Common Equity

12 Months Ended

Mar. 31, 2013

Common Equity

Note 12 – Common Equity

Common Stock Warrants

The Corporation’s election to participate in the Department of the Treasury’s (“Treasury”) Capital Purchase Program (“CPP”) in January 2009 resulted in the Treasury purchasing the Corporation’s preferred stock, along with warrants to purchase approximately 7,399,103 shares of common stock. The warrants have a term of 10 years and are exercisable at any time, in whole or in part, at an exercise price of $2.23 per share (subject to certain anti-dilution adjustments).

The following assumptions were used in estimating the fair value for the warrants at the date of issuance: a weighted average expected life of 10 years, a risk-free interest rate of 3.35%, an expected volatility of 50.12%, and a dividend yield of 1.55%. Based on these assumptions, the estimated fair value of the warrants was $37.1 million. The weighted average expected life of the warrants represents the period of time the instruments were expected to be outstanding. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility was based on the historical volatility of the Corporation’s stock.

Shareholders’ Rights Plan

On November 5, 2010, a shareholder rights plan was entered into designed to reduce the likelihood that an “ownership change” under U.S. federal income tax laws will be experienced. This rights plan is similar to rights plans adopted by other public companies with significant tax attributes. The purpose of the rights plan is to protect our ability to use our tax assets, such as net operating loss carryforwards and built-in losses, to offset future taxable income, which would be substantially limited if we experienced an “ownership change” as defined under Section 382 of the Internal Revenue Code and related Internal Revenue Service pronouncements. In general, an ownership change would occur if our “5-percent shareholders,” as defined under Section 382, collectively increase their ownership by more than 50 percentage points over a rolling three-year period. As part of the rights plan, the Board declared a dividend of one preferred share purchase right for each outstanding share of its common stock. The rights were distributed to shareholders of record as of November 22, 2010, as well as to holders of shares of our common stock issued after that date, but would only be activated if triggered by the rights plan.