Exhibit 99.1
The South Financial Group Reports Record Results:
Net Income of $32.3 Million, Up 61%, and EPS, Up 26%
GREENVILLE, S.C., April 14 /PRNewswire-FirstCall/ -- The South Financial
Group, Inc. (Nasdaq: TSFG) today reported record first quarter 2004 net income
of $32.3 million, an increase of 61% compared to $20.0 million for the first
quarter 2003. For the first quarter 2004, net income per diluted share
totaled $0.53, a 26% increase from $0.42 per diluted share for the first
quarter 2003. For the same period, average diluted shares outstanding
increased 26%, principally as a result of the acquisition of MountainBank
Financial and a common equity offering, both of which occurred in the fourth
quarter of 2003.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000424/TSFGLOGO )
"Strong loan growth contributed to earnings progress for the quarter,"
said Mack I. Whittle, Jr., President and Chief Executive Officer of The South
Financial Group. "This superior growth reflects the strength of our markets,
the dedication and talent of our lenders, and our unwavering commitment to
customer service in local markets."
Whittle continued, "As expected, we achieved solid financial performance
in the first quarter. We are pleased to report continued margin improvement,
an improving efficiency ratio and steady credit quality measures. Another
highlight for the quarter was the announcement of our continued expansion in
some of Florida's largest and fastest-growing markets. We announced plans to
acquire CNB Florida and Florida Banks. These mergers give us the 6th largest
deposit market share in Northeast/Central Florida and provide an excellent
foundation to build on."
Continued Double-Digit Revenue Growth
Strong top-line revenue growth drove TSFG's record performance. Total
revenues for the first quarter 2004 increased 30% to $111.3 million compared
with $85.4 million for first quarter 2003, as both net interest income and
noninterest income produced double-digit gains.
Net interest income for the first quarter 2004 increased 25% over first
quarter last year, due to strong loan growth, higher investment securities and
the MountainBank acquisition. The net interest margin for the first quarter
2004 was 3.39%, up 16 basis points from the fourth quarter 2003. This follows
a 22 basis point increase for the fourth quarter 2003.
Noninterest income increased to $29.3 million for the first quarter 2004,
up 47% from $19.9 million for the first quarter 2003. Excluding $8.0 million
in gains on sales of available for sale securities and equity investments and
a $2.4 million gain on disposition of land associated with a conservation
grant, first quarter 2004 noninterest income increased from the first quarter
2003 by $1.9 million, or 11%, to $18.9 million. Service charges on deposits,
merchant processing income, and benefits administration fees drove the
increases in noninterest income. These increases were partially offset by
losses on trading and derivative activities and declines in mortgage banking
income.
Enhanced efficiency from revenue growth, expense control and effective
merger integration improved the operating efficiency ratio (operating
noninterest expenses divided by total operating revenue) to 52%, an
improvement from 57% for the first quarter 2003. (See page 4 of the financial
highlights for the efficiency ratio calculation and reconciliation to its
related GAAP measure.) Since the fourth quarter 2002, The South Financial
Group has improved its efficiency ratio each quarter.
Noninterest expenses increased 17% for the first quarter 2004 versus first
quarter 2003, or 11% excluding non-operating items in both years. In first
quarter 2004, non-operating items included a $3.4 million conservation grant
of land (partially offset by a $2.4 million related gain reported in
noninterest income) and $1.4 million loss on early extinguishment of debt.
During the first quarter 2004, TSFG's noninterest-bearing deposits grew at
a 19% annualized rate, enriching its deposit mix and reflecting successful
sales and promotional campaigns. For the first quarter 2004, total deposits
increased at a 1% annualized growth rate.
Strong, Diversified Loan Growth
TSFG's strong loan growth accelerated to 18% annualized growth for the
first quarter 2004, significantly outpacing banking industry expectations.
Loans held for investment at March 31, 2004 increased $1.5 billion, or 33%,
over the prior year. This increase included $773 million in loans acquired in
the MountainBank merger.
TSFG's loan growth is well-diversified throughout its markets. First
quarter 2004 annualized loan growth totaled 36% for western North Carolina
(the former MountainBank Financial locations), 23% for Florida, and 15% for
South Carolina and coastal North Carolina.
Solid Credit Quality Measures
The South Financial Group's key credit quality measures remained stable
during the first quarter. To facilitate quarterly comparisons, two sets of
credit quality indicators are provided: one that includes all loans and one
that excludes the Rock Hill Bank & Trust Workout Loans. In connection with
the October 2002 asset purchase transaction with Rock Hill Bank & Trust,
certain identified problem loans were segregated into a separately-managed
portfolio, referred to as the Rock Hill Workout Loans. At March 31, 2004,
this portfolio totaled $26.9 million, down from $28.6 million at December 31,
2003 and $63.6 million at March 31, 2003. Nonperforming assets for the Rock
Hill Workout Loans totaled $20.5 million, and the allowance for loan losses
was $3.2 million. For the Rock Hill Workout Loans, net loan charge-offs for
the first quarter 2004 totaled $648,000.
Credit Quality Including Rock Hill Workout Loans. Nonperforming assets
remained stable at 1.05% of loans held for investment and other real estate
owned at March 31, 2004, comparable with 1.06% at December 31, 2003. Net loan
charge-offs in the first quarter 2004 were 0.42% of average loans, down from
0.47% in the fourth quarter 2003.
Credit Quality Excluding Rock Hill Workout Loans. Core credit quality
measures remained solid in the first quarter 2004, following an improving
trend that began eight quarters ago. Nonperforming assets as a percentage of
loans held for investment and other real estate owned totaled 0.71% at March
31, 2004, down slightly from 0.72% at December 31, 2003. Net loan charge-offs
as a percentage of average loans held for investment were 0.38% and 0.36% for
the first quarter 2004 and fourth quarter 2003, respectively.
Strategic Expansion in Florida
On January 21st, The South Financial Group entered into a definitive
agreement to acquire CNB Florida Bancshares, headquartered in Jacksonville,
Florida, in an all stock transaction valued at approximately $157 million.
CNB Florida's banking subsidiary, CNB National Bank, operates 16 branch
offices in 8 counties and had approximately $820 million in assets at December
31, 2003.
On March 17th, The South Financial Group entered into a definitive
agreement to acquire Florida Banks, Inc., also headquartered in Jacksonville,
Florida, in an all stock transaction valued at approximately $169 million.
Florida Banks operates 7 banking centers in 7 counties and had approximately
$944 million in assets at December 31, 2003.
The South Financial Group expects to close both mergers in July 2004.
Post merger, CNB Florida's and Florida Banks' operations will be conducted
through TSFG's banking subsidiary, Mercantile Bank. Once both mergers are
complete, Mercantile Bank is expected to have 57 branches, approximately $4
billion in assets, the #6 deposit market share in Northeast/Central Florida,
and the #17 deposit market share in Florida. In addition, post merger, The
South Financial Group's Florida deposits will represent approximately 40% of
TSFG's total deposits.
Whittle commented, "We have stated that we want to be in the top 10 in our
target Florida markets between Tampa Bay and Jacksonville. These mergers put
us firmly in that position. With the mergers, we increase our
Northeast/Central Florida market ranking to #6. In addition, following the
completion of these mergers, TSFG's total assets should exceed $13 billion,
placing us in the top 50 U.S. commercial bank holding companies. I want to
reiterate that while these growth and size measures are impressive,
particularly given our short 17-year history, our primary focus remains on
increasing profitability and returns to our shareholders."
General Information
The South Financial Group is a financial services company headquartered in
Greenville, South Carolina, which had total assets of approximately $10.9
billion at March 31, 2004. TSFG operates two primary subsidiary banks,
Carolina First Bank and Mercantile Bank, which conduct operations through
approximately 134 branch offices in South Carolina, Florida and North
Carolina. Carolina First Bank, the largest South Carolina-based commercial
bank, operates in South Carolina and North Carolina and on the Internet under
the brand name, Bank CaroLine. Mercantile Bank operates in Florida,
principally in the Jacksonville, Orlando and Tampa Bay markets. 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 .
Conference Call/Webcast Information
The South Financial Group will host a conference call today at 10:00 a.m.
(ET) to discuss the first quarter 2004 results. Additional material
information, including forward-looking statements such as trends and
projections, may be discussed during the presentation. TSFG will also provide
supplemental financial information in 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 1-484-630-4135 using the
access code "The South." A 7-day rebroadcast of the call will be available
via 1-800-934-9424 or 1-402-220-2254.
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 1st Quarter Earnings Conference
Call." For those unable to participate during the live webcast, it will be
archived on The South Financial Group website until April 30, 2004.
Explanation of TSFG's Use of Certain 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 (see page 4) provide
reconciliations between GAAP net income and net income excluding merger-
related costs. As has been TSFG's practice, TSFG also identified certain other
non-operating items (such as gain or losses on asset sales, loss on early
extinguishment of debt, and non-operating expenses). In addition, TSFG
provides data eliminating intangibles and related amortization in order to
present data on a "cash basis." The economic substance of non-operating and
"cash basis" items is clearly defined.
TSFG's management uses these non-GAAP measures in their analysis of TSFG's
performance and believes presentations of financial measures excluding merger-
related costs and these non-operating items provide useful supplemental
information, a clearer understanding of TSFG's financial performance, and
better reflect its core operating activities. Management uses operating
earnings in the calculation of certain of its 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 the company'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.
Certain matters set forth in this news release may contain forward-looking
statements that are provided to assist in the understanding of anticipated
future financial performance. These statements, as well as other statements
that may be made by management in the conference call, include, but are not
limited to, factors which may affect earnings, return goals, expected
financial results for mergers, estimates of merger synergies and merger-
related charges, and credit quality assessment. However, such performance
involves risks and uncertainties, such as market deterioration, that may cause
actual 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, see TSFG's Annual Report on
Form 10-K for the year ended December 31, 2003. 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.
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
Page 1
Three Months Ended %
3/31/04 3/31/03 Change
INCOME STATEMENT
Interest income (tax-equivalent) $117,961 $99,628 18.4%
Interest expense 34,998 33,500 4.5
Net interest income (tax-equivalent) 82,963 66,128 25.5
Less: Tax-equivalent adjustment 947 657 44.1
Net interest income 82,016 65,471 25.3
Provision for loan losses 7,722 5,500 40.4
Net interest income after provision
for loan losses 74,294 59,971 23.9
NONINTEREST INCOME:
Service charges on deposit accounts 8,113 6,960 16.6
Fees for investment services 2,123 2,491 (14.8)
Mortgage banking income, excluding
impairment 1,561 2,434 (35.9)
Impairment (loss) recovery on
mortgage servicing rights (6) (262) (97.7)
Other 7,123 5,402 31.9
Noninterest income, excluding non-
operating gains on asset sales 18,914 17,025 11.1
Gain on sale of available for sale
securities 5,214 986 n/m
Gain on equity investments 2,810 1,875 n/m
Gain on disposition of assets and
liabilities 2,350 - n/m
Gains on non-operating asset sales,
net 10,374 2,861 n/m
Total noninterest income 29,288 19,886 47.3
NONINTEREST EXPENSES:
Personnel expense 25,833 24,594 5.0
Occupancy 5,072 4,614 9.9
Furniture and equipment 4,615 4,594 0.5
Amortization of intangibles 1,195 705 69.5
Other 15,659 12,886 21.5
Noninterest expenses, excluding non-
operating items 52,374 47,393 10.5
Employment contract payments
(reversals) (59) - n/m
Merger-related costs 177 1,497 n/m
Conservation grant of land 3,350 - n/m
Loss on early extinguishment of debt 1,429 - n/m
Non-operating noninterest expenses 4,897 1,497 n/m
Total noninterest expenses 57,271 48,890 17.1
Income before income taxes and
minority interest 46,311 30,967 49.5
Income tax expense 14,018 9,910 41.5
Minority interest in consolidated
subsidiary, net of tax - (1,012) (100.0)
Net income $32,293 $20,045 61.1%
SHARE DATA:
Net income per common share, basic $0.55 $0.42 31.0%
Net income per common share, diluted 0.53 0.42 26.2
Cash dividends declared per common share 0.15 0.14 7.1
Average common shares outstanding,
basic 59,214,344 47,325,448 25.1
Average common shares outstanding,
diluted 60,809,470 48,257,498 26.0
Supplemental financial information, including results for the last five
quarters, may be found in the Investor Relations section of TSFG's web
site: www.thesouthgroup.com .
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
Page 2
% Change
1st Quarter
3/31/04 12/31/03 3/31/03 2004/2003
BALANCE SHEET (Period End)
Cash and due from banks $220,636 $184,057 $181,495 21.6%
Interest-bearing bank
balances 1,048 2,048 59,515 (98.2)
Federal funds sold 4,477 137 - n/m
Securities 3,866,120 4,007,571 3,422,928 12.9
Loans held for sale 15,850 29,619 60,202 (73.7)
Loans held for
investment 5,986,684 5,732,205 4,515,133 32.6
Allowance for loan losses (74,871) (73,287) (66,133) 13.2
Net loans 5,927,663 5,688,537 4,509,202 31.5
Premises and equipment,
net 144,860 142,705 133,261 8.7
Intangible assets 352,003 353,079 242,420 45.2
Mortgage servicing rights 1,517 1,781 3,215 (52.8)
Other assets 356,310 339,486 413,175 (13.8)
Total assets $10,874,634 $10,719,401 $8,965,211 21.3%
Noninterest-bearing
deposits $924,753 $882,129 $757,149 22.1%
Interest-bearing
deposits 5,120,577 5,146,520 3,978,566 28.7
Total deposits 6,045,330 6,028,649 4,735,715 27.7
Federal funds purchased
and repurchase
agreements 2,425,232 2,329,666 2,066,509 17.4
Debt and other borrowed
funds 1,259,152 1,264,158 1,148,174 9.7
Other liabilities 119,099 117,059 293,329 (59.4)
Total liabilities 9,848,813 9,739,532 8,243,727 19.5
Minority interest in
consolidated subsidiary - - 86,484 n/m
Shareholders' equity 1,025,821 979,869 635,000 61.5
Total liabilities
and shareholders'
equity $10,874,634 $10,719,401 $8,965,211 21.3
CAPITAL RATIOS
(Period End)
Total risk-based capital 12.50% 12.51% 10.71%
Tier 1 risk-based capital 10.54 10.51 8.46
Leverage ratio 7.68 7.49 6.04
Tangible equity to tangible
assets 6.40 6.05 4.50
SHARE DATA (Period End)
Book value per common
share $17.21 $16.59 $13.68 25.8%
Shares outstanding 59,599,431 59,064,375 46,405,600 28.4
BALANCE SHEET (Averages -
Three Months Ended)
Total assets $10,825,717 $10,673,057 $8,394,108 29.0%
Loans 5,855,050 5,685,409 4,520,965 29.5
Securities 3,986,351 4,033,841 3,009,441 32.5
Total earning assets 9,846,551 9,728,449 7,566,149 30.1
Intangible assets 352,449 337,820 242,104 45.6
Interest-bearing
liabilities 8,863,773 8,838,544 6,846,205 29.5
Total deposits 5,940,292 6,017,132 4,590,625 29.4
Shareholders' equity 996,494 883,514 653,106 52.6
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
Page 3
% Change
1st Quarter
3/31/04 12/31/03 3/31/03 2004/2003
CREDIT QUALITY
Nonaccrual loans -
commercial $50,282 $47,137 $58,114 (13.5)%
Nonaccrual loans - consumer 2,397 2,686 2,865 (16.3)
Restructured loans - - - -
Nonperforming loans 52,679 49,823 60,979 (13.6)
Other real estate owned 10,203 10,951 10,836 (5.8)
Nonperforming assets 62,882 60,774 71,815 (12.4)
Nonperforming loans as a %
of loans held for investment 0.88% 0.87% 1.35%
Nonperforming assets as a %
of loans HFI and OREO 1.05 1.06 1.59
Allowance for loan losses
as a % of loans held for
investment 1.25 1.28 1.46
Allowance for loan losses
to nonperforming loans 1.42 x 1.47 x 1.08 x
Specific allowance for
impaired loans $12,739 $9,689 $14,751 (13.6)
Loans past due 90 days
or more (mortgage and
consumer) (A) 4,269 3,960 3,652 16.9
Net loan charge-offs:
QTR ended 6,138 6,693 9,642 (36.3)
Net loan charge-offs as
a % of avg. loans HFI
(annualized):
QTR ended 0.42% 0.47% 0.88%
CREDIT QUALITY - Excluding
Rock Hill B&T Workout Loans
Loans held for
investment $5,959,796 $5,703,602 $4,451,498 33.9%
Allowance for loan losses 71,678 70,123 54,514 31.5
Nonaccrual loans -
commercial 31,842 28,952 25,389 25.4%
Nonaccrual loans -
consumer 2,397 2,686 2,865 (16.3)
Restructured loans - - - -
Nonperforming loans 34,239 31,638 28,254 21.2
Other real estate owned 8,159 9,561 10,751 (24.1)
Nonperforming assets 42,398 41,199 39,005 8.7
Nonperforming loans as a %
of loans held for investment 0.57% 0.55% 0.63%
Nonperforming assets as a %
of loans HFI and OREO 0.71 0.72 0.87
Allowance for loan losses as
a % of loans held for
investment 1.20 1.23 1.22
Allowance for loan losses to
nonperforming loans 2.09 x 2.22 x 1.93 x
Specific allowance for
impaired loans $9,864 $7,000 $6,176 59.7
Loans past due 90 days or
more (mortgage and
consumer) (A) 4,269 3,855 3,650 17.0
Net loan charge-offs:
QTR ended 5,490 5,110 5,533 (0.8)
Net loan charge-offs as a %
of avg. loans HFI
(annualized):
QTR ended 0.38% 0.36% 0.51%
OPERATIONS DATA
Branch offices 134 134 115 16.5%
ATMs 123 122 104 18.3
Employees (full-time
equivalent) 1,910 1,918 1,647 16.0
Internet banking customers 119,932 90,132 43,737 174.2
STOCK PERFORMANCE (At Period
End)
Market price per share of
common stock $29.59 $27.75 $21.65 36.7%
Indicated annual dividend 0.60 0.60 0.56 7.1
Dividend yield 2.03% 2.16% 2.59%
Price/book ratio 1.72 x 1.67 x 1.58 x
Market capitalization $1,763,547 $1,639,036 $1,004,681 75.5
(A) TSFG's accrued interest reserve associated with these loans totaled
$439,000, $474,000, and $480,000 at March 31, 2004, December 31,
2003, and March 31, 2003, respectively.
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share data) (unaudited)
Page 4
Three Months Ended
3/31/04 3/31/03 %Change
Diluted Diluted Diluted
EPS EPS EPS
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
NET INCOME, AS REPORTED
(GAAP) $32,293 $0.53 $20,045 $0.42 61.1% 26.2%
Merger-related costs 177 1,497
Related income taxes (54) (479)
Net income, excluding
merger-related costs 32,416 0.53 21,063 0.44 53.9 20.5
Add: Amortization of
intangibles, net of tax 833 479
CASH BASIS EARNINGS $33,249 $0.55 $21,542 $0.45 54.3 22.2
Average common shares
outstanding, diluted 60,809,470 48,257,498 26.0
Other non-operating items:
Gain on sale of available
for sale securities $5,214 $986
Gain on equity investments 2,810 1,875
Gain on disposition of
assets and liabilities 2,350 -
Employment contract
reversal 59 -
Conservation grant of
land (3,350) -
Loss on early
extinguishment of debt (1,429) -
Related income taxes (1,711) (916)
Total other non-
operating items, net
of income tax $3,943 $1,945
SELECTED BALANCE SHEET
(Averages)
Total assets $10,825,717 $8,394,108 29.0
Intangible assets (352,449) (242,104) 45.6
Tangible assets 10,473,268 8,152,004 28.5
Shareholders' equity 996,494 653,106 52.6
Intangible assets (352,449) (242,104) 45.6
Tangible equity 644,045 411,002 56.7
PERFORMANCE RATIOS
(Annualized)
RETURN ON AVERAGE ASSETS:
Using GAAP earnings 1.20% 0.96%
Using GAAP earnings,
excluding merger-related
costs 1.20 1.00
Using cash basis earnings
on average tangible assets 1.28 1.06
RETURN ON AVERAGE EQUITY:
Using GAAP earnings 13.03 12.28
Using GAAP earnings,
excluding merger-related
costs 13.08 12.90
Using cash basis earnings
on average tangible equity 20.76 20.97
NET INTEREST MARGIN 3.39 3.54
NONINTEREST INCOME AS
A % OF TOTAL REVENUE (A)
Using GAAP earnings 26.31 23.30
Excluding other non-
operating items 18.74 20.64
EFFICIENCY RATIOS (B):
Using GAAP earnings 51.45 57.28
Excluding merger-related
costs and other non-
operating items 51.89 57.45
Excluding merger-related
costs and other non-
operating items, cash basis 50.71 56.59
(A) Calculated as noninterest income, divided by the sum of net interest
income and noninterest income.
(B) Calculated as noninterest expenses, divided by the sum of net
interest income and noninterest income.
SOURCE The South Financial Group
-0- 04/14/2004
/CONTACT: William S. Hummers III, Vice Chairman and CFO, +1-864-255-7913,
or Mary M. Gentry, Director of Investor Relations, +1-864-255-4919, both of
The South Financial Group/
/Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20000424/TSFGLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com /
/Web site: http://www.thesouthgroup.com/
(TSFG)
CO: South Financial Group; CNB Florida Bancshares; Florida Banks;
MountainBank; CNB National Bank; Mercantile Bank; Carolina First Bank;
Bank CaroLine
ST: South Carolina, Florida, North Carolina
IN: FIN
SU: ERN CCA MAV TNM