FDIC Indemnification Asset

12 Months Ended

Sep. 30, 2011

FDIC Indemnification Asset [Text Block]

NOTE 6. FDIC Indemnification Asset

     First Federal has a loss-share agreement with the FDIC related to the Cape Fear Acquisition which affords First Federal significant protection regarding certain acquired assets. Under the loss sharing agreement, First Federal shares in the losses on assets covered under the agreement with the FDIC. On losses up to $110.0 million, First Federal assumes the first $31.5 million and the FDIC reimburses First Federal for 80% of the losses between $31.5 million and $110.0 million. On losses exceeding $110.0 million, the FDIC will reimburse First Federal for 95% of the losses. The expected reimbursements under the loss sharing agreement were recorded as an indemnification asset at the time of the Cape Fear Acquisition in April 2009.

          The following table presents the change in the FDIC indemnification asset during the current fiscal year.

(in thousands)	Gross Receivable			Discount			Net Receivable
Balance at September 30, 2010	$	70,079		$	(2,496	)	$	67,583
Payments from FDIC for losses on covered assets		(19,212	)		—			(19,212	)
Valuation adjustment on acquired other real estate owned		79			—			79
Discount accretion		—			2,015			2,015
Balance at September 30, 2011	$	50,946		$	(481	)	$	50,465

     During the year ended September 30, 2011, First Federal received payments totaling $20.5 million from the FDIC, of which $19.2 million for loss claims on loans was credited to the FDIC indemnification asset. The $1.3 million balance was for claims against reimbursable expenses and was credited to OREO expenses, net and other loan expense on the Consolidated Statements of Operations. These payments satisfied all claims through June 30, 2011. As of the September 30, 2011 quarterly reporting period, First Federal filed a $1.6 million claim with the FDIC under the terms of the loss share agreement, and payment is expected.