November 5, 2009
Mr. John P. Nolan
Senior Assistant Chief Accountant
Securities and Exchange Commission
Division of Corporation Finance
100 F. Street, N.E.
Washington, D.C. 20549
Re: |
| SCBT Financial Corporation |
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| Form 10-K for Fiscal Year Ended December 31, 2008 |
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| Form 10-Q for Fiscal Quarter Ended June 30, 2009 |
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| File No. 001-12669 |
Dear Mr. Nolan:
The letter is provided on behalf of SCBT Financial Corporation (the “Company,” “SCBT,” “we,” or “our”) in response to the letter from the Securities and Exchange Commission (“SEC”) dated November 4, 2009 (the “Request Letter”) related to its review of the Company’s Form 10-K for the fiscal year ended December 31, 2008, Form 10-Q for the fiscal quarter ended June 30, 2009, and request for certain information.
The Company acknowledges that:
· The Company is responsible for the adequacy and accuracy of the disclosure in the referenced filings;
· Staff comments or changes to disclosures in response to staff comments do not foreclose the Commission from taking any action with respect to the referenced filings; and
· The Company may not assert staff comments as a defense in any proceedings initiated by the Commission or any person under the federal securities laws of the United States.
Below we have outlined our response to the Request Letter. For your convenience, we have restated the SEC’s comment (in italics) prior to our response.
1. Consistent with the guidance in paragraphs 10 and 12 of FSP EITF 99-20-1 and 25 and 26 of FSP 115-2, we believe you must look at the specific collateral underlying each individual security to develop the credit deferral assumptions for your estimated cash flows and that simply using the same general deferral assumption for every pooled trust preferred security you hold is not a reasonable methodology consistent with the guidance. Therefore, please revise your OTTI methodology for these securities to use the specific collateral underlying each security as the basis for your credit deferral/default assumptions or provide us with an analysis that supports that the difference in credit loss is not material. In addition, if you intend to change you OTTI methodology going forward, please clearly disclose this policy in future filings.
RESPONSE:
In connection with this request, we submit the following analysis that supports that the difference in credit loss produced by our current methodology is not materially different than using a specific collateral methodology. See the two attached exhibits (1 and 2) representing our analysis that the difference is not material to the Company.
In addition, we intend to change our methodology going forward for determining OTTI. For such analysis, we will use the methodology that looks at the specific collateral underlying each individual trust preferred security to develop credit deferral/default assumptions for our estimated cash flows. We will clearly disclose this policy in future filings beginning with the filing of our Form 10-K subsequent to the fourth quarter of 2009.
Please contact the undersigned at (803) 765-4630 with any questions regarding this letter. Thank you.
Sincerely, | |||
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/s/ John C. Pollok |
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John C. Pollok | |||
Senior Executive Vice President and | |||
Chief Financial Officer | |||
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cc: |
| Matt Snow, CPA, Member, Dixon Hughes PLLC | |
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| John Jennings, Nelson Mullins Riley & Scarborough LLP | |
2
EXHIBIT 1
SCBT Financial Corporation
September 30, 2009
SAB 99 Analysis - TRUPs Investment Securities
(Dollars in thousands)
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| During the current |
| End of the period – |
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| Credit portion of |
| Credit portion of |
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| OTTI on TRUPs |
| OTTI on TRUPs |
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a |
| Misstatement due to inability to precisely estimate |
| No |
| No |
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b |
| Do misstatements mask a trend in earnings? (if made, would a positive trend become negative?) |
| No |
| No |
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c |
| Would misstatements (if adjusted) cause the company to miss analyst expectations? |
| No |
| No |
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d |
| Does misstatement change a loss to income or income to a loss? |
| No |
| No |
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e |
| Is the misstatement relevant to the area of the Company’s business that is most critical in determining the profitability of the business (NIM, Provision for loan losses) |
| No |
| No |
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f |
| Would misstatements (if adjusted) materially affect compliance with regulatory requirements (particularly RBC ratios?) |
| No |
| No |
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g |
| Do misstatements impact compliance with loan covenants? |
| No |
| No |
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h |
| Has misstatement increased management compensation? |
| No |
| No |
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i |
| Does misstatement conceal an unlawful transaction? |
| No |
| No |
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j |
| How have changes in financial statement items in which misstatements are noted impacted the volatility of the company’s stock price?(For example, if the company had previously announced significant REO charge-offs, and the stock price had been significantly impacted, this might indicate that the market is particularly sensitive to that line item.) |
| The misstatements would not have had any impact on the company’s stock price in the opinion of management. |
| The misstatements would not have had any impact on the company’s stock price in the opinion of management. |
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| Pre-tax net income on YTD basis 9/30/2009 |
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| $ | 18,305 |
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| Pre-tax net income on QTD basis 9/30/2009 |
| $ | 3,185 |
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| Pre-tax net income understated by |
| $ | 315 |
| $ | 315 |
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| Understated for the quarter ended 9/30/2009 - (1) |
| 9.89% |
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| Understated for the nine months ended 9/30/2009 |
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| 1.72% |
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(1) |
| SCBT does not believe that $315,000 understatement of net income is material for the following reasons: Net income is unusually deflated due to this impairment charge of $2.204 million, due to elevated loan loss provision, OREO expenses and FDIC assessments. This adjustment would increase net earnings versus decrease earnings, and on an annual basis represents 1.72% of YTD earnings. Annual net income is expected to be more than the September 30, 2009 YTD results, consequently the percentage understatement will be less than the 1.72% referenced above. |
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EXHIBIT 2
Analysis of OTTI Charges as of September 30, 2009
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| 15% Recovery |
| 5% Recovery |
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Book Value Sept 09 |
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| I. 75 bps Annually |
| II. 11.5% Accelerated |
| III. 75 bps Annually |
| IV. 11.5% Accelerated |
| V. Specific Collateral |
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$2,982,526 |
| PreTSL 9 |
| (396,958.00) |
| (591,919.00) |
| (493,136.00) |
| (699,291.00) |
| (402,317.00) |
|
$3,082,531 |
| PreTSL 10 B-1 |
| (289,294.00) |
| (576,310.00) |
| (357,016.00) |
| (654,435.00) |
| (686,305.00) |
|
$865,412 |
| PreTSL 10 B-3 |
| (83,206.00) |
| (164,512.00) |
| (101,914.00) |
| (186,294.00) |
| (180,756.00) |
|
$3,000,000 |
| PreTSL 11 |
| 11,927.00 |
| 11,927.00 |
| 11,927.00 |
| (39,528.00) |
| 11,927.00 |
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$1,000,000 |
| PreTSL 13 |
| 3,983.00 |
| (26,777.00) |
| 3,983.00 |
| (49,637.00) |
| (105,710.00) |
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$1,800,000 |
| PreTSL 14 |
| 7,381.00 |
| 7,381.00 |
| 7,381.00 |
| 7,381.00 |
| 7,429.00 |
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$1,009,620 |
| PreTSL 16 |
| (329,153.00) |
| (509,994.00) |
| (379,765.00) |
| (574,818.00) |
| (514,153.00) |
|
$13,740,089 |
| TOTAL PreTSL’s Impairment |
| (1,098,611.00) |
| (1,869,512.00) |
| (1,331,831.00) |
| (2,204,003.00) |
| (1,889,241.00) |
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| Projected Deferrals |
| Projected Deferrals |
| Projected Deferrals |
| Projected Deferrals |
| Projected Deferrals |
| Projected Deferrals |
| Projected Deferrals |
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| PreTSL 9 |
| PreTSL 10 B-1 |
| PreTSL 10 B-3 |
| PreTSL 11 |
| PreTSL 13 |
| PreTSL 14 |
| PreTSL 16 |
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September 30, 2009 |
| Specific Collateral |
| 6.06 | % | 8.87 | % | 8.87 | % | 9.67 | % | 12.33 | % | 9.21 | % | 10.39 | % |
deferrals as |
| Remaining deferrals |
| 4.625 | % | 4.688 | % | 4.688 | % | 4.75 | % | 4.88 | % | 4.94 | % | 5.13 | % |
a % of |
| Total Specific Collateral |
| 10.685 | % | 13.558 | % | 13.558 | % | 14.420 | % | 17.205 | % | 14.150 | % | 15.515 | % |
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| Deferrals based upon SCBT’s 99- |
| 16.313 | % | 16.375 | % | 16.375 | % | 16.438 | % | 16.563 | % | 16.625 | % | 16.813 | % |
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| Difference |
| 5.628 | % | 2.817 | % | 2.817 | % | 2.018 | % | -0.642 | % | 2.475 | % | 1.298 | % |
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| specific collateral approach - to be used prospectively. |
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| represents securities with a value denoting no credit related OTTI |
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| SCBT’s method used |
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