Charleston, South Carolina (July 20, 2005) – First Financial Holdings, Inc. (NASDAQ: FFCH) reported today net income for the third quarter of fiscal 2005 of $6.2 million, or $0.49 per diluted share.  These results compare with net income for the third quarter of fiscal 2004 of $6.7 million, or $0.52 per diluted share.  Net income for the nine months ended June 30, 2005 and 2004 totaled $19.1 million and $18.3 million, respectively. Diluted earnings per share totaled $1.52 and $1.42, respectively, for the nine months ended June 30, 2005 and 2004.      

President and Chief Executive Officer A. Thomas Hood commented, “Results in our third quarter ended June 30, 2005 as compared with the comparable quarter ended June 30, 2004 reflect lower loan servicing fees as a result of changes in valuations of mortgage servicing rights.  Remaining operations have been consistent with our expectations for the quarter.  Despite the continuation of Federal Reserve policies intended to increase interest rates, during the third quarter of fiscal 2005 the Company’s net interest margin of 3.34% remained fairly consistent with the most recent linked quarter ended March 31, 2005.  Compared with the same quarter one year ago, the net interest margin declined only two basis points from 3.36%.  Changes in the average balances of interest earning assets from the quarter ended June 30, 2004 to the current quarter ended June 30, 2005 included a $54.9 million increase in average loans while other average earning assets declined by $28.3 million.”

Hood continued, “Non-interest revenues were $1.4 million lower in the current quarter as compared to the third quarter of fiscal 2004.  Despite an increase in short term interest rates during the quarter ended June 30, 2005, longer term interest rates declined during the current quarter, resulting in higher estimated prepayment speeds for loans serviced and the recording of an additional mortgage servicing impairment of $507 thousand in the current quarter.  During the comparable quarter ended June 30, 2004, servicing rights valuations increased significantly as longer term rates moved up substantially, resulting in a positive valuation adjustment of approximately $1.7 million during that period.  Excluding these valuation adjustments, non-interest revenues increased $744 thousand, or 7.0% during the current quarter as compared to the June 2004 quarter. During the quarter ended June 30, 2004, the Company recorded $659 thousand in net gains on sales of investment and mortgage-backed securities while there was no similar activity in the current quarter.  Gains from loan sales in the current quarter of $816 thousand reflected an increase from $390 thousand in the quarter ended June 30, 2004.”   

Total expenses declined by $143 thousand during the quarter ended June 30, 2005; however, expenses in the comparable quarter ended June 30, 2004 included a $1.5 million prepayment fee for the early repayment of FHLB advances.  Excluding the prepayment fee from prior year’s expenses, total expenses increased by $1.4 million, or 7.7%, from the comparable quarter in 2004.  Salaries and employee benefits increased by $899 thousand, with a portion attributable to the opening of several new offices since June 2004 and from increases for health and other benefit programs.  The total for all of the remaining expenses categories increased by $506 thousand, or 7.3% between the two periods.  Approximately 50% of this increase was attributable to increased expenses for Sarbanes Oxley compliance costs.

First Financial’s asset quality indicators continued to improve during the third quarter of fiscal 2005.  The Company’s reserve coverage of non-performing loans increased to 210.6% at June 30, 2005 compared with 169.8% one year ago and 190.9% for the quarter ended March 31, 2005.  Annualized loan net charge-offs as a percentage of net loans were 0.26% in the quarter ended June 30, 2005, compared with 0.24% in the comparable period ended June 30, 2004.  Problem assets, which include problem loans as well as properties acquired, as a percentage of total assets declined to 0.36% at June 30, 2005 compared to 0.53% one year ago and 0.41% at March 31, 2005.  This ratio has declined in each consecutive quarter end since December 31, 2003.  Most of the reduction in problem assets from one year ago was the result of a 22.0% decline in non-accrual loans and a 47.0% decrease in real estate and other assets acquired.

 “We are particularly pleased with our credit quality today as our problem asset levels continue to decline while the coverage of non-performing loans has grown significantly.  We recognize that the treasury yield curve has been challenging to new product spreads during this year.  We believe our Company has performed well, holding our cost of funds increases to only moderate amounts while the Federal Reserve continues to increase short term interest rates.  We are making significant progress on our key goals for fiscal 2005 and remain focused on increasing opportunities for non-spread revenues as well as executing our growth initiatives.  During the June 2005 quarter, we relocated our North Myrtle Beach Office from Highway 17 to Main Street.  In September 2005, we will be opening our eighth Wal-Mart location in Summerville, South Carolina, with plans to open two additional Wal-Mart sales offices within the next year.  Our focus remains on taking advantage of the very favorable conditions in our major markets, continuing to consider new expansion opportunities and growing revenues as well as the balance sheet.  For the first nine months we have achieved a very respectable 15.08% annualized return on equity and an annualized return of 1.03% on assets compared to 14.81% and 1.01%, respectively, for the first nine months of fiscal 2004.”  Hood concluded. 

As of June 30, 2005, First Financial had total assets of $2.5 billion, and deposits of $1.6 billion.  At June 30, 2005, loans receivable totaled $1.9 billion and stockholders’ equity totaled $172.4 million.  Book value per common share increased to $14.08 at June 30, 2005 compared to $13.18 at June 30, 2004. 

First Financial is the holding company of First Federal, which operates 48 offices located in the Charleston metropolitan area, Horry, Georgetown, Florence and Beaufort counties in South Carolina and Brunswick County in coastal North Carolina.  The Company also provides insurance, brokerage and trust services through First Southeast Insurance Services, The Kimbrell Insurance Group, First Southeast Investor Services and First Southeast Fiduciary and Trust Services.

NOTE:  A. Thomas Hood, President and CEO of the Company, and Susan Baham, Executive Vice President and CFO of the Company, will discuss these results in a conference call at 10:00 AM (ET) tomorrow, July 21, 2005.  The call can be accessed via a webcast available on First Financial’s website at www.firstfinancialholdings.com.

Certain matters in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements relate to, among others, expectations of the business environment in which the Company operates, projections of future performance, including operating efficiencies, perceived opportunities in the market, potential future credit experience, and statements regarding the Company’s mission and vision.  These forward-looking statements are based upon current management expectations, and may, therefore, involve risks and uncertainties.  Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain.  The Company’s actual results, performance or achievements may differ materially from those suggested, expressed or implied by forward-looking statements due to a wide range of factors including, but not limited to, the general business environment, general economic conditions nationally and in the State of South Carolina, interest rates, the South Carolina real estate market, the demand for mortgage loans, competitive conditions between banks and non-bank financial services providers, regulatory changes and other risks detailed in the Company’s reports filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended September 30, 2004.  Accordingly, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on these statements.

For additional information about First Financial, please visit our web site at www.firstfinancialholdings.com or contact Susan E. Baham, Executive Vice President and CFO, (843) 529-5601.

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