Explanation of TSFG’s Use of Certain Unaudited Non-GAAP Financial Measures and Forward-Looking Statements

This press release contains financial information determined by methods other than Generally Accepted Accounting Principles (“GAAP”). The attached financial highlights provide reconciliations between GAAP net income (loss) and operating earnings (loss), which exclude gains or losses on certain items deemed not to reflect core operations. In addition, TSFG provides data eliminating intangibles and related amortization in order to present data on a “tangible” or “cash operating” basis. TSFG uses these non-GAAP measures in its analysis of TSFG’s performance and believes presentations of “operating” financial measures provide useful supplemental information, a clearer understanding of TSFG’s performance, and better reflect TSFG’s core operating activities. Management utilizes non-GAAP measures in the calculation of certain of TSFG’s ratios, in particular, to analyze on a consistent basis over time the performance of what it considers to be its core operations. TSFG believes the non-GAAP measures enhance investors’ understanding of TSFG’s business and performance. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures and cash basis information are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently. Management compensates for these limitations by providing detailed reconciliations between GAAP and operating measures. These disclosures should not be considered an alternative to GAAP.

This news release contains forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995) that are provided to assist in the understanding of anticipated future financial performance. These statements (as well as other forward-looking statements that may be made by management in the related conference call) include, but are not limited to, descriptions of management's plans, objectives or goals for future operations, and predictions, forecasts or other statements about future operations. They also include such items as return goals, loan growth, loan sales, customer funding growth, expense control, income tax rate, expected financial results for acquisitions, noninterest income, adequacy of capital and future capital levels, factors that will affect credit quality and the net interest margin, effectiveness of its hedging strategies, risks and effects of changes in interest rates, effects of future economic conditions, and market performance. However, such statements necessarily involve risks and uncertainties and there are a number of factors – many of which are beyond TSFG’s control -- that could cause the actual conditions, events, or results to differ materially from those in such statements. For a discussion of certain factors that may cause such forward-looking statements to differ materially from TSFG’s actual results, please refer to TSFG’s filings with the Securities and Exchange Commission. 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.

PAGE 1, FINANCIAL HIGHLIGHTS

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except share data) (unaudited)


	Three Months Ended									% Change 12/31/08 vs.

	12/31/08			9/30/08			12/31/07			9/30/08			9/30/08 Annualized			12/31/07

EARNINGS SUMMARY
Net interest income (tax-equivalent)	$	92,898		$	96,923		$	96,460			(4.2	)%		(16.5	)%		(3.7	)%
Less: tax-equivalent adjustment		1,265			1,304			1,512			(3.0	)		(11.9	)		(16.3	)

Net interest income		91,633			95,619			94,948			(4.2	)		(16.6	)		(3.5	)
Provision for credit losses		122,926			84,608			31,926			45.3			180.2			285.0
Noninterest income: ⁽¹⁾
Operating noninterest income (noninterest income, excluding non-operating items)		28,168			29,390			30,279			(4.2	)		(16.5	)		(7.0	)
Gain (loss) on securities		1,561			(725	)		(1,288	)		n/m			n/m			n/m

Non-operating noninterest income (loss)		1,561			(725	)		(1,288	)		n/m			n/m			n/m

Total noninterest income		29,729			28,665			28,991			3.7			14.8			2.5

Noninterest expenses: ⁽¹⁾
Operating noninterest expenses (noninterest expenses, excluding non-operating items)		91,785			89,661			79,351			2.4			9.4			15.7
Goodwill impairment		237,618			—			—			n/m			n/m			n/m
Employment contracts and severance		9,599			4,621			—			n/m			n/m			n/m
(Gain) loss on early extinguishment of debt		1,747			(125	)		499			n/m			n/m			n/m
Visa-related litigation		—			—			881			n/m			n/m			n/m
Loss on derivative collateral		1,061			—			—			n/m			n/m			n/m

Non-operating noninterest expenses		250,025			4,496			1,380			n/m			n/m			n/m

Total noninterest expenses		341,810			94,157			80,731			n/m			n/m			n/m

Income (loss) before income taxes		(343,374	)		(54,481	)		11,282			n/m			n/m			n/m
Income tax expense (benefit)		(33,435	)		(29,526	)		2,293			n/m			n/m			n/m

Net income (loss)		(309,939	)		(24,955	)		8,989			n/m			n/m			n/m
Preferred stock dividends		9,421			6,250			—			50.7			201.8			n/m

Net income (loss) available to common shareholders	$	(319,360	)	$	(31,205	)	$	8,989			n/m	%		n/m	%		n/m	%


Earnings:
Operating earnings (loss)	$	(65,542	)	$	(22,564	)	$	10,857			n/m	%		n/m	%		n/m	%
Operating earnings (loss) available to common shareholders		(74,963	)		(28,814	)		10,857			n/m			n/m			n/m
Per common share data:
Basic earnings (loss)	$	(4.29	)	$	(0.43	)	$	0.12			n/m	%		n/m	%		n/m	%
Diluted earnings (loss)		(4.29	)		(0.43	)		0.12			n/m			n/m			n/m
Operating earnings (loss) available to common shareholders, diluted		(1.01	)		(0.40	)		0.15			n/m			n/m			n/m
Cash dividends declared per common share		0.01			0.01			0.19			—			n/m			(94.7	)
Average common shares outstanding:
Basic		74,505,656			72,755,480			72,571,612			2.4	%		9.6	%		2.7	%
Diluted ⁽²⁾		74,505,656			72,755,480			72,875,062			2.4			9.6			2.2
PERFORMANCE RATIOS:
Total revenue: ⁽³⁾
GAAP	$	121,362		$	124,284		$	123,939			(2.4	)%		(9.4	)%		(2.1	)%
Operating ⁽⁴⁾		121,066			126,313			126,739			(4.2	)		(16.5	)		(4.5	)
Return on average assets⁽⁵⁾		(8.94	)%		(0.72	)%		0.26	%
Return on average common equity ⁽⁶⁾		(99.16	)		(9.53	)		2.29
Return on average equity⁽⁵⁾		(76.17	)		(6.39	)		2.29
Net interest margin (tax-equivalent)		2.97			3.08			3.09
Efficiency ratios: ⁽⁷⁾
GAAP		281.64			75.76			65.14
Cash operating ⁽⁴⁾		74.64			69.82			61.15


⁽¹⁾	During fourth quarter 2008, TSFG reclassified gain (loss) on sale of other real estate owned from noninterest income to noninterest expense. Prior periods have been reclassified to conform to the current presentation. See footnote on page 6 for amounts reclassified.

⁽²⁾	For the three months ended December 31, 2008, and September 30, 2008, average diluted shares exclude convertible preferred stock, warrants, and outstanding equity awards since either their effect would be antidilutive or the exercise price was greater than the average market price of the common shares.

⁽³⁾	The sum of net interest income and noninterest income.

⁽⁴⁾	Total revenue and the cash 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.

⁽⁵⁾	Return on average assets and return on average equity are calculated as net income divided by either average assets or average total equity.

⁽⁶⁾	Return on average common equity is calculated as net income available to common shareholders divided by average common equity.

⁽⁷⁾	Calculated as noninterest expenses divided by the sum of net interest income and noninterest income.

A Quarterly Financial Data Supplement is available in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com.

PAGE 2, FINANCIAL HIGHLIGHTS

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except share data) (unaudited)


	Year Ended

	12/31/08			12/31/07			% Change

EARNINGS SUMMARY
Net interest income (tax-equivalent)	$	385,517		$	389,027			(0.9	)%
Less: tax-equivalent adjustment		5,354			6,246			(14.3	)

Net interest income		380,163			382,781			(0.7	)
Provision for credit losses		344,589			68,568			402.6
Noninterest income: ⁽¹⁾
Operating noninterest income (noninterest income, excluding non-operating items)		116,672			118,335			(1.4	)
Gain (loss) on securities		3,108			(4,623	)		n/m
Gain on Visa IPO share redemption		1,904			—			n/m

Non-operating noninterest income (loss)		5,012			(4,623	)		n/m

Total noninterest income		121,684			113,712			7.0

Noninterest expenses: ⁽¹⁾
Operating noninterest expenses (noninterest expenses, excluding non-operating items)		346,367			316,033			9.6
Goodwill impairment		426,049			—			n/m
Employment contracts and severance		16,519			2,306			n/m
Branch acquisition and conversion costs		731			—			n/m
Loss on early extinguishment of debt		2,086			2,029			n/m
Visa-related litigation		(863	)		881			n/m
Loss on derivative collateral		1,061			—			n/m

Non-operating noninterest expenses		445,583			5,216			n/m

Total noninterest expenses		791,950			321,249			146.5

Income (loss) before income taxes		(634,692	)		106,676			n/m
Income tax expense (benefit)		(87,574	)		33,400			n/m

Net income (loss)		(547,118	)		73,276			n/m
Preferred stock dividends		21,504			—			n/m

Net income (loss) available to common shareholders	$	(568,622	)	$	73,276			n/m	%


Earnings:
Operating earnings (loss)	$	(112,864	)	$	79,928			n/m	%
Operating earnings (loss) available to common shareholders		(134,368	)		79,928			n/m
Per common share data:
Basic earnings (loss)	$	(7.77	)	$	1.00			n/m	%
Diluted earnings (loss)		(7.77	)		0.99			n/m
Operating earnings (loss) available to common shareholders, diluted		(1.84	)		1.08			n/m
Cash dividends declared per common share		0.22			0.73			(69.9	)
Average common shares outstanding:
Basic		73,136,936			73,618,338			(0.7	)%
Diluted ⁽²⁾		73,136,936			74,085,440			(1.3	)

PERFORMANCE RATIOS:
Total revenue: ⁽³⁾
GAAP	$	501,847		$	496,493			1.1	%
Operating ⁽⁴⁾		502,189			507,362			(1.0	)
Return on average assets⁽⁵⁾		(3.96	)%		0.52	%
Return on average common equity ⁽⁶⁾		(41.32	)		4.75
Return on average equity⁽⁵⁾		(35.11	)		4.75
Net interest margin (tax-equivalent)		3.09			3.10
Efficiency ratios: ⁽⁷⁾
GAAP		157.81			64.70
Cash operating ⁽⁴⁾		67.75			60.73


⁽¹⁾	During fourth quarter 2008, TSFG reclassified gain (loss) on sale of other real estate owned from noninterest income to noninterest expense. Prior periods have been reclassified to conform to the current presentation. See footnote on page 6 for amounts reclassified.

⁽²⁾	For the year ended December 31, 2008, average diluted shares exclude convertible preferred stock, warrants, and outstanding equity awards since either their effect would be antidilutive or the exercise price was greater than the average market price of the common shares.

⁽³⁾	The sum of net interest income and noninterest income.

⁽⁴⁾	Total revenue and the cash 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.

⁽⁵⁾	Return on average assets and return on average equity are calculated as net income divided by either average assets or average total equity.

⁽⁶⁾	Return on average common equity is calculated as net income available to common shareholders divided by average common equity.

⁽⁷⁾	Calculated as noninterest expenses divided by the sum of net interest income and noninterest income.

A Quarterly Financial Data Supplement is available in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com.

PAGE 3, FINANCIAL HIGHLIGHTS

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except share data) (unaudited)



										% Change 12/31/08 vs.

	12/31/08			9/30/08			12/31/07			9/30/08			9/30/08 Annualized			12/31/07

BALANCE SHEET DATA (Averages - Three Months Ended)
Total assets	$	13,784,934		$	13,835,936		$	13,917,386			(0.4	)%		(1.5	)%		(1.0	)%
Intangible assets		(481,380	)		(487,061	)		(678,851	)		(1.2	)		(4.6	)		(29.1	)

Tangible assets		13,303,554			13,348,875			13,238,535			(0.3	)		(1.4	)		0.5


Loans		10,344,242			10,458,765			10,186,272			(1.1	)		(4.4	)		1.6
Securities ⁽¹⁾		2,117,087			2,058,892			2,230,627			2.8			11.2			(5.1	)
Total earning assets		12,462,457			12,554,806			12,421,732			(0.7	)		(2.9	)		0.3

Noninterest-bearing deposits		1,001,516			1,059,565			1,149,816			(5.5	)		(21.8	)		(12.9	)
Total deposits⁽²⁾		9,630,077			10,115,872			9,906,020			(4.8	)		(19.1	)		(2.8	)
Customer funding ⁽³⁾		7,932,366			8,077,968			8,070,219			(1.8	)		(7.2	)		(1.7	)
Wholesale borrowings⁽⁴⁾		4,032,710			4,027,626			4,071,605			0.1			0.5			(1.0	)
Total funding		11,965,076			12,105,594			12,141,824			(1.2	)		(4.6	)		(1.5	)

Preferred stock		337,439			249,717			—			35.1			139.8			n/m
Common equity		1,281,312			1,302,890			1,556,766			(1.7	)		(6.6	)		(17.7	)

Shareholders’ equity		1,618,751			1,552,607			1,556,766			4.3			16.9			4.0
Intangible assets		(481,380	)		(487,061	)		(678,851	)		(1.2	)		(4.6	)		(29.1	)

Tangible equity		1,137,371			1,065,546			877,915			6.7			26.8			29.6


Loans/total earning assets		83.0	%		83.3	%		82.0	%
Securities/total assets		15.4			14.9			16.0
Customer funding/total funding		66.3			66.7			66.5
Wholesale borrowings/total assets		29.3			29.1			29.3
Loans/customer funding		130.4			129.5			126.2

BALANCE SHEET DATA (Averages - Year to Date)
Total assets	$	13,833,355		$	13,849,601		$	14,044,565									(1.5	)%
Intangible assets		(532,517	)		(549,688	)		(681,628	)								(21.9	)

Tangible assets		13,300,838			13,299,913			13,362,937									(0.5	)


Loans		10,374,423			10,384,557			10,013,387									3.6
Securities ⁽¹⁾		2,087,745			2,077,893			2,525,317									(17.3	)
Total earning assets		12,478,993			12,484,545			12,545,223									(0.5	)

Noninterest-bearing deposits		1,055,855			1,074,100			1,200,663									(12.1	)
Total deposits⁽²⁾		9,690,581			9,710,896			9,805,367									(1.2	)
Customer funding ⁽³⁾		8,065,982			8,110,845			8,216,762									(1.8	)
Wholesale borrowings⁽⁴⁾		4,019,601			4,015,200			4,053,062									(0.8	)
Total funding		12,085,583			12,126,045			12,269,824									(1.5	)

Preferred stock		181,849			129,607			—									n/m
Common equity		1,376,232			1,408,103			1,543,552									(10.8	)

Shareholders’ equity		1,558,081			1,537,710			1,543,552									0.9
Intangible assets		(532,517	)		(549,688	)		(681,628	)								(21.9	)

Tangible equity		1,025,564			988,022			861,924									19.0


Loans/total earning assets		83.1	%		83.2	%		79.8	%
Securities/total assets		15.1			15.0			18.0
Customer funding/total funding		66.7			66.9			67.0
Wholesale borrowings/total assets		29.1			29.0			28.9
Loans/customer funding		128.6			128.0			121.9


⁽¹⁾	The average balances for investment securities exclude the unrealized loss recorded for available for sale securities.

⁽²⁾	Total deposits include brokered deposits.

⁽³⁾	Customer funding includes total deposits less brokered deposits plus customer sweep accounts.

⁽⁴⁾	Wholesale borrowings include borrowings less customer sweep accounts plus brokered deposits.

A Quarterly Financial Data Supplement is available in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com.

PAGE 4, FINANCIAL HIGHLIGHTS

THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except share data) (unaudited)



										% Change 12/31/08 vs.

	12/31/08			9/30/08			12/31/07			9/30/08			9/30/08 Annualized			12/31/07

BALANCE SHEET DATA (Period End)
Loans held for sale ⁽¹⁾	$	30,963		$	37,575		$	17,867			(17.6	)%		(70.0	)%		73.3	%
Loans held for investment		10,192,072			10,299,640			10,213,420			(1.0	)		(4.2	)		(0.2	)
Allowance for loan losses		(247,086	)		(200,748	)		(126,427	)		23.1			91.8			95.4
Allowance for credit losses		(249,874	)		(203,000	)		(128,695	)		23.1			91.9			94.2
Securities		2,129,903			2,020,199			2,025,903			5.4			21.6			5.1
Intangible assets		246,020			484,570			678,182			(49.2	)		(195.8	)		(63.7	)
Total assets		13,602,326			13,695,178			13,877,584			(0.7	)		(2.7	)		(2.0	)
Noninterest-bearing deposits		1,041,140			1,022,632			1,127,657			1.8			7.2			(7.7	)
Total deposits ⁽²⁾		9,405,717			10,008,808			9,788,568			(6.0	)		(24.0	)		(3.9	)
Customer funding ⁽³⁾		7,989,962			7,986,534			8,178,471			—			0.2			(2.3	)
Wholesale borrowings ⁽⁴⁾		3,749,898			3,984,312			3,945,987			(5.9	)		(23.4	)		(5.0	)
Total funding		11,739,860			11,970,846			12,124,458			(1.9	)		(7.7	)		(3.2	)
Mandatorily convertible preferred stock		238,700			249,000			—			(4.1	)		(16.5	)		n/m
Perpetual preferred stock		327,679			—			—			n/m			n/m			n/m
Common equity		1,054,152			1,284,614			1,550,308			(17.9	)		(71.4	)		(32.0	)
Shareholders’ equity		1,620,531			1,533,614			1,550,308			5.7			22.5			4.5

CAPITAL RATIOS
Tier 1 risk-based capital		12.86	%		11.18	%		9.49	%
Total risk-based capital		14.35			12.68			10.88
Leverage ratio		11.22			9.70			8.42
Tangible equity to tangible assets		10.29			7.94			6.61
Tangible common equity to tangible assets		6.05			6.06			6.61
-Assuming conversion of mandatorily convertible preferred ⁽⁶⁾		7.84			7.94			6.61

SHARE DATA
Convertible preferred shares outstanding		238,700			249,000			—			(4.1	)%		(16.5	)%		n/m	%
Common shares outstanding		74,643,649			73,005,766			72,455,205			2.2			8.9			3.0
–Assuming conversion of mandatorily convertible preferred ⁽⁶⁾		111,366,726			111,313,458			72,455,205
Common book value per common share ⁽⁵⁾	$	14.12		$	17.60		$	21.40			(19.8	)		(78.7	)		(34.0	)
Common tangible book value per common share ⁽⁵⁾		10.83			10.96			12.04			(1.2	)		(4.7	)		(10.0	)
–Assuming conversion mandatorily convertible preferred ⁽⁶⁾		9.40			9.42			12.04
Market price per share of common stock		4.32			7.33			15.63			(41.1	)		(163.4	)		(72.4	)
Market capitalization		322,461			535,132			1,132,475			(39.7	)		(158.1	)		(71.5	)

OPERATIONS DATA
Branch offices		180			180			172			—	%		—	%		4.7	%
ATMs		202			202			187			—			—			8.0
Employees (full-time equivalent)		2,505			2,535			2,474			(1.2	)		(4.7	)		1.3


⁽¹⁾	As of December 31, 2008 and September 30, 2008, loans held for sale include $16.5 million and $22.6 million, respectively, of nonperfoming loans held for sale.

⁽²⁾	Total deposits include brokered deposits.

⁽³⁾	Customer funding includes total deposits less brokered deposits plus customer sweep accounts.

⁽⁴⁾	Wholesale borrowings include borrowings less customer sweep accounts plus brokered deposits.

⁽⁵⁾	Common book value per common share is calculated as total shareholders’ equity less preferred stock divided by common shares outstanding. Common tangible book value per common share also excludes intangible assets.

⁽⁶⁾	As of December 31, 2008, and September 30, 2008, assuming a $6.50 conversion price, the shares of convertible preferred stock are mandatorily convertible into approximately 36.7 million and 38.3 million common shares, respectively, by May 1, 2011.

A Quarterly Financial Data Supplement is available in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com.


PAGE 5, FINANCIAL HIGHLIGHTS
THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except share data) (unaudited)

										% Change 12/31/08 vs.

	12/31/08			9/30/08			12/31/07			9/30/08			9/30/08 Annualized			12/31/07

CREDIT QUALITY
Loans held for investment	$	10,192,072		$	10,299,640		$	10,213,420			(1.0	)%		(4.2	)%		(0.2	)%
Allowance for loan losses		(247,086	)		(200,748	)		(126,427	)		23.1						95.4
Allowance for credit losses		(249,874	)		(203,000	)		(128,695	)		23.1						94.2

Nonperforming loans held for investment	$	355,631		$	240,091		$	81,631			48.1	%					335.7	%
Nonperforming loans held for sale		16,544			22,576			—			(26.7	)					n/m
Foreclosed property (other real estate owned and personal property repossessions)		48,993			30,503			8,276			60.6						492.0

Nonperforming assets	$	421,168		$	293,170		$	89,907			43.7	%					368.4	%

Nonperforming loans held for investment as a % of loans held for investment		3.49	%		2.33	%		0.80	%
Nonperforming assets as a % of loans and foreclosed property ⁽¹⁾		4.10			2.83			0.88
Allowance for loan losses as a % of loans HFI		2.42			1.95			1.24
Allowance for credit losses as a % of loans HFI		2.45			1.97			1.26
Allowance for loan losses to nonperforming loans HFI		0.69	x		0.84	x		1.55	x
Loans past due 90 days or more (interest accruing)	$	47,481		$	12,899		$	5,349									787.7	%
Average loans held for investment:
Three months ended		10,308,823			10,441,580			10,164,807
Year to date		10,351,897			10,366,359			9,985,751
Net loan charge-offs:
Three months ended		76,052			75,433			23,655			0.8	%					221.5	%
Year to date		223,410			147,358			52,561									325.0
Net loan charge-offs as a % of average loans held for investment (annualized):
Three months ended		2.93	%		2.87	%		0.92	%
Year to date		2.16			1.90			0.53


⁽¹⁾	Excluding nonperforming loans held for sale, nonperforming assets as a % of loans held for investment and foreclosed property totaled 3.95% and 2.62%, respectively, at December 31, 2008 and September 30, 2008.

A Quarterly Financial Data Supplement is available in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com.


PAGE 6, FINANCIAL HIGHLIGHTS THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES (dollars in thousands, except share data) (unaudited)

	Three Months Ended									% Change 12/31/08 vs.

	12/31/08			9/30/08			12/31/07			9/30/08			9/30/08 Annualized			12/31/07

NONINTEREST INCOME
Customer fee income	$	13,237		$	14,807		$	14,830			(10.6	)%		(42.2	)%		(10.7	)%
Wealth management income		6,287			7,203			7,515			(12.7	)		(50.6	)		(16.3	)
Mortgage banking income		1,038			879			1,273			18.1			72.0			(18.5	)
Bank-owned life insurance		3,939			2,881			3,065			36.7			146.1			28.5
Merchant processing income, net		697			916			829			(23.9	)		(95.1	)		(15.9	)
Gain (loss) on certain derivative activities		(256	)		(199	)		5			n/m			n/m			n/m
Other ⁽¹⁾		3,226			2,903			2,762			11.1			44.3			16.8

Operating noninterest income (noninterest income, excluding non-operating items)		28,168			29,390			30,279			(4.2	)		(16.5	)		(7.0	)
Non-operating noninterest income (loss)		1,561			(725	)		(1,288	)		n/m			n/m			n/m

Total noninterest income	$	29,729		$	28,665		$	28,991			3.7	%		14.8	%		2.5	%

NONINTEREST EXPENSES
Personnel expense	$	45,885		$	46,952		$	42,452			(2.3	)%		(9.0	)%		8.1	%
Occupancy		9,946			9,770			8,783			1.8			7.2			13.2
Furniture and equipment		7,454			6,991			6,590			6.6			26.3			13.1
Professional services		4,804			4,573			3,767			5.1			20.1			27.5
Advertising and business development		2,611			2,114			2,054			23.5			93.5			27.1
Telecommunications		1,613			1,628			1,453			(0.9	)		(3.7	)		11.0
Amortization of intangibles		1,417			1,474			1,853			(3.9	)		(15.4	)		(23.5	)
Regulatory assessments		3,452			3,020			1,464			14.3			56.9			135.8
Loan and foreclosed asset expense		4,558			4,491			1,463			1.5			5.9			211.6
Other ⁽¹⁾		10,045			8,648			9,472			16.2			64.3			6.0

Operating noninterest expenses (noninterest expenses, excluding non-operating items)		91,785			89,661			79,351			2.4			9.4			15.7
Non-operating noninterest expenses		250,025			4,496			1,380			n/m			n/m			n/m

Total noninterest expenses	$	341,810		$	94,157		$	80,731			n/m	%		n/m	%		n/m	%



	Year Ended

	12/31/08			12/31/07			% Change

NONINTEREST INCOME
Customer fee income	$	56,080		$	57,349			(2.2	)%
Wealth management income		27,617			29,787			(7.3	)
Mortgage banking income		5,260			6,053			(13.1	)
Bank-owned life insurance		12,877			13,344			(3.5	)
Merchant processing income, net		3,279			3,263			0.5
Gain (loss) on certain derivative activities		(207	)		(1,197	)		n/m
Other ⁽¹⁾		11,766			9,736			20.9

Operating noninterest income (noninterest income, excluding non-operating items)		116,672			118,335			(1.4	)
Non-operating noninterest income (loss)		5,012			(4,623	)		n/m

Total noninterest income	$	121,684		$	113,712			7.0	%

NONINTEREST EXPENSES
Personnel expense	$	182,237		$	174,183			4.6	%
Occupancy		37,311			34,659			7.7
Furniture and equipment		27,561			26,081			5.7
Professional services		16,483			17,062			(3.4	)
Advertising and business development		9,927			7,401			34.1
Telecommunications		6,140			5,668			8.3
Amortization of intangibles		6,138			7,897			(22.3	)
Regulatory assessments		10,923			2,628			315.6
Loan and foreclosed asset expense		12,431			3,665			239.2
Other ⁽¹⁾		37,216			36,789			1.2

Operating noninterest expenses (noninterest expenses, excluding non-operating items)		346,367			316,033			9.6
Non-operating noninterest expenses		445,583			5,216			n/m

Total noninterest expenses	$	791,950		$	321,249			146.5	%

⁽¹⁾

In fourth quarter 2008, TSFG reclassified gain (loss) on sale of other real estate owned from noninterest income to noninterest expense. Such amounts totaled (in thousands) a gain of $316 for fourth quarter 2008, a loss of $765 for third quarter 2008, and a loss of $250 for fourth quarter 2007. For the years ended December 31, 2008 and 2007, such amounts totaled (in thousands) a loss of $633 and $401, respectively.

A Quarterly Financial Data Supplement is available in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com.


PAGE 7, FINANCIAL HIGHLIGHTS THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES (dollars in thousands, except share data) (unaudited)

	Three Months Ended

	12/31/08			9/30/08			12/31/07

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
NET INCOME (LOSS), AS REPORTED (GAAP)	$	(309,939	)	$	(24,955	)	$	8,989
Add: Income tax expense (benefit)		(33,435	)		(29,526	)		2,293

Income (loss) before income taxes		(343,374	)		(54,481	)		11,282
Non-operating items:
(Gain) loss on securities		(1,561	)		725			1,288
Goodwill impairment		237,618			—			—
Employment contracts and severance		9,599			4,621			—
(Gain) loss on early extinguishment of debt		1,747			(125	)		499
Visa-related litigation		—			—			881
Loss on derivative collateral		1,061			—			—

PRE-TAX OPERATING EARNINGS (LOSS) (income (loss) before taxes, excluding non-operating items)		(94,910	)		(49,260	)		13,950
Add: Provision for credit losses		122,926			84,608			31,926

PRE-TAX, PRE-PROVISION OPERATING EARNINGS (income (loss) before taxes and provision, excluding non-operating items)		28,016			35,348			45,876
Less: Provision for credit losses		(122,926	)		(84,608	)		(31,926	)
Related income tax expense (benefit)		(29,368	)		(26,696	)		3,093

OPERATING EARNINGS (LOSS) (net income (loss), excluding non-operating items)		(65,542	)		(22,564	)		10,857
Preferred stock dividends		(9,421	)		(6,250	)		—

OPERATING EARNINGS (LOSS) AVAILABLE TO COMMON SHAREHOLDERS (net income (loss) less preferred dividends, excluding non-operating items)		(74,963	)		(28,814	)		10,857
Add: Amortization of intangibles, net of income tax		885			922			1,476

CASH OPERATING EARNINGS (LOSS) AVAILABLE TO COMMON SHAREHOLDERS (net income (loss) less preferred dividends, excluding non-operating items and amortization of intangibles)	$	(74,078	)	$	(27,892	)	$	12,333



	Year Ended

	12/31/08			12/31/07

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
NET INCOME (LOSS), AS REPORTED (GAAP)	$	(547,118	)	$	73,276
Add: Income tax expense (benefit)		(87,574	)		33,400

Income (loss) before income taxes		(634,692	)		106,676
Non-operating items:
(Gain) loss on securities		(3,108	)		4,623
Gain on Visa IPO share redemption		(1,904	)		—
Goodwill impairment		426,049			—
Employment contracts and severance		16,519			2,306
Branch acquisition and conversion costs		731			—
Loss on early extinguishment of debt		2,086			2,029
Visa-related litigation		(863	)		881
Loss on derivative collateral		1,061			—

PRE-TAX OPERATING EARNINGS (LOSS) (income (loss) before taxes, excluding non-operating items)		(194,121	)		116,515
Add: Provision for credit losses		344,589			68,568

PRE-TAX, PRE-PROVISION OPERATING EARNINGS (income (loss) before taxes and provision, excluding non-operating items)		150,468			185,083
Less: Provision for credit losses		(344,589	)		(68,568	)
Related income tax expense (benefit)		(81,257	)		36,587

OPERATING EARNINGS (LOSS) (net income (loss), excluding non-operating items)		(112,864	)		79,928
Preferred stock dividends		(21,504	)		—

OPERATING EARNINGS (LOSS) AVAILABLE TO COMMON SHAREHOLDERS (net income (loss) less preferred dividends, excluding non-operating items)		(134,368	)		79,928
Add: Amortization of intangibles, net of income tax		3,836			5,538

CASH OPERATING EARNINGS (LOSS) AVAILABLE TO COMMON SHAREHOLDERS (net income (loss) less preferred dividends, excluding non-operating items and amortization of intangibles)	$	(130,532	)	$	85,466

A Quarterly Financial Data Supplement is available in the Investor Relations section of TSFG’s web site: www.thesouthgroup.com.