Shareholders' Equity, Dividend Restrictions and Other Regulatory Matters

12 Months Ended

Sep. 30, 2011

Stockholders' Equity Note Disclosure [Text Block]

Note 12. Shareholders’ Equity, Dividend Restrictions and Other Regulatory Matters

Stock Issuances

     On December 5, 2008, pursuant to the United States Department of the Treasury’s (the “Treasury”) Troubled Asset Relief Program (“TARP”) Capital Purchase Program (“CPP”), First Financial issued and sold to the Treasury for an aggregate purchase price of $65.0 million in cash (i) 65,000 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), and (ii) a ten-year warrant to purchase up to 483,391 shares of First Financial’s common stock (the “Warrant”). The Series A Preferred Stock has $0.01 par value, carries a liquidation price of $1,000 per share, pays cumulative dividends at a rate of 5% per annum for the first five years and 9% per annum thereafter, and qualifies as Tier 1 capital. The Warrant has a par value of $.01 per share and an initial exercise price of $20.17 per share, subject to certain anti-dilution and other adjustments. First Financial used relative fair value as the basis for allocating the proceeds from the issuance of the Series A Preferred Stock and warrants. The assumptions incorporated into the Black Scholes fair value model include a dividend yield of 4.85%, volatility of 35.4% and a risk-free interest rate of 2.5%. First Financial cannot redeem the Series A Preferred Stock during the first three years after issuance except with the proceeds from an offering of perpetual preferred or common stock that qualifies as and may be included in Tier 1 capital. After three years, First Financial may redeem the Series A Preferred Stock at the liquidation price plus accrued and unpaid dividends. First Financial is accreting the book value of the Series A Preferred Stock using the effective interest method up to the par value of $65 million. The preferred shares are non-voting, other than class voting rights on matters that could adversely affect the shares. The warrant is immediately exercisable and expires ten years from the issuance date. It provides for an adjustment to the exercise price and to the number of shares of common stock issuable upon exercise pursuant to customary anti-dilution provisions.

     On September 29, 2009, First Financial raised $65.0 million through a public offering by issuing 4,193,550 shares of its common stock at $15.50 per share. On October 9, 2009, the underwriters of the public offering fully exercised their over-allotment options, resulting in the issuance of an additional 629,032 shares at $15.50 per share. The Treasury deemed this transaction as a “Qualified Equity Offering” pursuant to the purchase agreement entered into with the Treasury and adjusted the number of shares exercisable under the Warrant to 241,696 shares of common stock. Pursuant to the purchase agreement, the Treasury has agreed not to exercise voting power with respect to any shares of common stock issued upon exercise of the Warrant.

Earnings (Loss) Per Share

     Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is calculated by applying the treasury stock method. Under the treasury stock method, the exercise of dilutive stock options is assumed. The sum of the assumed proceeds of (a) the stock option exercises, (b) the amount of any tax benefits that would be credited to additional paid-in capital assuming exercise of the options, and (c) the unamortized compensation expense on in-the-money options not yet recognized pursuant to GAAP for share-based payments (see Note 14 to the Consolidated Financial Statements) are assumed to be used to purchase common stock at the average market price during the period. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased), if any, are included in the denominator of the diluted earnings (loss) per share calculation.

	Years Ended September 30,
(in thousands, except per share data)	2011			2010			2009
Net loss from continuing operations	$	(37,621	)	$	(39,308	)	$	(2,144	)
Preferred stock dividends		3,250			3,252			2,663
Accretion on preferred stock discount		591			556			431
Net loss from continuing operations available to common shareholders		(41,462	)		(43,116	)		(5,238	)
(Loss) income from discontinued operations, net of tax		(3,565	)		2,519			2,607
Extraordinary gain on acquisition, net of tax		---			---			28,857
Net (loss) income available to common shareholders	$	(45,027	)	$	(40,597	)	$	26,226
Weighted average basic shares		16,527			16,511			11,721
Effect of dilutive stock options		---			---			---
Weighted average dilutive shares		16,527			16,511			11,721
Net loss per common share from continuing operations
Basic	$	(2.51	)	$	(2.61	)	$	(0.45	)
Diluted		(2.51	)		(2.61	)		(0.45	)
Net (loss) income per common share from discontinued operations
Basic	$	(0.21	)	$	0.15		$	0.23
Diluted		(0.21	)		0.15			0.23
Net income per common share from extraordinary gain
Basic	$	---		$	---		$	2.46
Diluted		---			---			2.46
Net (loss) income per common share
Basic	$	(2.72	)	$	(2.46	)	$	2.24
Diluted		(2.72	)		(2.46	)		2.24

     Stock options and warrants which were not included in computing diluted earnings per share because the effects were antidilutive totaled 743,333, 962,547, and 1,082,917 as of September 30, 2011, 2010, and 2009, respectively.

Other Comprehensive Income (Loss)

     The following table presents changes in other comprehensive (loss) income.

	Years Ended September 30,
(in thousands)	2011			2010			2009
Unrealized holding (losses) gains, net of tax	$	(1,784	)	$	(620	)	$	17,452
Less reclassification adjustment for realized gains (losses), net of tax		330			(1,716	)		(2,462	)
Unrealized (losses) gains on securities available for sale, net of tax		(2,114	)		1,096			19,914
Change related to employee benefit plans, net of tax		(260	)		(179	)		(15	)
Total other comprehensive (loss) income	$	(2,374	)	$	917		$	19,899

Dividend Restrictions and Other Regulatory Matters

     First Financial’s ability to pay dividends depends primarily on the ability of First Federal and its other subsidiaries to pay dividends to First Financial. First Federal is 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 First Federal’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, First Federal must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balancesheet items as calculated under regulatory accounting practices. First Federal’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

     First Federal generally may make capital distributions during any calendar year in an amount up to 100% of net income for the year-to-date plus retained net income for the two preceding years, so long as it is well-capitalized after the distribution. If First Federal, however, proposes to make a capital distribution when it does not meet the requirements to be adequately capitalized (or will not following the proposed capital distribution) or that will exceed these net income limitations, it must obtain regulatory approval prior to making such a distribution. The regulators may object to any distribution based on safety and soundness concerns.

     Quantitative measures established by regulation to ensure capital adequacy require First Federal to maintain minimum amounts and ratios (as defined in the regulations and set forth in the table below) of tangible and core capital to total assets, and of risk-based capital to risk-based assets. As of September 30, 2011, First Federal meets all capital adequacy requirements to which it is subject and was categorized as well-capitalized under the regulatory framework for prompt corrective action. As a result of the Dodd-Frank Act, effective July 21, 2011, all savings and loan holding companies, including First Financial, are now regulated by the Federal Reserve. As such, effective with the March 31, 2012 reporting period, First Financial will be required to report consolidated risk-based capital metrics.

     First Federal’s capital amounts and ratios are presented in the following table:

(dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2011
Tangible capital to Total Assets	$	263,410		8.26	%	$	47,855		1.50	%	$	---		---	%
Core capital to Total Assets		263,410		8.26			127,615		4.00			159,518		5.00
Tier I capital to Risk-based Assets		263,410		11.26			---		---			139,598		6.00
Risk-based capital to Risk-based Assets		291,463		12.53			186,131		8.00			232,663		10.00
As of September 30, 2010
Tangible capital to Total Assets	$	275,769		8.47	%	$	48,863		1.50	%	$	---		---	%
Core capital to Total Assets		275,769		8.47			130,300		4.00			162,875		5.00
Tier I capital to Risk-based Assets		275,769		11.27			---		---			145,943		6.00
Risk-based capital to Risk-based Assets		305,161		12.55			194,591		8.00			243,239		10.00

     Under Delaware law, First Financial 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. As a recipient of funds from the Treasury’s TARP CPP, First Financial is restricted from paying quarterly common stock dividend payments in excess of $0.255 per share, the dividend in effect at the time First Financial received TARP CPP funds, unless approved by Treasury and the Federal Reserve, as First Financial’s primary regulator.

     First Federal is required by regulatory agencies to maintain certain minimum balances of cash or noninterest-bearing deposits with the Federal Reserve. The required balance at September 30, 2011 and September 30, 2010 was $5.0 million.