SEC Challenges to Major Banks Largely Absent from the Analytical Discourse

Our research found that the SEC’s Division of Corporation Finance has engaged in a series of aggressive, and in some cases protracted, comment letter exchanges with many of the largest (read: too big to fail) U.S. banks over the past five years.  Though a wide array of substantive accounting and disclosure concerns were raised in some of these exchanges, their existence and potential lasting negative impact remains largely absent from the analytical discourse on these banks:

• Bank of America (BAC)
• Citigroup (C)
• Wells Fargo (WFC)
• Fifth Third Bancorp (FITB)
• Bank of New York Mellon (BK)
• Regions Financial (RF)
• SunTrust Banks (STI)
• Huntington Bancshares (HBAN)
• M&T Bank (MTB)
• State Street (STT)

What many investors may not know and as stated on its website is that the SEC’s Division of Corporation Finance “concentrates its resources on critical disclosures that appear to conflict with Commission rules or the applicable accounting standards or on disclosure that appears to be materially deficient in explanation or clarity.”

As such, in the context of the above banks, the frequency and length of SEC reviews is certainly noteworthy.

This note will show that the frequency of the SEC review activity and issues raised involving the above banks is, in some cases, staggering.  I’ll give a quick overview of what SEC comment letters are and what stood out to us in terms of the above banks.  I’ll end the note by presenting verbatim summaries prepared by our analysts of SEC comment letters exchanged with a number of the more notable U.S. banks.

SEC Comment Letters: An Overview

Sarbanes-Oxley requires the SEC to review each public company at least once every three years.  Though all public companies are reviewed, not all get so-called “comment letters.”  Comment letters are only sent to those companies where SEC Staff members have concerns about a public company’s accounting and disclosure practices that arose through routine reviews conducted by its Division of Corporation Finance. An SEC comment letter could force a company to change a previously aggressive accounting treatment or even disclose things to investors that it had previous held back.  As such, the impact of an SEC comment letter can be both negative and long lasting.

Because we recognize their analytical value, we have our analysts assess and summarize 5 years of SEC comment letters for each of the 1,500 public companies we have in our library.  You could say we’ve read a lot of SEC comment letters.

Based on this sizable universe, we found that the frequency and duration of the SEC review activity involving some U.S. banks is staggering in some cases.  Some of the banks we profile here have endured as many as 8 reviews in the past 5 years.  We simply had not seen that before.

Think about it from a bank’s perspective.  Just as it seems the SEC went away, along they come with a new review and a whole new set of accounting and disclosure challenges.  While intensive SEC comment letter activity does occur among companies deemed economically critical, again, we’ve never seen the level of SEC challenges as we found among certain of the financial names cited here.

Some of the issues raised in SEC comment letters exchanged with the financial institutions cited in this note include, but are certainly not limited to the following:

• provisions for credit losses
• accounting for basis swaps
• fixed-rate junior subordinated notes
• accounting for securitized loans
• business segment reclassifications
• hedging relationships
• embedded derivatives
• executive compensation
• unconsolidated CDO vehicles
• derivative contracts
• delinquency statistics
• director compensation
• non-GAAP measures
• commercial paper program
• goodwill impairment testing
• consumer credit card loans
• business card loans
• impaired loans
• valuations for residential mortgages
• “nonperforming” and “nonaccrual” loans
• repurchase reserves
• loan loss allowances
• mortgage loan modifications
• construction loans with interest reserves
• loan restructurings
• the home equity loan portfolio
• collateral securing impaired loans
• consumer lending loans
• pending litigation
• company pension plans
• synthetic securitizations
• loans charged-off
• foreclosure delays

Breaking it Down:  Comment Letter Summaries for Select U.S. Banks

Below are the verbatim summaries prepared by our analysts of SEC comment letters exchanged with the following U.S. banks:

• Bank of America
• Citigroup
• Wells Fargo
• Fifth Third Bancorp
• Bank of New York Mellon
• Regions Financial
• SunTrust
• Huntington Bancshares
• M&T Bank
• State Street

Bank of America

From a Disclosure Insight research report originally published 7-Sep-2011:

Comment letters are available from 8 SEC reviews.

1. The first review (14-Sep-06 to 17-Nov-06) pertained to the 2005 10-K and 1Q06 and 2Q06 10-Qs. Issues raised included segments with negative provisions for credit losses; accounting for basis swaps; fixed-rate junior subordinated notes; accounting for securitized loans; business segment reclassifications; and the effectiveness of internal controls.
    
2. The second review (31-May-07 to 25-Jan-08) pertained to the 2006 10-K, 1Q07 - 3Q07 10-Qs, and an 8-K filed 19-Jul-07. Issues raised included non-GAAP measures; the presentation of the income statement; outstanding hedging relationships; the evaluation of embedded derivatives; and bonds with a return based off a non-interest rate index. The review lasted more than 6 months, which is atypical in our experience.
    
3. The third review (21-Aug-07 to 18-Jan-08), pertaining to the proxy filed 19-Mar-07, raised issue on various executive compensation matters.
    
4. The fourth review (7-Mar-08 to 30-Oct-08) pertained to the S-4 filed 13-Feb-08, S-4 filed 1-Oct-08, 2007 10-K, 2Q08 10-Q, and proxy filed 19-Mar-08. Issues raised included the Countrywide acquisition; the Merrill Lynch merger; obligations under three multi-seller conduits in which the company provides liquidity; unconsolidated CDO vehicles; derivative contracts utilized in conjunction with asset acquisition conduits; delinquency statistics related to residential mortgage and home equity loan portfolios; exposure to credit derivatives; and director compensation. The review lasted more than 6 months, which is atypical in our experience.
    
5. The fifth review (4-Jun-09 to 9-Jun-09), pertaining to the TO-I filed 28-May-09, concerned that tender offer.
    
6. The sixth review (14-Apr-09 to 7-May-10) pertained to the 2008 10-K, 1Q09 - 3Q09 10-Qs, and an 8-K/A filed 3-Mar-09. Issues raised included assets covered under a loss sharing agreement; net income available to common shareholders; non-GAAP measures and presentations; a liquidity support program related to the commercial paper program; the funding of unconsolidated CDOs threatened with downgrade; goodwill impairment testing; the issuance of preferred stock and warrants to the Treasury; and the pro forma financial statements relating to the Merrill Lynch merger. The review lasted longer than 6 months, which is atypical in our experience.
    
7. The seventh review (29-Jan-10 to 23-Feb-10) pertained to an 8-K filed 20-Jan-10. Issues raised included the policy not to classify consumer credit card, consumer non-real estate, and business card loans as underperforming; purchased impaired loans; adjustments related to changes in valuations processes for residential mortgages and real estate owned; differences between “nonperforming” and “nonaccrual” loans; changes in allowances; repurchase reserves; and the impact of modifications on the timing of recording loan loss allowances.
    
8. The eighth review (29-Mar-10 to 18-Feb-11) pertained to the 2009 10-K, 1Q10 - 3Q10 10-Qs, and an 8-K filed 21-Jan-11. Issues raised included certain short-term mortgage loan modifications; construction loans with interest reserves; loan restructurings in which an existing loan was converted into multiple new loans; loans extended at maturity; the ratio of allowances for loan and lease losses to nonperforming loans and leases; the allowance methodology for the home equity loan portfolio; methods used to estimate the fair value of collateral securing impaired loans; information considered in OTTI determinations; the renegotiation of credit card and consumer lending loans; repurchase reserved for representations and warranties; details regarding pending litigation; corporate and legacy company pension plans; executive compensation; cash collateralized synthetic securitizations; loans charged-off as a result of regulatory guidance; the impact of foreclosure delays; and goodwill impairment testing. The review lasted more than 6 months, which is atypical in our experience.

Citigroup

From a Disclosure Insight research report originally published 7-Sep-2011:

Comment letters are available from 7 SEC reviews.

1. The first review (3-Jul-07 to 12-Mar-09) pertained to the 2006 and 2007 10-Ks and 3Q07 and 1Q08 10-Qs. Issues raised included policies for bank and credit card customer rewards programs; exposure to sub-prime mortgages; the classification of loans and credit card receivables on the balance sheet; the presentation of the “return on risk capital” and “return on invested capital” measures; regression analysis in assessing cash flow hedges; hedge effectiveness assessments; hedge accounting processes; restructuring charges; support for off-balance sheet entities; the increase in notional value of credit derivatives; and municipal securities tender option bond trusts. The review lasted more than 6 months, which is atypical in our experience.
    
2. The second review (26-Sep-07 to 9-Jan-08), pertaining to the proxy filed 13-Mar-07, raised issue on related party transactions and various executive compensation matters.
    
3. The third review (3-Apr-09 to 15-Jul-09) pertained to the S-4 filed 19-Mar-09 and its associated amendments, 2008 10-K, preliminary proxies filed 19-Mar-09, and an 8-K filed 10-Mar-09. Issues raised included an exchange offer; the fair value of issuances of preferred stock; assets covered under a loss sharing agreement; the increase in the deposits with banks balance; rates of return on retirement plan assets; the lack of a deferred tax asset valuation allowance; deferred tax liabilities relating to foreign earnings; the composition of security portfolios; future cash flows estimates when assessing credit impairment for MBS; liquidity provided to a third-party non-consolidated commercial paper conduit; the purchase of bonds issued by Omni Trust; executive compensation; related party transactions; non-GAAP measures; and information contained within the preliminary proxies.
    
4. The fourth review (12-Jan-10 to 8-Feb-10) pertained to the 3Q09 10-Q. Issues raised included disclosures related to the impaired loan balance and consumer loan modification programs.
    
5. The fifth review (29-Jan-10 to 23-Feb-10) pertained to an 8-K filed 19-Jan-10. Issues raised included an error in the calculation of a credit valuation adjustment; the impact of modifications on the timing of recording loan loss allowances; forbearance programs offered to credit card customers; repurchase reserves; credit reserve releases; the policy of not classifying credit card loans as non-accrual; and the non-accrual classification for purchased distressed loans.
    
6. The sixth review (30-Apr-10 to 14-Jan-11) pertained to the 2009 10-K, 1Q10 - 3Q10 10-Qs, and an 8-K filed 18-Oct-10. Issues raised included continuing obligations to the federal government; commercial loan workouts; the impact of a policy to move loans into non-accrual status at earlier stages; purchased distressed loans included in the allowance for loan losses; renegotiated loans; concessions made in loan modification programs; re-default rates and balance reduction trends in modified loans; reliance on guarantor support in the determination of estimated loan losses; the intended deconsolidation of certain items upon the adoption of new accounting guidance; the representations and warranties exposure; executive compensation; FDIC insurance fees and charges; defined-benefit pension plans; the Treasury’s intent to sell its holdings in the company; goodwill impairment testing; greater detail regarding legal proceedings; threatened litigation initiated by purchasers of MBS; variable interest entities; and insurance coverage on the Student Loan Corporation portfolio. The review lasted more than 6 months, which is atypical in our experience.
    
7. The seventh review (15-Mar-11 to 11-May-11), pertaining to the S-3 filed 2-Mar-11, concerned that registration.

Wells Fargo

From a Disclosure Insight research report originally published 7-Sep-2011:

Comment letters are available from 8 SEC reviews.

1. The first review (26-Sep-07 to 21-Feb-08), pertaining to the proxy filed 16-Mar-07, raised issue on various executive compensation matters.
    
2. The second review (15-Nov-07 to 20-Mar-08) pertained to the 2006 10-K, 3Q07 10-Q, and 8-Ks filed 31-May-07, 7-Jun-07, 9-Jul-07, and 7-Nov-07. Issues raised included exposure to subprime loans; information regarding sales of loans; hedge effectiveness; agreements with and ownership of Visa; credit risk associated with certain loans; and accounting for debt instruments.
    
3. The third review (12-Nov-08 to 16-Dec-08), pertaining to the S-4 filed 31-Oct-08, concerned that registration.
    
4. The fourth review (2-Feb-09 to 27-Feb-09) pertained to an 8-K filed 28-Jan-09. Issues raised included the metric “Allowance as a % of nonperforming loans”; nonperforming assets; and loans acquired from Wachovia.
    
5. The fifth review (22-Jun-09 to 4-Nov-09) pertained to the 2008 10-K, 1Q09 10-Q, and an 8-K filed 22-Apr-09. Issues raised included pension expense; the long-term rate of return on plan assets; a decrease in the discount rate; accounting for a non-controlling interest in WSFH; automated valuation models used to support property values in the underwriting process; the 2008 loss rate in home equity portfolios; collateral values for the current LTV ratio; nonmarketable equity securities; goodwill expected to be deductible for tax purposes; losses and risk associated with securities available for sale; involvement with qualifying special purpose entities (QSPE) and unconsolidated variable interest entities (VIE); retained mortgage-backed securities; capital support agreements for certain investments held by money market funds; a description of how credit-linked note structures generate regulatory capital; certain fees earned in connection with mortgage banking activities; risk characteristics for certain financial assets used to stratify recognized servicing assets; the use of internal credit default grades in managing risk; the fair value related to credit protection sold and credit protection purchased; methodology used to measure the fair value of warrants issued to the treasury; compensation; loans made to related persons; relevancy of the nonaccretable difference from the Wachovia acquisition to tangible common equity (TCE); the ratio of nonperforming loans to total loans; reporting units and the allocation of goodwill related to the Wachovia acquisition; the impact of the early settlement of derivative contracts on 1Q09 results; a non-GAAP profit measure; classification and valuation of available-for-sale securities, principally residential mortgage-backed securities and commercial mortgage-backed securities; the recognition (OTTI) in earnings; major security types; and the amount included in the broker/pricing service table.
    
6. The sixth review (1-Feb-10 to 25-Feb-10) pertained to an 8-K filed 20-Jan-10. Issues raised included life-of-loan losses for commercial purchased credit-impaired loans; reasons for the relatively low loss rate and the decline in the allowance for loan losses as a percentage of nonaccrual loans; repurchase reserves; and the impact of modifications on the timing of recording the allowance for loan losses.
    
7. The seventh review (29-Mar-10 to 18-Jan-11) pertained to the 2009 10-K and 1Q10 10-Q. Issues raised included collateral securing the commercial loan portfolio; accounting for consumer purchased credit-impaired loans; nonaccrual policies for restructured loans; greater detail relating to troubled debt restructurings; workouts in which an existing loan was restructured into multiple new loans; construction and commercial loans; the Pick-a-Pay loan portfolio; mortgages and loans held for sale; the representations and warranties exposure; quoted prices from internal traders; securities sold under repurchase agreements; greater detail regarding pending litigation; threatened litigation initiated by purchasers of MBS; CDO valuations; the freezing and merging of qualified benefit plans; loans charged-off as a result of regulatory guidance; the adoption of accounting guidance related to consolidation; contacts in countries identified as sponsors of terrorism; and compensation for customers who were allegedly charged improper overdraft fees. The review lasted more than 6 months, which is atypical in our experience.
    
8. The eighth review (11-May-11 to 3-Aug-11) pertained to the 2010 10-K and 1Q11 10-Q. Issues raised included enhanced risk factor disclosures; modification efforts resulting from settlements with state regulators; fluctuations in net gains from trading activities; expanded discussion regarding the home equity portfolio; possible losses exceeding the mortgage repurchase liability; unresolved mortgage repurchase demands and mortgage insurance recessions; mortgage repurchase settlements; proprietary trading revenues; a breakdown of the allowance for loan losses by category; factors considered in determining loan collectability; the classification of modified purchase credit-impaired loans; changes in the net realizable value of foreclosed assets; differences between securities backed by commercial loans and those backed by commercial collateral; portfolio segments; accounting for unconsolidated VIEs; the decision not to consolidate certain VIEs in light of significant debt and equity holdings; the exclusion of loans sold to FNMA, FHLMC, and GNMA from aspects of off-balance sheet loan analysis; differences between consolidated and non-consolidated residential mortgage securitizations; the impact of the credit environment on MSR valuations; changes in the fair value and impairment of MSRs; accounting for new residential MSRs under the amortized cost method; loans and mortgages held for sale with recourse; executive compensation; non-GAAP measures; consent orders with the Office of the Comptroller of the currency and Federal Reserve; an increase in the fair value of MSRs during 1Q11; and trends in claim denials from the U.S. government for FHA and VA loans.

Fifth Third Bancorp

From a Disclosure Insight research report originally published 26-Oct-11:

Comment letters are available from 6 SEC reviews.

1. The first review (18-Dec-06 to 8-Feb-07) pertained to the 2005 10-K and 3Q06 10-Q. Issues raised included the decision to sell $11.5 billion in available-for-sale securities; other-than-temporary impairment charges related to available-for-sale securities in an unrealized loss position; and reasons for not disclosing any information related to the sale of available-for-sale securities.
    
2. The second review (29-Mar-07 to 17-May-07) pertained to the 2006 10-K. Issues raised included terms of core deposits and wholesale funding; the nature and amount of earnings credits on compensating balances; and cash flows related to the transfer of portfolio loans to loans held for sale.
    
3. The third review (21-Aug-07 to 29-Jan-08), pertaining to the proxy filed 9-Mar-07, raised issue on executive compensation.
    
4. The fourth review (3-Dec-08 to 22-Dec-08), pertaining to the proxy filed 28-Nov-08, also raised issue on executive compensation.
    
5. The fifth review (29-Apr-09 to 15-Jul-09) pertained to the 2008 10-K, 1Q09 10-Q, and an 8-K filed 23-Apr-09. Issues raised included fair value techniques related to impairment analysis; methods and assumptions used to determine the fair value of preferred stock and warrants; critical accounting policies leading to the determination that a valuation allowance was not necessary for deferred tax assets; credit risk in valuing derivative liabilities; and non-GAAP measures.
    
6. The sixth review (7-May-10 to 30-Jun-10) pertained to the 2009 10-K. Issues raised included the accretion of purchase accounting adjustments related to a 2008 acquisition; construction and commercial loans; Shared National Credit (SNC) loans; accounting policies related to securities sold under repurchase agreements; the reversal of the net litigation reserve liability related to Visa; and executive compensation.

Bank of New York Mellon

From a Disclosure Insight research report originally published 25-Jul-2011:

Comment letters are available from 4 SEC reviews.

1. The first review (23-Mar-07 to 13-Apr-07) pertained to the 2006 10-K, S-4 filed 23-Feb-07, and amended S-4 filed 2-Apr-07. Issues raised included the merger of Bank of New York and Mellon and the newly formed holding company, The Bank of New York Mellon Corporation, in Jul-07; amendment of the S-4; proceeds from loans held for sale; and accounting treatment of fair value hedges of fixed rate long-term debt and fixed rate certificates of deposit.
    
2. The second review (28-Aug-08 to 19-Sep-08) pertained to the 2007 10-K and 1Q08 and 2Q08 10-Qs. Issues raised included the consolidation of Three Rivers Funding Corporation and fair value measurement of derivative liabilities.
    
3. The third review (5-May-09 to 3-Aug-09) pertained to the 2008 10-K. Issues raised included non-GAAP performance measures; $38 million in non-interest expenses as a result of an operational error; amount and types of securities under each of the company’s impairment models; and issuance of preferred stock and warrants to the U.S. Treasury.
    
4. The fourth review (29-Mar-10 to 28-Jan-11) pertained to the 2009 10-K and 1Q10 and 2Q10 10-Qs. Issues raised related to accounting treatment of repurchase agreements. The review lasted more than 6 months, which is atypical in our experience.

Regions Financial

From a Disclosure Insight research report originally published 19-Oct-2011:

Comment letters are available from 6 SEC reviews.

1. The first review (31-Aug-07 to 29-Nov-07) pertained to the 2006 10-K and 2Q07 10-Q. Issues raised included non-GAAP measures; cash flows from the sale of certain loans held for sale; accounting for the reserve for unfunded credit commitments; recourse liabilities; cash flows between the company and the securitization conduit; servicing fees, late fees, and ancillary fees earned; the reduced sale price for EquiFirst; and discontinued operations.
    
2. The second review (21-Aug-07 to 19-Dec-07), pertaining to the proxy filed 19-Mar-07, raised issue on various executive compensation matters.
    
3. The third review (17-Jun-08 to 10-Jul-08) pertained to the 2007 10-K. Issues raised included the increase in non-performing assets; goodwill; and impairment testing.
    
4. The fourth review (20-May-09 to 29-May-09) pertained to the 2008 10-K, 1Q09 10-Q, and an 8-K filed 7-May-09. Issues raised included goodwill impairment in the General Banking/Treasury segment; additional goodwill impairment testing; the issuance of preferred stock and warrants to the U.S. Treasury; and non-GAAP measures.
    
5. The fifth review (1-Jun-09 to 10-Jun-09), pertaining to the S-4 filed 20-May-09 and its associated amendments, concerned that registration statement and loans to related persons.
    
6. The sixth review (10-Jun-10 to 5-Jan-11) pertained to the 2009 10-K and 1Q10 and 3Q10 10-Qs. Issues raised included troubled debt restructurings; accounting for repurchase agreements; reliance on guarantor support in the determination of estimated loan losses; and greater detail regarding the conclusion that goodwill was not impaired. The review lasted longer than 6 months, which is atypical in our experience.

SunTrust

From a Disclosure Insight research report originally published 20-Oct-2011:

Comment letters are available from 5 SEC reviews.

1. The first review (21-Aug-07 to 18-Dec-07), pertaining to the proxy filed 2-Mar-07, raised issue on various executive compensation matters and loans that officers and directors may have with company subsidiaries.
    
2. The second review (20-Dec-07 to 15-Feb-08), pertaining to the 2006 10-K and 1Q07 - 3Q07 10-Qs, raised issue on the company’s decision to early adopt SFAS 159 for $15.4 billion in available-for-sale securities.
    
3. The third review (18-Dec-08 to 26-Feb-09) pertained to the 2007 10-K and 1Q08 - 3Q08 10-Qs. Issues raised included the increase in allowances for loan losses in comparison with the increase in nonperforming loans; mortgage insurance arrangements; the equity forward agreement to monetize holdings of Coke stock; the decision to sell the remaining capacity under the allotment from the Capital Purchase Program operated by the U.S. Treasury; goodwill impairment testing; greater detail regarding the effects of the company’s credit on the valuation of its liabilities; and the types of assets underlying certain Level 3 assets.
    
4. The fourth review (8-Jun-09 to 15-Jun-09), pertaining to the SC TO filed 1-Jun-09, concerned that tender offer.
    
5. The fifth review (23-Apr-10 to 23-Sep-10) pertained to the 2009 10-K and 1Q10 and 2Q10 10-Qs. Issues raised included interest reserves; the allocation of the allowance for loan losses; greater detail regarding past due loans; mortgage loan modification programs; the increase in time needed to complete the foreclosure process; concessions made on troubled debt restructurings; re-default rates on restructured debt; actions taken to strengthen commercial real estate loan structures; loans extended at maturity; short-term modification programs; nonaccrual policies for restructured loans; the frequency of appraisal updates; accounting for certain VIEs and SPEs; and greater detail regarding legal proceedings.

Huntington Bancshares

From a Disclosure Insight research report originally published 5-Oct-11:

Comment letters are available from 4 SEC reviews.

1. The first review (27-Mar-07 to 18-Apr-07), pertaining to the 2006 10-K and S-4 filed 26-Feb-07, raised issue on the merger with Sky Financial Group.
    
2. The second review (29-Jul-08 to 21-Aug-08) pertained to the 2007 10-K. Issues raised included risk management practices with respect to commercial real estate lending; charges related to the Franklin restructuring and the Franklin facility C loan; credit ratings; and other-than-temporary impairments.
    
3. The third review (10-Jun-09 to 5-Aug-09), pertaining to the 2008 10-K and 1Q09 10-Q, raised issue on trust preferred securities and non-GAAP measures.
    
4. The fourth review (12-Apr-10 to 3-Feb-11) pertained to the 2009 10-K, 1Q10 - 3Q10 10-Qs, and proxy filed 26-Feb-10. Issues raised included enhanced disclosures regarding products and services, the company’s business, economic conditions, and the competitive environment; participation in TARP and FDIC programs; revised and enhanced risk factor and MD&A disclosures; the Franklin Loans restructuring transaction; troubled debt restructurings; accruing restructured loans; commercial real estate workouts whereby an existing loan is restructured into multiple new loans; the frequency of updated appraisals for collateral dependent loans; an adjustment in the timing of loan loss recognition for consumer loans and leases; accounting for repurchase agreements; director qualifications and nominations; and certain executive compensation disclosures. The review lasted more than 6 months, which is atypical in our experience.

M&T Bank

From a Disclosure Insight research report originally published 23-Dec-2011:

Comment letters are available from 4 SEC reviews.

1. The first review (9-Aug-07 to 11-Oct-07) pertained to the 2006 10-K and 1Q07 and 2Q07 10-Qs. Issues raised included hedge accounting; reinsurance activities; segment reporting; the repurchase of Alt-A loans; sub-prime and mortgage loans which increase credit risk; repurchased loans guaranteed by government-related entities; management’s evaluation of the loan and lease portfolio; and segment information.
    
2. The second review (21-Aug-07 to 21-Feb-08), pertaining to the proxy filed 5-Mar-07, raised issue on executive compensation.
    
3. The third review (28-Jan-09 to 17-Feb-09), pertaining to the S-4 filed 23-Jan-09, concerned that registration statement.
    
4. The fourth review (17-Jun-10 to 14-Oct-10) pertained to the 2009 10-K and 1Q10 10-Q. Issues raised included analysis of the investment in Bayview Lending Group; disclosures related to impaired loans; and the presentation of investment securities.

State Street

From a Disclosure Insight research report originally published 9-Nov-2011:

Comment letters are available from 6 SEC reviews.

1. The first review (30-Mar-07 to 16-May-07), pertaining to the S-4 filed 1-Mar-07, concerned the acquisition of Investors Financial.
    
2. The second review (21-Jun-07 to 12-Sep-07) pertained to the 2006 10-K and 1Q07 10-Q. Issues raised included hedging relationships; new accounting rules; the off-balance sheet accounting treatment for tax-exempt investment programs; and the impact of proposed tax legislation.
    
3. The third review (21-Aug-07 to 19-Feb-08), pertaining to the proxy filed 19-Mar-07, raised issue on various executive compensation matters.
    
4. The fourth review (8-May-09 to 23-Sep-09) pertained to the 2008 10-K. Issues raised included counterparty risk; assumptions in expected loss models; plans for reducing the size of STT’s balance sheet; gross unrealized losses; and SILO leveraged lease transactions, among many other issues.
    
5. The fifth review (3-May-10 to 13-Jan-11) pertained to the 2009 10-K, 1Q10 and 2Q10 10-Qs, proxy statement filed 6-Apr-10, and 8-Ks filed 7-Jul-10 and 20-Jul-10. Issues raised included par value of assets; commercial real estate loans; sub-prime asset backed securities, which have an amortized cost of $5 billion and gross unrealized loss of $1.9 billion; ranges of losses for legal proceedings; executive compensation; differences between agency lending programs and SSGA lending funds; redemptions that have occurred since removal of redemption restrictions in collateral underlying SSGA lending funds; and the $180 million discrete tax benefit generated by the restructuring of former non-U.S. conduit assets. The review lasted more than 6 months, which is atypical in our experience.
    
6. The sixth review (27-Apr-11 to 3-Aug-11) pertained to the 2010 10-K, 1Q11 10-Q, proxy filed 6-Apr-11, and an 8-K filed 19-Apr-11. Issues raised included exposure to state and municipal entities; potential losses arising out of the Lehman bankruptcy; revenue from foreign exchange transactions; average amounts of liquid assets; subsidiary level liquidity analysis; proprietary trading revenues; the allowance for loan losses; the Dec-10 investment portfolio repositioning; a commercial real estate loan restructuring; greater detail regarding troubled debt restructurings; executive compensation; and non-GAAP measures.