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 March 31, 1995
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 May 10, 1995
$.01 Par Value 6,290,724
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FIRST FINANCIAL HOLDINGS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Consolidated Statements of Financial Condition
at March 31, 1995 and September 30, 1994 1
Consolidated Statements of Income for the Three
Months Ended March 31, 1995 and 1994 2
Consolidated Statements of Income for the Six
Months Ended March 31, 1995 and 1994 3
Consolidated Statements of Cash Flows for the
Six Months Ended March 31, 1995 and 1994 4
Notes to Financial Statements 5-8
Management's Discussion and Analysis of Results
of Operations and Financial Condition 9-24
PART II - OTHER INFORMATION 25-26
SIGNATURES 27
EXHIBITS
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
<CAPTION>
March 31, September 30,
1995 1994
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 27,791 $ 23,568
Investments held to maturity (market value of $69,011 and $66,974) 69,606 67,997
Investments available for sale, at fair value 39,095 37,897
Investment in capital stock of Federal Home Loan Bank, at cost 11,982 11,982
Loans receivable, net 1,001,737 960,532
Mortgage-backed securities held to maturity (market value
of $21,180 and $22,291) 21,024 22,483
Mortgage-backed securities available for sale, at fair value 83,678 83,137
Accrued interest receivable 8,486 7,862
Office properties and equipment, net 14,905 14,229
Real estate and other assets acquired in settlement of loans 5,222 6,124
Other assets 9,251 8,459
Total assets $1,292,777 $1,244,270
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit accounts $1,056,935 $1,062,995
Advances from Federal Home Loan Bank 87,707 46,406
Securities sold under agreements to repurchase 24,314 13,098
Long-term debt 19,763 19,763
Advances by borrowers for taxes and insurance 3,924 5,864
Outstanding checks 7,534 6,080
Other 6,830 7,392
Total liabilities 1,207,007 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 6,865,138 and 6,822,574 shares at
March 31, 1995 and September 30, 1994, respectively 69 68
Additional paid-in capital 23,534 23,237
Retained income, substantially restricted 69,668 67,098
Unrealized net loss on securities available for sale,
net of income tax (2,328) (2,872)
Treasury stock at cost, 578,409 and 558,214 shares at
March 31, 1995 and September 30, 1994, respectively (5,173) (4,859)
Total stockholders' equity 85,770 82,672
Total liabilities and stockholders' equity $1,292,777 $1,244,270
The accompanying notes are an integral part of the statements.
</TABLE>
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<TABLE>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended
March 31,
1995 1994
(Amounts in thousands,
except per share amounts)
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest on loans and mortgage-backed securities $21,293 $19,485
Interest and dividends on investments 1,365 904
Other 572 559
Total interest income 23,230 20,948
INTEREST EXPENSE
Interest on deposits:
NOW accounts 457 443
Money market accounts 1,281 1,024
Certificate and other accounts 9,864 8,097
Interest on deposits 11,602 9,564
Interest on borrowed money 1,923 1,265
Total interest expense 13,525 10,829
NET INTEREST INCOME 9,705 10,119
Provision for loan losses 26 118
Net interest income after provision for loan losses 9,679 10,001
OTHER INCOME
Net gain (loss) on sale of loans (177)
Loan servicing fees 315 349
Service charges and fees on deposit accounts 927 822
Real estate operations, net (73) (6)
Other 883 876
Total other income 2,052 1,864
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and employee benefits 4,364 4,087
Occupancy costs 718 684
Marketing 238 274
Depreciation, amortization, rental and maintenance
of equipment 595 544
FDIC insurance premiums 637 625
Other 1,805 1,788
Total general and administrative expenses 8,357 8,002
Income before income taxes 3,374 3,863
Income tax expense 1,243 1,100
NET INCOME $ 2,131 $ 2,763
NET INCOME PER COMMON SHARE $ 0.34 $ 0.43
Cash dividends $ 0.14 $ 0.12
Weighted average shares outstanding 6,277 6,415
The accompanying notes are an integral part of the statements.
</TABLE>
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<TABLE>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Six Months Ended
March 31,
1995 1994
(Amounts in thousands,
except per share amounts)
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest on loans and mortgage-backed securities $41,863 $40,110
Interest and dividends on investments 2,678 1,795
Other 1,041 1,148
Total interest income 45,582 43,053
INTEREST EXPENSE
Interest on deposits:
NOW accounts 964 904
Money market accounts 2,566 2,122
Certificate and other accounts 18,978 16,499
Interest on deposits 22,508 19,525
Interest on borrowed money 3,297 2,804
Total interest expense 25,805 22,329
NET INTEREST INCOME 19,777 20,724
Provision for loan losses 133 703
Net interest income after provision for loan losses 19,644 20,021
OTHER INCOME
Net gain on sale of loans - 86
Loan servicing fees 643 710
Service charges and fees on deposit accounts 1,901 1,690
Real estate operations, net (163) (212)
Other 1,594 1,672
Total other income 3,975 3,946
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and employee benefits 8,770 8,133
Occupancy costs 1,473 1,315
Marketing 544 517
Depreciation, amortization, rental and maintenance
of equipment 1,185 1,107
FDIC insurance premiums 1,257 1,315
Other 3,504 3,635
Total general and administrative expenses 16,733 16,022
Income before income taxes 6,886 7,945
Income tax expense 2,558 2,157
NET INCOME $ 4,328 $ 5,788
NET INCOME PER COMMON SHARE $ 0.69 $ 0.90
Cash dividends $ 0.28 $ 0.24
Weighted average shares outstanding 6,274 6,416
The accompanying notes are an integral part of the statements.
</TABLE>
<PAGE>
<TABLE>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
March 31,
1995 1994
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,328 $ 5,788
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 869 790
Gain on sale of loans, net (86)
Gain on sale of investments, net (20) -
Loss on sale of property and equipment, net 6 10
Gain on sale of real estate owned, net (80) (263)
Amortization of unearned discounts/premiums on
investments (27) (18)
Decrease in deferred loan fees and discounts (191) (530)
Increase in receivables and prepaid expenses (1,386) (2,359)
Provision for loan losses 133 703
Write downs of real estate acquired in settlement of loans 116 219
FHLB stock dividends - (298)
Proceeds from sales of loans held for sale 50 64,130
Origination of loans held for sale (62,280)
Increase (decrease) in accounts payable and accrued
expenses 594 (1,829)
Amortization of purchase accounting adjustments 170 (112)
Net cash provided by operating activities 4,562 3,865
INVESTING ACTIVITIES
Proceeds from maturity of investments held to maturity 7,000 14,001
Proceeds, at par, of redemption of mutual funds
available for sale 5,000
Principal collected on investments 380 163
Proceeds from sales of investments held to maturity 3,999 -
Proceeds from saleS of investments available for sale 2,419
Purchases of investments held to maturity (13,018) (24,241)
Purchases of investments available for sale (3,538) (5,961)
Purchases of mutual funds available for sale (4,000)
(Increase) decrease in loans, net (40,853) 18,569
Net increase in credit card receivables (554) (443)
Purchase of loans (813)
Repayment on mortgage-backed securities 5,102 30,229
Purchases of mortgage-backed securities available for sale (3,579) (9,924)
Proceeds from the sales of real estate owned 1,911 2,617
Net purchase of office properties and equipment (1,546) (409)
Net cash provided by investing activities (43,090) 25,601
FINANCING ACTIVITIES
Net increase (decrease) in deposit accounts (6,051) (15,665)
Proceeds from FHLB advances 63,300 6,000
Repayment of FHLB advances (22,000) (38,000)
Net purchase (repurchase) of securities sold under
agreements to repurchase 11,216 (324)
Decrease in funds held for others (1,940) (2,539)
Proceeds from sale of common stock 298 138
Dividends paid (1,758) (1,542)
Treasury stock purchased (314) (1,094)
Net cash used in financing activities 42,751 (53,026)
Net decrease in cash and cash equivalents 4,223 (23,560)
Cash and cash equivalents at beginning of period 23,568 48,140
Cash and cash equivalents at end of period $27,791 $24,580
Supplemental disclosures:
Cash paid during the period for:
Interest $27,103 $24,426
Income taxes 2,831 4,152
Loans foreclosed or insubstance foreclosed 1,078 3,309
Loans securitized into mortgage-backed securities
Increase (decrease) in unrealized net gain (loss) on
securities available for sale, net of income tax 544 (2,149)
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 6,277,387 for
the quarter ended March 31, 1995 as compared to 6,415,266 for the
quarter ended March 31, 1994. The weighted average shares
outstanding amounted to 6,273,918 for the six months ended
March 1, 1995 as compared to 6,416,076 for the six months ended
March 31, 1994.
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 $2.1 million, or $.34 per
share, for the second quarter of fiscal 1995, compared with $2.8
million, or $.43 per share earned in the second quarter of fiscal
1994. One major component of the variance in net income was a
decline in net interest income of $414 thousand compared with the
comparable quarter in fiscal 1995.
During the quarter ending March 31, 1995, the Company
experienced an increase in its average cost of funds of 72 basis
points while its average yield on earning assets increased 36
basis points from the March 1994 quarter. The Federal Reserve
Board of Governors (the "Fed") began to take actions a little
over one year ago to increase short-term interest rates in
response to signs of increased economic activity and possible
future increases in inflation. Since that time the Fed has
steadily increased the Fed funds rate from an average effective
rate of 3.34% in March of 1994 to 5.98% in March of 1995.
During the quarter ending March 31, 1994 - early in the Fed
intervention process - the Company's gross interest margin was
3.29%. During the most recent quarter, the gross margin declined
to 2.93%.
Another major component of the variance in net income for
the comparable periods was an increase in the effective tax rate
in the March 1995 quarter due to the elimination of net operating
loss carryforwards at Peoples Federal. The effective tax rate
for the March 1995 quarter was 36.8% compared to 28.5% in the
March 1994 quarter. Income before taxes for the March 1995
quarter was $3.4 million compared with $3.9 million for the March
1994 quarter.
Net income for the six months ended March 31, 1995, was $4.3
million, or $.69 per share, compared with $5.8 million, or $.90
per share, for the comparable period last year. Income before
taxes was $6.9 million for the current six months, or
approximately $1.1 million lower than in the six months ending
March 31, 1994. The largest variance was in net interest income
which declined $947, or 4.6%, from the previous period. Income
tax expense also increased $401 thousand with a resultant
effective tax rate of 37.1% compared with 27.1% in the six months
ending March 31, 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. Repurchases of 19,900
shares at an average price of $15.53 have been made under the
plan through March 31, 1995.
BALANCE SHEET ANALYSIS
Consolidated assets of the Company totaled $1.29 billion at
March 31, 1995 compared to $1.24 billion at September 30, 1994.
During the six months assets increased $48.5 million principally
as a result of growth of $41.2 million in net loans receivable.
Cash and Investment Securities
Cash, deposits in transit and interest-bearing deposits
increased $4.2 million during the six months and totaled $27.8
million at March 31, 1995. Investments held to maturity
increased by $1.6 million while investments available for sale
increased $1.2 million. 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 six months purchases of investments held to
maturity totaled $13.0 million while purchases of investments
available for sale totaled $3.5 million. Maturities of
investments totaled $7.4 million during the period with sales of
$6.4 million recorded.
Loans and Mortgage-backed Securities
Loans receivable totaled $1.0 billion at March 31, 1995
compared to $960.5 million at September 30, 1994. Mortgage-
backed securities declined $918 thousand in the current six
months to total $104.7 million at March 31, 1995.
The principal use of the Company's funds is the origination
of mortgage and other loans. The Company originated $75.6
million (net of refinances) in mortgage loans, $19.3 million in
consumer loans and $9.6 million in commercial business loans
during the six months ending March 31, 1995. Purchases of
adjustable-rate mortgage-backed securities available for sale
totaled $3.6 million in the six months ending March 31, 1995.
The Company did not originate any loans for sale during the
current period.
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):
Mar. 31, Sept. 30, Mar. 31,
1995 1994 1994
Residential (1-4 family) $ 623,008 $ 582,783 $ 538,145
Other residential 58,280 59,309 59,946
Acquisition and development 5,497 7,674 10,081
Other land and lots 16,720 15,313 14,880
Commercial real estate 188,888 191,976 207,140
Home equity lines of credit 46,266 47,389 48,301
Consumer 66,599 64,204 63,980
Commercial business 24,678 24,962 26,050
Mortgage-backed securities 104,702 105,620 83,038
Total gross loans $1,134,638 $1,099,230 $1,051,561
As the above table indicates, gross loan and mortgage-backed
securities balances increased $35.4 million during the current
six months 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 quarter. 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
$29.4 million at March 31, 1995, compared to $29.2 million at
September 30, 1994. Unused lines of credit on equity loans,
consumer loans, credit cards and commercial loans totaled $89.8
million as of March 31, 1995 compared to $84.8 million at
September 30, 1994.
Asset Quality
Problem assets declined $1.3 million during the first six
months of fiscal 1995, primarily due to a reduction in
renegotiated loans. The following table summarizes the Company's
problem assets for the periods indicated (amounts in thousands):
Mar. 31, Sept. 30, Mar. 31,
1995 1994 1994
Non-accrual loans $ 2,512 $ 1,620 $ 3,535
Loans 90 days or more
past due (1) 1,043 740 540
Renegotiated loans 11,536 13,129 13,536
In-substance foreclosures 3,365 2,834 4,180
Real estate and other
assets acquired in
settlement of loans 1,857 3,290 4,186
Total $20,313 $21,613 $ 25,977
As a percent of net loans
and real estate owned 2.02% 2.24% 2.73%
As a percent of total assets 1.57% 1.74% 2.15%
(1) The Company continues to accrue interest on these loans.
Non-accruing loans and loans contractually delinquent 90 days
or more are comprised of the following types of loans (amounts in
thousands):
Mar. 31, Sept. 30, Mar. 31,
1995 1994 1994
Residential (1-4 family) $1,908 $1,452 $1,916
Other residential - -
Acquisition and development
loans 290
Other land and lots 131 302 982
Commercial real estate 884 285 205
Home equity lines of credit 17
Consumer 145 123 328
Commercial business 487 198 337
Total $3,555 $2,360 $4,075
Loans on non-accrual and loans 90 days or more delinquent
totaled $3.6 million at March 31, 1995, increasing $1.2 million
during the first six months of fiscal 1995.
Renegotiated loans declined $1.6 million during the current
six months. A $1.2 million resort development loan renegotiated
in 1983 was repaid during the current period.
Real estate and other assets acquired in settlement of loans
and in-substance foreclosures declined by $902 thousand during
the current six months. 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 March 31, 1995 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>
<CAPTION>
March 31, 1995 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 $ 2,213 $ 623,008 .36% $ 1,825 $582,783 .31%
Other 1,603 58,280 2.75 1,582 59,309 2.67
Acquisition and
development loans 242 5,497 4.40 382 7,674 4.98
Other land and lot loans 579 16,720 3.46 1,009 15,313 6.59
Commercial real
estate 4,169 188,888 2.21 4,276 191,976 2.23
Commercial business 867 24,678 3.51 750 24,962 3.00
Consumer loans 925 112,865 .82 904 111,593 .81
Total $10,598 $1,029,936 1.03% $10,728 $993,610 1.08%
</TABLE>
The following table provides a summary of activity in the
allowance for loan losses for the first six months of fiscal 1995
(amounts in thousands).
<TABLE>
<CAPTION>
Balance Balance
Sept. 30 Charge- Mar. 31
1994 Additions offs Recoveries 1995
<S> <C> <C> <C> <C> <C>
Real estate $ 9,074 $(128) $212 $ 72 $ 8,806
Commercial business 750 136 3 42 925
Consumer 904 125 219 57 867
Total $10,728 $ 133 $434 $171 $10,598
</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
declined $6.1 million during the six months ending March 31,
1995.
First Financial's deposit composition at the indicated dates
is as follows (amounts in thousands):
<TABLE>
<CAPTION>
March 31, 1995 September 30, 1994 March 31, 1994
% of % of % of
Balance Total Balance Total Balance Total
<S> <C> <C> <C> <C> <C> <C>
Checking accounts $ 110,796 10.48% $ 112,270 10.56% $ 106,780 10.31%
Passbook, statement and
other accounts 133,774 12.66 150,693 14.18 161,334 15.58
Money market funds 127,921 12.10 140,511 13.22 145,745 14.08
Certificate accounts 684,444 64.76 659,521 62.04 621,523 60.03
Total deposits $1,056,935 100.00% $1,062,995 100.00% $1,035,382 100.00%
</TABLE>
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 current six months. Such deposits
comprised $17.4 million or 1.6% of total deposits at March 31,
1995 while there were no comparable brokered deposits at
September 30, 1994 or March 31, 1994.
Borrowings
Primarily as a result of growth in loans receivable during
the six months and the utilization of FHLB advances as a primary
source of funds, total borrowings increased $52.5 million to
total $131.8 million as of March 31, 1995. Approximately $86.3
million in FHLB advances mature within one year from March 31,
1995.
Stockholders' Equity
Stockholders' equity increased $3.1 million during the first
six months of fiscal 1995 to total $85.8 million at March 31,
1995. The Company's capital ratio, total capital to total
assets, was 6.63% at March 31, 1995, compared to 6.64% at
September 30, 1994. During the current six months, the Company
paid cash dividends of $.28 per share compared with $.24 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
March 31, 1995, 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 March 31 1995:
<TABLE>
<CAPTION>
First Federal Peoples Federal
Percent of Percent of
Amount Assets Amount Assets
(Amounts in thousands)
<S> <C> <C> <C> <C>
Tangible capital $71,925 7.63% $26,815 7.79%
Tangible capital requirement 14,144 1.50 5,162 1.50
Excess $57,781 6.13% $21,653 6.29%
Core capital $71,925 7.63% $26,815 7.79%
Core capital requirement 28,289 3.00 10,323 3.00
Excess $43,636 4.63% $16,492 4.79%
Risk-based capital(a) $78,145 11.93% $26,815 14.91%
Minimum risk-based capital requirement(a) 52,392 8.00 14,382 8.00
Excess(a) $25,753 3.93% $12,433 6.91%
____________________________
(a) Based on total risk-weighted assets.
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.
</TABLE>
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 7.29% for the current six months compared to 9.41% for
the comparable period in fiscal 1994. Peoples Federal's average
liquidity ratio was 9.90% during the present six months compared
with 9.21% in the comparable 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 six months the Company experienced a net
cash outflow from investing activities of $43.1 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 $4.6 million from
operating activities and $42.8 million from financing activities.
Financing activities consisted principally of $41.3 million in
FHLB advances and $11.2 million of 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 March 31, 1995, First Financial had cash reserves and
marketable securities of $7.2 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>
<CAPTION>
March 31, September 30, March 31,
1995 1994 1994
<S> <C> <C> <C>
Interest-earning assets maturing or
repricing within one year $880,730 $842,471 $788,849
Interest-bearing liabilities maturing or
repricing within one year 777,009 681,467 631,513
Cumulative gap $103,721 $161,004 $157,336
Gap as a percent of
total assets 8.02% 12.94% 13.04%
</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 8.02% during the
current six 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 March 31, 1995 AND 1994
Net Interest Income
First Financial's net interest income for the three months
ending March 31, 1995 was $9.7 million compared with $10.1
million for the comparable quarter in fiscal 1994. The gross
interest margin declined from 3.29% in the prior quarter to 2.93%
in the current quarter and reflects a greater increase in the
Company's average cost of funds than its average yield on earning
assets.
Average yields on earning assets were 7.58% and 7.22% in the
March 1995 and 1994 periods. Interest rates paid on deposits and
borrowings increased from one year ago resulting in a increase of
72 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>
<CAPTION>
Quarter Ending March 31,
1995 1994
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
<S> <C> <C> <C> <C>
Loans and mortgage-backed securities $1,113,437 7.76% $1,042,761 7.57%
Other interest-earning assets 129,417 6.07 133,300 4.44
Total interest-earning assets $1,242,854 7.58 $1,176,061 7.22
Deposits 1,060,445 4.44 $1,035,892 3.74
Borrowings 117,758 6.60 79,322 6.41
Total interest-bearing liabilities $1,178,203 4.65 $1,115,214 3.93
Gross interest margin 2.93% 3.29%
Net interest margin 3.12% 3.44%
</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):
Quarter Ending March 31,
1995 versus 1994
Volume Rate Total
Interest income:
Loans and mortgage-backed
securities $1,319 $ 489 $1,808
Investments and other
interest-earning assets (44) 518 474
Total interest income 1,275 1,007 2,282
Interest expense:
Deposit accounts 229 1,809 2,038
Borrowings 620 38 658
Total interest expense 849 1,847 2,696
Net interest income $ 426 $ (840) $ (414)
Total interest income for the current quarter of $23.2
million represents growth of $2.3 million from the comparative
quarter in fiscal 1994. Average balances of earning assets
increased $66.8 million during the current quarter compared to
the March 1994 quarter. Average yields on loans and mortgage-
backed securities increased by 19 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 loans reprice on an annual
basis.
The average yield on all other earning assets increased from
4.44% in the prior quarter to 6.07% in the current quarter. The
average yield increased 163 basis points in the current quarter
as short-term interest rates increased substantially from year-
ago levels.
Total interest expense increased $2.7 million during the
current quarter, with average interest-bearing liability balances
increasing by $63.0 million. An increasingly competitive deposit
market resulted in a higher cost of funds during the quarter.
The average cost of deposits increased 70 basis points while the
average cost of borrowings increased 19 basis points. The
Company's overall cost of funds increased 72 basis points to
4.65% from 3.93% in the prior period.
Provision for Loan Losses
During the current quarter, First Financial's provision for
loan losses totaled $26 thousand, compared to $118 thousand
during the same period in the previous year. Net charge-offs for
the current quarter totaled $117 thousand compared with $434
thousand in the comparable quarter in fiscal 1994. Total loan
loss reserves as of March 31, 1995 and 1994 were $10.6 million
and $10.9 million, respectively. Loan loss reserves as a
percentage of the total net loan portfolio, excluding mortgage-
backed securities, were 1.06% and 1.16% at March 31, 1995 and
1994, respectively.
Other Income
Net losses of $177 thousand were incurred on the sale of
mortgage loans during the March 31, 1994 quarter. Sales of
fixed-rate residential loans originated for sale totaled $33.8
million in the prior quarter. There were virtually 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 $34 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 $105 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 $73
thousand and $6 thousand in the quarters ending March 31, 1995
and 1994, respectively.
General and Administrative Expenses
General and administrative expenses increased $355 thousand
during the current quarter. General and administrative expenses
as a percentage of average assets declined from 2.63% in the
March 31, 1994 quarter to 2.61% in the current quarter. Salaries
and benefits increased $277 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 522 as of March 31, 1994 to 507 at
March 31, 1995.
Other expenses increased moderately in the current quarter
and were primarily attributable to higher costs related to
increased numbers of deposit accounts serviced and 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. 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 36.8% compared to 28.5% in the comparable quarter. The
actual tax provision of $1.2 million resulted in an increase of
$143 thousand from the prior period. The increased effective rate
is attributable to the elimination of net operating losses at
Peoples Federal.
COMPARISON OF OPERATING RESULTS
SIX MONTHS ENDING March 31, 1995 AND 1994
Net Interest Income
First Financial's net interest income for the six months
ending March 31, 1995 was $19.8 million compared with $20.7
million for the comparable six months in fiscal 1994. The gross
interest margin declined from 3.26% in the prior six months to
2.99% in the current six months.
The following table summarizes rates, yields and average
earning asset and costing liability balances for the respective
periods (amounts in thousands):
<TABLE>
Six Months Ending March 31,
1995 1994
<CAPTION>
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
<S> <C> <C> <C> <C>
Loans and mortgage-backed securities $1,101,608 7.62% $1,060,320 7.59%
Other interest-earning assets 126,607 5.89 133,451 4.42
Total interest-earning assets $1,228,215 7.44 $1,193,771 7.23
Deposits $1,059,944 4.26 $1,042,207 3.76
Borrowings 102,430 6.50 87,113 6.45
Total interest-bearing liabilities $1,162,374 4.45% $1,129,320 3.97%
Gross interest margin 2.99% 3.26%
Net interest margin 3.22% 3.47%
</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>
Six Months Ending March 31
1995 versus 1994
<CAPTION>
Volume Rate Total
<S> <C> <C> <C>
Interest income:
Loans and mortgage-backed
securities $1,591 $ 162 $1,753
Investments and other
interest-earning assets (158) 934 776
Total interest income 1,433 1,096 2,529
Interest expense:
Deposit accounts 338 2,645 2,983
Borrowings 472 21 493
Total interest expense 810 2,666 3,476
Net interest income $ 623 $(1,570) $ (947)
</TABLE>
Provision for Loan Losses
During the current six months, First Financial's provision
for loan losses totaled $133 thousand, compared to $703 thousand
during the same period in the previous year. Net charge-offs for
the current six months totaled $263 thousand compared with $547
thousand in the comparable period in fiscal 1994.
Other Income
Net gains on the sale of mortgage loans totaled $86 thousand
during the six months ending March 31, 1995. Sales of fixed-rate
residential loans originated for sale totaled $64.1 million in
the prior period. There were virtually no loan sales during the
current six months.
Loan servicing fee income declined $67 thousand in the
current six months, primarily as a result of decreases in
balances of loans serviced and respective servicing fees. Fees
on deposit accounts increased $211 thousand during the current
period. Real estate operations, net, produced losses of $163
thousand and $212 thousand in the six months ending March 31,
1995 and 1994, respectively.
General and Administrative Expenses
General and administrative expenses increased $711 thousand
during the current six months. General and administrative
expenses as a percentage of average assets increased from 2.60%
in the prior period to 2.64% in the current period. Salaries and
benefits increased $637 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.
FDIC insurance premiums were $58 thousand lower in the
current six months 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.
Income Tax Expense
During the first six months, the Company's effective tax rate
was 37.1% compared to 27.1% in the comparable period. The actual
tax provision of $2.6 million resulted in an increase of $401
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. Alternative solutions to the problem are now being
considered by Congress as well as the FDIC and other regulatory
agencies.
The federal banking agencies have finally completed their two
year effort to overhaul regulations implementing the Community
Reinvestment Act ("CRA'). The final rule is the culmination of
two proposal efforts made in response to President Clinton's July
1993 request that the agencies review and revise the CRA
regulations to make them more performance-based, objective, and
less burdensome. The rule replaces the twelve assessment factors
used to evaluate CRA performance with three tests, the lending,
investment and service tests, and the lending test will carry the
primary emphasis. Full implementation of the rule will begin
July 1, 1997, but institutions may opt to be evaluated under the
new requirements as early as January 1, 1996, provided they have
sufficient data collected. In all cases, data collection
requirements begin January 1, 1996.
<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
Not applicable.
Item 5 - Other Information
None
Item 6 - Exhibits and Report on Form 8-K.
Exhibits
No. 3. Amended Bylaws
Report on Form 8-K
On January 27, 1995, the Company filed a Form 8-K announcing
that A. L. Hutchinson, Jr., was named Vice Chairman of First
Financial and its subsidiary, First Federal. He will also remain
President and Chief Executive Officer of First Financial.
A. Thomas Hood was named Executive Vice President and Chief
Operating Officer of First Financial and President and Chief
Executive Officer and Treasurer of First Federal of Charleston.
He will continue to serve as Chief Financial Officer and
Treasurer of First Financial. The Vice Chairman and Chief
Operating Officer positions are newly created positions. All of
the announced changes became effective February 1, 1995.
On January 30, 1995, the Company filed a form 8-K announcing
the commencement of a stock repurchase program to acquire up to
250,000 shares, or 4%, of the Company's outstanding common stock.
<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: May 10, 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 County 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 principal place of
business 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(s) for which the meeting is called
shall be mailed by the secretary or the officer performing his or her 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 mail, addressed
to the stockholder at the 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 prepaid. If a stockholder is present at a
meeting, or in writing waives 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, 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 fewer 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.
SECTION 7. Voting Lists. At least ten days before each meeting of
the stockholders, the officer or agent having charge of the stock transfer
books for shares of the Corporation shall make a complete record of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address 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 entire time of the meeting. The original stock transfer books shall
constitute prima facie evidence of 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 constitute 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 or her 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 or her. 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 or her, either in person or by proxy, without a transfer of such
shares into his or her name. Shares standing in the name of a trustee may be
voted by him or her, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him or her without a transfer of such shares
into his or her 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 or her 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.
Any such appointment shall not be altered at the meeting. If inspectors of
election are not so appointed, the chairman or the vice 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 forty-eight hours when delivered personally or
by telegram or at least five days thereto when 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 mail so addressed, with
postage 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 on 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 or her dissent or abstention shall be entered in the minutes
of the meeting or unless his or her written dissent to such action is filed
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 seventy years of age. No director shall
serve beyond the annual meeting of the Corporation immediately following his
or her attainment of seventy 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 or her successor shall have been duly elected and
qualified or until the officer's death, resignation or removal in the manner
hereinafter provided. Election or appointment of an officer, employee or
agent shall not of itself create contractual 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 contractual 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 or she 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 or she 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 or her legal representative, who shall furnish proper evidence of such
authority, or by his or her attorney authorized by duly executed power of
attorney 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 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 or her 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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