[MAP OMITTED]
THE SOUTH FINANCIAL GROUP
ACQUISITION OF
POINTEBANK
October 27, 2004
Forward-Looking Statements, Non-GAAP
Financial Information and Offering Matters
The forward-looking statements being made today are subject to risks and
uncertainties. TSFG's actual results may differ materially from those set forth
in such forward-looking statements. These statements include, but are not
limited to, factors that may affect earnings, return goals, expected financial
results for mergers, estimates of merger synergies and merger-related charges,
and credit quality assessment. Reference is made to TSFG's reports filed with
the Securities and Exchange Commission for a discussion of factors that may
cause such differences to occur. TSFG undertakes no obligation to release
revisions to these forward-looking statements or reflect events or circumstances
after today's presentation.
This presentation contains certain non-GAAP measures, which TSFG management uses
in its analysis of TSFG's performance. TSFG believes presentations of financial
measures excluding the impact of these items provide useful supplemental
information and better reflect its core operating activities. Management uses
operating measures, 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
banking operations.
TSFG also provides data eliminating intangibles and related amortization in
order to present data on a "cash basis." Operating measures adjust GAAP
information to exclude the effects of non-operating items, such as
merger-related costs, gains or losses on certain asset sales, and non-operating
expenses. Cash basis items exclude intangibles and their amortization. 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 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 viewed as a substitute for GAAP operating results. A
reconciliation of GAAP results and non-GAAP performance measures is provided on
our web site, www.thesouthgroup.com, in the Investor Relations section under
Financial Information.
The following may be deemed to be offering materials of TSFG in connection with
TSFG's proposed acquisition of PNTE, on the terms and subject to the conditions
in the Agreement and Plan of Merger, dated October 27, 2004, between TSFG and
PNTE. This disclosure is being made in connection with Regulation of Takeovers
and Security Holder Communications (Release Nos. 33-7760 and 34-42055) adopted
by the Securities and Exchange Commission ("SEC"). Shareholders of PNTE and
other investors are urged to read the proxy statement/prospectus that will be
included in the registration statement on Form S-4, which TSFG will file with
the SEC in connection with the proposed merger because it will contain important
information about TSFG, PNTE, the merger, the persons soliciting proxies in the
merger and their interests in the merger and related matters. After it is filed
with the SEC, the proxy statement/prospectus will be available for free, both on
the SEC web site (http://www.sec.gov) and from TSFG and PNTE as follows: Marsha
L. Smunt, Director of Investor Relations, The South Financial Group, 104 South
Main Street, Greenville, SC 29601, Phone: (864) 255-4919,
marsha.smunt@thesouthgroup.com; and R. Carl Palmer, Jr., Chairman, President and
Chief Executive Officer, Pointe Financial Corporation, 21845 Powerline Road,
Boca Raton, Florida 33433, Phone: (561) 368-6300, RCPalmer@pointebank.com.
In addition to the proposed registration statement and proxy
statement/prospectus, TSFG files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information filed by TSFG at the SEC's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C., 20549 or at the
SEC's other public reference rooms in New York and Chicago. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. TSFG's
filings with the SEC are also available to the public from commercial
document-retrieval services and on the SEC's web site at http://www.sec.gov.
1
Transaction Summary
Fixed merger consideration: 2.554 mm TSFG shares +
$24.5 mm cash
% stock / % cash(1): 77/23
Implied PNTE price per share / transaction value(2):
Based on 10-14 TSFG closing price (agreement in principle date) $37.25/$92.0 mm
Based on 30-day average TSFG closing price $38.19/$94.5 mm
Based on 10-27 TSFG closing price $40.90/$101.5 mm
Exchange ratio per share (x) / cash ($)(3): 0.9906x/$9.50
Assumed cost saves: 30% of PNTE's core cash non-interest expense base
Assumed merger-related charge: $6.3 mm
EPS accretion / (dilution):
2006 GAAP 0.8%
2006 Cash 1.1%
Internal rate of return: 18%
Break-up fee: $3.5 mm
Due diligence: Completed
Required approvals: Regulatory, PNTE shareholders
Board representation: 1 PNTE director to join Mercantile Bank
Board of Directors
Expected closing: Q2 2005
(1) See page 19 for example of pro ration mechanism.
(2) Aggregate transaction value is net of proceeds from assumed exercise of
outstanding PNTE options.
(3) Calculated by dividing each of the total number of TSFG shares being issued
(2,554,022) and the total cash being paid ($24,493,075) by the total PNTE
shares outstanding on a fully diluted basis (2,578,258).
2
PNTE Overview
* $430 million Boca Raton, Florida headquartered bank formed in 1993
- Operates 10 attractive locations in Dade, Broward and Palm Beach
counties
* Complementary banking philosophy
- Niche community bank focused on the small businesses and professional
community of South Florida
* Well respected and talented employees
* Strong fundamentals
- Solid net interest margin
- Attractive loan mix
- Pristine asset quality
- Low cost core deposits
- Strong capital position
[MAP OMITTED]
3
PNTE Stand-alone Performance
Loans ($mm)
1999 155
2000 176
2001 226
2002 218
2003 256
9/04 280
13% CAGR
- -----------------------------------
Deposits ($mm)
1999 146
2000 161
2001 226
2002 254
2003 264
9/04 315
18% CAGR
- ------------------------------------
Revenue ($mm)
1999 9
2000 10
2001 13
2002 15
2003 16
2004(1) 19
15% CAGR
- ------------------------------------
Diluted EPS ($)
1999 $0.56
2000 $0.85
2001 $0.81
2002 $0.82
2003 $1.08
2004(1) $1.49
22% CAGR
Source: PNTE documents
(1) 2004 Revenue and Diluted EPS are annualized based on 2004 YTD as of 9/04;
EPS excludes non-recurring legal expenses
4
STRATEGIC RATIONALE
5
TSFG - Building Franchise Value
* Consistent with TSFG's disciplined approach to acquisitions:
- In-market transaction
- Accretive to demographics
- Low execution risk
- Conservative assumptions
- Minimal impact to capital ratios
- Accretive to EPS in the first full year
- Attractive IRR
- Advances 3-year goals
[MAP OMITTED]
6
Pro Forma Florida Franchise
- ---------------------------
[MAP OMITTED]
Pro Forma Florida Market Share
- ------------------------------
Deposits
In Market Market
Rank Company Branches ($mm) Share
- ---- ------- -------- ---------- ------
1 Bank of America 741 $62,019 20.6%
2 Wachovia 900 57,435 19.1
3 SunTrust 447 30,716 10.2
4 Washington Mutual 169 10,662 3.5
5 AmSouth 213 7,618 2.5
6 Regions 145 7,044 2.3
7 Golden West 49 6,659 2.2
8 Colonial 137 6,170 2.1
9 Ohio Savings 15 5,002 1.7
10 Fifth Third 95 4,474 1.6
11 Citigroup 35 4,305 1.4
12 Ocean Bankshares 22 3,878 1.3
13 Northern Trust 28 3,675 1.2
[14] PRO FORMA TSFG 63 3,569 1.2
14 BankUnited 47 3,422 1.2
15 BB&T 92 3,282 1.1
16 TSFG 53 3,282 1.1
17 BankAtlantic 74 3,273 1.1
18 Fidelity
Bankshares 42 2,709 0.9
19 Mercantile
Servicios 10 2,544 0.9
20 Third FS&LA 14 2,258 0.8
21 Everbank 4 2,095 0.7
22 Synovus 44 2,058 0.7
23 City National 18 2,039 0.7
24 Harbor Florida 35 1,772 0.6
25 Riverside 47 1,607 0.5
77 Pointe 10 288 0.1
TSFG Geographic Distribution(1)
- -------------------------------
Current:
FL NC SC
40% 10% 50%
Pro Forma:
FL NC SC
43% 9% 48%
Source: SNL Financial; FDIC
Note: Deposits and market share as of June 30, 2004, pro forma for acquisitions;
PNTE includes branch opened August 2004
(1) % of total deposits by state
7
Household Growth(1)
- -------------------
PNTE(4) 9.5%
Broward 7.2%
Miami-Dade 5.6%
Palm Beach 10.0%
Pro Forma TSFG(5) 8.1%
U.S. Average 5.0%
Southeast Average(3) 7.0%
Average Household Income(2)
- ---------------------------
PNTE(4) $76,185
Broward $63,879
Miami-Dade $57,143
Palm Beach $74,304
Pro Forma TSFG(5) $56,478
U.S. Average $63,301
Souteast Average(3) $57,856
Average HH Income Growth(1)
- ---------------------------
PNTE(4) 10.2%
Broward 13.0%
Miami-Dade 10.2%
Palm Beach 12.1%
Pro Forma TSFG(5) 12.1%
U.S. Average 13.3%
Southeast Average(3) 13.2%
Source: SNL Financial, Claritas
(1) Projected growth for the period 2004-2009
(2) Estimated for 2004
(3) Southeast average includes the states of AL, FL, GA, MS, NC, SC, TN, VA and
WV
(4) Deposit-weighted by zip code
(5) Deposit-weighted by county
8
BROWARD COUNTY
- --------------
[MAP OMITTED]
Deposits
In Market Market
Rank Institution Branches ($mm) Share
- ---- ----------- -------- ----- -----
1 Bank of America 87 $8,134 26.7%
2 Wachovia 98 6,545 21.5
3 SunTrust 27 2,158 7.1
4 Washington Mutual 27 2,156 7.1
5 Ohio Savings 4 1,743 5.7
6 BankAtlantic 22 1,624 5.3
7 BankUnited 18 1,323 4.3
8 World Savings 7 1,236 4.1
9 Citigroup 11 840 2.8
10 Colonial 15 647 2.1
[18] PRO FORMA TSFG 3 139 0.5
29 TSFG 1 77 0.3
37 Pointe 2 62 0.2
Totals 426 $30,504 100.0%
MIAMI-DADE COUNTY
- -----------------
[MAP OMITTED]
Deposits
In Market Market
Rank Institution Branches ($mm) Share
- ---- ----------- -------- ----- -----
1 Bank of America 72 $10,509 16.8%
2 Wachovia 73 9,581 15.4
3 SunTrust 27 4,519 7.2
4 Ocean Bankshares 17 3,824 6.1
5 Washington Mutual 48 3,690 5.9
6 Regions 48 3,623 5.8
7 Citigroup 17 2,902 4.7
8 Mercantile
Servicios 8 2,479 4.0
9 City National 14 1,759 2.8
10 Northern Trust 6 1,483 2.4
[54] PRO FORMA TSFG 5 103 0.2
54 Pointe 5 103 0.2
Totals 572 $62,368 100.0%
PALM BEACH COUNTY
- -----------------
[MAP OMITTED]
Deposits
In Market Market
Rank Institution Branches ($mm) Share
- ---- ----------- -------- ----- -----
1 Wachovia 103 $6,907 22.3%
2 Bank of America 69 5,526 17.8
3 Washington Mutual 32 2,640 8.5
4 Fidelity
Bankshares 37 2,461 7.9
5 Ohio Savings 7 2,253 7.3
6 Golden West 9 1,555 5.0
7 SunTrust 28 1,424 4.6
8 Lydian Private Bank 2 948 3.1
9 BankAtlantic 24 839 2.7
10 BankUnited 8 724 2.3
[23] PRO FORMA TSFG 4 135 0.4
24 Pointe 3 123 0.4
51 TSFG 1 11 0.0
Totals 448 $30,988 100.0%
Source: U.S. Census Bureau, SNL Financial, FDIC
Note: Deposits and market share as of June 30, 2004, pro forma for acquisitions;
PNTE includes branch opened August 2004
9
TSFG's Project Methodology Lowers Execution Risk
[GRAPHIC OMITTED]
"Project methodology for mergers and acquisitions supports integration,
branding"and other conversion processes in 45 - 60 days. Scalable systems
instrumental to growth from $3 billion in assets to $11 billion in five years."
"CIO Magazine"
August 15, 2004
Target
Deal LTM
Announce Value % of Est. Cost Efficiency
Acquisition Date ($mm) TSFG Saves Ratio
- --------------------------------------------------------------------------------
Florida Banks 3/18/04 $168 8% 25% 76%
CNB Florida 1/21/04 155 8 20 62%
MountainBank 5/14/03 137 9 20 55%
Central Bank of Tampa 10/3/02 68 3 25 48%
Gulf West 3/31/02 116 7 25 65%
Anchor Financial 1/10/00 300 28 35 62%
Average $157 11% 25% 61%
Median 146 8% 25% 62%
Pointe 10/27/04 $101 3% 30% 74%
Source: SNL Financial and Company documents
10
TRANSATION PRICING AND
FINANCIAL IMPACT
11
TSFG Remains Price Disciplined
Announced Florida Transaction Greater than $50mm in 2003 and 2004
Price to:
-------------------------
Announce LTM Tang. Core Deposit
Buyer/Target Date Deal Value Earnings Book Book Premium
------------ ---- ---------- -------- ---- ---- --------
Colonial/Union Bank of Florida Sep-04 $ 233.0 26.8 x 3.1 x 3.1 x 30.5 %
Popular/Kislak Financial Aug-04 158.0 22.5 x 2.4 x 2.4 x 24.6 %
Fifth Third/FNB Florida Aug-04 1,530.2 42.1 x 2.6 x 6.1 x 38.7 %
FNB Florida/Southern Community Mar-04 289.8 44.3 x 4.1 x 4.1 x 30.1 %
Whitney/Madison Bancshares Mar-04 66.4 31.1 x 3.8 x 3.8 x 39.9 %
South Financial/Florida Banks Mar-04 168.0 36.7 x 2.9 x 2.9 x 32.9 %
SouthTrust/FloridaFirst Feb-04 154.0 24.7 x 1.5 x 1.6 x 15.5 %
South Financial/CNB Florida Jan-04 154.8 23.4 x 2.8 x 3.1 x 19.5 %
Colonial/P.C.B. Bancorp Dec-03 143.3 25.2 x 3.3 x 4.2 x 23.2 %
BB&T/Republic Bancshares Dec-03 432.6 44.3 x 2.0 x 2.2 x 12.6 %
Alabama National/Indian River Oct-03 112.8 22.6 x 3.1 x 3.1 x 21.8 %
Synovus/Peoples Florida Oct-03 77.6 28.2 x 4.8 x 4.8 x 38.8 %
F.N.B./Charter Feb-03 150.3 36.7 x 3.3 x 3.9 x 34.8 %
Average 31.4 x 3.0 x 3.5 x 27.9 %
Median 28.2 x 3.1 x 3.1 x 30.1 %
South Financial/Pointe - 10/14/04(2) Oct-04 $ 92.0 26.2 x 2.3 x 2.5 x 20.3 %
South Financial/Pointe - 30-day avg. Oct-04 $ 94.5 26.9 x 2.4 x 2.5 x 21.2 %
South Financial/Pointe - 10/27/04 Oct-04 $ 101.5 28.8 x 2.5 x 2.7 x 23.6 %
Source: SNL Financial and SEC filings
(1) PNTE LTM Earnings excludes non-recurring legal expenses ($0.03 and $0.06 per
share impact in Q2 and Q3 2004, respectively)
(2) Agreement in principle date
12
Conservative Assumptions / Considerable Upside
* Cost savings identified and achievable in the short-term
- 30% reduction, which is consistent with past experience
- Eliminating 30% brings PNTE's efficiency ratio down from 74% to 51%,
which is high for a division and slightly higher than TSFG overall
- Addressing synergies early in TSFG's two most recent deals enabled
TSFG to keep its efficiency ratio flat from the second quarter to the
third
* Revenue synergies identified but not included in deal analysis
- PNTE customers will have access to a much broader array of products
and services
- Increased scale will provide higher lending limits, more branch
locations and heightened brand awareness
- New branch opened in August 2004 has not yet reached profitability but
has significant upside
- Asset sensitive balance sheet position
- Limited non-interest income activity
13
Financial Impact
Pro Forma Results ($mm, except per share data)
EPS Impact: 2006 2007
- ---------- ---- ----
Stand-alone net income
TSFG(1) $172.1 $192.8
PNTE(2) 5.9 6.6
Pro forma net income $178.1 $199.4
Transaction adjustments (net of tax)
Add: merger cost savings $2.9 $3.0
Subtract: core deposit amortization 0.7 0.7
Subtract: other 0.6 0.5
Adjusted pro forma GAAP net income $179.6 $201.2
Cash adjustments (net of tax)
New amortization $0.7 $0.7
Existing amortization 3.5 3.0
Adjusted pro forma cash net income $183.8 $204.8
Pro forma average diluted share count 72.8 72.8
Pro forma GAAP EPS $2.47 $2.76
Stand-alone TSFG GAAP EPS $2.45 $2.74
Pro forma cash EPS $2.53 $2.81
Stand-alone TSFG cash EPS $2.50 $2.78
GAAP accretion 0.8% 0.8%
Cash accretion 1.1% 1.1
Capital Impact:
- --------------
Pre-acquisition tangible common equity to tangible assets (4/1/05) 6.1%
Pro-forma tangible common equity to tangible assets (4/1/05) 6.0
Pro-forma tangible common equity to tangible assets (12/31/05) 6.4
(1) Based on I/B/E/S median consensus EPS estimate of $2.19 in 2005 grown at the
consensus long-term growth rate of 12% for 2006 and 2007 multiplied by 70.3
million average fully diluted shares
(2) Based on PNTE management projections
14
APPENDIX
15
Summary PNTE Balance Sheet
($000)
2000 2001 2002 2003 9/04
Balance sheet ---- ---- ---- ---- -----
- -------------
Cash and balances due $7,616 $40,655 $35,648 $12,943 $43,862
Investment securities 56,631 57,612 66,009 71,738 96,982
Net loans 173,848 223,825 214,990 253,415 276,411
Intangible assets 0 3,461 3,216 2,974 2,793
Other assets 6,413 7,842 7,444 7,644 8,847
Total assets $244,508 $333,395 $327,307 $348,714 $428,895
Deposits $161,136 $225,825 $233,501 $263,866 $315,607
Other liabilities 56,642 79,023 61,475 49,931 76,393
Total liabilities $217,778 $304,484 $294,976 $313,797 $392,000
Total equity $26,357 $28,530 $33,271 $35,493 $36,895
Total liabilities & equity 244,508 333,395 327,307 348,714 428,895
Source: PNTE documents and filings
16
Complementary Loan and Deposit Books
Pro Forma Composition
- ---------------------
Deposits
- --------
South Financial
- ---------------
Demand 26%
Money Market and Savings 38%
Retail CDs 11%
Jumbo CDs 24%
TOTAL $7.8bn
Pointe
- ------
Demand 31%
Money Market and Savings 43%
Retail CDs 16%
Jumbo CDs 9%
TOTAL $0.3bn
For Forma
- ---------
Demand 26%
Money Market and Savings 38%
Retail CDs 11%
Jumbo CDs 24%
TOTAL $8.1bn
Loans
- -----
South Financial
- ---------------
Commercial RE 51%
C&I 26%
Consumer 22%
Mortgage 2%
TOTAL $8.0bn
Pointe
- ------
Commercial RE 38%
C&I 26%
Consumer 10%
Mortgage 25%
TOTAL $0.3bn
Pro Forma
- ---------
Commercial RE 50%
C&I 26%
Consumer 21%
Mortgages 3%
TOTAL $8.3bn
Source: TSFG and PNTE documents and filings; Data as of September 30, 2004
17
Summary PNTE Income Statement
($000)
YTD
2000 2001 2002 2003 9/04
---- ---- ---- ---- ----
Interest income $18,545 $21,707 $20,230 $18,444 14,998
Interest expense 9,305 10,453 7,583 5,039 3,404
Net interest income 9,240 11,254 12,647 13,405 11,594
Provision $685 $1,296 $811 $(100) $215
Non-interest income $1,215 $1,973 $2,541 $2,807 $2,580
Non-interest expense 7,185 10,190 12,126 13,077 10,421
Pre-tax income $2,462 $2,482 $2,593 $3,671 $3,538
Income taxes 821 814 829 1,178 1,124
Net income to common $1,641 $1,668 $1,764 $2,493 $2,414
Diluted EPS $0.85 $0.81 $0.82 $1.08 $1.02
Adj. diluted EPS(1) $0.85 $0.81 $0.82 $1.08 $1.11
Source: PNTE documents and filings
(1) PNTE Adjusted Diluted EPS excludes non-recurring legal expenses ($0.03
and $0.06 per share impact in Q2 and Q3 2004 respectively)
18
Summary PNTE Asset Quality
($000)
YTD
Allowance 2000 2001 2002 2003 9/04
---- ---- ---- ---- ----
Beginning balance $1,331 $1,792 $2,407 $3,519 $3,441
Provision 685 1,296 811 (100) 215
Net Charge-offs (224) (1146) 301 22 (336)
Acquisitions 0 465 0 0 0
Ending balance $1,792 $2,407 $3,519 $3,441 $3,320
Ratios
- ------
YTD
2000 2001 2002 2003 9/04
---- ---- ---- ---- ----
NPAs/loans + OREO 0.88% 0.45% 0.15% 0.28% 0.05%
Reserves to NPLs 116% 223% 1,075% 470% 2,790%
Reserves to loans 1.02% 1.06% 1.61% 1.34% 1.19%
NCOs to average loans 0.14% 0.54% (0.13)% (0.01)% 0.17%
Source: PNTE documents and filings
19
PNTE Shareholder Pro Ration Examples
Assumed TSFG Stock Price - Transaction Close
--------------------------------------------------------
$27.00 $29.00 $31.00 $33.00
Aggregate transaction value ($mm)(1) $89.5 $94.6 $99.7 $104.8
Per PNTE share $36.25 $38.23 $40.21 $42.19
Implied stock/cash mix 74/26 75/25 76/24 77/23
Election example - per share
- Full pro ration(2) 0.9906x/$9.50 0.9906x/$9.50 0.9906x/$9.50 0.9906x/$9.50
- 100% stock 1.3424x 1.3182x 1.2970x 1.2785x
- 100% cash $36.25 $38.23 $40.21 $42.19
(1) Aggregate transaction value is net of proceeds from assumed exercise of
outstanding PNTE options
(2) Assuming full pro ration. This is derived by dividing the fixed merger
consideration (2.554 mm TSFG shares + $24.5 mm) by the total number of PNTE
fully diluted shares
20