UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549
	FORM 10-K
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended:	September 30, 2001
		OR
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	Commission File Number: 0-17122
FIRST FINANCIAL HOLDINGS, INC.
	(Exact name of registrant as specified in its charter)
Delaware				57-0866076
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
34 Broad Street, Charleston, South Carolina				29401
(Address of principal executive offices)				(Zip Code)
	Registrant's telephone number, including area code: (843)529-5933
	Securities registered pursuant to Section 12(b) of the Act: None
	Securities registered pursuant to Section 12(g) of the Act:
	Common Stock, par value $.01 per share
			(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

As of November 30, 2001 there were issued and outstanding 13,386,864 shares of the registrant's common stock. The registrant's common stock is traded over-the-counter and is listed on The Nasdaq Stock Market under the symbol "FFCH." The aggregate market value of the common stock held by nonaffiliates of the registrant, based on the closing sales price of the registrant's common stock as quoted on The Nasdaq Stock Market on December 14, 2001, was $331,994,227 (13,386,864 shares at $24.80 per share). It is assumed for purposes of this calculation that none of the registrant's officers, directors and 5% stockholders are affiliates.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Definitive Proxy Statement for the 2002 Annual Meeting of Stockholders. (Part III)

FIRST FINANCIAL HOLDINGS, INC.

2001 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

	PART I
Item 1.	Business		1
		General	1
		Discussion of Forward-Looking Statements	1
		Lending Activities	2
		Investment Activities	6
		Sources of Funds	9
		Asset and Liability Management	10
		Subsidiary Activities of the Associations	11
		Competition	12
		Personnel	12
		Regulation	12
Item 2.	Properties		16
Item 3.	Legal Proceedings		16
Item 4.	Submission of Matters to a Vote of Security Holders		17
	PART II
Item 5.	Market for the Registrant's Common Equity and Related Stockholder Matters		17
Item 6.	Selected Consolidated Financial Data		18
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations		19
Item 8.	Financial Statements and Supplementary Data		34
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		60
	PART III
Item 10.	Directors and Executive Officers of the Registrant		61
Item 11.	Executive Compensation		62
Item 12.	Security Ownership of Certain Beneficial Owners and Management		62
Item 13.	Certain Relationships and Related Transactions		62
	PART IV
Item 14.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K		63

PART I

ITEM 1. BUSINESS

GENERAL

First Financial Holdings, Inc. ("First Financial" or the "Company") is a savings and loan holding company incorporated under the laws of Delaware in 1987. The Company is headquartered in Charleston, South Carolina and operates First Federal Savings and Loan Association of Charleston ("First Federal") and Peoples Federal Savings and Loan Association, Conway, South Carolina ("Peoples Federal") (together, the "Associations"). The Company also owns First Southeast Investor Services, Inc. ("FSIS"), a South Carolina corporation organized in 1998 for the purpose of operating as a broker-dealer. Insurance agency operations are conducted under another First Financial subsidiary, First Southeast Insurance Services, Inc. ("FSIns."). At September 30, 2001, First Financial had total assets of $2.3 billion, total deposits of $1.4 billion and stockholders' equity of $156.9 million.

First Federal, chartered in 1934, is the largest financial institution headquartered in the Charleston, South Carolina metropolitan area and the largest thrift institution in South Carolina based on assets of approximately $1.6 billion at September 30, 2001. First Federal is a federally-chartered stock savings and loan association that conducts its business through its home office in the city's historic district, 21 branch offices in the three surrounding counties and two full-service offices in Georgetown, South Carolina and three full service offices in the Hilton Head area of Beaufort County, South Carolina.

Peoples Federal was chartered in 1914 and is a federally chartered stock savings and loan association headquartered in Conway, South Carolina. Peoples Federal is the result of a merger of Peoples Federal of Conway and Peoples Federal of Florence in 1982. On November 7, 1997, the Company completed the acquisition of Investors Savings Bank of South Carolina, Inc. ("Investors"), through the merger of Investors with Peoples Federal. Peoples Federal conducts its business through 16 branch offices in South Carolina, a branch office in Sunset Beach, North Carolina, and its main office in Conway. Branches are located in the Myrtle Beach/Grand Strand area, Florence, Conway and Loris. Peoples Federal had assets of approximately $712 million at September 30, 2001.

The business of the Company consists primarily of acting as a financial intermediary by attracting deposits from the general public and using such funds, together with borrowings and other funds, to originate first mortgage loans on residential properties located in its primary market areas. The Company also makes construction, consumer, non-residential mortgage and commercial business loans and invests in mortgage-backed securities, federal government and agency obligations, money market obligations and certain corporate obligations. Through its own subsidiaries or subsidiaries of the Associations, the Company also engages in full-service brokerage activities, property and casualty insurance, trust and fiduciary services, reinsurance of private mortgage insurance and certain passive investment activities. None of the subsidiary activities is considered to constitute a business segment.

First Federal and Peoples Federal are members of the Federal Home Loan Bank ("FHLB") System. The Associations' deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") under the Savings Association Insurance Fund ("SAIF") up to applicable limits. The Associations are subject to comprehensive regulation, examination and supervision by the Office of Thrift Supervision ("OTS") and the FDIC.

The Associations are subject to capital requirements under OTS regulations, and must satisfy three minimum capital requirements: core capital, tangible capital and risk-based capital. For more information regarding the Associations' compliance with capital requirements, see "Regulation -- Federal Regulation of Savings Associations -- Capital Requirements" contained herein and Note 16 of Notes to Consolidated Financial Statements.

DISCUSSION OF FORWARD-LOOKING STATEMENTS

Management's Discussion and Analysis of Financial Condition and Results of Operations and other portions of this annual report contain certain "forward-looking statements" concerning the future operations of the Company. Management desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing the Company of protections of such safe harbor with respect to all "forward-looking statements" contained in our Annual Report. We have used "forward-looking statements" to describe future plans and strategies including our expectations of the Company's future financial results. Management's ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors which could affect actual results include interest rate trends, the general economic climate in the Company's market area, the State of South Carolina and the country as a whole, the ability of the Company to control costs and expenses, the ability of the Company to efficiently incorporate acquisitions into its operations and the ability of the Company to offer competitive products and pricing, manage loan delinquency rates, and react to changes in federal and state regulation. These factors should be considered in evaluating the "forward-looking statements," and undue reliance should not be placed on such statements.

LENDING ACTIVITIES

General

At September 30, 2001, the Company's net loan portfolio totaled approximately $1.9 billion, or 81.9% of the Company's total assets. The Company's principal lending activity is the origination of loans secured by single-family residential real estate. The Company, however, is focusing more on the origination of consumer and commercial business loans. In addition, the Company selectively originates non-residential real estate loans. Although federal regulations allow the Company to originate loans nationwide, the Company has originated substantially all of its loans in its primary market areas of Charleston, Dorchester, Berkeley, Georgetown, Horry, Florence and Beaufort counties in South Carolina and Brunswick County in North Carolina.

Since 1995, the Company has operated a correspondent lending program allowing for the purchase of first mortgage loans originated by unaffiliated mortgage lenders and brokers in South Carolina and North Carolina. Loans originated by these lenders and brokers are subject to the same underwriting standards as those used by the Company in its own lending and are accepted for purchase only after approval by the Company's underwriters. Loans funded through the correspondent program totaled $66.3 million in fiscal 2001. In recent years the Company added second mortgage and mobile home lending programs on a correspondent basis, funding approximately $63.9 million of these types of originations during fiscal 2001.

The Company makes both fixed-rate and adjustable-rate loans and generally retains the servicing on loans originated. A large percentage of single-family loans are made pursuant to certain guidelines that will permit the sale of these loans in the secondary market to government agencies or private investors. The Company's primary single-family product is the conventional loan. However, loans are also originated that are either partially guaranteed by the Veterans Administration ("VA") or fully insured by the Federal Housing Administration ("FHA").

Set forth below is selected data relating to the aggregate composition of the Company's loan portfolio on the dates indicated.

			September 30,
			2001		2000		1999		1998		1997
			Amount	% of Total	Amount	% of Total	Amount	% of Total	Amount	% of Total	Amount	% of Total
			(dollar amounts in thousands)
TYPE OF LOAN
Real estate:
	1- to 4-family residential		$ 1,239,806	65.1%	$ 1,266,025	68.9%	$ 1,296,523	74.4%	$ 1,135,765	72.5%	$ 1,040,142	71.6%
	Multi-family		50,195	2.6	48,937	2.7	46,254	2.6	43,161	2.7	54,593	3.8
	Commercial real
		estate and land	222,303	11.7	222,424	12.1	210,488	12.1	225,039	14.4	220,169	15.2
Commercial business loans			93,081	4.9	57,381	3.1	42,721	2.5	33,790	2.2	32,967	2.3
Consumer loans:
	Home equity		145,146	7.6	121,993	6.6	86,764	5.0	73,961	4.7	58,879	4.0
	Mobile homes		90,262	4.7	63,016	3.4	44,561	2.6	26,983	1.7	19,537	1.3
	Credit cards		11,767	0.6	11,643	0.6	10,831	0.6	10,424	0.7	10,992	0.8
	Other consumer loans		103,267	5.4	115,339	6.3	74,959	4.3	61,316	4.0	57,219	3.9
Total gross loans receivable			1,955,827	102.6	1,906,758	103.7	1,813,101	104.1	1,610,439	102.9	1,494,498	102.9
Allowance for loan losses			(15,943)	(0.8)	(15,403)	(0.8)	(14,570)	(0.8)	(12,781)	(0.8)	(12,103)	(0.8)
Loans in process			(33,624)	(1.8)	(51,658)	(2.8)	(55,409)	(3.2)	(32,360)	(2.1)	(30,257)	(2.1)
Deferred loan fees and
	discounts		(927)	(0.0)	(1,200)	(0.1)	(972)	(0.1)	(258)	-	(641)	-
		Loans receivable, net	$ 1,905,333	100.0%	$ 1,838,497	100.0%	$ 1,742,150	100.0%	$ 1,565,040	100.0%	$ 1,451,497	100.0%

The following table shows, at September 30, 2001, the dollar amount of adjustable-rate loans and fixed-rate loans in the Company's portfolio based on their contractual terms to maturity. The amounts in the table do not include adjustments for deferred loan fees and discounts or allowances for loan losses. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less. Contractual principal repayments of loans do not necessarily reflect the actual term of the Company's loan portfolios. The average life of mortgage loans is substantially less than their contractual terms because of loan prepayments and because of enforcement of due-on-sale clauses, which gives the Company the right to declare a loan immediately due and payable if, among other things, the borrower sells the real property subject to the mortgage. The average life of mortgage loans tends to increase when current market rates on mortgage loans substantially exceed rates on existing mortgage loans. Correspondingly, when market rates on mortgages decline below rates on existing mortgage loans, the average life of these loans tends to be reduced.

Consolidated		Within One Year	Over One to Two Years	Over Two to Three Years	Over Three to Five Years	Over Five to Ten Years	Over Ten to Fifteen Years	Over Fifteen Years	Total
		(in thousands)
Real estate mortgages:
	Adjustable-rate	$ 9,130	$ 6,051	$ 2,653	$ 4,125	$ 24,626	$ 68,304	$ 701,298	$ 816,187
	Fixed-rate	54,525	27,492	27,443	43,306	89,188	140,753	279,786	662,493
Consumer loans:
	Adjustable-rate	144,352	386	323	624	1,766	1,230	225	148,906
	Fixed-rate	26,368	9,058	15,902	35,492	29,410	16,390	68,916	201,536
Commercial business loans:
	Adjustable-rate	34,292	8,855	1,555	2,396	1,375	99	-	48,572
	Fixed-rate	19,256	7,024	8,063	7,171	2,992	3	-	44,509
Total		$ 287,923	$ 58,866	$ 55,939	$ 93,114	$ 149,357	$ 226,779	$ 1,050,225	$ 1,922,203

Residential Mortgage Lending

At September 30, 2001, the Company's real estate loans totaled approximately $1.5 billion, or 79.4% of net loans receivable. One- to four-family residential mortgage loans totaled $1.2 billion, or 82.0% of the Company's real estate loans and 65.1% of total net loans receivable. The Company offers adjustable-rate mortgage loans ("ARMs") and fixed-rate mortgage loans with terms ranging from 10 years to 30 years.

The ARMs currently offered by the Company have up to 30-year terms and interest rates which adjust annually or adjust annually after being fixed for a period of three, five or seven years in accordance with a designated index. ARMs may be originated with a 1% or 2% cap on any increase or decrease in the interest rate per year, with a 4%, 5% or 6% limit on the amount by which the interest rate can increase or decrease over the life of the loan.

The Company emphasizes the origination of ARMs rather than long-term, fixed-rate mortgage loans for inclusion in its loan portfolios. In order to encourage the origination of ARMs with interest rates which adjust annually, the Company, like many of its competitors, may offer a rate of interest on such loans below the fully-indexed rate for the initial period of the loan. These loans are underwritten on the basis of the fully-indexed rate. The Company presently offers single-family ARMs indexed to the one-year constant maturity treasury index. While these loans are expected to adjust more quickly to changes in market interest rates, they may not adjust as rapidly as changes occur in the Company's cost of funds.

The Company originates residential mortgage loans with loan-to-value ratios up to 95%. Generally, on mortgage loans exceeding 80% loan-to-value ratio, the Company requires private mortgage insurance which protects the Company against losses of at least 20% of the mortgage loan amount. All property securing real estate loans made by the Company is appraised either by appraisers employed by the Company or by independent appraisers selected by the Company. Loans are usually made pursuant to certain guidelines which will permit the sale of these loans in the secondary market.

The Company offers various other residential lending programs, including bi-weekly mortgage loans and two-step mortgage loans originated principally for first-time home buyers. The Company also offers, as part of its Community Reinvestment Act program, more flexible underwriting criteria to broaden the availability of mortgage loans in the communities it serves.

The majority of the Company's residential construction loans are made to finance the construction of individual owner-occupied houses with up to 90% loan-to-value ratios. Residential construction loans totaled $73.7 million at September 30, 2001. These construction loans are generally structured to be converted to permanent loans at the end of the construction phase. Loan proceeds are disbursed in increments as construction progresses and as inspections warrant. As part of its residential lending program, the Company also offers construction loans with 75% loan-to-value ratios to qualified builders. These construction loans are generally at a competitive fixed rate of interest for one- or two-year periods. The Company also offers lot loans intended for residential use, which may be on a fixed-rate or adjustable-rate basis.

Commercial Real Estate, Multi-family and Land Lending

At September 30, 2001, the Company's commercial real estate portfolio totaled $132.1 million, or 7.0% of total net loans. Its multi-family portfolio totaled $50.2 million, or 2.6% of total net loans. Loans made with land as security totaled $90.2 million, or 4.7% of total net loans. In recent years the Company has limited growth in loans made on commercial real estate, multi-family properties and on land acquisition and development projects and placed greater emphasis on single-family real estate lending.

Interest rates charged on permanent commercial real estate loans are determined by market conditions existing at the time of the loan commitment. Generally, the loans are adjustable in interest and the rate is fixed for three to five years determined by market conditions, collateral and the relationship with the borrower. The amortization of the loans vary but will not exceed 20 years. In the past, the Company originated a substantial portion of its commercial real estate loans at rates generally two to three percentage points above its prevailing cost of funds. As these loans reach call or loan review dates or refinance, it is the Company's current policy to negotiate most of these loans to new terms based either on the prime lending rate as the interest rate index or to fix the rate of interest for a three year to five year period.

Commercial and multi-family mortgage lending generally involves greater risk than single-family lending. Such lending typically involves larger loan balances to single borrowers or groups of related borrowers than single-family lending. Furthermore, the repayment of loans secured by income-producing properties is typically dependent upon the successful operation of the related real estate project. If the cash flow from the property is reduced (for example, if leases are not obtained or renewed), the borrower's ability to repay the Company's loans may be impaired. These risks can be affected significantly by supply and demand in the market for the type of property securing the loan and by general economic conditions, and commercial and multi-family loans may thus be subject, to a greater extent than single-family property loans, to adverse conditions in the economy.

Consumer Lending

Federal regulations permit the Company to make secured and unsecured consumer loans up to 35% of assets. In addition, the Associations have lending authority above the 35% category for certain consumer loans, such as home equity loans, property improvement loans, mobile home loans and loans secured by savings accounts. The Company's consumer loans totaled $350.4 million at September 30, 2001, or 18.3% of net loans receivable. The largest component of consumer lending is comprised of single-family home equity lines of credit and other equity loans, currently totaling $145.1 million, or 41.4% of all consumer loans. Other consumer loans primarily consist of loans secured by mobile homes, boats, automobiles and credit cards.

Commercial Business Lending

The Company is permitted under federal law to make secured or unsecured loans for commercial, corporate business and agricultural purposes including issuing letters of credit. The aggregate amount of such loans outstanding generally may not exceed 20% of an institution's assets, provided that amounts in excess of 10% of total assets may be used only for small business loans.

The Company's commercial business loans are generally made on a secured basis with terms that usually do not exceed five years. Most of the Company's commercial business loans to date have interest rates that change at periods ranging from 30 days to one year based on the Company's prime lending rate. Some loans have fixed interest rates determined at the time of commitment. At September 30, 2001, the Company's commercial business loans outstanding were $93.1 million, which represented 4.9% of total net loans receivable.

Loan Sales and Servicing

While the Company originates adjustable-rate loans for its own portfolio, fixed-rate loans are generally made on terms that will permit their sale in the secondary market. The Company participates in secondary market activities by selling whole loans and participations in loans to the Federal Home Loan Bank ("FHLB") of Atlanta, the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as other institutional investors. This practice enables the Company to satisfy the demand for such loans in its local communities, to meet asset and liability objectives of management and to develop a source of fee income through loan servicing. At September 30, 2001, the Company was servicing loans for others in the amount of $768.0 million.

Based on the current level of market interest rates and other factors, the Company presently intends to sell selected current originations of conforming 30-year and 15-year conventional fixed-rate mortgage loans. The Company's policy with respect to the sale of fixed-rate loans is dependent to a large extent on the general level of market interest rates. Sales of fixed-rate residential loans totaled $234.8 million in 2001, $48.4 million in 2000 and $203.1 million in 1999.

Risk Factors

Certain risks are inherent with loan portfolios which contain commercial real estate, multi-family, commercial business and consumer loans. While these types of loans provide benefits to the Company's asset/liability management programs and reduce exposure to interest rate changes, such loans may entail significant additional credit risks compared to residential mortgage lending. Commercial real estate and multi-family loans may involve large loan balances to single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties is typically dependent on the successful operation of the properties and thus may be subject to a greater extent to adverse conditions in the local or regional real estate market or in the general economy.

Commercial business lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential, commercial and multi-family real estate lending. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable or other business assets, the liquidation of collateral in the event of a borrower default is often not a sufficient source of repayment because accounts receivable may be uncollectible and inventories and equipment may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment.

Construction loans also involve additional risks attributable to the fact that loan funds are advanced upon the security of the project under construction.

Consumer loans entail greater risk than do residential mortgage loans, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets such as automobiles and other vehicles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

All of the above risk factors are present in the Company's loan portfolio and could have an impact on future delinquency and charge-off rates and levels.

Limits on Loan Concentrations

The Associations' permissible lending limits for loans to one borrower is the greater of $500,000, or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus). At September 30, 2001, First Federal's and Peoples Federal's lending limits under this restriction were $18.2 million and $7.9 million, respectively. A broader limitation (the lesser of $30 million, or 30% of unimpaired capital and surplus) is provided under certain circumstances and subject to OTS approval for loans to develop domestic residential housing units. In addition, the Associations may provide purchase money financing for the sale of any asset without regard to the loans to one borrower limitation so long as no new funds are advanced and the Associations are not placed in a more detrimental position than if they had held the asset. At September 30, 2001, the largest aggregate amount of loans by First Federal and Peoples Federal to any one borrower, including related entities, was approximately $12.5 million and $4.6 million, respectively. All of these loans were performing according to their respective terms at September 30, 2001.

Delinquencies and Nonperforming Assets

Delinquent and problem loans are a normal part of any lending activity. When a borrower fails to make a required payment on a loan, the Company attempts to cure the default by contacting the borrower. The Company contacts the borrower after a payment is past due less than 20 days, and a late charge is assessed on the loan. In most cases, defaults are cured promptly. If the delinquency on a mortgage loan continues 60 to 90 days and is not cured through normal collection procedures or an acceptable arrangement is not worked out with the borrower, the Company will institute measures to remedy the default, including commencing a foreclosure action. The Company may accept voluntary deeds of the secured property in lieu of foreclosure.

The Company's mortgage loans are generally secured by the use of a mortgage instrument. Notice of default under these loans is required to be recorded and mailed. If the default is not cured within three months, a notice of sale is posted, mailed and advertised, and a sale is then conducted.

Real estate acquired by the Company as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired, it is recorded at the lower of cost or estimated fair value less cost to sell at the date of acquisition, and any resulting write-down is charged to the allowance for losses. Generally, interest accrual on a loan ceases when the loan becomes 90 days delinquent.

OTS Asset Classification System

OTS regulations include a classification system for problem assets. Under this classification system, problem assets for insured institutions are classified as "substandard," "doubtful" or "loss," depending on the presence of certain characteristics discussed below.

An asset is considered "substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. "Substandard" assets include those assets characterized by the "distinct possibility" that the institution will sustain "some loss" if the deficiencies are not corrected. Assets classified as "doubtful" have all of the weaknesses inherent in those classified "substandard" with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions, and values, "highly questionable and improbable." Assets classified "loss" are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

When an institution classifies problem assets as either substandard or doubtful, it is required to establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risks associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an institution classifies problem assets as "loss," it is required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount. An institution's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OTS, which can order the establishment of additional general or specific loss allowances. The Company has classified $16.1 million in assets as substandard as of September 30, 2001.

The OTS classification of assets regulation also provides for a "special mention" designation, in addition to the "substandard," "doubtful" and "loss" classifications. "Special mention" assets are defined as those that do not currently expose an institution to a sufficient degree of risk to warrant classification as either "substandard," "doubtful" or "loss" but do possess credit deficiencies or potential weaknesses deserving management's close attention which, if not corrected, could weaken the asset and increase such risk in the future. The Company had $6.2 million of assets designated "special mention" as of September 30, 2001.

Management periodically reviews its loan portfolio, and has, in the opinion of management, appropriately classified and established allowances against all assets requiring classification under the regulation.

For further discussion of the Company's problem assets, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Asset Quality," and Note 7 of Notes to Consolidated Financial Statements contained in Item 8 herein.

INVESTMENT ACTIVITIES

The Associations are required under federal regulations to maintain adequate liquidity to ensure safe-and-sound operations. Investment decisions are made by authorized officers of the Company and the Associations within policies established by the Company's and the Associations' Boards of Directors.

At September 30, 2001, the Company's investment and mortgage-backed securities portfolio totaled approximately $247.6 million, which included stock in the FHLB of Atlanta of $33.2 million. Investment securities include U.S. Government and agency obligations, corporate bonds and mutual funds approximating $6.3 million. Mortgage-backed securities totaled $208.2 million as of September 30, 2001. See Note 1 of Notes to Consolidated Financial Statements, contained in Item 8 herein for a discussion of the Company's accounting policy for investment and mortgage-backed securities. See Notes 3, 4 and 5 of Notes to Consolidated Financial Statements for additional information regarding investment and mortgage-backed securities and FHLB of Atlanta stock.

Objectives of the investment policies of the Company are achieved through investing in U.S. Government, federal agency, corporate debt securities, mortgage-backed securities, short-term money market instruments, mutual funds, loans and other investments as authorized by OTS regulations and specifically approved by the Boards of Directors of the Company and the Associations. Investment portfolio guidelines specifically identify those securities eligible for purchase and describe the operations and reporting requirements of the Investment Committees which execute investment policy. The primary objective of the Company in its management of the investment portfolio is to maintain a portfolio of high quality, highly liquid investments with returns competitive with short-term treasury or agency securities and highly rated corporate securities.

As members of the FHLB System, the Associations are required to maintain an investment in the common stock of the FHLB of Atlanta. See "Regulation -- Federal Regulation of Savings Associations -- Federal Home Loan Bank System." The stock of the FHLB of Atlanta is redeemable at par value.

Securities may differ in terms of default risk, interest risk, liquidity risk and expected rate of return. Default risk is the risk that an issuer will be unable to make interest payments, or to repay the principal amount on schedule. The Company primarily invests in U.S. Government and federal agency obligations. U.S. Government obligations are regarded as free of default risk. The issues of most government agencies are backed by the strength of the agency itself plus a strong implication that in the event of financial difficulty, the agency would be assisted by the federal government. The credit quality of corporate debt varies widely. The Company only invests in corporate debt securities which are rated in one of the three highest categories by two nationally recognized investment rating services.

The Company's investment in mortgage-backed securities serves several primary functions. First, the Company has securitized whole loans for mortgage-backed securities issued by federal agencies to use as collateral for certain of its borrowings and to secure public agency deposits. Second, the Company previously securitized loans with federal agencies to reduce its credit risk exposure and to reduce regulatory risk-based capital requirements. Third, the Company acquires mortgage-backed securities from time to time to meet earning asset growth objectives and provide additional interest income when necessary to augment lower loan originations and replace loan portfolio runoff.

The following tables set forth the carrying value of the Company's investment and mortgage-backed securities portfolio (excluding stock in the FHLB of Atlanta), maturities and average yields at September 30, 2001. The fair value of the Company's investment and mortgage-backed securities portfolio (excluding stock in the FHLB of Atlanta) was $214.4 million on September 30, 2001.

Investment and Mortgage-backed Securities Portfolio
			As of September 30,
			2001		2000		1999
			Amortized Cost	Fair	Amortized Cost	Fair	Amortized Cost	Fair
				Value		Value		Value
Securities Held to Maturity:			(in thousands)
State and local government obligations			$	$	$ 249	$ 255	$ 249	$ 258
Mortgage-backed securities					19	21	28	31
Total securities held to maturity			$           -	$ -	$268	$276	$ 277	$ 289
			As of September 30,
			2001		2000		1999
			Amortized Cost	Fair	Amortized Cost	Fair	Amortized Cost	Fair
				Value		Value		Value
Securities Available for Sale:			(dollar amounts in thousands)
U.S. Treasury and U.S. Government agencies and corporations			$ 2,251	$ 2,264	$ 3,241	$ 3,247	$ 4,006	$ 4,021
Corporate debt and other securities			2,499	2,440	2,331	2,301	2,468	2,429
Mutual Funds			1,555	1,555	370	370	1,119	1,119
Mortgage-backed securities			203,397	208,153	249,450	247,076	183,868	181,217
	Total securities available for sale		$ 209,702	$ 214,412	$ 255,392	$ 252,994	$ 191,461	$ 188,786
Maturity and Yield Schedule as of September 30, 2001
			Amortized Cost	Weighted Average Yield
		(dollar amounts in thousands)
U.S. Treasury and U.S. Government agencies and corporations:
	Within 1 year		$ 2,251	6.78%
			2,251	6.78
Corporate debt and other securities:
	After 1 but within 5 years		982	4.31
	After 5 but within 10 years		249	10.56
	After 10 years		1,268	3.60
			2,499	4.57
Mutual funds
	Within 1 year		1,555	3.36
			1,555	3.36
Mortgage-backed securities
	Within 1 year		2,026	5.98
	After 1 but within 5 years		3,702	6.33
	After 5 but within 10 years		18,869	6.78
	After 10 years		178,800	6.47
			203,397	6.49
			$ 209,702	6.44%

SOURCES OF FUNDS

Deposits have historically been the primary source of funds for lending and investing activities. The amortization and scheduled payment of loans and maturities of investment securities provide a stable source of funds, while deposit fluctuations and loan prepayments are significantly influenced by the overall interest rate environment and other market conditions. FHLB advances and short-term borrowings provide supplemental liquidity sources based on specific needs or if management determines that these are the best sources of funds to meet current requirements.

Deposits

The Company offers a number of deposit accounts including noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market accounts, Individual Retirement Accounts ("IRA") and certificate accounts which generally range in maturity from three months to five years. Deposit account terms vary, with the principal differences being the minimum balance required, the time period the funds must remain on deposit and the interest rate. For a schedule of the dollar amounts in each major category of the Company's deposit accounts, see Note 10 of Notes to Consolidated Financial Statements contained in Item 8 herein.

The Associations are subject to fluctuations in deposit flows because of the influence of general interest rates, money market conditions and competitive factors. The Asset and Liability Committees of the Associations meet frequently and make changes relative to the mix, maturity and pricing of assets and liabilities in order to minimize the impact on earnings from such external conditions. Deposits are attractive sources of liquidity because of their stability, generally lower cost than other funding and the ability to provide fee income through service charges and cross-sales of other services.

The Associations' deposits are obtained primarily from residents of South Carolina. Management estimates that less than 3% of deposits at September 30, 2001, are obtained from customers residing outside of South Carolina. The principal methods used by the Company to attract deposit accounts include the offering of a wide variety of services and accounts, competitive interest rates, and convenient office locations and service hours. The Company utilizes traditional marketing methods to attract new customers and savings deposits, including mass media advertising and direct mail. The Company also provides customers access to the convenience of automated teller machines ("ATMs") through a proprietary ATM network and access to regional and national ATM networks. The Company also enjoys an excellent reputation for providing products and services to meet the needs of market segments, such as seniors. For example, 50-Plus Club members benefit from a number of advantageous programs, such as exclusive travel packages, special events and classic movies.

Jumbo Certificates of Deposit

The following table indicates the amount of the Company's jumbo certificates of deposit by time remaining until maturity as of September 30, 2001. Jumbo certificates of deposit require minimum deposits of $100,000 and have negotiable interest rates.

Maturity Period	At September 30, 2001
	(in thousands)
Three months or less		$ 54,805
Over three through six months		24,895
Over six through twelve months		16,022
Over twelve months		3,873
Total		$ 99,595

Borrowings

The Company relies upon advances from the FHLB of Atlanta to supplement its supply of lendable funds and to meet deposit withdrawal requirements. The FHLB of Atlanta has served as the Company's primary borrowing source. Advances from the FHLB of Atlanta are typically secured by the Company's stock in the FHLB of Atlanta and a portion of the Company's first mortgage loans. Interest rates on advances vary from time to time in response to general economic conditions.

At September 30, 2001, the Company had advances totaling $625.0 million from the FHLB of Atlanta at an average rate of 4.90%. At September 30, 2001, the maturity of the Associations' FHLB advances ranged from one to nine years. For more information on borrowings, see Note 11 of Notes to Consolidated Financial Statements contained in Item 8 herein.

The Associations have periodically entered into transactions to sell securities under agreements to repurchase ("reverse repurchase agreements") through broker-dealers. Reverse repurchase agreements evidence indebtedness of the Company arising from the sale of securities that the Company is obligated to repurchase at specified prices and dates. At the date of repurchase, the Company will, in some cases, enter into another reverse repurchase agreement to fund the repurchase of the maturing agreement. For regulatory and accounting purposes these reverse repurchase agreements are deemed to be borrowings collateralized by the securities sold. At September 30, 2001, the Company had $66.3 million of outstanding reverse repurchase agreements secured by mortgage-backed securities. The agreements had a weighted average interest rate of 3.66% at September 30, 2001, and mature within three months. For more information on other borrowings, see Note 12 of Notes to Consolidated Financial Statements contained in Item 8 herein.

During 1998, the Company entered into a loan agreement with another bank for a $25.0 million funding line. The rate on the funding line is based on LIBOR. During fiscal 2000, the line was increased to $35.0 million. At September 30, 2001, $23.8 million was outstanding under this agreement with a weighted average rate of 5.58%.

The following table sets forth certain information regarding short-term borrowings by the Company at the end of and during the periods indicated:

			At or For the Year Ended September 30,
			2001	2000	1999
			(dollar amounts in thousands)
Weighted Average Rate Paid On (at end of period):
		FHLB advances	4.90%	6.38%	5.50%
		Securities sold under agreements to repurchase	3.66	6.73	5.45
		Bank line of credit	5.58	8.63	7.38
Maximum Amount of Borrowings Outstanding (during period):
		FHLB advances	$ 803,500	$ 795,500	$ 611,500
		Securities sold under agreements to repurchase	99,210	73,943	73,991
		Bank line of credit	23,750	12,250	8,750
Approximate Average Amount of Short-term Borrowings
	With Respect To:
		FHLB advances	728,100	706,551	540,893
		Securities sold under agreements to repurchase	66,385	57,138	35,323
		Bank line of credit	17,928	9,645	6,698
Approximate Weighted Average Rate Paid On (during period):
		FHLB advances	5.75%	6.10%	5.37%
		Securities sold under agreements to repurchase	5.31	6.26	5.39
		Bank line of credit	7.04	8.35	6.38

ASSET AND LIABILITY MANAGEMENT

Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. The Company=s market risk arises principally from interest rate risk inherent in its lending, deposit and borrowing activities. Management actively monitors and manages its interest rate risk exposure. Although the Company manages other risks, as in credit quality and liquidity risk, in the normal course of business, management considers interest rate risk to be its most significant market risk and could potentially have the largest material effect on the Company=s financial condition and results of operations. Other types of market risks, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company=s business activities.

The Company=s profitability is affected by fluctuations in interest rates. Management=s goal is to maintain a reasonable balance between exposure to interest rate fluctuations and earnings. A sudden and substantial increase in interest rates may adversely impact the Company=s earnings to the extent that the interest rates on interest-earning assets and interest-bearing liabilities do not change at the same speed, to the same extent or on the same basis. The Company monitors the impact of changes in interest rates on its net interest income using several tools. One measure of the Company=s exposure to differential changes in interest rates between assets and liabilities is shown in the Company=s Interest Rate Sensitivity Analysis Table. See Item 7, "Management=s Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Asset and Liability Management." Another measure, required to be performed by OTS-regulated institutions, is the test specified by OTS Thrift Bulletin No. 13A, "Interest Rate Risk Management" ("TB-13A"). This test measures the impact on net interest income and net portfolio value of an immediate change in interest rates in 100 basis point increments. Net portfolio value is defined as the net present value of assets, liabilities and off-balance sheet contracts. At September 30, 2001, the Company=s internal calculations, based on the information and assumptions produced for the analysis, suggested that a 200 basis point increase in rates would decrease net interest income over a twelve-month period by 9.3% and reduce net portfolio value by 9.1% while a 200 basis point decline in rates would increase net interest income over a twelve-month period by 9.1% and decrease net portfolio value by 3.9% in the same period.

Computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay rates, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Company could undertake in response to changes in interest rates.

 The following table shows the Company=s financial instruments that are sensitive to changes in interest rates, categorized by expected maturity, and the instruments= fair values at September 30, 2001. Market risk sensitive instruments are generally defined as on- and off-balance sheet derivatives and other financial instruments.

Expected Maturity/Principal Repayments at September 30,
		Average Rate	2001	2002	2003	2004	2005	Thereafter	Cost	Fair Value
Interest-sensitive assets:		(dollar amounts in thousands)
	Loans receivable	7.85%	$ 285,800	$ 242,930	$ 206,490	$ 175,517	$ 149,189	$ 845,407	$ 1,905,333	$ 1,958,345
	Mortgage-backed securities	6.49	30,510	25,933	22,043	18,737	15,926	90,248	203,397	208,153
	Investments and other interest-earning assets	3.53	42,610				982	1,517	45,109	45,063
	FHLB Stock	6.75						33,150	33,150	33,150
Interest-sensitive liabilities:
	Checking accounts	1.09	114,247	62,250	42,330	28,784	19,605	41,568	308,784	308,784
	Savings accounts	2.25	20,515	17,027	14,133	11,730	9,736	47,535	120,676	120,676
	Money Market accounts	3.11	174,434	13,910	9,737	6,816	4,771	11,134	220,802	220,802
	Certificate accounts	5.35	567,987	124,143	15,161	23,481	10,493	4,258	745,523	758,550
	Borrowings	4.81	286,316	55,000	75,000	125,000		173,750	715,066	745,594

Expected maturities are contractual maturities adjusted for prepayments of principal. The Company uses certain assumptions to estimate fair values and expected maturities. For assets, expected maturities are based upon contractual maturity, projected repayments and prepayment of principal. The prepayment experience reflected herein is based on the Company=s historical experience. For deposit liabilities, in accordance with standard industry practice, the Company has used decay rates utilized by the OTS. The actual maturities and run-off of loans could vary substantially if future prepayments differ from the Company=s historical experience.

Rate/Volume Analysis

For the Company's rate/volume analysis and information regarding the Company=s yields and costs and changes in net interest income, refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Net Interest Income."

SUBSIDIARY ACTIVITIES OF THE ASSOCIATIONS

The Carolopolis Corporation

The Carolopolis Corporation ("Carolopolis") was incorporated in 1976 for the principal purpose of land acquisition and development and construction of various projects for resale. Development activities began in 1981 and ended in 1989. Carolopolis had been inactive for a number of years until 1996 when a lower tier corporation of Carolopolis was formed to operate and market for resale a commercial real estate property acquired through foreclosure by First Federal. Carolopolis is currently inactive.

Broad Street Holdings

Broad Street Holdings was incorporated in 1998 as the holding company for Broad Street Investments, Inc., which was also formed in 1998. Broad Street Investments has been organized as a real estate investment trust to hold mortgage-related assets.

First Reinsurance

First Reinsurance was incorporated in 1998 as the holding company for First Southeast Reinsurance, Inc., a company also organized in 1998 and domiciled in Vermont. First Southeast Reinsurance reinsures mortgage insurance originated through mortgage insurance companies in connection with real estate loans originated by the Associations.

First Southeast Fiduciary and Trust

First Southeast Fiduciary and Trust Services, Inc. was incorporated in 1998 for the purpose of extending trust and other asset management services to customers of the Associations.

Coastal Carolina Service Corporation

Coastal Carolina Service Corporation was incorporated in 1980 for the purpose of conducting data processing activities. All such activities ended prior to 1992. Beginning in 1998, Coastal Carolina Service Corporation was engaged in certain investment activities, including holding for investment purposes mortgage loans, mortgage-backed securities and U.S. treasury and agency securities.

COMPETITION

First Federal was the largest and Peoples Federal the third largest of savings associations headquartered in South Carolina at September 30, 2001, based on asset size as reported by the OTS. The Company faces strong competition in the attraction of savings deposits and in the origination of real estate and other loans. The Company's most direct competition for savings deposits has historically come from commercial banks and from other savings institutions located throughout South Carolina. The Company also faces competition for savings from credit unions and competition for investors' funds from short-term money market securities and other corporate and government securities. In the more recent past, money market, stock, and fixed-income mutual funds have attracted an increasing share of household savings and are significant competitors of the Company.

The Company's competition for real estate and other loans comes principally from commercial banks, other thrift institutions, mortgage banking companies, insurance companies, developers, and other institutional lenders. The Company competes for loans principally through the interest rates and loan fees charged and the efficiency and quality of the services provided borrowers, developers, real estate brokers, and home builders.

PERSONNEL

As of September 30, 2001, the Company had 719 full-time equivalent employees. The Company provides its full-time employees and certain part-time employees with a comprehensive program of benefits, including medical and dental benefits, life insurance, long-term disability coverage, a profit-sharing plan and a 401(k) plan. The employees are not represented by a collective bargaining agreement. The Company believes its employee relations are excellent.

REGULATION

As federally chartered and federally insured thrift institutions, the Associations are subject to extensive regulation, examination and supervision by the OTS as its chartering agency, and the FDIC, as the insurer of their deposits. Lending activities and other investments must comply with various statutory and regulatory capital requirements. The Associations are regularly examined by federal regulators and file periodic reports concerning their activities and financial condition. In addition, the Associations' relationship with their depositors and borrowers also is regulated to a great extent by both federal and state laws, especially in such matters as the ownership of deposit accounts and the form and content of the Associations' mortgage documents.

Federal Regulation of Savings Associations

Office of Thrift Supervision

The OTS is an office in the Department of the Treasury subject to the general oversight of the Secretary of the Treasury. Among other functions, the OTS issues and enforces regulations affecting federally insured savings associations and regularly examines these institutions.

Federal Home Loan Bank System

The FHLB System, consisting of 12 FHLBs, is under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The Associations, as members of the FHLB of Atlanta, are required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount equal to the greater of (i) 1.0% of the aggregate outstanding principal amount of residential mortgage loans, home purchase contracts and similar obligations at the beginning of each year, or (ii) 1/20 of its advances (borrowings) from the FHLB of Atlanta. First Federal and Peoples Federal were in compliance with this requirement with an investment in FHLB of Atlanta stock of $20.4 million and $12.8 million, respectively, at September 30, 2001.

Among other benefits, the FHLB of Atlanta provides a central credit facility primarily for member institutions. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes advances to members in accordance with policies and procedures established by the FHFB and the Board of Directors of the FHLB of Atlanta.

Federal Deposit Insurance Corporation

The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of depository institutions. The FDIC maintains two separate insurance funds: the Bank Insurance Fund ("BIF") and the SAIF. As insurer of the Associations' deposits, the FDIC has examination, supervisory and enforcement authority over the Associations.

Under applicable regulations, the FDIC assigns an institution to one of three capital categories based on the institution=s financial information, as of the reporting period ending seven months before the assessment period. The capital categories are: (i) well-capitalized, (ii) adequately capitalized, or (iii) undercapitalized. An institution is also placed in one of three supervisory subcategories within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution=s primary federal regulator and information that the FDIC determines to be relevant to the institution=s financial condition and the risk posed to the deposit insurance funds. An institution=s assessment rate depends on the capital category and supervisory category to which it is assigned with the most well-capitalized, healthy institutions receiving the lowest rates. Risk classification of all insured institutions is made by the FDIC semi-annually. At September 30, 2001, the Associations were classified as well-capitalized institutions.

Effective January 1, 1997, the premium schedule for BIF and SAIF insured institutions ranged from 0 to 27 basis points. However, SAIF insured institutions and BIF insured institutions are required to pay a Financing Corporation assessment in order to fund the interest on bonds issued to resolve thrift failures in the 1980s. This amount is currently equal to about 2.1 basis points for each $100 in domestic deposits for SAIF and BIF insured institutions. These assessments, which are revised quarterly based upon the level of BIF and SAIF deposits, will continue until the bonds mature in the year 2015.

The FDIC is authorized to raise the assessment rates in certain circumstances. The FDIC has exercised this authority several times in the past and may raise insurance premiums in the future. If such action is taken by the FDIC, it could have an adverse effect on the earnings of the Associations.

Under the Federal Deposit Insurance Act, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS. Management of the Associations do not know of any practice, condition or violation that might lead to termination of deposit insurance.

Prompt Corrective Action

The federal banking agencies have implemented, by regulation, a system of prompt corrective action for all insured depository institutions. Under the regulations, an institution shall be deemed to be "well capitalized" if it has a total risk-based capital ratio of 10.0% or more, has a Tier I risk-based capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is not subject to specified requirements to meet and maintain a specific capital level for any capital measure. At September 30, 2001, First Federal and Peoples Federal were categorized as "well capitalized" under the prompt corrective action regulations of the OTS. See Note 16 of Notes to Consolidated Financial Statements contained in Item 8 herein.

Standards for Safety and Soundness

The federal banking regulatory agencies have prescribed, by regulation, standards for all insured depository institutions relating to: (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii) earnings; and (viii) compensation, fees and benefits ("Guidelines"). The Guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the OTS determines that the Associations fail to meet any standard prescribed by the Guidelines, the agency may require the Associations to submit to the agency an acceptable plan to achieve compliance with the standard. Management is aware of no conditions relating to these safety and soundness standards which would require submission of a plan of compliance.

Qualified Thrift Lender Test

The Qualified Thrift Lender ("QTL") test requires that a savings association maintain at least 65% of its total tangible assets in "qualified thrift investments" on a monthly average basis in nine out of every 12 months. At September 30, 2001, the Associations were in compliance with the QTL test.

Capital Requirements

Federally insured savings associations, such as the Associations, are required to maintain a minimum level of regulatory capital. The OTS has established capital standards, including a tangible capital requirement, a leverage ratio (or core capital) requirement and a risk-based capital requirement applicable to such savings associations. The capital regulations require tangible capital of at least 1.5% of adjusted total assets (as defined by regulation). The capital standards also require core capital equal to at least 3% to 4% of adjusted total assets, depending on an institution's supervisory rating. Core capital generally consists of tangible capital.

The OTS risk-based requirement requires savings associations to have total capital of at least 8% of risk-weighted assets. Total capital consists of core capital, as defined above, and supplementary capital. Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used to satisfy the risk-based requirement only to the extent of core capital.

In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet items, will be multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent in the type of asset. For example, the OTS has assigned a risk weight of 50% for prudently underwritten permanent one- to- four family first lien mortgage loans not more than 90 days delinquent and having a loan-to-value ratio of not more than 80% at origination unless insured to such ratio by an insurer approved by Fannie Mae or Freddie Mac.

The OTS is authorized to impose capital requirements in excess of these standards on individual associations on a case-by-case basis. The OTS and FDIC are authorized and, under certain circumstances required, to take certain actions against savings associations that fail to meet their capital requirements. The OTS is generally required to take action to restrict the activities of an "undercapitalized association" (generally defined to be one with less than either a 4% core capital ratio, a 4% Tier 1 risk-based capital ratio or an 8% risk-based capital ratio). Any such association must submit a capital restoration plan and until such plan is approved by the OTS may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions. The OTS is authorized to impose the additional restrictions that are applicable to significantly undercapitalized associations.

See Note 16 of Notes to Consolidated Financial Statements contained in Item 8 herein for a summary of all applicable capital requirements of First Federal and Peoples Federal.

Limitations on Capital Distributions

OTS regulations require the Associations to give the OTS 30 days' advance notice of any proposed declaration of dividends, and the OTS has the authority under its supervisory powers to prohibit the payment of dividends.

OTS regulations impose uniform limitations on the ability of all savings associations to engage in various distributions of capital such as dividends, stock repurchases and cash-out mergers. In addition, the regulation utilizes a three-tiered approach permitting various levels of distributions based primarily upon a savings association's capital level.

The Associations currently meet the criteria to be designated Tier 1 associations and, consequently, could at their option (after prior notice to, and no objection made by, the OTS) distribute up to 100% of their net income during the calendar year plus 50% of their surplus capital at the beginning of the calendar year less any distributions previously paid during the year.

Regulation of the Company

On November 12, 1999, the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 ("GLBA") was signed into law. The purpose of this legislation is to modernize the financial services industry by establishing a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers. Generally, the GLBA:

1. repeals the historical restrictions and eliminates many federal and state law barriers to affiliations among banks, securities firms, insurance companies and other financial service providers;
2. provides a uniform framework for the functional regulation of the activities of banks, savings institutions and their holding companies;
3. broadens the activities that may be conducted by national banks, banking subsidiaries of bank holding companies and their financial subsidiaries;
4. provides an enhanced framework for protecting the privacy of consumer information;
5. adopts a number of provisions related to the capitalization, membership, corporate governance and other measures designed to modernize the FHLB system;
6. modifies the laws governing the implementation of the Community Reinvestment Act; and
7. addresses a variety of other legal and regulatory issues affecting day-to-day operations and long-term activities of financial institutions.

The Company is a multiple savings and loan holding company and recently the OTS has clarified that all thrift holding companies are authorized to engage in the same list of activities permitted by the Federal Reserve Board for financial holding companies. These are activities that are financial in nature, incidental to a financial activity or complimentary to a financial activity.

The GLBA also imposes certain obligations on financial institutions to develop privacy policies, restrict the sharing of nonpublic customer data with nonaffiliated parties at the customer's request, and establish procedures and practices to protect and secure customer data. These privacy provisions were implemented by regulations that were effective on November 12, 2000. Compliance with the privacy provisions was required by July 1, 2001.

The Company is subject to certain restrictions under the Home Owners= Loan Act ("HOLA") and the OTS regulations issued thereunder. Such restrictions generally concern, among others, acquisitions of other savings associations and savings and loan holding companies.

As a multiple savings and loan holding company within the meaning of HOLA, the Company=s activities are generally subject to more restrictions than those of a unitary savings and loan holding company. Specifically, if First Federal or Peoples Federal fail to meet the QTL test, the activities of the Company and of its subsidiaries (other than the Associations or other federally insured subsidiary savings associations) would thereafter be subject to further restrictions. The HOLA provides that, among other things, no multiple savings and loan holding company or subsidiary thereof which is not an insured association shall commence or continue for more than two years after becoming a multiple savings and loan association holding company or subsidiary thereof, any business activity other than: (i) furnishing or performing management services for a subsidiary insured institution, (ii) conducting an insurance agency or escrow business, (iii) holding, managing, or liquidating assets owned by or acquired from a subsidiary insured institution, (iv) holding or managing properties used or occupied by a subsidiary insured institution, (v) acting as trustee under deeds of trust, (vi) those activities previously directly authorized by regulation as of March 5, 1987 to be engaged in by multiple holding companies or (vii) those activities authorized by the Federal Reserve Board as permissible for bank holding companies, unless the OTS by regulation prohibits or limits such activities for savings and loan holding companies. Those activities described in (vii) above also must be approved by the OTS prior to being engaged in by a multiple savings and loan holding company.

Notwithstanding the above restricted activities of a multiple savings and loan holding company imposed by HOLA, the OTS issued an opinion on April 1, 2001 ("Opinion") to clarify how the GLBA applied to multiple savings and loan holding companies. Specifically, the Opinion states that the GLBA, which amended the HOLA, permits multiple savings and loan holding companies to engage in the activities permissible for financial holding companies under the Bank Holding Company Act of 1956. Such activities include nonbanking businesses such as insurance and securities underwriting, which were prohibited activities for multiple savings and loan holding companies prior to the enactment of the GLBA. The HOLA also requires any savings and loan holding company that controls a savings association that fails the QTL test to, within one year after the date on which the association ceases to be a QTL, register as and be deemed a bank holding company subject to all applicable laws and regulations.

ITEM 2. PROPERTIES

The Company's principal executive offices are located at 2440 Mall Drive, North Charleston, South Carolina, in an office building partially leased by First Federal. The building also serves as First Federal's Operations Center. First Federal owns twenty-one of its branch offices, including its home office at 34 Broad Street in downtown Charleston. A substantial portion of its home office is now leased and approximately 50% of its offices in Beaufort County are also leased to others. The remaining six branch offices are leased properties on which First Federal has constructed banking offices. All of the leases include various renewal or purchase options.

Peoples Federal conducts its executive and support service functions from its 14,700 square foot Operations Center at 1601 Eleventh Avenue in Conway, South Carolina. Approximately 65% of the building is available for lease to others. Eleven of Peoples Federal's branch offices are owned and six facilities are leased.

First Southeast Insurance Services, Inc. leases space for certain insurance agency operations in Charleston, Lake City, Myrtle Beach, Hilton Head, Bluffton and Ridgeland, South Carolina. In addition, First Federal leases properties in several locations for off-site ATM facilities. Both Associations also own land purchased for potential future branch locations.

The Company evaluates on a continuing basis the suitability and adequacy of all of its facilities, including branch offices and service facilities, and has active programs of relocating, remodeling or closing any as necessary to maintain efficient and attractive facilities. The Company believes its present facilities are adequate for its operating purposes.

At September 30, 2001, the total book value of the premises and equipment owned by the Company was $33.0 million. Reference is made to Note 15 of Notes to Consolidated Financial Statements contained in Item 8 herein for information relating to minimum rental commitments under the Company's leases for office facilities and to Note 8 for further details on the Company's properties.

ITEM 3. LEGAL PROCEEDINGS

The Company is subject to various legal proceedings and claims which arise in the ordinary course of its business. Any litigation is vigorously defended by the Company, and, in the opinion of management based on consultation with external legal counsel, any outcome of such litigation would not materially affect the Company's consolidated financial position or results of operations.

On December 15, 1997, various plaintiffs filed an action against Peoples Federal and First Financial in the Court of Common Pleas for Charleston County, seeking unspecified damages, including treble damages, based upon a variety of causes of action, which arose out of alleged wrongful actions during the course of a foreclosure action brought by Peoples Federal against the plaintiffs in Georgetown County. This foreclosure action had resulted in a judicial sale held on January 5, 1998. By order dated December 28, 2000, the Circuit Court granted Peoples Federal's and First Financial's motion for Summary Judgment and dismissed all causes of action in their entirety. The plaintiffs have appealed and that appeal is pending.

On September 3, 1998, Peoples Federal filed a declaratory judgment action in Georgetown County, which named certain of the original plaintiffs in the previous litigation and others, seeking a judicial determination of claims made against its rights as purchasers of the property foreclosed. The civil action has been tried and the judge's final amended order was issued October 29, 2001. The ruling resulted in a net money judgment in Peoples Federal's favor. There were other rulings pertaining to such issues as declaration of developers' rights, future assessments, restrictive covenants and density designation which were varied. The recent ruling was appealed by Peoples Federal on November 23, 2001, to increase the net award to Peoples Federal by challenging the offsetting awards to the opposing parties. A briefing schedule has not yet been established. It is unlikely that the case will be decided within the next year. Peoples Federal intends to vigorously pursue this appeal.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended September 30, 2001.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Stock Prices and Dividends:

						Cash Dividend
		High		Low		Declared
2001:
	First Quarter		$ 19.69		$ 15.00		$ 0.155
	Second Quarter		21.75		17.75		$ 0.155
	Third Quarter		23.73		19.05		$ 0.155
	Fourth Quarter		26.45		20.70		$ 0.155
2000:
	First Quarter		$ 19.25		$ 15.25		$ 0.14
	Second Quarter		16.44		12.94		$ 0.14
	Third Quarter		15.63		12.75		$ 0.14
	Fourth Quarter		15.56		12.88		$ 0.14

The Company's common stock is traded in the Nasdaq National Market under the symbol "FFCH." Trading information in newspapers is provided on the Nasdaq Stock Market quotation page under the listing, "FSTFNHLD." As of September 30, 2001, there were approximately 2,445 stockholders of record.

The Company has paid a quarterly cash dividend since February 1986. The amount of the dividend to be paid is determined by the Board of Directors dependent upon the Company's earnings, financial condition, capital position and such other factors as the Board may deem relevant. The dividend rate has been increased 14 times with the most recent dividend paid in November 2001, at $.17 per share. Cash dividends per share totaled $.62, $.56 and $.48 for fiscal 2001, 2000 and 1999, respectively. These dividends per share amounted to 36.69%, 37.58%, and 33.33% of basic net income per common share, respectively.

Please refer to Item 1. "Business--Regulation--Federal Regulation of Savings Associations--Limitations on Capital Distributions" for information with respect to current restrictions on the Associations' ability to pay dividends to the Company.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

			At or For the Year Ended September 30,
			2001	2000	1999	1998(1)	1997(1)
			(dollar amounts in thousands, except per share amounts)
Summary of Operations
	Interest income		$ 173,277	$ 161,642	$ 140,832	$ 136,345	$ 126,359
	Interest expense		102,908	98,888	80,394	81,689	75,340
	Net interest income		70,369	62,754	60,438	54,656	51,019
	Provision for loan losses		(4,975)	(2,745)	(2,765)	(2,405)	(2,435)
	Net interest income after provision for loan losses		65,394	60,009	57,673	52,251	48,584
	Other income		24,918	18,310	15,314	13,357	12,296
	Non-interest expense		(55,143)	(47,884)	(43,280)	(40,158)	(37,356)
	SAIF special assessment						(313)
	Income tax expense		(12,610)	(10,507)	(10,400)	(8,571)	(8,501)
	Net income before extraordinary loss		22,559	19,928	19,307	16,879	14,710
	Extraordinary loss on retirement of debt (2)					(340)
	Net income		$ 22,559	$ 19,928	$ 19,307	$ 16,539	$ 14,710
Per Common Share
	Net income before extraordinary loss		$ 1.69	$ 1.49	$ 1.44	$ 1.24	$ 1.10
	Net income before extraordinary loss, diluted		1.64	1.47	1.40	1.20	1.07
	Extraordinary loss					(0.02)
	Extraordinary loss, diluted					(0.03)
	Net income		1.69	1.49	1.44	1.22	1.10
	Net income, diluted		1.64	1.47	1.40	1.17	1.07
	Book value		11.71	10.35	9.43	9.16	8.28
	Dividends		0.62	0.56	0.48	0.42	0.36
	Dividend payout ratio		36.69%	37.58%	33.33%	34.43%	32.73%
Core Earnings (3)
	Net income before extraordinary loss		$ 22,559	$ 19,928	$ 19,307	$ 16,879	$ 14,710
	Investors merger related expenses					210
	SAIF assessment						198
	Core income		$ 22,559	$ 19,928	$ 19,307	$ 17,089	$ 14,908
Core Earnings Per Share (3)
	Basic:
		Net income before extraordinary loss	$ 1.69	$ 1.49	$ 1.44	$ 1.24	$ 1.10
		Investors merger related expenses				0.02
		SAIF assessment					0.01
		Core income	$ 1.69	$ 1.49	$ 1.44	$ 1.26	$ 1.11
	Diluted:
		Net income before extraordinary loss	$ 1.64	$ 1.47	$ 1.40	$ 1.20	$ 1.07
		Investors merger related expenses				0.01
		SAIF assessment					0.01
		Core income	$ 1.64	$ 1.47	$ 1.40	$ 1.21	$ 1.08
			At or For the Year Ended September 30,
			2001	2000	1999	1998(1)	1997(1)
			(dollar amounts in thousands, except per share amounts)
At September 30,
	Assets		$ 2,325,664	$ 2,256,511	$ 2,070,752	$ 1,839,708	$ 1,774,952
	Loans receivable, net		1,905,333	1,838,497	1,742,150	1,565,040	1,451,497
	Mortgage-backed securities		208,153	247,095	181,245	148,630	149,781
	Investment securities and FHLB stock		39,409	45,492	37,743	40,412	76,959
	Deposits		1,395,785	1,241,295	1,219,848	1,164,440	1,123,988
	Borrowings		715,066	828,022	677,241	504,942	498,236
	Stockholders' equity		156,893	137,851	125,881	125,163	111,528
	Number of offices		44	40	38	36	35
	Full-time equivalent employees		719	638	611	576	564
Selected Ratios:
	Return on average equity		15.27%	15.21%	15.38%	13.97%	13.94%
	Return on average assets		0.98	0.91	0.99	0.90	0.88
	Core return on average equity		15.27	15.21	15.38	14.43	14.13
	Core return on average assets		0.98	0.91	0.99	0.93	0.89
	Gross interest margin		3.00	2.77	2.99	2.84	2.89
	Net interest margin		3.20	2.99	3.22	3.10	3.15
	Efficiency ratio		60.28	59.55	58.30	59.42	59.40
	Average equity as a percentage of average assets		6.40	5.99	6.42	6.48	6.28
Asset Quality Ratios:
	Allowance for loan losses to net loans		0.84%	0.84%	0.84%	0.82%	0.83%
	Allowance for loan losses to nonperforming loans		141.44	178.65	202.08	177.76	86.74
	Nonperforming assets to loans and real estate
		and other assets acquired in settlement of loans	0.77	0.79	0.74	0.83	1.75
	Nonperforming assets to total assets		0.63	0.64	0.62	0.71	1.44
	Net charge-offs to average loans		0.24	0.11	0.06	0.11	0.14
(1)	During 1998 First Financial acquired Investors. This business combination was accounted for utilizing the pooling-of-interests method of accounting, and accordingly all financial information prior to the merger has been retroactively restated.
(2)	Loss on retirement of First Financial's 9.375% senior notes, net of income tax benefit of $173.
(3)	Core earnings represents net income before extraordinary loss exclusive of after-tax expenses related to the Investors pooling and a one time SAIF assessment recorded in 1997.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The information presented in the following discussion of financial results is generally indicative of the activities of its two thrift operating subsidiaries, First Federal and Peoples Federal. The following discussion should be read in conjunction with the Selected Consolidated Financial Data contained in Item 6 of this report and the Consolidated Financial Statements and accompanying notes contained in Item 8 of this report.

First Financial achieved record earnings of $22.6 million in 2001, increasing 13.2% from $19.9 million in 2000. Basic and diluted earnings per share in 2001 improved to $1.69 and $1.64, respectively, compared with $1.49 and $1.47, respectively, in 2000. Net income was $19.3 million in 1999. Basic and diluted earnings per share totaled $1.44 and $1.40 in 1999, respectively. Net earnings resulted in a return on average equity of 15.27%, 15.21% and 15.38% for the three years ended September 30, 2001, respectively. The return on average assets for the three years ended September 30, 2001 was .98%, .91% and .99%, respectively.

First Financial's earnings momentum accelerated during the current year due principally to growth in net interest income. The Company's net interest margin improved from 2.99% in fiscal 2000 to 3.20% in fiscal 2001. Another important highlight in fiscal 2001 was the $6.6 million, or 36.1% increase, in non-interest revenues over fiscal 2000. First Financial generated additional revenues from growth in retail banking and insurance services, increased loan sales and from real estate owned sales. During fiscal 2001, non-interest expense increased by 15.2% due principally to First Financial's staffing and related expenses for retail sales office expansion, technology initiatives, and the acquisition of additional insurance agency operations. Provision for loan losses increased to $5.0 million from $2.7 million in fiscal 2000, principally from higher consumer loan charge-offs and loan growth.

First Financial's net income increased $621,000 in fiscal 2000, or approximately 3.2%, over fiscal 1999. Lower earnings growth in 2000 than in the more recent annual period was principally attributable to less growth in net interest income, as average net interest margins declined substantially.

On September 17, 2001, First Financial announced that its Board of Directors had authorized the repurchase of up to 600,000 shares of First Financial's common stock. As of September 30, 2001, 36,500 shares had been acquired under the new repurchase program.

On February 25, 2000, the Board of Directors of First Financial announced a stock repurchase program to acquire up to 500,000 shares of common stock, representing approximately 3.7% of outstanding shares at that time. Approximately 93,000 shares were repurchased under the program in fiscal 2000. A similar program initiated in October 1998 resulted in the repurchase of 500,000 shares of its common stock in fiscal 1999.

During fiscal 2001, First Financial acquired the Hilton Head, Bluffton and Ridgeland operations of the Kinghorn Insurance Agency, a full-service independent insurance agency specializing primarily in retail insurance lines. These operations, acquired on May 31, 2001, are included under Kinghorn Insurance Services, Inc. ("Kinghorn"), a subsidiary of First Southeast Insurance Services. The transaction was accounted for as a purchase of assets with four months of Kinghorn's operations included in fiscal 2001 results.

During fiscal 2000, First Financial acquired the operations of Associated Insurors, Inc. of Myrtle Beach, South Carolina ("Associated Insurors"), a full-service insurance agency, specializing in commercial insurance lines. The transaction was accounted for as a purchase of assets with four months of operations included in fiscal 2000 results.

National and Economic Events

At the beginning of the fiscal year First Financial's net interest margins were under pressure. The Federal Reserve's actions to increase short-term interest rates 175 basis points in the prior twelve-month period resulted in a nearly flat yield curve for United States Treasury securities. Nationally, during most of fiscal 2001, the United States experienced a slowing economy following a tenth year of expansion. During the year the economy was also affected by lower returns and expectations of the stock markets. Economic data led the Federal Reserve to begin an aggressive program of rate cutting, which moved the Federal Funds rate down by 350 basis points through September of 2001. The Company believes lower short-term interest rates in fiscal 2001 had a positive effect on results of operations in fiscal 2001.

Management believes that the economic impact of the terrorist attacks of September 11, 2001 did not materially affect operations during fiscal 2001. It is evident from recent economic data that the U.S. economy was affected significantly by these events. The extent and duration of the economic impact from the attacks are not predictable but could affect consumer confidence and the financial activities of retail and business customers. Prior to these events, many economists were predicting that the U.S. had been in a recession. Official economic data released in November confirms that the U.S. has been in a recession for several months and it is likely that recovery will not occur until sometime next year.

The Federal Reserve has continued to reduce rates lower after year-end, dropping the Federal Funds rate by another 125 basis points. Despite sharply lower short-term rates, stimulus to the economy has been muted because the yield curve has steepened and consumer demand and business investment activity has been weak. The financial markets are operating now under very low historical interest rates. Under these unusual conditions, an economic stimulus plan is expected to be passed shortly by Congress and further interest rate cuts by the Federal Reserve are possible. The Company continues to believe that its markets generally perform better than national markets, even in times of recession.

Financial Position

At September 30, 2001, First Financial's assets totaled $2.3 billion, increasing by 3.1%, or $69.2 million, from September 30, 2000. Net asset growth was principally attributable to a $33.6 million increase in cash and cash equivalents, a $66.8 million increase in net loans receivable and a $8.5 million increase in goodwill and other intangibles. Average assets increased 5.5% during the year and average interest-earning assets increased by 5.0%. Lower market interest rates in fiscal 2001 led to increased fixed-rate residential loan originations. Agency-qualifying production is normally sold by the Company, increasing loans sales substantially in fiscal 2001. As deposit inflows also improved, the Company reduced its reliance on wholesale funding sources, leading to a net reduction in borrowings of $113.0 million during the period.

At September 30, 2000, First Financial's assets totaled $2.3 billion, increasing 9.0%, or $185.8 million, from September 30, 1999. Net asset growth was principally attributable to growth in net loans receivable, which increased $96.3 million during 2000, and growth in mortgage-backed securities, which increased $65.9 million. Average interest-earning assets increased by 11.7% in 2000.

Investment Securities and Mortgage-backed Securities

At September 30, 2001, available for sale securities totaled $214.4 million compared to $253.0 million at September 30, 2000.

The primary objective of the Company in its management of the investment and mortgage-backed securities portfolio is to maintain a portfolio of high quality, highly liquid investments with returns competitive with short-term U.S. Treasury or agency securities and highly rated corporate securities. The Associations are required to maintain an adequate amount of liquidity to ensure safe and sound operations. The Associations have maintained balances in short-term investments and mortgage-backed securities based on their continuing assessment of cash flows, the level of loan production, current interest rate risk strategies and the assessment of the potential direction of market interest rate changes.

Loans Receivable

Loans comprise the major portion of interest-earning assets of the Company, accounting for 85.9% and 87.7% of average interest-earning assets in 2001 and 2000, respectively. Compared with balances on September 30, 2000, net loans receivable grew by 3.6% during 2001. Adding the effect of loan securitizations of $41.2 million, loan growth approximated 6% in fiscal 2001. Real estate originations were higher in fiscal 2001 than in fiscal 2000 due principally to the effect of lower market interest rates. Loan growth, however, slowed from the 13% growth in fiscal 2000, adjusted for the effect of securitizations, due to more sales of agency-qualifying residential loans. Consumer loans grew to $350.4 million at September 30, 2001, increasing $38.5 million, or 12.3% from September 30, 2000. The Company's home equity loan balances increased to $145.1 million at September 30, 2001, accounting for 60.2% of the consumer loan growth in 2001. Commercial loans increased $35.7 million, or 62.2% during the fiscal year ended September 30, 2001. The Company continues to emphasize growth in consumer lending and commercial business lending.

The Company's loan portfolio consists of real estate mortgage and construction loans, home equity, manufactured housing and other consumer loans, credit card receivables and commercial business loans. The Company believes the change in percentages of consumer and commercial loans and a lower percentage of single family mortgage loans has had a positive effect of the overall yield of the portfolio. These loans generally have higher credit risks than single family residential loans.

Asset Quality

The Company believes it maintains a conservative philosophy regarding its lending mix as well as its underwriting guidelines. The Company also maintains loan quality monitoring policies and systems that require detailed monthly and quarterly analyses of delinquencies, nonperforming loans, real estate owned and other repossessed assets. Reports of such loans and assets by various categories are reviewed by management and the Boards of Directors of the Associations. The majority of the Company's loans originated are in coastal South Carolina and North Carolina and in Florence, South Carolina.

The largest component of loan growth during fiscal 2001 has been in consumer loans. The largest percentage increase in loan growth was also attributable to consumer loans, which remain the sector of the portfolio where higher charge-off rates are generally experienced.

As a result of management's ongoing review of the loan portfolio, loans are classified as non-accruing when uncertainty exists about the ultimate collection of principal and interest under the original terms. The Company closely monitors trends in problem assets which include non-accrual loans, loans 90 days or more delinquent, renegotiated loans, and real estate and other assets acquired in settlement of loans. Renegotiated loans are those loans on which the Company has agreed to modifications of the terms of the loan such as changes in the interest rate charged and/or other concessions. The following table illustrates trends in problem assets and other asset quality indicators over the past five years.

Problem Assets

	At September 30,
	2001	2000	1999	1998	1997
	(dollar amounts in thousands)
Non-accrual loans	$ 8,547	$ 5,881	$ 4,466	$ 2,647	$ 6,609
Accruing loans 90 days or more delinquent	25	29	20	50	568
Renegotiated loans	2,700	2,712	2,724	4,493	6,776
Real estate and other assets acquired in settlement of loans	3,337	5,895	5,685	5,871	11,658
	$ 14,609	$ 14,517	$ 12,895	$ 13,061	$ 25,611
As a percent of loans receivable and real estate and other assets acquired in settlement of loans	0.77%	0.79%	0.74%	0.83%	1.75%
As a percent of total assets	0.63	0.64	0.62	0.71	1.44
Allowance for loan losses as a percent of problem loans	141.44	178.65	202.08	177.76	86.74
Net charge-offs to average loans outstanding	0.24	0.11	0.06	0.11	0.14

Problem assets were $14.6 million at September 30, 2001, or .63% of assets and .77% of loans receivable and real estate and other assets acquired in settlement of loans. At September 30, 2000, problem assets were $14.5 million, or .64% of assets and .79% of loans receivable and real estate and other assets acquired in settlement of loans. Loans on non-accrual increased to $8.5 million at September 30, 2001 from $5.9 million in fiscal 2000. The increase was primarily related to an increase in more severely delinquent residential mortgage and consumer loans. Real estate and other assets in settlement of loans declined to $3.3 million from $5.9 million at September 30, 2000, due principally to the sale of one large income-producing property.

Management's long-term goals continue to include lower ratios of problem assets to total assets, although management expects there will always remain a core level of delinquent loans and real estate acquired in settlement of loans from normal lending operations.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level sufficient to provide for estimated probable losses in the loan portfolio at each reporting date. Management reviews the adequacy of the allowance no less frequently than each quarter, utilizing its internal portfolio analysis system. The factors that are considered in a determination of the level of the allowance are management's assessment of current economic conditions, the composition of the loan portfolio, previous loss experience on certain types of credit, a review of specific high-risk sectors of the loan portfolio, selected individual loans and concentrations of credit. The value of the underlying collateral is also considered during such reviews.

Allowance for Loan Losses

			At or For the Year Ended September 30,
			2001	2000	1999	1998	1997
			(dollar amounts in thousands)
Balance, beginning of period			$ 15,403	$ 14,570	$ 12,781	$ 12,103	$ 11,639
Loans charged-off:
	Real estate loans		377	338	122	981	682
	Commercial business loans		273	62	46	122	431
	Consumer loans		4,282	1,992	1,428	1,427	1,196
		Total charge-offs	4,932	2,392	1,596	2,530	2,309
Recoveries:
	Real estate loans		57	21	245	159	164
	Commercial business loans		24	47	82	407	8
	Consumer loans		416	412	293	237	166
		Total recoveries	497	480	620	803	338
		Net charge-offs	4,435	1,912	976	1,727	1,971
	Provision for loan losses		4,975	2,745	2,765	2,405	2,435
Balance, end of period:
	Real estate loans		5,477	6,374	8,456	8,753	9,003
	Commercial business loans		2,475	1,883	2,079	1,087	1,384
	Consumer loans		7,991	7,146	4,035	2,941	1,716
Balance, end of period			$ 15,943	$ 15,403	$ 14,570	$ 12,781	$ 12,103
Balance as a percent of net loans:
	Real estate loans		0.37%	0.43%	0.56%	0.64%	0.70%
	Commercial business loans		2.73	3.28	4.87	3.22	4.20
	Consumer loans (1)		2.33	2.29	1.86	1.70	1.17
	Total net loans		0.84	0.84	0.84	0.82	0.83
Net charge-offs as a percent of average net loans:
	Real estate loans		0.02%	0.02%	(0.01%)	0.06%	0.04%
	Commercial business loans		0.33	0.03	(0.09)	(0.85)	1.30
	Consumer loans (1)		1.17	0.60	0.58	0.75	0.76
		Total net loans	0.24	0.11	0.06	0.11	0.14
(1)	Consumer loans include home equity lines of credit.

On September 30, 2001, the total allowance for loan losses was $15.9 million compared with $15.4 million at September 30, 2000. Total net loan charge-offs increased to $4.4 million in 2001 from $1.9 million in 2000. Net real estate loan charge-offs totaled $320,000 in 2001 compared with net charge-offs of $317,000 in 2000. Consumer loan net charge-offs were $3.9 million in 2001 compared with $1.6 million in 2000. Consumer loan charge-offs have increased due to growth in consumer loans and higher net charge-off rates on auto loans. Recently, underwriting standards have been tightened on new auto lending programs. Commercial business loan net charge-offs were $249,000 in 2001 compared with $15,000 in net charge-offs in 2000. Based on the current economic environment and other factors, management believes that the allowance for loan losses at September 30, 2001 was maintained at a level adequate to provide for estimated probable losses in the Company's loan portfolio.

The following table sets forth the breakdown of the Company's allowance for loan losses by loan category at the dates indicated. Management believes that the allowance can be allocated by category only on an approximate basis. The allocation of the allowance to each category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category.

			At September 30,
			2001	2000	1999	1998	1997
			(dollar amounts in thousands)
Allowance for loan losses applicable to:
	Real estate loans		$   5,477	$   6,374	$   8,456	$   8,753	$   9,003
	Commercial business loans		2,475	1,883	2,079	1,087	1,384
	Consumer loans		7,991	7,146	4,035	2,941	1,716
		Total	$ 15,943	$ 15,403	$ 14,570	$ 12,781	$ 12,103
Percent of loans to total net loans:
	Real estate loans		77.3%	80.4%	85.5%	87.1%	87.8%
	Commercial business loans		4.7	3.0	2.3	2.1	2.2
	Consumer loans		18.0	16.6	12.2	10.8	10.0
		Total	100.0%	100.0%	100.0%	100.0%	100.0%

Deposits

Retail deposits have traditionally been the primary source of funds for the Company and also provide a customer base for the sale of additional financial products and services. Business deposits have in the past been a lesser source of funding. The Company has set strategic targets for net growth in retail and business transaction accounts annually and in numbers of households served. The Company believes that its future focus must be on increasing the number of available opportunities to provide a broad array of products and services to retail consumers and to commercial customers.

The Company's total deposits increased $154.5 million during the year ended September 30, 2001. First Financial's deposit composition at September 30, 2001 and 2000 is as follows:

	At September 30,
	2001		2000
	Balance	Percent of Total	Balance	Percent of Total
	(dollar amounts in thousands)
Checking accounts	$   308,784	22.12%	$   209,938	16.91%
Statement and other accounts	120,676	8.65	118,874	9.58
Money market accounts	220,802	15.82	191,481	15.43
Certificate accounts	745,523	53.41	721,002	58.08
Total deposits	$ 1,395,785	100.00%	$ 1,241,295	100.00%

National and local market trends over the past several years suggest that consumers have moved an increasing percentage of discretionary savings funds into investments such as annuities and stock and fixed income mutual funds. While deposits remain a primary, highly stable source of funds for the Company, deposits had started to decline in recent fiscal years as a percentage of liabilities. Management believes that conditions in fiscal 2001 were more favorable for deposit growth. Factors such as the low returns on investments and mutual funds may have increased traditional deposit inflows in fiscal 2001. As of September 30, 2001, deposits as a percentage of liabilities were 64.4% compared with 58.6% at September 30, 2000. The Company expects to maintain a significant portion of its overall deposits in core account relationships; however, future growth in overall deposit balances may be achieved primarily through specifically targeted programs offering higher yielding investment alternatives to consumers. Such targeted programs may increase the Company's overall cost of funds and thus affect the Company's future net margins. The Company's average cost of deposits at September 30, 2001 was 3.79% compared with 4.47% at September 30, 2000.

Borrowings

Borrowings declined $113.0 million during the current year to $715.1 million as of September 30, 2001. Borrowings as a percentage of total liabilities were approximately 33.0% at the end of 2001 compared with 39.1% in 2000. Borrowings from the FHLB of Atlanta declined $141.5 million, reverse repurchase agreements increased $17.0 million and other short-term borrowings increased $11.5 million.

The Company's average cost of FHLB advances, reverse repurchase agreements and other borrowings declined from 6.43% at September 30, 2000 to 4.81% at September 30, 2001. Approximately $220.0 million in FHLB advances mature or are subject to call within one year and all of the reverse repurchase agreements mature within three months.

Capital Resources

Average shareholders' equity was $147.7 million during fiscal 2001, or 6.40% of average assets, increasing from 5.99% during 2000. The Consolidated Statement of Stockholders' Equity and Comprehensive Income contained in Item 8 herein details the changes in stockholders' equity during the year. The principal reason for the increase in average equity to average assets during the current period is due to the retention of net income. Total equity capital increased from $137.9 million at September 30, 2000 to $156.9 million at September 30, 2001. The Company's capital ratio of total capital to total assets, was 6.75% at September 30, 2001 compared to 6.11% at September 30, 2000.

Recent stock repurchases included the purchase of 57,000 shares of common stock in fiscal 2001, approximately 93,000 shares of common stock in fiscal 2000 and 500,000 shares of common stock in fiscal 1999. The dollar amount of such purchases totaled $1.2 million in fiscal 2001, $1.3 million in fiscal 2000 and $9.7 million in fiscal 1999.

During fiscal 2001, the Company's cash dividend payout was 36.7% of per share earnings compared with a payout ratio of 37.6% in 2000. The Company recently increased its cash dividend by 9.7% to $.68 per share on an annual basis, effective with the payment during November 2001 to shareholders.

The Associations are required to meet the regulatory capital requirements of the OTS, which currently include several measures of capital. Under current regulations, both banking subsidiaries meet all requirements including those to be categorized as well-capitalized under risk-based capital guidelines. Current capital distribution regulations of the OTS allow the greatest flexibility to well-capitalized institutions.

Liquidity and Asset and Liability Management

Liquidity

The desired level of liquidity for the Company is determined by management in conjunction with the Asset/Liability Committees of the Associations. The level of liquidity is based on management's strategic direction for the Company, commitments to make loans and the Committees' assessment of each Association's ability to generate funds. Historically, sources of liquidity have included net deposits to savings accounts, amortizations and prepayments of loans, FHLB advances, reverse repurchase agreements and sales of securities and loans held for sale.

The Company's most stable and traditional source of funding has been the attraction and retention of deposit accounts, the success of which the Company believes is based primarily on the strength and reputation of the Associations, effective marketing and rates paid on deposit accounts. First Federal has a major market share of deposits in Charleston, Berkeley and Dorchester counties and a significant share of deposits in the Georgetown market. As a new entrant into Beaufort County, the Company holds a small but growing market share. Peoples Federal's deposits are principally obtained in Horry and Florence counties. By continuing to promote innovative new products, pricing competitively and encouraging the highest level of quality in customer service, the Company continues to successfully meet challenges from competitors, many of which are non-banking entities offering investment products. Due to disintermediation of traditional savings balances to other investment products, including the equity markets, annuities and mutual funds, the pool of retail deposit funds held in financial institutions has contracted over time, resulting in more reliance by the Company on other sources of funds.

Other primary sources of funds include borrowings from the FHLB, principal repayments on loans and mortgage-backed securities, reverse repurchase agreements and sales of loans. To minimize vulnerability, the Associations have back-up sources of funds available, including FHLB borrowing capacity and securities available for sale. During fiscal 1999, the FHLB of Atlanta instituted a general policy of limiting borrowing capacity to a percent of assets, regardless of the level of advances that could be supported by available collateral for such advances. This new policy serves to define an upper cap for FHLB advances for each of the Associations.

During 2001, the Company experienced a net cash outflow from investing activities of $31.9 million, consisting principally of a net increase of $125.1 million in loans receivable, offset partially by $61.4 million of repayments of mortgage-backed securities and $26.3 million in sales of mortgage-backed securities. The Company experienced net cash inflows of $32.1 million from operating activities and $33.3 million from financing activities. Financing activities included $154.5 million growth in deposit balances, offset partially by $113.0 million in net reductions in borrowed funds.

Proceeds from the sale of loans totaled $237.1 million in 2001, increasing significantly from $48.4 million in 2000. Based on recent asset/liability management objectives, management expects to continue its strategy of selling selected longer-term, fixed-rate loans in fiscal 2002 and it anticipates volume may be strong due to declining market interest rates and their likely effect on fixed-rate loan originations.

Parent Company Liquidity

As a holding company, First Financial conducts its business through its subsidiaries. Unlike the Associations, First Financial is not subject to any regulatory liquidity requirements. Potential sources for First Financial's payment of principal and interest on its borrowings and for its periodic repurchase programs include (i) dividends from First Federal and Peoples Federal; (ii) payments from existing cash reserves and sales of marketable securities; and (iii) interest on its investment securities. As of September 30, 2001, First Financial had cash reserves and existing marketable securities of $2.3 million compared with $852,000 at September 30, 2000.

The Associations' ability to pay dividends and make other capital contributions to First Financial is restricted by regulation and may require regulatory approval. Such distributions may also depend on the Associations' ability to meet minimum regulatory capital requirements in effect during the period. Current OTS regulations permit institutions meeting certain capital requirements and subject to "normal supervision" to pay out 100% of net income to date over the calendar year and 50% of surplus capital existing at the beginning of the calendar year without supervisory approval. Both Associations are currently subject to "normal supervision" as to the payment of dividends.

Asset/Liability Management

Asset/liability management is the process by which the Company constantly changes the mix, maturity and pricing of assets and liabilities in an attempt to reduce a materially adverse impact on earnings resulting from the direction, frequency and magnitude of change in market interest rates. Although the net interest income of any financial institution is perceived as being vulnerable to fluctuations in interest rates, the Company's management has attempted to minimize that vulnerability. The future regulatory capital requirements of all financial institutions will become subject to the inclusion of additional components measured by exposure to interest rate sensitivity.

The Company, working principally through the Asset and Liability Committees of the Associations, has established policies and monitors results to control interest rate risk. The Company utilizes measures such as static gap, which is the measurement of the difference between interest-sensitive assets and interest-sensitive liabilities repricing for a particular time period. More important may be the process of evaluating how particular assets and liabilities are affected by changes in interest rates or selected indices as they reprice. Asset/liability modeling is performed by the Company to assess varying interest rate and balance sheet mix assumptions.

Management may adjust the Company's interest rate sensitivity position primarily through decisions on the pricing, maturity and marketing of particular deposit and loan products and by decisions regarding the maturities of FHLB advances and other borrowings. The Company has continued to emphasize adjustable-rate mortgage real estate lending and short-term consumer and commercial business lending to accomplish its objectives.

The following table sets forth in summary form the repricing attributes of the Company's interest-earning assets and interest-bearing liabilities. The time periods in the table represent the time period before an asset or liability matures or can be repriced.

Interest Rate Sensitivity Analysis at September 30, 2001

			Interest Rate Sensitivity Period
			3 Months	4-6 Months	7-12 Months	13 Months- 2 years	Over 2 Years	Cost
Interest-earning assets:			(dollar amounts in thousands)
	Loans (1)		$ 267,292	$ 109,676	$ 196,485	$ 153,098	$ 1,195,652	$1,922,203
	Mortgage-backed securities		122,784	2,462	7,964	644	69,543	203,397
	Interest-earning deposits, investments and FHLB stock		77,737				522	78,259
Total interest-earning assets			467,813	112,138	204,449	153,742	1,265,717	2,203,859
Interest-bearing liabilities:
	Deposits:
		Checking accounts (2)	19,373	19,373	38,745	42,222	89,719	209,432
		Savings accounts (2)	5,128	5,128	10,257	17,028	83,135	120,676
		Money market accounts	220,802					220,802
		Certificate accounts	249,883	156,763	161,129	121,580	56,168	745,523
	Total deposits		495,186	181,264	210,131	180,830	229,022	1,296,433
	Borrowings (3)		435,066		25,000	180,000	75,000	715,066
Total interest-bearing liabilities			930,252	181,264	235,131	360,830	304,022	2,011,499
Current period gap			$ (462,439)	$   (69,126)	$   (30,682)	$ (207,088)	$ 961,695	$   192,360
Cumulative gap			$ (462,439)	$ (531,565)	$ (562,247)	$ (769,335)	$ 192,360
Percent of total assets			(19.88%)	(22.86%)	(24.18%)	(33.08%)	8.27%

Assumptions:
(1)	Fixed-rate loans are shown in the time frame corresponding to contractual principal amortization schedules. Adjustable-rate loans are shown in the time frame corresponding to the next contractual interest rate adjustment date.
(2)	Decay rates for savings accounts approximate 17% in the first year and 14% in the second year. Decay rates for checking accounts approximate 37% in the first year and 20% in the second year.
(3)	Borrowings include fixed-rate FHLB advances at the earlier of maturity date or potential call dates. If FHLB advances are not called, maturities may extend.

Based on the Company's September 30, 2001 static gap position, in a one-year time period $784.4 million in interest-sensitive assets will reprice and approximately $1.3 billion in interest-sensitive liabilities will reprice. This current static gap position results in a negative mismatch of $562.2 million, or 24.2% of assets. The Company's static gap position one year ago was a negative 25.2% of assets. The respective ratios and dollars repricing as shown in the above table do not take into effect prepayments to mortgage, consumer and other loans and mortgage-backed securities, which may be significant in any year, based on the level and direction of market interest rates. The above table also does not consider the repricing considerations inherent in adjustable-rate loans, such as minimum and maximum annual and lifetime interest rate adjustments and also the index utilized. After applying the Company's estimates of prepayments of fixed-rate loans and mortgage-backed securities in a one-year period, the Company estimates it has a negative one-year gap position of 13.3% of assets at September 30, 2001.

During the past three years the Company extended maturities of interest-sensitive assets through retention of certain types of loans, particularly those originated under newer "hybrid" lending programs with both fixed-rate and variable-rate features. These loans have become very popular with consumers and carry a fixed rate of interest for three, five, or seven years and then adjust annually to an established index. Under current lower levels of market interest rates, prepayment speeds may increase on these types of loans as consumers lock into longer term fixed-rate loans.

Under normal economic conditions, a negative gap would normally suggest that net interest income would increase if market rates declined. A rise in market rates would normally have a detrimental effect on net interest income based on a negative gap. The opposite would normally occur when an institution is positively-gapped. As market interest rates declined during fiscal 2001 the Company=s negative gap position was a factor in increasing the net interest margin. It may be difficult to quantify expectations when interest rates are at very low levels, as we are currently experiencing. With market interest rates at the lowest levels in many years, further declines may not result in the magnitude of change in asset and liability pricing experienced under more historical market conditions.

During fiscal 2000, sharply higher interest rates and a flatter yield curve resulted in compression in the Company's net interest margin. Because of the short-term nature of its liability funding, the recent decline in short-term interest rates may continue to improve the Company's net interest margin for some time into fiscal 2002, but management expects that the margin will stabilize and perhaps decline as economic conditions begin to improve in late fiscal 2002.

Derivative transactions may be used by the Company to better manage its interest rate sensitivity. Although not used extensively by the Company in the past, such measures may be utilized on a more frequent basis in the future.

Results of Operations

Net Interest Income

The largest component of operating earnings for the Company is net interest income. Net interest income totaled $70.4 million in 2001 compared with $62.8 million in 2000 and $60.4 million in 1999. Net interest income represented approximately 74% of the gross income of First Financial in fiscal 2001. The level of net interest income is determined by balances of earning assets and successfully managing the net interest margin. Changes in interest rates paid on assets and liabilities, the rate of growth of the asset and liability base, the ratio of interest-earning assets to interest-bearing liabilities and management of the balance sheet's interest rate sensitivity all factor into changes in net interest income.

Net interest income increased by 12.1% to $70.4 million in 2001. This followed an increase of 3.8% in 2000 and 10.6% in 1999. The increase in fiscal 2001 was principally due to higher average yields on interest-earning assets and reduced average costs on interest-bearing liabilities. As short-term market interest rates declined, the Company's interest-sensitive liabilities repriced to an average cost of 4.87% from an average cost of 4.94% in fiscal 2000. Average yields improved to 7.87% from 7.71% in fiscal 2000. Economic conditions, market interest rates and competitive pressures in fiscal 2000 were more challenging than in fiscal 1999. Funding pressures coupled with strong growth prospects in the markets served by First Financial also led to higher usage of more external sources of funds during fiscal 2000. The Company's average cost of interest-bearing liabilities increased to 4.94% in fiscal 2000 from 4.51% in fiscal 1999. Average yields on interest-earning assets only increased from 7.50% to 7.71% in fiscal 2000.

As the table below illustrates, for the year ended September 30, 2001 the net interest margin increased to 3.20% compared to 2.99% in fiscal 2000. The net interest margin almost returned to the net interest margin of 3.22% in 1999.

The Company's net interest margin may be affected by many factors. Competition for deposit funds within the Company's markets ranges from many well-established national and regional banks and large credit unions to many smaller local banks. The general level and direction of interest rates and national monetary policy also can affect consumer deposit patterns and thus affect the Company's ability to utilize retail sources of funds. Management believes that conditions in fiscal 2001 were much more favorable for deposit growth than in fiscal 2000 and fiscal 1999. Expansion into new markets such as Hilton Head and declining stock market returns may have factored into the substantial growth in deposits in fiscal 2001. Fiscal 2000 was a very challenging year for retail deposit pricing. Late in calendar year 1999, many banks perceived the need to gather additional liquidity related to public concerns over the transition to the Year 2000. Many competitors developed special certificate of deposit products with higher interest rates to attract funds. Higher retail certificate of deposit pricing did not abate as expected after the first of the year and continued to affect the repricing of deposits, leading to higher average deposit costs for 2000. The demand for funds to originate loans required the Company to utilize other sources of funds, particularly FHLB borrowings.

Average Yields and Rates

		Year Ended September 30,
		2001			2000			1999
		Average Balance	Interest	Average Yield/Cost	Average Balance	Interest	Average Yield/Cost	Average Balance	Interest	Average Yield/Cost
		(dollar amounts in thousands)
Interest-earning assets:
	Loans (1)	$1,891,528	$152,695	8.07%	$1,839,607	$144,177	7.84%	$1,640,497	$125,742	7.66%
	Mortgage-backed securities	248,454	16,443	6.62	202,256	13,414	6.63	182,585	11,519	6.31
	Investment securities	45,153	3,132	6.94	42,084	3,207	7.62	39,112	2,801	7.16
	Other interest-earning assets (2)	17,133	1,007	5.88	13,293	844	6.35	15,124	770	5.09
Total interest-earning assets		2,202,268	173,277	7.87	2,097,240	161,642	7.71	1,877,318	140,832	7.50
Non-interest-earning assets		104,520			88,795			77,912
	Total assets	$2,306,788			$2,186,035			$1,955,230
Interest-bearing liabilities:
Deposit accounts:
Checking accounts		$  255,648	2,134	0.84	$  203,103	805	0.40	$  178,374	765	0.43
Savings accounts		115,854	2,677	2.31	120,805	2,836	2.35	122,621	2,912	2.37
Money market accounts		191,345	7,754	4.05	181,130	7,088	3.91	168,659	6,090	3.61
Certificate accounts		736,266	43,668	5.93	723,999	40,658	5.62	727,822	39,233	5.39
Total deposits		1,299,113	56,233	4.33	1,229,037	51,387	4.18	1,197,476	49,000	4.09
FHLB advances		728,100	41,891	5.75	706,551	43,119	6.10	540,893	29,063	5.37
Other borrowings		84,313	4,784	5.67	66,783	4,382	6.56	42,021	2,331	5.55
Total interest-bearing liabilities		2,111,526	102,908	4.87	2,002,371	98,888	4.94	1,780,390	80,394	4.51
Non-interest-bearing liabilities		47,523			52,642			49,318
Total liabilities		2,159,049			2,055,013			1,829,708
Stockholders' equity		147,739			131,022			125,522
	Total liabilities and stockholders' equity	$2,306,788			$2,186,035			$1,955,230
Net interest income/gross margin			$ 70,369	3.00%		$62,754	2.77%		$60,438	2.99%
Net yield on average interest-earning assets				3.20%			2.99%			3.22%
Percent of average interest-earning assets to average interest-bearing liabilities				104.30%			104.74%			105.44%
(1)	Average balances of loans include non-accrual loans.
(2)	This computation includes interest-earning deposits, which are classified as cash equivalents in the Company's Consolidated Statements of Financial Condition contained in Item 8 herein.

The Company's weighted average yield on earning assets and weighted average cost of interest-bearing liabilities shown above are derived by dividing interest income and expense by the weighted average balances of interest-earning assets or interest-bearing liabilities. During 2001, the average yield on interest-earning assets increased by 16 basis points while the average rate paid on average interest-bearing liabilities declined by 7 basis points, thereby leading to a significant improvement in the gross interest margin. Average interest-earning assets also increased $105.0 million in fiscal 2001.

The following table presents the dollar amount of changes in interest income and interest expense attributable to changes in volume and the amount attributable to changes in rate. The combined effect of changes in both volume and rate, which cannot be separately identified, has been allocated proportionately to the change due to volume and due to rate.

Rate/Volume Analysis

			Year Ended September 30,			Year Ended September 30,
			2001 versus 2000			2000 versus 1999
			Increase (Decrease)			Increase (Decrease)
			Due to			Due to
			Volume	Rate	Net	Volume	Rate	Net
			(dollar amounts in thousands)
Interest income:
	Loans		$ 4,153	$ 4,365	$ 8,518	$ 15,445	$ 2,990	$ 18,435
	Mortgage-backed securities		3,132	(103)	3,029	1,288	607	1,895
	Investment securities		171	(246)	(75)	220	186	406
	Other interest-earning assets		250	(87)	163	(101)	175	74
Total interest income			7,706	3,929	11,635	16,852	3,958	20,810
Interest expense:
	Deposit accounts
		Checking accounts	253	1,076	1,329	98	(58)	40
		Savings accounts	(112)	(47)	(159)	(48)	(28)	(76)
		Money market accounts	407	259	666	470	528	998
		Certificate accounts	707	2,303	3,010	(211)	1,636	1,425
	Total deposits		1,255	3,591	4,846	309	2,078	2,387
	Borrowings		2,329	(3,155)	(826)	11,302	4,805	16,107
Total interest expense			3,584	436	4,020	11,611	6,883	18,494
Net interest income			$ 4,122	$ 3,493	$ 7,615	$ 5,241	$ (2,925)	$ 2,316

Provision for Loan Losses

The provision for loan losses is a charge to earnings in a given period to maintain the allowance at an adequate level. In fiscal 2001, the Company's provision expense was $5.0 million compared with $2.7 million in 2000 and $2.8 million in 1999. The provision was higher in 2001 than in fiscal 2000 and 1999 principally as a result of the higher consumer loan charge-offs, growth in net loans and changes in the mix of the Company=s loan portfolio. Total loan loss reserves were $15.9 million and $15.4 million at September 30, 2001 and 2000, respectively, and represented .84% of net loans receivable.

Net charge-offs in fiscal 2001 totaled $4.4 million, or .24% of average net loans, compared with $1.9 million in 2000, or .11% of average net loans. Net loan charge-offs of $1.0 million in 1999 resulted in charge-offs to average loans of .06%. Recoveries were higher in fiscal 1999, and in fiscal 2000 and fiscal 2001 charge-offs increased due to increases in consumer loan net charge-offs.

Other Income

Other income increased by $6.6 million, or 36.1%, in fiscal 2001 to $24.9 million from $18.3 million in fiscal 2000. During fiscal 2000, other income increased by $3.0 million, or 19.6%, over fiscal 1999. Principal increases in fiscal 2001 included higher commissions on insurance, increasing $2.4 million, and improved net gains on loan sales, increasing $2.3 million. Insurance revenues grew from expansion of activities through the acquisition of additional agency operations. Insurance revenues grew from the acquisition of Associated Insurors in 2000 and and Kinghorn in 2001. Lower interest rates throughout the year improved fixed-rate residential loan production, which traditionally has been the product of choice for loan sales.

Although revenues from non-banking activities have expanded in recent years, the largest component of other income remains service charges and fees on deposit accounts. Comprising 34.1% of other income in fiscal 2001 and 41.5% in fiscal 2000, service charges and fees on deposit accounts improved to $8.5 million from $7.6 million in fiscal 2000. The 11.8% increase in 2001 was directly attributable to sales efforts to grow checking accounts, new retail sales office locations and product/pricing enhancements.

Income from real estate operations improved to $863,000 in fiscal 2001 from $377,000 in fiscal 2000. The improvement was principally related to the sale of a commercial property for a gain of approximately $1.0 million in the second quarter of fiscal 2001.

Other income increased by $3.0 million in fiscal 2000, or 19.6%, compared with fiscal 1999. Strong growth in other income was achieved during 2000 despite a $1.3 million decline in net gains on sale of loans in fiscal 2000 compared with fiscal 1999. Higher interest rates in 2000 curtailed agency-qualifying fixed-rate loan originations. In fiscal 2000, the largest dollar increase in revenues was a $1.0 million, or 15.3%, increase in service charges and fees on deposit accounts. Insurance and brokerage revenues increased $886,000 and $522,000, respectively, during fiscal 2000. Growth in insurance revenues was attributable principally to the purchase of Associated Insurors operations in 2000. Brokerage revenues increased due to additional staffing and sales activity. Loan servicing fees increased substantially, up $707,000, during fiscal 2000 due to higher average balances of serviced loans.

Non-interest Expense

In the more competitive financial services market of recent years, management has recognized the importance of controlling non-interest expense to maintain and improve profitability. Management also recognizes that there are operational costs which continue to increase as a result of the present operating climate for regulated financial institutions. The technical and operating environment for financial institutions continues to require a well-trained and motivated staff, superior operating systems and sophisticated marketing efforts.

	Year Ended September 30,
	2001		2000		1999		1998		1997
	Amount	% Average Assets	Amount	% Average Assets	Amount	% Average Assets	Amount	% Average Assets	Amount	% Average Assets
	(dollar amounts in thousands)
Salaries and employee benefits	$32,520	1.41%	$ 28,008	1.28%	$ 25,625	1.31%	$ 22,263	1.22%	$ 20,425	1.22%
Occupancy costs	4,195	0.18	3,738	0.17	3,203	0.16	3,316	0.18	3,113	0.18
Marketing	1,759	0.08	1,579	0.07	1,316	0.07	1,264	0.07	1,518	0.09
Depreciation, amortization, rental and maintenance of equipment	4,537	0.20	3,914	0.18	3,328	0.17	2,717	0.15	2,779	0.16
FDIC insurance premiums	261	0.01	406	0.02	728	0.04	709	0.04	1,116	0.07
Other	11,871	0.51	10,239	0.47	9,080	0.46	9,572	0.52	8,405	0.50
Core expenses	55,143	2.39	47,884	2.19	43,280	2.21	39,841	2.18	37,356	2.22
SAIF Special assessment									313	0.02
Merger-related expenses							317	0.02
Total non-interest expense	$55,143	2.39%	$ 47,884	2.19%	$ 43,280	2.21%	$ 40,158	2.20%	$ 37,669	2.24%

Comparison of Non-Interest Expense

Total non-interest expense increased $7.3 million, or 15.2%, in fiscal 2001. During fiscal 2000, these costs increased 10.6% from 1999. The largest component of non-interest expense, salaries and employee benefits, increased $4.5 million, or 16.1%, in fiscal 2001. Staffing for four additional retail sales offices, increases in incentive compensation payments, the addition of insurance operations of Kinghorn for a portion of fiscal 2001 and operations of Associated Insurors for the full year all factored into the increase. Significantly higher health insurance costs were also incurred as a result of the repricing of health insurance plans effective January 2001. Salaries and employee benefit costs increased $2.4 million in fiscal 2000, or 9.3%, due to increased staffing for the expansion of products and services, staffing for two additional retail sales offices and higher overtime and incentive compensation payments related to the Company's year 2000 conversion efforts, most of which involved internal staff activities.

In fiscal 2001, occupancy costs increased 12.2% to $4.2 million while equipment expenses increased 15.9% to $4.5 million. Compared to fiscal 1999, occupancy costs increased in 2000 by 16.7% to $3.7 million and equipment expenses increased by 17.6% to $3.9 million. These increases are attributable to a higher number of banking and insurance offices in fiscal 2001 and 2000. In addition, First Financial has invested heavily in new technology in recent fiscal years. Such investments include imaging systems, improved voice response technology, lending and deposit platform systems, branch office automation systems and telecommunication upgrades.

Other expenses in fiscal 2001 totaled $11.9 million compared with $10.2 million in fiscal 2000. In fiscal 1999, other expenses totaled $9.1 million. The amortization of goodwill and other intangibles associated with insurance agency acquisitions totaled $330,000 in fiscal 2001 compared with $44,000 thousand in fiscal 2000. Higher professional fees and other expenses were incurred in fiscal 2001 and increased levels of business activity, including the additional insurance operations, resulted in higher operating expense.

The Company's efficiency ratio was 60.3% in 2001, 59.6% in 2000 and 58.3% in 1999. Management continues to target lower expense ratios as an important strategic goal of the Company. During the last two years, the Company has increased its acquisitions of companies that are non-interest revenue-producing. Insurance agencies typically have higher efficiency ratios than traditional banking operations. The Company believes that the relatively flat trend in the efficiency ratio is an indicator of lower efficiency ratios in its traditional banking activities.

Income Tax Expense

Income taxes totaled $12.6 million in 2001, compared to $10.5 million in 2000 and $10.4 million in 1999. The Company=s effective tax rate was 35.9% in 2001, 34.5% in 2000 and 35.0% in 1999. The effective tax rate in future periods is expected to range from 35% to 36%.

Regulatory and Accounting Issues

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FASB 133" establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the statement of financial position, and measure those instruments at fair value. Changes in the fair value of those derivatives will be reported in earnings or other comprehensive income depending on the use of the derivative and whether the derivative qualifies for hedge accounting. The Company adopted SFAS No. 133, as amended by SFAS No. 138, on October 1, 2000. The adoption was not material to the Company's consolidated financial statements.

SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -- a replacement of FASB No. 125, " was issued in September 2000. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures but will carry over most of SFAS No. 125's provisions without reconsideration. SFAS 140 is effective for transfers and servicing of financial assets and extinguishment of liabilities occurring after March 31, 2001. This statement is effective for recognition and reclassification of collateral and for disclosures related to securitization transactions and collateral for fiscal years ending after December 15, 2000. The adoption of the provisions of SFAS No. 140 on April 1, 2001 did not have a material effect on the Company.

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. SFAS No. 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."

The Company was required to adopt the provisions of SFAS No. 141 immediately and must adopt SFAS No. 142 effective October 1, 2002. Furthermore, goodwill and intangible assets determined to have an indefinite useful life acquired in a purchase business combination completed after June 30, 2001, but before SFAS No. 142 is adopted in full will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-SFAS No. 142 accounting standards. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized and tested for impairment in accordance with the appropriate pre-SFAS No. 142 accounting requirements prior to the adoption of SFAS No. 142.

SFAS No. 141 will require upon adoption of SFAS No. 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and make any necessary reclassifications in order to conform with the new criteria in SFAS No. 141 for recognition apart from goodwill. Upon adoption of SFAS No. 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of SFAS No. 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principles in the first interim period.

In connection with SFAS No. 142's transitional goodwill impairment evaluation, the statement will require the Company to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this, the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of it assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS No. 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of operations.

The Company intends to adopt SFAS No. 142 on October 1, 2001. At October 1, 2001, the Company's unamortized goodwill and other intangible assets will total $10.7 million, all of which will be subject to the transition provisions of SFAS Nos. 141 and 142. Amortization expense related to goodwill and other intangibles was $330 thousand and $44 thousand for the years ended September 30, 2001 and 2000, respectively. Because of the extensive effort needed to comply with adopting SFAS Nos. 141 and 142, it is not practicable to reasonably estimate the effect of adopting these statements on the Company's financial statements at the date of this report, including whether it will be required to recognize any transitional impairment losses as the cumulative effect of a change in accounting principles.

Impact of Inflation and Changing Prices

The Consolidated Financial Statements contained in Item 8 herein and related data have been prepared in accordance with generally accepted accounting principles which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time because of inflation.

Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary. As a result, interest rates have a more significant impact on a financial institution's performance than the effect of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services since such prices are affected by inflation. The Company is committed to continuing to actively manage the gap between its interest-sensitive assets and interest-sensitive liabilities.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Asset/Liability Management."

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT'S REPORT

Primary responsibility for the integrity and objectivity of the Company's consolidated financial statements rests with management. The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles and accordingly include amounts that are based on management's best estimates and judgements. Non-financial information included in the Summary Annual Report to Stockholders has also been prepared by management and is consistent with the consolidated financial statements.

To assure that financial information is reliable and assets are safeguarded, management maintains an effective system of internal controls and procedures, important elements of which include: careful selection, training, and development of operating personnel and management; an organization that provides appropriate division of responsibility; and communications aimed at assuring that Company policies and procedures are understood throughout the organization. In establishing internal controls, management weighs the costs of such systems against the benefits it believes such systems will provide. An important element of the system is an ongoing internal audit program.

To assure the effective administration of the system of internal controls, the Company develops and widely disseminates written policies and procedures, provides adequate communications channels and fosters an environment conducive to the effective functioning of internal controls. All employees of the Company are informed of the need to conduct our business affairs in accordance with the highest ethical standards. The Company has set forth a written corporate code of conduct and communicated it to all employees.

KPMG LLP, independent auditors, have audited the Company's consolidated financial statements as described in their report.

/s/ A. Thomas Hood

President and Chief Executive Officer

REPORT OF INDEPENDENT AUDITORS

The Board of Directors

First Financial Holdings, Inc. and Subsidiaries

We have audited the accompanying consolidated statements of financial condition of First Financial Holdings, Inc. and Subsidiaries as of September 30, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive income and cash flows for each of the years in the three-year period ended September 30, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Financial Holdings, Inc. and Subsidiaries as of September 30, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

Greenville, South Carolina

October 23, 2001

FIRST FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
			September 30,
			2001	2000
			(dollar amounts in thousands)
Assets
Cash and cash equivalents			$      97,554	$      63,992
Investment securities held to maturity (fair value of $255)				249
Investment securities available for sale, at fair value			6,259	5,918
Investment in capital stock of FHLB, at cost			33,150	39,325
Loans receivable, net of allowance of $15,943 and $15,403			1,905,333	1,838,497
Mortgage-backed securities, held to maturity (fair value of $21)				19
Mortgage-backed securities available for sale, at fair value			208,153	247,076
Accrued interest receivable			13,535	13,552
Office properties and equipment, net			32,968	29,503
Real estate and other assets acquired in settlement of loans			3,337	5,895
Other assets			25,375	12,485
Total assets			$ 2,325,664	$ 2,256,511
Liabilities and Stockholders' Equity
Liabilities:
	Deposit accounts		$ 1,395,785	$ 1,241,295
	Advances from FHLB		625,000	766,500
	Securities sold under agreements to repurchase		66,316	49,272
	Other short-term borrowings		23,750	12,250
	Advances by borrowers for taxes and insurance		5,896	6,255
	Outstanding checks		17,454	15,405
	Other		34,570	27,683
Total liabilities			2,168,771	2,118,660
Commitments and contingencies (Note 15)
Stockholders' equity:
	Serial preferred stock, authorized 3,000,000 shares--none issued
	Common stock, $.01 par value, authorized 24,000,000 shares, issued
		15,427,872 and 15,292,726 shares at September 30, 2001 and
		2000, respectively	154	153
	Additional paid-in capital		34,015	32,374
	Retained income, substantially restricted		139,643	125,366
	Accumulated other comprehensive income (loss)		2,878	(1,467)
	Treasury stock at cost, 2,032,009 shares and 1,974,933 shares at
		September 30, 2001 and 2000, respectively	(19,797)	(18,575)
Total stockholders' equity			156,893	137,851
Total liabilities and stockholders' equity			$ 2,325,664	$ 2,256,511

See accompanying notes to consolidated financial statements.

FIRST FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
			Year Ended September 30,
			2001	2000	1999
Interest Income			(dollar amounts in thousands,  except per share amounts)
	Interest on loans		$ 152,695	$ 144,177	$ 125,742
	Interest on mortgage-backed securities		16,443	13,414	11,519
	Interest and dividends on investment securities		3,132	3,207	2,801
	Other		1,007	844	770
Total interest income			173,277	161,642	140,832
Interest Expense
	Interest on deposits
		NOW accounts	2,134	805	765
		Passbook, statement and other accounts	2,677	2,836	2,912
		Money market accounts	7,754	7,088	6,090
		Certificate accounts	43,668	40,658	39,233
	Total interest on deposits		56,233	51,387	49,000
	Interest on FHLB advances		41,891	43,119	29,063
	Interest on short term borrowings		4,784	4,382	2,331
Total interest expense			102,908	98,888	80,394
Net interest income			70,369	62,754	60,438
Provision for loan losses			4,975	2,745	2,765
Net interest income after provision for loan losses			65,394	60,009	57,673
Other Income
	Net gain on sale of loans		2,380	128	1,392
	Gain on sale of investment and mortgage-backed securities		572	144	37
	Brokerage fees		1,696	1,793	1,271
	Commissions on insurance		5,230	2,837	1,951
	Service charges and fees on deposit accounts		8,489	7,593	6,586
	Loan servicing fees		1,931	1,883	1,176
	Real estate operations, net		863	377	88
	Other		3,757	3,555	2,813
Total other income			24,918	18,310	15,314
Non-Interest Expense
	Salaries and employee benefits		32,520	28,008	25,625
	Occupancy costs		4,195	3,738	3,203
	Marketing		1,759	1,579	1,316
	Depreciation, amortization, rental and maintenance of equipment		4,537	3,914	3,328
	FDIC insurance premiums		261	406	728
	Other		11,871	10,239	9,080
Total non-interest expense			55,143	47,884	43,280
Income before income taxes			35,169	30,435	29,707
Income tax expense			12,610	10,507	10,400
Net income			$ 22,559	$ 19,928	$ 19,307
Earnings Per Common Share
	Basic		$ 1.69	$ 1.49	$ 1.44
	Diluted		1.64	1.47	1.40
Average Number of Shares Outstanding
	Basic		13,357	13,341	13,451
	Diluted		13,733	13,559	13,786
Dividends Per Common Share			$ 0.62	$ 0.56	$ 0.48

See accompanying notes to consolidated financial statements.

FIRST FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
							Accumulated Other Comprehensive Income (Loss)
					Additional Paid-in Capital
				Common Stock		Retained Income		Treasury Stock
								Shares	Amount	Total
				(dollar amounts in thousands)
Balance at September 30, 1998				$ 150	$ 30,308	$100,075	$ 2,195	1,375	$ (7,565)	$ 125,163
	Net income					19,307				19,307
	Other comprehensive income:
		Unrealized net loss on securities
			available for sale, net of income tax				(3,826)			(3,826)
	Total comprehensive income									15,481
	Common stock issued pursuant to stock
		option and employee benefit plans		2	1,379					1,381
	Cash dividends ($.48 per share)					(6,468)				(6,468)
	Treasury stock purchased							506	(9,676)	(9,676)
Balance at September 30, 1999				152	31,687	112,914	(1,631)	1,881	(17,241)	125,881
	Net income					19,928				19,928
	Other comprehensive income:
		Unrealized net gain on securities
			available for sale, net of income tax				164			164
	Total comprehensive income									20,092
	Common stock issued pursuant to stock
		option and employee benefit plans		1	687					688
	Cash dividends ($.56 per share)					(7,476)				(7,476)
	Treasury stock purchased							94	(1,334)	(1,334)
Balance at September 30, 2000				153	32,374	125,366	(1,467)	1,975	(18,575)	137,851
	Net income					22,559				22,559
	Other comprehensive income:
		Unrealized net gain on securities
			available for sale, net of income tax				4,345			4,345
	Total comprehensive income									26,904
	Common stock issued pursuant to stock
		option and employee benefit plans		1	1,641					1,642
	Cash dividends ($.62 per share)					(8,282)				(8,282)
	Treasury stock purchased							57	(1,222)	(1,222)
Balance at September 30, 2001				$ 154	$ 34,015	$139,643	$ 2,878	2,032	$(19,797)	$ 156,893

See accompanying notes to consolidated financial statements.

FIRST FINANCIAL  HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
			Year Ended September 30,
			2001	2000	1999
Operating Activities			(dollar amounts in thousands)
Net income			$ 22,559	$ 19,928	$ 19,307
Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation		3,597	2,977	2,450
	Gain on sale of loans, net		(2,380)	(128)	(1,392)
	Gain on sale of investments and mortgage-backed securities, net		(572)	(144)	(37)
	(Gain) loss on sale of property and equipment, net		27	(191)	4
	(Gain) loss on sale of real estate owned, net		(983)	19	(102)
	Amortization of unearned discounts/premiums on investments, net		124	899	689
	Increase (decrease) in deferred loan fees and discounts		(273)	228	714
	(Increase) decrease in receivables and prepaid expenses		(12,873)	(4,228)	880
	Provision for loan losses		4,975	2,745	2,765
	Write downs of real estate acquired in settlement of loans			14	13
	Deferred income taxes		(3,628)	(2,290)	6,835
	Proceeds from sales of loans held for sale		237,147	48,397	203,117
	Origination of loans held for sale		(225,408)	(51,163)	(193,794)
	Increase (decrease) in accounts payable and accrued expenses		9,801	4,428	(2,219)
Net cash provided by operating activities			32,113	21,491	39,230
Investing Activities
Proceeds from maturity of investments			1,000	1,900	9,434
Proceeds from sales of investment securities available for sale			86	1,994
Purchases of investment securities available for sale			(1,185)	(2,238)	(2,007)
(Purchase) redemption of FHLB stock			6,175	(9,400)	(4,925)
Increase in loans, net			(125,066)	(239,411)	(188,262)
Proceeds from sales of mortgage-backed securities available for sale			26,338	47,860	1,625
Repayments on mortgage-backed securities available for sale			61,361	27,958	61,552
Purchases of mortgage-backed securities available for sale					(102,542)
Proceeds from sales of real estate owned			6,516	591	855
Net purchase of office properties and equipment			(7,089)	(10,320)	(8,587)
Net cash used in investing activities			(31,864)	(181,066)	(232,857)
Financing Activities
Net increase in checking, passbook and money market fund accounts			129,969	30,951	52,676
Net increase (decrease) in certificates of deposit			24,521	(9,504)	2,732
Net proceeds (repayments) of FHLB advances			(141,500)	172,000	123,000
Net increase (decrease) in securities sold under agreements to repurchase			17,044	(24,719)	44,549
Net increase in other borrowings			11,500	3,500	4,750
Increase (decrease) in advances by borrowers for taxes and insurance			(359)	(690)	442
Proceeds from exercise of stock options			1,642	688	1,381
Dividends paid			(8,282)	(7,476)	(6,468)
Treasury stock purchased			(1,222)	(1,334)	(9,676)
Net cash provided by financing activities			33,313	163,416	213,386
Net increase in cash and cash equivalents			33,562	3,841	19,759
Cash and cash equivalents at beginning of period			63,992	60,151	40,392
Cash and cash equivalents at end of period			$ 97,554	$ 63,992	$ 60,151
Supplemental disclosures:
	Cash paid (received) during the period for:
		Interest	$ 104,177	$ 98,379	$ 80,362
		Income taxes	10,283	11,694	(495)
	Loans foreclosed		2,975	1,018	635
	Loans securitized into mortgage-backed securities		41,194	142,151
	Unrealized net gain (loss) on securities available for sale, net of income tax		4,345	164	(3,826)

See accompanying notes to consolidated financial statements.

FIRST FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2001, 2000 and 1999

(All Dollar Amounts, Except Per Share And Where Otherwise Indicated, In Thousands.)

1. Summary of Significant Accounting Policies

First Financial Holdings, Inc. ("First Financial" or the "Company") is incorporated under the laws of the State of Delaware and became a multiple savings and loan holding company upon the acquisition of Peoples Federal Savings and Loan Association ("Peoples Federal") on October 9, 1992. Prior to that date, First Financial was a unitary savings and loan holding company with First Federal Savings and Loan Association of Charleston ("First Federal") as its only subsidiary.

Consolidation

The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned thrift subsidiaries, First Federal and Peoples Federal (together, the "Associations") and First Southeast Investor Services, Inc. and First Southeast Insurance Services, Inc. The Company's consolidated financial statements also include the assets and liabilities of service corporations and operating subsidiaries wholly-owned by the Associations. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company operates as one business segment.

Derivative Financial Instruments and Hedge Accounting

Effective October 1, 2000, the Company adopted the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") as amended by SFAS No. 137 and 138, which establishes accounting and reporting standards for derivatives and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet, and measure those instruments at fair value. Changes in the fair value of those derivatives are reported in current earnings or other comprehensive income depending on the purpose for which the derivative is held and whether the derivative qualifies for hedge accounting. The impact of the adoption was not material to the Company.

Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income consists of net income and net unrealized gains (losses) on securities and is presented in the statements of stockholders' equity and comprehensive income. The statement requires only additional disclosures in the consolidated financial statements; it does not affect the Company's financial position or results of operations.

The Company's other comprehensive income (loss) for the years ended September 30, 2001, 2000 and 1999 and accumulated other comprehensive income (loss) as of September 30, 2001, 2000 and 1999 are comprised solely of unrealized gains and losses on certain investments in debt and equity securities. Other comprehensive income (loss) for the years ended September 30, 2001, 2000 and 1999 follows:

		2001	2000	1999
Unrealized holding gains (losses) arising during period		$ 4,717	$  258	$ (3,803)
Less: reclassification adjustment for realized gains,
	net of tax	372	94	23
Unrealized gains (losses) on securities available for sale,
	net of applicable income taxes	$ 4,345	$  164	$ (3,826)

Earnings Per Share

Basic earnings per share ("EPS") excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Stock Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation," allows a company to either adopt the fair value method of valuation or continue using the intrinsic valuation method presented under APB Opinion 25, "Accounting for Stock Issued to Employees" ("APB Opinion 25") to account for stock-based compensation. The Company has elected to continue using APB Opinion 25 and has disclosed in the footnotes proforma net income and earnings per share information as if the fair value method had been applied.

Impaired Loans

SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosure" requires that all creditors value all specifically reviewed loans for which it is probable that the creditor will be unable to collect all amounts due according to the terms of the loan agreement at the loan's fair value. Fair value may be determined based upon the present value of expected cash flows, market price of the loan, if available, or the value of the underlying collateral. Expected cash flows are required to be discounted at the loan's effective interest rate. SFAS 114 was amended by SFAS 118 to allow a creditor to use existing methods for recognizing interest income on an impaired loan and by requiring additional disclosures about how a creditor recognizes interest income related to impaired loans.

Investments in Debt and Equity Securities

The Company's investments in debt securities principally consist of U.S. Treasury securities and mortgage-backed securities purchased by the Company or created when the Company exchanges pools of loans for mortgage-backed securities. The Company classifies its investments in debt securities as held to maturity securities, trading securities and available for sale securities as applicable.

Debt securities are designated as held to maturity if the Company has the intent and the ability to hold the securities to maturity. Held to maturity securities are carried at amortized cost, adjusted for the amortization of any related premiums or the accretion of any related discounts into interest income using a methodology which approximates a level yield of interest over the estimated remaining period until maturity. Unrealized losses on held to maturity securities, reflecting a decline in value judged by the Company to be other than temporary, are charged to income in the Consolidated Statements of Operations.

Debt and equity securities that are purchased and held principally for the purpose of selling in the near term are reported as trading securities. Trading securities are carried at fair value with unrealized holding gains and losses included in earnings.

The Company classifies debt and equity securities as available for sale when at the time of purchase it determines that such securities may be sold at a future date or if the Company does not have the intent or ability to hold such securities to maturity. Securities designated as available for sale are recorded at fair value. Changes in the fair value of debt and equity securities available for sale are included in stockholders' equity as unrealized gains or losses, net of the related tax effect. Unrealized losses on available for sale securities, reflecting a decline in value judged to be other than temporary, are charged to income in the Consolidated Statements of Operations. Realized gains or losses on available for sale securities are computed on the specific identification basis.

Fair Value of Financial Instruments

SFAS 107, "Disclosures about Fair Values of Financial Instruments," requires disclosures about the fair value of all financial instruments whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized through immediate settlement of the instrument. SFAS 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Securities Sold Under Agreements to Repurchase

The Company enters into sales of securities under agreements to repurchase (reverse repurchase agreements). Fixed coupon reverse repurchase agreements are treated as financings. The obligations to repurchase securities sold are reflected as a liability and the securities underlying the agreements continue to be reflected as assets in the Consolidated Statements of Financial Condition.

Loans Receivable and Loans Held for Sale

The Company's real estate loan portfolio consists primarily of long-term loans secured by first mortgages on single-family residences, other residential property, commercial property and land. The adjustable-rate mortgage loan is the Company's primary loan product for portfolio lending purposes. The Company's consumer loans include lines of credit, auto loans, marine loans, manufactured housing loans and loans on various other types of consumer products. The Company also makes shorter term commercial business loans on a secured and unsecured basis.

Fees are charged for originating loans at the time the loan is granted. Loan origination fees received, if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred fees or costs are recognized as yield adjustments by applying the interest method.

Interest on loans is accrued and credited to income based on the principal amount and contract rate on the loan. The accrual of interest is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to meet future payments as they become due, generally when a loan is 90 days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. While a loan is on non-accrual status, interest is recognized only as cash is received. Loans are returned to accrual status only when the loan is brought current and ultimate collectibility of principal and interest is no longer in doubt.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses are provided for in a valuation allowance by charges to operations. Loans held for sale totaled $77 and $9,436 at September 30, 2001 and September 30, 2000, respectively.

Mortgage Servicing Rights

SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," - a replacement of SFAS 125, was issued in September 2000. It revised the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures but carried over most of SFAS 125's provisions without reconsideration. The Company adopted the provisions of SFAS 140 effective April 1, 2001 with no material impact.

SFAS No. 140 requires the recognition of originated mortgage servicing rights (AMSRs@) as assets by allocating total costs incurred between the originated loan and the servicing rights retained based on their relative fair values. SFAS 140 also requires the recognition of purchased mortgage servicing rights at fair value, which is presumed to be the price paid for the rights.

Amortization of MSRs is based on the ratio of net servicing income received in the current period to total net servicing income projected to be realized from the MSRs. Projected net servicing income is in turn determined on the basis of the estimated future balance of the underlying mortgage loan portfolio, which declines over time from prepayments and scheduled loan amortization. The Company estimates future prepayment rates based on current interest rate levels, other economic conditions and market forecasts, as well as relevant characteristics of the servicing portfolio, such as loan types, interest rate stratification and recent prepayment experience.

SFAS No. 140 also requires that all MSRs be evaluated for impairment based on the excess of the carrying amount of the MSRs over their fair value. Fair values of servicing rights are determined by estimating the present value of future net servicing income considering the average interest rate and the average remaining lives of the related loans being serviced. Periodically, the Company uses an independent party to evaluate the present values of its portfolio of mortgage servicing. This evaluation is principally determined using discounted cash flows of disaggregated groups of mortgage servicing rights.

Allowance for Loan Losses

The Company provides for loan losses on the allowance method. Accordingly, all loan losses are charged to the related allowance and all recoveries are credited to the allowance. Additions to the allowance for loan losses are provided by charges to operations based on various factors which, in management's judgment, deserve current recognition in estimating losses. Such factors considered by management include the fair value of the underlying collateral, growth and composition of the loan portfolios, loss experience, delinquency trends and economic conditions. Management evaluates the carrying value of loans periodically and the allowance is adjusted accordingly. While management uses the best information available to make evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. The allowance for loan losses is subject to periodic evaluation by various regulatory authorities and may be subject to adjustment upon their examination.

The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement on a timely basis. The Company's impaired loans include loans identified as impaired through review of the non-homogeneous portfolio and troubled debt restructurings. Specific valuation allowances are established on impaired loans for the difference between the loan amount and the fair value less estimated selling costs. Impaired loans may be left on accrual status during the period the Company is pursuing repayment of the loan. Such loans are placed on non-accrual status at the point either: (1) they become 90 days delinquent; or (2) the Company determines the borrower is incapable of, or has ceased efforts toward, continuing performance under the terms of the loan. Impairment losses are recognized through an increase in the allowance for loan losses and a corresponding charge to the provision for loan losses. Adjustments to impairment losses due to changes in the fair value of the collateral properties for impaired loans are included in provision for loan losses. When an impaired loan is either sold, transferred to real estate owned or written down, any related valuation allowance is charged off.

Increases to the allowance for loan losses are charged by recording a provision for loan losses. Charge-offs to the allowance are made when all, or a portion, of the loan is confirmed as a loss based upon management's review of the loan or through possession of the underlying security or through a troubled debt restructuring transaction. Recoveries are credited to the allowance.

Office Properties and Equipment

Office properties and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided generally on the straight-line method over the estimated life of the related asset for financial reporting purposes. Estimated lives range up to thirty years for buildings and improvements and up to ten years for furniture, fixtures and equipment. Maintenance and repairs are charged to expense as incurred. Improvements, which extend the useful lives of the respective assets, are capitalized. Accelerated depreciation is utilized on certain assets for income tax purposes.

Real Estate

Real estate acquired through foreclosure is carried at the lower of cost or fair value, adjusted for net selling costs. Fair values of real estate owned are reviewed regularly and writedowns are recorded when it is determined that the carrying value of real estate exceeds the fair value less estimated costs to sell. Costs relating to the development and improvement of such property are capitalized, whereas those costs relating to holding the property are charged to expense.

Risks and Uncertainties

In the normal course of its business the Company encounters two significant types of risk: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on different bases, than its interest-earning assets. Credit risk is the risk of default on the Company's loan portfolio that results from borrowers' inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans receivable, the valuation of real estate held by the Company, and the valuation of loans held for sale, investments and mortgage-backed securities available for sale and mortgage servicing rights.

The Company is subject to the regulations of various government agencies. These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions resulting from the regulators' judgments based on information available to them at the time of their examination.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the Consolidated Statements of Financial Condition and the Consolidated Statements of Operations for the periods covered. Actual results could differ significantly from those estimates and assumptions.

Income Taxes

Because some income and expense items are recognized in different periods for financial reporting purposes and for purposes of computing currently payable income taxes, a provision or credit for deferred income taxes is made for such temporary differences at currently enacted income tax rates applicable to the period in which realization or settlement is expected. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Reclassifications

Certain amounts previously presented in the consolidated financial statements for prior periods have been reclassified to conform to current classifications. All such reclassifications had no effect on the prior periods' net income or retained income as previously reported.

2. Cash and Cash Equivalents

Cash and cash equivalents consist of the following:

		September 30,
		2001	2000
Cash working funds		$ 17,677	$ 16,274
Non-interest-earning demand deposits		4,872	1,999
Deposits in transit		36,201	28,959
Interest-earning deposits		38,804	16,760
	Total	$ 97,554	$ 63,992

The Company considers all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents.

3. Investment and Mortgage-backed Securities Held to Maturity

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investment and mortgage-backed securities held to maturity are as follows:

			September 30, 2000
			Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair value
State and local government obligations			$ 249	$    6		$ 255
Mortgage-backed securities
	FHLMC		19	2		21
		Total	$ 268	$    8		$ 276

There were no sales of investment or mortgage-backed securities held to maturity during fiscal 2001, 2000 and 1999.

4. Investment and Mortgage-backed Securities Available for Sale

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investment and mortgage-backed securities available for sale are as follows:

			September 30, 2001
			Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
U.S. Treasury securities and obligations of U.S. government agencies and corporations			$     2,251	$       13		$      2,264
Corporate securities			2,499	18	77	2,440
Mutual funds			1,555			1,555
			6,305	31	77	6,259
Mortgage-backed securities:
	FHLMC		16,014	712	41	16,685
	FNMA		102,444	3,805	39	106,210
	GNMA		10,552	131	45	10,638
	CMO's		74,387	634	401	74,620
			203,397	5,282	526	208,153
		Total	$ 209,702	$ 5,313	$   603	$ 214,412
			September 30, 2000
			Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
U.S. Treasury securities and obligations of U.S. government agencies and corporations			$ 3,241	$       7	$       1	$    3,247
Corporate securities			2,331	17	47	2,301
Mutual funds			370			370
			5,942	24	48	5,918
Mortgage-backed securities:
	FHLMC		28,374	302	269	28,407
	FNMA		119,307	851	434	119,724
	GNMA		14,759	60	173	14,646
	CMO's		87,010	5	2,716	84,299
			249,450	1,218	3,592	247,076
		Total	$ 255,392	$ 1,242	$ 3,640	$ 252,994

The amortized cost and fair value of investment and mortgage-backed securities available for sale at September 30, 2001 by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		September 30, 2001
		Amortized Cost		Fair Value
Due in one year or less			$    3,806	$     3,820
Due after one year through five years			982	995
Due after five years through ten years			249	254
Due after ten years			1,268	1,190
			6,305	6,259
Mortgage-backed securities			203,397	208,153
	Total		$ 209,702	$ 214,412

Proceeds from the sale of the Company's investment and mortgage-backed securities available for sale totaled $26,424 in fiscal 2001 resulting in a gross realized gain of $608 and a gross realized loss of $36. Proceeds from the sale of the Company's investment and mortgage-backed securities available for sale totaled $49,854 in fiscal 2000 resulting in a gross realized gain of $188 and a gross realized loss of $44. Proceeds from the sale of the Company's investment and mortgage-backed securities available for sale totaled $1,625 in fiscal 1999 resulting in a gross realized gain of $37.

5. Federal Home Loan Bank Capital Stock

The Associations, as member institutions of the Federal Home Loan Bank ("FHLB") of Atlanta, are required to own capital stock in the FHLB of Atlanta based generally upon the Associations' balances of residential mortgage loans and FHLB advances. FHLB capital stock is pledged to secure FHLB advances. No ready market exists for this stock and it has no quoted market value. However, redemption of this stock has historically been at par value.

6. Earnings per Share

Basic and diluted earnings per share have been computed based upon net income as presented in the accompanying statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below:

		Year Ended September 30,
		2001	2000	1999
Weighted average number of common shares used in basic EPS		13,357,321	13,341,459	13,451,027
Effect of dilutive stock options		375,861	217,838	335,044
Weighted average number of common shares and dilutive
	potential common shares used in diluted EPS	13,733,182	13,559,297	13,786,071

7. Loans Receivable

Loans receivable, including loans held for sale, consisted of the following:

			September 30,
			2001	2000
Mortgage loans			$ 1,438,635	$ 1,456,580
Residential construction loans			73,669	80,806
Home equity loans			145,146	121,993
Mobile home loans			90,262	63,016
Commercial business loans			93,081	57,381
Credit cards			11,767	11,643
Other consumer loans			103,267	115,339
			1,955,827	1,906,758
Less:
	Allowance for loan losses		15,943	15,403
	Loans in process		33,624	51,658
	Deferred loan fees and discounts on loans		927	1,200
			50,494	68,261
		Total	$ 1,905,333	$ 1,838,497

First mortgage loans are net of whole loans and participation loans sold and serviced for others in the amount of $768,017 and $648,200 at September 30, 2001 and 2000, respectively. Mortgage servicing rights totaled $8,208 and $5,888 at September 30, 2001 and 2000, respectively, and are included in "other assets" on the Consolidated Statements of Financial Condition. The fair value of mortgage servicing rights was $8,450 at September 30, 2001 and $7,239 at September 30, 2000. No valuation allowance was required at September 30, 2001.

The following table summarizes the changes in mortgage servicing rights during 2001 and 2000:

	September 30,
	2001	2000
Balance at beginning of year	$     5,888	$    4,668
Capitalized mortgage servicing rights	3,484	1,659
Amortization	(1,164)	(439)
Balance at end of year	$     8,208	$    5,888

Non-accrual and renegotiated loans are summarized as follows:

		September 30,
		2001	2000
Non-accrual loans		$   8,547	$   5,881
Renegotiated loans		2,700	2,712
	Total	$ 11,247	$   8,593

Interest income related to non-accrual and renegotiated loans that would have been recorded if such loans had been current in accordance with their original terms amounted to $626, $489 and $544 for the years ended September 30, 2001, 2000 and 1999, respectively. Recorded interest income on these loans was $221, $269 and $268 for 2001, 2000 and 1999, respectively.

An analysis of changes in the allowance for loan losses is as follows:

	Year Ended September 30,
	2001	2000	1999
Balance, beginning of period	$  15,403	$  14,570	$   12,781
Charge-offs	(4,932)	(2,392)	(1,596)
Recoveries	497	480	620
Net charge-offs	(4,435)	(1,912)	(976)
Provision for loan losses	4,975	2,745	2,765
Balance, end of period	$   15,943	$  15,403	$   14,570

At September 30, 2001 and 2000 impaired loans totaled $8,547 and $5,881, respectively. The impaired loans at September 30, 2001 and 2000 were recorded at or below fair value. The average recorded investment in impaired loans for the years ended September 30, 2001, 2000 and 1999 was $8,095, $4,776 and $3,933, respectively. No interest income was recognized on loans while categorized as impaired loans in fiscal 2001 or fiscal 2000.

The Company principally originates residential and commercial real estate loans throughout its primary market area located in the coastal region of South Carolina and Florence County. Although the coastal region has a diverse economy, much of the area is heavily dependent on the tourism industry and industrial and manufacturing companies. A substantial portion of the Company's debtors' ability to honor their contracts is dependent upon the stability of the real estate market and these economic sectors.

Residential one-to-four family real estate loans amounted to $1,239,806 and $1,266,025 at September 30, 2001 and 2000, respectively. The Company's multi-family residential loan portfolio of $50,195 and $48,937 at September 30, 2001 and 2000, respectively, are highly dependent on occupancy rates for such properties throughout the Company's market area. The Company generally maintains loan to value ratios of no greater than 80 percent on these loans.

Commercial real estate loans totaled $132,116 and $131,027 and acquisition and development loans and lot loans totaled $90,186 and $91,397 at September 30, 2001 and 2000, respectively. These loans include amounts used for acquisition, development and construction as well as permanent financing of commercial income-producing properties. Such loans generally are associated with a higher degree of credit risk than residential one-to-four family loans due to the dependency on income production or future development and sale of real estate.

Management closely monitors its credit concentrations and attempts to diversify the portfolio within its primary market area. Before the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") was enacted, the Company was allowed to lend substantially higher amounts to any one borrower than the current regulatory limitations. However, the Company's internal loan policy placed lower limits on loans to any major borrower. Currently, there are no borrowers which exceed the current general regulatory limitation of 15 percent of each Association's capital. The maximum amount outstanding to any one borrower was $12,492 at September 30, 2001 and $13,364 at September 30, 2000.

8. Office Properties and Equipment

Office properties and equipment are summarized as follows:

		September 30,
		2001	2000
Land		$    9,164	$    8,730
Buildings and improvements		19,712	16,119
Furniture and equipment		22,392	19,849
Leasehold improvements		4,358	4,240
		55,626	48,938
Less, accumulated depreciation and amortization		(22,658)	(19,435)
	Total	$   32,968	$   29,503

9. Real Estate

Real estate and other assets acquired in settlement of loans held by the Company are summarized as follows:

		September 30,
		2001	2000
Real estate acquired in settlement of loans		$   2,808	$   5,689
Other assets acquired in settlement of loans		529	206
	Total	$   3,337	$   5,895

Real estate operations are summarized as follows:

		Year Ended September 30,
		2001	2000	1999
Gain (loss) on sale of real estate		$      983	$      (19)	$      102
Provision charged as a write-down to real estate			(14)	(13)
Expenses		(389)	(227)	(119)
Rental income		269	637	118
	Total	$      863	$      377	$       88

10. Deposit Accounts

The deposit balances and related rates were as follows:

			September 30,
			2001			2000
			Balance	Weighted Average Rate		Balance	Weighted Average Rate
Non-interest-bearing demand accounts			$     99,352			$     79,813
NOW accounts			209,432	1.60	%	130,125	0.50	%
Passbook, statement and other accounts			120,676	2.25		118,874	2.38
Money market accounts			220,802	3.11		191,481	4.39
			650,262	1.99		520,293	2.28
Certificate accounts:
	Fixed-rate		722,096	5.38		696,842	6.05
	Variable-rate		23,427	4.35		24,160	5.92
			745,523	5.35		721,002	6.04
		Total	$ 1,395,785	3.79	%	$ 1,241,295	4.47	%

Scheduled maturities of certificate accounts were as follows:

		September 30,
		2001	2000
Within one year		$ 567,987	$ 526,497
Within two years		124,143	130,669
Within three years		15,161	24,200
Within four years		23,481	8,581
Within five years		10,493	24,125
Thereafter		4,258	6,930
	Total	$ 745,523	$ 721,002

The Company has pledged certain interest-earning deposits and investment and mortgage-backed securities available for sale or held to maturity with a fair value of $54,665 and $33,007 at September 30, 2001 and 2000, respectively, to secure deposits by various entities.

Certificates of deposit with balances equal to or exceeding $100,000 totaled $194,349 and $160,053 at September 30, 2001 and 2000, respectively.

11. Advances From Federal Home Loan Bank

Advances from the FHLB of Atlanta consisted of the following:

		September 30,
		2001			2000
Maturity		Balance	Weighted Average Rate		Balance	Weighted Average Rate
One year		$ 220,000	3.21	%	$ 436,500	6.64	%
Two years		55,000	5.11
Three years		75,000	5.21		55,000	5.11
Four years		125,000	6.04
Five years					125,000	6.25
Seven years		25,000	5.57
Eight years					25,000	5.57
Nine years		125,000	6.31
Ten years					125,000	6.31
	Total	$ 625,000	4.90	%	$ 766,500	6.38	%

 As collateral for its advances, the Company has pledged qualifying first mortgage loans in the amount of $1,016,016 and $1,007,653 as of September 30, 2001 and 2000, respectively. Mortgage-backed securities with a book value of $17,120 and $44,260 are also pledged as collateral for advances at September 30, 2001 and 2000, respectively. In addition, all of the Company's FHLB stock is pledged as collateral for these advances. Advances are subject to prepayment penalties. Certain of the advances are subject to calls at the option of the FHLB of Atlanta.

12. Securities Sold Under Agreements to Repurchase and Other Short-term Borrowings

Securities sold under agreements to repurchase consisted of the following:

	September 30,
	2001	2000
Mortgage-backed securities with an amortized cost of $65,018 and $52,312 and fair value of $67,495 and $51,219 at September 30, 2001 and 2000, respectively	$  66,316	$  49,272

The agreements had a weighted average interest rate of 3.66% and 6.73% at September 30, 2001 and 2000, respectively, and mature within three months. The securities underlying the agreements were delivered to the dealers who arranged the transactions. At September 30, 2001 and 2000, the agreements were to repurchase identical securities. Securities sold under agreements to repurchase averaged $66,385 and $57,138 during 2001 and 2000, respectively, and the maximum amount outstanding at any month-end during 2001 and 2000 was $99,210 and $73,943, respectively.

The Company has a $35,000 funding line with another bank. The rate on the line is indexed to LIBOR.

	September 30,
	2001			2000
	Balance	Rate		Balance	Rate
Line of credit	$ 23,750	5.58	%	$ 12,250	8.63	%

13. Income Taxes

Income tax expense attributable to continuing operations for the years ended September 30, 2001, 2000 and 1999, is comprised of the following:

		Federal	State	Total
2001
Current		$ 16,043	$   195	$ 16,238
Deferred		(3,756)	128	$(3,628)
	Total	$ 12,287	$   323	$ 12,610
2000
Current		$ 12,994	$ (197)	$ 12,797
Deferred		(2,496)	206	$ (2,290)
	Total	$ 10,498	$       9	$ 10,507
1999
Current		$   3,549	$     16	$   3,565
Deferred		6,829	6	6,835
	Total	$ 10,378	$     22	$ 10,400

A reconciliation from expected federal tax expense to consolidated effective income tax expense for the periods indicated follows:

		Year Ended September 30,
		2001	2000	1999
Expected federal income tax expense		$ 12,309	$ 10,652	$ 10,397
Increases (reductions) in income taxes resulting from:
Tax exempt income		(74)	(56)	(25)
South Carolina income tax expense, net of federal income tax effect		210	6	14
Other, net		165	(95)	14
	Total	$ 12,610	$ 10,507	$ 10,400
Effective tax rate		35.9%	34.5%	35.0%

As a result of tax legislation in the Small Business Job Protection Act of 1996 ("SBJPA '96"), Peoples Federal and First Federal were required for the year ended September 30, 1997 to recapture bad debt tax reserves in excess of pre-1988 base year amounts of approximately $1,476 over an eight year period and to change their overall tax method of accounting for bad debts to the specific charge-off method. This legislation allows the Associations to defer recapture of this amount for the 1998 and 1997 tax years provided the "residential loan requirement" is met for both years. The Associations met this requirement for the year ending September 30, 1998, suspending the six-year recapture for the 1997 tax year. The Associations have recorded the related deferred tax liability in other liabilities.

During the year ended September 30, 1999, the Associations began to recapture bad debt reserves in excess of pre-1988 base year. This amortization will occur through year 2003.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at September 30, 2001 and 2000 are presented below.

		September 30,
		2001	2000
Deferred tax assets:
	Loan loss allowances deferred for tax purposes	$ 5,562	$ 5,769
	Net operating loss carryforward	129	199
	Unrealized loss on securities available for sale		931
	Other	740	806
	Total gross deferred tax assets	6,431	7,705
	Less valuation allowance	-	-
	Net deferred tax assets	6,431	7,705
Deferred tax liabilities:
	Loan fee income adjustments for tax purposes	2,900	2,808
	FHLB stock dividends deferred for tax purposes	1,533	1,704
	Expenses deducted under economic performance rules	556	387
	Excess carrying value of assets acquired for financial reporting purposes over tax basis	1,752	2,363
	Tax bad debt reserve in excess of base year amount	258	402
	Unrealized gain on securities available for sale	1,832
	Book over tax basis in subsidiary	7,273	10,638
	Other	162	103
	Total gross deferred tax liabilities	16,266	18,405
	Net deferred liability (included in other liabilities)	$ (9,835)	$ (10,700)

A portion of the change in the net deferred tax liability relates to unrealized gains and losses on securities available for sale. The related current period tax expense of $2,763 has been recorded directly to stockholders' equity. The balance of the change in the net deferred tax liability results from current period deferred tax benefit of $3,628.

Under SFAS 109, deferred tax assets or liabilities are initially recognized for differences between the financial statement carrying amount and the tax bases of assets and liabilities which will result in future deductible or taxable amounts and operating loss and tax credit carryforwards. A valuation allowance is then established to reduce the deferred tax asset to the level at which it is "more likely than not" that the tax benefits will be realized. Realization of tax benefits of deductible temporary differences and operating loss or credit carryforwards depends on having sufficient taxable income of an appropriate character within the carryback and carryforward periods. Sources of taxable income that may allow for the realization of tax benefits include (1) taxable income in the current year or prior years that is available through carryback, (2) future taxable income that will result from the reversal of existing taxable temporary differences, and (3) taxable income generated by future operations. Management has determined that it is more likely than not that the net deferred tax asset can be supported based upon these criteria.

The consolidated financial statements at September 30, 2001 and 2000 did not include a tax liability of $8,468 related to the base year bad debt reserve amounts since these reserves are not expected to reverse until indefinite future periods, and may never reverse. Circumstances that would require an accrual of a portion or all of this unrecorded tax liability are failure to meet the tax definition of a bank, dividend payments in excess of current year or accumulated tax earnings and profits, or other distributions in dissolution, liquidation or redemption of the Associations' stock.

14. Benefit Plans

Stock Option Plans

In January 1991, the stockholders approved the 1990 Stock Option and Incentive Plan. The 1990 Plan provided for the granting of Incentive Stock Options to key officers and employees to purchase the stock at the fair market value on the date of the grant. The 1990 Stock Option and Incentive Plan also provided for the grant of Non-Incentive Stock Options. Options of 284,028 granted under the 1990 Stock Option Plan expire at various dates through October 23, 2007.

In January 1998, the stockholders approved the 1997 Stock Option and Incentive Plan. An aggregate of 600,000 shares was reserved for future issuance by the Company upon the exercise of stock options under this Plan. The 1997 plan provides for the granting of Incentive Stock Options to key officers and employees to purchase the stock at the fair market value on the date of the grant. The 1997 Stock Option and Incentive Plan also provides for Non-Incentive Stock Options to be granted at a price to be determined by the Stock Option Committee. Officers have an exercise period of ten years and other employees must exercise options within five years. Options of 500,897 granted under the 1997 Stock Option Plan expire at various dates through June 2011.

The 2001 Stock Option Plan was approved by the stockholders in January 2001. An aggregate of 600,000 shares was reserved for future issuance by the Company upon the exercise of stock options under this Plan. The 2001 plan provides for the granting of Incentive or Non-Incentive Stock Options to be granted at a price at least equal to the fair market value of a share of Common Stock on the date of grant. No options have been granted under the 2001 Plan at September 30, 2001.

On July 28, 1994, the Company's Board of Directors approved the 1994 Outside Directors Stock Options-for-Fees Plan (the "1994 Director Plan") which was subsequently approved by the stockholders on January 25, 1995. The formula for computing the options awarded considers the percentage of annual fees each director wishes to allocate to the 1994 Director Plan, the market price of the common stock of the Company on the first business day of October of each fiscal year and the difference between the market price and an option price. The option price is based on 75% of the market value of the common stock. At September 30, 2001, options to purchase 203,764 shares of common stock at prices ranging from $6.09 to $16.88 expire at various dates through October 2010. These options were all granted in lieu of otherwise payable cash compensation.

During 1998 the Company, as part of its acquisition of Investors Savings Bank of South Carolina ("Investors"), converted all stock options of Investors outstanding at the time of the merger into options to acquire common stock of the Company. The stock option plan of Investors expired in May of 1996. Options remaining under the plan of Investors expire at various dates through September 19, 2006.

The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method prescribed by SFAS 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands except per share data):

			2001	2000	1999
Net Income	As reported		$ 22,559	$ 19,928	$ 19,307
	Pro-forma		22,101	19,110	18,751
Earnings per share	As reported
		Basic	$ 1.69	$ 1.49	$ 1.44
		Diluted	1.64	1.47	1.40
	Pro-forma
		Basic	1.65	1.43	1.39
		Diluted	1.61	1.41	1.36

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2001, 2000 and 1999, respectively: dividend yield of 2.75%, 2.75% and 2.50%, expected volatility of 31%, 29% and 29%, average risk-free interest rate of 5.30%, 6.29% and 4.78%, and expected lives of 6 years. The weighted average fair value of options granted approximated $5.65 in 2001, $4.80 in 2000 and $5.59 in 1999.

The following is a summary of the activity under the stock-based option plans for the years ended September 30, 2001, 2000 and 1999.

		2001		2000		1999
		Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price
Balance, beginning of year		1,087,450	$ 13.13	813,142	$ 12.31	819,980	$ 9.58
	Options exercised	(125,218)	10.80	(42,551)	10.58	(188,835)	6.18
	Options forfeited	(15,435)	16.11	(12,143)	18.18	(5,882)	16.74
	Options granted	94,793	16.63	329,002	14.99	187,879	17.96
Outstanding, September 30		1,041,590	$ 13.68	1,087,450	$ 13.13	813,142	$ 12.31

Stock options outstanding and exercisable as of September 30, 2001, are as follows:

Range of Exercise Prices			Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life
$ 5.82	-	7.63	220,666	$ 7.29	3.27	years
8.02	-	9.75	97,472	9.55	4.59
10.13	-	12.66	115,554	11.38	4.98
13.50	-	15.5	159,507	13.91	7.68
16.88	-	19.25	273,740	18.27	6.46
20.77	-	23.08	42,953	22.48	4.94
$ 5.82	-	23.08	909,892

Stock Purchase Plan

On January 25, 1995, the stockholders approved the Employee Stock Purchase Plan ("ESPP"). The ESPP allows employees to purchase stock of the Company at a discounted price. Purchases are made subject to various guidelines which allow the plan to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. Purchases of 43,803 shares of common stock have been made under the Plan.

Performance Equity Plan

On January 22, 1997, the stockholders approved the Performance Equity Plan for Non-Employee Directors. The purpose of the Plan is to provide non-employee directors with an opportunity to increase their equity interest in the Company if the Company and the Associations attain specific financial performance criteria. Performance targets for the 2000, 1999 and 1998 year resulted in the awarding of 1,586, 3,841 and 3,230 shares in the years 2001, 2000 and 1999 to the directors serving the Corporation and the Associations.

Sharing Thrift Plan

The Company has established the Sharing Thrift Plan which includes a deferred compensation plan (401(k)) for all full-time and certain part-time employees. The Plan permits eligible participants to contribute a maximum of 15 percent of their annual salary (not to exceed limitations prescribed by law). Part-time employees who work at least 1,000 hours in a calendar year may also contribute to the Plan. The Company will match the employee's contribution up to 5 percent of the employee's salary based on the attainment of certain profit goals.

The Company's matching contribution charged to expense for the years ended September 30, 2001, 2000 and 1999, was $892, $813 and $745, respectively.

The Sharing Thrift Plan provides that all employees who have completed a year of service with the Company in which they have worked at least 1,000 hours are entitled to receive a quarterly Profit Sharing Contribution of from 0% to 100% of 6% of their base pay during such quarter depending upon the amount of each subsidiary's return on equity for that quarter. The Plan provides that regardless of the return on equity each eligible employee will receive a Profit Sharing Contribution equal to at least 1% of his base compensation on an annual basis. Employees become vested in Profit Sharing Contributions made to their accounts over a seven-year period or upon their earlier death, disability or retirement at age 65 or over. Employees are able to direct the investment of Profit Sharing Contributions made to their accounts to any of the Plan investment funds. Contributions to the Plan during 2001, 2000 and 1999 totaled $1,166, $1,032 and $1,109, respectively.

Other Postretirement Benefits

The Company sponsors postretirement benefit plans that provide health care, life insurance and other postretirement benefits to retired employees. The health care plans generally include participant contributions, co-insurance provisions, limitations on the Company's obligation and service-related eligibility requirements. The Company pays these benefits as they are incurred. Postretirement benefits for employees hired after January 1, 1989 and those electing early retirement or normal retirement after January 1, 1999, were substantially curtailed.

The combined change in benefit obligation, change in plan assets and funded status of the Company's postretirement benefit plan and the amounts included in "other liabilities" on the Consolidated Financial Statements at September 30, 2001 and 2000 are shown below:

	2001	2000
Change in benefit obligation:
Benefit obligation at October 1	$ 1,600	$ 1,581
Interest cost	122	115
Actuarial loss	80
Benefit payments	(107)	(96)
Benefit obligation at September 30	1,695	1,600
Change in plan assets:
Fair value of plan assets at October 1
Employer contributions	147	120
Plan participants' contributions	17	20
Benefit payments	(164)	(140)
Fair value of plan assets at September 30	-	-
Funded status:
As of end of year	(1,695)	(1,600)
Unrecognized transition obligation	867	946
Unrecognized net loss	146	26
Accrued postretirement benefit expense	$ (682)	$ (628)

An increase in the assumed health care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation as of September 30, 2001 and 2000, by $175 and $165, the aggregate of service and interest cost by $13 and $12, respectively.

The combined postretirement benefit expense components for the Company's plan for the years ended September 30, 2001, 2000 and 1999 are shown below:

		2001	2000	1999
Interest Cost		$ 122	$ 115	$   99
Amortization of transition obligation		78	78	79
	Net pension expense	$ 200	$ 193	$ 178

Assumptions used in computing the actuarial present value of the Company's postretirement benefit obligation were as follows:

	2001	2000
Discount rate	7.50%	7.50%

15. Commitments and Contingencies

Loan Commitments

Outstanding commitments on mortgage loans not yet closed, including commitments issued to correspondent lenders, amounted to approximately $30,381 at September 30, 2001. These were principally single-family loan commitments. Other loan commitments totaled $5,094 at September 30, 2001.

Commitments to extend credit are agreements to lend to borrowers as long as there is no violation of any condition established by the commitment letter. Commitments generally have fixed expiration dates or other termination clauses. The majority of the commitments will be funded within a twelve month period. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies but primarily consists of residential or income producing commercial properties.

The Company originates and services mortgage loans. Substantially all of the Company's loan sales have been without provision for recourse. Unused lines of credit on equity loans, credit cards, other consumer and commercial loans amounted to $233,822, $202,815 and $196,283 at September 30, 2001, 2000 and 1999, respectively. Based on historical trends, it is not expected that the percentage of funds drawn on existing lines of credit will increase substantially over levels currently utilized.

Derivative Instruments

The Company has identified the following derivative instruments which were recorded on the Company's balance sheet at September 30, 2001: an interest rate cap agreement, commitments to originate fixed rate residential loans held for sale and forward sales commitments.

In September 1999, the Company purchased a $25,000 interest rate cap maturing September 30, 2002 which has been designated as a cash flow hedge of its exposure to higher interest payments on $25 million of adjustable rate FHLB advances in periods where LIBOR exceeds 6.25%. The fair value of the interest rate cap has two components, one related to the LIBOR interest rate (intrinsic value) and one related to the time value. As permitted under SFAS 133, the Company has excluded from its assessment of hedge effectiveness the portion of the change in fair value of the interest rate cap representing changes in time value.

Accordingly, changes in time value of the interest rate cap are recognized in earnings and are included in interest expense in the income statement. Interest expense for the year ended September 30, 2001 includes $225 of loss related to the changes in time value of the interest rate cap. Based on LIBOR rates at September 30, 2001, there are no amounts recorded in accumulated other comprehensive income for the interest rate cap as there was no intrinsic value.

The Company originates certain fixed rate residential loans with the intention of selling these loans. Between the time that the Company enters into an interest rate lock or a commitment to originate a fixed rate residential loan with a potential borrower and the time the closed loan is sold, the Company is subject to variability in market prices related to these commitments. The Company believes that it is prudent to limit the variability of expected proceeds from the sales through forward sales of "to be issued" mortgage backed securities and loans ("forward sales commitments"). The commitments to originate fixed rate residential loans and forward sales commitments are freestanding derivative instruments. They do not qualify for hedge accounting treatment so their fair value adjustments are recorded through the income statement in net gains on sale of loans. The commitments to originate fixed rate conforming loans totaled $19,867 at September 30, 2001. The fair value of these commitments was an asset of $373 at September 30, 2001. The forward sales commitments totaled $38,774 at September 30, 2001. The fair value of these commitments was an asset of $34 at September 30, 2001.

Lease Commitments

The Company occupies office space and land under leases expiring on various dates through 2011. Minimum rental commitments under noncancelable operating leases were as follows:

	September 30, 2001
One year		$ 1,409
Two years		1,382
Three years		1,256
Four years		441
Five years		252
Thereafter		316
Total		$ 5,056

Rental expenses under operating leases were $1,305, $1,146 and $1,104 in 2001, 2000 and 1999, respectively.

16. Stockholders' Equity and Dividend Restrictions

The ability of the Company to pay dividends depends primarily on the ability of the Associations to pay dividends to the Company. The Associations are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on the Associations' financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Associations must meet specific capital guidelines that involve quantitative measures of the Associations' assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Associations' capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Associations to maintain minimum amounts and ratios (set forth in the table below) of tangible and core capital (as defined in the regulations) to total assets (as defined), and of risk-based capital (as defined) to risk-based assets (as defined). Management believes, as of September 30, 2001, that the Associations meet all capital adequacy requirements to which they are subject.

As of September 30, 2001, the Associations were categorized as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized the Associations must maintain minimum total risk-based, Tier I risk-based, and Tier I core ("leverage") ratios as set forth in the table. There are no conditions or events since that date that management believes have changed the institutions' category.

The Associations' actual capital amounts and ratios are also presented in the table.

First Federal:	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions:
	Amount	Ratio		Amount	Ratio		Amount	Ratio
As of September 30, 2001:
Tangible capital (to Total Assets)	$ 111,928	7.01	%	$ 23,954	1.50	%
Core capital (to Total Assets)	111,928	7.01		63,876	4.00		$ 79,844	5.00	%
Tier I capital (to Risk-based Assets)	111,928	9.90					67,823	6.00
Risk-based capital (to Risk-based Assets)	121,057	10.71		90,432	8.00		113,039	10.00
As of September 30, 2000:
Tangible capital (to Total Assets)	$ 100,174	6.55	%	$ 22,954	1.50	%
Core capital (to Total Assets)	100,174	6.55		61,211	4.00		$ 76,514	5.00	%
Tier I capital (to Risk-based Assets)	100,174	9.69					62,017	6.00
Risk-based capital (to Risk-based Assets)	109,115	10.56		82,689	8.00		103,361	10.00
Peoples Federal	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions:
	Amount	Ratio		Amount	Ratio		Amount	Ratio
As of September 30, 2001:
Tangible capital (to Total Assets)	$ 51,018	7.18	%	$ 10,659	1.50	%
Core capital (to Total Assets)	51,018	7.18		28,425	4.00		$ 35,531	5.00	%
Tier I capital (to Risk-based Assets)	51,018	10.83					28,268	6.00
Risk-based capital (to Risk-based Assets)	52,650	11.17		37,691	8.00		47,114	10.00
As of September 30, 2000:
Tangible capital (to Total Assets)	$ 48,434	6.67	%	$ 10,896	1.50	%
Core capital (to Total Assets)	48,434	6.67		29,056	4.00		$ 36,320	5.00	%
Tier I capital (to Risk-based Assets)	48,434	10.28					28,277	6.00
Risk-based capital (to Risk-based Assets)	49,368	10.48		37,702	8.00		47,127	10.00

OTS capital distribution regulations specify the conditions relative to an institution's ability to pay dividends. The new regulations permit institutions meeting fully phased-in capital requirements and subject only to normal supervision to pay out 100 percent of net income to date over the calendar year and 50 percent of surplus capital existing at the beginning of the calendar year without supervisory approval. The regulations state that an institution subject to more stringent restrictions may make a request through the OTS to be subject to the new regulations. The Company has received approval from the OTS to be subject to the requirements of the new regulations.

The Company may not declare or pay a cash dividend on, or purchase, any of its common stock, if the effect thereof would cause the capital of the Associations to be reduced below the minimum regulatory capital requirements.

Under Delaware law, the Company may declare and pay dividends on its common stock either out of its surplus, as defined under Delaware law, or, if there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

17. Fair Value of Financial Instruments

The following table sets forth the fair value of the Company's financial instruments at September 30, 2001 and 2000:

					September 30,
					2001		2000
					Carrying Value	Fair Value	Carrying Value	Fair Value
Financial instruments:
	Assets:
		Cash and cash equivalents			$    97,554	$     97,554	$      63,992	$    63,992
		Investments held to maturity					249	255
		Investments available for sale			6,259	6,259	5,918	5,918
		Investment in capital stock of FHLB			33,150	33,150	39,325	39,325
		Loans receivable, net			1,905,333	1,958,345	1,838,497	1,824,936
		Mortgage-backed securities held to maturity					19	21
		Mortgage-backed securities available for sale			208,153	208,153	247,076	247,076
	Liabilities:
		Deposits:
			Demand deposits, savings accounts
				and money market accounts	650,262	650,262	520,293	520,293
			Certificate accounts		745,523	758,550	721,002	719,351
		Advances from FHLB			625,000	655,528	766,500	757,230
		Securities sold under agreements to repurchase			66,316	66,316	49,272	49,272
		Other short-term borrowings			23,750	23,750	12,250	12,250

Financial instruments of the Company for which fair value approximates the carrying amount at September 30, 2001, include cash and cash equivalents and investment in the capital stock of the FHLB. The fair value of investments, mortgage-backed securities and long-term debt is estimated based on bid prices published in financial newspapers or bid quotations received from independent securities dealers.

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as single-family residential, multi-family, non-residential, commercial and consumer. Each loan category is further segmented into fixed- and adjustable-rate interest terms and by performing and nonperforming categories.

The fair value of performing loans, except single-family residential mortgage loans, is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Company's historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions. For performing single-family residential mortgage loans, fair value is derived from quoted market prices for securities backed by similar loans, adjusted for differences between the market for the securities and the loans being valued and an estimate of credit losses inherent in the portfolio.

Under SFAS 107, the fair value of deposits with no stated maturity, such as regular savings accounts, checking and NOW accounts and money market accounts, is equal to the amount payable on demand. The fair value of certificate accounts is estimated using the rates currently offered for deposits of similar remaining terms. No value has been estimated for the Company's long-term relationships with customers (commonly known as the core deposit intangible) since such intangible asset is not a financial instrument pursuant to the definitions contained in SFAS 107. The fair value of FHLB advances is estimated based on current rates for borrowings with similar terms. The fair value of securities sold under agreements to repurchase approximates the carrying value.

Management uses its best judgment in estimating the fair value of non-traded financial instruments but there are inherent limitations in any estimation technique. For example, liquid markets do not exist for many categories of loans held by the Company. By definition, the function of a financial intermediary is, in large part, to provide liquidity where organized markets do not exist. Therefore, the fair value estimates presented herein are not necessarily indicative of the amounts which the Company could realize in a current transaction.

The information presented is based on pertinent information available to management as of September 30, 2001. Although management is not aware of any factors, other than changes in interest rates, that would significantly affect the estimated fair values, the current estimated fair value of these instruments may have changed significantly since that point in time.

18. First Financial Holdings, Inc. (Parent Company Only) Condensed Financial Information

At fiscal year end, the Company's principal asset was its investment in the Associations, and the principal source of income for the Company was dividends and equity in undistributed earnings from the Associations. The following is condensed financial information for the Company.

Statements of Financial Condition
		September 30,
		2001	2000
Assets
Cash and cash equivalents		$ 421	$ 45
Investments available for sale		1,628	443
Mortgage-backed securities available for sale, at fair value		250	364
Investment in subsidiaries		178,631	149,777
Other		286	160
Total assets		$ 181,216	$ 150,789
Liabilities and Stockholders' Equity
Accrued expenses		$ 573	$ 688
Other borrowings		23,750	12,250
Stockholders' equity		156,893	137,851
Total liabilities and stockholders' equity		$ 181,216	$ 150,789
Statements of Operations
	Year Ended September 30,
	2001	2000	1999
Income
Equity in undistributed earnings of subsidiaries	$ 15,661	$ 17,198	$   8,246
Dividend income	8,700	4,200	12,200
Interest income	135	85	145
Total income	24,496	21,483	20,591
Expenses
Interest expense	1,262	805	449
Salaries and employee benefits	997	917	855
Stockholder relations and other	747	625	593
Total expense	3,006	2,347	1,897
Net income before tax	21,490	19,136	18,694
Income tax benefit	(1,069)	(792)	(613)
Net income	$ 22,559	$ 19,928	$ 19,307

Statements of Cash Flows
			Year Ended September 30,
			2001	2000	1999
Operating Activities
Net income			$ 22,559	$ 19,928	$ 19,307
Adjustments to reconcile net income to net cash provided by operating activities
	Equity in undistributed earnings of subsidiaries		(15,661)	(17,198)	(8,246)
	Depreciation				15
	(Increase) decrease in accrued income and deferred expenses		(126)	850	(341)
	Increase (decrease) in accrued expenses		( 114)	341	35
Net cash provided by operating activities			6,658	3,921	10,770
Investing Activities
Repayments on mortgage-backed securities			115	141	509
Net (purchase) redemption of mutual funds			(1,185)	400	50
Equity investment in subsidiary			(8,850)		(1,510)
Net cash provided by (used in) investing activities			(9,920)	541	(951)
Financing Activities
Net increase in other borrowings			11,500	3,500	4,750
Proceeds from exercise of stock options			1,642	688	1,381
Treasury stock purchased			(1,222)	(1,334)	(9,676)
Dividends paid			(8,282)	(7,476)	(6,468)
Net cash provided by (used in) financing activities			3,638	(4,622)	(10,013)
Net increase (decrease) in cash and cash equivalents			376	(160)	(194)
Cash and cash equivalents at beginning of period			45	205	399
Cash and cash equivalents at end of period			$     421	$      45	$     205
Supplemental disclosures:
	Cash paid during the period for:
		Interest	$  1,262	$    805	$     449
		Income taxes	10,283	11,694	(150)
	Unrealized net loss on securities available for sale, net of income tax		2	(3)	(21)

20. Dividend Reinvestment and Direct Purchase Plan

The Company has a Dividend Reinvestment and Direct Purchase Plan, as amended December 1, 1998, for which shares are purchased only on the open market. At September 30, 2001, 1,316,119 shares had been purchased or transferred to the plan and remain in the Plan.

21. Quarterly Results (Unaudited):

Summarized below are selected financial data regarding results of operations for the periods indicated:

		First  Quarter	Second  Quarter	Third  Quarter	Fourth  Quarter	Year
2001
Total interest income		$ 43,812	$ 43,779	$ 43,436	$ 42,250	$ 173,277
Net interest income		15,958	16,879	18,286	19,246	70,369
Provision for loan losses		850	1,275	1,350	1,500	4,975
Income before income taxes		7,527	8,961	9,150	9,531	35,169
Net income		4,870	5,795	5,922	5,972	22,559
Earnings per common share:
	Basic	$     0.37	$     0.43	$     0.44	$     0.45	$       1.69
	Diluted	0.36	0.42	0.43	0.43	1.64
2000
Total interest income		$ 37,997	$ 39,409	$ 41,228	$ 43,008	$ 161,642
Net interest income		15,617	15,749	15,890	15,498	62,754
Provision for loan losses		840	690	640	575	2,745
Income before income taxes		7,280	7,634	7,790	7,731	30,435
Net income		4,767	4,925	5,100	5,136	19,928
Earnings per common share:
	Basic	$     0.36	$     0.37	$     0.38	$     0.39	$      1.49
	Diluted	0.35	0.36	0.38	0.38	1.47

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The Company has not, within the 24 months before the date of the most recent financial statements, changed its accountants.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained under the section captioned "Proposal I--Election of Directors" in the Company's Proxy Statement is incorporated herein by reference.

The following table sets forth certain information with respect to the executive officers of the Company and the Associations. The individuals listed below are executive officers of the Company and the Associations, as indicated.

Name	Age (1)		Position
A. Thomas Hood	55	President and Chief Executive Officer of the Company and
			President and Chief Executive Officer of First Federal
John L. Ott, Jr.	53	Senior Vice President of the Company and Senior Vice
			President/Retail Banking Division of First Federal
Charles F. Baarcke, Jr.	54	Senior Vice President of the Company and Senior Vice
			President/Lending Division of First Federal
George N. Magrath, Jr.	48	President and Chief Executive Officer of Peoples Federal
Susan E. Baham	51	Senior Vice President and Chief Financial Officer of the
			Company and First Federal

(1) At September 30, 2001.

The following is a description of the principal occupation and employment of the executive officers of the Company and the Associations during at least the past five years.

A. Thomas Hood has been the President and Chief Executive Officer of the Company since July 1, 1996. Mr. Hood had served as Executive Vice President and Chief Operating Officer of the Company from February 1, 1995 through June 30, 1996. Mr. Hood has also served as Treasurer of the Company and its Chief Financial Officer since 1984. Mr. Hood was named President and Chief Executive Officer of First Federal effective February 1, 1995. Prior to that time, he had been Executive Vice President and Treasurer of First Federal since 1984. As President and Chief Executive Officer of the Company and of First Federal, Mr. Hood is responsible for the daily business operations of the Company and of First Federal under policies and procedures established by the Board of Directors. Mr. Hood joined First Federal in 1975.

John L. Ott, Jr. is the Senior Vice President of the Company and First Federal and is responsible for directing and coordinating all retail banking operations, special savings and retirement programs and the sale of non-deposit investment products. He joined First Federal in 1971 and prior to becoming Senior Vice President of Retail Banking in 1985, he was the Senior Vice President for Branch Operations.

Charles F. Baarcke, Jr. is the Senior Vice President of the Company and First Federal. He is responsible for all lending operations, loan servicing and sales. He joined First Federal in 1975 and prior to becoming Senior Vice President for Lending Operations in 1985, he was the Vice President of Lending Operations.

George N. Magrath, Jr. became the President and Chief Executive Officer of Peoples Federal in 1993. Previously, Mr. Magrath was the Executive Vice President of Peoples Federal and was responsible for the general operations of Peoples Federal. Prior to serving as Executive Vice President, Mr. Magrath served as Senior Vice President, Lending.

Susan E. Baham became the Senior Vice President and Chief Financial Officer of the Company and of First Federal on July 1, 1996. Previously, Mrs. Baham served as Vice President and Chief Accounting Officer of the Company since 1988 and as Vice President of Finance of First Federal since 1984. Mrs. Baham is responsible for First Financial's treasury, finance, investor relations and strategic planning functions.

Pursuant to the Company's Bylaws, officers are elected on an annual basis. Directors of the Company are elected for a term of three years with approximately one-third of the directors standing for election each year.

ITEM 11. EXECUTIVE COMPENSATION

The information contained under the Section captioned "Proposal I -- Election of Directors" in the Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)	Security Ownership of Certain Beneficial Owners
	Information required by this item is incorporated herein by reference to the Section captioned "Voting Securities and Principal Holders Thereof" of the Proxy Statement.
(b)	Security Ownership of Management
	Information required by this item is incorporated herein by reference to the Sections captioned "Proposal I -- Election of Directors" and "Voting Securities and Principal Holders Thereof" of the Proxy Statement.
(c)	Changes in Control
	The Company is not aware of any arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change of control of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference to the Section captioned "Proposal I--Election of Directors" and "Voting Securities and Principal Holders Thereof" of the Proxy Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

1.	Consolidated Financial Statements and Report of Independent Auditors - see Item 8 for reference.
	All other schedules have been omitted as the required information is either inapplicable or included in the Notes to Consolidated Financial Statements.
2.	Exhibits

(3.1)	Certificate of Incorporation, as amended, of Registrant (1)
(3.2)	Bylaws, as amended, of Registrant (2)
(3.4)	Amendment to Registrant's Certificate of Incorporation(3)
(3.7)	Amendment to Registrant's Bylaws
(4)	Indenture, dated September 10, 1992, with respect to the Registrant's 9.375% Senior Notes, due September 1, 2001 (4)
(10.1)	Acquisition Agreement dated as of December 9, 1991 by and among the Registrant, First Federal Savings and Loan Association of Charleston and Peoples Federal Savings and Loan Association of Conway (4)
(10.3)	Employment Agreement with A. Thomas Hood, as amended (5)
(10.4)	Employment Agreement with Charles F. Baarcke, Jr. (6)
(10.5)	Employment Agreement with John L. Ott, Jr. (6)
(10.6)	1990 Stock Option and Incentive Plan (7)
(10.7)	1994 Outside Directors Stock Options-for-Fees Plan (8)
(10.8)	1994 Employee Stock Purchase Plan (8)
(10.9)	1996 Performance Equity Plan for Non-Employee Directors (9)
(10.10)	Employment Agreement with Susan E. Baham (5)
(10.11)	1997 Stock Option and Incentive Plan (10)
(10.12)	Investors Savings Bank of South Carolina, Inc. Incentive Stock Option Plan (11)
(10.13)	Borrowing Agreement with Bankers Bank (12)
(10.14)	Amendment to the 1994 Employee Stock Purchase Plan (13)
(10.15)	Amended Borrowing Agreement with Bankers Bank (14)
(10.16)	2001 Stock Option Plan (15)
(22)	Subsidiaries of the Registrant
(23)	Consent of Independent Auditors

(1)	Incorporated by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1993.
(2)	Incorporated by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
(3)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997.
(4)	Incorporated by reference to the Registrant's Registration Statement on Form S-8 File No. 33-55067.
(5)	Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1996.
(6)	Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1995.
(7)	Incorporated by reference to the Registrant's Registration Statement on Form S-8 File No. 33-57855.
(8)	Incorporated by reference to the Registrant's Proxy Statement for the Annual Meeting of Stockholders held on January 25, 1995
(9)	Incorporated by reference to the Registrant's Proxy Statement for the Annual Meeting of Stockholders held on January 22, 1997.
(10)	Incorporated by reference to the Registrant's Preliminary Proxy Statement for the Annual Meeting of Stockholders held on January 28, 1998.
(11)	Incorporated by reference to the Registrant's Registration Statement on Form S-8 File No. 333-45033.
(12)	Incorporated by reference to the Registrant's Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(13)	Incorporated by reference to the Registrant's Preliminary Proxy Statement for the Annual Meeting of Shareholders to be held on January 26, 2000.
(14)	Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended September 30, 2000.
(15)	Incorporated by reference to the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on Janaury 31, 2001.
3.	Reports on Form 8-K
	On September 14, 2001, the Company filed a Form 8-K announcing the approval of a stock repurchase program to acquire up to 600,000 shares of the Company's Common Stock.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
		FIRST FINANCIAL HOLDINGS, INC.
Date:	December 28, 2001		By:	/s/ A. Thomas Hood
				A. Thomas Hood
				President and Chief Executive Officer
				(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By:	/s/ A. Thomas Hood		By:	/s/ D. Van Smith
	A. Thomas Hood			D. Van Smith
	Director (Principal Executive Officer)			Director and Chairman
Date:	December 28, 2001		Date:	December 28, 2001
By:	/s/ Susan E. Baham		By:	/s/ Gary C. Banks, Jr.
	Susan E. Baham			Gary C. Banks, Jr.
	Senior Vice President			Director
	(Principal Financial Officer)
Date:	December 28, 2001		Date:	December 28, 2001
By:	/s/Paula Harper Bethea		By:	/s/ Paul G. Campbell, Jr.
	Paula Harper Bethea			Paul G. Campbell, Jr.
	Director			Director
Date:	December 28, 2001		Date:	December 28, 2001
By:	/s/ A. L. Hutchinson, Jr.		By:	/s/ Thomas J. Johnson
	A. L. Hutchinson, Jr.			Thomas J. Johnson
	Director			Director
Date:	December 28, 2001		Date:	December 28, 2001
By:	/s/ James C. Murray		By:	/s/ James L. Rowe
	James C. Murray			James L. Rowe
	Director			Director
Date:	December 28, 2001		Date:	December 28, 2001
By:	/s/ D. Kent Sharples
	D. Kent Sharples
	Director
Date:	December 28, 2001

EXHIBIT 3.7

Amendment to Registrant's Bylaws

At the November 20, 2001 board meeting First Financial Holdings, Inc. amended Article III, Section 2 of the First Financial Holdings, Inc. Bylaws to read as follows, effective December 20, 2001:

"SECTION 2. Number, Term and Election. The board of directors shall consist of ten members and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected or qualified. One class shall be elected by ballot annually. The board of directors shall be classified in accordance with the provisions of the Corporation's Certificate of Incorporation."

I, the undersigned Secretary of First Financial Holdings, Inc., do hereby certify that the above amendment was adopted by unanimous vote at the above stated board meeting.

	/s/ Phyllis B. Ainsworth
	Phyllis B. Ainsworth, Corporate Secretary
November 20, 2001

EXHIBIT 23

Independent Auditors' Consent

The Board of Directors

First Financial Holdings, Inc.:

We consent to incorporation by reference in the registration statement (No. 33-57855) on Form S-8 of First Financial Holdings, Inc. of our report dated October 23, 2001, with respect to the consolidated statements of financial condition of First Financial Holdings, Inc. and subsidiaries as of September 30, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended September 30, 2001, which report appears in the September 30, 2001, annual report on Form 10-K of First Financial Holdings, Inc.

/s/ KPMG LLP

Greenville, South Carolina

December 28, 2001