First Financial Holdings: Strong Buy


Upward estimate revisions on the back of strong third quarter results – including an earnings surprise of 21.4% – have helped First Financial Holdings Inc. (FFCH) achieve a Zacks #1 Rank (Strong Buy) on December 26. With a solid year-to-date return of 42.9%, this provider of integrated financial solutions offers an attractive investment opportunity.

The Rank Drivers

Better-than-expected third quarter results, improving credit quality and strong capital ratios are the primary rank drivers for this stock.

First Financial Holdings reported its third quarter results on October 25 with earnings per share of 34 cents, beating the Zacks Consensus Estimate of 28 cents by 21.4% and more-than-doubling the year-ago earnings of 12 cents. Robust results for the reported quarter were primarily aided by higher non-interest income, elevated net interest income and reduced provision for loan losses.

Non-interest expenses, which increased 11.5% on a year-over year basis to $33.0 million, were a dampener for the quarter.

Net interest income increased 14.1% to $33.2 million from $29.1 million in the year-ago quarter. Net interest margin expanded 48 basis points on a year-over year basis to 4.35%. The rise was primarily due to lower cost of funds.  Non-interest income jumped 2.1% year over year to $14.5 million. Provision for loan losses skidded 49.4% from the year-ago quarter to $4.5 million.

Credit quality continued to exhibit improvement. The allowance for loan losses was 1.80% of total loans as of September 30, 2012, compared with 2.31% of total loans as of September 30, 2011. Non-performing assets for the quarter were $70.6 million, dipping 34.9% from the prior-year period. Net charge-offs were $7.0 million, down 30.7% year over year.

As of September 30, 2012, First Financial Holdings’ total risk-based capital ratio was 15.70%, Tier 1 risk-based capital ratio was 14.42% and Tier 1 leverage capital ratio was 10.12%, above the "well-capitalized" regulatory requirements of 10.00%, 6.00% and 5.00%, respectively.

Earnings Estimate Revisions

Over the past 60 days, upward revisions of 6 out of 8 estimates pushed the Zacks Consensus Estimate for 2012 up by 8.7% to $1.37 per share, reflecting year-over-year growth of about 154.7%. The Zacks Consensus Estimate for 2013 has advanced 3.7% to $1.11, as 5 out of 8 estimates moved upward over the same time frame.

Attractive Valuation

Shares of First Financial Holdings currently trade at 10.0x 12-month forward earnings, a 12% discount to the peer group average of 11.3x. Its price to book ratio of 0.8 is at a 27% discount to the industry median of 1.1.

About the Company

Headquartered in Charleston, South Carolina, First Financial Holdings serves as the bank holding company for First Federal Savings and Loan Association of Charleston. It operates through 65 offices located in coastal South Carolina, as well as in the Florence, South Carolina; and Wilmington, North Carolina markets and offers an array of integrated financial solutions to individuals and businesses. The company, which was founded in 1934, has a market capitalization of roughly $221.3 million.

Other Zacks #1 Rank bank stocks include First Merchants Corporation (FRME).

Read the Full Research Report on FRME

Read the Full Research Report on FFCH

Zacks Investment Research

More From
View Comments (0)