UNITED STATES
SECURITY 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 June 30, 1997
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
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 July 31, 1997
$.01 Par Value 6,365,860
<PAGE>
FIRST FINANCIAL HOLDINGS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Consolidated Statements of Financial Condition
at June 30, 1997 and September 30, 1996 1
Consolidated Statements of Income for the Three
Months Ended June 30, 1997 and 1996 2
Consolidated Statements of Income for the Nine
Months Ended June 30, 1997 and 1996 3
Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 1997 and 1996 4
Notes to Financial Statements 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 12
PART II - OTHER INFORMATION 26
SIGNATURES 28
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>
<CAPTION>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, September 30,
1997 1996
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 48,234 $ 34,124
Investments held to maturity (market value of
$17,437 and $27,417) 17,478 27,487
Investments available for sale, at fair value 42,527 66,434
Investment in capital stock of Federal Home Loan
Bank, at cost 21,003 15,620
Loans receivable, net 1,369,392 1,278,757
Loans held for sale 7,638 1,353
Mortgage-backed securities available for sale, at
fair value 111,993 82,991
Accrued interest receivable 10,046 9,799
Office properties and equipment, net 15,490 16,125
Real estate and other assets acquired in
settlement of loans 12,765 2,326
Other assets 10,612 11,133
Total assets $ 1,667,178 $1,546,149
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit accounts $ 1,069,217 $ 1,061,617
Advances from Federal Home Loan Bank 420,052 312,402
Securities sold under agreements to repurchase 25,685 16,805
Long-term debt 19,763 19,763
Advances by borrowers for taxes and insurance 5,287 7,341
Other 25,295 33,426
Total liabilities 1,565,299 1,451,354
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
7,041,625 and 6,974,645 shares at
June 30, 1997 and September 30, 1996,
respectively 70 70
Additional paid-in capital 25,413 24,543
Retained income, substantially restricted 82,871 75,780
Unrealized net gain on securities available for
sale, net of income tax 979 341
Treasury stock at cost, 684,837 and 617,096
shares at June 30, 1997 and September 30, 1996,
respectively (7,454) (5,939)
Total stockholders' equity 101,879 94,795
Total liabilities and stockholders' equity $ 1,667,178 $ 1,546,149
The accompanying notes are an integral part of the statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
June 30,
1997 1996
(Amounts in thousands,
except per share amounts)
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest on loans and mortgage-backed securities $ 29,133 $ 26,001
Interest and dividends on investments 989 1,331
Other 543 655
Total interest income 30,665 27,987
INTEREST EXPENSE
Interest on deposits 11,898 12,205
Interest on borrowed money 6,501 4,278
Total interest expense 18,399 16,483
NET INTEREST INCOME 12,266 11,504
Provision for loan losses 600 498
Net interest income after provision for loan 11,666 11,006
losses
OTHER INCOME
Net gain on sale of loans 67 2
Net gain on sale of investment securities 205 6
Loan servicing fees 286 284
Service charges and fees on deposit accounts 1,375 1,152
Commissions on insurance 446 441
Brokerage fees 154 157
Bank card fees 381 264
Real estate operations, net (4) (94)
Other 324 287
Total other income 3,234 2,499
NON-INTEREST EXPENSE
Salaries and employee benefits 4,979 4,599
Occupancy costs 844 793
Marketing 488 334
Depreciation, amortization, rental and
maintenance of equipment 663 644
FDIC insurance premiums 172 631
Other 2,042 1,766
Total non-interest expense 9,188 8,767
Income before income taxes 5,712 4,738
Income tax expense 2,109 1,714
NET INCOME $ 3,603 $ 3,024
NET INCOME PER COMMON SHARE $ 0.55 $ 0.47
Cash dividends $ 0.18 $ 0.16
Weighted average shares outstanding 6,340 6,370
The accompanying notes are an integral part of the statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended
June 30,
1997 1996
(Amounts in thousands,
except per share amounts)
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest on loans and mortgage-backed securities $ 85,123 $ 76,015
Interest and dividends on investments 3,208 3,965
Other 1,860 2,044
Total interest income 90,191 82,024
INTEREST EXPENSE
Interest on deposits 35,898 37,439
Interest on borrowed money 17,832 11,206
Total interest expense 53,730 48,645
NET INTEREST INCOME 36,461 33,379
Provision for loan losses 1,650 1,223
Net interest income after provision for loan 34,811 32,156
losses
OTHER INCOME
Net gain on sale of loans 185 4
Net gain on sale of investment securities 210 38
Loan servicing fees 893 880
Service charges and fees on deposit accounts 3,969 3,423
Commissions on insurance 1,332 1,244
Brokerage fees 433 234
Bank card fees 1,071 720
Real estate operations, net (72) (174)
Other 1,038 951
Total other income 9,059 7,320
NON-INTEREST EXPENSE
Salaries and employee benefits 14,709 13,446
Occupancy costs 2,538 2,385
Marketing 1,136 953
Depreciation, amortization, rental and 1,960 1,873
maintenance of equipment
FDIC insurance premiums 822 1,929
Other 6,074 5,642
Total non-interest expense 27,239 26,228
Income before income taxes 16,631 13,248
Income tax expense 6,122 4,802
NET INCOME $ 10,509 $ 8,446
NET INCOME PER COMMON SHARE $ 1.66 $ 1.33
Cash dividends $ 0.54 $ 0.48
Weighted average shares outstanding 6,329 6,337
The accompanying notes are an integral part of the statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
June 30,
1997 1996
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 10,509 $ 8,446
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 1,483 1,385
Gain on sale of loans, net (185) (4)
Gain on sale of investments, net (210) (38)
(Gain) Loss on sale of property and equipment, net 24 (9)
(Gain) loss on sale of real estate owned, net 27 (101)
Amortization of unearned discounts/premiums on
investments 250 120
Decrease in deferred loan fees and discounts (247) (311)
(Increase) decrease in receivables and prepaid
expenses 298 (1,589)
Provision for loan losses 1,650 1,223
Write downs of real estate acquired in settlement
of loans 24 77
Proceeds from sales of loans held for sale 32,808 989
Origination of loans held for sale (39,093) (989)
Increase (decrease) in accounts payable and
accrued expenses (8,460) 2,569
Net cash provided by (used in) operating
activities (1,122) 11,768
INVESTING ACTIVITIES
Proceeds from maturity of investments 18,100 21,127
Proceeds from sale of investments 7,065 8,909
Net redemption (purchase) of mutual funds
available for sale 9,016 (1,625)
Purchase of investments (26,915)
Purchase of FHLB stock (5,383) (2,863)
Increase in loans, net (73,924) (129,290)
Increase in credit card receivables (658) (488)
Purchase of loans and loan participations (29,410) (23,793)
Repayments on mortgage-backed securities 12,589 16,784
Purchase of mortgage-backed securities (52,406) (14,151)
Proceeds from sale of mortgage-backed securities 11,453
Proceeds from the sales of real estate owned 1,649 2,557
Net purchase of office properties and equipment (872) (2,067)
Net cash used in investing activities (102,781) (151,815)
FINANCING ACTIVITIES
Net increase (decrease) in deposit accounts 7,600 (11,664)
Net proceeds of FHLB advances 107,650 169,054
Increase (decrease) of securities sold under
agreements to repurchase 8,880 (7,648)
Decrease in funds held for others (2,054) (395)
Proceeds from sale of common stock 870 691
Dividends paid (3,418) (3,041)
Treasury stock purchased (1,515) (250)
Net cash provided by financing activities 118,013 146,747
Net increase in cash and cash equivalents 14,110 6,700
Cash and cash equivalents at beginning of period 34,124 24,486
Cash and cash equivalents at end of period $ 48,234 $ 31,186
Supplemental disclosures:
Cash paid during the period for:
Interest $ 53,183 $ 57,155
Income taxes 3,748 3,562
Loans foreclosed 12,184 1,480
Unrealized net gain on securities available for
sale, net of income tax 638 75
Transfers of securities held to maturity to
available for sale -- 50,185
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 6,339,615
for the quarter ended June 30, 1997 as compared to 6,370,317 for
the quarter ended June 30, 1996. The weighted average shares
outstanding amounted to 6,328,985 for the nine months ended June
30, 1997 as compared to 6,336,558 for the nine months ended June
30, 1996.
Adoption of SFAS 114 and SFAS 118
The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" ("SFAS 114"), on October 1, 1995. SFAS
114 requires that all creditors value all specifically reviewed
loans for which it is probable that the creditor will be unable
to collect all amounts due according to the terms of the loan
agreement at the loan s fair value. Fair value may be
determined based upon the present value of expected cash flows,
market price of the loan, if available, or the value of the
underlying collateral. Expected cash flows are required to be
discounted at the loan's effective interest rate.
SFAS 114 was amended by SFAS 118, "Accounting by Creditors
for Impairment of a Loan -- Income Recognition and Disclosures,"
to allow a creditor to use existing methods for recognizing
interest income on an impaired loan and by requiring additional
disclosures about how a creditor recognizes interest income
related to impaired loans.
A loan is also considered impaired if its terms are modified
in a troubled debt restructuring after October 1, 1995. For
these accruing impaired loans, cash receipts are typically
applied to principal and interest receivable in accordance with
the terms of the restructured loan agreement. Interest income
is recognized on these loans using the accrual method of
accounting.
Investments in Debt and Equity 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 SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("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.
Debt 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 in the Consolidated Statements
of Operations.
Debt and equity securities that are purchased 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 debt and equity 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
fair value. Changes in the fair value of debt and equity
securities available for sale are included in stockholders'
equity as unrealized 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
Operations. Realized gains or losses on available for sale
securities are computed on the specific identification basis.
In November 1995, the FASB issued a Special Report as an aid
in understanding and implementing SFAS 115. The Special Report
included guidance that caused the Company to reassess the
appropriateness of the classifications of all securities held
and account for any resulting reclassifications at fair value in
accordance with SFAS 115. During the first quarter of fiscal
1996, the Company reclassified $32,161 of investment securities
and $18,024 of mortgage-backed securities from held to maturity
to available for sale.
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. The
obligations to repurchase securities sold are reflected as a
liability and the securities underlying the agreements continue
to be reflected as assets in the Consolidated Statements of
Financial Condition.
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 product for portfolio lending purposes. The
Company's consumer loans include lines of credit, auto loans,
marine loans, mobile home 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
deferred and offset by the deferral of certain direct expenses
associated with loans originated. The net deferred 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.
Allowance for Loan Losses
The Company provides for loan losses on the allowance
method. Accordingly, all loan losses are charged to the related
allowance and all recoveries are credited to the allowance.
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. The allowance for loan losses is subject to
periodic evaluation by various regulatory authorities and may be
subject to adjustment upon their examination.
The Company considers a loan to be impaired when, based upon
current information and events, it believes it is probable that
the Company will be unable to collect all amounts due according
to the contractual terms of the loan agreement on a timely
basis. The Company's impaired loans include loans identified as
impaired through review of the non-homogeneous portfolio and
troubled debt restructurings. Specific valuation allowances are
established on impaired loans for the difference between the
loan amount and the fair value less estimated selling costs.
Impaired loans may be left on accrual status during the period
the Company is pursuing repayment of the loan. Such loans are
placed on non-accrual status at the point either: (1) they
become 90 days delinquent; or (2) the Company determines the
borrower is incapable of, or has ceased efforts toward,
continuing performance under the terms of the loan. Impairment
losses are recognized through an increase in the allowance for
loan losses and a corresponding charge to the provision for loan
losses. Adjustments to impairment losses due to changes in the
fair value of the collateral properties for impaired loans are
included in provision for loan losses. When an impaired loan is
either sold, transferred to real estate owned or written down,
any related valuation allowance is charged off.
Increases to the allowance for loan losses are charged by
recording a provision for loan losses. Charge-offs to the
allowance are made when all, or a portion, of the loan is
confirmed as a loss based upon management's review of the loan
or through possession of the underlying security or through a
troubled debt restructuring transaction. Recoveries are
credited to the allowance.
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 less estimated costs
to sell. Costs relating to the development and improvement of
such property are capitalized, whereas those costs relating to
holding the property are charged to expense.
Risk Management Instruments
Risk management instruments are utilized to modify the
interest rate characteristics of related assets or liabilities
or hedge against changes in interest rates or other exposures as
part of the Company's asset and liability management process.
Instruments must be designated as hedges and must be effective
throughout the hedge period.
Gains and losses associated with futures and forward
contracts used as effective hedges of existing risk positions or
anticipated transactions are deferred as an adjustment to the
carrying value of the related asset and liability and recognized
in income over the remaining term of the related asset or
liability.
The Company also utilizes forward delivery contracts and
options for the sale of mortgage-backed securities to reduce the
interest rate risk inherent in mortgage loans held for sale and
the commitments made to borrowers for mortgage loans which have
not been funded. These financial instruments are considered in
the Company's valuation of its mortgage loans held for sale
which are carried at the lower of cost or market.
Risks and Uncertainties
In the normal course of its business the Company encounters
two significant types of risk: economic and regulatory. There
are three main components of economic risk: interest rate risk,
credit risk and market risk. The Company is subject to interest
rate risk to the degree that its interest-bearing liabilities
mature or reprice at different speeds, or on different bases,
than its interest-earning assets. Credit risk is the risk of
default on the Company's loan portfolio that results from
borrowers' inability or unwillingness to make contractually
required payments. Market risk reflects changes in the value of
collateral underlying loans receivable, the valuation of real
estate held by the Company, and the valuation of loans held for
sale, mortgage-backed securities available for sale, purchased
mortgage servicing rights, and capitalized servicing fees
receivable.
The Company is subject to the regulations of various
government agencies. These regulations can and do change
significantly from period to period. The Company also undergoes
periodic examinations by the regulatory agencies, which may
subject it to further changes with respect to asset valuations,
amounts of required loss allowances and operating restrictions
resulting from the regulators' judgments based on information
available to them at the time of their examination.
In preparing the consolidated financial statements,
management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the dates
of the Consolidated Statements of Financial Condition and the
Consolidated Statements of Operations for the periods covered.
Actual results could differ significantly from those estimates
and assumptions.
Income Taxes
Because some income and expense items are recognized in
different periods for financial reporting purposes and for
purposes of computing currently payable income taxes, a
provision or credit for deferred income taxes is made for such
temporary differences at currently enacted income tax rates
applicable to the period in which realization or settlement is
expected. As changes in tax laws or rates are enacted, deferred
tax assets and liabilities are adjusted through the provision
for income taxes.
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 periods' net income or retained
income 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's earnings for the third quarter of 1997
increased 19% over the comparable quarter in 1996. First
Financial earned $3.6 million in the June 1997 quarter compared
to $3.0 million in the June 1996 quarter. Per share earnings of
$.57 in the most recent quarter improved 21% over per share
earnings of $.47 in the June 1996 quarter. First Financial
earned $10.5 million in the first nine months of 1997,
increasing 24% over earnings of $8.4 million in the comparable
nine months of 1996. Per share earnings increased to $1.66 for
the nine months ended June 30, 1997 compared with $1.33 per
share for the comparable period in 1996.
On June 25, 1997 the Company announced the signing of a
definitive agreement to acquire Investors Savings Bank of South
Carolina. Founded in 1984, Investors Savings Bank has
approximately $63.9 million in total assets, $56.6 million in
deposits, $46.9 million in loans and $7.1 million in
shareholders equity at June 30, 1997. Investors Savings Bank
operates two full service branches in the City of Florence,
South Carolina. The shareholders of Investors Savings Bank will
receive $45.00 per share in common stock of First Financial for
all outstanding shares of Investors Savings Bank for total
consideration of approximately $11.7 million. The acquisition,
which has been approved by the boards of directors of each
company, is subject to, among other things, approval by the
regulators and Investors Savings Bank shareholders. The
transaction is expected to close in October, 1997.
BALANCE SHEET ANALYSIS
Consolidated assets of the Company totaled $1.7 billion at
June 30, 1997. During the first nine months of 1997 assets
increased $121 million, or 10.44% on an annualized basis.
Cash, Investment Securities and Mortgage-backed Securities
Cash, deposits in transit and interest-bearing deposits
increased $14.1 million during the nine months and totaled $48.2
million at June 30, 1997. Investments held to maturity declined
by $10.0 million while investments available for sale declined
$23.9 million. Maturities and sales of investments totaled
$25.2 million during the nine months and mutual fund balances
were also reduced $9.0 million during the period.
Mortgage-backed securities totaled $112.0 million at June
30, 1997, increasing $29.0 million during the first nine months
of 1997. The Company has utilized cash flows from maturities
and sales of investments to increase its mortgage-backed
securities and improve overall earning asset yields.
Loans Receivable
Loans receivable, including loans held for sale, totaled
approximately $1.4 billion at June 30, 1997, increasing $96.9
million from September 30, 1996. The principal use of the
Company's funds is the origination of mortgage and other loans.
The Company originated $209.5 million (net of refinances) in
mortgage loans, $48.9 million in consumer loans and $17.7
million in commercial business loans during the nine months
ended June 30, 1997. The Company also purchased $29.4 million
in loans from correspondent originators. The Company sold $32.8
million in fixed-rate mortgage loans during the current nine
months.
Loans comprise the major portion of interest-earning assets
of the Company, accounting for 83% of assets at June 30, 1997.
The Company s loan portfolio consists of real estate mortgage
and construction loans, home equity and other consumer loans,
credit card receivables and commercial business loans.
Management believes it continues to reduce the risk elements of
its loan portfolio through strategies focusing on residential
mortgage and consumer loan production. The following table
summarizes the composition of the Company's gross loan portfolio
(amounts in thousands):
<TABLE>
<CAPTION>
June 30, % of September % of June 30, % of
1997 Total 30, 1996 Total 1996 Total
<S> <C> <C> <C> <C> <C> <C>
Residential (1-4
family) $1,002,010 70.7% $ 903,269 68.5% $ 857,221 67.4%
Other residential 55,360 3.9 56,629 4.3 55,772 4.4
Land and lots 50,169 3.5 38,367 2.9 33,519 2.7
Commercial real
estate 155,012 10.9 173,692 13.2 179,655 14.1
Consumer 127,866 9.0 120,285 9.1 117,083 9.2
Commercial
business 27,707 2.0 26,634 2.0 28,056 2.2
Total gross loans $1,418,124 100.0% $1,318,876 100.0% $1,271,306 100.0%
</TABLE>
As the above table indicates, gross loan balances increased
$99.2 million during the current nine months principally due to
growth in 1-4 family residential loans. These loans currently
comprise 70.7% of total gross loans, increasing from 67.4% one
year ago. Outstanding commitments to originate mortgage loans
and to fund the undisbursed portion of construction loans
amounted to $50.0 million at June 30, 1997, compared to $47.1
million at September 30, 1996. Unused lines of credit on equity
loans, consumer loans, credit cards and commercial loans totaled
$124.4 million as of June 30, 1997 compared to $ 116.6 million
at September 30, 1996.
The Company originates the majority of its loans in its
primary market area located in the coastal region of South
Carolina. In an effort to expand mortgage lending operations
and improve earning asset growth the Company began originating
mortgage loans in other markets in 1995. The Company utilizes
its existing mortgage loan products and programs in establishing
correspondent relationships with other lenders.
Asset Quality
The following table summarizes the Company's problem assets for
the periods indicated (amounts in thousands):
June 30, September 30, June 30,
1997 1996 1996
Non-accrual loans $ 7,164 $ 8,129 $ 8,162
Loans 90 days or more delinquent (1) 718 1,278 1,124
Renegotiated loans 6,985 8,049 8,282
Real estate and other assets acquired
in settlement of loans 12,765 2,326 2,466
Total $ 27,632 $ 19,782 $ 20,034
As a percent of net loans and real
estate owned 1.99% 1.54% 1.62%
As a percent of total assets 1.66% 1.28% 1.32%
(1) The Company continues to accrue interest on these loans.
Real estate and other assets acquired in settlement of loans
increased $10.4 million in the nine months ended June 30, 1997.
This increase was attributable to the acquisition through
foreclosure of two properties with carrying balances of $11.3
million. The loans on these properties had been current as of
September 30, 1996, but the borrower became seriously delinquent
in the March 1997 quarter and the Company moved rapidly to
acquire the properties.
One property with a carrying value of $6.6 million is
collateralized by a 107,000 square foot shopping center and out
parcels in Summerville, South Carolina. The second property
with a carrying value of $4.7 million is collateralized by a
92,000 square foot shopping center in North Charleston, South
Carolina. Assessments are being conducted by a commercial
property management company for maintenance, upgrading and
tenant mix. Both properties have reasonable occupancy levels
and negotiations are underway presently with possible tenants
for existing vacancies. Management believes it will be
successful in correcting noted deficiencies, improving occupancy
levels and marketing the properties for sale.
Non-accruing loans and loans contractually delinquent 90
days or more are comprised of the following types of loans
(amounts in thousands):
June 30, September June 30,
1997 30, 1996 1996
Residential (1-4 family) $1,762 $ 3,190 $ 3,675
Other residential 2,827 2,928 2,916
Land and lots 1,555 1,514 463
Commercial real estate 132 607 708
Consumer 870 512 449
Commercial business 736 656 1,075
Total $7,882 $ 9,407 $ 9,286
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 June 30, 1997 and September 30, 1996 (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>
June 30, 1997 September 30, 1996
% of % of
Allowance Allowance
Gross Loan to Gross Loan to
Allowance Balance Balance Allowance Balance Balance
<S> <C> <C> <C> <C> <C> <C>
Residential loans:
1-4 family $ 1,847 $ 1,002,010 0.18% $ 1,872 $ 903,269 .21%
Other 2,353 55,360 4.25 2,465 56,629 4.35
Land and lot loans 1,548 50,169 3.09 1,410 38,367 3.68
Commercial real estate 3,317 155,012 2.14 3,240 173,692 1.87
Commercial business 1,036 27,707 3.74 925 26,634 3.47
Consumer loans 1,503 127,866 1.18 1,290 120,285 1.07
Total $ 11,604 $ 1,418,124 0.82% $ 11,202 $ 1,318,876 0.85%
</TABLE>
The following table provides a summary of activity in the
allowance for loan losses for the first nine months of fiscal
1997 (amounts in thousands).
Balance Balance
September June 30,
30, 1996 Additions Chargeoffs Recoveries 1997
Real estate $ 8,987 $ 293 $ 351 $ 136 $ 9,065
Commercial business 925 493 384 2 1,036
Consumer 1,290 864 762 111 1,503
Total $11,202 $ 1,650 $ 1,497 $ 249 $ 11,604
The Company's impaired loans totaled $7.2 million at June 30,
1997, $6.3 million at September 30, 1996 and $6.0 million at
June 30, 1996. Included in the allowance for loan losses at
June 30, 1997 is $800 thousand related to $2.8 million of
impaired loans. The remainder of the impaired loans are
recorded at or below fair value.
Deposits and Borrowings
First Financial's deposit composition at the indicated dates
is as follows (amounts in thousands):
<TABLE>
<CAPTION>
June 30, 1997 September 30, 1996 June 30, 1996
% of % of % of
Balance Total Balance Total Balance Total
<S> <C> <C> <C> <C> <C> <C>
Checking accounts $ 132,256 12.37% $ 123,907 11.67% $ 123,556 11.63%
Passbook, statement and
other accounts 120,320 11.25 119,509 11.26 122,223 11.50
Money market accounts 132,593 12.40 131,393 12.38 131,796 12.40
Certificate accounts 684,048 63.98 686,808 64.69 685,074 64.47
Total deposits $ 1,069,217 100.00% $1,061,617 100.00% $ 1,062,649 100.00%
</TABLE>
Checking and other transaction account balances have
increased as the Company has emphasized growth in these types of
products. While deposits remain a primary, highly stable source
of funds for the Company, deposits have declined as a percentage
of liabilities over recent years. At June 30, 1997, deposits as
a percentage of liabilities, declined to 68% from 73% at June
30, 1996.
Primarily as a result of growth in loans receivable during
the nine months ended June 30, 1997 and the utilization of FHLB
advances as a primary source of funds, total borrowings
increased $116.5 million during the period.
Stockholders' Equity
Stockholders' equity increased $7.1 million during the first
nine months of fiscal 1997 to total $101.9 million at June 30,
1997. The Company's capital ratio, total capital to total
assets, was 6.11% at June 30, 1997, compared to 6.13% at
September 30, 1996. During the current nine months, the
Company repurchased approximately 67,000 shares of common stock
at an average price of $22.45. In total, the Company
repurchased 93,000 shares under its latest stock repurchase
program which ended March 31, 1997. During the nine months, the
Company increased its dividends paid to $.54 per share compared
with $.48 per share in the first nine months of 1996.
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
June 30, 1997, 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 5.0% and 10.0%, respectively.
The following table summarizes the capital requirements for
First Federal and Peoples Federal as well as their capital
positions at June 30, 1997:
First Federal Peoples Federal
Percent Percent
Amount of Assets Amount of Assets
(Amounts in thousands)
Tangible capital $ 76,970 6.53% $31,119 6.54%
Tangible capital
requirement 17,674 1.50 7,134 1.50
Excess $ 59,296 5.03% $23,985 5.04%
Core capital $ 76,970 6.53% $31,119 6.54%
Core capital requirement 35,349 3.00 14,267 3.00
Excess $ 41,621 3.53% $16,852 3.54%
Risk-based capital(a) $ 83,824 10.39% $32,934 12.40%
Minimum risk-based
capital requirement(a) 64,530 8.00 21,256 8.00
Excess(a) $ 19,294 2.39% $11,678 4.40%
(a) Based on total risk-weighted assets.
For a complete discussion of capital issues, refer to
"Capital Requirements" and "Limitations on Capital
Distributions" in the Company's 10K for the fiscal year ending
September 30, 1996.
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 5.35% for the current nine months compared to 6.33% for
the comparable period in fiscal 1996. Peoples Federal's average
liquidity ratio was 6.18% during the present nine months
compared with 7.00% 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 Associations have back-up sources of
funds available, including excess FHLB borrowing capacity and
excess liquidity in securities available for sale.
During the current nine months the Company experienced a net
cash outflow from investing activities of $102.8 million,
consisting principally of loans originated and purchased for
investment, and mortgage-backed securities purchased, which were
partially offset by sales and maturities of investment
securities. The Company experienced cash outflows of $1.1
million from operating activities. Financing activities
resulted in cash inflows of $118.0 million, consisting
principally of $107.7 million in FHLB advances and $8.9 million
in securities sold under agreements to repurchase.
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 June 30, 1997, First
Financial had cash reserves and marketable securities of $11.9
million.
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 "Limitations on Capital Distributions" in
the Company's 10K for the fiscal year ending September 30, 1996.
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 sheet 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):
June 30, September June 30,
1997 30, 1996 1996
Interest-earning assets maturing
or repricing within one year $ 816,794 $ 843,281 $ 857,377
Interest-bearing liabilities
maturing or repricing within one
year 1,012,525 1,008,920 1,015,037
Cumulative gap $ (195,731) $ (165,639) $ (157,660)
Gap as a percent of total assets (11.74)% (10.71)% (10.35)%
The Company's one year gap as a percent of total assets
changed from (10.71)% to (11.74)% during the current nine
months. One year ago, the Company's one year gap as a percent
of total assets was (10.35)%. The respective ratios and dollars
repricing as shown in the above table do not take into effect
prepayments to mortgage, consumer and other loans and mortgage-
backed securities. The trend in the one year static gap is
indicative of the retention of selected fixed-rate loans by the
Company throughout most of fiscal 1996. In addition, the
Company has extended maturities of interest-sensitive assets
through origination of loans which have a fixed rate of interest
for three, five, or seven years and then adjust annually
thereafter to a treasury index.
A negative gap indicates that cumulative interest-sensitive
liabilities exceed cumulative interest-sensitive assets and
suggests that net interest income would decline if market
interest rates increased. A positive gap would suggest the
reverse. This relationship is not always ensured due to the
repricing attributes of both interest sensitive assets and
interest sensitive liabilities. The Company has a variety of
methods available to adjust its interest sensitivity.
COMPARISON OF OPERATING RESULTS
QUARTERS ENDING June 30, 1997 AND 1996
Net Interest Income
First Financial's net interest income for the quarter ending
June 30, 1997 was $12.3 million compared with $11.5 million for
the comparable quarter in fiscal 1996. The gross interest
margin declined from 3.20% in the prior quarter to 3.11% in the
current quarter.
The following table summarizes rates, yields and average
earning asset and costing liability balances for the respective
quarters (amounts in thousands):
<TABLE>
<CAPTION>
Quarter Ended June 30,
1997 1996
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
<S> <C> <C> <C> <C>
Loans and mortgage-backed securities $ 1,480,800 7.89% $ 1,308,655 7.99%
Investments and other interest-
earning assets 96,311 6.38 128,857 6.20
Total interest-earning assets $ 1,577,111 7.80% $ 1,437,512 7.83%
Deposits $ 1,065,576 4.48% $ 1,065,695 4.60%
Borrowings 437,906 5.95 295,571 5.87
Total interest-bearing liabilities $ 1,503,482 4.91% $ 1,361,266 4.88%
Gross interest margin 2.89% 2.95%
Net interest margin 3.11% 3.20%
</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 Ended June 30
1997 versus 1996
Volume Rate Total
Interest income:
Loans and mortgage-backed securities $ 3,456 $(324) $ 3,132
Investments and other interest-
earning assets (511) 57 (454)
Total interest income 2,945 (267) 2,678
Interest expense:
Deposits (1) (306) (307)
Borrowings 2,162 61 2,223
Total interest expense 2,161 (245) 1,916
Net interest income $ 784 $ (22) $ 762
Total interest income for the current quarter of $30.7
million represents growth of $2.7 million from the comparative
quarter in fiscal 1996. Average balances of earning assets
increased $139.6 million during the current quarter compared to
the June 1996 quarter. Average yields on loans and mortgage-
backed securities declined by 10 basis points and the average
yield on all other earning assets increased 18 basis points.
Total interest expense increased $1.9 million during the
current quarter, with average interest-bearing liability
balances increasing by $142.2 million. The average cost of
deposits declined 12 basis points while the average cost of
borrowings increased 8 basis points. The Company's overall cost
of funds increased by 3 basis points to 4.91% from 4.88% in the
prior period.
Provision for Loan Losses
During the current quarter, First Financial's provision for
loan losses totaled $600 thousand, compared to $498 thousand
during the same period in the previous year. Net charge-offs
for the current quarter totaled $441 thousand compared with $531
thousand in the comparable quarter in fiscal 1996. Total loan
loss reserves as of June 30, 1997 and 1996 were $11.6 million
and $11.0 million, respectively. Loan loss reserves as a
percentage of the total net loan portfolio, excluding mortgage-
backed securities, were .84% and .89% at June 30, 1997 and 1996,
respectively.
Other Income/Non-Interest Expenses
Total other income increased $735 thousand, or 29.4%, in
the current quarter. Non-recurring gains on sales of investment
and mortgage-backed securities totaled $205 thousand in the
current quarter. Fees on deposit accounts increased $223
thousand during the current quarter, reflecting increased
balances in checking and other transaction accounts at the
Company and changes to service charge pricing structure since
the June 1996 quarter. Bank card fee income increased $117
thousand in the current quarter and is indicative of expansion
of debit card usage and the Company's ATM network.
Non-interest expense increased $421 thousand or 4.8% during
the current quarter. The increase in non-interest expense in
the current quarter is primarily attributable to staff additions
related to the opening of a new branch office in Surfside Beach,
South Carolina and the expansion of Link Investment Services.
Non-interest expense as a percentage of average assets declined
from 2.36% in the June 30, 1996 quarter to 2.26% in the current
quarter.
Under the Deposit Insurance Funds Act of 1996, a special
assessment was charged to the Associations and other
institutions with deposits insured by the Savings Association
Insurance Fund ( SAIF ). This $7.0 million expense was recorded
in the quarter ended September 30, 1996 and is discussed under
Federal Deposit Insurance Corporation ("FDIC") in the
Company's Form 10-K for the year ended September 30, 1996. FDIC
premium expense declined $459 thousand in the current quarter
compared with the comparable quarter in fiscal 1996. Both
Associations benefited from lowered FDIC expense in the June
1997 quarter, which declined 16.5 basis points from a rate of 23
basis points to 6.5 basis points, on an annualized basis.
Income Tax Expense
During the current quarter, the Company's effective tax rate
was 36.9% compared to 36.2% in the comparable quarter. The
actual tax provision of $2.1 million resulted in an increase of
$395 thousand from the prior period.
COMPARISON OF OPERATING RESULTS
NINE MONTHS ENDING JUNE 30, 1997 AND 1996
Net Interest Income
First Financial's net interest income for the nine months
ending June 30, 1997 was $36.5 million compared with $33.4
million for the comparable nine months in fiscal 1996. The
gross interest margin declined from 2.93% in the prior nine
months to 2.91% in the current nine months.
The following table summarizes rates, yields and average
earning asset and costing liability balances for the respective
periods (amounts in thousands):
<TABLE>
<CAPTION>
Nine months Ending
June 30,
1997 1996
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
<S> <C> <C> <C> <C>
Loans and mortgage-backed
securities $1,440,529 7.90% $1,263,127 8.04%
Other interest-earning assets 106,469 6.36 129,103 6.22
Total interest-earning assets $1,546,998 7.80% $1,392,230 7.87%
Deposits $1,061,868 4.52% $1,065,183 4.69%
Borrowings 407,528 5.85 249,192 6.01
Total interest-bearing
liabilities $1,469,396 4.89% $1,314,375 4.94%
Gross interest margin 2.91% 2.93%
Net interest margin 3.14% 3.20%
</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):
Nine months Ending June 30,
1997 versus 1996
Volume Rate Total
Interest income:
Loans and mortgage-backed securities $10,457 $ (1,349) $ 9,108
Investments and other interest-earning
assets (1,074) 133 (941)
Total interest income 9,383 (1,216) 8,167
Interest expense:
Deposit accounts (122) (1,419) (1,541)
Borrowings 6,932 (306) 6,626
Total interest expense 6,810 (1,725) 5,085
Net interest income $ 2,573 $ 509 $ 3,082
Provision for Loan Losses
During the current nine months, First Financial's provision
for loan losses totaled $1.7 million, compared to $1.2 million
during the same period in the previous year. Net charge-offs
for the current nine months totaled $1.2 million compared with
$910 thousand in the comparable period in fiscal 1996.
Increases in charge-offs are related principally to higher
commercial loan charge-offs in the current period.
Other Income/Non-interest Expense
Total other income improved $1.7 million in the current nine
months. Fees on deposit accounts increased $546 thousand during
the current nine months while brokerage fees and bank card fees
increased $199 thousand and $351 thousand, respectively, in the
current period. The Company recorded gains of $185 thousand on
loan sales during the current nine months compared with gains of
$4 thousand in the nine months ended June 30, 1996. Net gains
on sales of investment securities totaled $210 thousand in the
current nine months while such gains were only $38 thousand in
the prior nine months.
Non-interest expense increased $1.0 million or 3.8% during
the current nine months. The Company's efficiency ratio
improved from 64.24% in the nine months ended June 30, 1996 to
60.27% in the current nine months. General and administrative
expenses as a percentage of average assets declined from 2.31%
in the prior period to 2.26% in the current period. Salaries
and employee benefits increased $1.3 million in the nine months
ended June 30, 1997. Most of the increase was attributable to
expansion of Link Investment Services, an additional branch
location and annual merit increases for existing staff. FDIC
insurance premiums in the current nine months were approximately
43% of the cost in the prior period due to lower premium rates
in effect during the current period. FDIC insurance premiums
for the remainder of fiscal 1997 should approximate $175
thousand. Included in the $5.6 million of other expense for the
prior nine months was a non-recurring expense of $348 thousand
related to a loss incurred on a deposit account.
Income Tax Expense
During the first nine months, the Company's effective tax
rate was 36.8% compared to 36.2% in the comparable period. The
actual tax provision of $6.1 million resulted in an increase of
$1.3 million from the prior period.
IMPACT OF REGULATORY AND ACCOUNTING ISSUES
For a comprehensive discussion of regulatory and accounting
issues, refer to "Federal Regulation of Savings Associations" in
the Company's 10K for the fiscal year ending September 30, 1996.
In an effort to simplify the current standards in the United
States for computing earnings per share ("EPS") and make them
compatible with international standards, the Financial
Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"), in February 1997. SFAS 128 applies to entities
with publicly traded common stock or potential common stock and
is effective for financial statements for periods ending after
December 15, 1997, including interim periods. SFAS 128
simplifies the standards for computing earnings per share
previously found in APB Opinion 15, Earnings per Share. It
replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all
companies with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. The Company's present computation of diluted EPS
under APB Opinion 15 is applied against a materiality test of 3
percent. For financial statements issued by the Company after
December 15, 1997, the materiality test will no longer apply and
the Company will report basic and diluted EPS for each period
presented as well as the further reconciliations required by
SFAS 128. Although earlier application is not permitted, SFAS
128 will require restatement of all prior-period EPS data
presented.
The FASB also issued Statement of Financial Accounting
Standards No. 129, Disclosure of Information about Capital
Structure ("SFAS 129") in February 1997. The purpose of SFAS
129 is to consolidate existing disclosure requirements for ease
of retrieval. SFAS 129 contains no change in disclosure
requirements for companies, such as First Financial, that were
subject to the previously existing requirements. It applies to
all entities and is effective for financial statements issued
for periods ending after December 15, 1997.
<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 6 - Exhibits and Report on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
June 30, 1997.
Exhibits
(3.1)Certificate of Incorporation, as amended, of
Registrant (1)
(3.2)Bylaws, as amended, of Registrant (2)
(4)Indenture, dated September 10, 1992, with respect to
the Registrant's 9.375% Senior Notes, due September
1, 2001 (3)
(10.1)Acquisition Agreement dated as of December 9, 1991 by
and among the Registrant, First Federal Savings and
Loan Association of Charleston and Peoples Federal
Savings and Loan Association of Conway (3)
(10.3)Employment Agreement with A. Thomas Hood, as amended
(8)
(10.4)Employment Agreement with Charles F. Baarcke, Jr. (4)
(10.5)Employment Agreement with John L. Ott, Jr. (4)
(10.6)1990 Stock Option and Incentive Plan (5)
(10.7)1994 Outside Directors Stock Options-for-Fees Plan
(6)
(10.8)1994 Employee Stock Purchase Plan (6)
(10.9)1996 Performance Equity Plan for Non-Employee
Directors (7)
(10.10)Employment Agreement with Susan E. Baham (8)
(22)Subsidiaries of the Registrant (8)
- -------------------------------
(1) Incorporated by reference to Exhibit 3 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993
(2) Incorporated by reference to Exhibit 3 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995
(3) Incorporated by reference to the Registrant's
Registration Statement on Form S-8 File No. 33-55067
(4) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended September 30,
1995
(5) Incorporated by reference to the Registrant's
Registration Statement on Form S-8 File No. 33-57855
(6) Incorporated by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders held
on January 25, 1995
(7) Incorporated by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be
held on January 22, 1997.
(8) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended September 30,
1996.
<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: August 14, 1997 By: /s/ A. Thomas Hood
A. Thomas Hood
President and Chief Executive
Officer
Duly Authorized Representative
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 33,380
<INT-BEARING-DEPOSITS> 14,854
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 154,520
<INVESTMENTS-CARRYING> 38,481
<INVESTMENTS-MARKET> 38,440
<LOANS> 1,388,634
<ALLOWANCE> 11,604
<TOTAL-ASSETS> 1,667,178
<DEPOSITS> 1,069,217
<SHORT-TERM> 445,737
<LIABILITIES-OTHER> 0
<LONG-TERM> 19,763
<COMMON> 70
0
0
<OTHER-SE> 101,809
<TOTAL-LIABILITIES-AND-EQUITY> 1,667,178
<INTEREST-LOAN> 85,123
<INTEREST-INVEST> 3,208
<INTEREST-OTHER> 1,860
<INTEREST-TOTAL> 90,191
<INTEREST-DEPOSIT> 35,898
<INTEREST-EXPENSE> 53,730
<INTEREST-INCOME-NET> 36,461
<LOAN-LOSSES> 1,650
<SECURITIES-GAINS> 210
<EXPENSE-OTHER> 6,074
<INCOME-PRETAX> 16,631
<INCOME-PRE-EXTRAORDINARY> 10,509
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,509
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 1.66
<YIELD-ACTUAL> 3.14
<LOANS-NON> 7,164
<LOANS-PAST> 718
<LOANS-TROUBLED> 6,985
<LOANS-PROBLEM> 14,867
<ALLOWANCE-OPEN> 11,202
<CHARGE-OFFS> 1,497
<RECOVERIES> 249
<ALLOWANCE-CLOSE> 11,604
<ALLOWANCE-DOMESTIC> 11,604
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
