholders of the Corporation only by vote of not less than 80% of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose
(provided that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting). In addition, the
board of directors may repeal, alter, amend or rescind these Bylaws by vote
of two-thirds of the board of directors at a legal meeting held in
accordance with the provisions of these Bylaws.
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