First Federal of Charleston's owner swung back into profitable territory in the second quarter of its fiscal year, despite having to set aside nearly $13 million for potential bad loans.
First Financial Holdings Inc., the parent of First Federal, said Friday that tighter controls on expenses helped it offset a drop in fee revenue, enabling it to earn $3.1 million for the three months ended March 31. The gain was a 59 percent decline compared to the same period last year.
"There were a lot of moving parts this quarter," said Tom Hood, president and chief executive officer, referring in part to various cost-cutting measures and a temporary foreclosure moratorium that the company undertook.
In the quarter ended Dec. 31, First Financial reported a loss of $6.5 million, mostly attributed to the recession and a $2.1 million write-down on three fixed-income investments that had fallen in value.
On a per-share basis, the company's latest quarterly profit worked out to 19 cents.
First Financial said it set aside $12.8 million in loan-loss reserves as of the end of March, compared to $20.5 million for the previous quarter and $3.6 million for the year-earlier period.
"The increase ... compared to the comparable quarter in 2008 is attributable to significant increases in non-accrual loans and net charge-offs, overall loan growth and uncertainties in the markets served by the company," Hood said in a statement.
The company, the largest bank owner based in the Charleston region, also said Friday it would pay a cash dividend of 5 cents a share on May 22 to stockholders of record May 8.
In February, First Financial announced it was slashing its quarterly payout, which had been 25 1/2 cents a share, to conserve cash.
Earlier this month the company added eight branches in coastal North Carolina by taking over most the assets and liabilities of the failed Cape Fear Bank under an agreement with the Federal Deposit Insurance Corp.
The newly acquired operations were not included in First Financial's latest financial statement because the change in ownership took place after March 31.
While greater Wilmington is still reeling from the real estate downturn, Hood said First Financial had been eyeing that market for years and is looking to quickly roll out new First Federal products there, including seven-day-a-week banking services inside local retail stores.
"For 75 years we have been operating in coastal markets in South Carolina. "We believe we understand coastal real estate and that environment very well. ... We're very pleased to have this opportunity."
Shares of First Financial closed up 30 cents, or 3.4 percent, to $9.10 on Friday.