SEC Company Response from UNITED COMMUNITY BANKS INC (UCB) (CIK 0000857855) (UCB) — Jun 28, 2011
UNITED COMMUNITY BANKS INC (UCB) (CIK 0000857855)
Date: June 28, 2011 · CIK: 0000857855 · Accession: 0001188112-11-001823
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-35095, 333-174420
Referenced dates: June 17, 2011
Letter
t71013a_corresp.htm
Suite 2800 1100 Peachtree St.
Atlanta GA 30309-4530
t 404 815 6500 f 404 815 6555
www.KilpatrickStockton.com
direct dial 404 815 6270
direct fax 404 541 3400
JStevens@kilpatrickstockton.com
June 28, 2011
VIA EDGAR, E-Mail and Federal Express
U.S. Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 4561
Washington, D.C. 20549
Attention: Michael R. Clampitt, Senior Counsel
Re: United Community Banks, Inc.
Registration Statement on Form S-1
Filed May 23, 2011
File No. 333-174420
Form 10-K for Fiscal Year Ended December 31, 2010
Filed March 16, 2011
Form 10-Q for Fiscal Quarter Ended March 31, 2011
Filed May 4, 2011
File No. 001-35095
Ladies and Gentlemen:
At the request and on behalf of our client, United Community Banks, Inc. (the “Company”), we provide below responses to the Staff’s comment letter to the Company dated June 17, 2011. As requested, these responses are keyed to correspond to the Staff’s comment letter, which we do by setting out each of the Staff’s comments followed by our response.
Unless the context requires otherwise, references to we, our, us, United Community Banks, Inc. or the Company in the response below refer to United Community Banks, Inc. In addition, in the case of all responses to comments, the use of first person pronouns reflect statements of the Company as if it were the signatory of this letter (rather than this firm on its behalf).
Letter to the Securities and Exchange Commission
June 28, 2011
Page 2
Form S-1 filed May 23, 2011
General
1.
We note the bank is currently subject to a memorandum of understanding (“MOU”) with the FDIC and Georgia Department of Banking and Finance. Please revise to include a recent developments section and disclose all material actions taken in response to the MOU. Disclose whether your capital ratios were in compliance with the MOU as of March 31, 2011.
Response:
The requested revision has been made in Amendment No. 1 to the Company’s Registration Statement on Form S-1 (the “Amendment”). That and all other revisions to the Amendment are shown in the redlined draft that we have sent to the Staff by e-mail and Federal Express to facilitate your review.
2.
We note foreclosed property costs were up $54.1 million in the first quarter of 2011 compared to the first quarter of 2010. On page 39 of your Form 10-Q for the quarter ended March 31, 2010, you attribute most of this increased expense to higher write downs on foreclosed properties incurred to expedite sales under the Problem Asset Disposition Plan. Please tell us, with a view toward revised disclosure, whether you expect to continue to incur elevated foreclosed property costs.
Response:
The Company does not expect to continue to incur elevated foreclosed property costs at the level incurred in the first quarter of 2011. As a result of the Company’s Bulk Loan Sale in the second quarter of 2011, inflows to foreclosed properties are expected to continue to decline because the loans with the highest probability of foreclosure were included in the Bulk Loan Sale. Correspondingly, the Company expects related foreclosure costs to continue to decline. The Bulk Loan Sale was a discrete transaction and there are currently no plans under consideration to execute another bulk sale of that magnitude. A revision has been made in the “Summary—Recent Developments” section of the Amendment with respect to these expectations.
3.
We note you have incurred increasing losses since 2008. Please revise to include a risk factor in the registration statement that addresses your recent quarterly and annual losses, including the loss incurred in the most recent quarter. We note you have incorporated by reference the risk factors from the Form 10-K for the year ended December 31, 2010, including the second risk factor on page 16.
Response:
The requested revision has been made in the Amendment.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 3
Prospectus Cover Page
4.
We note there is no existing market for the cumulative perpetual preferred stock or the warrants. Accordingly, an at-the-market offering is not permitted for these securities. Please revise to disclose that the selling shareholders will sell at a price of $x.xx per share/warrant until the shares/warrants are quoted on the OTCBB and thereafter at prevailing market prices or privately negotiated prices. In addition, disclose the current interest rate on the preferred and the exercise price of the warrants and whether or not they have a cashless exercise feature.
Response:
The requested revisions have been made in the Amendment.
A Warning About Forward ..., page ii
5.
Move this section to after the risk factors section.
Response:
The requested revision has been made in the Amendment.
Risk Factors
Future dividend payments are restricted ..., page 3
6.
Revise to disclose the dividend rate terms and the annual accrual based on the current rate. In addition, disclose if there are any arrangements, agreements or understandings regarding the issuance of additional preferred stock and add a cross-reference to another location in the prospectus where “subject to certain limited exceptions” is more fully described.
Response:
The requested revisions have been made in the Amendment.
Plan of Distribution, page 4
7.
Please disclose that you will file a post-effective amendment to the registration statement to update the plan of distribution in the event you engage underwriters, broker-dealers or agents to offer the securities.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 4
Response:
The requested revision has been made in the Amendment.
Selling Shareholders, page 6
8.
Please revise to name the natural persons who have or share voting or investment power for each identified selling shareholder. In addition, indicate if either seller is a broker-dealer or an affiliate of a broker-dealer. If so, add appropriate disclosure of seller’s intentions at the date of purchase.
Response:
The requested revision has been made in the Amendment.
Tax Benefits Preservation Plan, page 7
9.
We note the representations here and on page 18 of the Form 10-Q for the first quarter that management does not believe there was an ownership change under Section 382 of the Internal Revenue Code prior to, or in connection with, the private equity transaction completed in the first quarter. Please revise your disclosure here to address, by bullets, the negative aspects of the plan, e.g., how the net operating losses could be lost, impact on liquidity or poison pill elements, testing dates under section 382, reductions based on market value, etc. Disclose the amounts at risk. In this regard, please add a risk factor that addresses the potential risks related to a change of ownership or market value changes.
Response:
We have revised the Amendment to describe the negative aspects of the Company’s Tax Benefits Preservation Plan and to describe in more detail the impact of an ownership change under Section 382 of the Internal Revenue Code (“Section 382”). We have also included an updated Section 382-related risk factor in the Amendment.
Item 15. Recent Sales of Unregistered Securities
10.
Revise to disclose the Fletcher option and warrant issuance. In addition, add disclosure here to the Fletcher issuance as well as the other 2011 issuances as to how they were structured to comply with IRS Section 382. Alternately, add this disclosure on page 7 under “Tax Benefits Preservation Plan.” Also add a risk factor addressing the potential dilution associated with these issuances and the potential indemnification issuances.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 5
Response:
We have added disclosure regarding the Fletcher option and warrant issuance and disclosure to the description of the 2011 issuances to describe how the 2011 issuances were structured to comply with Section 382. The Fletcher option and warrant issuance was not structured in a way to comply with Section 382 because those transactions did not create any risk of an ownership change under Section 382 at such time.
We have added a risk factor with respect to potential dilution as a result of the exercise of the Fletcher warrants and possible purchase of convertible preferred stock. We have not added a risk factor with respect to a possible dilutive issuance as a result of the issuance of potential indemnification shares because the Company’s indemnification obligation lapsed on June 15, 2011 without an issuance.
11.
Revise to disclose the exemption from registration claimed for each unregistered sale identified in this section and state briefly the facts relied upon to make the exemption available. Refer to Item 701(d) of Regulation S-K. In addition, disclose the aggregate offering amount for each unregistered offering.
Response:
The requested revisions have been made in the Amendment.
Exhibit 5
12.
Please arrange for counsel to opine that the warrants are binding obligations under the state contract law governing the warrant agreement.
Response:
The requested revision has been made in the revised opinion filed with the Amendment (the “Revised Opinion”).
13.
Refer to the second sentence of the last paragraph. Counsel may limit reliance on the opinion with regard to purpose, but not person. Please arrange for counsel to revise accordingly.
Response:
The requested revision has been made in the Revised Opinion.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 6
Form 10-K for Fiscal Year Ended December 31, 2010
Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview, page 27
14.
Provide us with sufficient information so that we may better understand the nature and your accounting for the fraud loan loss provision recorded previously and subsequently reversed in fiscal 2010.
Response:
In 2007, the Company suffered an $18 million loss related to two fraudulent real estate developments in western North Carolina. The original $18 million fraud loan loss provision and related charge-off were described on page 22 of the Company’s Form 10-K for Fiscal Year Ended December 31, 2007. For the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview, we broke out separately the fraud loan loss provision and related charge-off to better disclose the nature of the loss. At the time of the loss, the Company filed a claim with its primary insurer for coverage of the loss under its blanket bond and excess bond. The Company’s insurer rejected the claim, and, as a result, the Company filed a suit against such insurer. Because the Company’s insurer initially rejected the claim, management determined the likelihood of collection was remote. We therefore recorded the recovery when we determined the realization was probable which was in the fourth quarter of 2010. In December 2010, the Company reached a settlement with its insurer for $12.25 million, less $500,000 paid in expenses related to the recovery. The Company recorded the net $11.75 million as a loan recovery of a previous charge-off in the fourth quarter of 2010 and separated the fraud loan recovery in the Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview consistent with our 2007 disclosures.
Item 11. Executive Compensation
Base Salary, page 20 of Definitive Proxy Statement on Schedule 14A
15.
We note the disclosure in the first paragraph on page 21 that Mr. Freeman’s compensation was reduced by $95,000 in 2010. Please reconcile this statement with the amounts disclosed in the summary compensation table.
Response:
Effective April 1, 2010, Mr. Freeman voluntarily requested that his annual base salary be reduced by $95,000 from $295,000 to $200,000. In the summary compensation table in the Company’s Definitive Proxy Statement on Schedule 14A, Mr. Freeman’s base salary for 2010 is shown as $223,750 because he earned an annual base salary of $295,000 for the first three months of the year and an annual base salary of $200,000 for the last nine months of the year. A reconciliation is shown below.
Base salary of $295,000 times 3/12 =
$ 73,750
Base salary of $200,000 times 9/12 =
150,000
Total
$ 223,750
Letter to the Securities and Exchange Commission
June 28, 2011
Page 7
Non-Equity Incentive Awards, page 21 of Definitive Proxy Statement on Schedule 14A
16.
It appears based on your disclosure that the qualitative performance measures were established as quantifiable performance targets. Please tell us what these targets were and revise future filings accordingly. Refer to Item 402(b)(2)(v) of Regulation S-K.
The key performance measure considered by the Company’s Compensation Committee for fiscal year 2010 was core pre-tax, pre-credit earnings, viewed as the primary quantitative performance measure. Additionally, if the minimum threshold target was met, the Compensation Committee had negative discretion to lower the targeted bonus level based on several qualitative performance measures. The qualitative performance measures targeted levels of provision for loan losses, core deposit growth, net interest margin, operating efficiency ratio, and customer satisfaction scores.
The Company described in its Proxy Statement that, to receive a bonus award, core pre-tax, pre-credit earnings must have reached a minimum level of $75 million, and higher bonus awards could be paid if the Company achieved $125 million in core pre-tax, pre-credit earnings for the year. If the minimum or a higher targeted level of core pre-tax, pre-credit earnings was met, the bonus award could be reduced by the Compensation Committee based on the collective performance of the qualitative measures discussed above.
The Company’s actual core pre-tax, pre-credit earnings for 2010 were $113.4 million. Even though the primary measure, core deposit growth and customer satisfaction scores were above the minimum levels, the provision for loan losses, net interest margin and operating efficiency goals were not met during 2010. Therefore, the Compensation Committee did not grant non-equity incentive compensation awards or cash bonuses in 2010 to any Named Executive Officers or any other member of senior management.
The Company has not disclosed the specific numerical performance targets for its qualitative performance measures because such disclosure would result in substantial competitive harm to the Company, as defined in Instruction 4 to Item 402(b) of Regulation S-K. Instruction 4 specifies that the applicable standard for that determination is the same as when requesting confidential treatment of confidential trade secrets or confidential commercial or financial information pursuant to Securities Act Rule 406 and Exchange Act Rule 24b-2, each of which in turn incorporates the criteria for nondisclosure when relying upon Exemption 4 of the Freedom of Information Act (5 U.S.C. § 552(b)(4)) (“FOIA”) and Rule 80(b)(4) thereunder. As described below, we believe that the Company omission of the specific numerical performance targets meets the criteria in Instruction 4 to Item 402(b) and in Exemption 4 to FOIA.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 8
Current Disclosure. The Company has carefully evaluated its various incentive compensation arrangements to determine if disclosure would result in competitive harm. When the Company does not believe that disclosure of information relating to performance targets will result in competitive harm, it has disclosed such information. For example, the Company has described the target for the key performance measure considered by the Committee that is a threshold for any incentive compensation to be paid. We believe th
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CORRESP
1
filename1.htm
t71013a_corresp.htm
Suite 2800 1100 Peachtree St.
Atlanta GA 30309-4530
t 404 815 6500 f 404 815 6555
www.KilpatrickStockton.com
direct dial 404 815 6270
direct fax 404 541 3400
JStevens@kilpatrickstockton.com
June 28, 2011
VIA EDGAR, E-Mail and Federal Express
U.S. Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 4561
Washington, D.C. 20549
Attention: Michael R. Clampitt, Senior Counsel
Re: United Community Banks, Inc.
Registration Statement on Form S-1
Filed May 23, 2011
File No. 333-174420
Form 10-K for Fiscal Year Ended December 31, 2010
Filed March 16, 2011
Form 10-Q for Fiscal Quarter Ended March 31, 2011
Filed May 4, 2011
File No. 001-35095
Ladies and Gentlemen:
At the request and on behalf of our client, United Community Banks, Inc. (the “Company”), we provide below responses to the Staff’s comment letter to the Company dated June 17, 2011. As requested, these responses are keyed to correspond to the Staff’s comment letter, which we do by setting out each of the Staff’s comments followed by our response.
Unless the context requires otherwise, references to we, our, us, United Community Banks, Inc. or the Company in the response below refer to United Community Banks, Inc. In addition, in the case of all responses to comments, the use of first person pronouns reflect statements of the Company as if it were the signatory of this letter (rather than this firm on its behalf).
Letter to the Securities and Exchange Commission
June 28, 2011
Page 2
Form S-1 filed May 23, 2011
General
1.
We note the bank is currently subject to a memorandum of understanding (“MOU”) with the FDIC and Georgia Department of Banking and Finance. Please revise to include a recent developments section and disclose all material actions taken in response to the MOU. Disclose whether your capital ratios were in compliance with the MOU as of March 31, 2011.
Response:
The requested revision has been made in Amendment No. 1 to the Company’s Registration Statement on Form S-1 (the “Amendment”). That and all other revisions to the Amendment are shown in the redlined draft that we have sent to the Staff by e-mail and Federal Express to facilitate your review.
2.
We note foreclosed property costs were up $54.1 million in the first quarter of 2011 compared to the first quarter of 2010. On page 39 of your Form 10-Q for the quarter ended March 31, 2010, you attribute most of this increased expense to higher write downs on foreclosed properties incurred to expedite sales under the Problem Asset Disposition Plan. Please tell us, with a view toward revised disclosure, whether you expect to continue to incur elevated foreclosed property costs.
Response:
The Company does not expect to continue to incur elevated foreclosed property costs at the level incurred in the first quarter of 2011. As a result of the Company’s Bulk Loan Sale in the second quarter of 2011, inflows to foreclosed properties are expected to continue to decline because the loans with the highest probability of foreclosure were included in the Bulk Loan Sale. Correspondingly, the Company expects related foreclosure costs to continue to decline. The Bulk Loan Sale was a discrete transaction and there are currently no plans under consideration to execute another bulk sale of that magnitude. A revision has been made in the “Summary—Recent Developments” section of the Amendment with respect to these expectations.
3.
We note you have incurred increasing losses since 2008. Please revise to include a risk factor in the registration statement that addresses your recent quarterly and annual losses, including the loss incurred in the most recent quarter. We note you have incorporated by reference the risk factors from the Form 10-K for the year ended December 31, 2010, including the second risk factor on page 16.
Response:
The requested revision has been made in the Amendment.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 3
Prospectus Cover Page
4.
We note there is no existing market for the cumulative perpetual preferred stock or the warrants. Accordingly, an at-the-market offering is not permitted for these securities. Please revise to disclose that the selling shareholders will sell at a price of $x.xx per share/warrant until the shares/warrants are quoted on the OTCBB and thereafter at prevailing market prices or privately negotiated prices. In addition, disclose the current interest rate on the preferred and the exercise price of the warrants and whether or not they have a cashless exercise feature.
Response:
The requested revisions have been made in the Amendment.
A Warning About Forward ..., page ii
5.
Move this section to after the risk factors section.
Response:
The requested revision has been made in the Amendment.
Risk Factors
Future dividend payments are restricted ..., page 3
6.
Revise to disclose the dividend rate terms and the annual accrual based on the current rate. In addition, disclose if there are any arrangements, agreements or understandings regarding the issuance of additional preferred stock and add a cross-reference to another location in the prospectus where “subject to certain limited exceptions” is more fully described.
Response:
The requested revisions have been made in the Amendment.
Plan of Distribution, page 4
7.
Please disclose that you will file a post-effective amendment to the registration statement to update the plan of distribution in the event you engage underwriters, broker-dealers or agents to offer the securities.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 4
Response:
The requested revision has been made in the Amendment.
Selling Shareholders, page 6
8.
Please revise to name the natural persons who have or share voting or investment power for each identified selling shareholder. In addition, indicate if either seller is a broker-dealer or an affiliate of a broker-dealer. If so, add appropriate disclosure of seller’s intentions at the date of purchase.
Response:
The requested revision has been made in the Amendment.
Tax Benefits Preservation Plan, page 7
9.
We note the representations here and on page 18 of the Form 10-Q for the first quarter that management does not believe there was an ownership change under Section 382 of the Internal Revenue Code prior to, or in connection with, the private equity transaction completed in the first quarter. Please revise your disclosure here to address, by bullets, the negative aspects of the plan, e.g., how the net operating losses could be lost, impact on liquidity or poison pill elements, testing dates under section 382, reductions based on market value, etc. Disclose the amounts at risk. In this regard, please add a risk factor that addresses the potential risks related to a change of ownership or market value changes.
Response:
We have revised the Amendment to describe the negative aspects of the Company’s Tax Benefits Preservation Plan and to describe in more detail the impact of an ownership change under Section 382 of the Internal Revenue Code (“Section 382”). We have also included an updated Section 382-related risk factor in the Amendment.
Item 15. Recent Sales of Unregistered Securities
10.
Revise to disclose the Fletcher option and warrant issuance. In addition, add disclosure here to the Fletcher issuance as well as the other 2011 issuances as to how they were structured to comply with IRS Section 382. Alternately, add this disclosure on page 7 under “Tax Benefits Preservation Plan.” Also add a risk factor addressing the potential dilution associated with these issuances and the potential indemnification issuances.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 5
Response:
We have added disclosure regarding the Fletcher option and warrant issuance and disclosure to the description of the 2011 issuances to describe how the 2011 issuances were structured to comply with Section 382. The Fletcher option and warrant issuance was not structured in a way to comply with Section 382 because those transactions did not create any risk of an ownership change under Section 382 at such time.
We have added a risk factor with respect to potential dilution as a result of the exercise of the Fletcher warrants and possible purchase of convertible preferred stock. We have not added a risk factor with respect to a possible dilutive issuance as a result of the issuance of potential indemnification shares because the Company’s indemnification obligation lapsed on June 15, 2011 without an issuance.
11.
Revise to disclose the exemption from registration claimed for each unregistered sale identified in this section and state briefly the facts relied upon to make the exemption available. Refer to Item 701(d) of Regulation S-K. In addition, disclose the aggregate offering amount for each unregistered offering.
Response:
The requested revisions have been made in the Amendment.
Exhibit 5
12.
Please arrange for counsel to opine that the warrants are binding obligations under the state contract law governing the warrant agreement.
Response:
The requested revision has been made in the revised opinion filed with the Amendment (the “Revised Opinion”).
13.
Refer to the second sentence of the last paragraph. Counsel may limit reliance on the opinion with regard to purpose, but not person. Please arrange for counsel to revise accordingly.
Response:
The requested revision has been made in the Revised Opinion.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 6
Form 10-K for Fiscal Year Ended December 31, 2010
Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview, page 27
14.
Provide us with sufficient information so that we may better understand the nature and your accounting for the fraud loan loss provision recorded previously and subsequently reversed in fiscal 2010.
Response:
In 2007, the Company suffered an $18 million loss related to two fraudulent real estate developments in western North Carolina. The original $18 million fraud loan loss provision and related charge-off were described on page 22 of the Company’s Form 10-K for Fiscal Year Ended December 31, 2007. For the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview, we broke out separately the fraud loan loss provision and related charge-off to better disclose the nature of the loss. At the time of the loss, the Company filed a claim with its primary insurer for coverage of the loss under its blanket bond and excess bond. The Company’s insurer rejected the claim, and, as a result, the Company filed a suit against such insurer. Because the Company’s insurer initially rejected the claim, management determined the likelihood of collection was remote. We therefore recorded the recovery when we determined the realization was probable which was in the fourth quarter of 2010. In December 2010, the Company reached a settlement with its insurer for $12.25 million, less $500,000 paid in expenses related to the recovery. The Company recorded the net $11.75 million as a loan recovery of a previous charge-off in the fourth quarter of 2010 and separated the fraud loan recovery in the Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview consistent with our 2007 disclosures.
Item 11. Executive Compensation
Base Salary, page 20 of Definitive Proxy Statement on Schedule 14A
15.
We note the disclosure in the first paragraph on page 21 that Mr. Freeman’s compensation was reduced by $95,000 in 2010. Please reconcile this statement with the amounts disclosed in the summary compensation table.
Response:
Effective April 1, 2010, Mr. Freeman voluntarily requested that his annual base salary be reduced by $95,000 from $295,000 to $200,000. In the summary compensation table in the Company’s Definitive Proxy Statement on Schedule 14A, Mr. Freeman’s base salary for 2010 is shown as $223,750 because he earned an annual base salary of $295,000 for the first three months of the year and an annual base salary of $200,000 for the last nine months of the year. A reconciliation is shown below.
Base salary of $295,000 times 3/12 =
$
73,750
Base salary of $200,000 times 9/12 =
150,000
Total
$
223,750
Letter to the Securities and Exchange Commission
June 28, 2011
Page 7
Non-Equity Incentive Awards, page 21 of Definitive Proxy Statement on Schedule 14A
16.
It appears based on your disclosure that the qualitative performance measures were established as quantifiable performance targets. Please tell us what these targets were and revise future filings accordingly. Refer to Item 402(b)(2)(v) of Regulation S-K.
The key performance measure considered by the Company’s Compensation Committee for fiscal year 2010 was core pre-tax, pre-credit earnings, viewed as the primary quantitative performance measure. Additionally, if the minimum threshold target was met, the Compensation Committee had negative discretion to lower the targeted bonus level based on several qualitative performance measures. The qualitative performance measures targeted levels of provision for loan losses, core deposit growth, net interest margin, operating efficiency ratio, and customer satisfaction scores.
The Company described in its Proxy Statement that, to receive a bonus award, core pre-tax, pre-credit earnings must have reached a minimum level of $75 million, and higher bonus awards could be paid if the Company achieved $125 million in core pre-tax, pre-credit earnings for the year. If the minimum or a higher targeted level of core pre-tax, pre-credit earnings was met, the bonus award could be reduced by the Compensation Committee based on the collective performance of the qualitative measures discussed above.
The Company’s actual core pre-tax, pre-credit earnings for 2010 were $113.4 million. Even though the primary measure, core deposit growth and customer satisfaction scores were above the minimum levels, the provision for loan losses, net interest margin and operating efficiency goals were not met during 2010. Therefore, the Compensation Committee did not grant non-equity incentive compensation awards or cash bonuses in 2010 to any Named Executive Officers or any other member of senior management.
The Company has not disclosed the specific numerical performance targets for its qualitative performance measures because such disclosure would result in substantial competitive harm to the Company, as defined in Instruction 4 to Item 402(b) of Regulation S-K. Instruction 4 specifies that the applicable standard for that determination is the same as when requesting confidential treatment of confidential trade secrets or confidential commercial or financial information pursuant to Securities Act Rule 406 and Exchange Act Rule 24b-2, each of which in turn incorporates the criteria for nondisclosure when relying upon Exemption 4 of the Freedom of Information Act (5 U.S.C. § 552(b)(4)) (“FOIA”) and Rule 80(b)(4) thereunder. As described below, we believe that the Company omission of the specific numerical performance targets meets the criteria in Instruction 4 to Item 402(b) and in Exemption 4 to FOIA.
Letter to the Securities and Exchange Commission
June 28, 2011
Page 8
Current Disclosure. The Company has carefully evaluated its various incentive compensation arrangements to determine if disclosure would result in competitive harm. When the Company does not believe that disclosure of information relating to performance targets will result in competitive harm, it has disclosed such information. For example, the Company has described the target for the key performance measure considered by the Committee that is a threshold for any incentive compensation to be paid. We believe th