As a result of First Federal’s charter conversion and Federal Reserve membership in February 2012, First Federal is subject to Federal Reserve Supervisory Letter SR 91-17, which provides guidance that de novo state member banks and converting thrifts maintain a Tier 1 leverage capital ratio of 9.00% for the first three years as a member bank unless an exception is granted.
On April 25, 2013, First Financial declared a quarterly cash dividend of $12.50 per share on its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, payable on May 15, 2013 to preferred shareholders of record as of May 3, 2013. First Financial also declared a quarterly cash dividend of $0.05 per common share, payable on May 23, 2013 to shareholders of record as of May 9, 2013.
Contractual obligations and off-balance sheet arrangements are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in First Financial’s 2012 Annual Report on Form 10-K. There have been no material changes to those obligations or arrangements outside the ordinary course of business. See Note 9 to the Consolidated Financial Statements for additional information.
An important component of First Federal’s asset/liability structure is the level of liquidity available to meet the needs of its customers and creditors. First Federal’s primary sources of funds consist of retail and commercial deposits, borrowings from the FHLB and Federal Reserve, other short term borrowings, principal repayments on loans and cash flows on investment securities, the sale of loans and securities and brokered deposits. First Federal’s desired level of liquidity is determined by management in conjunction with the Asset/Liability Committee (“ALCO”) of First Federal. The level of liquidity is based on management’s strategic direction, commitments to make loans and the ALCO’s assessment of First Federal’s ability to generate funds. Management believes First Federal has sufficient liquidity to meet future funding needs.
As of March 31, 2013, First Federal had the capacity to borrow an additional $714.6 million from the FHLB of Atlanta, the Federal Reserve, and through federal funds lines with three unaffiliated banks. Neither the line with the Federal Reserve nor the federal funds lines had outstanding balances at March 31, 2013.
As a holding company, First Financial conducts its business through its subsidiaries and is not subject to any regulatory liquidity requirements. Potential sources for First Financial’s payment of principal and interest on its borrowings, preferred and common
stock dividends and future funding needs include dividends from First Federal and other subsidiaries, payments from existing cash reserves, sales of marketable securities, and additional borrowings or stock offerings.Potential uses of First Financial’s cash and cash equivalents include dividend and interest payments, operating expenses, or capital contributions to its subsidiaries, including First Federal. As of March 31, 2013, First Financial had cash and cash equivalents of $14.1 million, compared with $18.1 million at December 31, 2012. The decrease was primarily the result of quarterly dividend payments to preferred and common shareholders and merger related expenses.
Asset and Liability Management
First Federal’s treasury function manages the wholesale segments of the balance sheet, including investments, purchased funds, long-term debt and derivatives. Management’s objective is to achieve the maximum level of stable earnings over the long term, while controlling the level of interest rate risk, credit risk, market risk and liquidity risk, and optimizing capital utilization. Market risk reflects the risk of economic loss resulting from adverse changes in market price and interest rates. This risk of loss can be reflected in diminished current market values and/or reduced potential net interest income in future periods. First Federal’s market risk arises primarily from interest rate risk inherent in its lending, deposit-gathering, and other funding activities. The structure of its loan, investment, deposit, and borrowing portfolios is such that a significant change in interest rates may adversely impact net market values and net interest income. In managing the investment portfolio to achieve its stated objective, First Federal invests predominately in agency securities, agency and private label mortgage-backed securities, asset-backed and collateralized debt securities including trust preferred securities, corporate bonds and municipal bonds. Treasury strategies and activities are overseen by First Federal’s ALCO and Investment Committee. ALCO activities are summarized and reviewed quarterly with the Board of Directors.
Interest Rate Risk
The nature of the banking business, which involves paying interest on deposits at varying rates and terms and charging interest on loans at other rates and terms, creates interest rate risk. As a result, net interest margin, earnings and the market value of assets and liabilities are subject to fluctuations arising from the movement of interest rates. First Federal manages several forms of interest rate risk, including asset/liability mismatch, basis risk and prepayment risk. An objective of First Federal’s asset/liability management policy is to maintain a balanced risk profile so that variations to net interest income stay within policy limits. A sudden and substantial increase or decrease in interest rates may adversely impact earnings to the extent that the interest rates on interest-earning assets and interest-bearing liabilities do not change at the same speed, to the same degree or on the same basis. Asset/liability management is the process by which First Federal evaluates and changes, when appropriate, the mix, maturity and pricing of assets and liabilities in an attempt to reduce a materially adverse impact on earnings resulting from the direction, frequency, and magnitude of change in market interest rates. Although the net interest income of any financial institution is perceived as being vulnerable to fluctuations in interest rates, management has attempted to maintain this vulnerability within board limits.
First Federal’s prepayment risk arises from the loans originated and investment securities purchased in which the underlying assets are real estate secured mortgage loans and may payoff prior to their contractual maturities. Both of these types of assets are subject to principal reduction due to principal prepayments resulting from borrowers’ elections to refinance the underlying mortgages based on market and other conditions. Prepayment rate projections utilize actual prepayment speed experience and available market information on similar instruments. The prepayment rates form the basis for income recognition of premiums or discounts on the related assets. Changes in prepayment estimates may cause the earnings recognized on these assets to vary over the term that the assets are held, creating volatility in the net interest margin. Prepayment rate assumptions are monitored and updated monthly to reflect actual activity and the most recent market projections.
First Federal’s ALCO has established policies and monitors results to manage interest rate risk. The dynamic repricing gap analysis provides a measurement of repricing risk as of a point in time by allocating rate sensitive assets and liabilities to repricing periods. The sum of assets and liabilities maturing or repricing in each of these periods is compared for mismatches within each period. Core deposits lacking contractual maturities or repricing frequencies are placed into repricing and maturity periods based on the historical price sensitivity of such liabilities to interest rate movements. Repricing periods for assets include the effects of expected prepayments on cash flows. Particular assets and liabilities, such as adjustable rate mortgages, are also evaluated for the manner in which changes in interest rates or selected indices may affect their repricing. Another measurement is asset/liability modeling and interest income simulation to assess varying interest rate and balance sheet mix assumptions. First Federal utilizes various balance sheet strategies to adjust its interest rate sensitivity position as necessary, including decisions on the pricing, maturity, and marketing of particular loan or deposit products, and to make decisions regarding the structure of maturities for borrowings or wholesale funding options.
Based on the dynamic gap analysis, First Federal is slightly liability-sensitive within one year, with rate-sensitive liabilities exceeding rate-sensitive assets by $68.8 million or 2.14% of total assets as of March 31, 2013. This is compared with a liability-sensitive position of $119.8 million or 3.73% of total assets as of December 31, 2012. The decrease in the liability-sensitive position was primarily the result of the reduction in certificates of deposit during the current quarter and the addition of core deposits which were placed in repricing periods greater than one year based on their respective historical price sensitivity as discussed above.
Repricing gap analysis is limited in its ability to measure interest rate sensitivity. The repricing characteristics of assets, liabilities, and off-balance sheet derivatives can change in different interest rate scenarios, thereby changing the repricing position from that outlined above. Further, basis risk is not captured by repricing gap analysis. Basis risk is the risk that changes in interest rates will reprice interest-bearing liabilities differently from interest-earning assets, thus causing an asset/liability mismatch. This analysis does not take into consideration the repricing dynamics in adjustable-rate loans, such as minimum and maximum annual
53
and lifetime interest rate adjustments and also the index utilized and whether the index is a current or lagging index. Included in the analysis are estimates of prepayments on fixed-rate loans and mortgage-backed securities in a one-year period and expectations that under current interest rates, certain advances from the FHLB will not be called and loans will not reprice due to floors. Also included in the analysis are estimates of core deposit decay rates, based on recent studies and regression analysis of core deposits.
An institution which is liability-sensitive would normally have a negative effect on net interest income in a rising rate environment. The opposite would generally occur when an institution has a positive gap position, or is asset-sensitive. Net interest income simulations were performed as of March 31, 2013 to evaluate the impact of market rate changes on net interest income over the subsequent 12 months assuming a static balance sheet composition. Based on the simulations, while First Federal is slightly liability-sensitive, net interest income would be expected to increase from what it would be if rates were to remain at March 31, 2013 levels by 1.29% if market interest rates were to increase immediately by 100 basis points in a parallel shift, while the increase in net interest income would be expected to be approximately 2.12% if market interest rates were to increase immediately by 200 basis points in a parallel shift. While the anticipated increase in net interest income is contrary for an institution with a negative gap, the nominal movement is primarily related to the lag matrix on the repricing of liabilities and the timing and magnitude of asset repricing relative to liabilities. There are fewer assets adjusting immediately, however loans generally move fully with the related index or yield curve change, while deposits may not change on a one-to-one correlation with the index or yield curve. The difference in the rate of change for assets relative to liabilities and the lagged timing of the liability changes has resulted in the projected slight increase in net interest income in a rising rate environment.
Net interest income simulation for 100 and 200 basis point declines in market rates were not performed at March 31, 2013 as the results would not have been meaningful given the current levels of short-term market interest rates. Net interest income is not only affected by the level and direction of interest rates, but also by the shape of the yield curve, pricing spreads in relation to market rates, balance sheet growth, the mix of different types of assets and liabilities, and the timing of changes in these variables. Another test measures the economic value of equity at risk by analyzing the impact of an immediate change in interest rates on the market value of portfolio equity. If market interest rates were to increase immediately by 100 or 200 basis points (a parallel and immediate shift in the yield curve), the economic value of equity would increase by 1.80% and increase by 2.90%, respectively, from where it would be if rates were to remain at March 31, 2013 levels. The increases are primarily the result of the core deposit intangibles, which increase in value as interest rates rise. Scenarios different from those outlined above, whether different by timing, level, or a combination of factors, could produce different results.
Computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay rates, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions that may be taken in response to changes in interest rates.
Critical Accounting Policies and Estimates
First Financial’s Consolidated Financial Statements are prepared in accordance with GAAP and follow general practices within the financial institutions industry. Application of these principles requires management to make estimates, assumptions, and complex judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements. Accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Actual results could differ significantly from these estimates. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates that are particularly susceptible to significant change include the determination of the allowance for loan losses; fair value measurements; income taxes; and business combinations, including the method of accounting for loans acquired and estimating the FDIC indemnification asset. First Financial believes that these estimates and the related policies discussed below are important to the portrayal of its financial condition and results of operations. Therefore, management considers them to be critical accounting policies and discusses them directly with the Audit Committee of the Board of Directors. First Financial’s accounting policies are more fully described in Note 1 to the Consolidated Financial Statements contained in First Financial’s 2012 Annual Report on Form 10-K, and the more significant assumptions and estimates made by management are more fully described in “Management’s Discussion and Results of Operations – Critical Accounting Policies and Estimates” in First Financial’s 2012 Annual Report on Form 10-K. For additional information regarding updates, see Note 1 to the Consolidated Financial Statements in this report.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this report includes non-GAAP financial measures such as the efficiency ratio, tangible common equity (“TCE”) to tangible assets ratio, tangible common book value (“TBV”) per share, pre-tax pre-provision earnings and adjusted net interest margin. First Financial believes these non-GAAP financial measures provide additional information that is useful to investors in understanding its underlying performance, business and performance trends, and such measures help facilitate performance comparisons with others in the banking industry. Non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. Readers should be aware of these limitations and should be cautious in their use of such measures. To mitigate these limitations, First Financial has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that its performance is properly reflected to facilitate consistent period-to-period comparisons. Although First Financial believes these non-
54
GAAP financial measures enhance readers’ understanding of its business and performance, they should not be considered in isolation, or as a substitute for GAAP basis financial measures. Readers should consider First Financial’s performance and financial condition as reported under GAAP and all other relevant information when assessing First Financial’s performance or financial condition.
The efficiency ratio measures the amount of revenue (defined as the sum of net interest income on a fully tax-equivalent basis and noninterest income) needed to cover noninterest expenses. In accordance with industry standards, First Financial believes that presenting net interest income on a taxable equivalent basis when calculating the efficiency ratio, using a 35% federal tax rate, allows comparability with industry peers by eliminating the effect of the differences in portfolios attributable to the proportion represented by both taxable and tax-exempt investments.
First Financial believes that the exclusion of other intangible assets facilitates the comparison of results for ongoing business operations. The TCE ratio and TBV have become a focus of some investors, analysts and banking regulators. Management believes these measures may assist in analyzing First Financial’s capital position absent the effects of intangible assets and preferred stock. Because TCE and TBV are not formally defined by GAAP or codified in federal banking regulations, these measures are considered to be non-GAAP financial measures. However, analysts and banking regulators may assess First Financial’s capital adequacy using TCE or TBV and, therefore, management believes that it is useful to provide investors the ability to assess its capital adequacy on the same basis.
First Financial believes that pre-tax pre-provision earnings is a useful measure in assessing its core operating performance, particularly during times of economic stress. This measurement, as defined by management, represents total revenue (net interest income plus noninterest income) less noninterest expense. As recent results for the banking industry demonstrate, credit write-downs, loan charge-offs and related provisions for loan losses can vary significantly from period to period, making a measure that helps isolate the impact of credit costs on profitability important to investors.
The performance of the Cape Fear loans acquired from the FDIC in April 2009 has been better than originally projected. During 2012, cash payments received exceeded First Federal’s initial investment in the pool and, in accordance with GAAP, First Federal began recognizing the cash payments in net interest income. As the amount and frequency of cash payments for the Cape Fear loan pool are not predictable, this creates volatility in net interest margin. First Financial believes that adjusting net interest margin to remove the effect of the incremental loan accretion and interest income associated with the Cape Fear loan pool provides a more consistent trend to compare First Federal’s historical performance against itself as well as its net interest margin with its peers.
The following table presents the calculation of these non-GAAP measures.
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| | | | | | | | | | | | | | | | | | | | |
| | | |
| | As of and for the Quarters Ended |
| | |
(dollars in thousands, except per share data) | | March 31,
2013 | | December 31,
2012 | | September 30,
2012 | | June 30,
2012 | | March 31,
2012 |
| | | | | | | | | | | |
Efficiency Ratio | | | | | | | | | | | | | | | | | | | | |
Net interest income (A) | | $ | 33,138 | | | $ | 35,089 | | | $ | 33,197 | | | $ | 31,713 | | | $ | 28,252 | |
Taxable equivalent adjustment (B) | | | 158 | | | | 168 | | | | 184 | | | | 226 | | | | 182 | |
Noninterest income (C) | | | 15,837 | | | | 16,173 | | | | 14,548 | | | | 32,530 | | | | 13,182 | |
(Loss) gain on acquisition (D) | | | --- | | | | (661 | ) | | | --- | | | | 14,550 | | | | --- | |
Net securities (losses) gains (E) | | | (268 | ) | | | (144 | ) | | | 189 | | | | 3,398 | | | | (69 | ) |
Noninterest expense (F) | | | 35,120 | | | | 35,357 | | | | 33,029 | | | | 39,250 | | | | 28,709 | |
FHLB prepayment termination charge (G) | | | --- | | | | --- | | | | --- | | | | 8,525 | | | | --- | |
Efficiency ratio: (F-G)/(A+B+C-D-E)
(non-GAAP) | | | 71.09 | % | | 67.69 | % | | 69.19 | % | | 66.05 | % | | 68.87 | % |
| | | | | | | | | | | | | | | | | | | | |
Tangible Assets and Tangible Common Equity | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 3,216,647 | | | $ | 3,215,558 | | | $ | 3,245,487 | | | $ | 3,304,174 | | | $ | 3,145,538 | |
Other intangible assets | | | (7,573 | ) | | | (8,025 | ) | | | (8,478 | ) | | | (8,931 | ) | | | (2,310 | ) |
| | | | | | | | | | | | | | | | | | | | |
Tangible assets (non-GAAP) | | $ | 3,209,074 | | | $ | 3,207,533 | | | $ | 3,237,009 | | | $ | 3,295,243 | | | $ | 3,143,228 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total shareholders’ equity | | $ | 304,689 | | | $ | 299,641 | | | $ | 292,500 | | | $ | 287,264 | | | $ | 278,043 | |
Preferred stock | | | (65,000 | ) | | | (65,000 | ) | | | (65,000 | ) | | | (65,000 | ) | | | (65,000 | ) |
Other intangible assets | | | (7,573 | ) | | | (8,025 | ) | | | (8,478 | ) | | | (8,931 | ) | | | (2,310 | ) |
| | | | | | | | | | | | | | | | | | | | |
Tangible common equity (non-GAAP) | | $ | 232,116 | | | $ | 226,616 | | | $ | 219,022 | | | $ | 213,333 | | | $ | 210,733 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Shares outstanding, end of period (000s) | | | 16,533 | | | | 16,527 | | | | 16,527 | | | | 16,527 | | | | 16,527 | |
| | | | | | | | | | | | | | | | | | | | |
Tangible common equity to tangible assets
(non-GAAP) | | | 7.23 | % | | 7.07 | % | | 6.77 | % | | 6.47 | % | | 6.70 | % |
Book value per common share | | $ | 14.50 | | | $ | 14.20 | | | $ | 13.77 | | | $ | 13.45 | | | $ | 12.89 | |
Tangible common book value per share
(non-GAAP) | | | 14.04 | | | | 13.71 | | | | 13.25 | | | | 12.91 | | | | 12.75 | |
| | | | | | | | | | | | | | | | | | | | |
Pre-tax Pre-provision Earnings | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | $ | 7,883 | | | $ | 11,744 | | | $ | 10,183 | | | $ | 20,296 | | | $ | 5,980 | |
Provision for loan losses | | | 5,972 | | | | 4,161 | | | | 4,533 | | | | 4,697 | | | | 6,745 | |
| | | | | | | | | | | | | | | | | | | | |
Pre-tax pre-provision earnings (non-GAAP) | | $ | 13,855 | | | $ | 15,905 | | | $ | 14,716 | | | $ | 24,993 | | | $ | 12,725 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Impact of Improved Performance of Cape Fear Loan Pool | | | | | | | | | | | | | | | | | | | | |
Net interest income | | $ | 33,138 | | | $ | 35,089 | | | $ | 33,197 | | | $ | 31,713 | | | $ | 28,252 | |
Tax equivalent adjustment | | | 158 | | | | 168 | | | | 184 | | | | 226 | | | | 182 | |
| | | | | | | | | | | | | | | | | | | | |
Net interest income on taxable equivalent basis (A) | | | 33,296 | | | | 35,257 | | | | 33,381 | | | | 31,939 | | | | 28,434 | |
Effect of Cape Fear incremental accretion | | | (3,849 | ) | | | (4,048 | ) | | | (472 | ) | | | --- | | | | --- | |
| | | | | | | | | | | | | | | | | | | | |
Net interest income, adjusted (B) (non-GAAP) | | $ | 29,447 | | | $ | 31,209 | | | $ | 32,909 | | | $ | 31,939 | | | $ | 28,434 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Average earning assets (C) | | $ | 2,978,227 | | | $ | 2,994,982 | | | $ | 3,061,432 | | | $ | 3,142,597 | | | $ | 2,967,614 | |
Net interest margin (A)/(C)1 | | | 4.51 | % | | 4.69 | % | | 4.35 | % | | 4.08 | % | | 3.84 | % |
Net interest margin, adjusted (B)/(C)
(non-GAAP)1 | | | 3.99 | % | | 4.15 | % | | 4.29 | % | | 4.08 | % | | 3.84 | % |
| | | | | | | | | | | | | | | | | | | | |
| |
1Represents an annualized rate; calculation is approximate due to differences in industry standards for annualizing underlying average earning assets. |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the information concerning quantitative and qualitative disclosures about market risk contained in Item 7A of First Financial’s 2012 Annual Report on Form 10-K, except as set forth in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Risk” of this Form 10-Q.
Item 4. Controls and Procedures
a) An evaluation of First Financial’s disclosure controls and procedures (as defined in Section 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934 (the “Act”) was carried out under the supervision and with the participation of First Financial’s Chief Executive Officer, Chief Financial Officer and First Financial’s Disclosure Committee as of the end of the period covered by this quarterly report. In designing and evaluating First Financial’s disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based on their evaluation, First Financial’s Chief Executive Officer and its Chief Financial Officer concluded that First Financial’s disclosure controls and procedures as of March 31, 2013, are effective in ensuring that the information required to be disclosed by First Financial in the reports it files or submits under the Act is (i) accumulated and communicated to First Financial’s management (including the Chief Executive Officer and the Chief
56
Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
b) There have been no changes in First Financial’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, First Financial’s internal control over financial reporting. First Financial does not expect that its internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within First Financial have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions regardless of how remote. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in cost-effective control procedures, misstatements due to error or fraud may occur and not be detected.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, First Financial is subject to various legal proceedings and claims which arise in the ordinary course of business. As of March 31, 2013, First Financial believes that such litigation will not materially affect First Financial’s consolidated financial position or results of operations.
On March 5, 2013, a purported shareholder of First Financial filed a lawsuit in the Court of Chancery of the State of Delaware captionedArthur Walter v. R. Wayne Hall et al., No. 8386. On March 25, 2013, another purported shareholder of First Financial filed a lawsuit in the Court of Chancery of the State of Delaware captionedEmmy Moore v. R. Wayne Hall et al., No. 8434. Both lawsuits name First Financial, members of First Financial’ s board of directors and SCBT as defendants, are purportedly brought on behalf of a putative class of First Financial’ s common shareholders and seek a declaration that the lawsuits are properly maintainable as a class action with the named plaintiffs as the proper class representatives. The lawsuits allege that First Financial, First Financial’s board of directors and SCBT breached duties and/or aided and abetted such breaches by failing to properly value the shares of First Financial and agreeing to certain terms of the transaction. First Financial believes that the claims are without merit.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in First Financial’s 2012 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
| | |
| | |
| EXHIBIT INDEX |
| | |
| Exhibit Number | Description |
| | |
| 2.1 | Agreement and Plan of Merger, dated as of February 19, 2013, by and between SCBT Financial Corporation and First Financial’s Holdings, Inc. (incorporated by reference to First Financial’s Form 8-K filed on February 22, 2013). |
| | |
| 31.1 | Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer. |
| | |
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer. |
| | |
| 32 | Section 1350 Certifications of the Principal Executive Officer and Principal Financial Officer. |
| | |
| 101* | The following materials from the Quarterly Report on Form 10-Q of First Financial for the quarter ended March 31, 2013, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statement of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements. |
| | |
*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, First Financial Holdings, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
| FIRST FINANCIAL HOLDINGS, INC. |
| |
Date: May 8, 2013 | /s/ Blaise B. Bettendorf |
| |
| Blaise B. Bettendorf |
| Executive Vice President and Chief Financial Officer |
| (Duly Authorized Officer and Principal Financial and Accounting Officer) |
59
