First Financial Holdings Signs a Definitive Agreement to Sell $197.9M of Selected Performing Loans and Classified Assets

First Financial Holdings, Inc.

announced today that its wholly-owned subsidiary, First Federal Savings and Loan Association entered into a definitive agreement to sell $197.9 million of selected performing loans and classified assets in a single transaction to affiliates of Värde Partners, Inc., and three of Värde's joint venture partners, affiliates of FirstCity Financial Corporation

, Mountain Real Estate Group and Shelving Rock Partners. The sale, which is expected to close on or about October 27, 2011, is structured with two consecutive closings. The first closing is comprised of 504 assets with an aggregate contractual principal balance of $194.8 million as of the August 31, 2011 sale cutoff date. The Cutoff Date balance reflects the June 30, 2011 held for sale loan pool balance, adjusted for principal pay-downs, migration to other real estate owned, and loan resolutions between June 30, 2011 and the Cutoff Date. Included in these assets is $16.0 million of contractual principal balances on 20 loans that migrated to OREO subsequent to the Cutoff Date. The second closing is expected to occur in November and will include an additional 8 OREO properties totaling $3.1 million of contractual principal balances as of the Cutoff Date. Gross proceeds from the October 27, 2011 closing are expected to total approximately $81 million. The carrying value of these assets as of the Cutoff Date was $58.8 million and this transaction is expected to result in a pretax gain of approximately $20 million which will be realized during the quarter ending December 31, 2011. The sale is subject to the satisfaction of customary closing conditions. As a result of completed loan resolutions and OREO sales that occurred during the fourth fiscal quarter of 2011, nonperforming assets at September 30, 2011 were $108.5 million, which included $41.3 million of nonperforming assets held for sale and $27.7 million of assets covered under a loss-share agreement with the FDIC. Non-covered nonperforming assets as a percent of total assets were 2.52% at September 30, 2011. Considering the results of this sale transaction, pro forma non-covered nonperforming assets as a percent of total assets would have been 1.23% at that date.