First Federal warns real estate decline will lead to loss

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More than two weeks before announcing its quarterly earnings, the parent company of Charleston-based First Federal on Friday sent out word that it would be reporting a loss because of money set aside to cover failed land and development loans.

Staff Report
Published Jan. 11, 2010

More than two weeks before announcing its quarterly earnings, the parent company of Charleston-based First Federal sent out word Friday that it would be reporting a loss related to the troubled real estate market.

Officials with First Financial Holdings Inc., the holding company for First Federal Savings and Loan Association of Charleston, said they expect to record a provision for loan losses between $25 million and $26 million for the first quarter of the bank’s 2010 fiscal year, which ended Dec. 31.

“This higher than historical provision results from asset quality downgrades to land loans and the acquisition and development portfolio,” said A. Thomas Hood, president and CEO, in a statement. “This deterioration is the result of weakness in the economy and further decline in real estate values.”

The action brings the bank’s allowance for loan loss reserve to about $73 million. Net charge-offs for the quarter are expected to be between $20 million and $21 million, officials said.

“We will continue to conduct an extensive review of our commercial real estate portfolio to implement loss mitigation strategies,” Hood said.

He said the bank expects its loan loss provisions and charge-offs to remain elevated throughout the fiscal year because of deterioration in the real estate market and the weak economy.

The company plans to release more detail about its first quarter performance on Jan. 27.

First Financial has evaluated its regulatory capital ratios and as of Dec. 31, continues to meet all regulatory capital requirements and remains “well capitalized.”

First Federal operates 65 offices in the Charleston area, Horry, Georgetown, Florence and Beaufort counties in South Carolina and Brunswick, New Hanover and Pender counties in North Carolina. It is the largest bank based in the Charleston market and has the second-largest share of deposits in the metro area.

First Financial also provides insurance and brokerage services through First Southeast Insurance Services, The Kimbrell Insurance Group and First Southeast Investor Services.

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