Filed by The South Financial Group, Inc.
Pursuant to Rule 425 under the
Securities Act of 1933, as amended,
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934.
Subject Company: The South Financial Group, Inc.
Commission File No. 0-15083
THE SOUTH FINANCIAL GROUP
MODERATOR: ED MATTHEWS
JULY 17, 2002/9:00 A.M. CDT
THE SOUTH FINANCIAL GROUP
JULY 17, 2002
9:00 A.M. CDT
Coordinator Good morning and welcome to The South Financial Group
Second Quarter Earnings Release conference call. All
participants will be on a listen only mode until the
question and answer session of the call. This
conference is being recorded at the request of The
South Financial Group. If you have any objections,
you may disconnect at this time.
I would now like to introduce your conference host,
Mr. Ed Matthews, Chief Financial Officer of The South
Financial Group. Mr. Matthews, you may begin when
ready.
E. Matthews Thank you and good morning. Let me remind you that a
number of our comments today will constitute forward-
looking statements and are subject to risk and
uncertainties. These statements will speak only as
of today. We undertake no obligation to release
revisions to these forward- looking statements or to
reflect events and circumstances that occur after
today. The South Financial Group's actual results may
differ materially from those set forth in such
forward-looking statements. Today's forward-looking
statements will include, but are not limited to
statements regarding factors which may affect
earnings, financial ratios, net interest margins,
cost savings, provision for loan losses, tax rates
and credit quality. Reference is made to The South
Financial Group's reports filed with the Securities
and Exchange Commission for a discussion of factors
that may cause such differences to occur.
Today the Company's reporting net income for the
second quarter is $15 million, or $0.36 per diluted
share. This represents a 64% increase over second
quarter of 2001 earnings per diluted share of $0.22.
These quarterly results are the highest in The South
Financial Group's history and represents the fifth
consecutive quarterly increase.
Second quarter of 2002 was a relatively clean
quarter, with only two non- recurring items. We had
gain on the South Securities of $186,000 and we
recognized a loss on one of our equity investments of
$150,000, which net to $24,000 after tax. We adopted
Statement of Financial Accounting Standard 142 on
January 1, 2002 and we ceased amortization of
goodwill. Second quarter of 2001 includes
approximately $1.1 million pre-tax or $0.02 per
diluted share for amortization of intangibles.
They're not amortized in 2002 under Statement of
Financial Accounting Standard 142.
The net interest margin increased slightly to 394
basis points during the quarter, from 390 basis
points in the first quarter. Net interest income
increased 24% from the second quarter of 2001 due to
higher net interest margin and 16% growth and average
earning assets. The improvement in net interest
margin is primarily attributable to re-pricing
maturing certificates of deposit at significantly
lower rates.
Average loans increased at an annualized rate of 12%
during the quarter and average deposits increased at
an annualized rate of 4%. At June 30th the unrealized
gain on securities, which is included in Accumulated
Other Comprehensive Income, totaled $10.4 million.
Non-interest income totaled $13.5 million for the
second quarter, for an increase of 15% over the first
quarter of last year. The increase reflects higher
customer service fees and service charges on deposit
accounts, fees for investment services and merchant
processing income. The increase also reflects results
from our customer service and sales process, Elevate,
which we implemented earlier this year.
Excluding non-recurring items, second quarter
non-interest income declined from the previous year's
quarter by $433,000. As expected, mortgage banking
income declined as a result of lower servicing
portfolio and the outsourcing of servicing to outside
third party servicers beginning in 2002. Losses on
the sale of real estate, which totaled $238,000 for
the quarter, compared with a prior year gain of
$398,000, also reduced non-interest income.
Non-interest expenses for the second quarter of 2002
totaled $38.4 million. This represents a 2% increase
from the preceding quarter, which can be contributed
to additional advertising expense incurred to support
merchants processing and data card operations.
The Company's efficiency ratio for the second quarter
of 2002 was 55.9% compared with 63% for the second
quarter of 2001 and 57.1% for the first quarter of
2002. The provision for loan losses increased
$644,000 from the second quarter a year ago. The
allowance to period-end loans remained at 1.2%, and
Mike Sperry, our Chief Credit Officer will address
both non-accrual loans and net loan charge-offs in
just a few minutes in his credit quality update.
During the quarter we raised approximately $51.6
million of capital from the sale of preferred shares
issued by Real Estate Investment Trust, which is
owned by Carolina First Bank. These securities are
like those sold in 2001 and will be included as a
minority interest and consolidated subsidiary on the
balance sheet. In addition, last week we raised
approximately $25 million in a pooled trust preferred
issue.
Let me give you some updated assumptions to use in
the second half of 2002. These assumptions include
Gulf West, beginning August 31st, but do not include
the associated non-recurring merger costs, which I
will address in just a few minutes.
We expect annualized earning asset growth of
approximately 8%. We still expect a slight
improvement in the net interest margin of two to
three basis points. We expect a quarterly provision
for loan losses between $6 and $7 million,
non-interest income of approximately $13.7 to $14.2
million per quarter, total non-interest expense of
approximately $39.8 to $40.3 million in the third
quarter, excluding merger related expenses, and
dividends to minority interest and consolidated
subsidiary of approximately a million dollars per
quarter after tax. We will be using an effective tax
rate of approximately 32.5%, assuming no realization
of capital gains, which could modestly reduce that
tax rate.
The third quarter will include merger related costs
from the Gulf West merger. In addition, we have
completed our valuation of goodwill and other
intangible assets in connection with the adoption of
FAS-142. We expect to take a $1.4 million charge in
the third quarter related to the impairment of
goodwill associated with Carolina First Mortgage
Company.
Last week Gulf West shareholders approved the merger.
We anticipate closing the deal at the end of August,
at which time we will convert over all Gulf West
operating systems. Yesterday, Gulf West reported
second quarter 2002 earnings of $1.5 million or $0.18
per diluted share. These earnings increased 30% and
29% over second quarter 2001 net income and earnings
per diluted share, respectively.
We are still confident in our ability to realize cost
savings of approximately 25% of Gulf West
non-interest expenses or $4 million pre-tax. We
anticipate incurring merger related charges in the
$15 to $17 million range. Approximately $8 million of
these charges will be accounted for as additional
acquisition cost resulting in additional goodwill and
will include investment banker fees, legal fees,
accounting fees and severance.
We expect to incur approximately $3 million in
equipment and software costs, which will be
capitalized, and we anticipate $4 to $6 million in
system conversion cost, merger related advertising,
personnel training and pay to stay bonuses, which
will be included in current expenses during the
second half of the year.
At this time we anticipate booking a core deposit
intangible in the $13 million range and a resulting
goodwill of approximately $85 million. Both of these
numbers, however, are subject to change as a result
of the final valuation study.
I will now turn the call over to Mack and Mike Sperry
to discuss more about the quarter.
M. Whittle, Jr. A year ago we said we would increase EPS each
quarter. That's exactly what we've done for the past
five consecutive quarters. Last year we set a goal of
a 14.50% ROE and a 1.25% ROA by the end of 2003.
Today we remain focused on achieving these goals and
continuing to report steady progress.
This quarter's financial performance demonstrates
progress in meeting our financial goals. Today we
reported higher non-interest income, up 15% from last
quarter, expansion in our net interest margin,
improvement in our efficiency ratio to 55.9%, which
is close to our internal goal by the end of this year
of 55%, and decreases in both non-performing assets
and net loan charge-offs.
At last quarter's conference call we highlighted why
we believe our progress would continue. We cited two
significant opportunities; increasing non-interest
income through our elevated process to levels equal
to our peers and bringing our credit losses back to
historic levels.
In a moment I will provide you an update on our
non-interest income, which has exceeded our
expectations for the quarter. But first, I would like
to ask Mike Sperry, our Chief Credit Officer, to
provide an update on our credit quality measures and
outlook.
M. Sperry Good morning. In our last conference call we
indicated that our credit quality measures should
improve in the second quarter, and I'm pleased to
report that they did. Non-accrual loans declined $4.5
million from $43.5 million to $39 million, or from
1.15% to 1% of quarter end loans. Our four largest
non-accruals account for $17.9 million; almost half
of this total. The largest is a $17.7 million loan to
a privately owned water utility.
We reported last quarter that this utility was under
contract for sale pending regulatory approval. The
approval of that sale has been granted by the
governing public service commissions and we expect
the sale to close and the balance of our loan to pay
out some time this quarter.
The second largest, which is $4.5 million, is on a
real estate development in Florida. We are in
litigation and do not expect a resolution of this
until the fourth quarter or perhaps not until the
first quarter of next year.
The third largest is $3.8 million to a real estate
investor in Florida, whose credit also in litigation,
but we do expect to resolve it in the fourth quarter.
The fourth largest, which is $1.9 million, is on a
golf course in Florida. The owners of this property
are close to signing a contract for sale and we
expect this property to be sold this quarter. If the
sale does occur as anticipated, our loan will pay out
this quarter.
Our quarter end loss estimate on these four
relationships totaled $500,000. Our total loss
estimate on all non-accruing loans was $4.3 million,
which is down slightly from $4.4 million last
quarter. So, if we get the expected pay out on the
water utility loan and the golf course loan, and if
we don't have any large additions, non-accruals
should decline again this quarter. Those are two big
ifs, closings are often delayed and also since the
economy weakened in the first quarter of last year
we've had additions to non-accrual every quarter and
we can obviously have one or two large ones this
quarter. On balance, however, although I don't
anticipate this, the total could increase slightly or
we may not have as significant a reduction as we
enjoyed in the second quarter.
Loan losses in the quarter were $4.5 million, .46% of
average loans, which is down nicely from last
quarter's $5.6 million and .60% of average loans.
Higher than normal recovery has contributed to this
improvement, but lower consumer loan losses were the
primary cause. We are cautiously optimistic about the
next couple of quarters. Our losses may improve
slightly from the second quarter level or they might
not, they might increase slightly but we do not
anticipate that they will return to the first
quarter's level.
Delinquencies also improved significantly. Loans over
30 days past due were 2.40% at the end of last year.
They improved to 2.05% at the end of the first
quarter and fell again to 1.61% at the second quarter
end. On these same dates accruing past dues, which
means past dues excluding non-accruals, declined from
1.39% to 0.93% to 0.68%. Generally, loans over 90
days past due and still accruing fell from 38 basis
points to 33 basis points to 18 basis points. These
ratios, of course, are higher than their historical
norms, a reminder that the economy is still weak, but
this trend is very encouraging.
In short, we had a good quarter. We may have turned
the corner, however, lest you attempted to read too
much into that comment, I close with a caveat
relating to the near term outlook.
Recent developments on Wall Street are a signal that
the recession may not be over. In the markets where
we lend money, businesses continue to struggle with
lower revenues and consumers continue to worry about
keeping their jobs. While we have reason to
anticipate continued improvement, the better business
climate we need to sustain a trend of steady
improvement is just not yet evident.
With that, I'll turn it back to Mike.
M. Sperry As you can see, our strategies are in place and are
working. This morning I want to highlight the steps
we've taken to position our company for long term
superior performance. As you may recall, the year
2000 was a building year for us. We put a new
management team in place. We put technology in place,
including a new operating system, products and
markets in place to build a strong foundation for our
company. We can now double our current size with
this leadership and technology we already have on
board. We are ready and the structure is in place to
do that. That's why, if you track our efficiency
ratio from the fourth quarter of 2000, you will see a
steady decline from over 70% to the 55.9% we reported
today.
While increasing profitably, we are also working on
lowering our risk profile. Our goal is to deliver
consistent quarter by quarter earnings growth. We
strive to maintain a neutral interest rate position,
so market rate swings will not significantly impact
net interest income. This quarter, we move closer to
a neutral position. We have developed a credit risk
management process designed to identify potential
problems before they become actual problems. Our
process reduces the risk of major surprises and has
served us well in this economic downturn.
We raised capital during the quarter and increased
our capital ratios, which were already above the well
capitalized guidelines. Bringing our non-interest
income up to peer level is our biggest performance
upside. This is a low risk strategy to improve
profitability and returns.
Elevate, our customer centered sales process is
designed to yield long term sustainable benefits. We
are creating a proactive customer centered sales
culture for our employees by providing tools to
capitalize upon what we already do quite well. We
completed the initial training of Elevate in February
of this year and based on our earlier results it is
working. How do we know it's working? At the end of
May we started a deposit campaign based on employee
referrals to raise our numbers and dollars of
transactions accounts. In the first month we
increased transaction deposit accounts by over $57
million.
Also, during the quarter we begin to see line of
business referrals turn into actual successful sales.
We saw increases in fee income across the board,
including trust, brokerage., mortgage banking,
insurance, merchant processing and debt card income.
We operate in superior markets. Projected five-year
population growth for our markets averages over twice
the US median. Projected five-year per capita income
growth in these same markets averages 20% higher than
the US median. Our pending merger with Gulf West will
add the Tampa Bay area to our Florida operation,
which fits extremely well into our existing presence
in Orlando and Jacksonville. The greater Tampa Bay
area meets our objective of operating in the right
markets. It is the second largest SMSA in the
Southeast behind Atlanta. In addition, this region
ranked first in the nation in new jobs created
between December 2000 and December of 2001.
We are enthusiastic about the opportunity presented
by our pending merger with Gulf West. Our merger team
is well organized and energized by how well our two
management teams work together. We are especially
pleased by the Gulf West management talent that we
will be adding to our Florida operation and the
opportunity to introduce fee income products in this
new market.
In particular, we are very appreciative of Gordon
Campbell and other members of the Gulf West Senior
management and the job they are currently doing. Bob
Blakely has agreed to be market President for the
Tampa St. Pete market and we are effectively leaving
the Gulf West management team in place.
I do want to stress that the merger enhances our
plans to meet the profitability targets and to
achieve the ROA and ROE goals we set for the end of
2003. We remain confident that we will achieve a
financial impact that is immediately accretive to our
earnings. Everyone involved at both The South
Financial Group and Gulf West understands the
importance of realizing the cost savings of $4
million pre-tax and executing this merger with a
positive financial impact.
The second quarter of this year was an excellent
quarter for us. We are pleased with the progress
we're making and with the organization we've built.
We have solid positions in high growth markets and
revenue growth opportunities are enhanced by our
Elevate process. We are on track to achieve our ROA
and ROE goals by the end of 2003, however, these
goals are interim steps, not a final goal. We are not
resting on the laurels of this quarter, we remain
committed to making The South Financial Group a top
performer in comparison with our peer group.
And with that I would like to open it up for
questions.
Coordinator We have a question from Jeff Davis from Midwest
Research.
J. Davis Good morning, good quarter gentlemen. A couple of
questions I had to bounce a way for a moment, so
if you covered it, I apologize. Mike or Mack, first
if you could give us a little more color on the loan
growth we saw on ... quarter, at least on the average
balances? Since we are not seeing it elsewhere around
the country, though we are certainly seeing the
follow through on improvement and credit quality.
Then Ed, I would like to come back to you on the
merger charges again.
M. Sperry I can talk about loan growth.
J. Davis Okay, that's fine.
M. Sperry Total loans grew point to point for the quarter, $135
million; $73 million of that, a little over half, was
in consumer loans. Most of that was in equity lines.
We grew equity lines $60 million in the quarter. That
is a significant growth in that particular product.
It's a combination of two things. One, the fact that
we've enhanced the product to make it more
competitive this quarter and also as Mack mentioned,
the Elevate process has energized the referrals in
that process, so it's a direct result of the
combination of those two things.
The growth in commercial loans was about $63 million.
It's split kind of half and half between Florida and
South Carolina and there are really only two key
contributors to that; one, is that we had some
funding of construction loans that were approved in
the fourth quarter of last year and the first quarter
of this year that came to fruition in this quarter
and secondly, we continue to be very selective of
course, but we continue to get opportunities to take
whole relationships away from merging banks in our
market, the Wachovia/First Union merger. So, those
are the things that contributed to a little bit
higher than what we expected ... growth.
M. Whittle Jeff, I think we'll continue to see opportunities
from the Wachovia/First Union merger, especially in
the South Carolina market as we go through the
balance of the year.
J. Davis Then Mike, on the equity lines, that's all originated
through your system; there are no wholesale
purchases, right?
M. Sperry That's correct.
J. Davis In the enhancement, I noticed a Tennessee bank
offering home equity lines at 2.9%. Are you doing
anything that low?
M. Sperry No, ours was not rate related. It was more in terms
of repayment terms, interest...loans for five years,
and things of that nature. Our rates are normal
market rates.
J. Davis Ed, can I get you to walk us through the merger
charges again, what's going to be capitalized, what
we're going to expense, etc.?
E. Matthews Okay, Jeff we're going to have $15 to $17 million and
that's an all-inclusive merger charge.
J. Davis Okay.
E. Matthews Okay, as the $15 to $17 million, about $8 million
will be included as additional acquisition cost
and as a result will be included in goodwill.
J. Davis We are going to capitalize?
E. Matthews And that $8 million are the investment banking fees,
legal accounting fees, and severance.
J. Davis Okay, that's fine.
E. Matthews Okay, you've got about $3 million in equipment
upgrades, software upgrades, and conversion costs
there. That $3 million will be capitalized as FF&E
and depreciated over its respective term. The
balance, which is $4 to $6 million, will be for
advertising, personnel training, pay to stay bonuses
and that will be included during the second half of
the year.
J. Davis That is expense?
E. Matthews That will be current expense.
J. Davis Okay.
Coordinator Our next question comes from Todd Hagerman.
T. Hagerman Good morning. If I could just follow up on Jeff's
earlier question on loan growth. Can you talk a
little bit more, just on the commercial side, you
guys have had pretty good growth in the commercial
now in a couple of quarters. Can you talk a little
bit about just the middle market customer as well as
the syndicated portfolio a little bit in terms of,
are you seeing any, is the pipeline building there?
Is there any growth that's coming out of those two
segments?
E. Matthews I'll lead out on that, Mike. There are two things
going on. Obviously, the old Wachovia had the
largest deposit market share in South Carolina and
they are the largest financial institution in all of
these major markets that we talk about in South
Carolina. With First Union making that acquisition, a
lot of those old customers are now looking for other
opportunities to do banking. These are the old South
Carolina National Bank customers that Wachovia bought
back in 1992.
In addition to that, there's been a change in the
middle market strategy of Bank of America and they
have abandoned a number of the markets ... They have
removed commercial lenders from a number of markets
in South Carolina. As a result of that, we picked up
a substantial amount of what we call middle market
commercial customers. Those are companies typically
with $50 million in sales and under, but they have
taken commercial lenders out of any market that has a
population of less than 50,000 people and we have
seen some real old line South Carolina companies that
have come to us, as a result of that.
Mike, do you want to add to that?
M. Sperry The only thing I would add is, he asked about the
syndication approval. We don't do a great deal of
that kind of lending.
J. Davis Right.
M. Sperry We do have 10 or 12 share national credits. The total
commitment outstanding on that portfolio is $110 to
$120 million, something on that range. The
outstanding is less than half that. We have added
probably three or four of those this year. We started
last year with about eight and now we've got 12, I
think. They're not all closed yet, but again those
have come primarily from people who were with those
other banks and have asked us to take them out.
J. Davis Right, that $110 million you say, how does that
compare to a year ago?
M. Sperry It was probably $70 million a year ago.
M. Whittle These are in most cases, in all cases, they're
South Carolina based companies. They're companies
that have headquarters in South Carolina or have a
major presence in the markets that we're in. These
are not blind credits that we don't know anything
about.
J. Davis Sure.
M. Sperry Our criteria is that they have to be headquartered
in South Carolina, the pricing has to be attractive
compared to other alternatives, the management has
to be accessible to us, so we can go meet with them.
We don't do one of these, unless I personally meet
with them and they have to be in industries we
understand.
M. Whittle This would be similar to what used to be called the
National Credit Market in some of the commercial
banks that most of us work in. They are national
credits, but they have a very strong local presence
and in most cases have a corporate or regional
headquarters in South Carolina.
Coordinator Our next question comes from John Kline from Sandler
O'Neil.
J. Kline Congratulations on a really good quarter guys. Just
a couple of clarifications, on the mortgage banking
charge that you mentioned Ed, was that $1.4 million?
E. Matthews I believe that's correct.
J. Kline Could you just expand on that? You're exiting the
business or...?
E. Matthews No, you are talking about what's included in the
goodwill number in merger charges? I'm sorry, the
impairment. I'm with you.
J. Kline I just wasn't clear on that. I was trying to keep up
with you. What is that? Was that this quarter or is
that expected for next quarter?
E. Matthews Okay, it's in connection, it will be in third
quarter. Let me talk about that for just a minute.
The $1.4 million is goodwill that we have recorded
associated with our mortgage company. With the
adoption of FAS-142, it was adopted on January 1st,
so we seized amortization of goodwill. You have
until June 30th to assess rather or not you have
impairment and under FAS-142 you have until the end
of this year to record that impairment.
J. Kline Got you.
E. Matthews We're planning to record that in the third quarter
and that impairment is $1.4 million, but with this
adoption of 142 it's a little bit different, in that
it will not show up in our third quarter numbers.
It will be reported in our year to date number,
but not in our third quarter number.
J. Kline Okay.
E. Matthews It's reported on the income statement as an
cumulative change in accounting principle, so if it's
reported down at the bottom of the income statement.
You won't see it in the three months ended September
30th, but you will see it in the nine months ended
September 30th.
J. Kline Okay, great and just in your guidance you mentioned
8%. Was that earning asset growth or asset growth and
is it for the balance of the year?
E. Matthews It's earning asset growth for the balance of the
year.
J. Kline And does that include Gulf West?
E. Matthews No, that does not. The 8%, you will need to add our
earnings assets with Gulf West earnings assets.
J. Kline Great.
E. Matthews With the 8% on top of that annualized.
J. Kline What's the balance of the water utility credit?
M. Sperry It's $7.7 million.
J. Kline Great, thanks a lot guys.
Coordinator Our next question comes from Gary Tenner from Sun
Trust Robinson.
G. Tenner Hello, I had one quick question, just to clarify.
Looking at the second half assumptions, the fee
income level of 13.7 to 14.2, was that Q3 only or was
that both for Q3 and Q4?
E. Matthews That is for Q3 only.
G. Tenner Okay, very good. Thank you.
Coordinator Our next question comes from Jeff Davis from Midwest
Research.
J. Davis Ed, I got cut off. I'm sorry, the core deposit is,
how much is the core deposit intangible? I know it's
subject to final valuation.
E. Matthews It's going to be about $13 million is what we're
expecting.
J. Davis Okay, what's our amortization run off schedule look
like roughly, Ed?
E. Matthews Ten years...some of the year's digits is what we're
expecting.
J. Davis Okay, since I'm not quick with math, what's our first
year run rate likely to be?
E. Matthews About $2 million pre-tax.
J. Davis Okay, great. Then, on the AFS, the unrealized gain
now is what, $10 million?
E. Matthews On the securities it's $10.4 million.
J. Davis Okay.
E. Matthews And the reason I bring that up is it was negative 15
.... did a $25 million flip flop in our equity.
J. Davis Right, okay, are you going to do any restructuring
with Gulf West?
E. Matthews Portfolio?
J. Davis Yes.
E. Matthews We may do a little bit, I wouldn't think it would be
extensive.
J. Davis Okay.
E. Matthews They do not have that extensive of an investment
portfolio.
J. Davis Okay, I just simply ask because the treasuries got
under water pretty quickly the first part of this
year. I know the markets come back your way.
Okay and then last Ed, capital management, what, if
anything, did you do this quarter and what are your
plans for the balance of the year, aside from our ...
capital issues.
E. Matthews Okay, Jeff you said you stepped away, so I'm not sure
what...
J. Davis Repurchases, Ed.
E. Matthews Repurchases, I'm sorry, because we talked about that
we did some...and we also did a trust preferred. I'm
not sure if you heard that.
J. Davis I did get that portion.
E. Matthews Repurchases, I will not rule it out. We may do that,
but if we do it will be in the fourth quarter.
J. Davis Okay, and none repurchased this quarter?
E. Matthews No.
J. Davis Okay, do you still have the equity for it
outstanding?
E. Matthews Yes, we do.
J. Davis Okay, and let's see you settled that by delivery of
shares?
E. Matthews We will settle that by delivering of shares and we
have suspended that, that repurchase has been
suspended, so that will unwind, we're anticipating,
in October.
J. Davis Okay, so is that a net issuance then of a million for
the quarter. I guess it's a wash going back?
E. Matthews It is. Jeff, you're getting into a fairly detailed
calculation, but it's a reflection of that million
shares. When we settle this thing in October, the
change in market price of that stock is the impact of
reflecting that in shares is included in the
calculation of our diluted earnings per share.
J. Davis I will give you a follow up call, because that is
more technical here.
E. Matthews Please.
J. Davis Anyway, good quarter gentlemen. Thanks much.
Coordinator Our next question comes from Holly Clark from Scott
and Stringfellow.
H. Clark Thank you and nice quarter and my questions have been
answered. So thank you very much.
Coordinator Our next question comes from Russ Haberman from
Haberman Brothers.
R. Haberman Good morning gentlemen, how are you? Nice quarter.
I just wanted to ask you a quick question regarding
the equity investment. You said you took $150,000
hit. I was just wondering, what was that from? Was
that from your Rock Hill Investment? I happened
to see that they, excuse my expression, stepped
into a pile of doo. One, have you been in touch with
them and does that present an opportunity perhaps at
some point for you?
E. Matthews Let's dice this up just a little bit. The loss we
took does not reflect Rock Hill's. It's disclosed
in our financial publications with the SEC, but we do
have a fairly substantial ownership in Rock Hill, but
the $150,000 is not. We have a small business, a
lending operation, and the $150,000 is related to an
investment that we have had for some time in a
locally owned and operated business.
R. Haberman As a follow up, can you tell what you know about the
Rock Hill and have you been in touch with them?
E. Matthews No and no.
M. Sperry We know no more than you've read in the newspaper.
R. Haberman Okay. Thank you.
Coordinator I am showing no questions at this time.
E. Matthews Thank you very much....if you will remind everyone of
the play back please.
Coordinator Thank you for joining today's conference call. Should
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