SecProbe.io

CORRESP
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filename1.htm

October 16,
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

  Form 10-K
  for Fiscal Year Ended December 31, 2008

  Form 10-Q
  for Fiscal Quarter Ended June 30, 2009

  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 September 18,
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 responses.

Form 10-K for Fiscal Year Ended December 31, 2008

Financial Statements

Note 4 — Investment Securities, page F-21

1.              We have
reviewed your response to comment 1 of our letter dated July 24,
2009.  We have the following comments:

a.              You
state you used an estimate of 75 basis points for your future
deferrals/defaults annually on your TRUPs.
Please clarify to us if you are assuming a deferral/default rate of 75
basis points for each year in the future.

RESPONSE:

We
estimated that additional future deferrals / defaults would occur at a rate of
75 basis points annually on the remaining performing collateral each
year until maturity on each of the TRUPs.

b.              We note
that your TRUPs have significantly different actual deferral rates, credit
ratings, and fair values.  Presumably,
this is because each security has different and distinct credit characteristics
represented by the individual banks in each trust and based on the specific
tranche in which you have invested.  We
believe you must look at the specific collateral underlying each individual
security to develop the credit deferral/default assumptions for your estimated
cash flows and that simply using the same credit default assumptions based on
the average long term performance of FDIC regulated banks, AM Best’s study and
Standard & Poor’s methodology for all of your securities is not a
reasonable methodology consistent with the guidance.  Therefore, please revise your TRUP OTTI
methodology to use the specific collateral underlying each security as the
basis for your credit deferral/default assumptions.

RESPONSE:

We
agree that each of our TRUP securities has specific credit risks that are
relevant to the analysis of OTTI. However, we believe that our method for
evaluating OTTI takes into account these specific risks, therefore we have
provided the explanation below to more clearly explain the methodology and
analysis we perform each reporting period to determine whether or not OTTI
exists within our TRUPs.  We essentially
employ a four-step process, with each of the four forms of analyses intended to
supplement the others and work harmoniously to provide a sound basis for a very
reasonable determination of whether, or not, OTTI exists at the time.  In addition, we have attached a table that
has the SEC’s suggested changes to the table that was included in our June 30,
2009 Form 10Q.  The revisions to the
table are intended to clarify certain amounts and notations which the company
evaluates in determining the probability of loss during each reporting period.

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I.                                         Review of
Individual Issuers / Banks

Within each of the eight pooled trust preferred
securities, we review each issuer (typically a bank or insurance company)
individually.  This review includes
obtaining quarterly financial information and monitoring SNL Financial, LC for
news releases and pertinent information relative to those issuers on a daily
basis.  We specifically look to financial
ratios of asset quality, capitalization, and profitability.  We believe the “Texas Ratio (“TR”)” is a
prominent indicator of the stress a financial institution is experiencing.  We compile information both on a specific
issuer basis and on a pooled basis for each security.  Specifically, we account for defaults that
have occurred, we account for deferrals which have occurred, then we account
for expected deferrals/defaults for which we have information that indicates a
deferral/default is likely to occur and create loss and recovery assumptions
for the banks in these categories.  In
addition, we stratify the pooled information for the performing issuers based
upon their TR to assess the likely “at risk” issuers within each security.  Based on the results of this analysis, we
ensure that actual deferrals/defaults as well as forecasted deferrals/defaults
of specific institutions are appropriately factored into the cash flow
projections for each security.

II.                                     Break in Yield (“BIY”)
/ Stress Analysis

We receive analyses from outside analysts that we
review.  This data provides us with an
indication of how much more in immediate deferrals/defaults are needed to trigger
a BIY of the security.  A BIY means that
our security would not be expected to collect all contractual cash flows
(principal and interest) by maturity.  This BIY
analysis does not project any future defaults; rather, it solves for the
amount of deferrals that would trigger a BIY if the deferrals occurred at
the next payment date.  This
stress analysis is used as an indicator which allows us to make reasonable
judgments regarding the likelihood of the existence of OTTI at any reporting
date.  “Excess subordination” is considered
by us to be the amount of immediate additional defaults / deferrals necessary
to deplete the entire credit enhancement beneath our tranche within each pool
to the point that results in a BIY.  A
declining ratio of excess subordination to performing collateral is an
indicator of the need for additional review, such as comparing back to the
credit quality of the pool of issuing banks.

III.                                 FSP EITF
99-20-1 Discounted Cash Flow Analysis

Next, management evaluates each of these securities
under FSP EITF 99-20-1 and FSP FAS 115-2 and 124-2, considering the context of
our deemed likelihood (or not) of OTTI garnered from the stress analysis
above.  When performing this detailed
cash flow analysis, management works with independent third parties to identify
its best estimate of the cash flows to be collected over the life of the
security.  If the estimated results of
the present

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value
of expected cash flows is less than the amortized cost basis of the security,
an OTTI is considered to have occurred (a credit loss exists).  If there is no credit loss, then any
impairment is deemed to be temporary.

The
following assumptions were used at March 31, 2009 and December 31,
2008:

·                  We assumed all currently existing deferrals will
default immediately with a 0% recovery;

·                  Using information from the pool’s trustee, we
project specific additional deferrals/defaults for institutions that are likely
to defer or default but have not made public announcements as of the date of
our analysis;

·                  We assumed that future additional annual
defaults for the remaining life of each security will be 75 basis points. This
rate is approximately double the FDIC average annual default rate (36 basis
points) of bank failures each year from 1934-2008 according to FTN Financial;

·                  We assumed recoveries on future projected
deferrals to be from 0% to 15% after two-years (a two-year lag) for March 31,
2009, and 0% to 80% after two-years for December 31, 2008;

·                  We assumed prepayments of 2% annually which
according to FTN Financial prepayments were common in 2006 and 2007 with
issuers refinancing to a lower rate. Given the current environment and a change
in credit conditions expected prepayments will remain low; and

·                  FTN Financial and Sandler O’Neill have used the
assumptions above along with the book yield of the security to discount projected
cash flows to present value.

The
following assumptions were used at June 30, 2009:

·                  We assumed all currently existing deferrals
will default immediately with a 0% recovery;

·                  Using information from the pool’s trustee, we
project specific additional deferrals/defaults for institutions that are likely
to defer or default but have not made public announcements as of the date of our
analysis;

·                  We assumed that future additional annual defaults
would be 3% (annually) in 2009; 3% in 2010; 2.5% in 2011; 2.0% in 2012; 1.0% in
2013; and 25 basis points applied annually (each
year) until maturity. Management changed to these assumptions (compared to the assumptions
above) to incorporate new information coming in during the quarter that showed
a continued and accelerated pace of bank failures, and therefore deferrals/defaults
within each security. The annual default rates assumed for 2009-2013 are representative
of the rate of bank failures which occurred from 1988-1992 from statistics on FDIC
bank failures each year from 1934-2008;

·                  We assumed recoveries on future projected
deferrals to be from 0% to 15% after two-years (a two-year lag);

·                  We assumed prepayments of 1% annually to
reflect

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the current environment and a
change in credit conditions that would lead to a reasonable expectation of very
low prepayments.

IV.                                                         Review of Test
Results and Analysis

Both (FSP EITF 99-20-1 Analysis and BIY/Stress
Analysis) of the test results and analyses referenced above are again reviewed
together to allow management to arrive at a reasonable conclusion of the
existence of OTTI at any point in time.
Currently, this complete analysis is performed at the end of each
reporting period when actual payments have been made by the trustee on each
security and cash flows can be modeled, but the data for this analysis is
gathered and considered each day as it becomes available.

Note:                                           If we had used
the same future default assumptions from March 31, 2009 at June 30,
2009 for the EITF 99-20-1 discounted cash flow analysis, the amount of credit
impairment on the PreTSL X tranches would have been $237,000, instead of
$544,000 which was recorded in the second quarter of 2009.

c.               As a
related matter, please tell us how you were able to conclude that the analysis
you performed that considered the specific collateral underlying each
individual security was similar enough to the analysis that based its default
assumptions on the performance of numerous banks, as discussed above.

RESPONSE:

See
information above in response to 1b.

2.              On page 9
you state the company evaluates its “intent and ability” to hold investments
for a period of time sufficient to allow for any anticipated market
recovery.  Please revise your disclosure
in future filings to discuss whether you may be required to sell the security
before recovery of its amortized cost basis and refer to paragraph 21 of SFAS
FSP 115-2.

RESPONSE:

As noted above, we will revise future filings to include the discussion
of whether the security would be required to be sold before the anticipated recovery
of its amortized cost basis.  This
discussion will include reference to our current cash position, liquidity
position and any contractual or regulatory obligations.  At June 30, 2009, our cash and cash
equivalent position had increased by more than $107.6 million, due primarily to
a net decrease in customer loans of $71.3 million and the issuance of common
stock of $29.4 million. Our liquidity position remains very strong to meet
working capital requirements, contractual obligations and all regulatory
requirements for appropriate liquidity in the current banking and economic
environment, and we would not be required to sell any securities currently in
an unrealized loss position.  Therefore, management
continues to maintain our intent and ability to hold these

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investments
for a period of time sufficient to allow for anticipated recoveries of the
amortized cost basis of the investments.

3.              We note
the impairment recorded on PreTSL X B-1 and PreTSL X B-3 during the three
months ending June 30, 2009.  Please
tell us the events that transpired during the three month period that caused
these securities to become other than temporarily impaired.  Please be as specific as possible in your
response.

RESPONSE:

The company relies primarily on a discounted cash flow analysis under
EITF 99-20, as amended, to determine the existence of credit-related other than
temporary impairments in our TRUP securities.
As of June 30, 2009, defaults/deferrals equaled approximately 25%
of total current collateral compared to approximately 18% at March 31,
2009.  This was an increase of more than
$34.8 million in additional deferrals during the second quarter of 2009.   Consequently, we incorporated this new
information relating to the continued accelerated pace of deferrals and bank
failures announced during the second quarter and modified the assumptions being
used in the discounted cash flow analysis, specifically related to projected defaults
within the remaining balance of currently performing collateral.  This change resulted in our accelerating the projected
defaults into the earlier years (2009-2013 — see response below to comment 4
for detail), and then assuming a 25 basis point projected future default rate annually
over the remaining life of the security (until maturity) compared to the
estimate used at March 31, 2009 that assumed a constant 75 basis points of
deferrals on remaining collateral each year throughout the remaining life of
each security.

4.              On page 10
you state you will have “11.5% in defaults over the next five years on top of
deferrals previously encountered in prior periods…..” Please tell us and revise
future filings to state the percentage of defaults that you expect will occur
in each of the next five years.

RESPONSE:

As of June 30, 2009, the projected default rates on currently
performing collateral were assumed over the next five years as follows:

  2009

  3

  %

  2010

  3

  %

  2011

  2.5

  %

  2012

  2

  %

  2013

  1

  %

Beginning in 2014, the projected default rate assumption goes to 25
basis points of remaining performing collateral each year until maturity.

The percentage of defaults expected in each of the next five years will
be stated in future filings, along with the default rate each year until
maturity.

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Please contact the undersigned at (803) 765-4630 with any questions
regarding this letter.  Thank you.

  Sincerely,

  /s/
  John C. Pollok

  John
  C. Pollok

  Senior
  Executive Vice President and Chief Financial Officer

  cc:

  Matt
  Snow, CPA, Member, Dixon Hughes PLLC

  John
  Jennings, Nelson Mullins Riley & Scarborough LLP

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SCBT
Financial Corporation

Pooled
Trust Preferred Securities

(dollars in thousands)

  Current Information for the Securities

  Deferral/Default Statistics

  Receiving

  Deferral /

  Excess Subordination (4)

  Principal /

  D