NAIROBI (Reuters) – Kenya’s second-largest mortgage lender Housing Finance posted a 74 percent jump in 2011 profit, as its loan book grew by a third despite high interest rates, it said on Wednesday, adding it planned to raise long-term financing abroad.
Housing Finance said its pretax profit rose to 975.8 million shillings, while its loan book grew by 31 percent to 24.2 billion shillings and earnings per share climbed 26 percent to 2.70 shillings.
“We are optimistic that we can maintain the growth curve in the current financial year on the back of long term financing which will shield the company from current market fluctuation in the money market,” Frank Ireri, the managing director of the lender, told an investor briefing.
He said the firm’s net interest income rose to 1.9 billion shillings from 1.4 billion shillings.
Concerned with the huge fluctuations in short-term funding instruments, Housing Finance said in October it was considering floating a 25-year housing bond targeting pension funds and real estate investment trusts.
Ireri said the company was now seeking to raise funds abroad as opposed to the bond, because of the high domestic rates.
“We cannot come in with a bond right now because guys will ask for very high interest rates. We are borrowing an offshore debt,” Ireri said.
The mortgage lender raised 7 billion shillings through a seven-year bond issue in October 2010. The bond had a fixed rate set at 8.5 percent and a variable rate pegged at 3 percent above the 182-day Treasury bill rate.
High interest rates and double digit inflation in Kenya are hurting the real estate industry, as developers and buyers struggle to meet financing requirements, property pricing index firm HassConsult said in January.
Shilling depreciation for most of 2011 also slowed the flow of real estate developments and hurt the industry as construction material costs rose.
“There is a lot of imported content in construction and with the exchange rate going crazy and interest rates raising last year some developers slowed down,” said Ireri.
“The impact may still be there this year, but in 2013 we may find that there is a housing shortage … and there will be high demand again.”
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2012年2月22日星期三
2012年2月7日星期二
AP Enterprise: Brown bank regulator an insider
SACRAMENTO, Calif. —
Gov. Jerry Brown’s appointee to head the department that oversees banking, financial and consumer regulations in California led a trade association that fought against tighter lending restrictions before the subprime mortgage crisis exploded and was an executive with Washington Mutual when the now-failed bank was among the most aggressive marketers of loans to high-risk borrowers.
Jan Owen, a Democrat, also is named in a congressional inquiry into whether lawmakers and certain executives received preferential treatment for home loans, although she was not accused of wrongdoing.
Consumer advocates said they are watching Owen’s decisions carefully to see how she performs in her role as commissioner of the California Department of Corporations. The Democratic governor appointed her in December to the $143,000-a-year position, and she started in January.
Owen, 59, of West Sacramento, has a long resume in California, including stints in both business and government, but it is her history with organizations that were at the heart of the mortgage meltdown that stands out in a state that has one of the highest home foreclosure rates in the nation.
Owen served as state director of government and industry affairs at Washington Mutual from 2002 until its collapse in 2008, one of the largest bank failures in American history. It was taken over by JP Morgan Chase, where Owen stayed on as vice president of government affairs until 2009.
“It is of concern if a person who takes a job there, at that pay level in particular, has such experience, particularly with the mortgage bankers association, JPMorgan and Washington Mutual,” said Rick Jacobs, president of the Courage Campaign, which advocates on behalf of policies for poor and working-class families.
“These are big institutions, some of which don’t even exist anymore because of what they did in the mortgage business, and what they did to California,” Jacobs said. “That should be watched very carefully.”
Owen declined to be interviewed by The Associated Press for this story, but a spokesman for the Department of Corporations, Mark Leyes, responded to questions by email and telephone. He said Owen’s professional background is an asset because she understands consumer issues.
“Understanding these industries and how they function- and fail – improves the ability to regulate effectively,” Leyes said in an email.
He said the department protects consumers by licensing and regulating the network of financial services and securities businesses, including brokers, dealers, investment advisers, financial planners and lenders. Because Owen “really understands how these complex industries operate, she knows what to look for and how to crack down,” Leyes said.
Officials with several consumer groups said they were hesitant to openly criticize Owen’s background because they will have to work with her in her new role. Lawmakers similarly were hesitant because Owen’s appointment still has to be approved in the Legislature. Although Owen’s appointment requires confirmation by the state Senate, she is allowed to work for up to one year before lawmakers decide.
Some consumer advocates who have worked with Owen in the past praised her, saying she was responsive to their concerns.
Orson Aguilar, executive director of the Greenlining Institute, a Berkeley-based national policy group that advocates for racial and economic justice, said he often found himself on the opposite side of the table from Owen on consumer protection and affordable housing issues when she was an executive at Washington Mutual.
“I think people would be surprised, but definitely she was somebody who was easy to work with and she got it. She just didn’t pay lip service, she tried her hardest” to help poor communities, he said.
Before joining Washington Mutual, Owen was executive director of the California Mortgage Bankers Association from 2000 to 2002, where she worked on behalf of lenders on regulatory issues that she now is in charge of enforcing.
Owen was among those who argued against a 2001 bill that attempted to control high-interest predatory lending several years before the collapse of the housing industry, which helped propel the state’s unemployment rate to more than 12 percent during the height of the recession.
SB60 by then-Sen. Joe Dunn, a Democrat, would have required lenders to assess whether potential recipients of high-interest, high-risk loans had the means to repay them and required the attorney general to document complaints against lenders.
The bill sought to end the “abusive practices imposed upon a captive market,” according to its text.
“These abusive tactics, known as `predatory lending’ practices, range from the charging of exorbitant fees and interest rates from those least likely to afford them, to aggressive sales of costly and unnecessary services, to outright fraud aimed at forcing foreclosures and allowing seizures of property,” the bill said.
That was 2001, long before most Americans had heard about the complex lending and financial instruments that contributed to the collapse of the housing market and billions of dollars in bank bailouts.
A report that year in American Banker, a trade magazine, notes that a hearing on the bill was canceled and said Owen’s office contacted the senator to try to “work with him” on it. A newsletter for bankers association members from 2001 quotes Owen as saying the legislation and other bills like it would turn lenders away from California, which would lead to complaints that low-income buyers and the elderly could not receive loans.
“There is a fine line between protecting consumers and making the process so cumbersome and risky that lenders will simply do business elsewhere,” she said in the newsletter.
Dunn’s bill died in committee that year.
The former senator, who is now executive director of the State Bar of California, did not return a call from The Associated Press seeking comment.
Leyes, of the Department of Corporations, said industry groups argued that the law duplicated existing federal regulations, although those did not cap interest rates or fees on loans. He noted that the association did not take an official public position on the bill.
“The industry wasn’t supportive of Dunn’s bill and similar efforts that year or in that time period. Jan was employed by the association, the CMBA, and she needed to represent their point of view,” he said.
Leyes said a similar bill by then-Sen. Carole Migden passed later. The Mortgage Bankers Association also lobbied against that bill.
The association also is listed as an opponent of the California Financial Privacy Act by then-Assemblyman Tim Leslie, which sought to prohibit financial companies from sharing customers’ data unless customers opted in. That legislation, AB21, died in a committee in 2002.
The California Reinvestment Coalition is one of many groups that lobbied in the early 2000s for tighter lending standards and more restrictions on high-interest loans. Its associate director, Kevin Stein, said he did not recall whether Owen spoke out publicly against the Dunn bill but said her resume raises some concerns about whether she will be an effective advocate for consumers.
Stein called Washington Mutual a “perfect example of what happens when regulators don’t regulate.”
“So she’s aware of that, and maybe there’s some appreciation that she might have for the role that regulations can and should play,” he said.
A spokesman for the governor, Gil Duran, said is uniquely qualified to lead the department.
“Jan Owen is a highly experienced and respected commissioner with a deep knowledge of California’s complex industries and regulations. Gov. Brown picks appointees based on their qualifications,” he said.
Owen’s name also is cited in two congressional investigations.
They include a 2009 inquiry into the collapse of Countrywide Financial Corp. as a potential “Friend of Angelo” – a reference to former Countrywide chief executive Angelo Mozilo, who helped high-profile clients get discounted mortgages.
Once the country’s largest lender, Countrywide played a major role in the collapse of the housing market because it aggressively pushed complicated home loans to people with a questionable ability to repay.
An April 2003 email exchange cited as part of the House Oversight and Government Reform Committee’s investigation begins with an email message from Owen to Pete Mills, then-senior vice president of legislative and government regulatory affairs for Countrywide Home Loans.
“Don’t forget name and telephone number of the guy for refi for us,” Owen wrote.
Mills then emailed another Countrywide executive, asking him or “one of your top people,” to help Owen. In addition to noting her government affairs position at Washington Mutual, Mills refers in his email to Owen as “a good friend of Countrywide from her days as executive director at Calif. MBA.” A follow-up email urges another staffer to offer Owen a discount of half a percentage point on her loan and “no junk fees.”
Leyes said Owen does not remember ever receiving a refinancing offer from Countrywide, and public records reviewed by The Associated Press do not show her or her husband having any loans from the company for the two Sacramento-area homes they have owned.
The report concluded that Countrywide loan officers waived fees and knocked off points for VIP borrowers at no cost, saving them thousands of dollars in deals that were not available to regular applicants. It does not say whether Owen received a loan with preferential terms.
“She didn’t seek any preferential treatment even though she may have kind of innocuously asked into the terms that Countrywide provided for a refinance,” Leyes said. “What’s unfortunate is that that got included in that report back then and it didn’t get challenged or corrected at the time.”
Owen’s name also surfaced in a July 2010 House Ethics Committee investigation that cleared Rep. Laura Richardson, D-Long Beach, of wrongdoing in the foreclosure of her Sacramento home, an action that Washington Mutual later rescinded. Owen was among the bank officials who dealt with Richardson’s case.
Before she worked for the trade association and the banks, Owen was chief consultant to the Senate Banking Committee in the Legislature from 1992 to 1995, a deputy commissioner at the Department of Financial Institutions under former Gov. Gray Davis from 1996 to 1999 and acting commissioner from 1999 to 2000, when she left to head the bankers association
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Gov. Jerry Brown’s appointee to head the department that oversees banking, financial and consumer regulations in California led a trade association that fought against tighter lending restrictions before the subprime mortgage crisis exploded and was an executive with Washington Mutual when the now-failed bank was among the most aggressive marketers of loans to high-risk borrowers.
Jan Owen, a Democrat, also is named in a congressional inquiry into whether lawmakers and certain executives received preferential treatment for home loans, although she was not accused of wrongdoing.
Consumer advocates said they are watching Owen’s decisions carefully to see how she performs in her role as commissioner of the California Department of Corporations. The Democratic governor appointed her in December to the $143,000-a-year position, and she started in January.
Owen, 59, of West Sacramento, has a long resume in California, including stints in both business and government, but it is her history with organizations that were at the heart of the mortgage meltdown that stands out in a state that has one of the highest home foreclosure rates in the nation.
Owen served as state director of government and industry affairs at Washington Mutual from 2002 until its collapse in 2008, one of the largest bank failures in American history. It was taken over by JP Morgan Chase, where Owen stayed on as vice president of government affairs until 2009.
“It is of concern if a person who takes a job there, at that pay level in particular, has such experience, particularly with the mortgage bankers association, JPMorgan and Washington Mutual,” said Rick Jacobs, president of the Courage Campaign, which advocates on behalf of policies for poor and working-class families.
“These are big institutions, some of which don’t even exist anymore because of what they did in the mortgage business, and what they did to California,” Jacobs said. “That should be watched very carefully.”
Owen declined to be interviewed by The Associated Press for this story, but a spokesman for the Department of Corporations, Mark Leyes, responded to questions by email and telephone. He said Owen’s professional background is an asset because she understands consumer issues.
“Understanding these industries and how they function- and fail – improves the ability to regulate effectively,” Leyes said in an email.
He said the department protects consumers by licensing and regulating the network of financial services and securities businesses, including brokers, dealers, investment advisers, financial planners and lenders. Because Owen “really understands how these complex industries operate, she knows what to look for and how to crack down,” Leyes said.
Officials with several consumer groups said they were hesitant to openly criticize Owen’s background because they will have to work with her in her new role. Lawmakers similarly were hesitant because Owen’s appointment still has to be approved in the Legislature. Although Owen’s appointment requires confirmation by the state Senate, she is allowed to work for up to one year before lawmakers decide.
Some consumer advocates who have worked with Owen in the past praised her, saying she was responsive to their concerns.
Orson Aguilar, executive director of the Greenlining Institute, a Berkeley-based national policy group that advocates for racial and economic justice, said he often found himself on the opposite side of the table from Owen on consumer protection and affordable housing issues when she was an executive at Washington Mutual.
“I think people would be surprised, but definitely she was somebody who was easy to work with and she got it. She just didn’t pay lip service, she tried her hardest” to help poor communities, he said.
Before joining Washington Mutual, Owen was executive director of the California Mortgage Bankers Association from 2000 to 2002, where she worked on behalf of lenders on regulatory issues that she now is in charge of enforcing.
Owen was among those who argued against a 2001 bill that attempted to control high-interest predatory lending several years before the collapse of the housing industry, which helped propel the state’s unemployment rate to more than 12 percent during the height of the recession.
SB60 by then-Sen. Joe Dunn, a Democrat, would have required lenders to assess whether potential recipients of high-interest, high-risk loans had the means to repay them and required the attorney general to document complaints against lenders.
The bill sought to end the “abusive practices imposed upon a captive market,” according to its text.
“These abusive tactics, known as `predatory lending’ practices, range from the charging of exorbitant fees and interest rates from those least likely to afford them, to aggressive sales of costly and unnecessary services, to outright fraud aimed at forcing foreclosures and allowing seizures of property,” the bill said.
That was 2001, long before most Americans had heard about the complex lending and financial instruments that contributed to the collapse of the housing market and billions of dollars in bank bailouts.
A report that year in American Banker, a trade magazine, notes that a hearing on the bill was canceled and said Owen’s office contacted the senator to try to “work with him” on it. A newsletter for bankers association members from 2001 quotes Owen as saying the legislation and other bills like it would turn lenders away from California, which would lead to complaints that low-income buyers and the elderly could not receive loans.
“There is a fine line between protecting consumers and making the process so cumbersome and risky that lenders will simply do business elsewhere,” she said in the newsletter.
Dunn’s bill died in committee that year.
The former senator, who is now executive director of the State Bar of California, did not return a call from The Associated Press seeking comment.
Leyes, of the Department of Corporations, said industry groups argued that the law duplicated existing federal regulations, although those did not cap interest rates or fees on loans. He noted that the association did not take an official public position on the bill.
“The industry wasn’t supportive of Dunn’s bill and similar efforts that year or in that time period. Jan was employed by the association, the CMBA, and she needed to represent their point of view,” he said.
Leyes said a similar bill by then-Sen. Carole Migden passed later. The Mortgage Bankers Association also lobbied against that bill.
The association also is listed as an opponent of the California Financial Privacy Act by then-Assemblyman Tim Leslie, which sought to prohibit financial companies from sharing customers’ data unless customers opted in. That legislation, AB21, died in a committee in 2002.
The California Reinvestment Coalition is one of many groups that lobbied in the early 2000s for tighter lending standards and more restrictions on high-interest loans. Its associate director, Kevin Stein, said he did not recall whether Owen spoke out publicly against the Dunn bill but said her resume raises some concerns about whether she will be an effective advocate for consumers.
Stein called Washington Mutual a “perfect example of what happens when regulators don’t regulate.”
“So she’s aware of that, and maybe there’s some appreciation that she might have for the role that regulations can and should play,” he said.
A spokesman for the governor, Gil Duran, said is uniquely qualified to lead the department.
“Jan Owen is a highly experienced and respected commissioner with a deep knowledge of California’s complex industries and regulations. Gov. Brown picks appointees based on their qualifications,” he said.
Owen’s name also is cited in two congressional investigations.
They include a 2009 inquiry into the collapse of Countrywide Financial Corp. as a potential “Friend of Angelo” – a reference to former Countrywide chief executive Angelo Mozilo, who helped high-profile clients get discounted mortgages.
Once the country’s largest lender, Countrywide played a major role in the collapse of the housing market because it aggressively pushed complicated home loans to people with a questionable ability to repay.
An April 2003 email exchange cited as part of the House Oversight and Government Reform Committee’s investigation begins with an email message from Owen to Pete Mills, then-senior vice president of legislative and government regulatory affairs for Countrywide Home Loans.
“Don’t forget name and telephone number of the guy for refi for us,” Owen wrote.
Mills then emailed another Countrywide executive, asking him or “one of your top people,” to help Owen. In addition to noting her government affairs position at Washington Mutual, Mills refers in his email to Owen as “a good friend of Countrywide from her days as executive director at Calif. MBA.” A follow-up email urges another staffer to offer Owen a discount of half a percentage point on her loan and “no junk fees.”
Leyes said Owen does not remember ever receiving a refinancing offer from Countrywide, and public records reviewed by The Associated Press do not show her or her husband having any loans from the company for the two Sacramento-area homes they have owned.
The report concluded that Countrywide loan officers waived fees and knocked off points for VIP borrowers at no cost, saving them thousands of dollars in deals that were not available to regular applicants. It does not say whether Owen received a loan with preferential terms.
“She didn’t seek any preferential treatment even though she may have kind of innocuously asked into the terms that Countrywide provided for a refinance,” Leyes said. “What’s unfortunate is that that got included in that report back then and it didn’t get challenged or corrected at the time.”
Owen’s name also surfaced in a July 2010 House Ethics Committee investigation that cleared Rep. Laura Richardson, D-Long Beach, of wrongdoing in the foreclosure of her Sacramento home, an action that Washington Mutual later rescinded. Owen was among the bank officials who dealt with Richardson’s case.
Before she worked for the trade association and the banks, Owen was chief consultant to the Senate Banking Committee in the Legislature from 1992 to 1995, a deputy commissioner at the Department of Financial Institutions under former Gov. Gray Davis from 1996 to 1999 and acting commissioner from 1999 to 2000, when she left to head the bankers association
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2012年2月3日星期五
Geithner says 2010 law made financial system 'stronger and safer'
Reporting from Washington—
Treasury Secretary Timothy F. Geithner has a message for voters as they listen to Republican presidential candidates call for repeal of the 2010 Dodd-Frank financial overhaul law: Remember the pain.
“I would say remember 2008 and 2009,” Geithner told reporters Thursday during a news conference touting the benefits of the overhaul. “Remember the fact that the reason why we’re living with very high unemployment with millions of Americans that have lost their homes, terrible damage to the basic economics of America is because of the failures that caused this crisis in the financial system.”
“And if you want to go back to that,” he said, “if you want to choose that future, then you should be in favor of the repeal of the law.”
Republican presidential candidates have hammered away at the sweeping rewrite of financial regulations.
At a debate in Florida last month, GOP frontrunner Mitt Romney said the law was “just killing the residential home market and it’s got to be replaced.”
Newt Gingrich was more blunt. Asked what could be done to help struggling homeowners, he said, “I think, first of all, if you could repeal Dodd-Frank tomorrow morning, you would see the economy start to improve overnight.”
In the face of such criticism on the campaign trail and from Republicans in Congress, Geithner defended the law.
He said it already had helped the financial system become “stronger and safer” even as some key provisions, such as the Volcker Rule restriction on banks trading with their own money, are still being implemented by regulators.
Speaking as the head of the Financial Stability Oversight Council, a panel of regulators created by the law to monitor the financial system for signs of problems, Geithner said the law had helped the economy recover.
Regulators this year would designate the large financial firms outside the banking system that will receive tougher oversight because their failure would pose a risk to the financial system, he said.
And the Obama administration would release more details about its plans to overhaul the housing finance system and replace Fannie Mae and Freddie Mac, which the government seized in 2008.
Republicans and business groups have criticized the hundreds of regulations required by the new law and tough new oversight, including the creation of the Consumer Financial Protection Bureau.
They have said that the uncertainty about pending regulations has made businesses hesitant to hire, and that tough new rules on banks, such as requiring them to hold more reserves, was limiting the banks’ ability to make loans to boost the recovery.
But Geithner said the new rules were badly needed to prevent a repeat of the crisis, and he criticized opponents who were trying to drag out implementation of the Volcker rule and other provisions. Slowing those changes would only increase uncertainty, he said.
“No financial system is invulnerable to crisis. We have a lot of challenges ahead. We still have a lot of unfinished business on the path of reform,” Geithner said. “But the American financial system now is much less vulnerable than it was and is now able to help finance a growing economy, rather than being a drag on overall economic growth.”
RELATED:
Timothy Geithner says a second stint at Treasury is unlikely
Financial regulatory overhaul faces new criticism on first birthday
Consumer agency chief’s appointment is invalid, GOP senators say
http://tourism9.com http://vkins.com/
Treasury Secretary Timothy F. Geithner has a message for voters as they listen to Republican presidential candidates call for repeal of the 2010 Dodd-Frank financial overhaul law: Remember the pain.
“I would say remember 2008 and 2009,” Geithner told reporters Thursday during a news conference touting the benefits of the overhaul. “Remember the fact that the reason why we’re living with very high unemployment with millions of Americans that have lost their homes, terrible damage to the basic economics of America is because of the failures that caused this crisis in the financial system.”
“And if you want to go back to that,” he said, “if you want to choose that future, then you should be in favor of the repeal of the law.”
Republican presidential candidates have hammered away at the sweeping rewrite of financial regulations.
At a debate in Florida last month, GOP frontrunner Mitt Romney said the law was “just killing the residential home market and it’s got to be replaced.”
Newt Gingrich was more blunt. Asked what could be done to help struggling homeowners, he said, “I think, first of all, if you could repeal Dodd-Frank tomorrow morning, you would see the economy start to improve overnight.”
In the face of such criticism on the campaign trail and from Republicans in Congress, Geithner defended the law.
He said it already had helped the financial system become “stronger and safer” even as some key provisions, such as the Volcker Rule restriction on banks trading with their own money, are still being implemented by regulators.
Speaking as the head of the Financial Stability Oversight Council, a panel of regulators created by the law to monitor the financial system for signs of problems, Geithner said the law had helped the economy recover.
Regulators this year would designate the large financial firms outside the banking system that will receive tougher oversight because their failure would pose a risk to the financial system, he said.
And the Obama administration would release more details about its plans to overhaul the housing finance system and replace Fannie Mae and Freddie Mac, which the government seized in 2008.
Republicans and business groups have criticized the hundreds of regulations required by the new law and tough new oversight, including the creation of the Consumer Financial Protection Bureau.
They have said that the uncertainty about pending regulations has made businesses hesitant to hire, and that tough new rules on banks, such as requiring them to hold more reserves, was limiting the banks’ ability to make loans to boost the recovery.
But Geithner said the new rules were badly needed to prevent a repeat of the crisis, and he criticized opponents who were trying to drag out implementation of the Volcker rule and other provisions. Slowing those changes would only increase uncertainty, he said.
“No financial system is invulnerable to crisis. We have a lot of challenges ahead. We still have a lot of unfinished business on the path of reform,” Geithner said. “But the American financial system now is much less vulnerable than it was and is now able to help finance a growing economy, rather than being a drag on overall economic growth.”
RELATED:
Timothy Geithner says a second stint at Treasury is unlikely
Financial regulatory overhaul faces new criticism on first birthday
Consumer agency chief’s appointment is invalid, GOP senators say
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2012年1月30日星期一
First Financial Holdings, Inc. Announces Quarterly Financial Results and Declares Cash Dividend
CHARLESTON, S.C., Jan. 30, 2012 (GLOBE NEWSWIRE) — First Financial Holdings, Inc. (“First Financial“) (Nasdaq:FFCH – News), the holding company for First Federal Savings and Loan Association of Charleston (“First Federal”), announced today net income of $15.6 million for the three months ended December 31, 2011, compared with $1.1 million for the three months ended September 30, 2011 and $1.2 million for the three months ended December 31, 2010. After the effect of the preferred stock dividend and related accretion, First Financial reported net income available to common shareholders of $14.6 million for the three months ended December 31, 2011, compared with $113 thousand and $210 thousand for the three months ended September 30, 2011 and December 31, 2010, respectively. Diluted net income per common share was $0.88 for the quarter ended December 31, 2011, compared with $0.01 for both the prior quarter and for the same quarter last year. Diluted net income per common share from continuing operations was $0.88 for the quarter ended December 31, 2011, compared with $0.12 and $0.01 for the quarters ended September 30, 2011 and December 31, 2010, respectively.
“The successful completion of the bulk loan sale during this quarter marked yet another strategic initiative in the transformation of our company and has positioned First Financial to produce improved results for our shareholders,” said R. Wayne Hall, president and chief executive officer of First Financial and First Federal. “We are focused on providing superior products and services to our customers, generating organic loan growth and improving the efficiency of our operations.”
Highlights for the Quarter ended December 31, 2011
Total assets at December 31, 2011 were $3.1 billion, a decrease of $59.3 million or 1.9% from September 30, 2011 and a decrease of $154.4 million or 4.7% from December 31, 2010. The decline from September 30, 2011 was primarily the result of a decrease in loans held for sale due to the bulk loan sale and other assets, partially offset by an increase in portfolio loans. The decline from December 31, 2010 was primarily the result of the bulk loan sale, as well as the sales of First Southeast Insurance Services Inc. and Kimbrell Insurance Group, Inc. during 2011, partially offset by an increase in total investment securities.
Investment securities at December 31, 2011 totaled $457.7 million, a decrease of $11.8 million or 2.5% over September 30, 2011 and an increase of $22.2 million or 5.1% over December 31, 2010. The decrease from September 30, 2011 was primarily the result of normal cash flows and prepayments received during the quarter, partially offset by investment securities purchased. The increase over December 31, 2010 was primarily the result of purchasing new securities during 2011.
The following table summarizes the loan portfolio by major categories.
Total loans at December 31, 2011 increased $30.2 million or 1.3% over September 30, 2011 and decreased $197.9 million or 7.7% from December 31, 2010. The increase over September 30, 2011 was primarily the result of a higher volume of 15-year fixed rate residential loan originations, which were held in the portfolio, partially offset by declines in the commercial and consumer loan portfolios. While the total commercial loan portfolio declined, the commercial business portfolio increased 3.6% over September 30, 2011, and this pipeline has displayed recent signs of improvement. The decrease from December 31, 2010 was primarily the result of the bulk loan sale, partially offset by continued demand for residential mortgage loans due to the low interest rate environment. For both comparative periods, continued lower loan demand from creditworthy borrowers, charge-offs, transfers of nonperforming loans to other real estate owned (“OREO”), and paydowns due to normal borrower activity contributed to a reduction in loans.
The allowance for loan losses was $53.5 million at December 31, 2011 or 2.24% of total loans, compared with $54.3 million or 2.31% of total loans at September 30, 2011 and $88.3 million or 3.42% of total loans at December 31, 2010. The decrease from September 30, 2011 was primarily the result of the continued reduced level of charge-offs since the bulk loan sale. The decrease from December 31, 2010 was primarily the result of the bulk loan sale and improvement in credit quality measures during the past twelve months, as discussed further below. The allowance for loan losses at December 31, 2011 was 2.39% of loans excluding loans covered under a purchase and assumption loss-share agreement (“loss-share agreement”) with the FDIC (“covered loans”), and represented 1.77 times coverage of the non-covered nonperforming loans.
At December 31, 2011, loans held for sale totaled $48.3 million, a decrease of $46.6 million from September 30, 2011 and an increase of $19.8 million over December 31, 2010. Loans held for sale at September 30, 2011 consisted of $40.8 million of residential mortgage loans to be sold in the secondary market and $54.1 million of nonperforming and performing loans selected for the bulk loan sale, while during the other two periods the loans held for sale were solely comprised of residential mortgage loans to be sold in the secondary market. The increases in residential mortgage loans to be sold in the secondary market over both prior periods were primarily the result of higher borrower demand due to recent reductions in market interest rates. These loans generally settle in 45 to 60 days. The decrease in the bulk loan pool, which was established as of June 30, 2011, was the result of the sale and settlement of the entire pool during the December 31, 2011 quarter.
The FDIC indemnification asset, net at December 31, 2011 was $51.0 million, essentially unchanged from September 30, 2011 and a decrease of $17.3 million or 25.3% from December 31, 2010. The decrease was primarily the result of receiving claims reimbursement from the FDIC, partially offset by the normal accretion recorded to the indemnification asset.
Other assets totaled $98.9 million at December 31, 2011, a decrease of $22.6 million or 18.6% from September 30, 2011 and an increase of $4.7 million or 5.0% over December 31, 2010. The decrease from September 30, 2011 was primarily the result of lower levels of OREO properties, current tax adjustments and federal tax refunds received. The increase over December 31, 2010 was primarily the result of an increase in the deferred tax asset associated with the loss recorded in the June 30, 2011 quarter.
Core deposits, which include checking, savings, and money market accounts, totaled $1.2 billion at December 31, 2011, essentially unchanged from September 30, 2011 and an increase of $121.2 million or 10.9% over December 31, 2010. The increase was primarily the result of new retail deposit products introduced during 2011 as well as several marketing initiatives and campaigns during the last twelve months to attract and retain core deposits. Time deposits at December 31, 2011 totaled $1.0 billion, a decrease of $70.8 million or 6.6% from September 30, 2011 and a decrease of $291.7 million or 22.5% from December 31, 2010. The decreases were primarily the result of a planned reduction in maturing high rate retail and wholesale time deposits and lower funding needs relative to asset growth during the last twelve months.
Advances from the FHLB at December 31, 2011 totaled $561.0 million, essentially unchanged from September 30, 2011 and an increase of $63.9 million or 12.9% over December 31, 2010. The increase was primarily the result of a shift in funding mix due to the planned reduction of high rate time deposits, partially offset by using cash flow from investment securities and the loan portfolio to paydown FHLB advances.
Shareholders’ equity at December 31, 2011 was $277.2 million, an increase of $8.7 million or 3.2% over September 30, 2011 and a decrease of $38.1 million or 12.1% from December 31, 2010. The variances were primarily the result of net operating results during the last twelve months combined with a reduction in accumulated other comprehensive income due to a change in market value related to recent activity and updated assumptions on the valuation of certain securities. While First Financial is not currently required to report risk-based capital metrics at the holding company level, using December 31, 2011 data on a pro-forma basis, the Tier 1 capital ratio for First Financial would have been 14.13% and the total risk-based capital ratio would have been 15.39%. First Federal’s regulatory capital ratios continue to be above “well-capitalized” minimums, as evidenced by the key capital ratios and additional capital information presented in the following table.
Asset Quality
The following tables illustrate the trend in quality and risk inherent in the loan portfolio over the past twelve months.
Total delinquent loans at December 31, 2011 increased $3.6 million or 24.2% over September 30, 2011. The increases in delinquent residential and consumer loans were primarily the result of several customers with modification requests in process as well as a seasonal increase normally experienced in the fourth calendar quarter each year. Total delinquent loans at December 31, 2011 included $2.3 million in covered loans, as compared with $2.7 million at September 30, 2011.
Total nonperforming assets at December 31, 2011 decreased $40.3 million or 37.2% from September 30, 2011. The decrease was primarily the result of the bulk loan sale as well as lower OREO due to property sales exceeding transfers to OREO and lower nonperforming commercial loans due to the resolution of several non-performing loans. These decreases were partially offset by higher nonperforming residential loans due to six accounts totaling $2.8 million; higher home equity loans related to impaired loans totaling $1.7 million; and additional restructured loans still accruing due to completing customer modification requests. Nonperforming loans covered under the loss-share agreement decreased $1.5 million from September 30, 2011 to $17.5 million at December 31, 2011. Covered OREO totaled $7.6 million at December 31, 2011, a decrease of $1.1 million from September 30, 2011.
The decrease in net charge-offs for the quarter ended December 31, 2011 as compared with the prior quarter was the result of the lower risk inherent in the loan portfolio after the bulk loan sale. The increase in commercial real estate charge-offs was primarily the result of the resolution of several nonperforming loans. Net charge-offs for the prior quarter were comprised of $7.9 million of charge-offs related to normal credit practices and $2.2 million of charge-offs on additional loans transferred to loans held for sale, the majority of which were related to existing loans in the pool.
The following table provides details on classified assets by category.
Discontinued Operations Financial Statement Presentation
As a result of First Financial’s sales of its insurance agency subsidiary, First Southeast Insurance Services, Inc., which was completed on June 1, 2011, and its managing general insurance agency subsidiary, Kimbrell Insurance Group, Inc., which was completed on September 30, 2011, the financial condition, operating results, and the gain or loss on the sales, net of transaction costs and taxes, for these subsidiaries have been segregated from the financial condition and operating results of First Financial’s continuing operations throughout this release and, as such, are presented as discontinued operations. While all prior periods have been revised retrospectively to align with this treatment, these changes do not affect First Financial’s reported consolidated financial condition or operating results for any of the prior periods.
Quarterly Results of Operations
First Financial reported net income from continuing operations of $15.6 million for the three months ended December 31, 2011, compared with $2.9 million for the three months ended September 30, 2011 and $1.1 million for the three months ended December 31, 2010. The quarter ended December 31, 2011 included a $20.8 million pre-tax gain ($12.7 million after-tax) from the bulk loan sale. The changes in the key components of net income from continuing operations are discussed below.
Net interest income
Net interest margin, on a fully tax-equivalent basis, was 3.91% for the quarter ended December 31, 2011, as compared with 3.87% for the quarter ended September 30, 2011 and 3.83% for the quarter ended December 31, 2010. The increase over the linked quarter was primarily the result of a reduction in the rate paid on interest-bearing liabilities. The increase from the same quarter last year was primarily the result of the decrease in yield on interest-bearing liabilities exceeding the decrease in the yield on earning assets as First Financial continues to grow core deposits, especially noninterest-bearing deposits.
Net interest income for the quarter ended December 31, 2011 was $28.9 million, essentially unchanged from the prior quarter and a decrease of $1.3 million or 4.5% from the same quarter last year. The decrease from the same quarter last year was primarily the result of a decline in average earning assets due to the bulk loan sale, combined with the decline in net loans due to the generally lower loan demand from creditworthy borrowers and loan charge-offs.
Provision for loan losses
After determining what First Financial believes is an adequate allowance for loan losses based on the estimated risk inherent in the loan portfolio, the provision for loan losses is calculated based on the net effect of the change in the allowance for loan losses and net charge-offs. The provision for loan losses was $7.4 million for the quarter ended December 31, 2011, compared with $8.9 million for the linked quarter and $10.5 million for the same quarter last year. The provision for loan losses for the linked quarter included $1.4 million related to loans transferred to the bulk sale pool, and represents the net result of the incremental charge-offs on those loans less their related reserve release. The decrease from both prior periods was primarily the result of lower net charge-offs and lower classified loans at December 31, 2011.
Noninterest income
Noninterest income totaled $32.8 million for the quarter ended December 31, 2011, an increase of $18.5 million over the prior quarter and an increase of $22.2 million over the same quarter last year. The quarter ended December 31, 2011 included a $20.8 million pre-tax gain from the bulk loan sale. The prior quarter included net gains totaling $1.9 million related to the resolution of certain loans in the bulk loan pool. Noninterest income from core operations totaled $12.0 million and $12.3 for the quarters ended December 31, 2011 and September 30, 2011, respectively.
The increase over the same quarter last year was primarily the result of the gain on the bulk loan sale as well as higher service charges on deposit accounts ($821 thousand) due to higher transaction-related revenue from increases in both volume and fees.
Noninterest expense
Noninterest expense totaled $28.9 million for the quarter ended December 31, 2011, a decrease of $701 thousand or 2.4% over the linked quarter and essentially unchanged from the same quarter last year. The decrease from the linked quarter was primarily the result of lower OREO, net ($1.6 million) and lower professional services expenses ($502 thousand), partially offset by higher other expense ($1.2 million). The decrease in OREO costs was primarily the result of fewer valuation adjustments on properties held. The decrease in professional services was primarily the result of $521 thousand in legal and other advisory services in the prior quarter related to preparing the loans held in the bulk sale pool for final disposition. The increase in other expense was primarily the result of higher processing fees related to a new reward program for deposit customers, higher loss reserves for the reinsurance subsidiary, and higher operational losses related to uncollectible foreclosure expenses.
Noninterest expense was essentially unchanged from the same quarter last year as increases in other expense ($1.1 million) and OREO, net ($414 thousand) were essentially offset by reductions in salaries and employee benefits ($969 thousand), professional services ($523 thousand), and FDIC insurance and regulatory fees ($350 thousand). The variances in other expense and OREO, net were primarily the result of the factors discussed above. The decrease in salaries and employee benefits was primarily the result of lower staff levels due to initiatives implemented during 2011. The reduction in professional services was primarily the result of using external resources to assist in the implementation of several strategic initiatives including loss-sharing management, OREO management, and compensation studies during the December 31, 2010 quarter. The decrease in FDIC insurance and regulatory fees was primarily the result of the new assessment methodology implemented by the FDIC during 2011.
Cash Dividend Declared
On January 30, 2012, First Financial’s Board of Directors declared a quarterly cash dividend of $0.05 per share. The dividend is payable on February 27, 2012 to shareholders of record as of February 13, 2012.
Conference Call
R. Wayne Hall, president and CEO; Blaise B. Bettendorf, EVP and CFO; and Joseph W. Amy, EVP and CCO; will review the quarter’s results in a conference call at 2:00 pm (ET), January 30, 2012. The live audio webcast is available on First Financial’s website at www.firstfinancialholdings.com and will be available for 90 days.
About First Financial
First Financial Holdings, Inc. (“First Financial”) (Nasdaq:FFCH – News) is a Charleston, South Carolina financial services provider with $3.1 billion in total assets as of December 31, 2011. First Financial offers integrated financial solutions, including personal, business, and wealth management services. First Federal Savings and Loan Association (“First Federal”), which was founded in 1934 and is the primary subsidiary, serves individuals and businesses throughout coastal South Carolina, Florence, South Carolina and Wilmington, North Carolina. First Financial subsidiaries include: First Federal; First Southeast Investor Services, Inc., a registered broker-dealer; and First Southeast 401(k) Fiduciaries, Inc., a registered investment advisor. First Federal is the largest financial institution headquartered in the Charleston, South Carolina metropolitan area and the third largest financial institution headquartered in South Carolina, based on asset size. Additional information about First Financial is available at www.firstfinancialholdings.com.
Non-GAAP Financial Information
In addition to results presented in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release includes non-GAAP financial measures such as the efficiency ratio, the tangible common equity to tangible assets ratio, tangible common book value per share, and pre-tax pre-provision earnings. First Financial believes these non-GAAP financial measures provide additional information that is useful to investors in understanding its underlying performance, business, and performance trends and such measures help facilitate performance comparisons with others in the banking industry. Non-GAAP measures have inherent limitations, are not required to be uniformly applied, and are not audited. Readers should be aware of these limitations and should be cautious to their use of such measures. To mitigate these limitations, First Financial has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that its performance is properly reflected to facilitate consistent period-to-period comparisons. Although management believes the above non-GAAP financial measures enhance investors’ understanding of First Financial’s business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.
In accordance with industry standards, certain designated net interest income amounts are presented on a taxable equivalent basis, including the calculation used in the efficiency ratio.
First Financial believes the exclusion of goodwill and other intangible assets facilitates the comparison of results for ongoing business operations. The tangible common equity (“TCE”) ratio and tangible common book value per share (“TBV”) have become a focus of some investors, analysts and banking regulators. Management believes these measures may assist in analyzing First Financial’s capital position absent the effects of intangible assets and preferred stock. Because TCE and TBV are not formally defined by GAAP or codified in the federal banking regulations, these measures are considered to be non-GAAP financial measures. However, analysts and banking regulators may assess First Financial’s capital adequacy using TCE or TBV, therefore, management believes that it is useful to provide investors the ability to assess its capital adequacy on the same basis.
First Financial believes that pre-tax, pre-provision earnings are a useful measure in assessing its core operating performance, particularly during times of economic stress. This measurement, as defined by management, represents total revenue (net interest income plus noninterest income) less noninterest expense. As recent results for the banking industry demonstrate, credit writedowns, loan charge-offs, and related provisions for loan losses can vary significantly from period to period, making a measure that helps isolate the impact of credit costs on profitability important to investors.
Please refer to the Selected Financial Information table and the Non-GAAP Reconciliation table later in this release for additional information.
Forward-Looking Statements
Statements in this release that are not statements of historical fact, including without limitation, statements that include terms such as “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” or “could” constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements regarding First Financial’s future financial and operating results, plans, objectives, expectations and intentions involve risks and uncertainties, many of which are beyond First Financial’s control or are subject to change. No forward-looking statement is a guarantee of future performance and actual results could differ materially. Factors that could cause or contribute to such differences include, but are not limited to, the general business environment, general economic conditions nationally and in the States of North and South Carolina, interest rates, the North and South Carolina real estate markets, the demand for mortgage loans, the credit risk of lending activities, including changes in the level and trend of delinquent and nonperforming loans and charge-offs, changes in First Federal’s allowance for loan losses and provision for loan losses that may be affected by deterioration in the housing and real estate markets; results of examinations by banking regulators, including the possibility that any such regulatory authority may, among other things, require First Federal to increase its allowance for loan losses, writedown assets, change First Federal’s regulatory capital position or affect its ability to borrow funds or maintain or increase deposits, which could adversely affect liquidity and earnings; First Financial’s ability to control operating costs and expenses, First Financial’s ability to successfully integrate any assets, liabilities, customers, systems, and management personnel acquired or may in the future acquire into its operations and its ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto, competitive conditions between banks and non-bank financial services providers, and regulatory changes including the Dodd-Frank Wall Street Reform and Consumer Protection Act. Other risks are also detailed in First Financial’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and current reports on Form 8-K filings with the Securities and Exchange Commission (“SEC”), which are available at the SEC’s website www.sec.gov. Other factors not currently anticipated may also materially and adversely affect First Financial’s results of operations, financial position, and cash flows. There can be no assurance that future results will meet expectations. While First Financial believes that the forward-looking statements in this release are reasonable, the reader should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. First Financial does not undertake, and expressly disclaims any obligation to update or alter any statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
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“The successful completion of the bulk loan sale during this quarter marked yet another strategic initiative in the transformation of our company and has positioned First Financial to produce improved results for our shareholders,” said R. Wayne Hall, president and chief executive officer of First Financial and First Federal. “We are focused on providing superior products and services to our customers, generating organic loan growth and improving the efficiency of our operations.”
Highlights for the Quarter ended December 31, 2011
- On October 26, 2011, First Financial sold certain performing loans and classified assets in a bulk sale (the “bulk loan sale”) with an aggregate contractual principal balance of $197.9 million to affiliates of Varde Partners, Inc. and recorded a pre-tax gain of $20.8 million on the transaction.
- Net interest margin remained strong for the quarter ended December 31, 2011 at 3.91%, an increase of four basis points over the prior quarter ended September 30, 2011.
- The allowance for loan losses totaled $53.5 million at December 31, 2011 or 2.24% of total loans, compared with $54.3 million or 2.31% of total loans at September 30, 2011.
- Credit metrics remain strong with non-covered nonperforming assets to total assets of 1.35% at December 31, 2011 compared with 1.23% at September 30, 2011.
- The provision for loan losses for the quarter ended December 31, 2011 totaled $7.4 million, compared with $8.9 million for the linked quarter.
- Net charge-offs totaled $8.3 million for the quarter ended December 31, 2011, compared with $10.1 million for the linked quarter.
- First Financial’s tangible common equity to tangible common assets ratio increased to 6.67% at December 31, 2011, as compared with 6.27% at September 30, 2011. The consolidated total risk-based capital ratio (pro-forma) would have been 15.39% at December 31, 2011, as compared with 14.36% at September 30, 2011.
- On December 21, 2011 First Financial announced that it filed an application with the Federal Reserve Bank of Richmond to convert from a savings and loan holding company to a bank holding company, that First Federal had received conditional approval from the State of South Carolina to convert from a federal savings and loan association to a state-chartered commercial bank (subject to the holding company approval), and that First Financial’s Board of Directors approved an amendment to the bylaws to change the fiscal year from September 30th to December 31st.
Total assets at December 31, 2011 were $3.1 billion, a decrease of $59.3 million or 1.9% from September 30, 2011 and a decrease of $154.4 million or 4.7% from December 31, 2010. The decline from September 30, 2011 was primarily the result of a decrease in loans held for sale due to the bulk loan sale and other assets, partially offset by an increase in portfolio loans. The decline from December 31, 2010 was primarily the result of the bulk loan sale, as well as the sales of First Southeast Insurance Services Inc. and Kimbrell Insurance Group, Inc. during 2011, partially offset by an increase in total investment securities.
Investment securities at December 31, 2011 totaled $457.7 million, a decrease of $11.8 million or 2.5% over September 30, 2011 and an increase of $22.2 million or 5.1% over December 31, 2010. The decrease from September 30, 2011 was primarily the result of normal cash flows and prepayments received during the quarter, partially offset by investment securities purchased. The increase over December 31, 2010 was primarily the result of purchasing new securities during 2011.
The following table summarizes the loan portfolio by major categories.
| LOANS(in thousands) | December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | |||||
| Residential loans | ||||||||||
| Residential 1-4 family | $ 975,405 | $ 909,907 | $ 895,650 | $ 916,146 | $ 887,924 | |||||
| Residential construction | 15,117 | 16,431 | 19,603 | 20,311 | 15,639 | |||||
| Residential land | 41,612 | 40,725 | 42,763 | 48,955 | 53,772 | |||||
| Total residential loans | 1,032,134 | 967,063 | 958,016 | 985,412 | 957,335 | |||||
| Commercial loans | ||||||||||
| Commercial business | 83,814 | 80,871 | 80,566 | 91,005 | 91,129 | |||||
| Commercial real estate | 456,541 | 471,296 | 482,315 | 570,300 | 590,816 | |||||
| Commercial construction | 16,477 | 15,051 | 16,037 | 22,269 | 23,895 | |||||
| Commercial land | 61,238 | 67,432 | 70,562 | 119,326 | 133,899 | |||||
| Total commercial loans | 618,070 | 634,650 | 649,480 | 802,900 | 839,739 | |||||
| Consumer loans | ||||||||||
| Home equity | 357,270 | 369,213 | 379,122 | 387,957 | 396,010 | |||||
| Manufactured housing | 275,275 | 276,047 | 274,192 | 270,694 | 269,555 | |||||
| Marine | 52,590 | 55,243 | 57,406 | 59,428 | 62,830 | |||||
| Other consumer | 50,118 | 53,064 | 53,853 | 53,454 | 57,898 | |||||
| Total consumer loans | 735,253 | 753,567 | 764,573 | 771,533 | 786,293 | |||||
| Total loans | 2,385,457 | 2,355,280 | 2,372,069 | 2,559,845 | 2,583,367 | |||||
| Less: Allowance for loan losses | 53,524 | 54,333 | 55,491 | 85,138 | 88,349 | |||||
| Net loans | $ 2,331,933 | $ 2,300,947 | $ 2,316,578 | $ 2,474,707 | $ 2,495,018 | |||||
Total loans at December 31, 2011 increased $30.2 million or 1.3% over September 30, 2011 and decreased $197.9 million or 7.7% from December 31, 2010. The increase over September 30, 2011 was primarily the result of a higher volume of 15-year fixed rate residential loan originations, which were held in the portfolio, partially offset by declines in the commercial and consumer loan portfolios. While the total commercial loan portfolio declined, the commercial business portfolio increased 3.6% over September 30, 2011, and this pipeline has displayed recent signs of improvement. The decrease from December 31, 2010 was primarily the result of the bulk loan sale, partially offset by continued demand for residential mortgage loans due to the low interest rate environment. For both comparative periods, continued lower loan demand from creditworthy borrowers, charge-offs, transfers of nonperforming loans to other real estate owned (“OREO”), and paydowns due to normal borrower activity contributed to a reduction in loans.
The allowance for loan losses was $53.5 million at December 31, 2011 or 2.24% of total loans, compared with $54.3 million or 2.31% of total loans at September 30, 2011 and $88.3 million or 3.42% of total loans at December 31, 2010. The decrease from September 30, 2011 was primarily the result of the continued reduced level of charge-offs since the bulk loan sale. The decrease from December 31, 2010 was primarily the result of the bulk loan sale and improvement in credit quality measures during the past twelve months, as discussed further below. The allowance for loan losses at December 31, 2011 was 2.39% of loans excluding loans covered under a purchase and assumption loss-share agreement (“loss-share agreement”) with the FDIC (“covered loans”), and represented 1.77 times coverage of the non-covered nonperforming loans.
At December 31, 2011, loans held for sale totaled $48.3 million, a decrease of $46.6 million from September 30, 2011 and an increase of $19.8 million over December 31, 2010. Loans held for sale at September 30, 2011 consisted of $40.8 million of residential mortgage loans to be sold in the secondary market and $54.1 million of nonperforming and performing loans selected for the bulk loan sale, while during the other two periods the loans held for sale were solely comprised of residential mortgage loans to be sold in the secondary market. The increases in residential mortgage loans to be sold in the secondary market over both prior periods were primarily the result of higher borrower demand due to recent reductions in market interest rates. These loans generally settle in 45 to 60 days. The decrease in the bulk loan pool, which was established as of June 30, 2011, was the result of the sale and settlement of the entire pool during the December 31, 2011 quarter.
The FDIC indemnification asset, net at December 31, 2011 was $51.0 million, essentially unchanged from September 30, 2011 and a decrease of $17.3 million or 25.3% from December 31, 2010. The decrease was primarily the result of receiving claims reimbursement from the FDIC, partially offset by the normal accretion recorded to the indemnification asset.
Other assets totaled $98.9 million at December 31, 2011, a decrease of $22.6 million or 18.6% from September 30, 2011 and an increase of $4.7 million or 5.0% over December 31, 2010. The decrease from September 30, 2011 was primarily the result of lower levels of OREO properties, current tax adjustments and federal tax refunds received. The increase over December 31, 2010 was primarily the result of an increase in the deferred tax asset associated with the loss recorded in the June 30, 2011 quarter.
Core deposits, which include checking, savings, and money market accounts, totaled $1.2 billion at December 31, 2011, essentially unchanged from September 30, 2011 and an increase of $121.2 million or 10.9% over December 31, 2010. The increase was primarily the result of new retail deposit products introduced during 2011 as well as several marketing initiatives and campaigns during the last twelve months to attract and retain core deposits. Time deposits at December 31, 2011 totaled $1.0 billion, a decrease of $70.8 million or 6.6% from September 30, 2011 and a decrease of $291.7 million or 22.5% from December 31, 2010. The decreases were primarily the result of a planned reduction in maturing high rate retail and wholesale time deposits and lower funding needs relative to asset growth during the last twelve months.
Advances from the FHLB at December 31, 2011 totaled $561.0 million, essentially unchanged from September 30, 2011 and an increase of $63.9 million or 12.9% over December 31, 2010. The increase was primarily the result of a shift in funding mix due to the planned reduction of high rate time deposits, partially offset by using cash flow from investment securities and the loan portfolio to paydown FHLB advances.
Shareholders’ equity at December 31, 2011 was $277.2 million, an increase of $8.7 million or 3.2% over September 30, 2011 and a decrease of $38.1 million or 12.1% from December 31, 2010. The variances were primarily the result of net operating results during the last twelve months combined with a reduction in accumulated other comprehensive income due to a change in market value related to recent activity and updated assumptions on the valuation of certain securities. While First Financial is not currently required to report risk-based capital metrics at the holding company level, using December 31, 2011 data on a pro-forma basis, the Tier 1 capital ratio for First Financial would have been 14.13% and the total risk-based capital ratio would have been 15.39%. First Federal’s regulatory capital ratios continue to be above “well-capitalized” minimums, as evidenced by the key capital ratios and additional capital information presented in the following table.
| For the Three Months Ended | ||||||||||||
| December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | ||||||||
| First Financial | ||||||||||||
| Equity to assets | 8.81% | 8.37% | 8.27% | 9.43% | 9.55% | |||||||
| Tangible common equity to tangible assets (non-GAAP) | 6.67 | 6.27 | 6.08 | 6.40 | 6.51 | |||||||
| Book value per common share | $ 12.84 | $ 12.31 | $ 12.20 | $ 14.92 | $ 15.15 | |||||||
| Tangible common book value per share (non-GAAP) | 12.69 | 12.16 | 11.83 | 12.65 | 12.86 | |||||||
| Dividends paid per common share, authorized | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | |||||||
| Common shares outstanding, end of period (000s) | 16,527 | 16,527 | 16,527 | 16,527 | 16,527 | |||||||
| First Federal | Regulatory Minimum for “Well-Capitalized” | |||||||||||
| Leverage capital ratio | 5.00% | 8.92% | 8.26% | 7.48% | 8.58% | 8.58% | ||||||
| Tier 1 risk-based capital ratio | 6.00 | 12.35 | 11.26 | 10.07 | 11.51 | 11.42 | ||||||
| Total risk-based capital ratio | 10.00 | 13.61 | 12.53 | 11.33 | 12.78 | 12.69 | ||||||
Asset Quality
The following tables illustrate the trend in quality and risk inherent in the loan portfolio over the past twelve months.
| DELINQUENT LOANS | December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | |||||||||||||||
| (30-89 days past due) (in thousands) | $ | % of Portfolio | $ | % of Portfolio | $ | % of Portfolio | $ | % of Portfolio | $ | % of Portfolio | ||||||||||
| Residential loans | ||||||||||||||||||||
| Residential 1-4 family | $ 2,986 | 0.31% | $ 1,722 | 0.19% | $ 1,404 | 0.16% | $ 3,050 | 0.33% | $ 6,712 | 0.76% | ||||||||||
| Residential construction | – | – | – | – | – | – | – | – | – | – | ||||||||||
| Residential land | 561 | 1.35 | 65 | 0.16 | 325 | 0.76 | 1,398 | 2.86 | 432 | 0.80 | ||||||||||
| Total residential loans | 3,547 | 0.34 | 1,787 | 0.18 | 1,729 | 0.18 | 4,448 | 0.45 | 7,144 | 0.75 | ||||||||||
| Commercial loans | ||||||||||||||||||||
| Commercial business | 908 | 1.08 | 868 | 1.07 | 2,387 | 2.96 | 1,618 | 1.78 | 3,476 | 3.81 | ||||||||||
| Commercial real estate | 3,514 | 0.77 | 3,394 | 0.72 | 2,703 | 0.56 | 9,322 | 1.63 | 10,600 | 1.79 | ||||||||||
| Commercial construction | – | – | 595 | 3.95 | – | – | – | – | 635 | 2.66 | ||||||||||
| Commercial land | 1,185 | 1.94 | 537 | 0.80 | 821 | 1.16 | 4,220 | 3.54 | 5,348 | 3.99 | ||||||||||
| Total commercial loans | 5,607 | 0.91 | 5,394 | 0.85 | 5,911 | 0.91 | 15,160 | 1.89 | 20,059 | 2.39 | ||||||||||
| Consumer loans | ||||||||||||||||||||
| Home equity | 4,525 | 1.27 | 3,408 | 0.92 | 3,266 | 0.86 | 3,550 | 0.92 | 4,355 | 1.10 | ||||||||||
| Manufactured housing | 3,267 | 1.19 | 2,600 | 0.94 | 2,298 | 0.84 | 2,491 | 0.92 | 4,043 | 1.50 | ||||||||||
| Marine | 597 | 1.14 | 980 | 1.77 | 264 | 0.46 | 296 | 0.50 | 707 | 1.13 | ||||||||||
| Other consumer | 831 | 1.66 | 629 | 1.19 | 589 | 1.09 | 592 | 1.11 | 905 | 1.56 | ||||||||||
| Total consumer loans | 9,220 | 1.25 | 7,617 | 1.01 | 6,417 | 0.84 | 6,929 | 0.90 | 10,010 | 1.27 | ||||||||||
| Total delinquent loans | $ 18,374 | 0.77% | $ 14,798 | 0.63% | $ 14,057 | 0.59% | $ 26,537 | 1.04% | $ 37,213 | 1.44% | ||||||||||
Total delinquent loans at December 31, 2011 increased $3.6 million or 24.2% over September 30, 2011. The increases in delinquent residential and consumer loans were primarily the result of several customers with modification requests in process as well as a seasonal increase normally experienced in the fourth calendar quarter each year. Total delinquent loans at December 31, 2011 included $2.3 million in covered loans, as compared with $2.7 million at September 30, 2011.
| December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | ||||||||||||||||
| NONPERFORMING ASSETS(in thousands) | $ | % of Portfolio | $ | % of Portfolio | $ | % of Portfolio | $ | % of Portfolio | $ | % of Portfolio | ||||||||||
| Residential loans | ||||||||||||||||||||
| Residential 1-4 family | $ 4,977 | 0.51% | $ 1,595 | 0.18% | $ 1,242 | 0.14% | $ 23,663 | 2.58% | $ 20,371 | 2.29% | ||||||||||
| Residential construction | – | – | – | – | – | – | – | – | – | – | ||||||||||
| Residential land | 1,448 | 3.48 | 1,140 | 2.80 | 451 | 1.05 | 3,604 | 7.36 | 4,997 | 9.29 | ||||||||||
| Total residential loans | 6,425 | 0.62 | 2,735 | 0.28 | 1,693 | 0.18 | 27,267 | 2.77 | 25,368 | 2.65 | ||||||||||
| Commercial loans | ||||||||||||||||||||
| Commercial business | 3,665 | 4.37 | 4,322 | 5.34 | 3,664 | 4.55 | 9,151 | 10.06 | 9,769 | 10.72 | ||||||||||
| Commercial real estate | 17,160 | 3.76 | 18,400 | 3.90 | 16,396 | 3.40 | 60,256 | 10.57 | 57,724 | 9.77 | ||||||||||
| Commercial construction | 573 | 3.48 | 266 | 1.77 | 1,451 | 9.05 | 4,074 | 18.29 | 4,484 | 18.77 | ||||||||||
| Commercial land | 5,232 | 8.54 | 6,310 | 9.36 | 5,411 | 7.67 | 40,740 | 34.14 | 43,824 | 32.73 | ||||||||||
| Total commercial loans | 26,630 | 4.31 | 29,298 | 4.62 | 26,922 | 4.15 | 114,221 | 14.23 | 115,801 | 13.79 | ||||||||||
| Consumer loans | ||||||||||||||||||||
| Home equity | 8,192 | 2.29 | 6,871 | 1.86 | 9,165 | 2.42 | 9,379 | 2.42 | 9,450 | 2.39 | ||||||||||
| Manufactured housing | 3,461 | 1.26 | 2,922 | 1.06 | 2,953 | 1.08 | 3,517 | 1.30 | 3,609 | 1.34 | ||||||||||
| Marine | 246 | 0.47 | 47 | 0.09 | 94 | 0.16 | 42 | 0.07 | 67 | 0.11 | ||||||||||
| Other consumer | 224 | 0.45 | 127 | 0.24 | 129 | 0.24 | 181 | 0.34 | 555 | 0.96 | ||||||||||
| Total consumer loans | 12,123 | 1.65 | 9,967 | 1.32 | 12,341 | 1.61 | 13,119 | 1.70 | 13,681 | 1.74 | ||||||||||
| Total nonaccrual loans | 45,178 | 1.89 | 42,000 | 1.78 | 40,956 | 1.73 | 154,607 | 6.04 | 154,850 | 5.99 | ||||||||||
| Loans 90+ days still accruing | 121 | 171 | 76 | 109 | 204 | |||||||||||||||
| Restructured Loans, still accruing | 2,411 | 734 | 1,535 | 1,550 | 1,578 | |||||||||||||||
| Total nonperforming loans | 47,710 | 2.00% | 42,905 | 1.82% | 42,567 | 1.79% | 156,266 | 6.10% | 156,632 | 6.06% | ||||||||||
| Nonperforming loans held for sale | – | 39,412 | 42,656 | – | – | |||||||||||||||
| Other repossessed assets acquired | 20,487 | 26,212 | 27,812 | 25,986 | 19,660 | |||||||||||||||
| Total nonperfoming assets | $ 68,197 | $108,529 | $113,035 | $182,252 | $176,292 | |||||||||||||||
Total nonperforming assets at December 31, 2011 decreased $40.3 million or 37.2% from September 30, 2011. The decrease was primarily the result of the bulk loan sale as well as lower OREO due to property sales exceeding transfers to OREO and lower nonperforming commercial loans due to the resolution of several non-performing loans. These decreases were partially offset by higher nonperforming residential loans due to six accounts totaling $2.8 million; higher home equity loans related to impaired loans totaling $1.7 million; and additional restructured loans still accruing due to completing customer modification requests. Nonperforming loans covered under the loss-share agreement decreased $1.5 million from September 30, 2011 to $17.5 million at December 31, 2011. Covered OREO totaled $7.6 million at December 31, 2011, a decrease of $1.1 million from September 30, 2011.
| December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | ||||||||||||||||
| NET CHARGE-OFFS(in thousands) | $ | % of Portfolio* | $ | % of Portfolio* | $ | % of Portfolio* | $ | % of Portfolio* | $ | % of Portfolio* | ||||||||||
| Residential loans | ||||||||||||||||||||
| Residential 1-4 family | $ 391 | 0.16% | $ 414 | 0.18% | $ 12,177 | 5.28% | $ 976 | 0.43% | $ 612 | 0.29% | ||||||||||
| Residential construction | – | – | – | – | – | – | – | – | – | – | ||||||||||
| Residential land | 532 | 5.31 | 165 | 1.58 | 4,099 | 34.79 | 620 | 4.83 | 735 | 5.26 | ||||||||||
| Total residential loans | 923 | 0.37 | 579 | 0.24 | 16,276 | 6.59 | 1,596 | 0.65 | 1,347 | 0.59 | ||||||||||
| Commercial loans | ||||||||||||||||||||
| Commercial business | 640 | 3.22 | 136 | 0.69 | 6,826 | 30.60 | 1,829 | 8.00 | 264 | 1.04 | ||||||||||
| Commercial real estate | 1,417 | 1.22 | 433 | 0.36 | 41,022 | 29.15 | 2,195 | 1.51 | 237 | 0.16 | ||||||||||
| Commercial construction | (3) | (0.07) | 635 | 16.12 | 3,067 | 53.06 | (3) | (0.05) | 314 | 3.93 | ||||||||||
| Commercial land | 804 | 4.94 | 2,052 | 12.15 | 33,995 | 118.23 | 4,824 | 14.94 | 2,127 | 5.70 | ||||||||||
| Total commercial loans | 2,858 | 1.83 | 3,256 | 2.04 | 84,910 | 42.98 | 8,845 | 4.28 | 2,942 | 1.34 | ||||||||||
| Consumer loans | ||||||||||||||||||||
| Home equity | 2,955 | 3.26 | 4,910 | 5.28 | 4,725 | 4.91 | 3,368 | 3.43 | 2,974 | 2.97 | ||||||||||
| Manufactured housing | 845 | 1.23 | 978 | 1.42 | 1,049 | 1.54 | 1,172 | 1.74 | 834 | 1.25 | ||||||||||
| Marine | 142 | 1.05 | 158 | 1.12 | 44 | 0.30 | 258 | 1.69 | 184 | 1.12 | ||||||||||
| Other consumer | 531 | 4.09 | 217 | 1.61 | 446 | 3.28 | 647 | 4.66 | 724 | 4.80 | ||||||||||
| Total consumer loans | 4,473 | 2.41 | 6,263 | 3.31 | 6,264 | 3.26 | 5,445 | 2.80 | 4,716 | 2.38 | ||||||||||
| Total net charge-offs | $ 8,254 | 1.39% | $ 10,098 | 1.71% | $107,450 | 16.87% | $ 15,886 | 2.45% | $ 9,005 | 1.39% | ||||||||||
| *Represents an annualized rate | ||||||||||||||||||||
The decrease in net charge-offs for the quarter ended December 31, 2011 as compared with the prior quarter was the result of the lower risk inherent in the loan portfolio after the bulk loan sale. The increase in commercial real estate charge-offs was primarily the result of the resolution of several nonperforming loans. Net charge-offs for the prior quarter were comprised of $7.9 million of charge-offs related to normal credit practices and $2.2 million of charge-offs on additional loans transferred to loans held for sale, the majority of which were related to existing loans in the pool.
The following table provides details on classified assets by category.
| December 31, 2011 | September 30, 2011 | |||||||
| CLASSIFIED ASSETS (in thousands) | Covered Classified | Non-covered Classified | Total Classified | Total Classified | ||||
| Residential loans | ||||||||
| Residential 1-4 family | $ 734 | $ 7,232 | $ 7,966 | $ 3,246 | ||||
| Residential land | 253 | 1,518 | 1,771 | 1,461 | ||||
| Total residential loans | 987 | 8,750 | 9,737 | 4,707 | ||||
| Commercial loans | ||||||||
| Commercial business | 4,386 | 9,466 | 13,852 | 12,689 | ||||
| Commercial real estate | 22,569 | 39,936 | 62,505 | 62,740 | ||||
| Commercial construction | 588 | 261 | 849 | 2,166 | ||||
| Commercial land | 3,516 | 10,697 | 14,213 | 15,550 | ||||
| Total commercial loans | 31,059 | 60,360 | 91,419 | 93,145 | ||||
| Consumer loans | ||||||||
| Home equity | 1,359 | 8,087 | 9,446 | 7,278 | ||||
| Manufactured housing | – | 3,461 | 3,461 | 2,922 | ||||
| Marine | 15 | 231 | 246 | 47 | ||||
| Other consumer | 89 | 256 | 345 | 298 | ||||
| Total consumer loans | 1,463 | 12,035 | 13,498 | 10,545 | ||||
| Total classified loans | 33,509 | 81,145 | 114,654 | 107,854 | ||||
| Loans held for sale | – | – | – | 50,063 | ||||
| Other repossessed assets acquired | – | 20,487 | 20,487 | 26,212 | ||||
| Total classified assets | $ 33,509 | $ 101,632 | $ 135,141 | $ 184,129 | ||||
| Classified assets/FFCH tier 1 capital + ALLL | 24.97% | 36.12% | 51.18% | |||||
| Classified assets excluding Loans Held for Sale/FFCH tier 1 capital + ALLL | 24.97 | 36.12 | 36.77 | |||||
Discontinued Operations Financial Statement Presentation
As a result of First Financial’s sales of its insurance agency subsidiary, First Southeast Insurance Services, Inc., which was completed on June 1, 2011, and its managing general insurance agency subsidiary, Kimbrell Insurance Group, Inc., which was completed on September 30, 2011, the financial condition, operating results, and the gain or loss on the sales, net of transaction costs and taxes, for these subsidiaries have been segregated from the financial condition and operating results of First Financial’s continuing operations throughout this release and, as such, are presented as discontinued operations. While all prior periods have been revised retrospectively to align with this treatment, these changes do not affect First Financial’s reported consolidated financial condition or operating results for any of the prior periods.
Quarterly Results of Operations
First Financial reported net income from continuing operations of $15.6 million for the three months ended December 31, 2011, compared with $2.9 million for the three months ended September 30, 2011 and $1.1 million for the three months ended December 31, 2010. The quarter ended December 31, 2011 included a $20.8 million pre-tax gain ($12.7 million after-tax) from the bulk loan sale. The changes in the key components of net income from continuing operations are discussed below.
Net interest income
Net interest margin, on a fully tax-equivalent basis, was 3.91% for the quarter ended December 31, 2011, as compared with 3.87% for the quarter ended September 30, 2011 and 3.83% for the quarter ended December 31, 2010. The increase over the linked quarter was primarily the result of a reduction in the rate paid on interest-bearing liabilities. The increase from the same quarter last year was primarily the result of the decrease in yield on interest-bearing liabilities exceeding the decrease in the yield on earning assets as First Financial continues to grow core deposits, especially noninterest-bearing deposits.
Net interest income for the quarter ended December 31, 2011 was $28.9 million, essentially unchanged from the prior quarter and a decrease of $1.3 million or 4.5% from the same quarter last year. The decrease from the same quarter last year was primarily the result of a decline in average earning assets due to the bulk loan sale, combined with the decline in net loans due to the generally lower loan demand from creditworthy borrowers and loan charge-offs.
Provision for loan losses
After determining what First Financial believes is an adequate allowance for loan losses based on the estimated risk inherent in the loan portfolio, the provision for loan losses is calculated based on the net effect of the change in the allowance for loan losses and net charge-offs. The provision for loan losses was $7.4 million for the quarter ended December 31, 2011, compared with $8.9 million for the linked quarter and $10.5 million for the same quarter last year. The provision for loan losses for the linked quarter included $1.4 million related to loans transferred to the bulk sale pool, and represents the net result of the incremental charge-offs on those loans less their related reserve release. The decrease from both prior periods was primarily the result of lower net charge-offs and lower classified loans at December 31, 2011.
Noninterest income
Noninterest income totaled $32.8 million for the quarter ended December 31, 2011, an increase of $18.5 million over the prior quarter and an increase of $22.2 million over the same quarter last year. The quarter ended December 31, 2011 included a $20.8 million pre-tax gain from the bulk loan sale. The prior quarter included net gains totaling $1.9 million related to the resolution of certain loans in the bulk loan pool. Noninterest income from core operations totaled $12.0 million and $12.3 for the quarters ended December 31, 2011 and September 30, 2011, respectively.
The increase over the same quarter last year was primarily the result of the gain on the bulk loan sale as well as higher service charges on deposit accounts ($821 thousand) due to higher transaction-related revenue from increases in both volume and fees.
Noninterest expense
Noninterest expense totaled $28.9 million for the quarter ended December 31, 2011, a decrease of $701 thousand or 2.4% over the linked quarter and essentially unchanged from the same quarter last year. The decrease from the linked quarter was primarily the result of lower OREO, net ($1.6 million) and lower professional services expenses ($502 thousand), partially offset by higher other expense ($1.2 million). The decrease in OREO costs was primarily the result of fewer valuation adjustments on properties held. The decrease in professional services was primarily the result of $521 thousand in legal and other advisory services in the prior quarter related to preparing the loans held in the bulk sale pool for final disposition. The increase in other expense was primarily the result of higher processing fees related to a new reward program for deposit customers, higher loss reserves for the reinsurance subsidiary, and higher operational losses related to uncollectible foreclosure expenses.
Noninterest expense was essentially unchanged from the same quarter last year as increases in other expense ($1.1 million) and OREO, net ($414 thousand) were essentially offset by reductions in salaries and employee benefits ($969 thousand), professional services ($523 thousand), and FDIC insurance and regulatory fees ($350 thousand). The variances in other expense and OREO, net were primarily the result of the factors discussed above. The decrease in salaries and employee benefits was primarily the result of lower staff levels due to initiatives implemented during 2011. The reduction in professional services was primarily the result of using external resources to assist in the implementation of several strategic initiatives including loss-sharing management, OREO management, and compensation studies during the December 31, 2010 quarter. The decrease in FDIC insurance and regulatory fees was primarily the result of the new assessment methodology implemented by the FDIC during 2011.
Cash Dividend Declared
On January 30, 2012, First Financial’s Board of Directors declared a quarterly cash dividend of $0.05 per share. The dividend is payable on February 27, 2012 to shareholders of record as of February 13, 2012.
Conference Call
R. Wayne Hall, president and CEO; Blaise B. Bettendorf, EVP and CFO; and Joseph W. Amy, EVP and CCO; will review the quarter’s results in a conference call at 2:00 pm (ET), January 30, 2012. The live audio webcast is available on First Financial’s website at www.firstfinancialholdings.com and will be available for 90 days.
About First Financial
First Financial Holdings, Inc. (“First Financial”) (Nasdaq:FFCH – News) is a Charleston, South Carolina financial services provider with $3.1 billion in total assets as of December 31, 2011. First Financial offers integrated financial solutions, including personal, business, and wealth management services. First Federal Savings and Loan Association (“First Federal”), which was founded in 1934 and is the primary subsidiary, serves individuals and businesses throughout coastal South Carolina, Florence, South Carolina and Wilmington, North Carolina. First Financial subsidiaries include: First Federal; First Southeast Investor Services, Inc., a registered broker-dealer; and First Southeast 401(k) Fiduciaries, Inc., a registered investment advisor. First Federal is the largest financial institution headquartered in the Charleston, South Carolina metropolitan area and the third largest financial institution headquartered in South Carolina, based on asset size. Additional information about First Financial is available at www.firstfinancialholdings.com.
Non-GAAP Financial Information
In addition to results presented in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release includes non-GAAP financial measures such as the efficiency ratio, the tangible common equity to tangible assets ratio, tangible common book value per share, and pre-tax pre-provision earnings. First Financial believes these non-GAAP financial measures provide additional information that is useful to investors in understanding its underlying performance, business, and performance trends and such measures help facilitate performance comparisons with others in the banking industry. Non-GAAP measures have inherent limitations, are not required to be uniformly applied, and are not audited. Readers should be aware of these limitations and should be cautious to their use of such measures. To mitigate these limitations, First Financial has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that its performance is properly reflected to facilitate consistent period-to-period comparisons. Although management believes the above non-GAAP financial measures enhance investors’ understanding of First Financial’s business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.
In accordance with industry standards, certain designated net interest income amounts are presented on a taxable equivalent basis, including the calculation used in the efficiency ratio.
First Financial believes the exclusion of goodwill and other intangible assets facilitates the comparison of results for ongoing business operations. The tangible common equity (“TCE”) ratio and tangible common book value per share (“TBV”) have become a focus of some investors, analysts and banking regulators. Management believes these measures may assist in analyzing First Financial’s capital position absent the effects of intangible assets and preferred stock. Because TCE and TBV are not formally defined by GAAP or codified in the federal banking regulations, these measures are considered to be non-GAAP financial measures. However, analysts and banking regulators may assess First Financial’s capital adequacy using TCE or TBV, therefore, management believes that it is useful to provide investors the ability to assess its capital adequacy on the same basis.
First Financial believes that pre-tax, pre-provision earnings are a useful measure in assessing its core operating performance, particularly during times of economic stress. This measurement, as defined by management, represents total revenue (net interest income plus noninterest income) less noninterest expense. As recent results for the banking industry demonstrate, credit writedowns, loan charge-offs, and related provisions for loan losses can vary significantly from period to period, making a measure that helps isolate the impact of credit costs on profitability important to investors.
Please refer to the Selected Financial Information table and the Non-GAAP Reconciliation table later in this release for additional information.
Forward-Looking Statements
Statements in this release that are not statements of historical fact, including without limitation, statements that include terms such as “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” or “could” constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements regarding First Financial’s future financial and operating results, plans, objectives, expectations and intentions involve risks and uncertainties, many of which are beyond First Financial’s control or are subject to change. No forward-looking statement is a guarantee of future performance and actual results could differ materially. Factors that could cause or contribute to such differences include, but are not limited to, the general business environment, general economic conditions nationally and in the States of North and South Carolina, interest rates, the North and South Carolina real estate markets, the demand for mortgage loans, the credit risk of lending activities, including changes in the level and trend of delinquent and nonperforming loans and charge-offs, changes in First Federal’s allowance for loan losses and provision for loan losses that may be affected by deterioration in the housing and real estate markets; results of examinations by banking regulators, including the possibility that any such regulatory authority may, among other things, require First Federal to increase its allowance for loan losses, writedown assets, change First Federal’s regulatory capital position or affect its ability to borrow funds or maintain or increase deposits, which could adversely affect liquidity and earnings; First Financial’s ability to control operating costs and expenses, First Financial’s ability to successfully integrate any assets, liabilities, customers, systems, and management personnel acquired or may in the future acquire into its operations and its ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto, competitive conditions between banks and non-bank financial services providers, and regulatory changes including the Dodd-Frank Wall Street Reform and Consumer Protection Act. Other risks are also detailed in First Financial’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and current reports on Form 8-K filings with the Securities and Exchange Commission (“SEC”), which are available at the SEC’s website www.sec.gov. Other factors not currently anticipated may also materially and adversely affect First Financial’s results of operations, financial position, and cash flows. There can be no assurance that future results will meet expectations. While First Financial believes that the forward-looking statements in this release are reasonable, the reader should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. First Financial does not undertake, and expressly disclaims any obligation to update or alter any statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
| FIRST FINANCIAL HOLDINGS, INC. | |||||
| CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||
| (in thousands) | December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 |
| ASSETS | |||||
| Cash and due from banks | $ 61,400 | $ 54,307 | $ 60,905 | $ 59,495 | $ 48,340 |
| Interest-bearing deposits with banks | 15,275 | 31,630 | 4,094 | 5,167 | 5,064 |
| Total cash and cash equivalents | 76,675 | 85,937 | 64,999 | 64,662 | 53,404 |
| Investment securities | |||||
| Securities available for sale, at fair value | 404,550 | 412,108 | 418,967 | 383,229 | 372,277 |
| Securities held to maturity, at amortized cost | 20,486 | 21,671 | 21,977 | 21,962 | 21,948 |
| Nonmarketable securities – FHLB stock | 32,694 | 35,782 | 37,626 | 41,273 | 41,273 |
| Total investment securities | 457,730 | 469,561 | 478,570 | 446,464 | 435,498 |
| Loans | 2,385,457 | 2,355,280 | 2,372,069 | 2,559,845 | 2,583,367 |
| Less: Allowance for loan losses | 53,524 | 54,333 | 55,491 | 85,138 | 88,349 |
| Net loans | 2,331,933 | 2,300,947 | 2,316,578 | 2,474,707 | 2,495,018 |
| Loans held for sale | 48,303 | 94,872 | 84,288 | 19,467 | 28,528 |
| FDIC indemnification asset, net | 51,021 | 50,465 | 58,926 | 61,135 | 68,326 |
| Premises and equipment, net | 79,979 | 80,477 | 81,001 | 81,251 | 81,806 |
| Goodwill | – | – | – | 630 | 630 |
| Other intangible assets, net | 2,401 | 2,491 | 2,571 | 2,653 | 2,735 |
| Other assets | 98,922 | 121,560 | 129,332 | 108,891 | 94,256 |
| Assets of discontinued operations | – | – | 5,279 | 42,152 | 41,137 |
| Total assets | $ 3,146,964 | $ 3,206,310 | $ 3,221,544 | $ 3,302,012 | $ 3,301,338 |
| LIABILITIES | |||||
| Deposits | |||||
| Noninterest-bearing checking | $ 279,520 | $ 279,152 | $ 234,478 | $ 233,197 | $ 222,023 |
| Interest-bearing checking | 429,697 | 440,377 | 437,179 | 437,113 | 405,727 |
| Savings and money market | 522,496 | 505,059 | 506,236 | 501,924 | 482,717 |
| Retail time deposits | 791,544 | 824,874 | 854,202 | 893,064 | 991,253 |
| Wholesale time deposits | 215,941 | 253,395 | 283,650 | 279,482 | 307,892 |
| Total deposits | 2,239,198 | 2,302,857 | 2,315,745 | 2,344,780 | 2,409,612 |
| Advances from FHLB | 561,000 | 558,000 | 557,500 | 561,506 | 497,106 |
| Long-term debt | 47,204 | 47,204 | 47,204 | 47,204 | 47,204 |
| Other liabilities | 22,384 | 29,743 | 29,432 | 30,539 | 27,183 |
| Liabilities of discontinued operations | – | – | 5,099 | 6,456 | 4,911 |
| Total liabilities | 2,869,786 | 2,937,804 | 2,954,980 | 2,990,485 | 2,986,016 |
| SHAREHOLDERS’ EQUITY | |||||
| Preferred stock | 1 | 1 | 1 | 1 | 1 |
| Common stock | 215 | 215 | 215 | 215 | 215 |
| Additional paid-in capital | 196,002 | 195,790 | 195,597 | 195,361 | 195,090 |
| Treasury stock, at cost | (103,563) | (103,563) | (103,563) | (103,563) | (103,563) |
| Retained earnings | 187,367 | 173,587 | 174,300 | 219,088 | 221,304 |
| Accumulated other comprehensive (expense) income | (2,844) | 2,476 | 14 | 425 | 2,275 |
| Total shareholders’ equity | 277,178 | 268,506 | 266,564 | 311,527 | 315,322 |
| Total liabilities and shareholders’ equity | $ 3,146,964 | $ 3,206,310 | $ 3,221,544 | $ 3,302,012 | $ 3,301,338 |
| FIRST FINANCIAL HOLDINGS, INC. | ||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||
| Three Months Ended | ||||||||||
| (in thousands, except share data) | December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | |||||
| INTEREST INCOME | ||||||||||
| Interest and fees on loans | $ 33,460 | $ 33,828 | $ 34,497 | $ 34,844 | $ 36,366 | |||||
| Interest and dividends on investments | 3,859 | 4,390 | 4,527 | 4,774 | 5,023 | |||||
| Other | 293 | 338 | 448 | 566 | 683 | |||||
| Total interest income | 37,612 | 38,556 | 39,472 | 40,184 | 42,072 | |||||
| INTEREST EXPENSE | ||||||||||
| Interest on deposits | 4,554 | 5,323 | 5,929 | 6,879 | 7,600 | |||||
| Interest on borrowed money | 4,159 | 4,169 | 4,127 | 4,018 | 4,224 | |||||
| Total interest expense | 8,713 | 9,492 | 10,056 | 10,897 | 11,824 | |||||
| NET INTEREST INCOME | 28,899 | 29,064 | 29,416 | 29,287 | 30,248 | |||||
| Provision for loan losses | 7,445 | 8,940 | 77,803 | 12,675 | 10,483 | |||||
| Net interest income (loss) after provision for loan losses | 21,454 | 20,124 | (48,387) | 16,612 | 19,765 | |||||
| NONINTEREST INCOME | ||||||||||
| Service charges on deposit accounts | 7,099 | 7,196 | 6,982 | 6,381 | 6,278 | |||||
| Mortgage and other loan income | 2,681 | 2,743 | 2,051 | 1,124 | 2,642 | |||||
| Trust and plan administration | 1,192 | 1,333 | 1,116 | 1,112 | 1,177 | |||||
| Brokerage fees | 532 | 588 | 657 | 666 | 514 | |||||
| Other | 650 | 647 | 670 | 675 | 503 | |||||
| Gains on sold loan pool, net | 20,796 | 1,900 | – | – | – | |||||
| Net securities (loses) gains | (180) | (169) | (54) | 1,297 | (534) | |||||
| Total noninterest income | 32,770 | 14,238 | 11,422 | 11,255 | 10,580 | |||||
| NONINTEREST EXPENSE | ||||||||||
| Salaries and employee benefits | 14,511 | 14,672 | 15,373 | 17,396 | 15,480 | |||||
| Occupancy costs | 2,144 | 2,188 | 2,116 | 2,208 | 2,058 | |||||
| Furniture and equipment | 1,870 | 1,725 | 1,769 | 1,825 | 1,725 | |||||
| Other real estate owned, net | 1,541 | 3,115 | 800 | (133) | 1,127 | |||||
| FDIC insurance and regulatory fees | 830 | 576 | 850 | 1,484 | 1,180 | |||||
| Professional services | 1,019 | 1,521 | 1,094 | 1,326 | 1,542 | |||||
| Advertising and marketing | 792 | 868 | 810 | 993 | 562 | |||||
| Other loan expense | 1,043 | 990 | 1,099 | 925 | 902 | |||||
| Goodwill impairment | – | – | 630 | – | – | |||||
| Intangible asset amortization | 90 | 79 | 82 | 82 | 82 | |||||
| Other expense | 5,046 | 3,854 | 3,976 | 4,039 | 3,912 | |||||
| Total noninterest expense | 28,886 | 29,588 | 28,599 | 30,145 | 28,570 | |||||
| Income (loss) income from continuing operations before taxes | 25,338 | 4,774 | (65,564) | (2,278) | 1,775 | |||||
| Income tax (benefit) from continuing operations | 9,766 | 1,893 | (25,288) | (913) | 636 | |||||
| NET INCOME (LOSS) FROM CONTINUING OPERATIONS | 15,572 | 2,881 | (40,276) | (1,365) | 1,139 | |||||
| (Loss) income from discontinued operations, net of tax | – | (1,804) | (2,724) | 935 | 28 | |||||
| NET INCOME (LOSS) | $ 15,572 | $ 1,077 | $ (43,000) | $ (430) | $ 1,167 | |||||
| Preferred stock dividends | 813 | 813 | 812 | 812 | 813 | |||||
| Accretion on preferred stock discount | 153 | 151 | 149 | 147 | 144 | |||||
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ 14,606 | $ 113 | $ (43,961) | $ (1,389) | $ 210 | |||||
| Net income (loss) per common share from continuing operations: | ||||||||||
| Basic | $ 0.88 | $ 0.12 | $ (2.50) | $ (0.14) | $ 0.01 | |||||
| Diluted | 0.88 | 0.12 | (2.50) | (0.14) | 0.01 | |||||
| Net (loss) income per common share from discontinued operations: | ||||||||||
| Basic | – | (0.11) | (0.16) | 0.06 | 0.00 | |||||
| Diluted | – | (0.11) | (0.16) | 0.06 | 0.00 | |||||
| Net income (loss) per common share: | ||||||||||
| Basic | 0.88 | 0.01 | (2.66) | (0.08) | 0.01 | |||||
| Diluted | 0.88 | 0.01 | (2.66) | (0.08) | 0.01 | |||||
| Average common shares outstanding: | ||||||||||
| Basic | 16,527 | 16,527 | 16,527 | 16,527 | 16,527 | |||||
| Diluted | 16,527 | 16,527 | 16,527 | 16,527 | 16,529 | |||||
| For the Quarters Ended | |||||||||
| December 31, 2011 | December 31, 2010 | Change in | |||||||
| (in thousands) | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Basis Points |
| Earning Assets | |||||||||
| Interest-bearing deposits with banks | $ 10,212 | $ 4 | 0.16% | $ 11,587 | $ 6 | 0.21% | $ (1,375) | $ (2) | (5) |
| Investment securities1 | 469,925 | 3,859 | 3.41 | 452,900 | 5,023 | 4.57 | 17,025 | (1,164) | (116) |
| Loans2 | 2,428,743 | 33,460 | 5.48 | 2,614,918 | 36,366 | 5.52 | (186,175) | (2,906) | (3) |
| FDIC Indemnification Asset | 50,700 | 289 | 2.27 | 67,854 | 677 | 3.96 | (17,154) | (388) | (169) |
| Total Earning Assets | 2,959,580 | 37,612 | 5.06 | 3,147,259 | 42,072 | 5.32 | (187,679) | (4,460) | (26) |
| Interest-bearing Liabilities | |||||||||
| Deposits | 1,992,957 | 4,554 | 0.91 | 2,197,647 | 7,600 | 1.37 | (204,690) | (3,046) | (46) |
| Borrowings | 565,114 | 4,159 | 2.93 | 543,039 | 4,224 | 3.09 | 22,075 | (65) | (16) |
| Total interest-bearing liabilities | 2,558,071 | 8,713 | 1.35 | 2,740,686 | 11,824 | 1.71 | (182,615) | (3,111) | (36) |
| Net interest income | $ 28,899 | $ 30,248 | $(1,349) | ||||||
| Net interest margin | 3.91% | 3.83% | 8 | ||||||
| 1 Interest income used in the average rate calculation includes the tax equivalent adjustment of $145 thousand, and $157 thousand for the quarters ended December 31, 2011 and 2010, respectively, calculated based on a federal tax rate of 35%. | |||||||||
| 2 Average loans include loans held for sale and nonaccrual loans. Loan fees, which are not material for any of the periods, have been included in loan interest income for the rate calculation. | |||||||||
| FIRST FINANCIAL HOLDINGS, INC. | |||||
| SELECTED FINANCIAL INFORMATION (Unaudited) | For the Quarters Ended | ||||
| (in thousands, except ratios) | December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 |
| Average for the Quarter | |||||
| Total assets | $ 3,153,286 | $ 3,201,416 | $ 3,294,350 | $ 3,310,796 | $ 3,323,825 |
| Investment securities | 469,925 | 468,360 | 464,277 | 435,568 | 452,900 |
| Loans | 2,428,743 | 2,442,071 | 2,566,827 | 2,607,161 | 2,614,918 |
| Allowance for loan losses | 54,178 | 55,503 | 81,025 | 88,086 | 87,605 |
| Deposits | 2,272,035 | 2,302,518 | 2,360,572 | 2,397,801 | 2,424,807 |
| Borrowings | 565,114 | 595,508 | 593,103 | 555,630 | 543,039 |
| Shareholders’ equity | 279,066 | 267,404 | 302,996 | 313,663 | 318,202 |
| Performance Metrics from Continuing Operations | |||||
| Return on average assets | 1.98% | 0.36% | (4.89)% | (0.16)% | 0.14% |
| Return on average shareholders’ equity | 22.32 | 4.31 | (53.17) | (1.74) | 1.43 |
| Net interest margin (FTE) 1 | 3.91 | 3.87 | 3.83 | 3.83 | 3.83 |
| Efficiency ratio (non-GAAP) | 70.12% | 70.90% | 69.69% | 76.53% | 68.81% |
| Pre-tax pre-provision earnings (non-GAAP) | $ 32,783 | $ 13,714 | $ 12,239 | $ 10,397 | $ 12,258 |
| Performance Metrics From Consolidated Operations | |||||
| Return on average assets | 1.98% | 0.13% | (5.22)% | (0.05)% | 0.14% |
| Return on average shareholders’ equity | 22.32 | 1.61 | (56.77) | (0.55) | 1.47 |
| Asset Quality Metrics | |||||
| Allowance for loan losses as a percent of loans | 2.24% | 2.31% | 2.34% | 3.33% | 3.42% |
| Allowance for loan losses as a percent of nonperforming loans | 112.19 | 126.64 | 130.36 | 54.48 | 56.41 |
| Nonperforming loans as a percent of loans | 2.00 | 1.82 | 1.79 | 6.10 | 6.06 |
| Nonperforming assets as a percent of loans and other repossessed assets acquired2 | 2.83 | 4.48 | 4.63 | 7.05 | 6.77 |
| Nonperforming assets as a percent of total assets | 2.17 | 3.38 | 3.51 | 5.52 | 5.34 |
| Net loans charged-off as a percent of average loans (annualized) | 1.39% | 1.71 | 16.87 | 2.45 | 1.39 |
| Net loans charged-off | $ 8,254 | $ 10,098 | $ 107,450 | $ 15,886 | $ 9,005 |
| Asset Quality Metrics excluding Nonperforming Loans Held For Sale | |||||
| Nonperforming assets excluding nonperforming loans held for sale as a percent of loans and other repossessed assets acquired | 2.83% | 2.82% | 2.93% | 7.05% | 6.77% |
| Nonperforming assets excluding nonperforming loans held for sale as a percent of total assets | 2.17 | 2.10 | 2.18 | 5.52 | 5.34 |
| Asset Quality Metrics Excluding Covered Loans | |||||
| Allowance for loan losses as a percent of non-covered loans | 2.39% | 2.47% | 2.51% | 3.57% | 3.68% |
| Allowance for loan losses as a percent of non-covered nonperforming loans | 177.35 | 227.09 | 216.35 | 60.79 | 61.83 |
| Nonperforming loans as a percent of non-covered loans | 1.34 | 1.09 | 1.16 | 5.87 | 5.95 |
| Nonperforming assets as a percent of non-covered loans and other repossessed assets acquired2 | 1.88 | 3.58 | 3.91 | 6.65 | 6.46 |
| Nonperforming assets as a percent of total assets | 1.35 | 2.52 | 2.76 | 4.84 | 4.72 |
| Asset Quality Metrics Excluding Covered Loans and Nonperforming Loans Held for Sale | |||||
| Nonperforming assets excluding nonperforming loans held for sale as a percent of non-covered loans and other repossessed assets acquired | 1.88% | 1.79% | 2.07% | 6.65% | 6.46% |
| Nonperforming assets excluding nonperforming loans held for sale as a percent of total assets | 1.35 | 1.23 | 1.43 | 4.84 | 4.72 |
| 1 Net interest margin is presented on an annual basis, includes taxable equivalent adjustments to interest income and is based on a federal tax rate of 35%. | |||||
| 2 Nonperforming loans held for sale in the amount of $39,412, and $42,656 thousand is included in loans at September 30, 2011 and June 30, 2011, respectively. | |||||
| FIRST FINANCIAL HOLDINGS, INC. | |||||
| Non-GAAP Reconciliation (Unaudited) | For the Quarters Ended | ||||
| (in thousands, except share data) | December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 |
| Efficiency Ratio from Continuing Operations | |||||
| Net interest income (A) | $ 28,900 | $ 29,064 | $ 29,416 | $ 29,287 | $ 30,248 |
| Taxable equivalent adjustment (B) | 145 | 159 | 144 | 144 | 157 |
| Noninterest income (C) | 32,770 | 14,238 | 11,422 | 11,255 | 10,580 |
| Gains on sold loan pool, net (D) | 20,796 | 1,900 | – | – | – |
| Net securities gains (losses) (E) | (180) | (169) | (54) | 1,297 | (534) |
| Noninterest expense (F) | 28,887 | 29,588 | 28,599 | 30,145 | 28,570 |
| Efficiency Ratio: F/(A+B+C-D-E) (non-GAAP) | 70.12% | 70.90% | 69.69% | 76.53% | 68.81% |
| Tangible Assets and Tangible Common Equity | |||||
| Total assets | $ 3,146,964 | $ 3,206,310 | $ 3,221,544 | $ 3,302,012 | $ 3,301,338 |
| Goodwill1 | – | – | (3,250) | (28,260) | (28,260) |
| Other intangible assets, net2 | (2,401) | (2,491) | (2,776) | (9,278) | (9,515) |
| Tangible assets (non-GAAP) | $ 3,144,563 | $ 3,203,819 | $ 3,215,518 | $ 3,264,474 | $ 3,263,563 |
| Total shareholders’ equity | $ 277,178 | $ 268,506 | $ 266,564 | $ 311,527 | $ 315,322 |
| Preferred stock | (65,000) | (65,000) | (65,000) | (65,000) | (65,000) |
| Goodwill1 | – | – | (3,250) | (28,260) | (28,260) |
| Other intangible assets, net2 | (2,401) | (2,491) | (2,776) | (9,278) | (9,515) |
| Tangible common equity (non-GAAP) | $ 209,777 | $ 201,015 | $ 195,538 | $ 208,989 | $ 212,547 |
| Shares outstanding, end of period (000s) | 16,527 | 16,527 | 16,527 | 16,527 | 16,527 |
| Tangible common equity to tangible assets (non-GAAP) | 6.67% | 6.27% | 6.08% | 6.40% | 6.51% |
| Tangible common book value per share (non-GAAP) | $ 12.69 | $ 12.16 | $ 11.83 | $ 12.65 | $ 12.86 |
| Pre-tax Pre-provision Earnings from Continuing Operations | |||||
| Income (loss) before income taxes | $ 25,338 | $ 4,774 | $ (65,564) | $ (2,278) | $ 1,775 |
| Provision for loan losses | 7,445 | 8,940 | 77,803 | 12,675 | 10,483 |
| Pre-tax pre-provision earnings (non-GAAP) | $ 32,783 | $ 13,714 | $ 12,239 | $ 10,397 | $ 12,258 |
| 1 Goodwill represents goodwill for Continuing Operations, as shown on the balance sheet, and includes goodwill for Discontinued Operations of $3,250 for the quarter ended June 30, 2011 and $27,630 for the quarters ended March 31, 2011, December 31, 2010, respectively. | |||||
| 2 Intangible assets represents intangible assets for Continuing Operations, as shown on the balance sheet, and includes intangible assets for Discontinued Operations of $205, $6,625, and $6,780, for the quarters ended June 30, 2011, March 31, 2011, and December 31, 2010, respectively. | |||||
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