UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 1998
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(843) 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, 1998
$.01 Par Value 13,635,438
<PAGE>
FIRST FINANCIAL HOLDINGS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Consolidated Statements of Financial Condition
at June 30, 1998 and September 30, 1997 1
Consolidated Statements of Income for the Three
Months Ended June 30, 1998 and 1997 2
Consolidated Statements of Income for the Nine
Months Ended June 30, 1998 and 1997 3
Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 1998 and 1997 4
Notes to Financial Statements 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
PART II - OTHER INFORMATION 17
SIGNATURES 19
EXHIBIT 10.13 20
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,
1998 1997
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 50,714 $ 48,034
Investments held to maturity (market value of $7,179 and $14,345) 7,144 14,282
Investments available for sale, at fair value 32,909 40,826
Investment in capital stock of Federal Home Loan Bank, at cost 26,050 21,851
Loans receivable, net 1,521,937 1,446,981
Loans held for sale 18,032 4,516
Mortgage-backed securities available for sale, at fair value 165,025 148,963
Mortgage-backed securities held to maturity (market value of $556
and $828) 546 818
Office properties and equipment, net 16,519 15,944
Real estate and other assets acquired in settlement of loans 11,654 11,658
Other assets 23,668 21,079
Total assets $ 1,874,198 $ 1,774,952
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit accounts $ 1,153,667 $ 1,123,988
Advances from Federal Home Loan Bank 514,000 419,577
Securities sold under agreements to repurchase 20,823 58,896
Long-term debt 19,763 19,763
Accounts payable and other liabilities 44,335 41,200
Total liabilities 1,752,588 1,663,424
Stockholders' equity:
Serial preferred stock, authorized 3,000,000 shares--
none issued
Common stock, $.01 par value, authorized 24,000,000 shares,
issued and outstanding 15,005,975 and 14,835,218 shares at
June 30, 1998 and September 30, 1997, respectively 150 148
Additional paid-in capital 30,092 28,901
Retained income, substantially restricted 97,145 88,787
Unrealized net gain on securities available for sale,
net of income tax 1,775 1,156
Treasury stock at cost, 1,374,236 and 1,370,254 shares at June
30, 1998 and September 30, 1997, respectively (7,552) (7,464)
Total stockholders' equity 121,610 111,528
Total liabilities and stockholders' equity $ 1,874,198 $ 1,774,952
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
1998 1997
(Amounts in thousands,
except per share amounts)
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest on loans and mortgage-backed securities $ 33,057 $ 30,133
Interest and dividends on investments 919 1,126
Other 437 543
Total interest income 34,413 31,802
INTEREST EXPENSE
Interest on deposits 12,587 12,492
Interest on borrowed money 7,982 6,501
Total interest expense 20,569 18,993
NET INTEREST INCOME 13,844 12,809
Provision for loan losses 600 615
Net interest income after provision for loan losses 13,244 12,194
OTHER INCOME
Net gain on sale of loans 289 67
Net gain on investment and mortgage-backed securities 200 205
Loan servicing fees 297 332
Service charges and fees on deposit accounts 1,434 1,421
Real estate operations, net (324) (4)
Other 1,365 1,310
Total other income 3,261 3,331
NON-INTEREST EXPENSE
Salaries and employee benefits 5,576 5,177
Occupancy costs 894 865
Marketing 376 493
Depreciation, amortization, rental and maintenance of equipment 702 718
FDIC insurance premiums 175 206
Other 2,710 2,387
Total non-interest expense 10,433 9,846
Income before income taxes 6,072 5,679
Income tax expense 1,869 2,092
NET INCOME $ 4,203 $ 3,587
NET INCOME PER COMMON SHARE $ 0.31 $ 0.27
NET INCOME PER COMMON SHARE DILUTED $ 0.30 $ 0.26
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,
1998 1997
(Amounts in thousands,
except per share amounts)
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest on loans and mortgage-backed securities $ 97,513 $ 88,255
Interest and dividends on investments 2,824 3,473
Other 1,535 1,860
Total interest income 101,872 93,588
INTEREST EXPENSE
Interest on deposits 37,771 37,689
Interest on borrowed money 23,465 17,832
Total interest expense 61,236 55,521
NET INTEREST INCOME 40,636 38,067
Provision for loan losses 1,805 1,695
Net interest income after provision for loan losses 38,831 36,372
OTHER INCOME
Net gain on sale of loans 681 185
Net gain on investment and mortgage-backed securities 471 210
Loan servicing fees 951 1,032
Service charges and fees on deposit accounts 4,309 4,129
Real estate operations, net (291) (72)
Other 4,133 3,896
Total other income 10,254 9,380
NON-INTEREST EXPENSE
Salaries and employee benefits 16,537 15,268
Occupancy costs 2,638 2,600
Marketing 1,057 1,150
Depreciation, amortization, rental and maintenance of equipment 2,072 2,123
FDIC insurance premiums 533 921
Merger-related expenses 317
Other 7,208 6,501
Total non-interest expense 30,362 28,563
Income before income taxes 18,723 17,189
Income tax expense 6,547 6,318
NET INCOME $ 12,176 $ 10,871
NET INCOME PER COMMON SHARE $ 0.90 $ 0.81
NET INCOME PER COMMON SHARE DILUTED $ 0.86 $ 0.79
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,
1998 1997
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 12,176 $ 10,871
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation 1,313 1,519
Gain on sale of loans, net (681) (185)
Gain on sale of investments and mortgage-backed seucrities, net (471) (210)
(Gain) loss on sale of real estate owned, net (49) 27
Amortization of unearned discounts/premiums on investments (415) 250
Decrease in deferred loan fees and discounts (490) (247)
(Increase) decrease in receivables and prepaid expenses (2,589) 298
Provision for loan losses 1,805 1,650
Write downs of real estate acquired in settlement of loans 275 24
Proceeds from sales of loans held for sale 118,637 32,808
Origination of loans held for sale (132,153) (39,093)
Increase (decrease) in accounts payable and accrued expenses 2,735 (10,981)
Net cash provided by (used in) operating activities 93 (3,269)
INVESTING ACTIVITIES
Proceeds from maturity of investments 14,042 18,100
Proceeds from sale of investments 4,889 7,065
Net redemption (purchase) of mutual funds available for sale (3,120) 9,016
Purchase of investments (966)
Purchase of FHLB stock (4,199) (5,383)
Increase in loans, net (129,634) (103,770)
(Increase)decrease in credit card receivables 443 (658)
Repayments on mortgage-backed securities 36,269 12,718
Purchase of mortgage-backed securities available for sale (21,779) (52,406)
Proceeds from sale of mortgage-backed securities 24,095 11,453
Proceeds from the sales of real estate owned 661 1,755
Net purchase of office properties and equipment (1,888) (848)
Net cash used in investing activities (80,221) (103,924)
FINANCING ACTIVITIES
Net increase (decrease) in deposit accounts 29,679 8,413
Net proceeds of FHLB advances 94,423 107,650
Increase (decrease) of securities sold under agreements to
repurchase (38,073) 8,880
Proceeds from sale of common stock 1,193 915
Dividends paid (4,326) (3,418)
Treasury stock purchased (88) (1,515)
Net cash provided by financing activities 82,808 120,925
Net increase in cash and cash equivalents 2,680 13,732
Cash and cash equivalents at beginning of period 48,034 43,114
Cash and cash equivalents at end of period $ 50,714 $ 56,846
Supplemental disclosures:
Cash paid during the period for:
Interest $ 61,873 $ 54,974
Income taxes 7,245 3,944
Loans foreclosed 2,419 12,184
Loans securitiezed into mortgage-backed securities 53,226
Unrealized net gain on securities available for sale,
net of income tax 619 638
The accompanying notes are an integral part of the statements.
</TABLE>
<PAGE>
FIRST FINANCIAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<PAGE>
A. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
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.
The significant accounting policies followed by First
Financial for interim financial reporting are consistent with the
accounting policies followed for annual financial reporting. The
unaudited consolidated financial statements and notes are
presented in accordance with the instructions for Form 10-Q. The
information contained in the footnotes included in First
Financial s latest annual report on Form 10-K should be referred
to in connection with the reading of these unaudited interim
consolidated financial statements. Certain fiscal 1997 amounts
have been reclassified to conform with the statement
presentations for fiscal 1998.
The results of operations for the quarter and the nine months
ended June 30, 1998 may not necessarily be indicative of the
results of operations that may be expected in future periods.
This report may contain certain forward-looking statements with
respect to financial conditions, results of operations and
business of First Financial. These forward-looking statements
involve certain risks and uncertainties, including, but not
limited to, timing of certain business initiatives of the
Company, the Company s interest rate risk position and future
regulatory actions of the office of Thrift Supervision and the
Federal Deposit Insurance Corporation. It is important to note
that the Company s actual results may differ materially and
adversely from those discussed in forward-looking statements.
B. EARNINGS PER SHARE
Effective with periods ended December 31, 1997, First
Financial has implemented Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share." This Statement
simplifies the standards for computing earnings per share
previously found in Accounting Principles Board ("APB") Opinion
No. 15, "Earnings per Share" ("EPS"), and makes them comparable
to international EPS standards. It replaces the presentation of
primary EPS with basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the diluted
EPS computation. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted-
average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the
entity. Diluted EPS is computed similarly to fully diluted EPS
pursuant to APB Opinion No. 15.
Basic and diluted earnings per share have been computed based
upon net income as presented in the accompanying statements of
income divided by the weighted average number of common shares
outstanding or assumed to be outstanding as summarized below:
Quarter Ended June 30,
1998 1997
Weighted average number of common shares
used in basic EPS 13,607,943 13,381,428
Effect of dilutive stock options 516,860 421,578
Weighted average number of common shares
and dilutive potential common shares
used in diluted EPS 14,124,803 13,803,006
Nine Months Ended June 30,
1998 1997
Weighted average number of common shares
used in basic EPS 13,548,567 13,357,775
Effect of dilutive stock options 557,299 396,922
Weighted average number of common shares
and dilutive potential common shares
used in diluted EPS 14,105,866 13,754,697
C. NATURE OF OPERATIONS
First Financial is a multiple savings and loan holding
company headquartered in Charleston, South Carolina. First
Financial conducts its operations principally in South Carolina
with lending functions also in North Carolina. The thrift
subsidiaries, First Federal and Peoples Federal, provide a wide
range of traditional banking services and also offer investment
and insurance services through subsidiaries. The Company has a
total of 36 offices in South Carolina located in the Charleston
Metropolitan area and Horry, Georgetown and Florence counties, a
loan origination office in coastal North Carolina and a private
banking office in Hilton Head, South Carolina.
D. MERGERS AND ACQUISITIONS
On November 7, 1997, First Financial completed the
acquisition of Investors Savings Bank of South Carolina, Inc.
("Investors") in a transaction accounted for as a pooling of
interests. Under the terms of the agreement, Investors'
shareholders received 1.36 shares of First Financial common stock
in exchange for each share of Investors stock held, which
resulted in the issuance of 709 thousand shares. Based on the
last reported sales price of the Company's common stock on
November 7, 1997, such shares had an aggregate value of
approximately $14.4 million. At the time of the acquisition,
Investors had assets of approximately $62.7 million, deposits of
$55.0 million and stockholders' equity of $7.3 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Net income for the quarter ended June 30, 1998 improved 17%
to $4.2 million from net income of $3.6 million in the comparable
quarter in 1997. Earnings per common share increased to $.31
for the current quarter compared to $.27 in the June 1997
quarter. On a diluted basis, earnings per common share increased
to $.30 from $.26 in the comparable period.
In the first nine months of 1998, First Financial reported
that it earned $12.2 million compared with $10.9 million in the
first nine months of 1997. Results for the nine months included
approximately $317 thousand in non-recurring before-tax expenses
related to the acquisition of Investors Savings Bank of South
Carolina, Inc., which was completed in November 1997. Year-to-
date earnings per common share and diluted earnings per common
share improved to $.90 and $.86, respectively, compared with $.81
and $.79 in 1997.
BALANCE SHEET ANALYSIS
Consolidated assets of the Company totaled $1.9 billion at
June 30, 1998. During the nine months ended June 30, 1998 assets
increased $99.2 million, or 7.5% on an annualized basis.
Cash, Investment Securities and Mortgage-backed Securities
Cash, deposits in transit and interest-bearing deposits
increased $2.7 million during the nine months and totaled $50.7
million at June 30, 1998. Investments declined by $15.1 million
while investments in the capital stock of the Federal Home Loan
Bank ("FHLB") of Atlanta increased $4.2 million. Maturities of
investments totaled $14.0 million during the nine months.
Sales of securities totaled $4.9 million during the nine-
month period. Mutual fund balances increased $3.1 million in the
nine months.
Mortgage-backed securities totaled $165.6 million at June 30,
1998, increasing $15.8 million during the first nine months of
1998. The Company has utilized cash flows from maturities and
sales of investments to increase its mortgage-backed securities
and improve overall earning asset yields. The Company's
securitization of $53.2 million of single family loans for
mortgage-backed securities during the first quarter was the
principal factor leading to the growth in mortgage-backed
securities. During the none months ended June 30, 1998,
purchases of mortgage-backed securities totaled $21.8 million
while sales and repayments totaled $24.1 million and $36.3
million, respectively.
Loans Receivable
Loans receivable, including loans held for sale, totaled $1.5
billion at June 30, 1998, increasing $88.5 million from September
30, 1997. The Company purchased $22.9 million in adjustable-rate
loans during the first half of 1998 and swapped $53.2 million of
fixed-rate loans in a securitization transaction. The principal
use of the Company's funds is the origination of mortgage and
other loans. The Company originated $318.3 million (net of
refinances) in mortgage loans, $87.0 million in consumer loans
and $30.2 million in commercial business loans during the nine
months ending June 30, 1998. Included in mortgage loan
originations were $132.2 million in loans originated for sale.
The Company also originated or purchased $56.7 million in loans
through its regional correspondent originators.
Loans comprise the major portion of interest-earning assets
of the Company, accounting for 82% of assets at June 30, 1998.
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):
June 30, 1998 September 30, 1997
Residential (1-4 family) $ 1,114,368 $ 1,044,045
Other residential 45,675 53,368
Land and lots 77,141 58,251
Commercial real estate 145,869 159,228
Consumer 165,273 145,133
Commercial business 36,155 34,472
Total gross loans $ 1,584,481 $ 1,494,497
Outstanding commitments to originate mortgage loans and to
fund the undisbursed portion of construction loans amounted to
$78.1 million at June 30, 1998. Unused lines of credit on equity
loans, consumer loans, credit cards and commercial loans totaled
$144.6 million as of June 30, 1998.
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,
1998 1997
Non-accrual loans $ 4,049 $ 6,609
Loans 90 days or more delinquent (1) 40 568
Renegotiated loans 6,061 6,776
Real estate and other assets acquired
in settlement of loans 11,654 11,658
Total $ 21,804 $ 25,611
As a percent of net loans and real
estate owned 1.41% 1.75%
As a percent of total assets 1.16% 1.44%
(1) The Company continues to accrue interest on these loans.
At June 30, 1998, the Company had negotitated a contract for
sale on one of the two shopping centers acquired by foreclosure
in the June 1997 quarter. The closing occured in early August on
this property which had a carrying value of $5.4 million at June
30, 1998.
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 provides a summary of activity in the
allowance for loan losses for the first six months of fiscal 1998
(amounts in thousands).
<TABLE>
<CAPTION>
Balance Balance
September 30, June 30,
1997 Additions Chargeoffs Recoveries 1998
<S> <C> <C> <C> <C> <C>
Real estate $ 9,003 $ 474 $ 973 $ 113 $ 8,617
Commercial business 1,384 (600) 105 388 1,067
Consumer 1,716 1,931 1,165 191 2,673
Total $ 12,103 $ 1,805 $ 2,243 $ 692 $ 12,357
</TABLE>
Net loan charge-offs of $1.6 million during the nine months
ended June 30, 1998 included $679 thousand related to a $2.8
million multifamily loan on which the company had maintained an
$800 thousand specific reserve.
The Company's impaired loans totaled $4.7 million at June 30,
1998, $7.6 million at September 30, 1997 and $7.2 million at
June 30, 1997.
Deposits and Borrowings
First Financial's deposit composition at June 30, 1998 is as
follows (amounts in thousands):
June 30, 1998
Balance % of Total
Checking accounts $ 161,770 14.02%
Passbook, statement and other accounts 122,782 10.64
Money market accounts 150,215 13.02
Certificate accounts 718,900 62.32
Total deposits $1,153,667 100.00%
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, 1998, deposits as a
percentage of liabilities, declined to 66% from 68% at September
30, 1997.
Primarily as a result of growth in loans receivable during the
nine months ended June 30, 1998 and the utilization of FHLB
advances as a primary source of funds, total borrowings increased
$56.4 million during the period.
Stockholders' Equity
Stockholders' equity increased $10.1 million during the first
nine months of fiscal 1998 to total $121.6 million at June 30,
1998. The Company's capital ratio, total capital to total
assets, was 6.49% at June 30, 1998, compared to 6.28% at
September 30, 1997. During the nine months, the Company's
dividends to stockholders totaled $4.3 million, or 35.5% of net
income for the same 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
June 30, 1998, 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, 1998:
<TABLE>
First Federal Peoples Federal
Percent Percent
of of
Amount Assets Amount Assets
(Amounts in thousands)
<S> <C> <C> <C> <C>
Tangible capital $ 81,549 6.37% $ 40,959 7.10%
Tangible capital requirement 19,198 1.50 8,650 1.50
Excess $ 62,351 4.87% $ 32,309 5.60%
Core capital $ 81,549 6.37% $ 40,959 7.10%
Core capital requirement 51,195 4.00 23,065 4.00
Excess $ 30,354 2.37% $ 17,894 3.10%
Risk-based capital(a) $ 88,870 10.22% $ 42,116 12.26%
Minimum risk-based capital
requirement(a) 69,567 8.00 27,489 8.00
Excess(a) $ 19,303 2.22% $ 14,627 4.26%
(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,
1997.
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 4.00% of net withdrawable savings and borrowings
payable in one year. The liquidity ratios of the Associations,
based on revised regulations issued by the Office of Thrift
Supervision in November 1997, substantially exceed the required
levels.
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 $80.2 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 and mortgage-
backed securities. The Company experienced a net cash inflow of $93
thousand from operating activities principally as a result of
$132.2 million in loans originated for sale offset by sales
through June of 1998 totaling $118.6 million and by other
operating activities. Financing activities resulted in cash
inflows of $82.8 million, consisting principally of $94.4 million
in FHLB advances and $29.7 million in increased deposit account
balances, offset partially by net repayments of $38.1 million of
securities sold under agreement 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. 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's Senior Notes became callable at par on Semptember
1, 1997. Recently the Company provided notice to noteholders of
the early redemption of the Notes on September 1, 1998. The sources of
repayment of the notes will primarily consist of existing cash
reserves and the sale of investment securities, with the
remainder provided from other financing sources.
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, 1997.
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,
1998
Interest-earning assets maturing or repricing
within one year $ 809,651
Interest-bearing liabilities maturing or repricing
within one year 1,159,480
Cumulative gap $ (349,829)
Gap as a percent of total assets (18.67%)
The Company's one year gap as a percent of total assets
changed from (12.33)% to (18.67)% during the current nine months.
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.
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.
COMPARISON OF OPERATING RESULTS
QUARTERS ENDING June 30, 1998 AND 1997
Net Interest Income
First Financial's net interest income for the quarter ending
June 30, 1998 was $13.8 million compared with $12.8 million for
the comparable quarter in fiscal 1997. The gross interest margin
declined from 2.90% in the prior quarter to 2.86% 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>
<TABLE>
<CAPTION>
Quarter Ended June 30,
1998 1997
Average Average
Average Yield/ Average Yield/
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
Loans and mortgage-backed
securities $ 1,702,092 7.77% $ 1,526,020 7.92%
Investments and other interest-
earning assets 85,961 6.33 105,577 6.33
Total interest-earning assets $ 1,788,053 7.70% $ 1,631,597 7.82%
Deposits $ 1,149,830 4.39% $ 1,112,292 4.51%
Borrowings 551,654 5.79 437,906 5.95
Total interest-bearing $ 1,550,198 4.92%
liabilities $ 1,701,484 4.84%
Gross interest margin 2.86% 2.90%
Net interest margin 3.10% 3.14%
</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>
<CAPTION>
Quarter Ended June 30
1998 versus 1997
Volume Rate Total
<S> <C> <C> <C>
Interest income:
Loans and mortgage-backed securities $ 3,492 $ (568) $ 2,924
Investments and other interest-earning
assets (313) 0 (313)
Total interest income 3,179 (568) 2,611
Interest expense:
Deposits 425 (330) 95
Borrowings 1,659 (178) 1,481
Total interest expense 2,084 (508) 1,576
Net interest income $ 1,095 $ (60) $ 1,035
</TABLE>
Average balances of interest-earning assets increased $156.5
million, or 9.6%, in the June 1998 quarter compared with the June
1997 quarter, contributing to a $1.1 million increase in net
interest income due to changes in volume. However, a decline in
the Company's net interest margin from 3.14% in the June 1997
quarter to 3.10% in the December 1998 quarter reduced net
interest income by approximately $60 thousand and served to
offset a portion of the increase due to volume changes. There
can be no assurance that the Company's net margin will not
decline further based on the current spread between short and
long-term treasury interest rates, the likelihood that
prepayments of higher yielding earning assets may increase under
current interest rates, the Company's current asset/liability
structure and competitive forces within its markets.
Provision for Loan Losses
During the current quarter, First Financial's provision for
loan losses totaled $600 thousand, compared to $615 thousand
during the same period in the previous year. Net charge-offs for
the current quarter totaled $316 thousand compared with $441
thousand in the comparable quarter in fiscal 1997. Total loan
loss reserves as of June 30, 1998 and 1997 were $12.4 million and
$12.1 million, respectively. Loan loss reserves as a percentage
of the total net loan portfolio, excluding mortgage-backed
securities, were .80% at June 30, 1998.
Other Income/Non-Interest Expenses
Total other income declined $70 thousand in the current
quarter. The decline was principally attributable to higher
losses in real estate operations due to a write-down on one
sizeable property pending its sale in the final quarter of fiscal
1998. Gains on the sale of loans increased $222 thousand due to
an increase in the volume of loans sold in the current quarter.
Non-interest expense increased $587 thousand or 6.0% during
the current quarter. The increase in non-interest expense in the
current quarter is primarily attributable to staff additions
and to higher other operating costs, offset partially by
lower marketing and FDIC insurance premium costs. The June 1998
quarter included non-recurring professional fees of approximately
$375 thousand and the June 1997 quarter included the $313
thousand Savings Association Insurance Fund ("SAIF") Special
Assessment of Investors.
Income Tax Expense
During the current quarter, the Company's effective tax rate
was 30.8% compared to 36.8% in the comparable quarter. The
actual tax provision of $1.9 million resulted in a decline of
$223 thousand from the prior period. During the quarter the Company
implemented certain strategies aimed at reducing the Company's effective
tax rate in future periods. It is expected that the effective tax rate
in future quarters will range from 35% to 36%.
COMPARISON OF OPERATING RESULTS
NINE MONTHS ENDING JUNE 30, 1998 AND 1997
Net Interest Income
First Financial's net interest income for the nine months
ending June 30, 1998 was $40.6 million compared with $38.1
million for the comparable nine months in fiscal 1997. The gross
interest margin declined from 2.92% in the prior nine months to
2.84% 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,
1998 1997
Average Average Average Average
Balance Yield/Rate Balance Yield/Rate
<S> <C> <C> <C> <C>
Loans and mortgage-backed
securities $1,664,193 7.81% $ 1,485,492 7.93%
Investments and other
interest-earning assets 91,928 6.34 115,753 6.32
Total interest-earning
assets $1,756,121 7.73% $ 1,601,245 7.81%
Deposits $1,136,119 4.44% $ 1,108,820 4.54%
Borrowings 536,207 5.85 407,528 5.85
Total interest-bearing
liabilities $1,672,326 4.89% $ 1,516,348 4.89%
Gross interest margin 2.84% 2.92%
Net interest margin 3.09% 3.17%
</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 Ended June 30,
1998 versus 1997
Volume Rate Total
Interest income:
Loans and mortgage-backed securities $ 10,592 $ (1,334) $ 9,258
Investments and other interest-earning
assets (993) 19 (974)
Total interest income 9,599 (1,315) 8,284
Interest expense:
Deposit accounts 919 (837) 82
Borrowings 5,633 5,633
Total interest expense 6,552 (837) 5,715
Net interest income $ 3,047 $ (478) $ 2,569
Provision for Loan Losses
During the current nine months, First Financial's provision
for loan losses totaled $1.8 million, compared to $1.7 million
during the same period in the previous year. Net charge-offs for
the current nine months totaled $1.6 million compared with $1.2
million in the comparable period in fiscal 1997. Charge-offs in
the current nine months included $679 thousand related to a $2.8
million multifamily loan.
Other Income/Non-interest Expense
Total other income improved $874 thousand in the current nine
months. Fees on deposit accounts increased $180 thousand during
the current nine months while brokerage fees and bank card fees
increased $210 thousand and $82 thousand, respectively, in the
current period. The Company recorded gains of $681 thousand on
loan sales during the current nine months compared with gains of
$185 thousand in the nine months ended June 30, 1997. Net gains
on sales of investment and mortgage-backed securities totaled
$471 thousand in the current nine months while such gains were
$210 thousand in the prior nine months. Higher losses from real
estate operations in the current nine months reflected a
provision for loss on a pending contract of sale on a large
shopping center.
Non-interest expense increased $1.8 million or 6.3% during
the current nine months. Non-interest expenses in the current
nine months included non-recurring expenses of $317 thousand
related to the Investors merger. Also included in nine-month
expenses were approximately $375 thousand of non-recurring
professional fees related to strategic intiatives of the Company.
Non-interest expenses in the nine months ended June 30, 1997
included $313 thousand in non-recurring charges for the SAIF
Special Assessment of Investors.
Income Tax Expense
During the first nine months, the Company's effective tax
rate was 35.0% compared to 36.8% in the comparable period. The
actual tax provision of $6.5 million resulted in an increase of
$229 thousand from the prior period.
Year 2000 Issue
The Company continues to work aggressively on its
comprehensive project concerning the impact of the Year 2000.
The awareness and assessment phases of the project have been
completed and the remediation, validation and implementation
phases are well underway. The Company's core business systems
(those systems which run on its internal mainframe) are
considered to be the most critical. The Company expects its host
hardware and operating systems software to be compliant by
September 30, 1998. The Company currently utilizes an integrated
banking application system from one vendor for most of its
critical banking applications. The Company last reported that it
expected this critical application software vendor to have all of
its systems compliant by March 31, 1998. This vendor has met
expectations and the Company remains substantially on its
timeline to have all of these banking application system releases
tested by December 31, 1998. Management expects these critical
banking applications will be moved from a test environment into
production before March 31, 1999. The Company expects scheduled
changes in operating system software and purchase of certain
hardware components to bring its item processing ancilliary
systems into compliance by December 31, 1998. Throughout 1999,
the Company will continue to test for the Year 2000 and will also
be conducting tests with external entities, such as service
providers and the Federal Reserve, as they become Year 2000
compliant.
As part of a comprehensive two year project, the Company
recently selected software and hardware for new branch automation
systems. The new teller systems, which are Year 2000 compliant,
will be installed and in use by December 31, 1998. Upgrades to
customer service platform systems will follow by March 31, 1999.
Capitalized costs for the new branch automation hardware,
software and a frame relay communication network are estimated to
total approximately $2.0 million during fiscal 1998 and 1999.
These expenditures will be below the Company's projected costs
when the branch automation project was initiated.
The Company has budgeted approximately $300 thousand in
estimated operating costs for Year 2000 readiness, with approximately
$100 thousand expensed to date. The costs of the Year 2000 project and
the dates scheduled by the Company for being compliant are based
on management's best estimates at this time.
The Company continues to remediate non-critical systems and
to evaluate the readiness of its vendors and its customers as a
part of its Year 2000 project plan. The Company is also
developing a comprehensive contingency plan which will outline
options in the event that any mission-critical application or
system remediation efforts are not successful. The Company and
its subsidiaries are regulated by federal thrift regulatory
agencies, and thus are subject to supervisory reviews of all
financial institutions' Year 2000 conversion efforts.
Additionally, the vendor that provides the Company's integrated
banking application system is also subject to examinations of
their Year 2000 readiness by federal banking regulatory agencies.
Management presently believes that with modifications to
existing systems and, in certain circumstances, conversions to
new systems, the effects of the Year 2000 problem will be
minimized. There can be no assurance, however, that the systems
of other vendors upon which the Company's operations rely,
including essential utilities and telecommunications providers,
will be Year 2000 compliant in a timely manner. If the Company's
modifications and conversions of its systems are not made, or are
not completed on a timely basis, or if the Company is subject to
failure of a critical vendor to be compliant, the Year 2000 Issue
could have a material impact on the operations of the Company,
which in turn could have a materially adverse effect on the
Company's results of operations and financial condition.
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, 1997.
DISCUSSION OF FORWARD-LOOKING STATEMENTS
Information in the enclosed report, other than historical
information, may contain forward-looking statements that involve
risks and uncertainties, including, but not limited to, timing of
certain business initiatives of the Company, the Company's
interest rate risk position and Year 2000 status. It is
important to note that the Company's actual results may differ
materially and adversely from those discussed in forward-looking
statements
<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, 1998.
Exhibits
(3.1)Certificate of Incorporation, as amended, of Registrant (1)
(3.2)Bylaws, as amended, of Registrant (2)
(3.3)Amendment to Registrant's Bylaws (3)
(3.4)Amendment to Registrant's Certificate of Incorporation (4)
(3.5)Amendment to Registrant's Bylaws
(4.0)Indenture, dated September 10, 1992, with respect to the
Registrant's 9.375% Senior Notes, due September 1, 2001 (5)
(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 (5)
(10.3)Employment Agreement with A. Thomas Hood, as amended (6)
(10.4)Employment Agreement with Charles F. Baarcke, Jr. (7)
(10.5)Employment Agreement with John L. Ott, Jr. (7)
(10.6)1990 Stock Option and Incentive Plan (8)
(10.7)1994 Outside Directors Stock Options-for-Fees Plan (9)
(10.8)1994 Employee Stock Purchase Plan (9)
(10.9)1996 Performance Equity Plan for Non-Employee Directors (10)
(10.10)Employment Agreement with Susan E. Baham (6)
(10.11)1997 Stock Option and Incentive Plan (11)
(10.12)Investors Savings Bank of South Carolina, Inc. Incentive
Stock Option Plan (12)
(10.13)Borrowing Agreement with Bankers Bank
(22.0)Subsidiaries of the Registrant (3)
(27)Financial Data Schedule
(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 Registrant's Annual Report on Form
10-K for the year ended September 30, 1997
(4) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1997
(5) Incorporated by reference to the Registrant's Registration
Statement on Form S-8 File No. 33-55067.
(6) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended September 30, 1996.
(7) Incorporated by reference to the Registrant's Annual Report on
Form 10-K
(8) Incorporated by reference to the Registrant's Registration
Statement on Form S-8 File No. 33-57855.
(9) Incorporated by reference to the Registrant's Proxy Statement for
the Annual Meeting of Stockholders held on January 25, 1995
(10)Incorporated by reference to the Registrant's Proxy Statement for
the Annual Meeting of Stockholders held on January 22, 1997.
(11)Incorporated by reference to the Registrant's Preliminary Proxy
Statement for the Annual Meeting of Stockholders to be held on
January 28, 1998.
(12)Incorporated by reference to the Registrant's Registration
Statement on Form S-8 File No. 333-45033.
<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, 1998 By: /s/ A. Thomas Hood
A. Thomas Hood
President and Chief
Executive Officer
Duly Authorized
Representative
<PAGE>
EXHIBIT 10.13
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made and entered
into as of the 15th day of July, 1998, by and between THE BANKERS
BANK, a banking corporation organized under the laws of Georgia
(the "Lender"), and FIRST FINANCIAL HOLDINGS, INC., a Delaware
corporation (the "Borrower").
RECITALS
WHEREAS, the Borrower wishes to obtain from the Lender a loan
in the principal amount of up to $25,000,000, and the Lender, on
the terms and conditions hereinafter set forth, is willing to
lend such sum to the Borrower;
NOW, THEREFORE, for and in consideration of the premises, and
the mutual agreements, warranties and representations herein
made, the Lender and the Borrower agree as follows:
ARTICLE I - DEFINITIONS
1.1 "Bank" means each of First Federal Savings and Loan
Association of Charleston ("First Federal") and Peoples Federal
Savings and Loan Association of South Carolina ("Peoples
Federal"), two federal savings and loan associations formed under
the laws of the United States, regulated by the Office of Thrift
Supervision (the "OTS"), and authorized to do business in South
Carolina.
1.2 "Bank Stock" means all of the issued and outstanding
capital stock of each Bank owned by Borrower.
1.3 "Bank Subsidiaries" means each and every banking
Subsidiary of the Borrower, now or hereafter in existence,
including, but not limited to, First Federal and Peoples Federal.
1.4 "Capital" means all capital or all components of
capital, other than any allowance for loan and lease losses that
would otherwise be included and net of any intangible assets, as
defined from time to time by the primary federal regulator of the
Borrower, each Bank, or each of the other Bank Subsidiaries (as
the case may be).
1.5 "Collateral" means and includes all property assigned or
pledged to the Lender or in which the Lender has been granted a
security interest or to which the Lender has been granted
security title under this Agreement or the other Financing
Documents or any other agreement, instrument, or document and the
proceeds thereof.
1.6 "Core Capital" shall have the definition set forth in 12
C.F.R. Section 567.5(a), as amended from time to time.
1.7 "ERISA" means the Employee Retirement Income Security
Act of 1974, P.L. No. 93-406, as amended from time to time.
1.8 "Event of Default" shall have the meaning set forth in
Article VII hereof.
1.9 "Financing Documents" means and includes this Agreement,
the Note, the Pledge Agreement, and all other associated loan and
collateral documents including, without limitation, all
guaranties, suretyship agreements, stock powers, security
agreements, security deeds, subordination agreements, exhibits,
schedules, attachments, financing statements, notices, consents,
waivers, opinions, letters, reports, records, assignments,
documents, instruments, information and other writings related
thereto, or furnished by the Borrower to the Lender in connection
therewith or in connection with any of the Collateral, and any
amendments, extensions, renewals, modifications or substitutions
thereof or therefor.
1.10 "Lender" shall include transferees, assignees, and
successors of the Lender, and all rights of the Lender under the
Financing Documents shall inure to the benefit of its
transferees, successors, and assigns. All obligations of the
Borrower under the Financing Documents shall bind its heirs,
legal representatives, successors, and assigns.
1.11 "LIBOR" means the one month London Interbank Offered
Rate designated in the Money Rates Section of the Eastern Edition
of The Wall Street Journal.
1.12 "Liabilities" means all indebtedness, liabilities, and
obligations of the Borrower or any Subsidiary thereof of any
nature whatsoever which the Lender may now or hereafter have, own
or hold, and which are now or hereafter owing to the Lender
regardless of however and whenever created, arising or evidenced,
whether now, heretofore or hereafter incurred, whether now,
heretofore or hereafter due and payable, whether alone or
together with another or others, whether direct or indirect,
primary or secondary, absolute or contingent, or joint or
several, and whether as principal, maker, endorser, guarantor,
surety or otherwise, and also regardless of whether such
Liabilities are from time to time reduced and thereafter
increased or entirely extinguished and thereafter reincurred,
including without limitation the Note and any amendments,
extensions, renewals, modifications, or substitutions thereof or
therefor.
1.13 "Loan" shall have the meaning set forth in Section 2.1
hereof.
1.14 "Material Adverse Change" means any act, omission, event
or circumstance that would entail loss, liability, damage, or
expense to the Borrower or any Subsidiary equal to or in excess
of $1,200,000 in any single act, omission, event or circumstance,
or $1,200,000 in the aggregate, for which amount Borrower has not
previously provided a reserve or specific allocation.
1.15 "Note" shall have the meaning set forth in Section 2.2
hereof.
1.16 "Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization, or government or any agency or
political subdivision thereof.
1.17 "Pledge Agreement" shall have the meaning set forth in
Section 2.4(a) hereof.
1.18 "Senior Notes" mean the Borrower's 9.375% Senior Notes
issued pursuant to the Indenture dated September 10, 1992 and
due on September 1, 2002.
1.19 "Subsidiary" means each of the Bank Subsidiaries and
each other corporation for which the Borrower has the power,
directly or indirectly, to direct its management or policies or
to vote 25% or more of any class of its voting securities.
1.20 "Total Risk-Based Capital Ratio" means the total risk-
based capital ratio as defined by the capital maintenance
regulations of the primary federal bank regulatory agency of the
relevant Bank Subsidiary.
1.21 All accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally
accepted accounting principles in effect from time to time.
ARTICLE II - THE LOAN
2.1 Subject to the terms and conditions of this Agreement,
the Lender agrees to lend to the Borrower the principal sum of up
to $25,000,000 (the "Loan") in a series of advances as requested
from time to time by the Borrower in a period beginning on the
date of this Agreement and ending on the date 24 months after the
date of this Agreement. Each such advance will reduce the
remaining commitment to lend hereunder and repayments of advances
shall not permit the Borrower to receive an additional advance of
such funds.
2.2 The Loan shall be evidenced by a grid promissory note,
in the form attached hereto as Exhibit A, duly executed and
delivered by the Borrower in favor of the Lender. This grid
promissory note and any amendment(s), extension(s), renewal(s),
modification(s) or substitution(s) thereof or therefor which is
in effect at any particular time is hereinafter called the
"Note." The Note shall provide that:
(a) The Loan shall bear interest at a rate per annum,
calculated on the basis of a 360-day year and actual days
elapsed, equal to LIBOR plus 200 basis points. This rate will be
adjusted based on the LIBOR rate published on the first business
day of each calendar month.
(b) Accrued interest shall be payable quarterly in
arrears on the last day of each quarter, commencing September 30,
1998, and continuing to be due on the last day of each quarter
(March 31, June 30, September 30, or December 31) thereafter
until the loan is paid in full. Interest shall also be due and
payable when the Loan shall become due (whether at maturity, by
reason of acceleration or otherwise).
(c) Principal payments on the Loan shall be due in
three equal installments, on June 30, 2001, June 30, 2002, and
June 30, 2003. The entire remaining outstanding balance of the
Loan, together with all accrued and unpaid interest, shall be due
and payable on June 30, 2003.
(d) No penalty or premium shall be imposed for the
prepayment in whole or in part of the principal balance of the
Loan. Any prepayment in full shall be accompanied by the payment
in full of all accrued but unpaid interest on the Loan through
the prepayment date, whether or not such interest is otherwise
due and payable.
(e) In the event of conflict between the terms of this
Section 2.2 and those of the Note, the Note shall control.
2.3 The proceeds of the Loan shall be used by the Borrower
as follows: up to $7,000,000 of the proceeds shall be used to
repay the Senior Notes and the remaining proceeds shall be used
to provide funds for capital management and future expansion.
The Borrower covenants that it shall use up to $7,000,000 the
proceeds of this Loan, together with existing cash or other funds
of the Borrower, to pay the Senior Notes in full, together with
accrued interest and any fees or other amounts due thereunder, at
the closing of the first advance under the Loan.
2.4 To secure the repayment of the Loan:
(a) The Borrower shall execute and deliver to the
Lender a stock pledge agreement (the "Pledge Agreement") in the
form and substance attached hereto as Exhibit B, and pursuant to
which the Borrower shall grant to the Lender a security interest
in the Bank Stock. On or before the day the Loan is made, the
Borrower shall deliver to the Lender the certificate(s)
representing the Bank Stock together with stock transfer powers
for the same in form and substance satisfactory to the Lender.
If at any time prior to repayment in full of the Loan the
Borrower acquires any additional shares of the Bank Stock, the
Borrower shall promptly deliver certificates evidencing such
shares of the Bank Stock to the Lender and such additional shares
shall be added to the collateral already pledged to the Lender
under the Pledge Agreement, and the Lender shall have a security
interest in such additional shares.
(b) If at any time prior to repayment in full of the
Loan the aggregate book value (as determined in accordance with
generally accepted accounting principles) of the shares of Bank
Stock under pledge to the Lender becomes less than $80,000,000,
the Borrower shall promptly deliver to the Lender on demand
additional collateral of a type and value acceptable to the
Lender (and the Lender's judgment in valuing same shall be
conclusive) so that the sum of the value of such additional
collateral plus the aggregate book value of the Bank Stock then
under pledge is equal to or in excess of $80,000,000. In
connection with the Borrower's delivery of any additional
collateral under this Section 2.4(b), the Borrower will execute
any and all security documents as the Lender may request to
evidence and perfect the Lender's rights in such additional
collateral.
2.5 In connection with the Loan, the Borrower also will
deliver to the Lender the resolutions and other agreements or
instruments specified in Section 6.5 hereof and such other
documents as may be reasonably required by the Lender.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Lender as
follows:
3.1 The Borrower is a corporation organized, validly
existing and in good standing under the laws of the State of
Delaware, and is qualified to do business in all jurisdictions
where such qualification is necessary, except where the failure
to so qualify would not have a material adverse effect on the
Borrower or its business. The Borrower is registered as a
multiple thrift holding company with the Office of Thrift
Supervision.
3.2 Each Bank is a federal savings and loan association
formed under the laws of the United States, regulated by the
Office of Thrift Supervision, and authorized to do business in
South Carolina. First Federal has 7,000,000 shares of common
stock, par value $1.00 per share, authorized, of which 10,000 are
issued and outstanding, 3,000,000 shares of preferred stock
authorized, none of which are issued and outstanding, and Peoples
Federal has 10,000 shares of common stock, par value $1.00 per
share, authorized, of which 10,000 are issued and outstanding,
and no shares of preferred stock authorized. The Borrower owns
all of the outstanding capital stock of each Bank, and there are
no outstanding options, warrants or other rights which can be
converted into shares of capital stock of either Bank (other than
those, if any, issued in favor of the Borrower). Each Bank has
all requisite corporate power and authority and possesses all
licenses, permits and authorizations necessary for it to own its
properties and conduct its business as presently conducted.
3.3 Each financial statement of the Borrower or any
Subsidiary which has been delivered to the Lender presents fairly
the financial condition of the Borrower or such Subsidiary as of
the date indicated therein and the results of its operations for
the periods shown therein. The Borrower has filed all forms,
reports, and documents required to be filed by the Borrower with
the Securities and Exchange Commission since December 31, 1994
(collectively, the "First Financial SEC Reports") except where
the failure to file would not have a material adverse effect on
the Borrower or its business. The First Financial SEC Reports
(i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as the case may be, and (ii) did
not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such First
Financial SEC Reports or necessary in order to make the
statements in such First Financial SEC Reports, in light of the
circumstances under which they were made, not misleading. There
has been no Material Adverse Change in the financial condition or
operations of the Borrower or any Subsidiary since the date of
the most recent financial statements delivered to the Lender or
the most recent First Financial SEC Report filed with the
Securities and Exchange Commission.
3.4 The Borrower has full power and authority to make,
execute, and perform each of the Financing Documents in
accordance with the respective terms thereof. The execution and
performance by the Borrower of each and every one of the
Financing Documents has been duly authorized by all requisite
action, and each and every one of them constitutes the legal,
valid, and binding obligation of the Borrower enforceable in
accordance with its respective terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement rights of creditors
generally and by general principles of equity.
3.5 Execution, delivery, and performance by the Borrower of
each and every one of the Financing Documents does not violate
any provision of law or regulations applicable to Borrower and
material to its operations and will not result in a material
breach of or constitute a default under any material agreement,
indenture, or other instrument to which the Borrower or any
Subsidiary is a party or which the Borrower or any Subsidiary is
bound.
3.6 Except for the security interest created by the Pledge
Agreement, the Borrower owns the Bank Stock free and clear of all
liens, charges, and encumbrances. The Bank Stock is duly issued,
fully paid, and non-assessable, and the Borrower has the
unencumbered right to pledge the Bank Stock.
3.7 There is no claim, action, suit, arbitration,
investigation, condemnation or other proceeding at law or in
equity, or by or before any federal, state, local or other
governmental agency, or by or before any other agency or
arbitrator involving the Borrower, nor is there any judgment,
order, writ, injunction or decree of any court pending that names
the Borrower, or to the knowledge of Borrower, anticipated or
threatened against the Borrower or any Subsidiary or against any
of their properties or assets, which might have a material
adverse effect on the Borrower, any Subsidiary, or their
respective properties or assets, or which might call into
question the validity or enforceability of any of the Financing
Documents, or which might involve the alleged violation by the
Borrower or any Subsidiary of any material federal, state, local
or other law, rule or regulation.
3.8 All of the Borrower's outstanding capital stock has been
validly issued, fully paid, and is non-assessable. The Borrower
is not in material violation of any applicable federal, state,
local, or other securities laws and regulations with respect to
the issuance of any of its capital stock or any other of its
securities.
3.9 The Borrower and each Subsidiary have accurately
prepared and timely filed (or caused to be filed) in all material
respects all required federal, state, local, or other tax returns
and have paid (except as otherwise permitted by Section 4.4
hereof) all governmental taxes and other charges imposed upon it
or on any of its properties or assets. The Borrower does not
know of any proposed additional tax assessment against it or any
Subsidiary.
3.10 No consent, approval, order, authorization, designation,
registration, declaration, or filing with or of any federal,
state, local, or other governmental authority or public body on
the part of the Borrower or any Subsidiary is required in
connection with the Borrower's execution, delivery or performance
of any of the Financing Documents; or if required, all such
prerequisites have been, or as of the date the Loan is advanced
will be, fully satisfied.
3.11 Neither the Borrower nor any Subsidiary has established
or maintains any defined employee benefit plan within the meaning
of ERISA.
3.12 None of the transactions contemplated in this Agreement
(including, without limitation, the use of the proceeds of the
Loan) will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934 or any regulations issued
pursuant thereto, including, without limitation, Regulations G,
T, U, and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Parts 207, 220, 221, and 224. None of the
Collateral is "margin stock" within the meaning of Regulation U.
3.13 The Borrower and each Subsidiary have a Year 2000
program in place to handle Year 2000 issues. These programs
assess current information technology Year 2000 status, address
all Year 2000 issues that may affect the Borrower and each
Subsidiary's business, allocate the necessary resources toward
completing the programs, and provide systematic and complete
evaluations of progress made on the programs. Based on progress
to date, the Borrower and each Subsidiary anticipate their
systems will be Year 2000 compliant. The Borrower has delivered
a current and accurate copy of its Year 2000 project plan to the
Lender.
ARTICLE IV - AFFIRMATIVE COVENANTS
For so long as this Agreement is in effect, and unless the
Lender expressly consents in writing otherwise or to the
contrary, the Borrower hereby expressly covenants and agrees as
follows:
4.1 The Borrower shall promptly furnish to the Lender copies
of all reports which it files or is required to file with the
Securities and Exchange Commission under Section 12 or 15 of the
Securities Exchange Act of 1934, in each case not later than the
date such report is filed or required to be filed. If at any
time the Borrower is not subject to the reporting requirements
under Section 12 or 15 of the Securities and Exchange Commission,
the Borrower shall furnish to the Lender the same information,
including, when applicable, audited financial statements, that
the Borrower would be required to file with the Securities and
Exchange Commission if the Borrower were subject to the reporting
requirements under Section 12 or 15.
4.2 The Borrower and each Subsidiary shall punctually pay
and discharge all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or upon any of its
property, as well as all claims of any kind, which if unpaid,
might by law become a lien or charge upon its property, except
taxes, assessments, charges, levies or claims which are in good
faith being timely litigated or otherwise properly contested by
the Borrower or the Subsidiary and as to which the contestant has
established an adequate reserve on its books.
4.3 The Borrower and each Subsidiary shall comply in all
material respects with the requirements of all provisions of
constitutions, statutes, rules, regulations and orders of
governmental bodies or regulatory agencies applicable to it, and
all orders and decrees of all courts and arbitrators in
proceedings or actions to which it is a party or by which it is
bound.
4.4 The Borrower shall promptly report to the Lender any
significant change in Borrower's management or any change of
greater than 1% of Borrower's total outstanding shares in the
beneficial ownership of the Borrower's common stock by any
officer, director, or 5% or greater stockholder of the Borrower,
in each case not later than the date it publicly announces or
reports or is required to report to the Securities and Exchange
Commission.
4.5 The Borrower shall purchase a minimum of $50,000 in the
stock of Community Financial Services, Inc., Atlanta, Georgia.
ARTICLE V - NEGATIVE COVENANTS
For so long as this Agreement is in effect, and unless the
Lender expressly consents in writing otherwise or to the
contrary, the Borrower hereby expressly covenants and agrees to
the following negative covenants:
5.1 The Borrower shall not permit the book value (as
determined in accordance with generally accepted accounting
principles) of the shares of Bank Stock under pledge to the
Lender as of the end of any fiscal quarter during the term of
this Agreement to be less than $80,000,000.
5.2 The Borrower shall not permit the Total Risk-Based
Capital Ratio of the Borrower, if applicable, or any of the Bank
Subsidiaries as of the end of any fiscal quarter during the term
of this Agreement to be less than 9.0% of risk weighted assets.
5.3 The Borrower shall not, and shall not permit any of the
Bank Subsidiaries to, fail to comply with any minimum capital
requirement imposed by any of their federal and state regulators.
5.4 The Borrower shall not permit the aggregate earnings of
the Bank Subsidiaries, on an annualized basis as of the end of
each calendar quarter during the term of this Agreement, to be
less than adequate on a prospective basis to pay to the Borrower
in the immediately succeeding calendar year legally permissible
dividends in amounts sufficient to fund the payments of principal
and interest on the Loan required under the Note and this
Agreement during such year, except to the extent that new funds
available for debt service in an amount sufficient to cover the
prospective deficiency are made available to the Borrower in a
manner that does not violate any covenant in this Agreement or
any other Financing Document.
5.5 Neither the Borrower nor any Bank Subsidiary shall
receive a composite CAMELS rating from any of its regulators
other than a "1" or "2".
5.6 Neither the Borrower nor any Bank Subsidiary shall
permit its Core Capital to be less than 5.0% of total assets as
of the end of any fiscal quarter during the term of this
Agreement.
5.7 The Borrower shall receive a return on assets (as
computed in accordance with generally accepted accounting
principles) of at least 0.65% for each fiscal year during the
term of this Agreement.
5.8 The Borrower shall neither declare nor pay any dividend
nor make any distribution on any shares of stock of the Borrower
or to its stockholders (other than dividends or distributions
payable in shares of stock of the Borrower), nor shall the
Borrower retire, redeem, purchase or otherwise acquire for value,
directly or indirectly, any shares of the capital stock of the
Borrower (nor permit any Subsidiary to do so) if an Event of
Default has occurred or if such declaration, payment,
distribution, retirement, purchase, redemption, or other
acquisition would result in an Event of Default hereunder or an
event which, with the giving of notice or passage of time (or
both), would constitute such an Event of Default.
5.9 The Borrower shall not, nor permit any Bank Subsidiary
to, incur, create, assume or permit to exist any indebtedness or
liability for borrowed money in excess of $250,000 other than to
the Lender, the Borrower, or a wholly-owned Subsidiary of the
Borrower, without prior Lender approval, except that this
covenant shall not apply to deposits, repurchase agreements,
reverse repurchase agreements, reverse dollar roll repurchase
agreements, overdrafts, borrowing of federal funds, FHLB
advances, and other banking transactions entered into by a Bank
Subsidiary in the ordinary course of its business.
5.10 The Borrower shall not in any manner, directly or
indirectly, become a guarantor of any obligation of, or an
endorser of, or otherwise assume or become liable upon any notes,
obligations, or other indebtedness of any other Person (other
than a Subsidiary) except in connection with the normal and
ordinary course of business, with the exception of the Senior
Notes.
5.11 Except for the real estate investment trust subsidiary
to be established by First Federal (as outlined in the notice
dated April 1, 1998 filed by First Federal with the FDIC and the
OTS), without the prior written consent of the Lender, which
consent will not be unreasonably withheld, the Borrower shall not
permit any Subsidiary (either directly or indirectly by the
issuance of rights or options for, or securities convertible
into, such shares) to issue, sell or otherwise dispose of any
shares of any class of its stock (other than directors'
qualifying shares) except to the Borrower or a wholly-owned
Subsidiary of the Borrower.
5.12 Without the prior written consent of the Lender, which
consent will not be unreasonably withheld, the Borrower shall not
sell or otherwise dispose of, or part with control of, any
securities or indebtedness of any Subsidiary, and the Borrower
shall not pledge, hypothecate, assign, transfer or grant a
security interest in any of the capital stock or other securities
of any of its Subsidiaries.
ARTICLE VI - CONDITIONS PRECEDENT
All of the Lender's obligations under this Agreement,
including without limitation any obligation to make any advance
of the Loan to the Borrower, are subject to the prior fulfillment
of each of the following conditions, and the Borrower shall use
its best efforts to cause each of the following conditions to be
so fulfilled:
6.1 All representations and warranties of the Borrower
contained in this Agreement and in each and every one of the
other Financing Documents shall be true, correct, complete, and
accurate in all material respects on and as of the date of each
advance of the Loan.
6.2 The Borrower and each Subsidiary shall have duly and
properly performed in all material respects all covenants,
agreements, and obligations required by the terms of this
Agreement or any of the other Financing Documents to be performed
by the Borrower or the Subsidiary at the closing of the Loan,
except that the Borrower shall repay the Senior Notes in full,
together with accrued interest and any fees or other amounts due
thereunder, immediately upon receipt of the initial advance under
the Loan.
6.3 The Borrower shall not have taken or permitted to be
taken any actions which would conflict with any of the provisions
of Article V hereof.
6.4 Since the date of this Agreement, no Material Adverse
Change shall have occurred.
6.5 Prior to the advance of the Loan, the Borrower shall
have delivered to the Lender the following described documents:
(a) This Agreement duly executed by the Borrower;
(b) The Note duly executed by the Borrower;
(c) The Pledge Agreement duly executed by the Borrower;
(d) A Certificate of the Borrower's Secretary or
Assistant Secretary, in the form attached hereto as Exhibit C,
with respect to the corporate documents of the Borrower and each
Bank, the resolutions of the Borrower's directors authorizing the
execution of this Agreement and the other Financing Documents,
and such other matters as the Lender may reasonably require;
(e) A copy of the Borrower's certificate of
incorporation certified by the Secretary of State of Delaware;
(f) A certificate of the Secretary of State of Delaware
certifying that the Borrower is a corporation in good standing
under the laws of such state;
(g) A copy of each Bank's Federal Stock Charter
certified by the Office of Thrift Supervision;
(h) An opinion of legal counsel, in the form attached
hereto as Exhibit D;
(i) Stock powers covering all of the Bank Stock; and
(j) Such other documents, instruments, and agreements
as may be reasonably required by the Lender or the Lender's
counsel in connection with the Loan hereunder.
6.6 No Event of Default or event which, with the giving of
notice or passage of time (or both), would constitute an Event of
Default under the terms of this Agreement, shall have occurred.
6.7 Prior to the advance of any amount of the Loan in excess
of $8,000,000, the Lender shall have received commitments from
its respondent/correspondent banks to purchase at least
$17,000,000 in participations in the Loan.
ARTICLE VII - EVENTS OF DEFAULT
The occurrence of any one or more of the following events
will constitute an event of default (herein called an "Event of
Default") by the Borrower under this Agreement:
7.1 After written notice from Lender of amount payable,
failure of the Borrower punctually to make payment of any amount
payable, whether principal or interest or other amount, on any of
the Liabilities, whether at maturity, or at a date fixed for any
prepayment or partial prepayment, or by acceleration or
otherwise.
7.2 If any statement, representation, or warranty of the
Borrower made in this Agreement or in any of the other Financing
Documents or at any time furnished by or on behalf of the
Borrower to the Lender proves to have been untrue, incorrect,
misleading, or incomplete in any material respect as of the date
made; provided that any such statement, representation, or
warranty made prior to the initial advance under this Agreement
may be cured by a corrective statement, representation, or
warranty identified as such and delivered in writing to the
Lender prior to the earlier to occur of 30 days from the date of
this Agreement or the business day before the initial advance is
made under this Agreement.
7.3 Failure of the Borrower to comply with the covenants set
forth in Sections 5.1, 5.2, and 5.6 hereof, which failure is not
cured as of the end of the fiscal quarter following the fiscal
quarter as to which such failure occurred (i.e., the Borrower
shall have one fiscal quarter to cure such failure).
7.4 Failure of the Borrower to comply with any of the other
covenants set forth in Article V hereof, which failure is not
cured within 30 days after notice from the Lender to the
Borrower.
7.5 Failure of the Borrower to comply with any of the other
covenants set forth in this Agreement, which failure is not cured
within 30 days after notice from the Lender to the Borrower.
7.6 The occurrence of a default, an event of default, or an
Event of Default under any of the other Financing Documents or
under any other agreement to which the Borrower and the Lender
are parties or under any other instrument executed by the
Borrower in favor of the Lender, which failure is not cured
within 30 days after notice from the Lender to the Borrower.
7.7 If the Borrower or any Subsidiary becomes insolvent or
makes an assignment for the benefit of creditors; or if any
action is brought by the Borrower or any Subsidiary seeking
dissolution of the Borrower or such Subsidiary or liquidation of
its assets or seeking the appointment of a trustee, interim
trustee, receiver, or other custodian for any of its property; or
if the Borrower or any Subsidiary commences a voluntary case
under the Federal Bankruptcy Code; or if any reorganization or
arrangement proceeding is instituted by the Borrower or any
Subsidiary for the settlement, readjustment, composition, or
extension of any of its debts upon any terms; or if any action or
petition is otherwise brought by the Borrower or any Subsidiary
seeking similar relief or alleging that it is insolvent or unable
to pay its debts as they mature.
7.8 If any action is brought against the Borrower or any
Subsidiary seeking dissolution of the Borrower or such Subsidiary
or liquidation of any of its assets or seeking the appointment of
a trustee, interim trustee, receiver or other custodian for any
of its property, and such action is consented to or acquiesced in
by the Borrower or such Subsidiary or is not dismissed within 30
days of the date upon which it was instituted; or if any
proceeding under the Federal Bankruptcy Code is instituted
against the Borrower or any Subsidiary and (i) an order for
relief is entered in such proceeding or (ii) such proceeding is
consented to or acquiesced in by the Borrower or such Subsidiary
or is not dismissed within 30 days of the date upon which it was
instituted; or if any reorganization or arrangement proceeding is
instituted against the Borrower or any Subsidiary for the
settlement, readjustment, composition, or extension of any of its
debts upon any terms, and such proceeding is consented to or
acquiesced in by the Borrower or such Subsidiary or is not
dismissed within 30 days of the date upon which it was
instituted; or if any action or petition is otherwise brought
against the Borrower or any Subsidiary seeking similar relief or
alleging that it is insolvent, unable to pay its debts as they
mature, or generally not paying its debts as they become due, and
such action or petition is consented to or acquiesced in by the
Borrower or such Subsidiary or is not dismissed within 30 days of
the date upon which it was brought.
7.9 If the Borrower or any Subsidiary is in default on
indebtedness to another Person or an event has occurred which,
with the giving of notice or passage of time, or both, will cause
the Borrower or any Subsidiary to be in default on indebtedness
to another Person, and the amount of such indebtedness exceeds
$500,000 or the acceleration of the maturity of such indebtedness
would have a material adverse effect upon the Borrower or such
Subsidiary.
7.10 Any other Material Adverse Change occurs in the
Borrower's financial condition.
7.11 If any cease and desist order has been entered against
Borrower or any Subsidiary by any federal or state bank or bank
holding company regulatory agency or body, or if the Borrower or
any Subsidiary enters into any form of memorandum of
understanding, plan of corrective action, or letter agreement
with any such federal or state bank or bank holding company
regulatory agency or body concerning a material aspect of its
business, or if any other regulatory enforcement action is taken
against Borrower or any Subsidiary relating to the
capitalization, management or material operation of the Borrower
or any Subsidiary.
7.12 If Borrower or any Subsidiary is indicted or convicted
or pleads guilty or nolo contendere to any charge that Borrower
or such Subsidiary has violated the Federal Money Laundering
Control Act, the Controlled Substances Act, the Currency and
Foreign Transactions Reporting Act, or any other federal, state,
or local drug, controlled substances, money laundering, currency
reporting, racketeering, or racketeering-influenced-and-corrupt-
organization statute or regulations, or any other similar
federal, state, or local forfeiture statute (including without
limitation 18 U.S.C. Section 1963).
7.13 If any Person or group of Persons acting in concert
(other than a Person or group of Persons which controls Borrower
as of the date of this Agreement) shall at any time after the
date of the Agreement acquire control of the Borrower, as such
term is defined by the Change in Bank Control Act of 1978, as
amended, 12 U.S.C. Section 1817(j), and the rules and regulations
adopted thereunder.
7.14 If the Borrower ceases to own 100% of the issued and
outstanding capital stock of, or to control, either Bank, or
ceases to control any of the Bank Subsidiaries.
ARTICLE VIII- REMEDIES UPON DEFAULT
8.1 Upon the occurrence of an Event of Default:
(a) Any of the Liabilities may (notwithstanding any
provisions contained therein or herein to the contrary), at the
option of the Lender and without presentment, demand, notice, or
protest of any kind (all of which are expressly waived by the
Borrower in this Agreement), be declared due and payable,
whereupon they immediately will become due and payable;
(b) The Lender may also, at its option, and without
notice or demand of any kind, exercise from time to time any and
all rights and remedies available to it under this Agreement or
under any of the other Financing Documents, as well as exercise
from time to time any and all rights and remedies available to a
secured party when a debtor is in default under a security
agreement as provided in the Uniform Commercial Code of Georgia,
or available to the Lender under any other applicable law or in
equity, including without limitation the right to any deficiency
remaining after disposition of the Collateral; and
(c) The Borrower shall pay all of the reasonable and
documented costs and expenses incurred by the Lender in enforcing
its rights under this Agreement and the other Financing
Documents. In the event any claim under this Agreement or under
any of the other Financing Documents is referred to an attorney
for collection, or collected by or through an attorney at law,
the Borrower will be liable to the Lender for all reasonable and
documented expenses incurred by it in seeking to collect the
Liabilities or to enforce its rights hereunder, in the other
Financing Documents, or in the Collateral, including, without
limitation, reasonable and documented attorneys' fees.
8.2 Any proceeds from disposition of any of the Collateral
may be applied by the Lender first to the payment of all expenses
and costs incurred by the Lender in collecting such Liabilities,
in enforcing the rights of the Lender under each and every one of
the Financing Documents, and in collecting, retaking, holding,
preparing the Collateral for and advertising the sale or other
disposition of and realizing upon the Collateral, including,
without limitation, reasonable and documented attorneys' fees as
well as all other reasonable and documented legal expenses and
court costs. Any balance of such proceeds may be applied by the
Lender toward the payment of such of the Liabilities and in such
order of application as the Lender may from time to time elect.
The Lender shall pay the surplus, if any, to the Borrower. The
Borrower shall pay the deficiency, if any, to the Lender.
ARTICLE IX - MISCELLANEOUS
9.1 Time is of the essence of this Agreement.
9.2 This Agreement, together with all of the other Financing
Documents, supersedes all prior discussions, understandings, and
agreements by and between the Borrower and the Lender with
respect to the Loan and the Collateral, and together they
constitute the sole and entire agreement between the parties.
9.3 This Agreement and the security interests and security
title conveyed under the Financing Documents shall remain in full
force and effect until such time as (i) the Liabilities are
repaid in full, (ii) the Lender is under no obligation to make
loans or other financial accommodations to the Borrower, and
(iii) either party in writing notifies the other that it is
thereby terminating this Agreement.
9.4 The Lender will not be deemed as a consequence of any
act, delay, failure, omission, or forbearance (including without
limitation failure to exercise its rights of accelerating the
maturity of any of the Liabilities or other indulgences granted
from time to time by the Lender) or for any other reason: (i) to
have waived, or to be estopped from exercising, any of its rights
or remedies under this Agreement or under any of the other
Financing Documents; or (ii) to have modified, changed, amended,
terminated, rescinded, or superseded any of the terms of this
Agreement or of any of the other Financing Documents unless such
waiver, modification, amendment, change, termination, rescission,
or supersession is express, in writing, and signed by a duly
authorized officer of the Lender. No single or partial exercise
by the Lender of any right or remedy will preclude other or
further exercise thereof or preclude the exercise of any right or
remedy, and a waiver expressly made in writing on one occasion
will be effective only in that specific instance and only for the
precise purpose for which given, and will not be construed as a
consent to or a waiver of any right or remedy on any future
occasion.
9.5 Except as provided otherwise in this Agreement, all
notices and other communications under this Agreement are to be
in writing and are to be deemed to have been duly given and to be
effective upon delivery to the party to whom they are directed.
If sent by U.S. mail, first class, certified, return receipt
requested, postage prepaid, and addressed to the Lender or to the
Borrower at their respective addressees set forth below, such
notices, demands and other communications are to be deemed to
have been delivered on the second business day after being so
posted.
If to the Lender: The Bankers Bank
2410 Paces Ferry Road
600 Paces Summit
Atlanta, Georgia 30339
Attn: Jack Gardner, Vice President
If to the Borrower: First Financial Holdings, Inc.
2440 Mall Drive
Suite 100
Charleston, South Carolina 29406
Attn: A. Thomas Hood, President
and Chief Executive Officer
Either the Lender or the Borrower may, by written notice to the
other, designate a different address for receiving notices under
this Agreement; provided, however, that no such change of address
will be effective until written notice thereof is actually
received by the party to whom such change of address is sent.
9.6 The Borrower may not, without the consent of the Lender,
assign or transfer any of its rights or duties hereunder or under
any of the other Financing Documents.
9.7 The Lender may at any time grant participation in or
sell, assign, transfer, or otherwise dispose of, all or any
portion of the indebtedness of the Borrower outstanding pursuant
to this Agreement and the Note; provided, however, that no such
participant, nor any of its successors or assigns, may be a
direct competitor of the Borrower. The Borrower hereby agrees
that any holder of a participation in, and any assignee or
transferee of, all or any portion of any amount owed by the
Borrower under this Agreement and the Note (i) shall be entitled
to the benefits of the provisions of this Agreement as the Lender
hereunder, and (ii) may exercise any and all rights of the
banker's lien, set-off, or counterclaim with respect to any and
all amounts owed by the Borrower to such assignee, transferee, or
holder as fully as if such assignee, transferee, or holder had
made the Loan in the amount of the obligation in which it holds a
participation or which is assigned or transferred to it.
9.8 All statements, reports, certificates, opinions, and
other documents or information furnished to the Lender under the
Financing Documents shall be supplied by the Borrower without
cost to the Lender. Further, the Borrower shall reimburse the
Lender on demand for up to $4,000 in out-of-pocket costs and
expenses (including legal fees and recording costs) incurred by
the Lender in connection with the preparation of the Financing
Documents and for all out-of-pocket costs and expenses (including
legal fees and recording costs) incurred by the Lender in
connection with the interpretation, operation, and enforcement of
the Financing Documents or the protection or preservation of any
right or claim of the Lender with respect to the Financing
Documents.
9.9 The Borrower will pay all taxes (if any) in connection
with this Agreement, any of the other Financing Documents, any
loan made in connection with this Agreement, or the issuance or
ownership of any of the Financing Documents and in connection
with any modification of this loan, this Agreement, or any of the
Financing Documents (excluding, however, any taxes imposed upon
or measured by the net income of the Lender), and will save the
Lender harmless without limitation as to time against any and all
liabilities with respect to all such taxes. The obligations of
the Borrower under this section shall survive the payment of the
Liabilities and the termination of this Agreement.
9.10 In addition to any other amounts payable by Borrower
under this Agreement, Borrower hereby agrees to pay and indemnify
Lender from and against all claims, liabilities, losses, costs,
and expenses (including, without limitation, reasonable
attorneys' fees and expenses) which Lender may (other than as a
result of the gross negligence or willful misconduct of Lender),
incur or be subject to as a consequence, directly or indirectly,
of (i) any breach by Borrower of any warranty, term, or condition
in, or the occurrence of any default under, this Agreement or any
other Financing Document, including all fees or expenses
resulting from the settlement or defense of any claims or
liabilities arising as a result of any such breach or default,
(ii) allegations of participation or interference by Lender in
the management, contractual relations, or other affairs of
Borrower or any Subsidiary, (iii) allegations that Lender has
joint liability with Borrower or any Subsidiary for any reason,
and (iv) any suit, investigation, or proceeding as to which
Lender or such participant is involved as a consequence, directly
or indirectly, of its execution of this Agreement or any other
Financing Document, or any other event or transaction
contemplated by any of the foregoing. The obligations of
Borrower under this Section 9.10 shall survive the termination of
this Agreement. The foregoing indemnities shall not apply to any
claims, liabilities, losses, costs or expenses which are caused
in whole or in part by Lender's gross negligence or willful
misconduct.
9.11 Upon the occurrence of an Event of Default hereunder,
the Lender, without notice or demand of any kind, may hold and
set off against such of the Liabilities (whether matured or
unmatured) as the Lender may elect, any balance or amount to the
credit of the Borrower in any deposit, agency, reserve, holdback,
or other account of any nature whatsoever maintained by or on
behalf of the Borrower with the Lender at any of its offices,
regardless of whether such accounts are general or special and
regardless of whether such accounts are individual or joint. The
Lender agrees to notify Borrower promptly after any such set off
and application. Any Person purchasing an interest in debt
obligations under this Agreement held by the Lender may exercise
all rights of offset with respect to such interest as fully as if
such Person were a holder of debt obligations hereunder in the
amount of such interest.
9.12 If at any time the Lender upon advice of its counsel
shall determine that any further document shall be reasonably
required to effect this Agreement and the transactions and other
agreements contemplated thereby, the Borrower shall, and shall
cause its Subsidiaries to, execute and deliver such document and
otherwise carry out the purposes of this Agreement.
9.13 This Agreement and all of the other Financing Documents
have been made and delivered in the State of Georgia, and the
terms, provisions, and performance thereof are in all respects,
including without limitation all matters of construction,
interpretation, validity, enforcement, and performance, to be
construed in accordance with and governed by the laws of that
State, including without limitation the Uniform Commercial Code
of Georgia, as amended from time to time. Wherever possible,
each provision of this Agreement and of each and every one of the
other Financing Documents is to be interpreted in such manner as
to be effective and valid under applicable law, but if any
provision thereof is prohibited or invalid under such law, such
provision is to be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement or
of any of the other Financing Documents.
9.14 "Herein," "hereof," and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular article, paragraph, section, or other subdivision.
The titles of the Articles appear as a matter of convenience only
and shall not affect the interpretation hereof.
9.15 This Agreement may not be amended, supplemented, or
otherwise modified except by an instrument in writing signed by
each of the parties hereto.
9.16 Unless specifically authorized in writing by the
Borrower, the Lender shall hold all non-public information
obtained pursuant to this Agreement in accordance with the
Lender's customer procedures for handling confidential
information of this nature and in accordance with safe and sound
banking practices.
9.17 The representations and warranties of Borrower contained
herein shall terminate immediately upon the expiration of the
term of this Agreement or any extension thereof and the repayment
in full of all principal and interest and any other amounts due
under the Note or this Agreement.
IN WITNESS WHEREOF, the Lender has executed this
Agreement, and the Borrower has executed this Agreement and
placed its seal hereon, all as of the day and year first above
written.
BORROWER:
First Financial Holdings, Inc.
By: /s/ A. Thomas Hood
A. Thomas Hood
Title: President and Chief
Executive Officer
Attest: /s/ Susan E. Baham
Title: Senior Vice President and
Chief Financial Officer
[CORPORATE SEAL]
LENDER:
THE BANKERS BANK
By: /s/ Jack Gardner
Jack Gardner
Title: Vice President
Attest: /s/ Jim Hammack
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 39,898
<INT-BEARING-DEPOSITS> 10,816
<FED-FUNDS-SOLD> 0
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<INVESTMENTS-CARRYING> 33,740
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<ALLOWANCE> 12,357
<TOTAL-ASSETS> 1,874,198
<DEPOSITS> 1,153,667
<SHORT-TERM> 534,823
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0
0
<COMMON> 150
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<INCOME-PRETAX> 18,723
<INCOME-PRE-EXTRAORDINARY> 12,176
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,176
<EPS-PRIMARY> .90
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<LOANS-NON> 4,049
<LOANS-PAST> 40
<LOANS-TROUBLED> 6,061
<LOANS-PROBLEM> 10,150
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