EXHIBIT 99.1
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| 102 South Main Street |
| Greenville, SC 29601 |
| 864.421.1068 |
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Date: January 19, 2006 | |
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Release Time: Immediate | |
THE SOUTH FINANCIAL GROUP ANNOUNCES FOURTH QUARTER
AND FULL YEAR 2005 EARNINGS
Highlights for 2005 include 17% period-end organic customer deposit growth, 13% period-end
organic loan growth, improved credit quality, and improved balance sheet mix.
GREENVILLE, SC – The South Financial Group, Inc. (Nasdaq/NM: TSFG) today reported net income for 2005 of $70.4 million, or $0.94 per diluted share, compared with $119.5 million, or $1.80 per diluted share, for 2004. Operating earnings for 2005 totaled $126.1 million, or $1.69 per diluted share, compared with $127.3 million, or $1.92 per diluted share, in 2004. A reconciliation of net income to operating earnings is provided in the financial highlights.
During fourth quarter 2005, TSFG repositioned its balance sheet, realizing losses from the sale of investment securities and the early extinguishment of debt. This balance sheet repositioning led to a net loss of $15.8 million, or $(0.21) per diluted share for fourth quarter 2005. This compares with net income of $23.4 million, or $0.32 per diluted share, for fourth quarter 2004. Operating earnings for fourth quarter 2005 totaled $26.8 million, or $0.36 per diluted share, compared with $36.2 million, or $0.50 per diluted share, for fourth quarter 2004. Operating earnings exclude the impact of various non-operating items, including losses from the sale of investment securities and the early extinguishment of debt, employment contract buyouts, and declines in fair value of interest rate swaps.
“2005 was a year of mixed results,” said Mack I. Whittle, Jr., Chairman and Chief Executive Officer of The South Financial Group. “The challenging interest rate environment lowered the profitability of our investment securities. This reduced our overall financial performance. However, a number of very positive events occurred, as the core underlying company continues to mature. Counter to past years, deposit growth funded substantially all of our strong loan growth, which is good news. Our loan yield grew faster than the cost of customer deposits. Our major asset quality ratios showed improvement, as demonstrated by lower nonperforming loan, nonperforming asset, and net loan charge-off ratios. In addition, we increased our investments in three key noninterest income areas: mortgage, treasury services, and wealth management.”
“As we enter 2006, the expected interest rate environment looks to be as challenging, if not more so, than 2005. We will remain focused on profitable customer growth. To date, we have taken actions to increase our relative level of customer-related income, by completing a sizable reduction of investment securities in 2005. Yet, we are equally mindful of improving our balance sheet risk management practices and implementing corporate-wide expense initiatives. Accordingly, we have begun a process to aggressively review our expenses to slow the rate of expense growth in 2006. In total, we have already identified and implemented actions, which will eliminate at least $5 million of annual expense.”
Whittle continued, “Our core strengths remain our attractive markets and proven ability to generate loan growth above peer levels with comparable yields and credit quality. During 2005, we made important investments in our franchise to supplement these strengths. In particular, we added to our management team, acquired South Florida-based Pointe Bank in May, acquired three insurance agencies, and opened ten de novo branches. In 2006, we plan to implement a new retail strategy, increase the contribution from our fee-based businesses, and improve efficiency. While we are cautious about 2006, we are committed to enhancing profitability and returns over the long term.”
Balance Sheet Repositioning
In December, TSFG took further actions to improve its balance sheet mix, selling $1.2 billion of available for sale securities (approximately 30% of the portfolio) for a pre-tax loss of $52.7 million, purchasing approximately $440 million of higher-yielding securities, and extinguishing $799 million of wholesale borrowings prior to maturity for a pre-tax loss of $5.1 million. These actions, which follow a similar repositioning that began in May 2005, were taken to improve interest rate and capital risk, the net interest margin, profitability ratios, and the predictability and growth prospects of future operating earnings.
Since March 31, 2005, prior to beginning the balance sheet repositioning, TSFG has reduced investment securities by approximately $1.7 billion to 22.1% of total assets at December 31, 2005, down from 32.9%. TSFG’s ratio of wholesale borrowings to total assets declined to 33.1% at December 31, 2005, down from 43.0% at March 31, 2005.
Revenue
Tax-equivalent net interest income was $106.7 million in fourth quarter 2005, compared with $105.2 million in third quarter 2005. Including the net cash settlement related to certain interest rate swaps to present comparable trends (see footnotes on page 7 of the financial highlights for additional explanation), fourth quarter 2005 tax-equivalent net interest income declined to $106.4 million from $107.6 million for third quarter 2005, due to lower levels of investment securities as well as two basis points of net interest margin compression.
TSFG reported a negative $25.0 million for fourth quarter 2005 noninterest income, which includes a $52.7 million loss from the sale of investment securities related to the balance sheet repositioning and a $2.1 million decline in fair value of interest rate swaps related to certain derivatives terminated during the quarter. Excluding these and other non-operating items and the net cash settlement of certain interest rate swaps, operating noninterest income for fourth quarter 2005 totaled $29.9 million, compared with $31.1 million for third quarter 2005.
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The linked-quarter decline in operating noninterest income was primarily due to trading and certain derivative activities and declines in customer fee income, mortgage banking, and merchant processing income. These declines offset the benefit from strong double-digit annualized growth in wealth management income, which grew in part from insurance acquisitions, and increased bank-owned life insurance. While customer fee income, mortgage banking, and merchant processing declined linked-quarter, each of these areas posted healthy increases over fourth quarter 2004, with over 20% growth.
Balance Sheet Trends
TSFG continues to focus on improving its relative level of customer assets and liabilities in an effort to create a higher, more sustainable net interest margin and more predictable longer-term earnings. TSFG accelerated its ability to achieve this goal by significantly reducing its level of investment securities and wholesale borrowings. In addition, TSFG is striving to grow both loans and customer deposits at double-digit growth rates and intends to reduce its dependence on wholesale funding.
For full year 2005, TSFG’s period-end organic loan growth (loans held for investment, excluding acquired loans) totaled 12.6%. Consistent with TSFG’s past experience of seasonally slower growth during the fourth quarter, period-end organic loan growth totaled 6.2% linked-quarter annualized for fourth quarter 2005, the same growth rate as fourth quarter 2004.
In 2005, TSFG shifted its strategic focus to target customer deposit growth (total deposits minus brokered CDs) in excess of loan growth. For 2005, TSFG’s period-end organic customer deposit growth totaled 17.2%. Annualized period-end organic customer deposit growth totaled 6.4% on a linked-quarter basis for fourth quarter 2005. This follows three consecutive quarters of double-digit organic customer deposit growth. TSFG experienced strong double-digit period-end growth in two of its lower-cost customer deposit categories for the full year 2005. Organic noninterest-bearing deposits and interest checking grew 13.0% and 31.6%, respectively, during 2005. However, certificates of deposit remained the fastest-growing category.
Net Interest Margin
The net interest margin (tax-equivalent) for the fourth quarter of 2005 totaled 3.16%, compared with 3.10% for the third quarter of 2005. Including the net cash settlement of certain interest rate swaps to present comparable trends, the net interest margin for fourth quarter 2005 declined two basis points to 3.15% from 3.17% for third quarter 2005. Improvements in the mix of earning assets and funding sources, which should enhance the net interest margin over time, were offset by the resulting impact of the flattening yield curve on investment security yields and wholesale borrowing costs.
In fourth quarter 2005, the loan yield increased 35 basis points, while the total cost of customer deposits increased only 30 basis points. However, interest rate spreads for investment securities relative to wholesale borrowing costs continued to narrow. In fourth quarter 2005, the investment security yield increased 10 basis points from the prior quarter, while wholesale borrowing costs (including brokered CDs), including the net cash settlement of certain interest rate swaps, increased 50 basis points.
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Credit Quality
The nonperforming assets ratio continued to improve in the fourth quarter, reaching its best level since 2000. Nonperforming assets declined $1.6 million, or 3.4%, from the previous quarter-end level. As a percent of loans held for investment and foreclosed property, nonperforming assets improved to 0.47% at December 31, 2005 from 0.49% last quarter-end and 0.69% a year earlier. Annualized fourth quarter 2005 net loan charge-offs were 0.38% of average loans held for investment, an increase from the previous quarter’s 0.31% and an improvement from 0.50% in fourth quarter 2004. For 2005, net loan charge-offs totaled 0.36%, in line with TSFG’s expectations and an improvement from 0.46% for 2004.
The fourth quarter 2005 provision for credit losses exceeded net loan charge-offs by $2.0 million. The allowance for credit losses at December 31, 2005 was 1.16% of loans held for investment, the same as the previous quarter-end and down from 1.20% at December 31, 2004. Fourth quarter 2005 allowance coverage of nonperforming loans increased to 3.24 times, compared with 3.15 times a quarter earlier and 2.14 times a year earlier.
Noninterest Expenses
Noninterest expenses for fourth quarter 2005 totaled $100.0 million, which included $9.0 million in employment contract buyouts and a $5.1 million loss on early extinguishment of debt. Noninterest expenses totaled $81.0 million for third quarter 2005. Excluding these and other non-operating items, operating noninterest expenses totaled $85.4 million for fourth quarter 2005, compared with $79.4 million for third quarter 2005.
Higher operating noninterest expenses for fourth quarter 2005 resulted primarily from increases in personnel expense and professional service fees. During the third quarter, TSFG rolled out a profitability enhancement project, which includes a broad-based assessment of operations and business practices, designed to slow the rate of noninterest expense growth. To date, approximately $5 million of annual expense reductions have been identified and implemented for 2006.
Capital
Tangible shareholders’ equity at December 31, 2005 totaled $795.8 million, or $10.65 per share, representing 5.84% of tangible assets. This compares with $811.7 million, or $10.88 per share, representing 5.69% of tangible assets at September 30, 2005. Tangible equity per share decreased 8.4% linked-quarter annualized during this period, primarily due to a net loss of $15.8 million for fourth quarter 2005. This was partially offset by a decrease in the after-tax unrealized loss on available for sale securities, which totaled $46.4 million at December 31, 2005 from $55.3 million at September 30, 2005. Excluding the impact of the unrealized loss on available for sale securities, TSFG’s tangible equity to tangible assets ratio improved to 6.15% at December 31, 2005 from 6.04% at September 30, 2005.
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Expansion
During fourth quarter 2005, TSFG opened three de novo branches, two in North Carolina and one in South Carolina. During 2005, TSFG opened ten de novo branches: four in South Carolina, three in Florida, and three in North Carolina. In addition, TSFG closed two branches during fourth quarter 2005. The 2005 net increase in de novo branches was approximately 5% over TSFG’s year-end 2004 number of branches.
Conference Call / Webcast Information
The South Financial Group will host a conference call on Friday, January 20th at 10:00 a.m. (ET) to discuss the fourth quarter 2005 and full year results. Additional material information, including forward-looking statements such as trends and projections, may be discussed during the presentation. For supplemental financial information, please refer to the Form 8-K filed by TSFG with the Securities and Exchange Commission on January 19, 2006 or visit the Investor Relations section of its website under the financial information button. To participate in the conference call or webcast, please follow the instructions listed below.
Conference Call: Please call 1-888-405-5393 or 1-517-645-6236 using the access code “The South.” A 7-day rebroadcast of the call will be available via 1-800-839-4574 or 1-402-220-5085.
Webcast: To gain access to the webcast, which will be “listen-only,” please go to www.thesouthgroup.com under the Investor Relations tab and click on the link “Webcast/The South Financial Group 4th Quarter Earnings Conference Call.” For those unable to participate during the live webcast, it will be archived on The South Financial Group website until February 3, 2006.
General Information
The South Financial Group is a financial services company, headquartered in Greenville, South Carolina with approximately $14.3 billion in total assets and 172 branch offices in Florida, North Carolina, and South Carolina. TSFG focuses on fast-growing banking markets in the Southeast and concentrates its growth in metropolitan statistical areas. TSFG operates two subsidiary banks. Carolina First Bank, the largest South Carolina-based commercial bank, operates in North Carolina, South Carolina, and on the Internet under the brand name, Bank CaroLine. Mercantile Bank operates in Florida. At December 31, 2005, approximately 48% of TSFG’s total customer deposits were in South Carolina, 39% were in Florida, and 13% were in North Carolina. The South Financial Group’s common stock trades on the Nasdaq National Market under the symbol TSFG. Press releases along with additional information may also be found at The South Financial Group’s website: www.thesouthgroup.com.
Explanation of TSFG’s Use of Certain Unaudited Non-GAAP Financial Measures and Forward-Looking Statements
This press release contains financial information determined by methods other than in accordance with Generally Accepted Accounting Principles (“GAAP”). The attached financial highlights provide reconciliations between GAAP net income, operating earnings (which exclude gains or losses on asset sales, changes in fair value of certain interest rate swaps, merger-related costs, early extinguishment of debt, impairment charges, employment contract buyouts, and other non-operating expenses), and certain measures excluding or including the net cash settlement of certain interest rate swaps. In addition, TSFG provides data eliminating intangibles and related amortization in order to present data on a “cash operating basis.”
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TSFG’s management uses these non-GAAP measures in its analysis of TSFG’s performance and believes presentations of financial measures on an operating basis provide useful supplemental information, a clearer understanding of TSFG’s financial performance, and better reflect TSFG’s core operating activities. Management utilizes operating earnings in the calculation of certain of TSFG’s ratios, in particular, to analyze on a consistent basis and over a longer period of time the performance of which it considers to be its core operating activities. TSFG believes the non-GAAP measures enhance investors’ understanding of TSFG’s business and performance. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of others in the financial services industry.
The limitations associated with utilizing operating measures and cash basis information are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently. Management compensates for these limitations by providing detailed reconciliations between GAAP information and operating measures. These disclosures should not be considered an alternative to GAAP.
This news release contains forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995) that are provided to assist in the understanding of anticipated future financial performance. These statements (as well as other forward-looking statements that may be made by management in the related conference call) include but are not limited to, descriptions of management’s plans, objectives or goals for future operations, and predictions, forecasts or other statements about future operations. They also include such items as return goals, loan growth, customer deposit growth, expected financial results for acquisitions, factors that will affect credit quality and the net interest margin, the effectiveness of its hedging strategies, the risks and effects of changes in interest rates, effects of future economic conditions, performance following TSFG’s balance sheet repositioning, and market performance. However, such statements necessarily involve risks and uncertainties and there are a number of factors – many of which are beyond TSFG’s control -- that could cause the actual conditions, events, or results to differ materially from those in such statements. For a discussion of certain factors that may cause such forward-looking statements to differ materially from TSFG’s actual results, please refer to TSFG’s filings with the Securities and Exchange Commission. The South Financial Group undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.
CONTACT:
Timothy K. Schools, Chief Financial Officer (864) 255-8980
Mary M. Gentry, SVP – Investor Relations (864) 421-1068
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THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
| | Three Months Ended | | % Change 12/31/05 vs. | |
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| | 12/31/05 | | 9/30/05 | | 12/31/04 | | (Annualized)
9/30/05 | | 12/31/04 | |
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TOTAL REVENUE(1) | | | | | | | | | | | | | | | | |
GAAP | | $ | 79,973 | | $ | 120,017 | | $ | 116,206 | | | (132.4 | )% | | (31.2 | )% |
Operating (2) | | | 136,262 | | | 138,636 | | | 128,420 | | | (6.8 | ) | | 6.1 | |
EARNINGS | | | | | | | | | | | | | | | | |
GAAP (loss) earnings | | $ | (15,772 | ) | $ | 21,090 | | $ | 23,394 | | | (693.4 | )% | | (167.4 | )% |
Operating earnings | | | 26,837 | | | 34,113 | | | 36,159 | | | (84.6 | ) | | (25.8 | ) |
Cash operating earnings | | | 28,485 | | | 35,749 | | | 37,330 | | | (80.6 | ) | | (23.7 | ) |
DILUTED SHARE DATA | | | | | | | | | | | | | | | | |
Average common shares outstanding | | �� | 75,485,436 | | | 75,414,866 | | | 72,832,859 | | | 0.4 | % | | 3.6 | % |
GAAP (loss) earnings | | $ | (0.21 | ) | $ | 0.28 | | $ | 0.32 | | | (694.3 | ) | | (165.6 | ) |
Operating earnings | | | 0.36 | | | 0.45 | | | 0.50 | | | (79.3 | ) | | (28.0 | ) |
Cash operating earnings | | | 0.38 | | | 0.47 | | | 0.51 | | | (76.0 | ) | | (25.5 | ) |
PERFORMANCE RATIOS (Annualized) | | | | | | | | | | | | | | | | |
RETURN ON AVERAGE ASSETS: | | | | | | | | | | | | | | | | |
GAAP (loss) earnings | | | (0.42 | )% | | 0.56 | % | | 0.68 | % | | | | | | |
Operating earnings | | | 0.72 | | | 0.91 | | | 1.05 | | | | | | | |
Cash operating earnings on average tangible assets | | | 0.80 | | | 1.00 | | | 1.13 | | | | | | | |
RETURN ON AVERAGE EQUITY: | | | | | | | | | | | | | | | | |
GAAP (loss) earnings | | | (4.18 | ) | | 5.55 | | | 6.72 | | | | | | | |
Operating earnings | | | 7.11 | | | 8.97 | | | 10.39 | | | | | | | |
Cash operating earnings on average tangible equity | | | 14.05 | | | 17.38 | | | 19.29 | | | | | | | |
NET INTEREST MARGIN: | | | | | | | | | | | | | | | | |
Tax equivalent | | | 3.16 | | | 3.10 | | | 3.15 | | | | | | | |
Including net cash settlement of certain interest rate swaps (3) | | | 3.15 | | | 3.17 | | | 3.34 | | | | | | | |
NONINTEREST (LOSS) INCOME AS A % OF TOTAL REVENUE(4): | | | | | | | | | | | | | | | | |
GAAP | | | (31.21 | ) | | 13.69 | | | 16.42 | | | | | | | |
Operating (2) | | | 21.72 | | | 24.13 | | | 23.41 | | | | | | | |
Operating, excluding net cash settlement of certain interest rate swaps (5) | | | 21.93 | | | 22.41 | | | 18.69 | | | | | | | |
EFFICIENCY RATIOS (6): | | | | | | | | | | | | | | | | |
GAAP | | | 125.01 | | | 67.52 | | | 59.08 | | | | | | | |
Operating (2) | | | 62.64 | | | 57.31 | | | 51.44 | | | | | | | |
Cash operating (2) | | | 60.92 | | | 55.62 | | | 50.03 | | | | | | | |
CREDIT | | | | | | | | | | | | | | | | |
Net charge-offs as a % of average loans held for investment (annualized): | | | 0.38 | | | 0.31 | | | 0.50 | | | | | | | |
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(1) | The sum of net interest income and noninterest income. |
(2) | Total revenue, noninterest income as a % of total revenue, and the efficiency ratio, on an operating basis, are calculated using tax-equivalent net interest income and exclude non-operating items. The cash operating efficiency ratio also excludes amortization of intangibles. |
(3) | Calculated as tax-equivalent net interest income plus net cash settlement on certain interest rate swaps divided by average earning assets, annualized. |
(4) | Calculated as noninterest income, divided by the sum of net interest income and noninterest income. |
(5) | Calculated as operating noninterest income excluding the net cash settlement of certain interest rate swaps divided by operating revenues. |
(6) | Calculated as noninterest expenses, divided by the sum of net interest income and noninterest income. |
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Supplemental financial information may be found in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com. |
Financial Highlights, 1
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
| | Year Ended | | | | |
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| | 12/31/05 | | 12/31/04 | | % Change | |
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TOTAL REVENUE (1) | | | | | | | | | | |
GAAP | | $ | 464,266 | | $ | 460,718 | | | 0.8 | % |
Operating (2) | | | 535,737 | | | 458,820 | | | 16.8 | |
EARNINGS | | | | | | | | | | |
GAAP earnings | | $ | 70,446 | | $ | 119,508 | | | (41.1 | )% |
Operating earnings | | | 126,130 | | | 127,308 | | | (0.9 | ) |
Cash operating earnings | | | 132,069 | | | 131,397 | | | 0.5 | |
DILUTED SHARE DATA | | | | | | | | | | |
Average common shares outstanding | | | 74,594,626 | | | 66,235,171 | | | 12.6 | % |
GAAP earnings | | $ | 0.94 | | $ | 1.80 | | | (47.8 | ) |
Operating earnings | | | 1.69 | | | 1.92 | | | (12.0 | ) |
Cash operating earnings | | | 1.77 | | | 1.98 | | | (10.6 | ) |
PERFORMANCE RATIOS | | | | | | | | | | |
RETURN ON AVERAGE ASSETS: | | | | | | | | | | |
GAAP earnings | | | 0.48 | % | | 0.98 | % | | | |
Operating earnings | | | 0.85 | | | 1.04 | | | | |
Cash operating earnings on average tangible assets | | | 0.94 | | | 1.12 | | | | |
RETURN ON AVERAGE EQUITY: | | | | | | | | | | |
GAAP earnings | | | 4.81 | | | 10.27 | | | | |
Operating earnings | | | 8.62 | | | 10.94 | | | | |
Cash operating earnings on average tangible equity | | | 16.51 | | | 18.88 | | | | |
NET INTEREST MARGIN: | | | | | | | | | | |
Tax equivalent | | | 3.12 | | | 3.06 | | | | |
Including net cash settlement of certain interest rate swaps (3) | | | 3.20 | | | 3.31 | | | | |
NONINTEREST INCOME AS A % OF TOTAL REVENUE (4): | | | | | | | | | | |
GAAP | | | 11.89 | | | 27.10 | | | | |
Operating (2) | | | 22.52 | | | 25.85 | | | | |
Operating, excluding net cash settlement of certain interest rate swaps (5) | | | 20.58 | | | 19.85 | | | | |
EFFICIENCY RATIOS (6): | | | | | | | | | | |
GAAP | | | 70.45 | | | 54.32 | | | | |
Operating (2) | | | 56.93 | | | 51.61 | | | | |
Cash operating (2) | | | 55.32 | | | 50.29 | | | | |
CREDIT | | | | | | | | | | |
Net charge-offs as a % of average loans held for investment (annualized): | | | 0.36 | | | 0.46 | | | | |
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(1) | The sum of net interest income and noninterest income. |
(2) | Total revenue, noninterest income as a % of total revenue, and the efficiency ratio, on an operating basis, are calculated using tax-equivalent net interest income and exclude non-operating items. The cash operating efficiency ratio also excludes amortization of intangibles. |
(3) | Calculated as tax-equivalent net interest income plus net cash settlement on certain interest rate swaps divided by average earning assets, annualized. |
(4) | Calculated as noninterest income, divided by the sum of net interest income and noninterest income. |
(5) | Calculated as operating noninterest income excluding the net cash settlement of certain interest rate swaps divided by operating revenues. |
(6) | Calculated as noninterest expenses, divided by the sum of net interest income and noninterest income. |
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Supplemental financial information may be found in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com. |
Financial Highlights, 2
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
| | Three Months Ended | | % Change 12/31/05 vs. | |
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| | 12/31/05 | | 9/30/05 | | 12/31/04 | | (Annualized)
9/30/05 | | 12/31/04 | |
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INCOME STATEMENT | | | | | | | | | | | | | | | | |
Interest income (tax-equivalent) | | $ | 206,142 | | $ | 196,336 | | $ | 161,269 | | | 19.8 | % | | 27.8 | % |
Interest expense | | | 99,479 | | | 91,146 | | | 62,915 | | | 36.3 | | | 58.1 | |
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Net interest income (tax-equivalent) | | | 106,663 | | | 105,190 | | | 98,354 | | | 5.6 | | | 8.4 | |
Less: tax-equivalent adjustment | | | 1,730 | | | 1,601 | | | 1,230 | | | 32.0 | | | 40.7 | |
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Net interest income | | | 104,933 | | | 103,589 | | | 97,124 | | | 5.1 | | | 8.0 | |
Provision for credit losses | | | 10,833 | | | 8,853 | | | 10,829 | | | 88.7 | | | 0.0 | |
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Net interest income after provision for credit losses | | | 94,100 | | | 94,736 | | | 86,295 | | | (2.7 | ) | | 9.0 | |
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NONINTEREST (LOSS) INCOME: | | | | | | | | | | | | | | | | |
Customer fee income | | | 14,456 | | | 15,112 | | | 11,671 | | | (17.2 | ) | | 23.9 | |
Wealth management income | | | 6,743 | | | 6,150 | | | 3,920 | | | 38.3 | | | 72.0 | |
Mortgage banking income | | | 1,720 | | | 2,087 | | | 1,412 | | | (69.8 | ) | | 21.8 | |
Bank-owned life insurance | | | 3,253 | | | 2,835 | | | 2,598 | | | 58.5 | | | 25.2 | |
Merchant processing income | | | 2,202 | | | 2,864 | | | 1,681 | | | (91.7 | ) | | 31.0 | |
(Loss) gain on trading and certain derivative activities (1) | | | (610 | ) | | 403 | | | 1,076 | | | (997.3 | ) | | (156.7 | ) |
Net cash settlement of certain interest rate swaps (2) | | | (288 | ) | | 2,377 | | | 6,064 | | | (444.8 | ) | | (104.7 | ) |
Other | | | 2,123 | | | 1,618 | | | 1,644 | | | 123.8 | | | 29.1 | |
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Operating noninterest income (noninterest income, excluding non-operating items) | | | 29,599 | | | 33,446 | | | 30,066 | | | (45.6 | ) | | (1.6 | ) |
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Change in fair value of interest rate swaps (2) | | | (2,106 | ) | | (16,240 | ) | | (2,383 | ) | | n/m | | | n/m | |
(Loss) gain on sale of available for sale securities | | | (52,677 | ) | | (1,032 | ) | | 499 | | | n/m | | | n/m | |
Impairment of GSE preferred stock | | | — | | | — | | | (10,367 | ) | | n/m | | | n/m | |
Gain on equity investments | | | 224 | | | 254 | | | 1,267 | | | n/m | | | n/m | |
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Non-operating noninterest (loss) income | | | (54,559 | ) | | (17,018 | ) | | (10,984 | ) | | n/m | | | n/m | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total noninterest (loss) income | | | (24,960 | ) | | 16,428 | | | 19,082 | | | (999.5 | ) | | (230.8 | ) |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
NONINTEREST EXPENSES: | | | | | | | | | | | | | | | | |
Personnel expense | | | 43,454 | | | 39,879 | | | 33,642 | | | 35.6 | | | 29.2 | |
Occupancy | | | 7,455 | | | 7,387 | | | 5,780 | | | 3.7 | | | 29.0 | |
Furniture and equipment | | | 5,966 | | | 5,779 | | | 5,763 | | | 12.8 | | | 3.5 | |
Professional services | | | 7,124 | | | 6,125 | | | 3,766 | | | 64.7 | | | 89.2 | |
Advertising and business development | | | 2,277 | | | 2,131 | | | 1,678 | | | 27.2 | | | 35.7 | |
Merchant processing expense | | | 1,773 | | | 2,327 | | | 1,358 | | | (94.5 | ) | | 30.6 | |
Telecommunications | | | 1,559 | | | 1,533 | | | 1,346 | | | 6.7 | | | 15.8 | |
Amortization of intangibles | | | 2,354 | | | 2,337 | | | 1,814 | | | 2.9 | | | 29.8 | |
Other | | | 13,398 | | | 11,950 | | | 10,910 | | | 48.1 | | | 22.8 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Operating noninterest expenses (noninterest expenses, excluding non-operating items) | | | 85,360 | | | 79,448 | | | 66,057 | | | 29.5 | | | 29.2 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Employment contract buyouts | | | 8,998 | | | 144 | | | 965 | | | n/m | | | n/m | |
Merger-related costs | | | 529 | | | 981 | | | 1,627 | | | n/m | | | n/m | |
Loss on early extinguishment of debt | | | 5,086 | | | 462 | | | — | | | n/m | | | n/m | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Non-operating noninterest expenses | | | 14,613 | | | 1,587 | | | 2,592 | | | n/m | | | n/m | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total noninterest expenses | | | 99,973 | | | 81,035 | | | 68,649 | | | 92.7 | | | 45.6 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(Loss) income before income taxes and discontinued operations | | | (30,833 | ) | | 30,129 | | | 36,728 | | | (802.7 | ) | | (183.9 | ) |
Income tax (benefit) expense | | | (15,061 | ) | | 9,039 | | | 13,009 | | | (1,057.8 | ) | | (215.8 | ) |
Discontinued operations, net of income tax | | | — | | | — | | | (325 | ) | | n/m | | | n/m | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Net (loss) income | | $ | (15,772 | ) | $ | 21,090 | | $ | 23,394 | | | (693.4 | )% | | (167.4 | )% |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
SHARE DATA: | | | | | | | | | | | | | | | | |
Net (loss) income per common share, basic | | $ | (0.21 | ) | $ | 0.28 | | $ | 0.33 | | | (694.3 | )% | | (163.6 | )% |
Net (loss) income per common share, diluted | | | (0.21 | ) | | 0.28 | | | 0.32 | | | (694.3 | ) | | (165.6 | ) |
Cash dividends declared per common share | | | 0.17 | | | 0.16 | | | 0.16 | | | 24.8 | | | 6.3 | |
Average common shares outstanding, basic | | | 74,453,225 | | | 74,272,867 | | | 70,910,845 | | | 1.0 | | | 5.0 | |
Average common shares outstanding, diluted | | | 75,485,436 | | | 75,414,866 | | | 72,832,859 | | | 0.4 | | | 3.6 | |
|
(1) | Includes any ineffectiveness on derivatives qualifying for hedge accounting and the fair value adjustments and net cash settlements on all derivatives not qualifying for hedge accounting. |
(2) | Relates to derivatives originally documented under the short-cut method. All of these derivatives have been either terminated or redesignated as hedges under the long-haul method during fourth quarter 2005. |
Financial Highlights, 3
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
| | Year Ended | | | |
| |
| | | |
| | 12/31/05 | | 12/31/04 | | % Change | |
| |
|
| |
|
| |
|
| |
INCOME STATEMENT | | | | | | | | | | |
Interest income (tax-equivalent) | | $ | 760,351 | | $ | 546,588 | | | 39.1 | % |
Interest expense | | | 345,241 | | | 206,391 | | | 67.3 | |
| |
|
| |
|
| |
|
| |
Net interest income (tax-equivalent) | | | 415,110 | | | 340,197 | | | 22.0 | |
Less: tax-equivalent adjustment | | | 6,054 | | | 4,356 | | | 39.0 | |
| |
|
| |
|
| |
|
| |
Net interest income | | | 409,056 | | | 335,841 | | | 21.8 | |
Provision for credit losses | | | 40,592 | | | 34,987 | | | 16.0 | |
| |
|
| |
|
| |
|
| |
Net interest income after provision for credit losses | | | 368,464 | | | 300,854 | | | 22.5 | |
| |
|
| |
|
| |
|
| |
NONINTEREST INCOME: | | | | | | | | | | |
Customer fee income | | | 53,242 | | | 43,499 | | | 22.4 | |
Wealth management income | | | 21,861 | | | 15,319 | | | 42.7 | |
Mortgage banking income | | | 7,434 | | | 6,106 | | | 21.7 | |
Bank-owned life insurance | | | 11,608 | | | 11,215 | | | 3.5 | |
Merchant processing income | | | 9,817 | | | 8,653 | | | 13.5 | |
(Loss) gain on trading and certain derivative activities (1) | | | (335 | ) | | 3,209 | | | (110.4 | ) |
Net cash settlement of certain interest rate swaps (2) | | | 10,360 | | | 27,560 | | | (62.4 | ) |
Other | | | 6,640 | | | 3,062 | | | 116.9 | |
| |
|
| |
|
| |
|
| |
Operating noninterest income (noninterest income, excluding non-operating items) | | | 120,627 | | | 118,623 | | | 1.7 | |
| |
|
| |
|
| |
|
| |
Change in fair value of interest rate swaps (2) | | | (13,278 | ) | | 2,550 | | | n/m | |
(Loss) gain on sale of available for sale securities | | | (54,978 | ) | | 6,998 | | | n/m | |
Gain on equity investments | | | 2,839 | | | 4,723 | | | n/m | |
Impairment of GSE preferred stock | | | — | | | (10,367 | ) | | n/m | |
Gain on disposition of assets and liabilities | | | — | | | 2,350 | | | n/m | |
| |
|
| |
|
| |
|
| |
Non-operating noninterest (loss) income | | | (65,417 | ) | | 6,254 | | | n/m | |
| |
|
| |
|
| |
|
| |
Total noninterest income | | | 55,210 | | | 124,877 | | | (55.8 | ) |
| |
|
| |
|
| |
|
| |
NONINTEREST EXPENSES: | | | | | | | | | | |
Personnel expense | | | 152,652 | | | 118,410 | | | 28.9 | |
Occupancy | | | 27,764 | | | 21,878 | | | 26.9 | |
Furniture and equipment | | | 23,301 | | | 20,938 | | | 11.3 | |
Professional services | | | 22,820 | | | 14,026 | | | 62.7 | |
Advertising and business development | | | 8,627 | | | 6,318 | | | 36.5 | |
Merchant processing expense | | | 7,943 | | | 6,811 | | | 16.6 | |
Telecommunications | | | 5,802 | | | 4,834 | | | 20.0 | |
Amortization of intangibles | | | 8,637 | | | 6,043 | | | 42.9 | |
Other | | | 47,470 | | | 37,538 | | | 26.5 | |
| |
|
| |
|
| |
|
| |
Operating noninterest expenses (noninterest expenses, excluding non-operating items) | | | 305,016 | | | 236,796 | | | 28.8 | |
| |
|
| |
|
| |
|
| |
Employment contract buyouts | | | 9,327 | | | 1,080 | | | n/m | |
Merger-related costs | | | 4,009 | | | 7,866 | | | n/m | |
Impairment (recovery) from write-down of assets | | | 917 | | | (277 | ) | | n/m | |
Charitable contribution to foundation | | | 683 | | | — | | | n/m | |
Conservation grant of land | | | — | | | 3,350 | | | n/m | |
Loss on early extinguishment of debt | | | 7,101 | | | 1,429 | | | n/m | |
| |
|
| |
|
| |
|
| |
Non-operating noninterest expenses | | | 22,037 | | | 13,448 | | | n/m | |
| |
|
| |
|
| |
|
| |
Total noninterest expenses | | | 327,053 | | | 250,244 | | | 30.7 | |
| |
|
| |
|
| |
|
| |
Income before income taxes and discontinued operations | | | 96,621 | | | 175,487 | | | (44.9 | ) |
Income tax expense | | | 25,779 | | | 55,489 | | | (53.5 | ) |
Discontinued operations, net of income tax | | | (396 | ) | | (490 | ) | | n/m | |
| |
|
| |
|
| |
|
| |
Net income | | $ | 70,446 | | $ | 119,508 | | | (41.1% | ) |
| |
|
| |
|
| |
|
| |
SHARE DATA: | | | | | | | | | | |
Net income per common share, basic | | $ | 0.96 | | $ | 1.85 | | | (48.1 | )% |
Net income per common share, diluted | | | 0.94 | | | 1.80 | | | (47.8 | ) |
Cash dividends declared per common share | | | 0.65 | | | 0.61 | | | 6.6 | |
Average common shares outstanding, basic | | | 73,307,403 | | | 64,592,317 | | | 13.5 | |
Average common shares outstanding, diluted | | | 74,594,626 | | | 66,235,171 | | | 12.6 | |
|
(1) | Includes any ineffectiveness on derivatives qualifying for hedge accounting and the fair value adjustments and net cash settlements on all derivatives not qualifying for hedge accounting. |
(2) | Relates to derivatives originally documented under the short-cut method. All of these derivatives have been either terminated or redesignated as hedges under the long-haul method during fourth quarter 2005. |
Financial Highlights, 4
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
| | | | | | | | | | | % Change 12/31/05 vs. | |
| | | | | | | | | | |
| |
| | 12/31/05 | | 9/30/05 | | 12/31/04 | | (Annualized)
9/30/05 | | 12/31/04 | |
| |
| |
| |
| |
| |
| |
BALANCE SHEET (Period End) | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 341,195 | | $ | 264,979 | | $ | 199,847 | | | 114.1 | % | | 70.7 | % |
Interest-bearing bank balances | | | 21,510 | | | 14,165 | | | 4,669 | | | 205.7 | | | 360.7 | |
Securities | | | 3,159,617 | | | 4,033,597 | | | 4,310,088 | | | (86.0 | ) | | (26.7 | ) |
Loans held for sale | | | 37,171 | | | 59,135 | | | 21,302 | | | (147.4 | ) | | 74.5 | |
Loans held for investment | | | 9,439,395 | | | 9,293,031 | | | 8,107,757 | | | 6.2 | | | 16.4 | |
Allowance for loan losses | | | (107,767 | ) | | (106,224 | ) | | (96,434 | ) | | 5.8 | | | 11.8 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Net loans | | | 9,368,799 | | | 9,245,942 | | | 8,032,625 | | | 5.3 | | | 16.6 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Premises and equipment, net | | | 193,574 | | | 186,970 | | | 170,648 | | | 14.0 | | | 13.4 | |
Intangible assets | | | 691,758 | | | 692,796 | | | 611,450 | | | (0.6 | ) | | 13.1 | |
Other assets | | | 542,457 | | | 508,760 | | | 469,362 | | | 26.3 | | | 15.6 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total assets | | $ | 14,318,910 | | $ | 14,947,209 | | $ | 13,798,689 | | | (16.7 | )% | | 3.8 | % |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Noninterest-bearing deposits | | $ | 1,512,508 | | $ | 1,508,370 | | $ | 1,237,877 | | | 1.1 | % | | 22.2 | % |
Interest-bearing deposits | | | 7,721,929 | | | 7,617,649 | | | 6,433,067 | | | 5.4 | | | 20.0 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total deposits | | | 9,234,437 | | | 9,126,019 | | | 7,670,944 | | | 4.7 | | | 20.4 | |
Federal funds purchased and repurchase agreements | | | 1,421,301 | | | 1,336,114 | | | 1,583,495 | | | 25.3 | | | (10.2 | ) |
Other short-term borrowings | | | 53,064 | | | 44,649 | | | 43,516 | | | 74.8 | | | 21.9 | |
Long-term debt | | | 1,922,151 | | | 2,751,268 | | | 2,972,270 | | | (119.6 | ) | | (35.3 | ) |
Other liabilities | | | 200,425 | | | 184,712 | | | 135,004 | | | 33.7 | | | 48.5 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total liabilities | | | 12,831,378 | | | 13,442,762 | | | 12,405,229 | | | (18.0 | ) | | 3.4 | |
Shareholders’ equity | | | 1,487,532 | | | 1,504,447 | | | 1,393,460 | | | (4.5 | ) | | 6.8 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total liabilities and shareholders’ equity | | $ | 14,318,910 | | $ | 14,947,209 | | $ | 13,798,689 | | | (16.7 | )% | | 3.8 | % |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
BALANCE SHEET (Averages) | | | | | | | | | | | | | | | | |
(Averages - Three Months Ended) | | | | | | | | | | | | | | | | |
Total assets | | $ | 14,854,460 | | $ | 14,945,151 | | $ | 13,701,884 | | | (2.4 | )% | | 8.4 | % |
Intangible assets | | | (693,016 | ) | | (691,881 | ) | | (614,507 | ) | | 0.7 | | | 12.8 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Tangible assets | | | 14,161,444 | | | 14,253,270 | | | 13,087,377 | | | (2.6 | ) | | 8.2 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Loans | | | 9,392,454 | | | 9,138,137 | | | 8,071,632 | | | 11.0 | | | 16.4 | |
Securities (excludes unrealized gains (losses) on available for sale securities) | | | 3,947,099 | | | 4,290,472 | | | 4,342,378 | | | (31.8 | ) | | (9.1 | ) |
Total earning assets | | | 13,395,486 | | | 13,462,755 | | | 12,422,343 | | | (2.0 | ) | | 7.8 | |
Interest-bearing liabilities | | | 11,707,125 | | | 11,843,635 | | | 10,987,435 | | | (4.6 | ) | | 6.6 | |
Total deposits | | | 9,163,599 | | | 8,917,737 | | | 7,777,123 | | | 10.9 | | | 17.8 | |
Shareholders’ equity | | | 1,497,231 | | | 1,508,140 | | | 1,384,294 | | | (2.9 | ) | | 8.2 | |
Intangible assets | | | (693,016 | ) | | (691,881 | ) | | (614,507 | ) | | 0.7 | | | 12.8 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Tangible equity | | | 804,215 | | | 816,259 | | | 769,787 | | | (5.9 | ) | | 4.5 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(Averages - Year to Date) | | | | | | | | | | | | | | | | |
Total assets | | $ | 14,752,973 | | $ | 14,718,772 | | $ | 12,208,069 | | | 0.9 | % | | 20.8 | % |
Intangible assets | | | (663,274 | ) | | (653,250 | ) | | (468,060 | ) | | 6.1 | | | 41.7 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Tangible assets | | | 14,089,699 | | | 14,065,522 | | | 11,740,009 | | | 0.7 | | | 20.0 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Loans | | | 8,883,837 | | | 8,712,435 | | | 6,927,336 | | | 7.8 | | | 28.2 | |
Securities (excludes unrealized gains (losses) on available for sale securities) | | | 4,388,351 | | | 4,537,052 | | | 4,158,202 | | | (13.0 | ) | | 5.5 | |
Total earning assets | | | 13,307,956 | | | 13,278,459 | | | 11,101,951 | | | 0.9 | | | 19.9 | |
Interest-bearing liabilities | | | 11,760,594 | | | 11,778,612 | | | 9,895,706 | | | (0.6 | ) | | 18.8 | |
Total deposits | | | 8,631,714 | | | 8,452,470 | | | 6,899,366 | | | 8.4 | | | 25.1 | |
Shareholders’ equity | | | 1,463,125 | | | 1,451,632 | | | 1,164,004 | | | 3.1 | | | 25.7 | |
Intangible assets | | | (663,274 | ) | | (653,250 | ) | | (468,060 | ) | | 6.1 | | | 41.7 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Tangible equity | | | 799,851 | | | 798,382 | | | 695,944 | | | 0.7 | | | 14.9 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Financial Highlights, 5
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
| | | | | | | | | | | % Change 12/31/05 vs. | |
| | | | | | | | | | |
| |
| | 12/31/05 | | 9/30/05 | | 12/31/04 | | (Annualized)
9/30/05 | | 12/31/04 | |
| |
| |
| |
| |
| |
| |
CREDIT QUALITY | | | | | | | | | | | | | | | | |
Nonperforming loans (1) | | $ | 33,255 | | $ | 33,708 | | $ | 45,082 | | | | | | (26.2 | ) % |
Foreclosed property (other real estate owned and personal property repossessions) | | | 10,722 | | | 11,839 | | | 10,894 | | | | | | (1.6 | ) |
| |
|
| |
|
| |
|
| | | | |
|
| |
Nonperforming assets | | $ | 43,977 | | $ | 45,547 | | $ | 55,976 | | | | | | (21.4 | ) |
| |
|
| |
|
| |
|
| | | | |
|
| |
Nonperforming loans as a % of loans held for investment | | | 0.35 | % | | 0.36 | % | | 0.56 | % | | | | | | |
Nonperforming assets as a % of loans held for investment and foreclosed property | | | 0.47 | | | 0.49 | | | 0.69 | | | | | | | |
Allowance for loan losses | | $ | 107,767 | | $ | 106,224 | | $ | 96,434 | | | | | | | |
Allowance for credit losses (2) | | $ | 109,350 | | $ | 107,381 | | $ | 96,918 | | | | | | | |
Allowance for loan losses as a % of loans HFI | | | 1.14 | | | 1.14 | | | 1.19 | | | | | | | |
Allowance for credit losses as a % of loans HFI (2) | | | 1.16 | | | 1.16 | | | 1.20 | | | | | | | |
Allowance for loan losses to nonperforming loans | | | 3.24 | x | | 3.15 | x | | 2.14 | x | | | | | | |
Impaired loans (1) | | $ | 16,911 | | $ | 20,674 | | $ | 28,836 | | | | | | (41.4 | ) |
Specific allowance for impaired loans | | | 4,336 | | | 4,238 | | | 11,129 | | | | | | (61.0 | ) |
Loans past due 90 days or more (mortgage and consumer with interest accruing) | | | 4,548 | | | 1,598 | | | 3,764 | | | | | | 20.8 | |
Net loan charge-offs: | | | | | | | | | | | | | | | | |
Three months ended | | | 8,864 | | | 7,024 | | | 10,229 | | | | | | (13.3 | ) |
Year to date | | | 31,901 | | | 23,037 | | | 31,532 | | | | | | | |
Average loans held for investment: | | | | | | | | | | | | | | | | |
Three months ended | | | 9,342,761 | | | 9,093,257 | | | 8,058,301 | | | | | | | |
Year to date | | | 8,848,279 | | | 8,681,649 | | | 6,909,545 | | | | | | | |
Net loan charge-offs as a % of average loans held for investment (annualized): | | | | | | | | | | | | | | | | |
Three months ended | | | 0.38 | % | | 0.31 | % | | 0.50 | % | | | | | | |
Year to date | | | 0.36 | | | 0.35 | | | 0.46 | | | | | | | |
CAPITAL RATIOS | | | | | | | | | | | | | | | | |
Total risk-based capital | | | 10.46 | | | 10.41 | | | 11.13 | | | | | | | |
Tier 1 risk-based capital | | | 8.87 | | | 8.86 | | | 9.47 | | | | | | | |
Leverage ratio | | | 7.08 | | | 7.20 | | | 7.34 | | | | | | | |
Tangible equity to tangible assets | | | 5.84 | | | 5.69 | | | 5.93 | | | | | | | |
SHARE DATA | | | | | | | | | | | | | | | | |
Book value per common share | | $ | 19.91 | | $ | 20.17 | | $ | 19.56 | | | (5.1 | ) % | | 1.8 | % |
Tangible book value per common share | | | 10.65 | | | 10.88 | | | 10.98 | | | (8.4 | ) | | (3.0 | ) |
Shares outstanding | | | 74,721,461 | | | 74,574,907 | | | 71,252,346 | | | 0.8 | | | 4.9 | |
STOCK PERFORMANCE | | | | | | | | | | | | | | | | |
Market price per share of common stock | | $ | 27.54 | | $ | 26.84 | | $ | 32.53 | | | 10.3 | % | | (15.3 | ) % |
Indicated annual dividend | | | 0.68 | | | 0.64 | | | 0.64 | | | 24.8 | | | 6.3 | |
Dividend yield | | | 2.47 | % | | 2.38 | % | | 1.97 | % | | | | | | |
Price/book ratio | | | 1.38 | x | | 1.33 | x | | 1.66 | x | | | | | | |
Market capitalization | | $ | 2,057,829 | | $ | 2,001,591 | | $ | 2,317,839 | | | 11.1 | | | (11.2 | ) |
OPERATIONS DATA | | | | | | | | | | | | | | | | |
Branch offices | | | 172 | | | 171 | | | 154 | | | 2.3 | % | | 11.7 | % |
ATMs | | | 167 | | | 163 | | | 145 | | | 9.7 | | | 15.2 | |
Employees (full-time equivalent) | | | 2,607 | | | 2,573 | | | 2,308 | | | 5.2 | | | 13.0 | |
Active internet banking customers | | | 75,674 | | | 84,717 | | | 66,046 | | | (42.3 | ) | | 14.6 | |
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(1) | At December 31, 2005 and September 30, 2005, these credit quality indicators (nonperforming loans and impaired loans) included $1.9 million in restructured loans. |
(2) | As of December 31, 2005, the reserve for unfunded lending commitments has been reclassified from the allowance for loan losses to other liabilities. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. The provision for credit losses is the sum of the provision for loan losses and the provision for unfunded lending commitments. Amounts presented for prior periods have been reclassified to conform to the presentation in the fourth quarter of 2005. |
Financial Highlights, 6
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
| | Three Months Ended | | % Change 12/31/05 vs. | |
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| | 12/31/05 | | 9/30/05 | | 12/31/04 | | (Annualized)
9/30/05 | | 12/31/04 | |
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RECONCILIATION OF GAAP TO NON-GAAP MEASURES | | | | | | | | | | | | | | | | |
NET (LOSS) INCOME, AS REPORTED (GAAP) | | $ | (15,772 | ) | $ | 21,090 | | $ | 23,394 | | | (693.4 | )% | | (167.4 | )% |
Non-operating items: | | | | | | | | | | | | | | | | |
Change in fair value of interest rate swaps | | | 2,106 | | | 16,240 | | | 2,383 | | | | | | | |
Loss (gain) on sale of available for sale securities | | | 52,677 | | | 1,032 | | | (499 | ) | | | | | | |
Gain on equity investments | | | (224 | ) | | (254 | ) | | (1,267 | ) | | | | | | |
Employment contract buyouts | | | 8,998 | | | 144 | | | 965 | | | | | | | |
Merger-related costs | | | 529 | | | 981 | | | 1,627 | | | | | | | |
Loss on early extinguishment of debt | | | 5,086 | | | 462 | | | — | | | | | | | |
Related income taxes (2) | | | (26,563 | ) | | (5,582 | ) | | (1,136 | ) | | | | | | |
Impairment of GSE preferred stock | | | — | | | — | | | 10,367 | | | | | | | |
Discontinued operations, net of income tax | | | — | | | — | | | 325 | | | | | | | |
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OPERATING EARNINGS (net income, excluding non-operating items) | | | 26,837 | | | 34,113 | | | 36,159 | | | (84.6 | ) | | (25.8 | ) |
Add: Amortization of intangibles, net of income tax | | | 1,648 | | | 1,636 | | | 1,171 | | | | | | | |
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CASH OPERATING EARNINGS (net income, excluding non-operating items and amortization of intangibles) | | $ | 28,485 | | $ | 35,749 | | $ | 37,330 | | | (80.6 | ) | | (23.7 | ) |
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NET INTEREST INCOME, AS REPORTED (GAAP) | | $ | 104,933 | | $ | 103,589 | | $ | 97,124 | | | | | | | |
Add: Tax-equivalent adjustment | | | 1,730 | | | 1,601 | | | 1,230 | | | | | | | |
Add: Net cash settlement of certain interest rate swaps (1) | | | (288 | ) | | 2,377 | | | 6,064 | | | | | | | |
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Net interest income (tax equivalent), including net cash settlement of certain interest rate swaps (1) | | $ | 106,375 | | $ | 107,567 | | $ | 104,418 | | | (4.4 | ) | | 1.9 | |
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OPERATING NONINTEREST INCOME (see page 3) | | $ | 29,599 | | $ | 33,446 | | $ | 30,066 | | | | | | | |
Less: Net cash settlement of certain interest rate swaps (1) | | | 288 | | | (2,377 | ) | | (6,064 | ) | | | | | | |
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Operating noninterest income, excluding net cash settlement of certain interest rate swaps (1) | | $ | 29,887 | | $ | 31,069 | | $ | 24,002 | | | (15.1 | ) | | 24.5 | |
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| | Year Ended | |
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| | 12/31/05 | | 12/31/04 | | % Change | |
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RECONCILIATION OF GAAP TO NON-GAAP MEASURES | | | | | | | | | | |
NET INCOME, AS REPORTED (GAAP) | | $ | 70,446 | | $ | 119,508 | | | (41.1 | )% |
Non-operating items: | | | | | | | | | | |
Change in fair value of interest rate swaps | | | 13,278 | | | (2,550 | ) | | | |
Loss (gain) on sale of available for sale securities | | | 54,978 | | | (6,998 | ) | | | |
Gain on equity investments | | | (2,839 | ) | | (4,723 | ) | | | |
Gain on disposition of assets and liabilities | | | — | | | (2,350 | ) | | | |
Employment contract buyouts | | | 9,327 | | | 1,080 | | | | |
Merger-related costs | | | 4,009 | | | 7,866 | | | | |
Impairment (recovery) from write-down of assets | | | 917 | | | (277 | ) | | | |
Charitable contribution to foundation | | | 683 | | | — | | | | |
Conservation grant of land | | | — | | | 3,350 | | | | |
Loss on early extinguishment of debt | | | 7,101 | | | 1,429 | | | | |
Related income taxes | | | (32,166 | ) | | 116 | | | | |
Impairment of GSE preferred stock | | | — | | | 10,367 | | | | |
Discontinued operations, net of income tax | | | 396 | | | 490 | | | | |
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OPERATING EARNINGS (net income, excluding non-operating items) | | | 126,130 | | | 127,308 | | | (0.9 | ) |
Add: Amortization of intangibles, net of income tax | | | 5,939 | | | 4,089 | | | | |
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CASH OPERATING EARNINGS (net income, excluding non-operating items and amortization of intangibles) | | $ | 132,069 | | $ | 131,397 | | | 0.5 | |
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NET INTEREST INCOME, AS REPORTED (GAAP) | | $ | 409,056 | | $ | 335,841 | | | | |
Add: Tax-equivalent adjustment | | | 6,054 | | | 4,356 | | | | |
Add: Net cash settlement of certain interest rate swaps (1) | | | 10,360 | | | 27,560 | | | | |
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Net interest income (tax equivalent), including net cash settlement of certain interest rate swaps (1) | | $ | 425,470 | | $ | 367,757 | | | 15.7 | |
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OPERATING NONINTEREST INCOME (see page 4) | | $ | 120,627 | | $ | 118,623 | | | | |
Less: Net cash settlement of certain interest rate swaps (1) | | | (10,360 | ) | | (27,560 | ) | | | |
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Operating noninterest income, excluding net cash settlement of certain interest rate swaps (1) | | $ | 110,267 | | $ | 91,063 | | | 21.1 | |
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(1) | Relates to derivatives originally documented under the short-cut method. All of these derivatives have been either terminated or redesignated as hedges under the long-haul method during fourth quarter 2005. TSFG is presenting prior periods to be comparable to these fourth quarter 2005 classifications under hedge accounting. Accordingly, TSFG has presented these non-GAAP measures classifying the net cash settlement for these certain derivatives in net interest income instead of noninterest income. |
(2) | The tax benefit for the fourth quarter 2005 non-operating items was computed at 38.4%, which approximates the statutory rate. The operating tax expense for the fourth quarter 2005 was computed at 30%, which was the effective rate for the third quarter 2005, and represents the effective rate for the fourth quarter 2005 exclusive of the non-operating items. The effective tax rate is anticipated to increase to 34% - 35% for 2006. |
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Supplemental financial information may be found in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com. |
Financial Highlights, 7
