Basis of Presentation and Accounting Policies

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

NOTE 1. Basis of Presentation and Accounting Policies

     The accompanying unaudited consolidated financial statements for First Financial Holdings, Inc. (“First Financial”) and its wholly-owned subsidiaries, including First Federal Bank (“First Federal”), a South Carolina-chartered commercial bank, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X pursuant to the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

     Certain amounts have been reclassified to conform with the current year presentation. First Financial’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in First Financial’s 2012 Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission (“SEC”) on March 18, 2013. For interim reporting purposes, First Financial follows the same basic accounting policies, as updated by the information contained in this report. For further information, refer to the consolidated financial statements and footnotes included in First Financial’s 2012 Annual Report on Form 10-K.

     First Financial has one active wholly-owned trust formed for the purpose of issuing securities which qualify as regulatory capital and is considered a Variable Interest Entity (“VIE”). First Financial is not the primary beneficiary, and consequently, the trust is not consolidated in the accompanying consolidated financial statements. The trust issued $46.4 million in trust preferred securities to investors in 2004 which remains outstanding at March 31, 2013. The net proceeds from the issuance were used to purchase junior subordinated deferrable interest debentures issued by First Financial, which is the sole asset of the trust. The trust preferred securities held by this entity qualify as Tier 1 capital for First Financial and are classified as long-term debt on the Consolidated Balance Sheets, with the associated interest expense recorded in interest on borrowed money on the Consolidated Statements of Income. The expected losses and residual returns for this entity are absorbed by the trust preferred security holders and, consequently, First Financial is not exposed to loss related to this VIE.

Recently Adopted Accounting Pronouncements

FASB ASU 2013-02, “Comprehensive Income (Topic 220) - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”

     The objective of this Accounting Standards Update (“ASU”) is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments require First Financial to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required by GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, First Financial is required to cross-reference other disclosures required under GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of directly to income or expense in the same reporting period. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. First Financial previously accounted for its accumulated other comprehensive income in accordance with this guidance and adoption did not have a material impact on its financial position, results of operations or cash flows.

FASB ASU 2013-01, “Balance Sheet (Topic 210) - Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”

     This ASU addresses implementation issues about the scope of ASU 2011-11, Balance Sheet Topic 210: Disclosures about Offsetting Assets and Liabilities, which requires First Financial to disclose both gross information and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope includes derivatives, sale and repurchase agreements and reverse sales and repurchase agreements, as well as securities borrowing and securities lending arrangements. An entity is required to apply the amendments for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The adoption of ASU 2013-02 did not have a material impact on First Financial’s financial condition, results of operations or cash flows.

FASB ASU 2011-11, “Balance Sheet (Topic 210) - Disclosures about Offsetting Assets and Liabilities.”

     This ASU addresses the differences in reporting between GAAP and International Financial Reporting Standards (“IFRS”) regarding offsetting (netting) assets and liabilities and enhances current disclosures. ASU 2011-11 requires First Financial to disclose both gross information and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope includes derivatives, sale and repurchase agreements and reverse sales and repurchase agreements, as well as securities borrowing and securities lending arrangements. ASU 2011-11 will be effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. The adoption of ASU 2011-11 did not have a material impact on First Financial’s financial condition, results of operations or cash flows.

Correction of a Misstatement in the Consolidated Statement of Cash Flows

     First Financial has reclassified certain amounts from the original presentation in the Consolidated Statements of Cash Flows as reported in the Form 10-Q for the quarter ended March 31, 2012 to conform with current period presentation and for corrections of immaterial misstatements. The misstatements were the result of miscalculating certain activity between its operating and investing cash flows primarily related to purchased loan accounting. The effects of the correction to appropriately classify activity on the Consolidated Statements of Cash Flows had no impact to the Consolidated Balance Sheets, Statements of Income, Statements of Comprehensive Income or Statements of Changes in Shareholders’ Equity as of and for the quarter ended March 31, 2012.

     The following table presents the effect of these reclassifications on the Consolidated Statements of Cash Flows.

	For the Quarter Ended March 31, 2012
(in thousands)	As Previously Reported			Adjustment			As Adjusted
Accretion and amortization of purchase accounting adjustments	$	(5,292	)	$	4,046		$	(1,246	)
Loans originated for sale		(162,090	)		(154	)		(162,244	)
Proceeds from loans held for sale		161,213			1,068			162,281
Gain on sale of premises and equipment		---			(38	)		(38	)
FDIC reimbursement of covered assets		5,368			(608	)		4,760
Other		294			(1,254	)		(960	)
Net cash provided by operating activities		12,879			3,060			15,939
Decrease in loans, net		14,969			(2,870	)		12,099
Proceeds from sale of other real estate owned		6,638			(247	)		6,391
Increase in premises and equipment, net		(1,638	)		57			(1,581	)
Net cash used in investing activities		(21,712	)		(3,060	)		(24,772	)

SCBT Merger

     On February 19, 2013, First Financial entered into a merger agreement with SCBT. Subject to the terms and conditions set forth in the agreement, First Financial plans to merge with and into SCBT with SCBT continuing as the surviving corporation after the merger and First Federal will merge with and into SCBT’s bank subsidiary. The merger is expected to close in the third quarter of 2013, subject to customary closing conditions. Under the terms of the agreement, SCBT will add five First Financial board members to the combined company’s board. Robert J. Hill, Jr., president and chief executive officer of SCBT, will continue to serve as chief executive officer of the combined company and R. Wayne Hall, president and chief executive officer of First Financial, will be named president of the combined company.