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First Financial Holdings (FFCH)
F1Q2011 (Qtr End 12/31/10) Earnings Call
January 26, 2011 2:00 p.m. ET
Dorothy B. Wright - SVP-IR and Corporate Secretary
Wayne Hall - President and CEO
Blaise B. Bettendorf - EVP and CFO
Joseph W. Amy - EVP and Chief Credit Officer
Adam Barkstrom - Sterne, Agee & Leach
Christopher Marinac - FIG Partners
Catherine Mealor - KBW
Mac Hodgson – Suntrust Robinson Humphrey
Ladies and gentlemen, thank you for standing by. Welcome to First Financial Holdings Fiscal 2011 first quarter earnings conference call.
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It is now my pleasure to introduce D.B. Wright, Corporate Secretary. You may proceed.
Dorothy B. Wright
Thank you, France. Good afternoon and thank you for participating in our first quarter Fiscal 2011 earnings conference call. Before we begin, I have several brief administrative items to address.
You should have received our first quarter earnings release today. For those who did not, it is available on our website at www.firstfinancialholdings.com.
In addition to this teleconference call, we have a listen-only live web cast available. This webcast will be available for 90 days following today, and both the live and archived webcasts may be accessed via a link on our website.
On our call today, Wayne Hall, our President and Chief Executive Officer, Blaise Bettendorf, our Chief Financial Officer and Joe Amy, Chief Credit Officer will be presenting and they will take questions at the end.
During the course of this call we may make forward-looking statements about future events and future financial performance, management plans, objectives, goals for future operations, products or services, forecasts of financial or other performance measures and statement about our general outlook for economic and business condition.
You should not place undue reliance on any forward-looking statements, which speak only as of the date made. These statements are subject to numerous factors that could cause actual results to differ materially from those anticipated or projected. For a list of some of these factors, please see the forward-looking statement disclosure on our 2010 Form 10-K and our first quarter 2011 earnings release.
I will now turn this call over to Wayne Hall.
Thanks D.B. Good afternoon everyone, and thank you for joining us today and for your interest in First Financial. We are pleased to report net income for the first quarter of our 2011 fiscal year.
While we continue to face challenges from external economic and internal credit quality considerations, we are encouraged by improved profitability, strong capital levels, and ongoing expense control. We reported lower charge-offs in the first quarter as we remain focused on reducing the level of our nonperforming assets in order to maintain profitability.
Today we reported net income for the quarter of 1.2 million. This is compared to a net loss for the prior quarter of 1.2 million and a net loss of 4.5 million for the quarter ended December 31, 2009.
The lower provision for loan losses during this quarter was the primary reason for the improved results. Blaise and Joe will address the elements of our credit quality trends.
We have maintained a solid net interest margin, diverse non-interest income, and effective cost control discipline.
In addition, our capital remains strong. As of December 31, 2010, we reported consolidated tangible common equity of 6.51% compared to 6.55% at September 30, 2010, and 7.3% at December 31, 2009.
First Federal continues to be considered well capitalized based on regulatory definitions. Tier 1 capital was 11.42%, and total risk-based capital was 12.69% at December 31, 2010.
We believe our ability to continue to improve results and strengthen the balance sheet will result in enhanced returns to our shareholders.
While we reported net income for the quarter, our pre-tax pre-provision profit was down from the linked quarter by 2.9 million, primarily as a result of lower non-interest income. Two causes for this decline; our insurance revenues were down $1 million that generally occurs in the last calendar quarter of each year. And mortgage bank and revenues decline due to movements and rates returning to a normalize level as the September third quarter was higher than usual.
This quarter we saw a growth in our loan portfolio primarily in residential mortgage loans as originations were bolstered by the low interest rate environment. While we are starting to see some increase in demand from creditworthy commercial and other borrowers, the originations are not yet sufficient to offset payments in other loan reductions.
Small business lending initiatives are a key component of our strategic plan and we believe we have the personnel, processes, and systems in place to effectively execute in this sector.
I would now ask Blaise to cover the financial highlights for the quarter.
Blaise B. Bettendorf
Thanks, Wayne. At December 31, 2010, we reported a slight decrease in the balance sheet as compared to the linked quarter. This is primarily results of the pre-payments of our mortgage-backed security which exceeded the investment purchases during the quarter.
As Wayne stated, we did report net growth in the loan portfolio which was primarily due to residential mortgages. We saw residential origination of 152.6 million for the current quarter compared to 125.3 million for the linked quarter, and 102.9 million for the same period last year. We are starting to see some slowing in the mortgage origination given the recent increases in rates.