EX-99 3 revised-supplemental.htm SUPPLEMENTAL SCHEDULES Supplemental Schedules


 

Quarterly Financial Data Supplement (Unaudited)
Second Quarter 2006

Page
Consolidated Statements of Income (Loss)   1  
  
Details for Noninterest Income (Loss) and Noninterest Expenses  2  
  
Consolidated Balance Sheets  3  
  
Investment Securities Portfolio Analysis  4  
  
Loan Portfolio Composition Based on Loan Purpose and Loan Growth  5  
  
Summary of Credit Quality and Allowance for Loan Losses  6  
  
Type of Deposits and Deposit Growth  7  
  
Type of Organic Deposit Growth  8  
  
Types of Wholesale Borrowings and Borrowing Costs  9  
  
Summary of Capital and Capital Ratios  10  
  
Comparative Average Balance Sheets - Yields and Costs  11 -12
  
Summary of Margin Excluding Net Cash Settlement of Swaps  13  
  
GAAP to Non-GAAP Reconciliation: Earnings, ROA and ROE  14 -17
  
GAAP to Non-GAAP Reconciliation: Noninterest income as a % of total revenue and efficiency ratios  18 -21
  
  
See disclosure of explanation of TSFG's use of certain Non-GAAP financial measures in the earnings release. 

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(dollars in thousands, except share data) (unaudited)

Three Months Ended
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Interest Income                        
Interest and fees on loans   $ 179,971   $ 169,188   $ 162,114   $ 149,788   $ 134,842  
Interest and dividends on securities:  
   Taxable    31,652    32,543    38,548    41,657    47,304  
   Exempt from Federal income taxes     3,210     3,344     3,213     2,973     2,595  
      Total interest and dividends on securities    34,862    35,887    41,761    44,630    49,899  
Interest on short-term investments     879     292     537     317     160  
      Total interest income     215,712     205,367     204,412     194,735     184,901  
Interest Expense  
Interest on deposits     68,704    62,479    58,806    52,333    45,573  
Interest on borrowed funds     43,886     39,976     40,673     38,813     37,043  
   Total interest expense     112,590     102,455     99,479     91,146     82,616  
   Net Interest Income    103,122    102,912    104,933    103,589    102,285  
Provision for Credit Losses     7,487     9,911     10,833     8,853     9,944  
   Net interest income after provision for  
      credit losses    95,635    93,001    94,100    94,736    92,341  
Noninterest Income (Loss)    32,020    29,320    (24,960 )  16,428    50,471  
Noninterest Expenses     83,059     79,834     100,973     81,035     79,535  
   Income (loss) from continuing operations before  
      income taxes and discontinued operations    44,596    42,487    (31,833 )  30,129    63,277  
Income tax expense (benefit)     15,253     14,680     (15,436 )   9,039     20,565  
   Income (loss) from continuing operations    29,343    27,807    (16,397 )  21,090    42,712  
Discontinued operations, net of income tax     --     --     --     --     --  
   Net Income (Loss)   $ 29,343   $ 27,807   $ (16,397 ) $ 21,090   $ 42,712  
   
Average Common Shares Outstanding, Basic    74,864,648    74,685,192    74,453,225    74,272,867    73,083,009  
Average Common Shares Outstanding, Diluted    75,504,683    75,339,283    75,485,436    75,414,866    74,421,103  
Per Common Share, Basic  
Income (loss) from continuing operations   $ 0.39   $ 0.37   $ (0.22 ) $ 0.28   $ 0.58  
Discontinued operations     --     --     --     --     --  
Net income (loss)   $ 0.39   $ 0.37   $ (0.22 ) $ 0.28   $ 0.58  
Per Common Share, Diluted  
Income (loss) from continuing operations   $ 0.39   $ 0.37   $ (0.22 ) $ 0.28   $ 0.57  
Discontinued operations     --     --     --     --     --  
Net income (loss)   $ 0.39   $ 0.37   $ (0.22 ) $ 0.28   $ 0.57  
Cash Dividends Declared Per Common Share   $ 0.17   $ 0.17   $ 0.17   $ 0.16   $ 0.16  

1

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
DETAILS FOR NONINTEREST INCOME (LOSS) AND NONINTEREST EXPENSES
(dollars in thousands) (unaudited)

Three Months Ended
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Noninterest Income (Loss)                        
Service charges on deposit accounts   $ 11,592   $ 11,288   $ 11,844   $ 12,245   $ 9,979  
Debit card income    2,095    1,921    1,611    1,770    1,652  
Customer service fee income     1,074     1,009     1,001     1,097     1,120  
   Total customer fee income     14,761     14,218     14,456     15,112     12,751  
Retail investment services    2,249    2,023    2,091    2,054    1,467  
Insurance income    2,806    2,977    2,702    2,010    1,449  
Trust and investment management income    1,678    1,457    1,312    1,268    1,261  
Benefits administration fees     749     667     638     818     650  
   Total wealth management income     7,482     7,124     6,743     6,150     4,827  
Mortgage banking income    2,078    1,884    1,720    2,087    2,140  
Bank-owned life insurance    2,969    2,819    3,253    2,835    2,759  
Merchant processing income    3,318    2,686    2,202    2,864    2,713  
(Loss) gain on trading and certain derivative  
    activities (1)    (245 )  (1,125 )  (610 )  403    (1,032 )
Net cash settlement of certain interest rate swaps (2)    --    --    (288 )  2,377    3,534  
Loss on indirect auto loans (3)    (985 )  --    --    --    --  
Other     2,518     1,039     2,123     1,618     1,355  
   Operating noninterest income (noninterest income,  
     excluding non-operating items)     31,896     28,645     29,599     33,446     29,047  
Change in fair value of interest rate swaps (2)    --    --    (2,106 )  (16,240 )  22,277  
(Loss) gain on sale of available for sale securities    (150 )  (183 )  (52,677 )  (1,032 )  (1,503 )
Gain on equity investments    3,751    858    224    254    650  
Loss on sale of indirect auto loans previously HFI(3)     (3,477 )   --     --     --     --  
   Non-operating noninterest income (loss)     124     675     (54,559 )   (17,018 )   21,424  
     Total noninterest income (loss)   $ 32,020   $ 29,320   $ (24,960 ) $ 16,428   $ 50,471  
   
Noninterest Expenses  
Salaries and wages   $ 33,605   $ 31,456   $ 34,628   $ 31,350   $ 27,258  
Employee benefits    8,703    9,029    8,826    8,529    8,423  
Occupancy    7,684    7,313    7,455    7,387    6,823  
Furniture and equipment    6,468    5,952    5,966    5,779    6,023  
Professional services    5,497    5,779    7,124    6,125    5,135  
Advertising and business development    2,187    2,506    2,277    2,131    2,310  
Merchant processing expense    2,678    2,165    1,773    2,327    2,211  
Telecommunications    1,421    1,418    1,559    1,533    1,384  
Amortization of intangibles    2,208    2,207    2,354    2,337    2,140  
Other       12,608     11,411     13,398     11,950     11,514  
   Operating noninterest expenses  
      (noninterest expenses, excluding non-operating  
       items)     83,059     79,236     85,360     79,448     73,221  
Employment contract buyouts (reversals)    --    598    9,998    144    222  
Merger-related costs    --    --    529    981    2,194  
Impairment from write-down of assets    --    --    --    --    917  
Charitable contribution to foundation    --    --    --    --    --  
Loss (gain) on early extinguishment of debt     --     --     5,086     462     2,981  
   Non-operating noninterest expenses     --     598     15,613     1,587     6,314  
     Total noninterest expenses   $ 83,059   $ 79,834   $ 100,973   $ 81,035   $ 79,535  

(1) Includes any ineffectiveness on derivatives qualifying for hedge accounting and the fair value adjustments and net cash settlements on all derivatives not qualifying for hedge accounting.
(2) Relates to derivatives originally documented under the short-cut method. All of these derivatives were either terminated or redesignated as hedges under the long-haul method during fourth quarter 2005.
(3) In June 2006, TSFG sold approximately $360 million of indirect auto loans originated from August 2005 through the end of May 2006 and classified the loss on sale of these loans previously held for investment as a non-operating item. TSFG classified its June production of indirect auto loans as held for sale and reported the loss from the lower of cost or market adjustment as an operating item.

2

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) (unaudited)

6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Assets                        
Cash and due from banks   $ 286,954   $ 249,324   $ 341,195   $ 264,979   $ 269,996  
Interest-bearing bank balances    16,275    10,406    21,510    14,165    21,643  
Federal funds sold and securities  
    purchased to resell    7,176    --    --    --    --  
Securities  
   Trading    --    --    1,402    1,402    20  
   Available for sale    2,861,182    2,982,574    3,095,567    3,968,618    4,260,671  
   Held to maturity     53,617     57,508     62,648     63,577     65,276  
         Total securities     2,914,799     3,040,082     3,159,617     4,033,597     4,325,967  
Loans held for sale    78,763    23,536    37,171    59,135    41,427  
Loans held for investment    9,439,445    9,720,891    9,439,395    9,293,031    8,966,337  
Allowance for loan losses     (108,995 )   (111,219 )   (107,767 )   (106,224 )   (104,853 )
         Net loans held for investment     9,330,450     9,609,672     9,331,628     9,186,807     8,861,484  
Premises and equipment, net    207,393    203,953    193,574    186,970    183,189  
Accrued interest receivable    71,905    69,739    70,838    63,517    69,714  
Intangible assets    689,690    691,328    691,758    692,796    693,541  
Other assets     473,678     463,885     471,994     445,243     420,944  
      $ 14,077,083   $ 14,361,925   $ 14,319,285   $ 14,947,209   $ 14,887,905  
   
Liabilities and Shareholders' Equity  
Liabilities  
   Deposits  
      Noninterest-bearing   $ 1,579,852   $ 1,536,796   $ 1,512,508   $ 1,508,370   $ 1,466,803  
      Interest-bearing     7,660,467     7,641,886     7,721,929     7,617,649     7,406,999  
         Total deposits    9,240,319    9,178,682    9,234,437    9,126,019    8,873,802  
   Federal funds purchased and repurchase  
      agreements    1,088,143    1,534,680    1,421,301    1,336,114    1,328,931  
   Other short-term borrowings    171,157    36,356    53,064    44,649    113,798  
   Long-term debt    1,846,062    1,911,929    1,922,151    2,751,268    2,901,532  
   Accrued interest payable    60,928    58,000    54,401    46,202    39,922  
   Other liabilities     185,485     158,173     147,024     138,510     112,848  
      Total liabilities     12,592,094     12,877,820     12,832,378     13,442,762     13,370,833  
   
Shareholders' equity  
   Preferred stock    --    --    --    --    --  
   Common stock    75,034    74,907    74,721    74,575    74,348  
   Surplus    1,158,758    1,153,056    1,151,005    1,148,311    1,143,654  
   Retained earnings    341,431    324,839    309,768    338,880    329,743  
   Guarantee of employee stock ownership  
      plan debt and nonvested restricted  
      stock (1)    (268 )  (327 )  (2,687 )  (3,192 )  (3,611 )
   Common stock held in Rabbi Trust for  
      deferred compensation    (1,266 )  (1,279 )  (1,404 )  (1,396 )  (1,388 )
   Deferred compensation payable in common stock    1,266    1,279    1,404    1,396    1,388  
   Accumulated other comprehensive loss, net of  
      income tax     (89,966 )   (68,370 )   (45,900 )   (54,127 )   (27,062 )
        Total shareholders' equity     1,484,989     1,484,105     1,486,907     1,504,447     1,517,072  
      $ 14,077,083   $ 14,361,925   $ 14,319,285   $ 14,947,209   $ 14,887,905  
   
(1)    Effective January 1, 2006, nonvested restricted stock has been netted against surplus.   

3

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
INVESTMENT SECURITIES PORTFOLIO ANALYSIS
(dollars in thousands) (unaudited)

6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Investment Securities Portfolio                            
Trading (at fair value)   $ --   $ --   $ 1,402   $ 1,402   $ 20  
Available for sale (at fair value):  
   U.S. Treasury    173,049    178,864    182,468    171,623    183,938  
   U.S. Government agencies    641,315    648,264    656,442    740,888    856,308  
   Mortgage-backed securities    1,504,818    1,603,090    1,688,862    2,494,747    2,696,421  
   State and municipal    351,462    356,057    373,892    351,732    318,018  
   Other investments (1)     190,538     196,299     193,903     209,628     205,986  
      Total available for sale securities     2,861,182     2,982,574     3,095,567     3,968,618     4,260,671  
Held to maturity (at amortized cost)     53,617     57,508     62,648     63,577     65,276  
   Total securities   $ 2,914,799   $ 3,040,082   $ 3,159,617   $ 4,033,597   $ 4,325,967  
Total securities as a percentage of total assets     20.7 %   21.2 %   22.1 %   27.0 %   29.1 %

(1) Other investments in available for sale securities includes corporate bonds, FHLB stock, community bank stocks, and other equity securities.
June 30, 2006
Amortized
Cost		 Percentage
of Total		 Duration Book
Yield
Debt Securities                    
U.S. Treasury   $ 177,140     6.1 %   1.9   4.05 %
U.S. Government agencies     666,261     22.8   4.5   5.41
Mortgage-backed securities:  
   Collateralized mortgage obligations     1,149,294     39.4   5.8   4.64
   Adjustable rate mortgages     309,943     10.6   2.2   4.62
   Pass-through     138,914     4.7   3.9   4.79
State and municipal     361,225     12.4   3.7   4.62
Corporate bonds     116,355     4.0   4.1   4.35
   Total available for sale debt securities   $ 2,919,132     100.0 %   4.5   4.77 %
   
Fixed interest rate:  
   Mortgage-backed securities   $ 1,286,194     44.1 %   5.6   4.65 %
   Other     1,286,039     44.0   3.9   4.92
Variable interest rate:  
   Mortgage-backed securities     311,957     10.7   2.2   4.62
   Other     34,942     1.2   3.1   4.63
      Total available for sale debt securities   $ 2,919,132     100.0 %   4.5   4.77 %

Projected Cash Flows for Debt Securities

Roll-Off Projected Annual Cash Flows By Interest Rate Scenario
Year Yield Based on (2) Current Up 1.00% Down 1.00%
2006       4.15 %   $ 155,677   $ 128,956   $ 118,114   $ 343,634  
2007     4.36   440,966     404,794     330,752     574,953  

(2)      Cash flow for month of June 2006.

Projected Interest Rate Shock for Debt Securities

Interest
Rate
Scenario		 Estimated
Impact on
Market
Value		 Duration
 Up 2.00%      (10 .5)%  5 .3
 Up 1.00%    (5 .2)  5 .1
   Flat    - -  4 .5
Down 1.00%    4 .4  3 .1
Down 2.00%    7 .3  1 .5

The estimated decrease in market value for a five year U.S. Treasury Note when interest rates increase 100 basis points is negative 4.23%.

4

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION BASED ON LOAN PURPOSE AND LOAN GROWTH
(dollars in thousands) (unaudited)

6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Commercial Loans                        
Commercial and industrial     $ 2,328,925   $ 2,303,909     $ 2,271,605   $ 2,329,544   $ 2,314,125
Owner - occupied real estate     935,170     806,256     801,953   821,426   806,692
Commercial real estate     4,064,137     4,116,217     3,933,927   3,803,047   3,669,440
      7,328,232   7,226,382   7,007,485   6,954,017   6,790,257
   
Consumer Loans  
Indirect - sales finance    555,678    928,633     916,318   891,127   856,564
Other consumer loans    1,011,700    1,013,987     956,668   882,646   754,753
Home equity     543,835     551,889     558,924   565,241   564,763
        2,111,213   2,494,509   2,431,910   2,339,014   2,176,080
   
    Total loans held for investment   $ 9,439,445   $ 9,720,891     $ 9,439,395   $ 9,293,031   $ 8,966,337
   
Percentage of Loans Held for Investment  
Commercial and industrial    24.7 %  23.7 %   24.1 % 25.1 % 25.8 %
Owner - occupied real estate    9.9  8.3   8.5   8.8   9.0
Commercial real estate    43.0  42.3   41.7   40.9   40.9
Indirect - sales finance    5.9  9.6   9.7   9.6   9.6
Other consumer loans    10.7  10.4   10.1   9.5   8.4
Home equity     5.8   5.7   5.9   6.1   6.3
    Total     100.0 %   100.0 %   100.0 % 100.0 % 100.00 %
   
      For The Period Ended
      6/30/06   3/31/06   12/31/05   9/30/05     6/30/05
Change in loans held for investment related to  
    acquisitions (dispositions) during the  
    three months ended (1)   $ (359,158 ) $ --     $ --   $ --   $ 311,607
   
Growth in Loans Held for Investment (2)  
Growth vs. prior quarter, annualized     (11.6 )%   12.1 %   6.2 % 14.5 % 27.1 %
Growth year-to-date, annualized     --     12.1   16.4   19.5   21.4
   
Growth in Loans Held for Investment, Excluding  
    Changes from Acquisitions and Dispositions (2)  
Organic growth vs. prior quarter, annualized     3.2 %   12.1 %   6.2 % 14.5 % 12.2 %
Organic growth year-to-date, annualized     7.7   12.1   12.6   14.4   13.6
   
Growth in Loans Held for Investment, Excluding  
    All Indirect Loans and Changes from  
    Acquisitions (2)(3)  
Growth vs. prior quarter, annualized (excluding all  
    indirect loans and changes from acquisitions)     4.2 % 12.8 %   5.7 % 14.3 % 29.0 %
Growth year-to-date, annualized (excluding all  
    indirect loans and changes from acquistions)     8.5   12.8   16.5   19.8   21.8
 

(1) The change during the three months ended June 30, 2006 related to the sale of indirect auto loans. The change during the three months ended June 30, 2005 related to the acqusition of Pointe. The bank acquisition amounts include fair value adjustments recorded in accordance with the purchase method of accounting.
(2) At December 31, 2004, loans held for investment totaled $8,107,757.
(3) At March 31, 2005 and December 31, 2004, indirect loans totaled $835,629 and $790,371, respectively.

5

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY AND ALLOWANCE FOR LOAN LOSSES
(dollars in thousands) (unaudited)

At and for the Three Months Ended
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Credit Quality                        
Loans held for investment   $ 9,439,445   $ 9,720,891   $ 9,439,395   $ 9,293,031   $ 8,966,337  
Allowance for loan losses    108,995    111,219    107,767    106,224    104,853  
Allowance for credit losses (1)    110,320    112,454    109,350    107,381    105,552  
Nonperforming loans (2)    37,782    35,722    33,255    33,708    42,457  
Foreclosed property (other real estate owned and   
   personal property repossessions)     10,187     9,323     10,722     11,839     12,618  
      Nonperforming assets   $ 47,969   $ 45,045   $ 43,977   $ 45,547   $ 55,075  
  
   Nonperforming loans as a % of loans held for investment    0.40 %  0.37 %  0.35 %  0.36 %  0.47 %
Nonperforming assets as a % of loans held  
   for investment and foreclosed property    0.51    0.46    0.47    0.49    0.61  
Allowance for loan losses as a % of loans  
   held for investment    1.15    1.14    1.14    1.14    1.17  
Allowance for credit losses as a % of loans  
   held for investment    1.17    1.16    1.16    1.16    1.18  
Allowance for loan losses to nonperforming  
   loans    2.88x    3.11x    3.24x    3.15x    2.47x  
Impaired loans (2) (3)   $ 30,860   $ 22,055   $ 16,911   $ 20,674   $ 28,266  
Specific allowance for impaired loans    8,027    4,904    4,336    4,238    4,956  
Loans past due 90 days or more (mortgage  
   and consumer with interest accruing)    2,849    2,369    4,548    1,598    2,035  
Net loan charge-offs    6,532    6,807    8,864    7,024    6,823  
Average loans held for investment    9,664,441    9,606,556    9,342,761    9,093,257    8,679,316  
Net loan charge-offs as a % of average  
   loans held for investment (annualized)    0.27 %  0.29 %  0.38 %  0.31 %  0.32 %
 
Allowance for Loan Losses  
Balance at beginning of period   $ 111,219   $ 107,767   $ 106,224   $ 104,853   $ 97,989  
Purchase accounting acquisitions:  
   Pointe Financial Corporation    --    --    --    --    3,741  
Allowance adjustment for loans sold    (3,089 )  --    --    --    --  
Provision for loan losses    7,397    10,259    10,407    8,395    9,946  
Loans charged-off    (8,785 )  (8,873 )  (10,715 )  (8,708 )  (8,817 )
Recoveries of loans previously charged-off     2,253     2,066     1,851     1,684     1,994  
Balance at end of period   $ 108,995   $ 111,219   $ 107,767   $ 106,224   $ 104,853  
 
Reserve for Unfunded Lending Commitments (1)  
Balance at beginning of period   $ 1,235   $ 1,583   $ 1,157   $ 699   $ 701  
Provision for unfunded lending commitments     90     (348 )   426     458     (2 )
Balance at end of period   $ 1,325   $ 1,235   $ 1,583   $ 1,157   $ 699  
 
Allowance for Credit Losses (1)  
Balance at beginning of period   $ 112,454   $ 109,350   $ 107,381   $ 105,552   $ 98,690  
Purchase accounting acquisitions:  
   Pointe Financial Corporation    --    --    --    --    3,741  
Allowance adjustment for loans sold    (3,089 )  --    --    --    --  
Provision for credit losses    7,487    9,911    10,833    8,853    9,944  
Loans charged-off    (8,785 )  (8,873 )  (10,715 )  (8,708 )  (8,817 )
Recoveries of loans previously charged-off     2,253     2,066     1,851     1,684     1,994  
Balance at end of period   $ 110,320   $ 112,454   $ 109,350   $ 107,381   $ 105,552  

(1) As of December 31, 2005, the reserve for unfunded lending commitments has been reclassified from the allowance for loan losses to other liabilities. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. The provision for credit losses is the sum of the provision for loan losses and the provision for unfunded lending commitments. Amounts presented for prior periods have been reclassified to conform to the current presentation.
 
(2) At June 30, 2006, March 31, 2006, December 31, 2005, September 30, 2005, and June 30, 2005, these credit quality indicators (nonperforming loans and impaired loans) included $743,000, $693,000, $1.9 million, $1.9 million, and $5.5 million, respectively, in restructured loans.
 
(3) In second quarter 2006, TSFG changed its policy to include nonaccruing loans that are fully protected by collateral as impaired loans. This change added $7.5 million to impaired loans at June 30, 2006.

 

6

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
TYPE OF DEPOSITS AND DEPOSIT GROWTH
(dollars in thousands) (unaudited)

  6/30/06   3/31/06   12/31/05 9/30/05   6/30/05  
Noninterest-bearing       $ 1,579,852   $ 1,536,796   $ 1,512,508   $ 1,508,370   $ 1,466,803
Interest-bearing checking     1,102,916   1,116,579   1,109,297   1,062,531   971,750
Money market accounts     2,337,984   2,265,571   2,290,134   2,559,559   2,754,418
Savings accounts       181,871     191,449     187,101     190,832     200,903
   Core deposits     5,202,623   5,110,395   5,099,040   5,321,292   5,393,874
Time deposits under $100,000     1,426,624   1,381,468   1,401,469   1,211,875   1,077,281
Time deposits of $100,000 or more       1,205,796     1,285,048     1,395,247     1,237,049     1,047,466
   Customer deposits (3)     7,835,043   7,776,911   7,895,756   7,770,216   7,518,621
Brokered deposits       1,405,276     1,401,771     1,338,681     1,355,803     1,355,181
   Total deposits     $ 9,240,319   $ 9,178,682   $ 9,234,437   $ 9,126,019   $ 8,873,802
   
Percentage of Deposits  
Noninterest-bearing     17.1 % 16.7 % 16.4 % 16.5 % 16.5 %
Interest-bearing checking     11.9   12.2   12.0   11.6   11.0
Money market accounts     25.3   24.7   24.8   28.0   31.0
Savings accounts       2.0     2.1     2.0     2.1     2.3
   Core deposits     56.3   55.7   55.2   58.2   60.8
Time deposits under $100,000     15.4   15.0   15.2   13.3   12.1
Time deposits of $100,000 or more       13.0     14.0     15.1     13.6     11.8
   Customer deposits (3)     84.8   84.7   85.5   85.1   84.7
Brokered deposits       15.2     15.3     14.5     14.9     15.3
   Total deposits       100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
   
  For The Period Ended  
        6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Growth vs. Prior Quarter, Annualized (1)  
Noninterest-bearing     11.2 % 6.5 % 1.1 % 11.2 % 54.8 %
Core deposits     7.2   0.9   (16.6 ) (5.3 ) 28.0
Customer deposits (3)     3.0   (6.1 ) 6.4   13.3   40.9
Total deposits     2.7   (2.4 ) 4.7   11.3   34.3
   
Growth Year-To-Date, Annualized (2)  
Noninterest-bearing     9.0 % 6.5 % 22.2 % 29.2 % 37.3 %
Core deposits     4.1   0.9   3.0   10.0   18.0
Customer deposits (3)     (1.6 ) (6.1 ) 22.3   27.3   33.3
Total deposits     0.1   (2.4 ) 20.4   25.4   31.6

(1) At March 31, 2005, noninterest-bearing totaled $1,290,427, core deposits totaled $5,041,804, customer deposits totaled $6,822,455, and total deposits totaled $8,174,970.
(2) At December 31, 2004, noninterest-bearing totaled $1,237,877, core deposits totaled $4,951,866, customer deposits totaled $6,454,072, and total deposits totaled $7,670,944.
(3) Total deposits less brokered deposits.

7

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
TYPE OF ORGANIC DEPOSIT GROWTH
(dollars in thousands) (unaudited)

For The Period Ended
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Noninterest-Bearing                        
Beginning balance   $ 1,536,796   $ 1,512,508 $ 1,508,370 $ 1,466,803   $ 1,290,427  
Increase (decrease) during the three  
   months ended related to:  
     Organic change    43,056    24,288    4,138    41,567    62,617  
     Bank acquisitions (dispositions)(1)     --     --     --     --     113,759  
Ending balance   $ 1,579,852   $ 1,536,796   $ 1,512,508   $ 1,508,370   $ 1,466,803  
   
Core Deposits  
Beginning balance   $ 5,110,395   $ 5,099,040   $ 5,321,292   $ 5,393,874   $ 5,041,804  
Increase (decrease) during the three  
   months ended related to:  
     Organic change    92,228    11,355    (222,252 )  (72,582 )  99,461  
     Bank acquisitions (dispositions) (1)     --     --     --     --     252,609  
Ending balance   $ 5,202,623   $ 5,110,395   $ 5,099,040   $ 5,321,292   $ 5,393,874  
   
Customer Deposits (excludes brokered deposits)  
Beginning balance   $ 7,776,911   $ 7,895,756 $ 7,770,216 $ 7,518,621 $ 6,822,455  
Increase (decrease) during the three  
   months ended related to:  
     Organic change    58,132    (118,845 )  125,540    251,595    367,605  
     Bank acquisitions (dispositions) (1)     --     --     --     --     328,561  
Ending balance     $ 7,835,043   $ 7,776,911   $ 7,895,756   $ 7,770,216   $ 7,518,621  
   
Total Deposits  
Beginning balance   $ 9,178,682   $ 9,234,437   $ 9,126,019   $ 8,873,802   $ 8,174,970  
Increase (decrease) during the three  
   months ended related to:  
     Organic change    61,637    (55,755 )  108,418    252,217    370,271  
     Bank acquisitions (dispositions) (1)     --     --     --     --     328,561  
Ending balance   $ 9,240,319   $ 9,178,682   $ 9,234,437   $ 9,126,019   $ 8,873,802  
   
Organic Change vs. Prior Quarter, Annualized(2)  
Noninterest-bearing    11.2 %  6.5 %  1.1 %  11.2 %  19.5 %
Core deposits    7.2    0.9    (16.6 )  (5.3 )  7.9  
Customer deposits (4)    3.0    (6.1 )  6.4    13.3    21.6  
Total deposits    2.7    (2.4 )  4.7    11.3    18.2  
   
Organic Change Year-To-Date, Annualized (3)  
Noninterest-bearing    9.0 %  6.5 %  13.0 %  16.9 %  18.8 %
Core deposits    4.1    0.9    (2.1 )  3.2    7.7  
Customer deposits (4)    (1.6 )  (6.1 )  17.2    20.5    23.0  
Total deposits    0.1    (2.4 )  16.1    19.6    23.0  

(1) The non organic changes in deposits relate to the May 6, 2005 acquisition of Pointe Financial Corporation. These bank acquisition amounts include fair value adjustments recorded in accordance with the purchase method of accounting.
(2) At March 31, 2005, noninterest-bearing totaled $1,290,427, core deposits totaled $5,041,804, customer deposits totaled $6,822,455, and total deposits totaled $8,174,970.
(3) At December 31, 2004, noninterest-bearing totaled $1,237,877, core deposits totaled $4,951,866, customer deposits totaled $6,454,072, and total deposits totaled $7,670,944.
(4) Total deposits less brokered deposits.

 

8

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
TYPES OF WHOLESALE FUNDING
(dollars in thousands) (unaudited)

At and for the Three Months Ended
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Types of wholesale funding                        
Short-term borrowings  
Federal funds purchased and repurchase  
   agreements   $ 1,088,143   $ 1,534,680   $ 1,421,301   $ 1,336,114   $ 1,328,931  
Commercial paper    30,336    35,210    32,933    33,579    28,734  
Treasury, tax and loan note     140,821     1,146     20,131     11,070     85,064  
   Total short-term borrowings    1,259,300    1,571,036    1,474,365    1,380,763    1,442,729  
Long-term borrowings  
Repurchase agreements    771,000    821,000    821,000    1,619,893    1,769,893  
FHLB advances    749,127    842,134    852,140    882,147    882,153  
Subordinated notes    233,016    155,695    155,695    155,695    155,695  
Manditorily redeemable preferred stock of  
   subsidiary    89,800    89,800    89,800    89,800    89,800  
Note payable    847    856    865    873    882  
Employee stock ownership plan note payable    350    425    500    575    650  
Purchase accounting premiums, net of  
   amortization     1,922     2,019     2,151     2,285     2,459  
   Total long-term borrowings     1,846,062     1,911,929     1,922,151     2,751,268     2,901,532  
   Total borrowings    3,105,362    3,482,965    3,396,516    4,132,031    4,344,261  
Brokered deposits     1,405,276     1,401,771     1,338,681     1,355,803     1,355,181  
   Total wholesale borrowings   $ 4,510,638   $ 4,884,736   $ 4,735,197   $ 5,487,834   $ 5,699,442  
   
   
Wholesale borrowings as a percentage  
   of total assets    32.0 %  34.0 %  33.1 %  36.7 %  38.3 %
   
   
Impact of the Net Cash Settlement of Certain Interest Rate Swaps on the Cost of Wholesale Funding (1)  
   
Interest expense - brokered deposits    17,728    15,389    14,329    14,967    15,470  
Interest expense - borrowings     43,886     39,976     40,673     38,813     37,043  
 Total interest expense - wholesale borrowings    61,614    55,365    55,002    53,780    52,513  
      Net cash settlement of certain interest  
       rate swaps included in noninterest income     --     --     288     (2,377 )   (3,534 )
Interest expense on wholesale borrowings,  
    including net cash settlement of certain  
    interest rate swaps   $ 61,614   $ 55,365   $ 55,290   $ 51,403   $ 48,979  
   
 Average wholesale borrowings, including  
   brokered CDs   $ 4,975,576   $ 4,945,488   $ 5,399,810   $ 5,725,658   $ 6,197,520  
   
 Cost of wholesale borrowings    4.97 %  4.54 %  4.04 %  3.73 %  3.40 %
 Cost of wholesale borrowings, including  
   net cash settlement of certain interest rate  
   swaps (2)    4.97 %  4.54 %  4.06 %  3.56 %  3.17 %

(1) The costs of wholesale borrowings reflect the net cash settlement of certain interest rate swaps as if it were included as a component of interest expense rather than included in operating noninterest income. With the redesignation of the CD swap derivatives as hedges effective October 2005, TSFG expects the net cash settlement of the CD swaps to be included in interest expense for future periods rather than included in noninterest income.
(2) Calculated as interest expense on wholesale borrowings, net of the net cash settlement on swaps, as a % of average outstanding wholesale borrowings (annualized).

 

 

 

9

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF CAPITAL, CAPITAL RATIOS, UNREALIZED LOSSES
ON AVAILABLE FOR SALE SECURITIES, AND MARKET RATES FOR U.S. TREASURY NOTES
(dollars in thousands) (unaudited)

6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Regulatory Capital                        
Tier 1 capital   $ 1,121,122   $ 1,021,970   $ 1,001,841   $ 1,026,543   $ 1,011,327  
Tier 2 capital     176,237     178,403     179,831     179,427     177,995  
   Total risk-based capital     1,297,359     1,200,373     1,181,672     1,205,970     1,189,322  
Total risk-weighted assets    11,255,642    11,588,786    11,308,017    11,589,370    11,145,953  
   
Tangible Equity  
Shareholders' equity   $ 1,484,989   $ 1,484,105   $ 1,486,907   $ 1,504,447   $ 1,517,072  
Intangible assets     (689,690 )   (691,328 )   (691,758 )   (692,796 )   (693,541 )
  Tangible equity     795,299     792,777     795,149     811,651     823,531  
   
   
Capital Ratios  
Total risk-based capital    11.53 %  10.36 %  10.45 %  10.41 %  10.67 %
Tier 1 risk-based capital    9.96    8.82    8.86    8.86    9.07  
Leverage ratio    8.21    7.47    7.07    7.20    7.12  
   
Tangible equity to tangible assets ratio    5.94    5.80    5.83    5.69    5.80  
Less: impact of unrealized gain or loss     (0.57 )   (0.44 )   (0.31 )   (0.35 )   (0.17 )
  Tangible equity to tangible assets ratio,  
      excluding unrealized gain or loss     6.51     6.24     6.14     6.04     5.97  
   
   
   
Unrealized Losses on AFS Securities  
Gross (included in AFS securities)   $ (134,480 ) $ (105,060 ) $ (73,635 ) $ (87,834 ) $ (42,914 )
Net of income tax (included in equity)    (84,667 )  (66,137 )  (46,350 )  (55,291 )  (27,029 )
   
   
   
Market Rates for U.S. Treasury Notes  
Three year    5.13 %  4.82 %  4.36 %  4.17 %  3.64 %
Five year    5.09    4.81    4.35    4.19    3.70  

 

 

 

10

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
COMPARATIVE AVERAGE BALANCES - YIELDS AND COSTS
(dollars in thousands) (unaudited)

Three Months Ended
6/30/06 3/31/06 12/31/05
Average
Balance		 Income/
Expense		 Yield/
Rate		 Average
Balance		 Income/
Expense		 Yield/
Rate		 Average
Balance		 Income/
Expense		 Yield/
Rate
Assets                                                    
Earning assets    
  Loans (1)     $ 9,711,641 $ 179,971   7.43 % $ 9,630,573 $ 169,188 7.12 % $ 9,392,454 $ 162,114   6.85 %
  Investment securities (taxable) (2)       2,676,211     31,652     4.74   2,752,345     32,543     4.80   3,517,591   38,548   4.35
  Investment securities (nontaxable) (3)       416,117     4,938     4.76   434,980     5,145     4.80   429,508   4,943   4.57
    Total investment securities       3,092,328     36,590     4.75   3,187,325     37,688     4.80   3,947,099   43,491   4.37
  Federal funds sold, interest-bearing    
    bank balances, and other temp investments       64,319     879     5.48   21,509     292     5.51   55,933   537   3.81
      Total earning assets       12,868,288     217,440     6.78   12,839,407     207,168     6.54   13,395,486   206,142   6.11
  Non-earning assets       1,476,147         1,527,849       1,458,974
      Total assets     $ 14,344,435       $ 14,367,256     $ 14,854,460
     
Liabilities and Shareholders' Equity    
Liabilities    
  Interest-bearing liabilities    
   Interest-bearing deposits    
    Interest checking     $ 1,074,420   $ 5,054     1.89 $ 1,065,190   $ 4,406     1.68 $ 1,027,699   $ 3,321   1.28
    Savings       179,220     287     0.64   191,613     308     0.65   186,666   228   0.48
    Money market       2,265,029     18,651     3.30   2,218,937     16,345     2.99   2,453,893   17,255   2.79
    Time deposits, excluding brokered    
       deposits (4)       2,641,817     26,984     4.10   2,778,587     26,031     3.80   2,639,057   23,673   3.56
      Total interest-bearing customer    
         deposit(5)       6,160,486     50,976     3.32   6,254,327     47,090     3.05   6,307,315   44,477   2.80
    Brokered deposits       1,408,889     17,728     5.05   1,373,199     15,389     4.54   1,343,222   14,329   4.23
      Total interest-bearing deposits       7,569,375     68,704     3.64   7,627,526     62,479     3.32   7,650,537   58,806   3.05
   Borrowings       3,566,687     43,886     4.94   3,572,289     39,976     4.54   4,056,588   40,673   3.98
    Total interest-bearing liabilities       11,136,062     112,590     4.06   11,199,815     102,455     3.71   11,707,125   99,479   3.37
   Noninterest-bearing liabilities    
    Noninterest-bearing deposits       1,536,140             1,502,958             1,513,062
    Other noninterest liabilities       192,587             173,075             137,042
    Total liabilities       12,864,789             12,875,848             13,357,229
Shareholders' equity       1,479,646             1,491,408             1,497,231
  Total liabilities and shareholders'    
     equity     $ 14,344,435       $ 14,367,256   $ 14,854,460
Net interest margin (tax-equivalent)           $ 104,850     3.27 %   $ 104,713   3.31 %   $ 106,663 3.16 %
Less: tax-equivalent adjustment (3)             1,728         1,801     1,730
Net interest income           $ 103,122       $ 102,912       $ 104,933
     
     
      Customer deposits(6)       7,696,626     50,976     2.66   7,757,285     47,090     2.46   7,820,377   44,477   2.26
      Wholesale borrowings(7)       4,975,576     61,614     4.97   4,945,488     55,365     4.54   5,399,810   55,002   4.04
      Total funding(8)       12,672,202     112,590     3.56   12,702,773     102,455     3.27   13,220,187   99,479   2.99

(1) Nonaccrual loans are included in average balances for yield computations.
(2) The average balances for investment securities exclude the unrealized gain or loss recorded for available for sale securities.
(3) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.
(4) At June 30, 2006, March 31, 2006, and December 31, 2005, this line includes time deposits greater than $100,000 of (in thousands) $1,232,787, $1,384,999, and $1,327,869, respectively.
(5) Interest bearing customer deposits include total deposits less brokered deposits and noninterest-bearing deposits.
(6) Customer deposits include total deposits less brokered deposits.
(7) Wholesale borrowings include borrowings and brokered deposits.
(8) Total funding includes customer deposits and wholesale borrowings.
Note: Average balances are derived from daily balances.

11

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
COMPARATIVE AVERAGE BALANCES - YIELDS AND COSTS - CONTINUED
(dollars in thousands) (unaudited)

Three Month Ended
9/30/05 6/30/05
Average
Balance		 Income/
Expense		 Yield/
Rate		 Average
Balance		 Income/
Expense		 Yield/
Rate
Assets                            
Earning assets  
  Loans (1)   $ 9,138,137   $ 149,788    6.50 % $8,706,276   $ 134,842     6.21 %
  Investment securities (taxable) (2)    3,883,705    41,657    4.26  4,366,761    47,304     4.35
  Investment securities (nontaxable) (3)     406,767     4,574     4.46   364,360     3,992     4.39
    Total investment securities    4,290,472    46,231    4.27  4,731,121    51,296     4.35
  Federal funds sold and interest-  
 bearing bank balances     34,146     317     3.68   22,698     160     2.83
      Total earning assets     13,462,755     196,336     5.79   13,460,095     186,298     5.55
  Non-earning assets     1,482,396         1,441,975
      Total assets   $ 14,945,151       $ 14,902,070  
   
Liabilities and Shareholders' Equity  
Liabilities  
  Interest-bearing liabilities  
   Interest-bearing deposits  
    Interest checking   $ 979,487   $ 2,533    1.03 $ 928,672   $ 1,725     0.75
    Savings    193,518    151    0.31  195,851    152     0.31
    Money market    2,690,104    16,819    2.48  2,704,178    15,185     2.25
    Time deposits, excluding brokered deposits(4)     2,254,868     17,863     3.14   1,917,124     13,041     2.73
      Total interest-bearing customer deposits(5)     6,117,977    37,366    2.42  5,745,825    30,103     2.10
    Brokered deposits     1,353,364     14,967     4.39   1,365,262     15,470     4.54
      Total interest-bearing deposits    7,471,341    52,333    2.78  7,111,087    45,573     2.57
   Borrowings     4,372,294     38,813     3.52   4,832,258     37,043     3.07
    Total interest-bearing liabilities    11,843,635     91,146     3.05  11,943,345     82,616     2.77
   Noninterest-bearing liabilities  
    Noninterest-bearing deposits    1,446,396         1,349,746
    Other noninterest liabilities     146,980         158,305
    Total liabilities    13,437,011        13,451,396
Shareholders' equity     1,508,140         1,450,674
  Total liabilities and shareholders' equity   $ 14,945,151       $ 14,902,070  
Net interest margin (tax-equivalent)       $ 105,190    3.10 %     $ 103,682     3.09 %
Less: tax-equivalent adjustment (3)       1,601       1,397
Net interest income     $ 103,589         $ 102,285    
   
   
        Customer deposits (6)    7,564,373    37,366    1.96  7,095,571    30,103     1.70
        Wholesale borrowings (7)    5,725,658    53,780    3.73  6,197,520    52,513     3.40
        Total funding (8)    13,290,031    91,146    2.72  13,293,091    82,616     2.49

(1) Nonaccrual loans are included in average balances for yield computations.
(2) The average balances for investment securities exclude the unrealized gain or loss recorded for available for sale securities.
(3) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.
(4) At September 30, 2005 and June 30, 2005, this line includes time deposits greater than $100,000 of (in thousands) $1,130,798 and $926,308, respectively.
(5) Interest bearing customer deposits include total deposits less brokered deposits and noninterest-bearing deposits.
(6) Customer deposits include total deposits less brokered deposits.
(7) Wholesale borrowings include borrowings and brokered deposits.
(8) Total funding includes customer deposits and wholesale borowings.
Note: Average balances are derived from daily balances.

 

 

 

12

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF FINANCIAL RESULTS AS RESTATED FOR ACCOUNTING TREATMENT OF DERIVATIVES
(dollars in thousands) (unaudited)

 
Impact of the Net Cash Settlement of Certain Interest Rate Swaps on the Net Interest Margin (1)

Three Months Ended
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
Net interest income     $ 103,122   $ 102,912   $ 104,933   $ 103,589   $ 102,285  
Tax-equivalent adjustment     1,728     1,801     1,730     1,601     1,397  
Net interest income (tax equivalent)    104,850    104,713    106,663    105,190    103,682  
     Plus net cash settlement of certain interest  
        rate swaps included in noninterest income     --     --     (288 )   2,377     3,534  
Net interest income (tax equivalent), including  
     net cash settlement of certain interest  
     rate swaps   $ 104,850   $ 104,713   $ 106,375   $ 107,567   $ 107,216  
   
Average loans   $ 9,711,641   $ 9,630,573   $ 9,392,454   $ 9,138,137   $ 8,706,276  
Average earning assets     12,868,288     12,839,407     13,395,486    13,462,755    13,460,095  
   
Net interest margin (tax equivalent)     3.27 %   3.31 %   3.16 %   3.10 %   3.09 %
Net interest margin, including net cash settlement  
    of certain interest rate swaps (2)    3.27    3.31    3.15    3.17    3.19  
   
Average loan growth vs. prior quarter (annualized)    3.4    10.3    11.0    19.7    20.5  
Average earning asset growth vs. prior quarter  
   (annualized)    0.9    (16.8 )  (2.0 )  0.1    17.2  

(1) These operating net interest margin ratios reflect the net cash settlement of certain interest rate swaps as if it were included in net interest income (tax-equivalent) rather than in noninterest income.
(2) Calculated as net interest income, including the net cash settlement of certain interest rate swaps, as a % of average earning assets (annualized).

 

 

 

13

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(dollars in thousands, except share data) (unaudited)

Three Months Ended
6/30/06 3/31/06
Diluted
EPS		 Diluted
EPS
Net Income, as Reported (GAAP)     $ 29,343   $ 0.39   $ 27,807   $ 0 .37
Non-Operating Items  
Loss on sale of available for sale securities     150           183  
Gain on equity investments    (3,751 )         (858 )
Loss on sale of indirect auto loans previously HFI     3,477           --  
Employment contract buyouts    --           598  
Related income taxes     42           27  
Operating Earnings (Net Income, Excluding  
   Non-Operating Items)     29,261     0.39     27,757     0 .37
Amortization of intangibles    2,208           2,207  
Related income taxes     (755 )         (763 )
Cash Operating Earnings (Net Income,  
   Excluding Non-Operating Items and  
   Amortization of Intangibles)   $ 30,714   $ 0.41   $ 29,201   $ 0 .39
   
Average Common Shares Outstanding, Diluted    75,504,683           75,339,283  
   
Select Balance Sheet (Averages)  
Total assets   $ 14,344,435         $ 14,367,256  
Intangible assets     (690,375 )         (691,262 )
   Tangible assets     13,654,060           13,675,994  
   
Shareholders' equity    1,479,646           1,491,408  
Intangible assets     (690,375 )         (691,262 )
   Tangible equity     789,271           800,146  
   
Return on Average Assets  
GAAP earnings     0.82 %       0.78 %
Operating earnings     0.82       0.78
Cash operating earnings on average tangible assets     0.90       0.87
   
Return on Average Equity  
GAAP earnings     7.95       7.56
Operating earnings     7.93       7.55
Cash operating earnings on average tangible equity     15.61       14.80

14

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(dollars in thousands, except share data) (unaudited)

Three Months Ended
12/31/05 9/30/05 6/30/05   3/31/05
Diluted
EPS 		Diluted
EPS 		Diluted
EPS 		Diluted
EPS
Net (Loss) Income, as Reported (GAAP)     $ (16,397 ) $ (0.22 ) $ 21,090   $ 0.28 $ 42,712   $ 0.57 $ 22,416   $ 0.31
Non-Operating Items    
Change in fair value of interest rate swaps       2,106       16,240       (22,277 )     17,209  
Loss (gain) on sale of available for sale    
   securities       52,677       1,032       1,503       (234 )
Gain on equity investments       (224 )     (254 )     (650 )     (1,711 )
Employment contract buyouts (reversals)       9,998       144       222       (37 )
Impairment from write-down of assets       --       --       917       --  
Merger-related costs       529       981       2,194       305  
Charitable contribution to foundation       --       --       --       683  
Loss (gain) on early extinguishment of debt       5,086       462       2,981       (1,428 )
Related income taxes       (26,938 )     (5,582 )     4,911       (4,932 )
Discontinued operations, net of income tax       --       --       --       396  
Operating Earnings (Net Income, Excluding    
   Non-Operating Items)       26,837     0.36   34,113     0.45   32,513     0.44   32,667     0.45
Amortization of intangibles       2,354       2,337       2,140       1,806  
Related income taxes       (706 )     (701 )     (695 )     (596 )
Cash Operating Earnings (Net Income,    
   Excluding Non-Operating Items and    
   Amortization of Intangibles)     $ 28,485   $ 0.38 $ 35,749   $ 0.47 $ 33,958   $ 0.46 $ 33,877   $ 0.46
     
Average Common Shares Outstanding, Diluted       75,485,436       75,414,866       74,421,103       73,021,005  
     
Select Balance Sheet (Averages)    
Total assets     $ 14,854,460     $ 14,945,151     $ 14,902,070       $14,302,030
Intangible assets       (693,016 )     (691,881 )     (656,066 )     (610,914 )
   Tangible assets       14,161,444       14,253,270       14,246,004       13,691,116  
     
Shareholders' equity       1,497,231       1,508,140       1,450,674       1,394,839  
Intangible assets       (693,016 )     (691,881 )     (656,066 )     (610,914 )
   Tangible equity       804,215       816,259       794,608       783,925  
     
Return on Average Assets    
GAAP (loss) earnings       (0.44 )%   0.56 %   1.15 %     0.64 %
Operating earnings       0.72     0.91     0.88     0.93
Cash operating earnings on average tangible assets       0.80     1.00     0.96     1.00
     
Return on Average Equity    
GAAP (loss) earnings       (4.34 )     5.55     11.81     6.52
Operating earnings       7.11     8.97     8.99     9.50
Cash operating earnings on average tangible    
   equity       14.05     17.38     17.14     17.53

 

15

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(dollars in thousands, except share data) (unaudited)

Three Months Ended
12/31/04 9/30/04 6/30/04   3/31/04
Diluted
EPS 		Diluted
EPS 		Diluted
EPS 		Diluted
EPS
Net Income, as Reported (GAAP)     $ 23,394 $ 0.32 $ 42,571   $ 0.61 $ 14,407   $ 0.24 $ 39,136   $ 0.64
Non-Operating Items    
Change in fair value of interest rate swaps       2,383       (16,924 )     23,067     (11,076 )
Gain on sale of available for sale    
   securities       (499 )     (678 )     (607 )     (5,214 )
(Gain) loss on equity investments       (1,267 )     367     (1,013 )     (2,810 )
Gain on disposition of assets and liabilities       --     --     --     (2,350 )
Employment contract buyouts (reversals)       965       174       --       (59 )
Impairment recovery from write-down of assets       --       --       (277 )     --  
Merger-related costs       1,627       5,487       575       177  
Conservation grant of land      --       --       --       3,350  
Loss on early extinguishment of debt       --       --       --       1,429
Related income taxes       (1,136 )     3,472     (7,230 )     5,010
Impairment of perpetual preferred stock       10,367     --     --     --
Discontinued operations, net of income tax       325       165       --       --  
Operating Earnings (Net Income, Excluding    
   Non-Operating Items)       36,159     0.50   36,634     0.49   28,922     0.48   27,593     0.45
Amortization of intangibles       1,814       1,839       1,195       1,195  
Related income taxes       (643 )     (552 )     (397 )     (362 )
Cash Operating Earnings (Net Income,    
   Excluding Non-Operating Items and    
   Amortization of Intangibles)     $ 37,330   $ 0.51 $ 35,921   $ 0.51 $ 29,720   $ 0.49 $ 28,426   $ 0.47
     
Average Common Shares Outstanding, Diluted       72,832,859       70,342,922       60,837,792       60,809,470  
     
Select Balance Sheet (Averages)    
Total assets     $ 13,701,884     $ 13,173,844     $ 11,100,782       $10,828,734
Intangible assets       (614,507 )     (551,625 )     (351,133 )     (352,449 )
   Tangible assets       13,087,377       12,622,219       10,749,649       10,476,285  
     
Shareholders' equity       1,384,294       1,281,463       993,685       992,864  
Intangible assets       (614,507 )     (551,625 )     (351,133 )     (352,449 )
   Tangible equity       769,787       729,838       642,552       640,415  
     
Return on Average Assets    
GAAP earnings       0.68 %   1.29 %   0.52 %   1.45 %
Operating earnings       1.05     1.05     1.05     1.02
Cash operating earnings on average tangible assets       1.13     1.13     1.11     1.09
     
Return on Average Equity    
GAAP earnings       6.72     13.22     5.83     15.85
Operating earnings       10.39     10.75     11.71     11.18
Cash operating earnings on average tangible    
   equity       19.29     19.58     18.60     17.85

16

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(dollars in thousands, except share data) (unaudited)

Years Ended December 31,
2005   2004
Diluted
EPS		 Diluted
EPS
Net Income, as Reported (GAAP)     $ 69,821   $ 0.94   $ 119,508   $ 1 .80
Non-Operating Items  
Change in fair value of interest rate swaps     13,278           (2,550 )
Loss (gain) on sale of available for sale securities    54,978          (6,998 )
Gain on equity investments    (2,839 )        (4,723 )
Gain on disposition of assets and liabilities    --          (2,350 )
Employment contract buyouts    10,327          1,080  
Impairment (recovery) loss from write-down of assets    917          (277 )
Merger-related costs    4,009          7,866  
Conservation grant of land    --          3,350  
Loss on early extinguishment of debt    7,101          1,429  
Charitable contribution to foundation    683          --  
Related income taxes    (32,541 )        116  
Impairment of perpetual preferred stock    --          10,367  
Discontinued operations, net of income tax     396           490  
Operating Earnings (Net Income, Excluding  
    Non-Operating Items)    126,130    1.69    127,308    1 .92
Amortization of intangibles    8,637          6,043  
Related income taxes     (2,698 )         (1,954 )
Cash Operating Earnings (Net Income,  
    Excluding Non-Operating Items and  
    Amortization of Intangibles)   $ 132,069   $ 1.77   $ 131,397   $ 1 .98
   
Average Common Shares Outstanding, Diluted    74,594,626          66,235,171  
   
Select Balance Sheet (Averages)  
Total assets   $ 14,752,973         $ 12,208,069  
Intangible assets     (663,274 )         (468,060 )
    Tangible assets     14,089,699           11,740,009  
   
Shareholders' equity    1,463,125          1,164,004  
Intangible assets     (663,274 )         (468,060 )
    Tangible equity     799,851           695,944  
   
Return on Average Assets  
GAAP earnings     0.47 %         0.98 %
Operating earnings     0.85         1.04
Cash operating earnings on average tangible assets     0.94         1.12
   
Return on Average Equity  
GAAP earnings     4.77         10.27
Operating earnings     8.62         10.94
Cash operating earnings on average tangible equity     16.51         18.88

17

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(dollars in thousands) (unaudited)

Three Months Ended
6/30/06   3/31/06
Select Financial Data Used in Ratios Calculated Below            
Net interest income   $ 103,122   $ 102,912  
Tax-equivalent adjustment     1,728     1,801  
   Net interest income (tax-equivalent)   $ 104,850   $ 104,713  
   
Total noninterest income, as reported (GAAP)   $ 32,020   $ 29,320  
Adjustments for non-operating items:  
   Loss on sale of available for sale securities    150    183  
   Gain on equity investments    (3,751 )  (858 )
   Loss on sale of indirect auto loans previoysly HFI     3,477     --  
Operating noninterest income (noninterest income, excluding  
   non-operating items)   $ 31,896   $ 28,645  
   
   
Total noninterest expenses, as reported (GAAP)   $ 83,059   $ 79,834  
Adjustments for non-operating items:  
   Employment contract buyouts     --     (598 )
Operating noninterest expenses (noninterest expenses, excluding  
   non-operating items)    83,059    79,236  
Less: amortization of intangibles     (2,208 )   (2,207 )
Cash operating noninterest expenses (noninterest expenses,  
   excluding non-operating items and amortization of  
   intangibles)   $ 80,851   $ 77,029  
   
Total Revenue (1)  
GAAP   $ 135,142   $ 132,232  
Operating (2)    136,746    133,358  
   
Noninterest Income as a % Total Revenue (3)  
GAAP    23.69 %  22.17 %
Operating (2)    23.32    21.48  
   
Efficiency Ratios (4)  
GAAP    61.46    60.37  
Operating (2)    60.74    59.42  
Cash operating (2)    59.12    57.76  

(1) The sum of net interest income and noninterest income.
(2) Total revenue, noninterest income as a % of total revenue, and the efficiency ratio, on an operating basis, are calculated using tax-equivalent net interest income and exclude non-operating items. The cash operating efficiency ratio also excludes amortization of intangibles.
(3) Calculated as noninterest income, divided by the sum of net interest income and noninterest income.
(4) Calculated as noninterest expenses, divided by the sum of net interest income and noninterest income.

18

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(dollars in thousands) (unaudited)

Three Months Ended
12/31/05 9/30/05 6/30/05 3/31/05
Select Financial Data Used in Ratios Calculated Below                    
Net interest income   $ 104,933   $ 103,589   $ 102,285   $ 98,249  
Tax-equivalent adjustment       1,730     1,601     1,397     1,326  
   Net interest income (tax-equivalent)   $ 106,663   $ 105,190   $ 103,682   $ 99,575  
   
Total noninterest (loss) income, as reported (GAAP)   $ (24,960 ) $ 16,428   $ 50,471   $ 13,271  
Adjustments for non-operating items:  
   Change in fair value of interest rate swaps    2,106    16,240    (22,277 )  17,209  
   Loss (gain) on sale of available for sale securities    52,677    1,032    1,503    (234 )
   Gain on equity investments     (224 )   (254 )   (650 )   (1,711 )
Operating noninterest income (noninterest income, excluding  
   non-operating items)     29,599     33,446     29,047     28,535  
   
    Net cash settlement of certain interest rate swaps  
       included in noninterest income     (288 )   2,377     3,534     4,737  
Operating noninterest income, excluding net cash settlement  
   of certain interest rate swaps   $ 29,887   $ 31,069   $ 25,513   $ 23,798  
   
Total noninterest expenses, as reported (GAAP)   $ 100,973   $ 81,035   $ 79,535   $ 66,510  
Adjustments for non-operating items:  
   Employment contract (buyouts) reversals    (9,998 )  (144 )  (222 )  37  
   Merger-related costs    (529 )  (981 )  (2,194 )  (305 )
   Impairment from write-down of assets    --    --    (917 )  --  
   Charitable contribution to foundation    --    --    --    (683 )
   (Loss) gain on early extinguishment of debt     (5,086 )   (462 )   (2,981 )   1,428  
Operating noninterest expenses (noninterest expenses,  
   excluding non-operating items)    85,360    79,448    73,221    66,987  
Less: amortization of intangibles     (2,354 )   (2,337 )   (2,140 )   (1,806 )
Cash operating noninterest expenses (noninterest expenses,  
   excluding non-operating items and amortization of  
   intangibles)   $ 83,006   $ 77,111   $ 71,081   $ 65,181  
   
Total Revenue (1)  
GAAP   $ 79,973   $ 120,017   $ 152,756   $ 111,520  
Operating (2)    136,262    138,636    132,729    128,110  
   
Noninterest (Loss) Income as a % Total Revenue (3)  
GAAP    (31.21 )%  13.69 %  33.04 %  11.90 %
Operating (2)    21.72    24.13    21.88    22.27  
Operating, excluding net cash settlement of certain  
   interest rate swaps (4)    21.93    22.41    19.22    18.58  
   
Efficiency Ratios (5)  
GAAP    126.26    67.52    52.07    59.64  
Operating (2)    62.64    57.31    55.17    52.29  
Cash operating (2)    60.92    55.62    53.55    50.88  

(1) The sum of net interest income and noninterest income.
(2) Total revenue, noninterest income as a % of total revenue, and the efficiency ratio, on an operating basis, are calculated using tax-equivalent net interest income and exclude non-operating items. The cash operating efficiency ratio also excludes amortization of intangibles.
(3) Calculated as noninterest income, divided by the sum of net interest income and noninterest income.
(4) Calculated excluding the net cash settlement of certain interest rate swaps.
(5) Calculated as noninterest expenses, divided by the sum of net interest income and noninterest income.

19

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(dollars in thousands) (unaudited)

Three Months Ended
12/31/04 9/30/04 6/30/04 3/31/04
Select Financial Data Used in Ratios Calculated Below                    
Net interest income   $ 97,124   $ 92,084   $ 72,881   $ 73,752  
Tax-equivalent adjustment     1,230     1,153     1,026     947  
   Net interest income (tax-equivalent)   $ 98,354   $ 93,237   $ 73,907   $ 74,699  
   
Total noninterest income, as reported (GAAP)   $ 19,082   $ 48,266   $ 10,163   $ 47,366  
Adjustments for non-operating items:  
   Change in fair value of interest rate swaps    2,383    (16,924 )  23,067    (11,076 )
   Gain on sale of available for sale securities    (499 )  (678 )  (607 )  (5,214 )
   (Gain) loss on equity investments    (1,267 )  367    (1,013 )  (2,810 )
   Impairment of perpetual preferred stock    10,367    --    --    --  
   Gain on disposition of assets and liabilities     --     --     --     (2,350 )
Operating noninterest income (noninterest income, excluding  
   non-operating items)     30,066     31,031     31,610     25,916  
   
    Net cash settlement on certain interest rate swaps  
       included in noninterest income     6,064     7,259     7,235     7,002  
Operating noninterest income, excluding net cash settlement  
   on certain interest rate swaps   $ 24,002   $ 23,772   $ 24,375   $ 18,914  
   
Total noninterest expenses, as reported (GAAP)   $ 68,649   $ 69,858   $ 54,466   $ 57,271  
Adjustments for non-operating items:  
   Employment contract (buyouts) reversals    (965 )  (174 )  --    59  
   Merger-related costs    (1,627 )  (5,487 )  (575 )  (177 )
   Impairment recovery from write-down of assets    --    --    277    --  
   Conservation grant of land    --    --    --    (3,350 )
   Loss on early extinguishment of debt     --     --     --     (1,429 )
Operating noninterest expenses (noninterest expenses, excluding  
   non-operating items)    66,057    64,197    54,168    52,374  
Less: amortization of intangibles     (1,814 )   (1,839 )   (1,195 )   (1,195 )
Cash operating noninterest expenses (noninterest expenses,  
   excluding non-operating items and amortization of  
   intangibles)   $ 64,243   $ 62,358   $ 52,973   $ 51,179  
   
Total Revenue (1)  
GAAP   $ 116,206   $ 140,350   $ 83,044   $ 121,118  
Operating (2)    128,420    124,268    105,517    100,615  
   
Noninterest Income as a % Total Revenue (3)  
GAAP    16.42 %  34.39 %  12.24 %  39.11 %
Operating (2)    23.41    24.97    29.96    25.76  
Operating, excluding net cash settlement of certain  
   interest rate swaps(4)    18.69    19.13    23.10    18.80  
   
Efficiency Ratios (5)  
GAAP    59.08    49.77    65.59    47.29  
Operating (2)    51.44    51.66    51.34    52.05  
Cash operating (2)    50.03    50.18    50.20    50.87  

(1) The sum of net interest income and noninterest income.
(2) Total revenue, noninterest income as a % of total revenue, and the efficiency ratio, on an operating basis, are calculated using tax-equivalent net interest income and exclude non-operating items. The cash operating efficiency ratio also excludes amortization of intangibles.
(3) Calculated as noninterest income, divided by the sum of net interest income and noninterest income.
(4) Calculated excluding the net cash settlement of certain interest rate swaps.
(5) Calculated as noninterest expenses, divided by the sum of net interest income and noninterest income.

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THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(dollars in thousands) (unaudited)

Years Ended December 31,
2005 2004
Select Financial Data Used in Ratios Calculated Below            
Net interest income   $ 409,056   $ 335,841  
Tax-equivalent adjustment     6,054     4,356  
   Net interest income (tax-equivalent)   $ 415,110   $ 340,197  
   
Total noninterest income, as reported (GAAP)   $ 55,210   $ 124,877  
Adjustments for non-operating items:  
   Change in fair value of interest rate swaps    13,278    (2,550 )
   Loss (gain) on sale of available for sale securities    54,978    (6,998 )
   Gain on equity investments     (2,839 )   (4,723 )
   Impairment of perpetual preferred stock    --    10,367  
   Gain on disposition of assets and liabilities     --     (2,350 )
Operating noninterest income (noninterest income, excluding  
   non-operating items)    120,627    118,623  
   
     Net cash settlement on certain interest rate swaps  
        included in noninterest income     10,360     27,560  
Operating noninterest income, excluding net cash settlement  
   on certain interest rate swaps   $ 110,267   $ 91,063  
   
Total noninterest expenses, as reported (GAAP)   $ 328,053   $ 250,244  
Adjustments for non-operating items:  
   Employment contract buyouts    (10,327 )  (1,080 )
   Merger-related costs    (4,009 )  (7,866 )
   Impairment recovery (loss) from write-down of assets    (917 )  277  
   Conservation grant of land    --    (3,350 )
   Loss on early extinguishment of debt    (7,101 )  (1,429 )
   Charitable contribution to foundation     (683 )   --  
Operating noninterest expenses (noninterest expenses, excluding  
   non-operating items)    305,016    236,796  
Less: amortization of intangibles     (8,637 )   (6,043 )
Cash operating noninterest expenses (noninterest expenses,  
   excluding non-operating items and amortization of  
   intangibles)   $ 296,379   $ 230,753  
   
Total Revenue (1)  
GAAP   $ 464,266   $ 460,718  
Operating (2)    535,737    458,820  
   
Noninterest Income as a % Total Revenue (3)  
GAAP    11.89 %  27.10 %
Operating (2)    22.52    25.85  
Operating, excluding net cash settlement of certain interest rate swaps (4)    20.58    19.85  
   
Efficiency Ratios (5)  
GAAP    70.66    54.32  
Operating (2)    56.93    51.61  
Cash operating (2)    55.32    50.29  

(1) The sum of net interest income and noninterest income.
(2) Total revenue, noninterest income as a % of total revenue, and the efficiency ratio, on an operating basis, are calculated using tax-equivalent net interest income and exclude non-operating items. The cash operating efficiency ratio also excludes amortization of intangibles.
(3) Calculated as noninterest income, divided by the sum of net interest income and noninterest income.
(4) Calculated excluding the net cash settlement of certain interest rate swaps.
(5) Calculated as noninterest expenses, divided by the sum of net interest income and noninterest income.

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