First Financial Holdings, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 2012 and 2011
The First
Financial Holdings, Inc. Sharing Thrift Plan (“the Plan”) is a defined contribution plan which covers
substantially all full time employees of First Financial Holdings, Inc. (“First Financial”) and its subsidiaries.
The following description of the Plan provides only general information about the Plan’s provisions. Participants
should refer to the Plan document and the summary of plan description for a more complete description of the Plan’s
provisions, copies of which may be obtained from the plan sponsor, First Financial. In accordance with Internal Revenue Code
(“IRC”) Section 414(b), the companies participating in the Plan are a controlled group of corporations whereby
all employees of each company shall be treated as employees of a single employer. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (“ERISA”). Ineligible employees include those whose
employment are governed by collective bargaining agreements and leased employees, with certain exceptions. Employees of
acquired entities are credited with their years of service prior to acquisition for all purposes under the Plan.
Employees may
elect to make tax-deferred contributions beginning with the first payroll period of the calendar quarter following one full month
of service. Employees may receive matching contributions if approved by First Financial’s Board of Directors (the “Board”).
As of the quarter ended March 31, 2009, First Financial’s matching contribution was temporarily suspended. Effective January
1, 2013, First Financial reinstated its match of employee contributions up to 50% of deferral up to 6% of the employee salary.
The Plan is
administered by the Trustee Committee, members of which are appointed by the Board. The Trustee Committee contracts with American
Pensions (the “Administrator”), which is a division of one of First Financial’s subsidiaries, First Federal Bank
(“First Federal”) for record-keeping, administrative, custodial and trust services and contracts with MG Trust Company,
LLC (“MG Trust” or “Investment Trustee”) to operate as custodian for the Plan.
Contributions
Effective January
1, 2011, the Plan amended the definition of compensation as follows: the term Compensation means a participant’s Form W-2
Compensation received during a Compensation Determination Period. A Compensation Determination Period is defined as the Plan Year;
and any elective deferrals as defined under Code §402(g) and any amount contributed or deferred by the Employer at the election
of the Employee which is not includible in gross income by reason of Code §125, Code §132(f)(4) or Code §457, will
be included in Compensation. In addition, any amount received under the following circumstances will not be considered Compensation:
amounts set forth in Regulation §1.414(s)-1(c)(3) (i.e., reimbursements or other expense allowances, including fringe benefits
(cash and non-cash), moving expenses, deferred compensation and welfare benefits, even if includible in gross income).
The Plan permits
eligible participants to contribute up to a maximum annual amount of $17,000 ($22,500 if the participant will attain the age of
50 during the plan year) for 2012 and $16,500 for 2011. Participants age 50 and older are permitted to make catch-up contributions
of $5,500 for 2012 and 2011.
The Plan requires
newly eligible employees be automatically enrolled in the Plan with a withholding of 5% of Compensation as defined by the Plan
unless a Salary Deferral Election form is filed.
The Plan provides
for discretionary non-elective profit sharing contributions on an annual basis. Employees will be entitled to such contributions
if they are of an eligible class, are employed on the last day of the year and have completed 1,000 hours of service during the
Plan year. Employment
terminated
during the year due to normal retirement, death or disability shall not result in loss of the non-elective Company contribution.
There were no non-elective contributions for 2012 or 2011.
Participant Accounts
Each
participant’s account is credited with the participant’s contributions and allocations of any First
Financial contributions based on participant earnings. Plan earnings and administrative expenses are allocated based on
participant account elections and account balances, respectively. The benefit to which a participant is entitled is the
benefit that can be provided from the participant’s vested account.
Vesting
All participant
contributions and First Financial matching contributions are immediately vested. Participants vest in non-elective profit sharing
contributions at 10% for first and second year, 20% per year for the next four years until fully vested at six years, or upon the
earlier of their death, disability or retirement at age 65 or older.
Investment Options
Participants
may direct how their tax deferred contributions, rollover funds, employer matching contributions and employer
non-elective profit sharing contributions will be invested within various investment options selected by the Trustee
Committee. All participant directed funds, except investments in First Financial Holdings, Inc. Unitized Stock Fund
(“First Financial unitized stock fund”), may be redirected daily.
Participants
must wait 30 calendar days before exchanging back into First Financial common stock. The 30-day clock restarts after every exchange
out of the account. This does not apply to the following:
|
1.
|
Purchases of shares with participant payroll or employer contributions or loan payments.
|
|
2.
|
Purchases of shares with reinvested capital.
|
|
3.
|
Redemption of shares to pay any otherwise permissible withdrawals from the plan.
|
|
4.
|
Redemption of shares at the direction of the plan.
|
|
5.
|
Redemption of shares to pay fees.
|
Forfeitures
Forfeitures
may be used to pay administrative expenses incurred by the Plan. Any additional balances in the forfeiture account will then be
applied to restore previous forfeitures of participant accounts pursuant to the Plan document. The portion of the forfeiture account
available after the above items are satisfied is then available to be used to offset any employer contribution.
Notes Receivable from Participants
Participants
may borrow from their Plan assets after one year of participation. A participant must borrow at least $2,500 with the maximum amount
being the lesser of (1) $50,000 or (2) one-half of the participant’s vested account balance. Loans are payable in full upon
default or termination of employment.
Outstanding loans at December
31,
2012 and 2011 carry interest rates ranging from 4.25
% to 10.00%.
The Plan allows
one loan outstanding per participant at a time. A participant also must wait until at least 30 days after the pay-off of the previous
loan to obtain a new loan. The Plan does not restrict loans from any portion of the participant’s funds invested in First
Financial’s common stock.
Benefits and Withdrawals
On termination
of service due to death, disability or retirement, a participant will receive the value of the vested interest in his or her account.
A participant
may also receive a hardship withdrawal upon meeting certain immediate financial need requirements as defined by the Plan and receiving
approval of the Trustee Committee. Funds derived from matching and profit sharing contributions are not available for hardship
withdrawals.
The Plan allows
the Administrator, at its sole discretion, to distribute a participant’s Vested Aggregate Account balance without the consent
of the participant if the account balance is less than $5,000. Such distribution may be made in a lump sum at any time after a
participant terminates employment, subject to certain provisions of the Plan.
Administrative and Accounting
Fees
Substantially
all administrative and accounting fees are paid by the Plan. Investment related expenses are included in net appreciation of
fair value of investments.
Plan Termination
Although it
has not expressed any intent to do so, First Financial has the right under the Plan to discontinue its contributions at any time
and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent
vested in their 401(k) and profit sharing accounts.
2.
|
Summary of Accounting Policies and Activities
|
Basis of Accounting
The financial
statements of the Plan are prepared under the accrual method of accounting, except benefit payments which are recorded when paid.
Use of Estimates
The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein,
and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Investment Valuation and Income
Recognition
The Plan’s
investments are stated at fair value. Fair value estimates are intended to represent the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 4
for discussion of fair value measurements.
Investment contracts
held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement
attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive
investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions
under the terms of the Plan. The Statements of Net Assets Available for Benefits present the fair value of the investment contracts
as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement
of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
Purchases and
sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date. Net appreciation (depreciation) includes the Plan’s gains (losses) on investments bought and sold
during the year.
Payment of Benefits and Withdrawals
Benefits and
withdrawals are recorded when paid. Amounts allocated to withdrawing participants may be recorded on the Form 5500 for benefit
claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date.
Notes Receivable from Participants
Notes
receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent
participant loans are reclassified as distributions based on the terms of the Plan document. No allowance for credit losses
has been recorded as of December 31, 2012 or 2011.
Risks and Uncertainties
The Plan invests
in various investment securities which are exposed to various risks such as interest rate, market volatility and credit risks.
Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the
values of investment securities will occur in the near term and that such changes could materially affect participants’ account
balances and the amounts reported in the Statements of Net Assets Available for Benefits.
Recently Issued Accounting Pronouncements
In May 2011,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04,
Amendments
to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS.
ASU 2011-04 amended ASC 820,
Fair
Value Measurements and Disclosures
, to converge the fair value measurement guidance in GAAP and International Financial Reporting
Standards. Some of the amendments clarify the application of existing fair value measurement requirements, while other amendments
change a particular principle in ASC 820. In addition, ASU 2011-04 requires additional fair value disclosures. The amendments were
effective for annual periods beginning after December 15, 2011 and did not have a significant effect on the Plan’s financial
statements.
Plan assets
are held in a trust established pursuant to an agreement between First Financial and the Trustee Committee.
The Trustee
Committee and Investment Trustee direct the investment activities of the trust and have full discretionary authority for the purchase
and sale of investments, subject to the participants’ permitted investment elections and certain other specified limitations.
The Investment
Trustee maintains a First Financial unitized stock fund, for
the exclusive use of the Plan, to account for the Plan’s interest in First Financial common stock, plus any undistributed
cash to be invested into First Financial common stock. The common stock is presented as an investment within these financial statements,
due to the nature of this unitized fund. The Investment Trustee acquires and sells the common stock through a broker-dealer.
The following
table presents investments that represent 5% or more of the Plan’s net assets at December 31, 2012 and 2011.
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Mutual Funds:
|
|
|
|
|
|
|
|
|
Oakmark Equity & Income Fund
|
|
$
|
7,236,540
|
|
|
$
|
7,177,306
|
|
T Rowe Price Retirement 2020 Fund
|
|
|
3,536,632
|
|
|
|
3,100,074
|
|
Janus Perkins Mid Cap Value Fund
|
|
|
4,109,238
|
|
|
|
4,710,003
|
|
Vanguard 500 Index Fund Signal Shares
|
|
|
3,666,372
|
|
|
|
3,702,751
|
|
Columbia Dividend Income Fund
|
|
|
3,568,673
|
|
|
|
301,943
|
(1)
|
First Financial unitized stock fund
|
|
|
8,503,480
|
|
|
|
6,585,724
|
|
Common Collective Trust Fund:
|
|
|
|
|
|
|
|
|
Federated Capital Preservation Fund
|
|
|
8,604,344
|
|
|
|
8,917,951
|
|
(1)
|
Does
not represent five percent for respective year.
|
The following table presents net
appreciation (depreciation) in the fair value of the Plan’s investments.
|
|
For the year ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Mutual funds
|
|
$
|
3,658,818
|
|
|
$
|
(1,612,507
|
)
|
First Financial unitized stock fund
|
|
|
2,942,489
|
|
|
|
(2,109,268
|
)
|
Net appreciation (depreciation) of investments
|
|
$
|
6,601,307
|
|
|
$
|
(3,721,775
|
)
|
Net
appreciation (depreciation) amounts represent the total of net realized gains or losses, from investment transactions and
the net unrealized appreciation (depreciation) in the fair value of investments. The method used in calculating realized
gains and losses is based on average net cost. Interest and dividends are excluded from the above amounts.
4.
|
Fair Value of Financial Instruments
|
ASC 820,
Fair
Value Measurements and Disclosures
, establishes a framework for measuring fair value. That framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority
to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
|
·
|
Level 1 – Valuation is based on quoted prices for identical instruments in active markets.
|
|
|
|
|
·
|
Level 2 – Valuation is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. If the asset or liability has a specified (contractual) term, the lower input must be observable for substantially the full term of the asset or liability.
|
|
|
|
|
·
|
Level 3 – Valuation is generated from
model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions
reflect estimates that
|
|
|
market participants would use in pricing
the asset or liability. Valuation techniques include the use of discounted cash flow models and similar techniques.
|
The following
is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the valuation
methodologies used for assets measured at fair value at December 31, 2012 or 2011.
Mutual funds
Valued at the daily closing price
as reported by the fund. Mutual funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange
Commission. These funds are required to publish their daily net asset value (“NAV”) and to transact at that price.
The mutual funds held by the Plan are deemed to be actively traded.
First Financial Unitized Stock
Fund
Valued at the
closing price of First Financial’s common stock reported on the active market on which the individual securities are traded
plus the carrying value of the cash component of the fund, which approximates fair value.
Interest-bearing deposits
Valued at carrying
value, which approximates fair value.
Common collective trust fund
The fair value
of the Plan’s interest in common collective trusts (“CCT” or “pooled funds”) is based on the NAV
after adjustments to reflect all fund investments at fair value. The CCT holds guaranteed investment contracts (“GIC”),
separate account GICs, and synthetic GICs. Traditional GICs represent deposits which guarantee a stated interest
rate for the term of the contracts. The fair value of the traditional GICs is determined based on the present value of the
contract’s expected cash flows, discounted by current market interest rates for like-duration and like-quality investments.
Separate account GICs are portfolios of securities held in a separate account owned and managed by or on behalf of the insurance
company issuing the GIC for the exclusive benefit of investors in the separate account. Synthetic GICs are portfolios of securities
owned by the CCT. The fair value of a separate account GIC and a synthetic GIC is determined based on the fair value of the securities
underlying each GIC.
C
ash
The carrying
amount of cash is deemed to be a reasonable estimate of fair value.
The following
table sets forth by level the Plan’s assets at fair value as of December 31, 2012 and 2011.
|
|
As of December 31, 2012
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth funds
|
|
$
|
7,299,951
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,299,951
|
|
Value funds
|
|
|
16,611,787
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,611,787
|
|
Income funds
|
|
|
430,767
|
|
|
|
—
|
|
|
|
—
|
|
|
|
430,767
|
|
Target retirement date funds
|
|
|
8,522,594
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,522,594
|
|
Index funds
|
|
|
6,767,568
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,767,568
|
|
Total mutual funds
|
|
|
39,632,667
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,632,667
|
|
First Financial unitized stock fund
|
|
|
8,503,480
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,503,480
|
|
Interest-bearing deposits
|
|
|
8,858
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,858
|
|
Common collective trust fund
|
|
|
—
|
|
|
|
8,604,344
|
|
|
|
—
|
|
|
|
8,604,344
|
|
Cash
|
|
|
6,241
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,241
|
|
Total assets at fair value
|
|
$
|
48,151,246
|
|
|
$
|
8,604,344
|
|
|
$
|
—
|
|
|
$
|
56,755,590
|
|
|
|
As of December 31, 2011
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth funds
|
|
$
|
5,272,169
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,272,169
|
|
Value funds
|
|
|
11,498,633
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,498,633
|
|
Income funds
|
|
|
7,547,404
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,547,404
|
|
Target retirement date funds
|
|
|
6,797,493
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,797,493
|
|
Index funds
|
|
|
6,655,187
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,655,187
|
|
Total mutual funds
|
|
|
37,770,886
|
|
|
|
—
|
|
|
|
—
|
|
|
|
37,770,886
|
|
First Financial unitized stock fund
|
|
|
6,585,724
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,585,724
|
|
Interest-bearing deposits
|
|
|
132,548
|
|
|
|
—
|
|
|
|
—
|
|
|
|
132,548
|
|
Common collective trust fund
|
|
|
—
|
|
|
|
8,917,951
|
|
|
|
—
|
|
|
|
8,917,951
|
|
Cash
|
|
|
3,573
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,573
|
|
Total assets at fair value
|
|
$
|
44,492,731
|
|
|
$
|
8,917,951
|
|
|
$
|
—
|
|
|
$
|
53,410,682
|
|
5.
|
|
Common Collective Trust Fund
|
During 2011,
the Plan added an option allowing participants to invest in the Federated Capital Preservation Fund, which is a CCT fund that simulates
the performance of a guaranteed investment contract through an issuer’s guarantee of a specific interest rate and a portfolio
of financial instruments that are owned by the issuer. This provides a stable value fund option for Plan participants. The Group
Annuity Contract (“GAC”) includes underlying assets which are held in a trust owned by Federated Investors Trust Company
(“Federated Investors”), through the Plan’s investment in a separate GAC. The contract provides that participants
execute Plan transactions at contract value. Contract value represents contributions made to the fund, plus earnings, less participant
withdrawals. The investment is stated at fair value as reported by Federated Investors and adjusted to contract value on the Statement
of Assets Available for Benefits. The GACs fair value equals the fluctuating value of the assets backing the contract.
The crediting
interest rate was 2.28% and the average yield was 1.16% for the year ended December 31, 2012 in comparison to a crediting interest
rate of 2.33% and the average yield of 2.09% for the year ended December 31, 2011. Participants may ordinarily direct the withdrawal
or transfer of all or a portion of their investment at contract value. There are no reserves against contract value for credit
risk or the contract issuer or otherwise. Federated Investors will guarantee principal and accrued interest, based on crediting
interest rates, for participant initiated withdrawals as long as the contract remains active. Interest is credited to the contract
at interest rates that reflect the performance of the
underlying portfolio. Federated Investors will reset the rate quarterly,
by amortizing the difference between the market value of the portfolio and the guaranteed value over the weighted average duration
of the fund’s investments.
Participants
withdrawing from their accounts for allowable events will receive the principal and accrued earnings. These events include transfers
to other Plan investment options, and payments because of retirement, termination of employment, disability, death and in-service
withdrawals as permitted by the Plan. Share redemption may be immediate, with no notice period. Certain events, such as plan termination
or a Plan merger initiated by the Plan sponsor, may limit the ability of the Plan to transact at contract value. The Plan sponsor
does not believe any events are probable that may limit the ability of the Plan to transact at contract value.
The following
table reconciles fair value of the investments to contract value as identified in the custodian statements.
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Common collective trust fund at fair value
|
|
$
|
8,604,344
|
|
|
$
|
8,917,951
|
|
Adjustment to contract value
|
|
|
(148,984
|
)
|
|
|
(189,714
|
)
|
Common collective trust fund at contract value
|
|
$
|
8,455,360
|
|
|
$
|
8,728,237
|
|
6.
|
|
Concentration of Credit Risk
|
Investments in
the First Financial unitized stock fund represented 14.6% and 12.0% of Plan assets at December 31, 2012 and 2011, respectively.
The number of common shares held of First Financial’s stock was 633,833 and 727,078 at December 31, 2012 and 2011, respectively.
7.
|
|
Administrative Fees and Forfeitures
|
All expenses
associated with maintaining the Plan are paid by the Plan. Administrative and accounting fees represent professional services rendered
to the Plan by the third party administrator, auditors and legal counsel. For the years ended December 31, 2012 and 2011, forfeitures
in the amount of $15,548 and $25,208, respectively, were used to pay plan expenses. Forfeitures available for use at December 31,
2012 and 2011 totaled $8,858 and $8,723, respectively.
8.
|
|
Related Party Transactions
|
The Trustee Committee
selects the investment options available to the participants. MG Trust initiates transactions to purchase and sell First Financial’s
common stock. Common stock transactions are at market value using registered investment brokers. Expenses incurred in connection
with the administration of the Plan are paid by the Plan. The Plan’s third party administrator, American Pensions, is a division
of First Federal.
The Plan paid
fees of $4,415 and $18,308 to American Pensions for the cost of recordkeeping services during 2012 and 2011, respectively.
At December 31,
2012 and 2011, the Plan held the following party-in-interest investments.
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
First Financial unitized stock fund
|
|
$
|
8,503,480
|
|
|
$
|
6,585,724
|
|
Notes receivable from participants
|
|
|
1,840,974
|
|
|
|
1,905,310
|
|
Interest-bearing deposits
|
|
|
8,858
|
|
|
|
132,548
|
|
Cash dividends
of $135,519 and $158,716 were paid to the Plan by First Financial during 2012 and 2011, respectively, based on shares of First
Financial’s common stock held by the Plan on the dates of declaration.
The Internal
Revenue Service has determined and informed First Financial by a letter dated December 7, 2011, that the Plan and related trust
are designed in accordance with applicable sections of the IRC. However, the Plan has been amended since receiving the determination
letter, the Trustee Committee, advisors and tax counsel believe that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the IRC and therefore believe that the Plan is qualified and the related trust is tax-exempt.
GAAP requires
plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the organization has taken
an uncertain position that more likely than not would not be sustained upon examination by the United States federal, state or
local tax authorities. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for
any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior
to 2009.
During 2011,
the Plan sponsor inadvertently failed to make deposits of $137,136 for participant deferrals within the timeframe as required by
the DOL. The DOL considers late deposits, without regard to materiality, to be prohibited transactions. The general rule for deposits
of 401(k) withholdings requires that the employer remit withheld employee 401(k) deferrals to the Plan as of the earliest date
on which such amounts can reasonably be segregated from the employer’s general assets, but in no event later than 15 business
days after the end of the month in which the contributions were withheld. The plan sponsor generally makes deposits from 2 to 10
days after the date in which the contribution is withheld. The Plan sponsor filed a Form 5330 in 2012 and paid the applicable excise
tax related to the late deposits. The excise tax payments were made from the Plan sponsor’s assets and not from the assets
of the Plan. In addition, participant accounts were credited with the amount of investment income which would have been earned
had participant contributions been remitted on a timely basis.
Participant contributions
for the year ended December 31, 2011 are shown net of excess contributions of $33,908. These refunds are required to satisfy
the relevant non-discrimination provisions of the Plan.
The Plan has evaluated
subsequent events through May 24, 2013, the date the financial statements were available to be issued. On February 19, 2013, First
Financial entered into a merger agreement with SCBT Financial Corporation (“SCBT”). Subject to the terms and conditions
set forth in the agreement, First Financial plans to merge with and into SCBT with SCBT continuing as the surviving corporation
after the merger and First Federal will merge with and into SCBT’s bank subsidiary. The merger is expected to close in the
third quarter of 2013, subject to customary closing conditions. To date, there has been no effect to the Plan as a result of the
merger.