[TSFG Logo Omitted] Exhibit 99.1
Date: April 15, 2003
Release Date: Immediate
THE SOUTH FINANCIAL GROUP REPORTS RECORD EARNINGS;
FIRST QUARTER NET INCOME UP 53%
GREENVILLE, SC - The South Financial Group, Inc. (Nasdaq/NM: TSFG) today
reported record net income of $20.0 million, an increase of 53% compared with
$13.1 million for the first quarter 2002. For the first quarter 2003, net income
per diluted share totaled $0.42, a 35% increase from $0.31 per diluted share for
the first quarter 2002.
For the first quarter 2003, operating earnings totaled $19.1 million, or $0.40
per diluted share, compared with $14.5 million, or $0.34 per diluted share, for
the first quarter 2002. This represents an 18% increase in operating earnings
per diluted share.
"I am very pleased to report record operating earnings for the first quarter of
2003," said Mack I. Whittle, Jr., President and Chief Executive Officer of The
South Financial Group. "Our strong performance reflects the successful execution
of our strategies. For the last eight quarters, we have increased operating
earnings per share each quarter. We've built a strong foundation for profitable
growth--a solid management team, executable strategies, effective credit risk
management, and an evolving sales culture. And we operate in superior banking
markets."
Whittle continued, "During the first quarter, loan growth strengthened
reflecting the attractiveness of both our banking approach and geographic
footprint. We recognized a meaningful reduction in nonperforming assets.
Excluding the Rock Hill workout loans, nonperforming assets declined 13% for the
quarter, which marked the fourth consecutive quarter of improvement in that key
core credit quality component. Our credit risk management process is delivering
results, which is critical to success in this challenging economy."
Earnings Summary - Strong Top-Line Revenue Growth Continues
Strong top-line revenue growth drove TSFG's record performance for the first
quarter of 2003. Fully tax equivalent net interest income for the first quarter
of 2003 increased 27% over the prior year quarter as average earning assets grew
35%. The net interest margin for first quarter 2003 declined modestly to 3.54%,
compared with 3.60% for the fourth quarter 2002 and 3.75% for first quarter
2002. This decline was largely attributable to downward repricing of fixed rate
commercial loans and higher investment securities balances, which generally have
a lower yield than loans.
Noninterest income increased to $19.9 million for the first quarter 2003, up 71%
from $11.6 million for the first quarter 2002. In the first quarter 2003,
noninterest income included $2.9 million in gains on sales of securities and
equity investments. Excluding these non-operating gains, noninterest income
increased 47% to $17.0 million. The increases came principally from fee income
increases from service charges on deposit accounts of 42%, mortgage banking
origination and secondary marketing income of 75%, brokerage income of 180%,
insurance income of 388%, debit card income of 136%, and customer service fees
of 45%.
Noninterest expenses increased 40% for the first quarter 2003 versus first
quarter 2002, or 36% excluding $1.5 million in merger-related costs. These
increases are in part attributable to costs from expanded operations related to
the mergers in the second half of 2002, higher amortization of core deposit
intangibles from the mergers, and the addition of revenue-producers.
Solid Loan and Transaction Deposit Growth
Loans held for investment at March 31, 2003 increased 20% over the prior year,
with accelerating internal loan growth in the first quarter of 2003. Loan growth
strengthened to over 7% annualized growth for the first quarter of 2003.
Commercial, home equity and indirect consumer loans led the increase.
Total deposits at March 31, 2003 increased 30% over the prior year, principally
from transaction accounts. Deposit growth totaled 12% annualized for the first
quarter of 2003. Deposit transaction account balances increased at a 26%
annualized growth rate for the first quarter of 2003, driven by money market and
noninterest-bearing deposits. TSFG continues to enhance its deposit mix by
focusing on increasing transaction accounts through increased sales referrals
and targeted deposit promotions. The growth in deposit transaction accounts
demonstrates how TSFG's Elevate sales process is working.
Meaningful Improvement in Nonperforming Assets
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 purchase from Rock Hill
Bank & Trust, The South Financial Group segregated certain identified problem
loans into a separately-managed portfolio, referred to as the Rock Hill Bank &
Trust Workout Loans. At March 31, 2003, this portfolio totaled $63.6 million,
down from $72.4 million at year-end. Nonperforming assets were $32.8 million,
and the allowance for loan losses was $11.6 million. Net loan charge-offs for
the first quarter 2003, which were fully reserved as of the prior quarter-end,
totaled $4.1 million.
Credit Quality Including Rock Hill Bank & Trust Workout Loans. Nonperforming
assets declined to 1.59% of loans and other real estate owned at March 31, 2003
from 1.67% at December 31, 2002. Net loan charge-offs increased from 0.37% for
the fourth quarter 2002 to 0.85% for the first quarter 2003, primarily due to
the disposition of fully-reserved loans in the Rock Hill Bank & Trust Workout
Loans and the liquidation of fully-reserved nonperforming loans. As anticipated,
the allowance for loan losses declined to 1.46% of period-end loans at March 31,
2003 from 1.58% at December 31, 2002.
Credit Quality Excluding Rock Hill Bank & Trust Workout Loans. The South
Financial Group's core nonperforming assets (which exclude the Rock Hill Bank &
Trust Workout Loans) declined 13% to 0.87% of loans and other real estate owned
at March 31, 2003 from 1.03% at December 31, 2002. This ratio has declined every
quarter-end since its peak of 1.34% at the end of the first quarter 2002. Net
loan charge-offs increased from $4.4 million for the fourth quarter 2002 to $5.5
million for the first quarter 2003, or from 0.41% to 0.50% of average loans, as
write-downs of $1.5 million were incurred to liquidate nonperforming loans with
allocated reserves of $2.1 million. The allowance for loan losses declined
slightly as a percent of loans held for investment, from 1.24% at December 31,
2002 to 1.22% at March 31, 2003, but increased from 1.56 times to 1.93 times
nonperforming loans for the quarter-ends.
General Information
The attached financial highlights provide reconciliations between GAAP net
income and operating earnings. Operating earnings exclude merger-related costs,
gains on sale of available for sale securities and equity investments, and the
cumulative effect of a change in accounting principle. Management believes that
excluding these non-operating items provides a clearer understanding of The
South Financial Group's financial performance.
The South Financial Group, headquartered in Greenville, South Carolina, is a
financial services company with $9.0 billion in total assets and 115 branch
offices in South Carolina, Florida, and North Carolina. It operates two
subsidiary banks: Carolina First Bank and Mercantile Bank. Carolina First Bank,
the largest South Carolina-based commercial bank, operates in South Carolina,
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 web
site: 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 earnings results and provide a live webcast of the
call, which may be accessed through The South Financial Group's Internet site at
www.thesouthgroup.com under the Investor Relations tab. Additional material
information, including forward-looking statements such as trends and future
projections, may be discussed during the presentation. To participate in the
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
1-800-945-7436 or 1-402-220-3567. The South Financial Group will also provide a
copy of the presentation and supplemental financial information in the Investor
Relations section of its website prior to the call.
This press release contains financial information determined by methods
other than in accordance with Generally Accepted Accounting Principles ("GAAP").
The South Financial Group's management uses these non-GAAP measures in their
analysis of TSFG's performance. In particular, a number of measures presented
adjust GAAP information to exclude the effects of non-operating item (such as
merger-related costs, gains or losses on asset sales, and non-operating
expenses) and the amortization of intangibles for "cash basis" performance
measures. Since these items and their impact on TSFG's performance are difficult
to predict, management believes presentations of financial measures excluding
the impact of these items provide useful supplemental information that is
essential to a clear understanding of the operating results of TSFG. These
disclosures should not be viewed as a substitute for GAAP operating results, and
furthermore TSFG's non-GAAP measures may not necessarily be comparable to
non-GAAP performance measures of other companies.
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, 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
The South Financial Group's actual results, see The South Financial Group's
Annual Report on Form 10-K for the year ended December 31, 2002. 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.
CONTACTS:
William S. Hummers III, Executive Vice President, (864) 255-7913
Mary M. Gentry, Treasurer, (864) 255-4919
***END***
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED
RESTATED %
3/31/03 3/31/02 CHANGE
------- ------- ------
INCOME STATEMENT
Interest income (tax-equivalent) $ 99,628 $ 85,875 16.0 %
Interest expense 33,500 33,895 (1.2)
-------- -------- --------
Net interest income (tax-equivalent) 66,128 51,980 27.2
Less: Tax-equivalent adjustment 657 588 11.7
-------- -------- --------
Net interest income 65,471 51,392 27.4
Provision for loan losses 5,500 6,238 (11.8)
-------- -------- --------
Net interest income after provision for loan losses 59,971 45,154 32.8
-------- -------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 6,960 4,907 41.8
Fees for investment services 2,491 1,427 74.6
Mortgage banking income, excluding impairment 2,434 881 176.3
(Impairment) recovery on mortgage servicing rights (262) 200 (231.0)
Gain on trading securities 72 30 140.0
Other 5,330 4,153 28.3
------- -------- -----
Noninterest income, excluding non-operating gains on asset sales 17,025 11,598 46.8
------- -------- -------
Gain on sale of available for sale securities 986 29 3,300.0
Gain on equity investments 1,875 11 n/m
------- -------- -------
Gains on non-operating asset sales, net 2,861 40 7,052.5
------- -------- -------
Total noninterest income 19,886 11,638 70.9
------- -------- -------
NONINTEREST EXPENSES:
Personnel expense 24,594 18,014 36.5
Occupancy 4,614 3,545 30.2
Furniture and equipment 4,594 3,596 27.8
Amortization of intangibles 710 239 197.1
Other 12,881 9,458 36.2
------- ------- -------
Noninterest expenses, excluding non-operating items 47,393 34,852 36.0
Merger-related costs 1,497 - n/m
------- ------- -------
Total noninterest expenses 48,890 34,852 40.3
------- ------- -------
Income before income taxes, minority interest, and cumulative
effect of change in accounting principle 30,967 21,940 41.1
Income tax expense 9,910 6,999 41.6
Minority interest in consolidated subsidiary, net of tax (1,012) (428) 136.4
Cumulative effect of change in accounting principle, net of tax - (1,406) (100.0)
-------- -------- ------
Net income $ 20,045 $ 13,107 52.9 %
======== ======== ======
SHARE DATA:
Net income per common share, basic $ 0.42 $ 0.32 31.3 %
Net income per common share, diluted 0.42 0.31 35.5
Cash dividends declared per common share 0.14 0.12 16.7
Average common shares outstanding, basic 47,325,448 41,180,460 14.9
Average common shares outstanding, diluted 48,257,498 42,059,462 14.7
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.
AT AND FOR THE THREE MONTHS ENDED % CHANGE
RESTATED 1ST QUARTER
3/31/03 12/31/02 3/31/02 2003/2002
BALANCE SHEET (Period End)
Cash and due from banks $ 181,495 $ 201,333 $ 120,439 50.7 %
Interest-bearing bank balances 59,515 58,703 68,753 (13.4)
Federal funds sold - 31,293 - n/m
Securities 3,422,928 2,572,186 1,655,186 106.8
Loans held for sale 60,202 67,218 29,900 101.3
Loans held for investment 4,515,133 4,434,011 3,779,682 19.5
Allowance for loan losses (66,133) (70,275) (45,208) 46.3
---------- ---------- ---------- ------
Net loans 4,509,202 4,430,954 3,764,374 19.8
---------- ---------- ---------- ------
Premises and equipment, net 133,261 137,501 112,005 19.0
Intangible assets 242,420 242,182 95,495 153.9
Mortgage servicing rights 3,215 4,386 8,040 (60.0)
Other assets 413,175 262,472 232,130 78.0
---------- ---------- ---------- ------
Total assets $8,965,211 $7,941,010 $6,056,422 48.0 %
========== ========== ========== ======
Noninterest-bearing deposits $ 757,149 $ 743,174 $ 527,629 43.5 %
Interest-bearing deposits 3,978,566 3,849,336 3,113,875 27.8
---------- ---------- ---------- ------
Total deposits 4,735,715 4,592,510 3,641,504 30.0
Federal funds purchased and repurchase agreements 2,066,509 1,510,840 1,379,340 49.8
Debt and other borrowed funds 1,148,174 998,664 498,336 130.4
Other liabilities 293,329 105,785 66,234 342.9
---------- ---------- ---------- ------
Total liabilities 8,243,727 7,207,799 5,585,414 47.6
---------- ---------- ---------- ------
Minority interest in consolidated subsidiary 86,484 86,412 37,023 133.6
Shareholders' equity 635,000 646,799 433,985 46.3
---------- ---------- ---------- ------
Total liabilities and shareholders' equity $8,965,211 $7,941,010 $6,056,422 48.0
========== ========== ========== ======
CAPITAL RATIOS (Period End)
Tier 1 risk-based capital 8.46 % 9.21 % 8.87 %
Total risk-based capital 10.71 11.66 10.91
Leverage ratio 6.04 7.15 6.56
SHARE DATA (Period End)
Book value per common share $ 13.68 $ 13.66 $ 10.78 26.9 %
Shares outstanding 46,405,600 47,347,375 40,261,842 15.3
BALANCE SHEET (Averages)
Total assets $ 8,387,830 $ 7,244,663 $ 6,134,119 36.7 %
Loans 4,520,965 4,346,823 3,774,762 19.8
Securities 3,009,441 2,172,963 1,735,452 73.4
Total earning assets 7,566,149 6,563,909 5,620,956 34.6
Intangible assets 242,104 185,746 96,931 149.8
Interest-bearing liabilities 6,846,205 5,863,888 5,070,077 35.0
Total deposits 4,590,625 4,282,840 3,615,594 27.0
Shareholders' equity 646,828 555,053 465,426 39.0
% CHANGE
RESTATED 1ST QUARTER
3/31/03 12/31/02 3/31/02 2003/2002
CREDIT QUALITY
Nonaccrual loans - commercial $ 58,114 $ 61,206 $ 40,521 43.4 %
Nonaccrual loans - consumer 2,865 2,384 2,965 (3.4)
Restructured loans - - - -
-------- -------- -------- -----
Nonperforming loans 60,979 63,590 43,486 40.2
Other real estate owned 10,836 10,596 7,143 51.7
-------- -------- -------- -----
Nonperforming assets 71,815 74,186 50,629 41.8
-------- -------- -------- -----
Nonperforming loans as a % of loans held for investment 1.35 % 1.43 % 1.15 %
Nonperforming assets as a % of loans and OREO 1.59 1.67 1.34
Allowance for loan losses as a % of loans held for investment 1.46 1.58 1.20
Allowance for loan losses as a % of nonperforming loans 1.08 x 1.11 x 1.04 x
Specific allowance for impaired loans $ 14,751 $ 22,016 $ 4,409 234.6
Loans past due 90 days still accruing interest 3,652 5,414 9,532 (61.7)
Net loan charge-offs:
QTR ended 9,642 4,049 5,617 71.7
Net loan charge-offs as a % of avg. loans (annualized):
QTR ended 0.85 % 0.37 % 0.60 %
CREDIT QUALITY - Excluding Rock Hill B&T Workout Loans
Loans held for investment $4,451,498 $4,361,658 $3,779,682 17.8 %
Allowance for loan losses 54,514 53,979 45,208 20.6
Nonaccrual loans - commercial 25,389 32,212 40,521 (37.3)%
Nonaccrual loans - consumer 2,865 2,384 2,965 (3.4)
Restructured loans - - - -
---------- ---------- ---------- -----
Nonperforming loans 28,254 34,596 43,486 (35.0)
Other real estate owned 10,751 10,422 7,143 50.5
---------- ---------- ---------- -----
Nonperforming assets 39,005 45,018 50,629 (23.0)
---------- ---------- ---------- -----
Nonperforming loans as a % of loans held for investment 0.63 % 0.79 % 1.15 %
Nonperforming assets as a % of loans and OREO 0.87 1.03 1.34
Allowance for loan losses as a % of loans held for investment 1.22 1.24 1.20
Allowance for loan losses as a % of nonperforming loans 1.93 x 1.56 x 1.04 x
Specific allowance for impaired loans $ 6,176 $ 9,429 $ 4,409 40.1
Loans past due 90 days still accruing interest 3,650 5,392 9,532 (61.7)
Net loan charge-offs:
QTR ended 5,533 4,416 5,617 (1.5)
Net loan charge-offs as a % of avg. loans (annualized):
QTR ended 0.50 % 0.41 % 0.60 %
OPERATIONS DATA
Branch offices 115 117 90 27.8 %
ATMs 104 105 79 31.6
Employees (full-time equivalent) 1,647 1,700 1,332 23.6
Internet banking customers 43,737 35,227 29,533 48.1
STOCK PERFORMANCE (At Period End)
Market price per share of common stock $ 21.65 $ 20.66 $ 20.35 6.4 %
Indicated annual dividend 0.56 0.56 0.48 16.7
Dividend yield 2.59 % 2.71 % 2.36 %
Price/book ratio 1.58 x 1.51 x 1.89 x
Market capitalization $1,004,681 $ 978,197 $ 819,328 22.6
The South Financial Group, Inc. and Subsidiaries
Financial Highlights
(dollars in thousands, except share data) (unaudited)
Three Months Ended
-------------------------------------------------
3/31/03 Restated 3/31/02 % Change
----------------------- ----------------------- --------------------
Diluted Diluted Diluted
EPS EPS EPS
- ------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF GAAP vs. NON-GAAP MEASURES
NET INCOME, AS REPORTED (GAAP) $ 20,045 $0.42 $ 13,107 $0.31 52.9 % 35.5 %
Merger-related costs 1,497 -
Related income taxes (479) -
--------- --------
Net income, excluding merger-related items 21,063 0.44 13,107 0.31 60.7 41.9
Adjustments for other non-operating items:
Gain on sale of available for sale securities (986) (29)
Gain on equity investments (1,875) (11)
Related income taxes 916 13
Cumulative effect of change in accounting
principle, net of tax - 1,406
OPERATING EARNINGS 19,118 0.40 14,486 0.34 32.0 17.6
--------- ---------
Add: Amortization of intangibles, net of tax 483 163
--------- ---------
OPERATING EARNINGS, CASH BASIS $ 19,601 $0.41 $ 14,649 $0.35 33.8 17.1
========= =========
Average common shares outstanding, diluted 48,257,498 42,059,462 14.7
SELECTED BALANCE SHEET (Averages)
Total assets $8,387,830 $6,134,119 36.7
Intangible assets (242,104) 96,931 149.8
---------- ---------- -----
Tangible assets 8,145,726 6,037,188 34.9
---------- ---------- -----
Shareholders' equity 646,828 465,426 39.0
Intangible assets (242,104) (96,931) 149.8
---------- ---------- -----
Tangible equity 404,724 368,495 9.8
---------- ---------- -----
PERFORMANCE RATIOS (Annualized)
RETURN ON AVERAGE ASSETS:
Using GAAP earnings 0.96 % 0.85 %
Using operating earnings 0.91 0.94
Using operating earnings, cash basis on
average tangible assets 0.96 0.97
RETURN ON AVERAGE EQUITY:
Using GAAP earnings 12.40 11.26
Using operating earnings 11.82 12.45
Using operating earnings, cash basis on
average tangible equity 19.37 15.90
NET INTEREST MARGIN 3.54 3.75
EFFICIENCY RATIOS (TAX EQUIVALENT) (A):
Using GAAP earnings 56.84 54.78
Using operating earnings 56.99 54.82
Using operating earnings, cash basis 56.14 54.44
(A) Calculated as noninterest expenses, divided by the sum of interest income
(tax equivalent) and noninterest income.