##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 for the quarterly period ended March 31, 2008
 o
    
    Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 for the transition period from   to
 Commission file number 0-15083
 The South Financial Group, Inc.
  South Carolina
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    57-0824914
(IRS Employer Identification No.)
 102 South Main Street, Greenville, South Carolina
(Address of Principal Executive Offices)
    
    29601
(Zip Code)
 (864) 255-7900
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II. OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Securities HoldersItem 5. Other InformationSIGNATURESExhibit 3.2Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1eXHIBIT 32.2    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) (Unaudited)
 March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007AssetsCash and due from banks
    
    $
    223,185
    
    
    $
    257,884
    
    
    $
    290,974Interest-bearing bank balances
    
    
    10,035
    
    
    
    7,012
    
    
    
    5,551Federal
funds sold and securities purchased to resell Securities
    
    
    
    
    
    
    50,000
    
    
    
    Available for sale, at fair value
    
    
    2,069,898
    
    
    
    2,546,047
    
    
    
    1,986,212Held to maturity (fair value $31,841, $46,025, and
$39,782, respectively)
    
    
    31,468
    
    
    
    46,217
    
    
    
    39,691Total securities
    
    
    2,101,366
    
    
    
    2,592,264
    
    
    
    2,025,903Loans held for sale (includes $16,119 measured at fair
value at March 31, 2008)
    
    
    16,119
    
    
    
    33,519
    
    
    
    17,867Loans held for investment
    
    
    10,275,653
    
    
    
    9,898,134
    
    
    
    10,213,420Less: Allowance for loan losses
    
    
    (174,420
    )
    
    
    (113,736
    )
    
    
    (126,427
    )Net loans held for investment
    
    
    10,101,233
    
    
    
    9,784,398
    
    
    
    10,086,993Premises and equipment, net
    
    
    243,628
    
    
    
    223,738
    
    
    
    233,852Accrued interest receivable
    
    
    56,764
    
    
    
    72,801
    
    
    
    70,464Goodwill
    
    
    462,572
    
    
    
    650,536
    
    
    
    651,003Other intangible assets, net
    
    
    25,521
    
    
    
    33,075
    
    
    
    27,179Other assets
    
    
    491,297
    
    
    
    452,920
    
    
    
    467,798Total assets
    
    $
    13,731,720
    
    
    $
    14,158,147
    
    
    $
    13,877,584Liabilities and Shareholders EquityLiabilitiesDepositsNoninterest-bearing retail and commercial deposits
    
    $
    1,108,623
    
    
    $
    1,286,800
    
    
    $
    1,127,657Interest-bearing retail and commercial deposits
    
    
    6,466,940
    
    
    
    6,686,919
    
    
    
    6,402,503Total retail and commercial deposits
    
    
    7,575,563
    
    
    
    7,973,719
    
    
    
    7,530,160Brokered deposits
    
    
    1,875,969
    
    
    
    1,977,489
    
    
    
    2,258,408Total deposits
    
    
    9,451,532
    
    
    
    9,951,208
    
    
    
    9,788,568Short-term borrowings
    
    
    1,917,450
    
    
    
    1,607,533
    
    
    
    1,637,550Long-term debt
    
    
    799,217
    
    
    
    809,290
    
    
    
    698,340Accrued interest payable
    
    
    58,705
    
    
    
    77,380
    
    
    
    69,288Other liabilities
    
    
    126,495
    
    
    
    151,126
    
    
    
    133,530Total liabilities
    
    
    12,353,399
    
    
    
    12,596,537
    
    
    
    12,327,276Commitments and contingencies (Note 9)
    
    
    
    
    
    
    
    
    
    
    Shareholders equityPreferred stock-no par value; authorized 10,000,000
shares; issued and
outstanding none
    
    
    
    
    
    
    
    
    
    
    Common stock-par value $1 per share;
authorized 200,000,000 shares; issued
and
outstanding 72,629,724, 74,673,419, and 72,455,205
shares, respectively
    
    
    72,630
    
    
    
    74,673
    
    
    
    72,455Surplus
    
    
    1,110,356
    
    
    
    1,150,288
    
    
    
    1,107,601Retained earnings
    
    
    170,186
    
    
    
    373,788
    
    
    
    386,061Guarantee of employee stock ownership plan debt
    
    
    
    
    
    
    (95
    )
    
    
    Accumulated other comprehensive income (loss), net of tax
    
    
    25,149
    
    
    
    (37,044
    )
    
    
    (15,809
    )Total shareholders equity
    
    
    1,378,321
    
    
    
    1,561,610
    
    
    
    1,550,308Total liabilities and shareholders equity
    
    $
    13,731,720
    
    
    $
    14,158,147
    
    
    $
    13,877,584
  1




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in thousands, except per share data) (Unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007Interest IncomeInterest and fees on loans
    
    $
    171,228
    
    
    $
    186,628Interest and dividends on securities:Taxable
    
    
    20,392
    
    
    
    28,825Exempt from federal income taxes
    
    
    2,693
    
    
    
    3,048Total interest and dividends on securities
    
    
    23,085
    
    
    
    31,873Interest on short-term investments
    
    
    72
    
    
    
    141Total interest income
    
    
    194,385
    
    
    
    218,642Interest ExpenseInterest on deposits
    
    
    77,106
    
    
    
    88,479Interest on short-term borrowings
    
    
    12,200
    
    
    
    21,264Interest on long-term debt
    
    
    12,373
    
    
    
    14,361Total interest expense
    
    
    101,679
    
    
    
    124,104Net Interest Income
    
    
    92,706
    
    
    
    94,538Provision for Credit Losses
    
    
    73,292
    
    
    
    9,013Net interest income after provision for credit losses
    
    
    19,414
    
    
    
    85,525Noninterest Income
    
    
    30,916
    
    
    
    26,970Noninterest Expenses
    
    
    268,179
    
    
    
    81,477(Loss) income before income taxes
    
    
    (217,849
    )
    
    
    31,018Income taxes
    
    
    (16,557
    )
    
    
    10,500Net (Loss) Income
    
    $
    (201,292
    )
    
    $
    20,518Average Common Shares Outstanding, Basic
    
    
    72,449
    
    
    
    74,737Average Common Shares Outstanding, Diluted
    
    
    72,575
    
    
    
    75,245Net (Loss) Income Per Common Share, Basic
    
    $
    (2.78
    )
    
    $
    0.27Net (Loss) Income Per Common Share, Diluted
    
    
    (2.77
    )
    
    
    0.27
  2




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share data) (Unaudited)
 AccumulatedRetained
    
    
    OtherShares of
    
    
    
    
    
    
    
    
    
    
    Earnings
    
    
    ComprehensiveCommon
    
    
    Common
    
    
    
    
    
    
    and
    
    
    IncomeStock
    
    
    Stock
    
    
    Surplus
    
    
    Other*
    
    
    (Loss), Net
    
    
    TotalBalance, December 31, 2006
    
    
    75,341,276
    
    
    $
    75,341
    
    
    $
    1,167,685
    
    
    $
    367,110
    
    
    $
    (48,104
    )
    
    $
    1,562,032Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,518
    
    
    
    
    
    
    
    20,518Other comprehensive income, net of
income tax of $6,452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,060
    
    
    
    11,060Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,578Cash dividends declared ($0.18 per common
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,431
    )
    
    
    
    
    
    
    (13,431
    )Common stock activity:Repurchase of stock
    
    
    (1,000,000
    )
    
    
    (1,000
    )
    
    
    (24,989
    )
    
    
    
    
    
    
    
    
    
    
    (25,989
    )Exercise of stock options, including
income tax benefit of $619
    
    
    275,816
    
    
    
    276
    
    
    
    5,328
    
    
    
    
    
    
    
    
    
    
    
    5,604Dividend reinvestment plan
    
    
    33,166
    
    
    
    33
    
    
    
    778
    
    
    
    
    
    
    
    
    
    
    
    811Restricted stock plan
    
    
    11,390
    
    
    
    11
    
    
    
    208
    
    
    
    (72
    )
    
    
    
    
    
    
    147Employee stock purchase plan
    
    
    5,250
    
    
    
    5
    
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    128Director compensation
    
    
    4,905
    
    
    
    5
    
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    130Acquisitions
    
    
    1,616
    
    
    
    2
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    44Common stock released by trust for
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21Deferred compensation payable in common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )Cumulative effect of initial application
of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (488
    )
    
    
    
    
    
    
    (488
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    971
    
    
    
    
    
    
    
    
    
    
    
    971Other, net
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    56
    
    
    
    
    
    
    
    73Balance, March 31, 2007
    
    
    74,673,419
    
    
    $
    74,673
    
    
    $
    1,150,288
    
    
    $
    373,693
    
    
    $
    (37,044
    )
    
    $
    1,561,610Balance, December 31, 2007
    
    
    72,455,205
    
    
    $
    72,455
    
    
    $
    1,107,601
    
    
    $
    386,061
    
    
    $
    (15,809
    )
    
    $
    1,550,308Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (201,292
    )
    
    
    
    
    
    
    (201,292
    )Other comprehensive income, net of
income tax of $23,465
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,958
    
    
    
    40,958Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (160,334
    )Cash dividends declared ($0.19 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,827
    )
    
    
    
    
    
    
    (13,827
    )Common stock activity:Restricted stock plan
    
    
    100,463
    
    
    
    100
    
    
    
    1,020
    
    
    
    (79
    )
    
    
    
    
    
    
    1,041Dividend reinvestment plan
    
    
    56,794
    
    
    
    57
    
    
    
    803
    
    
    
    
    
    
    
    
    
    
    
    860Employee stock purchase plan
    
    
    5,885
    
    
    
    6
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    86Director compensation
    
    
    7,775
    
    
    
    8
    
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    139Exercise of stock options, including
income tax benefit of $6
    
    
    3,602
    
    
    
    4
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    41Common stock purchased by trust for
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Deferred compensation payable in common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Cumulative effect of initial application of:SFAS 159, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    60EITF 06-4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (737
    )
    
    
    
    
    
    
    (737
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    743
    
    
    
    
    
    
    
    
    
    
    
    743Other, net
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    
    
    
    
    (59
    )Balance, March 31, 2008
    
    
    72,629,724
    
    
    $
    72,630
    
    
    $
    1,110,356
    
    
    $
    170,186
    
    
    $
    25,149
    
    
    $
    1,378,321
 
 *
    
    Other includes guarantee of employee stock ownership plan debt and deferred compensation.  3




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (Unaudited)
 Three Months Ended March 31,2008
    
    
    2007Cash Flows from Operating ActivitiesNet (loss) income
    
    $
    (201,292
    )
    
    $
    20,518Adjustments to reconcile net (loss) income to net cash provided by operating activitiesDepreciation, amortization, and accretion, net
    
    
    8,499
    
    
    
    8,256Provision for credit losses
    
    
    73,292
    
    
    
    9,013Share-based compensation expense
    
    
    1,921
    
    
    
    1,755Goodwill impairment
    
    
    188,431
    
    
    
    (Gain) loss on securities
    
    
    (396
    )
    
    
    1,385Gain on Visa IPO share redemption
    
    
    (1,904
    )
    
    
    Gain on certain derivative activities
    
    
    (12
    )
    
    
    (97
    )Gain on sale of mortgage loans
    
    
    (931
    )
    
    
    (1,550
    )Loss on early extinguishment of debt
    
    
    547
    
    
    
    Loss on disposition of premises and equipment
    
    
    208
    
    
    
    49Loss on disposition of other real estate owned
    
    
    187
    
    
    
    136Excess tax benefits from share-based compensation
    
    
    (6
    )
    
    
    (619
    )Origination of loans held for sale
    
    
    (66,693
    )
    
    
    (125,525
    )Sale of loans held for sale and principal repayments
    
    
    75,366
    
    
    
    129,651(Increase) decrease in other assets
    
    
    (6,898
    )
    
    
    8,298Decrease in other liabilities
    
    
    (19,718
    )
    
    
    (3,632
    )Net cash provided by operating activities
    
    
    50,601
    
    
    
    47,638Cash Flows from Investing ActivitiesSale of securities available for sale
    
    
    116,582
    
    
    
    125,057Maturity, redemption, call, or principal repayments of securities available for sale
    
    
    248,592
    
    
    
    90,202Maturity, redemption, call, or principal repayments of securities held to maturity
    
    
    8,225
    
    
    
    6,060Purchase of securities available for sale
    
    
    (401,633
    )
    
    
    (4,370
    )Origination of loans held for investment, net of principal repayments
    
    
    (95,008
    )
    
    
    (213,432
    )Sale of other real estate owned
    
    
    836
    
    
    
    2,887Sale of premises and equipment
    
    
    5
    
    
    
    108Purchase of premises and equipment
    
    
    (14,858
    )
    
    
    (9,807
    )Net cash used for investing activities
    
    
    (137,259
    )
    
    
    (3,295
    )Cash Flows from Financing Activities(Decrease) increase in deposits
    
    
    (342,342
    )
    
    
    428,981Increase (decrease) in short-term borrowings
    
    
    279,539
    
    
    
    (161,631
    )Issuance of long-term debt
    
    
    175,000
    
    
    
    Payment of long-term debt
    
    
    (75,980
    )
    
    
    (321,091
    )Cash dividends paid on common stock
    
    
    (13,796
    )
    
    
    (13,579
    )Repurchase of common stock
    
    
    
    
    
    
    (25,989
    )Excess tax benefits from share-based compensation
    
    
    6
    
    
    
    619Other common stock activity
    
    
    926
    
    
    
    5,412Net cash provided by (used for) financing activities
    
    
    23,353
    
    
    
    (87,278
    )Net change in cash and cash equivalents
    
    
    (63,305
    )
    
    
    (42,935
    )Cash and cash equivalents at beginning of year
    
    
    296,525
    
    
    
    357,831Cash and cash equivalents at end of period
    
    $
    233,220
    
    
    $
    314,896Supplemental Cash Flow DataInterest paid, net of amounts capitalized
    
    $
    114,308
    
    
    $
    115,564Income tax payments, net
    
    
    366
    
    
    
    4,823Significant non-cash investing and financing transactions:Decrease in unrealized loss on available for sale securities
    
    
    45,799
    
    
    
    15,538Loans transferred to other real estate owned
    
    
    1,421
    
    
    
    2,385
  4




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
 Note 1  General
  Nature of Operations
  Accounting Estimates and Assumptions
  Principles of Consolidation
  Reclassifications
  Recently Adopted Accounting Pronouncements
 Fair Value Measurements
  5




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
 Endorsement Split-Dollar Life Insurance Arrangements
  Fair Value Option for Financial Assets and Financial Liabilities
  Written Loan Commitments Recorded at Fair Value Through Earnings
  Recently Issued Accounting Pronouncements
 Business Combinations
  Noncontrolling Interests in Consolidated Financial Statements
  6




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
  Disclosures about Derivative Instruments and Hedging Activities
  7




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
 Note 2  Noninterest Income and Noninterest Expense
  Three Months EndedMarch 31,2008
    
    
    2007Noninterest IncomeService charges on deposit accounts
    
    $
    10,429
    
    
    $
    10,613Debit card income, net (1)
    
    
    1,876
    
    
    
    1,567Customer service fee income
    
    
    1,331
    
    
    
    1,291Total customer fee income
    
    
    13,636
    
    
    
    13,471Insurance income
    
    
    3,060
    
    
    
    3,297Retail investment services, net (2)
    
    
    1,546
    
    
    
    1,714Trust and investment management income
    
    
    1,666
    
    
    
    1,594Benefits administration fees
    
    
    756
    
    
    
    742Total wealth management income
    
    
    7,028
    
    
    
    7,347Bank-owned life insurance income
    
    
    3,147
    
    
    
    2,851Mortgage banking income
    
    
    1,485
    
    
    
    2,069Merchant processing income, net (3)
    
    
    857
    
    
    
    735Gain on certain derivative activities
    
    
    12
    
    
    
    97Gain (loss) on securities
    
    
    396
    
    
    
    (1,385
    )Gain on Visa IPO share redemption
    
    
    1,904
    
    
    
    Other
    
    
    2,451
    
    
    
    1,785Total noninterest income
    
    $
    30,916
    
    
    $
    26,970Noninterest ExpensesSalaries and wages
    
    $
    34,853
    
    
    $
    36,832Employee benefits
    
    
    9,298
    
    
    
    9,759Occupancy
    
    
    8,623
    
    
    
    8,608Furniture and equipment
    
    
    6,383
    
    
    
    6,462Professional services
    
    
    3,527
    
    
    
    4,103Advertising and business development
    
    
    2,471
    
    
    
    1,931Regulatory assessments
    
    
    2,077
    
    
    
    428Amortization of intangibles
    
    
    1,658
    
    
    
    2,001Goodwill impairment
    
    
    188,431
    
    
    
    Telecommunications
    
    
    1,423
    
    
    
    1,393Loss on early extinguishment of debt
    
    
    547
    
    
    
    Visa-related litigation
    
    
    (863
    )
    
    
    Other
    
    
    9,751
    
    
    
    9,960Total noninterest expenses
    
    $
    268,179
    
    
    $
    81,477
 
 (1)
    
    In fourth quarter 2007, TSFG began presenting its debit card income net of related
expenses. Debit card expense totaled (in thousands) $647 and $610, respectively, for the
quarters ended March 31, 2008 and 2007. Amounts presented for prior periods have been
reclassified to conform to the current presentation.(2)
    
    In fourth quarter 2007, TSFG began presenting its retail investment services income
net of certain revenue sharing arrangements with a third party. Such amounts for these
arrangements totaled (in thousands) $191 and $244, respectively, for the quarters ended March
31, 2008 and 2007. Amounts presented for prior periods have been reclassified to conform to
the current presentation.(3)
    
    In second quarter 2007, TSFG began presenting its merchant income net of direct
processing costs. Direct merchant processing costs totaled (in thousands) $4,004 and $3,020,
respectively, for the quarters ended March 31, 2008 and 2007. Amounts presented for prior
periods have been reclassified to conform to the current presentation. 8




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
 Note 3  Accumulated Other Comprehensive Income (Loss)
  Three Months EndedMarch 31,2008
    
    
    2007Net Unrealized Losses on Securities Available for SaleBalance at beginning of period
    
    $
    (30,765
    )
    
    $
    (47,378
    )Other comprehensive income:Unrealized holding gains arising during the period
    
    
    46,425
    
    
    
    14,153Income tax expense
    
    
    (17,165
    )
    
    
    (5,276
    )Less: Reclassification adjustment for (gains) losses included in net income
    
    
    (626
    )
    
    
    1,385Income tax expense (benefit)
    
    
    219
    
    
    
    (485
    )28,853
    
    
    
    9,777Balance at end of period
    
    
    (1,912
    )
    
    
    (37,601
    )Net Unrealized Gains on Cash Flow HedgesBalance at beginning of period
    
    
    14,956
    
    
    
    (726
    )Other comprehensive income (loss):Unrealized gain on change in fair values
    
    
    18,624
    
    
    
    2,405Income tax expense
    
    
    (6,519
    )
    
    
    (842
    )Less: Amortization of terminated swaps
    
    
    
    
    
    
    (431
    )Income tax expense
    
    
    
    
    
    
    15112,105
    
    
    
    1,283Balance at end of period
    
    
    27,061
    
    
    
    557$
    25,149
    
    
    $
    (37,044
    )Total other comprehensive income
    
    $
    40,958
    
    
    $
    11,060Net (loss) income
    
    
    (201,292
    )
    
    
    20,518Comprehensive (loss) income
    
    $
    (160,334
    )
    
    $
    31,578
 Note 4  Gross Unrealized Losses on Investment Securities
  March 31, 2008Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesSecurities Available for SaleAgency mortgage-backed securities
    
    $
    264,175
    
    
    $
    966
    
    
    $
    565,176
    
    
    $
    13,643
    
    
    $
    829,351
    
    
    $
    14,609Private label mortgage-backed securities
    
    
    16,209
    
    
    
    763
    
    
    
    
    
    
    
    
    
    
    
    16,209
    
    
    
    763State and municipals
    
    
    777
    
    
    
    2
    
    
    
    4,511
    
    
    
    70
    
    
    
    5,288
    
    
    
    72Corporate bonds
    
    
    16,293
    
    
    
    920
    
    
    
    
    
    
    
    
    
    
    
    16,293
    
    
    
    920Equity investments
    
    
    24
    
    
    
    4
    
    
    
    2,986
    
    
    
    964
    
    
    
    3,010
    
    
    
    968$
    297,478
    
    
    $
    2,655
    
    
    $
    572,673
    
    
    $
    14,677
    
    
    $
    870,151
    
    
    $
    17,332Securities Held to MaturityState and municipals
    
    $
    988
    
    
    $
    4
    
    
    $
    1,054
    
    
    $
    10
    
    
    $
    2,042
    
    
    $
    14
 9




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
 December 31, 2007Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesSecurities Available for SaleU.S. Government agencies
    
    $
    
    
    
    $
    
    
    
    $
    51,775
    
    
    $
    230
    
    
    $
    51,775
    
    
    $
    230Agency mortgage-backed securities
    
    
    67,150
    
    
    
    512
    
    
    
    1,003,886
    
    
    
    49,702
    
    
    
    1,071,036
    
    
    
    50,214State and municipals
    
    
    4,641
    
    
    
    3
    
    
    
    157,857
    
    
    
    1,105
    
    
    
    162,498
    
    
    
    1,108Corporate bonds
    
    
    4,792
    
    
    
    617
    
    
    
    
    
    
    
    
    
    
    
    4,792
    
    
    
    617Equity investments
    
    
    3,044
    
    
    
    935
    
    
    
    
    
    
    
    
    
    
    
    3,044
    
    
    
    935$
    79,627
    
    
    $
    2,067
    
    
    $
    1,213,518
    
    
    $
    51,037
    
    
    $
    1,293,145
    
    
    $
    53,104Securities Held to MaturityState and municipals
    
    $
    813
    
    
    $
    1
    
    
    $
    15,136
    
    
    $
    117
    
    
    $
    15,949
    
    
    $
    118
   Note 5  Loans
  March 31, 2008
    
    
    December 31, 2007Commercial, financial and agricultural
    
    $
    2,311,876
    
    
    $
    2,309,294Real estate  construction
    
    
    1,854,851
    
    
    
    1,763,365Real estate  residential mortgages (1-4 family)
    
    
    1,497,199
    
    
    
    1,390,729Commercial secured by real estate
    
    
    3,801,268
    
    
    
    3,946,440Consumer
    
    
    810,459
    
    
    
    803,592Loans held for investment
    
    $
    10,275,653
    
    
    $
    10,213,420Included in the above:Nonaccrual loans
    
    $
    222,356
    
    
    $
    80,191Loans past due 90 days and still accruing interest
    
    $
    9,588
    
    
    $
    5,349
 10




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
  At and For the
    
    At and for theThree Months Ended
    
    Year EndedMarch 31, 2008
    
    December 31, 2007Impaired loans
    
    $
    206,621
    
    
    $
    68,102Related allowance
    
    
    32,070
    
    
    
    11,340Interest income recognized
    
    
    15
    
    
    
    59Foregone interest
    
    
    4,324
    
    
    
    3,437
 Note 6  Allowance for Credit Losses
  At and For the
    
    
    At and For theThree Months
    
    
    Year EndedEnded March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007Allowance for loan lossesBalance at beginning of year
    
    $
    126,427
    
    
    $
    111,663
    
    
    $
    111,663Provision for loan losses
    
    
    72,964
    
    
    
    8,952
    
    
    
    67,325Loans charged-off
    
    
    (27,583
    )
    
    
    (8,611
    )
    
    
    (59,408
    )Recoveries of loans previously charged off
    
    
    2,612
    
    
    
    1,732
    
    
    
    6,847Balance at end of period
    
    $
    174,420
    
    
    $
    113,736
    
    
    $
    126,427Reserve for unfunded lending commitmentsBalance at beginning of year
    
    $
    2,268
    
    
    $
    1,025
    
    
    $
    1,025Provision for unfunded lending commitments
    
    
    328
    
    
    
    61
    
    
    
    1,243Balance at end of period
    
    $
    2,596
    
    
    $
    1,086
    
    
    $
    2,268Allowance for credit lossesBalance at beginning of year
    
    $
    128,695
    
    
    $
    112,688
    
    
    $
    112,688Provision for credit losses
    
    
    73,292
    
    
    
    9,013
    
    
    
    68,568Loans charged-off
    
    
    (27,583
    )
    
    
    (8,611
    )
    
    
    (59,408
    )Recoveries of loans previously charged off
    
    
    2,612
    
    
    
    1,732
    
    
    
    6,847Balance at end of period
    
    $
    177,016
    
    
    $
    114,822
    
    
    $
    128,695
 11




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
 Note 7  Goodwill
  South
    
    
    NorthCarolina
    
    
    Carolina
    
    
    FloridaBank
    
    
    Bank
    
    
    Bank
    
    
    Other
    
    
    TotalBalance, December 31, 2007
    
    $
    119,267
    
    
    $
    87,961
    
    
    $
    440,538
    
    
    $
    3,237
    
    
    $
    651,003Reclassification for change in operating
Segments
    
    
    (3,085
    )
    
    
    (343
    )
    
    
    (12,651
    )
    
    
    16,079
    
    
    
    Revised balance, December 31, 2007
    
    
    116,182
    
    
    
    87,618
    
    
    
    427,887
    
    
    
    19,316
    
    
    
    651,003Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    (188,431
    )
    
    
    
    
    
    
    (188,431
    )Balance, March 31, 2008
    
    $
    116,182
    
    
    $
    87,618
    
    
    $
    239,456
    
    
    $
    19,316
    
    
    $
    462,572
  th
 Note 8  Derivative Financial Instruments and Hedging Activities
  March 31, 2008
    
    
    December 31, 2007Fair Value
    
    
    Notional
    
    
    Fair Value
    
    
    NotionalAsset
    
    
    Liability
    
    
    Amount
    
    
    Asset
    
    
    Liability
    
    
    AmountCash Flow HedgesInterest rate swaps associated with
lending activities
    
    $
    34,671
    
    
    $
    
    
    
    $
    815,000
    
    
    $
    20,114
    
    
    $
    
    
    
    $
    830,000Interest rate floor associated with
lending activities
    
    
    8,381
    
    
    
    
    
    
    
    200,000
    
    
    
    4,531
    
    
    
    
    
    
    
    200,000Fair Value HedgesInterest rate swaps associated with
brokered CDs
    
    
    5,076
    
    
    
    2,235
    
    
    
    684,407
    
    
    
    672
    
    
    
    8,235
    
    
    
    988,477Other DerivativesForward foreign currency contracts
    
    
    39
    
    
    
    39
    
    
    
    1,113
    
    
    
    5
    
    
    
    5
    
    
    
    653Customer swap contracts
    
    
    10,538
    
    
    
    10,682
    
    
    
    390,073
    
    
    
    5,065
    
    
    
    5,065
    
    
    
    238,224Options, interest rate swaps and other
    
    
    5,085
    
    
    
    7,148
    
    
    
    158,603
    
    
    
    5,807
    
    
    
    7,712
    
    
    
    161,832$
    63,790
    
    
    $
    20,104
    
    
    $
    2,249,196
    
    
    $
    36,194
    
    
    $
    21,017
    
    
    $
    2,419,186
  12




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
  Note 9  Commitments and Contingent Liabilities
 Legal Proceedings
  Recourse Reserve
  Expanded Corporate Facilities
  Loan Commitments
    13




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
  Outstanding CommitmentsMarch 31, 2008
    
    
    December 31, 2007Loan commitments:Commercial, financial, agricultural, and other
    
    $
    968,511
    
    
    $
    988,962Commercial secured by real estate
    
    
    561,927
    
    
    
    698,179Home equity loans
    
    
    519,184
    
    
    
    530,626Standby letters of credit
    
    
    184,641
    
    
    
    184,529Documentary letters of credit
    
    
    2,796
    
    
    
    153Unused business credit card lines
    
    
    33,944
    
    
    
    32,948Total
    
    $
    2,271,003
    
    
    $
    2,435,397
 Note 10  Share Information
  Three Months EndedMarch 31,2008
    
    
    2007Net (loss) income (numerator)
    
    $
    (201,292
    )
    
    $
    20,518BasicAverage common shares outstanding (denominator)
    
    
    72,449,437
    
    
    
    74,736,832(Loss) earnings per share
    
    $
    (2.78
    )
    
    $
    0.27DilutedAverage common shares outstanding
    
    
    72,449,437
    
    
    
    74,736,832Average dilutive potential common shares
    
    
    125,403
    
    
    
    508,136Average diluted shares outstanding (denominator)
    
    
    72,574,840
    
    
    
    75,244,968(Loss) earnings per share
    
    $
    (2.77
    )
    
    $
    0.27
  Number
    
    Range ofof Shares
    
    Exercise PricesFor the Three Months EndedMarch 31, 2008
    
    
    3,371,564
    
    
    $15.20 to $31.96March 31, 2007
    
    
    1,354,004
    
    
    $26.25 to $31.96
 Note 11  Fair Value Disclosures
  14




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
  Opening
    
    
    
    
    
    
    AdjustedBalance Sheet
    
    
    Adoption
    
    
    Balance SheetJanuary 1, 2008
    
    
    Net Gain (Loss)
    
    
    January 1, 2008Mortgage loans held for sale
    
    $
    17,867
    
    
    $
    92
    
    
    $
    17,959Pretax cumulative effect of adoption of the fair value option
    
    
    
    
    
    
    92Tax impact
    
    
    
    
    
    
    (32
    )Cumulative effect of adoption of the fair value option
(increase to retained earnings)
    
    
    
    
    
    $
    60
   
    
    Level 1  Valuations are based on quoted prices in active markets for identical assets
and liabilities. Level 1 assets include debt and equity securities that are traded in an
active exchange market, as well as certain U.S. Treasury securities that are highly liquid
and are actively traded in over-the-counter markets.
    
    Level 2  Valuations are based on observable inputs other than Level 1 prices, such as
quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market
data. Level 2 assets and liabilities include debt securities with quoted prices that are
traded less frequently than exchange-traded instruments and derivative contracts whose
value is determined using a pricing model with inputs that are observable in the market or
can be derived principally from or corroborated by observable market data. Valuations are
obtained from third party pricing services for similar assets or liabilities. This
category generally includes U.S. government agencies, agency mortgage-backed debt
securities, private-label mortgage-backed debt securities, state and municipal bonds,
corporate bonds, certain derivative contracts, and mortgage loans held for sale.
    
    Level 3  Valuations include unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the assets. For example,
certain available for sale securities included in this category are not readily marketable
and may only be redeemed with the issuer at par. This category includes certain derivative
contracts for which independent pricing information was not able to be obtained for a
significant portion of the underlying assets.
 15




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
  March 31, 2008Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Securities available for sale
    
    $
    2,069,898
    
    
    $
    150,577
    
    
    $
    1,877,424
    
    
    $
    41,897Loans held for sale
    
    
    16,119
    
    
    
    
    
    
    
    16,119
    
    
    
    Derivative assets
    
    
    63,790
    
    
    
    
    
    
    
    55,334
    
    
    
    8,456Total
    
    $
    2,149,807
    
    
    $
    150,577
    
    
    $
    1,948,877
    
    
    $
    50,353Derivative liabilities
    
    $
    20,104
    
    
    $
    
    
    
    $
    14,210
    
    
    $
    5,894
  Three months ended March 31, 2008Securities
    
    
    Net derivativeavailable for sale
    
    
    assets (liabilities)Balance, beginning of quarter
    
    $
    37,735
    
    
    $
    370Total net gains included in net income
    
    
    
    
    
    
    2,008Purchases, sales, issuances and settlements, net
    
    
    4,162
    
    
    
    184Balance, end of quarter
    
    $
    41,897
    
    
    $
    2,562Net gains included in net income relating to assets held at March 31, 2008
    
    $
    
    
    
    $
    2,008
  Three monthsendedCarrying value at March 31, 2008
    
    
    March 31, 2008Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total gains (losses)Loans held for investment (1)
    
    $
    173,119
    
    
    $
    
    
    
    $
    
    
    
    $
    173,119
    
    
    $
    (41,325
    )Private equity investments (2)
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    359
    
    
    
    (229
    )$
    (41,554
    )
 
 (1)
    
    Represents carrying value and related write-downs of loans for which adjustments are
based on the appraised value of the collateral.(2)
    
    Write-downs of private equity investments are included in gain (loss) on securities.  16




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
 Fair Value Option
  Note 12  Income Taxes
  Note 13  Business Segments
   17




---



##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
 South
    
    
    NorthCarolina
    
    
    Carolina
    
    
    FloridaBank
    
    
    Bank
    
    
    Bank
    
    
    Other
    
    
    TotalThree Months Ended March 31, 2008Net interest income before inter-segment income (expense)
    
    $
    35,800
    
    
    $
    18,213
    
    
    $
    35,276
    
    
    $
    3,417
    
    
    $
    92,706Inter-segment interest income (expense)
    
    
    6,621
    
    
    
    (3,725
    )
    
    
    1,256
    
    
    
    (4,152
    )
    
    
    Net interest income
    
    
    42,421
    
    
    
    14,488
    
    
    
    36,532
    
    
    
    (735
    )
    
    
    92,706Provision for credit losses
    
    
    7,725
    
    
    
    8,419
    
    
    
    56,340
    
    
    
    808
    
    
    
    73,292Noninterest income
    
    
    11,632
    
    
    
    2,319
    
    
    
    6,911
    
    
    
    10,054
    
    
    
    30,916Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    188,431
    
    
    
    
    
    
    
    188,431Other noninterest expenses  direct (1)
    
    
    15,418
    
    
    
    5,176
    
    
    
    14,574
    
    
    
    44,580
    
    
    
    79,748Contribution before allocation
    
    
    30,910
    
    
    
    3,212
    
    
    
    (215,902
    )
    
    
    (36,069
    )
    
    
    (217,849
    )Noninterest expenses  allocated (2)
    
    
    18,770
    
    
    
    5,384
    
    
    
    16,121
    
    
    
    (40,275
    )
    
    
    Contribution before income taxes
    
    $
    12,140
    
    
    $
    (2,172
    )
    
    $
    (232,023
    )
    
    $
    4,206
    
    
    
    (217,849
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,557
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (201,292
    )March 31, 2008Total assets
    
    $
    4,088,147
    
    
    $
    1,820,787
    
    
    $
    3,930,094
    
    
    $
    3,892,692
    
    
    $
    13,731,720Total loans held for investment
    
    
    3,895,976
    
    
    
    1,728,135
    
    
    
    3,673,300
    
    
    
    978,242
    
    
    
    10,275,653Total deposits
    
    
    3,391,931
    
    
    
    1,133,304
    
    
    
    2,967,750
    
    
    
    1,958,547
    
    
    
    9,451,532Three Months Ended March 31, 2007Net interest income before inter-segment income (expense)
    
    $
    41,484
    
    
    $
    20,159
    
    
    $
    39,909
    
    
    $
    (7,014
    )
    
    $
    94,538Inter-segment interest income (expense)
    
    
    1,081
    
    
    
    (6,506
    )
    
    
    (1,428
    )
    
    
    6,853
    
    
    
    Net interest income
    
    
    42,565
    
    
    
    13,653
    
    
    
    38,481
    
    
    
    (161
    )
    
    
    94,538Provision for credit losses
    
    
    2,870
    
    
    
    (141
    )
    
    
    4,459
    
    
    
    1,825
    
    
    
    9,013Noninterest income
    
    
    11,057
    
    
    
    2,098
    
    
    
    6,826
    
    
    
    6,989
    
    
    
    26,970Noninterest expenses  direct (1)
    
    
    15,414
    
    
    
    5,001
    
    
    
    15,099
    
    
    
    45,963
    
    
    
    81,477Contribution before allocation
    
    
    35,338
    
    
    
    10,891
    
    
    
    25,749
    
    
    
    (40,960
    )
    
    
    31,018Noninterest expenses  allocated (2)
    
    
    17,681
    
    
    
    6,106
    
    
    
    14,903
    
    
    
    (38,690
    )
    
    
    Contribution before income taxes
    
    $
    17,657
    
    
    $
    4,785
    
    
    $
    10,846
    
    
    $
    (2,270
    )
    
    
    31,018Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,500Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,518March 31, 2007Total assets
    
    $
    4,012,523
    
    
    $
    1,806,774
    
    
    $
    4,005,864
    
    
    $
    4,332,986
    
    
    $
    14,158,147Total loans held for investment
    
    
    3,778,607
    
    
    
    1,685,895
    
    
    
    3,466,011
    
    
    
    967,621
    
    
    
    9,898,134Total deposits
    
    
    3,649,717
    
    
    
    1,169,746
    
    
    
    3,077,076
    
    
    
    2,054,669
    
    
    
    9,951,208
 
 (1)
    
    Noninterest expenses  direct include the direct costs of the segments operations
such as facilities, personnel, and other operating expenses.(2)
    
    Noninterest expenses  allocated includes expenses not directly attributable to the
segments, such as information services, operations, human resources, accounting, finance,
treasury, and corporate incentive plans. Note 13  Subsequent Events
  18




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Index to Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations
 PageWebsite Availability of Reports Filed with the Securities and Exchange Commission
    
    
    19Forward-Looking Statements
    
    
    19Non-GAAP Financial Information
    
    
    20Overview
    
    
    20Critical Accounting Policies and Estimates
    
    
    21Expanded Corporate Facilities
    
    
    25Balance Sheet Review
    
    
    25Earnings Review
    
    
    47Enterprise Risk Management
    
    
    52Off-Balance Sheet Arrangements
    
    
    53Liquidity
    
    
    54Recently Adopted/Issued Accounting Pronouncements
    
    
    56
 Website Availability of Reports Filed with the Securities and Exchange Commission
  Forward-Looking Statements
  
    
    risks from changes in economic, monetary policy, and industry conditions;
    
    changes in interest rates, shape of the yield curve, deposit rates, the net interest
margin, and funding sources;
    
    market risk (including net interest income at risk analysis and economic value of
equity risk analysis) and inflation;
    
    risks inherent in making loans including repayment risks and changes in the value of
collateral;
    
    loan growth, the adequacy of the allowance for credit losses, provision for credit
losses, and the assessment of problem loans (including loans acquired via acquisition);
    
    continued deterioration in the overall credit environment;
    
    level, composition, and repricing characteristics of the securities portfolio;
    
    deposit growth, change in
the mix or type of deposit products, and cost of deposits;
    
    loss of deposits due to perceived capital weakness or otherwise;
    
    availability of wholesale funding;
    
    adequacy of capital and
future capital needs;
 19




---



##### Table of Contents




    
    issuance of subordinated debt;
    
    fluctuations in consumer spending;
    
    competition in the banking industry and demand for our products and services;
    
    continued availability of senior management;
    
    technological changes;
    
    ability to increase market share;
    
    income and expense projections, ability to control expenses, and expense reduction
initiatives;
    
    changes in the compensation, benefit, and incentive plans, including compensation
accruals;
    
    risks associated with income taxes, including the potential for adverse adjustments;
    
    acquisitions, greater than expected deposit attrition or customer loss, inaccuracy
of related cost savings estimates, inaccuracy of estimates of financial results, and
unanticipated integration issues;
    
    valuation of goodwill and intangibles and any potential future impairment;
    
    significant delay or inability to execute strategic initiatives designed to grow
revenues;
    
    changes in managements assessment of and strategies for lines of business, asset,
and deposit categories;
    
    changes in accounting policies and practices;
    
    changes in the evaluation of the effectiveness of our hedging strategies;
    
    changes in regulatory actions, including the potential for adverse adjustments;
    
    changes, costs, and effects of litigation, and environmental remediation; and
    
    recently-enacted or proposed legislation.
  Non-GAAP Financial Information
  Overview
  20




---



##### Table of Contents



Critical Accounting Policies and Estimates
  21




---



##### Table of Contents



Allowance for Loan Losses and Reserve for Unfunded Lending Commitments
     Derivatives and Hedging Activities
  Fair Value of Certain Financial Instruments
  22




---



##### Table of Contents



Income Taxes
  23




---



##### Table of Contents



Share-Based Compensation
  Accounting for Acquisitions
    24




---



##### Table of Contents



Expanded Corporate Facilities
  Balance Sheet Review
 Loans
     25




---



##### Table of Contents



Table 1
Loan Portfolio Composition Based on Collateral Type or Borrower Type
(dollars in thousands)
 March 31, 2008
    
    
    December 31,2008
    
    
    2007
    
    
    2007Commercial, financial and agricultural
    
    $
    2,311,876
    
    
    $
    2,231,572
    
    
    $
    2,309,294Real estate  construction (1)
    
    
    1,854,851
    
    
    
    1,718,783
    
    
    
    1,763,365Real estate  residential mortgages (1-4 family)
    
    
    1,497,199
    
    
    
    1,369,196
    
    
    
    1,390,729Commercial secured by real estate (1)
    
    
    3,801,268
    
    
    
    3,797,868
    
    
    
    3,946,440Consumer
    
    
    810,459
    
    
    
    780,715
    
    
    
    803,592Loans held for investment
    
    $
    10,275,653
    
    
    $
    9,898,134
    
    
    $
    10,213,420
 
 (1)
    
    These categories include loans to businesses other than real estate companies where
owner-occupied real estate is pledged on loans to finance operations, equipment, and
facilities. Table 2
Loan Portfolio Composition Based on Loan Purpose
(dollars in thousands)
 March 31, 2008
    
    
    December 31,2008
    
    
    2007
    
    
    2007Commercial LoansCommercial and industrial
    
    $
    2,805,825
    
    
    $
    2,596,705
    
    
    $
    2,759,492Owner  occupied real estate (1)
    
    
    1,107,069
    
    
    
    883,738
    
    
    
    1,070,376Commercial real estate (2)
    
    
    4,156,522
    
    
    
    4,209,149
    
    
    
    4,158,3848,069,416
    
    
    
    7,689,592
    
    
    
    7,988,252Consumer LoansIndirect  sales finance
    
    
    710,806
    
    
    
    666,801
    
    
    
    699,014Consumer lot loans
    
    
    291,378
    
    
    
    353,694
    
    
    
    311,386Direct retail
    
    
    87,064
    
    
    
    97,786
    
    
    
    94,228Home equity
    
    
    558,334
    
    
    
    514,963
    
    
    
    548,9281,647,582
    
    
    
    1,633,244
    
    
    
    1,653,556Mortgage Loans
    
    
    558,655
    
    
    
    575,298
    
    
    
    571,612Total loans held for investment
    
    $
    10,275,653
    
    
    $
    9,898,134
    
    
    $
    10,213,420Percentage of Loans Held for InvestmentCommercial and industrial
    
    
    27.3
    
    
    
    26.2
    
    
    
    27.0
    %Owner  occupied real estate (1)
    
    
    10.8
    
    
    
    8.9
    
    
    
    10.5Commercial real estate
    
    
    40.5
    
    
    
    42.5
    
    
    
    40.7Consumer
    
    
    16.0
    
    
    
    16.5
    
    
    
    16.2Mortgage
    
    
    5.4
    
    
    
    5.9
    
    
    
    5.6Total
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    %
 
 (1)
    
    In Table 1, these loans are included in the Real estate  construction and
Commercial secured by real estate categories, which also include loans to non-real estate
industry borrowers.(2)
    
    See Commercial Real Estate Concentration, Credit Quality, and Allowance for
Loan Losses and Reserve for Unfunded Lending Commitments for more detail on commercial real
estate loans. Commercial and industrial loans
 26




---



##### Table of Contents



Owner  occupied real estate loans
 Commercial real estate (CRE) loans
 Indirect  sales finance loans
 Consumer lot loans
 Direct retail consumer loans
 Home equity loans
 Mortgage loans
   Commercial Real Estate Concentration
  27




---



##### Table of Contents



CRE Product
    
    DescriptionCompleted income property
    
    Loans to finance a variety of income producing properties, including
apartments, retail centers, hotels, office buildings and industrial
facilitiesResidential A&D
    
    Loans to develop land into residential lotsCommercial A&D
    
    Loans to finance the development of raw land into sellable commercial lotsCommercial construction
    
    Loans to finance the construction of various types of income propertyResidential construction
    
    Loans to construct single family housing; primarily to residential buildersResidential condo
    
    Loans to construct or convert residential condominiumsUndeveloped land
    
    Loans to acquire land for resale or future development
  Table 3
Selected Characteristics of Commercial Real Estate Loans
(dollars in thousands)
 March 31, 2008Weighted Average
    
    Weighted
    
    LargestTime to Maturity
    
    Average
    
    TenPolicy LTV
    
    (in months)
    
    Loan Size
    

Total
O / SCompleted income property
    
    
    85
    %
    
    
    45.2
    
    
    $
    451
    
    
    $
    117,718Residential A&D
    
    
    75
    
    
    
    9.9
    
    
    
    732
    
    
    
    121,839Commercial A&D
    
    
    75
    
    
    
    11.9
    
    
    
    943
    
    
    
    93,727Commercial construction
    
    
    80
    
    
    
    32.5
    
    
    
    1,671
    
    
    
    110,894Residential construction
    
    
    85
    
    
    
    8.9
    
    
    
    313
    
    
    
    57,100Residential condo
    
    
    80
    
    
    
    8.5
    
    
    
    1,924
    
    
    
    150,109Undeveloped land
    
    
    65
    
    
    
    11.1
    
    
    
    728
    
    
    
    92,281Overall
    
    
    
    
    
    
    28.4
    
    
    $
    570
    
    
    $
    743,670
  Project
Hold Limits.
 Construction Advances.
 Quarterly Project Reviews.
 Appraisal Policies.
 28




---



##### Table of Contents




    
    Funds are being advanced to increase the loan above the originally committed
loan amount and the appraisal is more than 18 months old;
    
    Loan is downgraded to substandard or worse and the appraisal is more than three
years old or significant adverse changes have occurred in the market where the
property is located;
    
    Loan is downgraded to watch and the appraisal is more than five years old or
significant adverse changes have occurred in the market where the property is
located;
    
    Loan is restructured to advance additional funds or extend the original
amortization term and the appraisal is over three years old or significant adverse
changes have occurred in the market where the property is located;
    
    Property is being cross-pledged to another loan (other than an abundance of
caution) and the appraisal is over three years old or significant adverse changes
have occurred in the market where the property is located.
  Stress
Testing.
   29




---



##### Table of Contents



Table 4  Commercial Real Estate Loans by Geographic Diversification (1)  (dollars in thousands)
 March 31, 2008
    
    
    December 31, 2007% of
    
    
    
    
    
    
    % ofBalance
    
    
    Total CRE
    
    
    Balance
    
    
    Total CREWestern North Carolina (Hendersonville/Asheville)
    
    $
    843,578
    
    
    
    20.3
    %
    
    $
    868,226
    
    
    
    20.9
    %Tampa Bay Florida
    
    
    548,573
    
    
    
    13.2
    
    
    
    565,917
    
    
    
    13.6South Carolina, exluding Coastal:Upstate South Carolina (Greenville)
    
    
    386,331
    
    
    
    9.3
    
    
    
    400,936
    
    
    
    9.6Midlands South Carolina (Columbia)
    
    
    292,025
    
    
    
    7.0
    
    
    
    300,414
    
    
    
    7.2Greater South Charlotte South Carolina (Rock Hill)
    
    
    135,688
    
    
    
    3.3
    
    
    
    134,166
    
    
    
    3.2Coastal South Carolina:North Coastal South Carolina (Myrtle Beach)
    
    
    328,212
    
    
    
    7.9
    
    
    
    297,075
    
    
    
    7.2South Coastal South Carolina (Charleston)
    
    
    241,893
    
    
    
    5.8
    
    
    
    231,881
    
    
    
    5.6North Florida:Northeast Florida (Jacksonville)
    
    
    327,702
    
    
    
    7.9
    
    
    
    327,877
    
    
    
    7.9North Central Florida
    
    
    312,873
    
    
    
    7.5
    
    
    
    301,485
    
    
    
    7.3Central Florida:Central Florida (Orlando)
    
    
    283,159
    
    
    
    6.8
    
    
    
    278,416
    
    
    
    6.7Marion County, Florida (Ocala)
    
    
    175,110
    
    
    
    4.2
    
    
    
    168,054
    
    
    
    4.0South Florida (Ft. Lauderdale)
    
    
    281,378
    
    
    
    6.8
    
    
    
    283,937
    
    
    
    6.8Total commercial real estate loans
    
    $
    4,156,522
    
    
    
    100.0
    %
    
    $
    4,158,384
    
    
    
    100.0
    %
 
 (1)
    
    Geography is primarily determined by the originating operating geographic market
and not necessarily the ultimate location of the underlying collateral.Note: At March 31, 2008 and December 31, 2007, average loan size for commercial real estate
loans totaled $570,000 and $557,000, respectively. Table 5
Commercial Real Estate Loans by Geography and Product Type
(dollars in thousands)
 March 31, 2008 Commercial Real Estate Loans by GeographySC, Excl
    
    
    Coastal
    
    
    Western
    
    
    Central
    
    
    North
    
    
    South
    
    
    Tampa
    
    
    Total
    
    
    % ofCoastal
    
    
    SC
    
    
    NC
    
    
    FL
    
    
    FL
    
    
    FL
    
    
    Bay
    
    
    CRE
    
    
    LHFICommercial
Real Estate  Loans by Product TypeCompleted income property
    
    $
    408,917
    
    
    $
    236,658
    
    
    $
    438,292
    
    
    $
    181,217
    
    
    $
    343,654
    
    
    $
    162,878
    
    
    $
    200,203
    
    
    $
    1,971,819
    
    
    
    19.2
    %Residential A&D
    
    
    105,189
    
    
    
    79,894
    
    
    
    162,783
    
    
    
    81,183
    
    
    
    103,101
    
    
    
    4,599
    
    
    
    102,933
    
    
    
    639,682
    
    
    
    6.2Commercial A&D
    
    
    53,598
    
    
    
    32,830
    
    
    
    50,845
    
    
    
    22,673
    
    
    
    21,837
    
    
    
    12,162
    
    
    
    63,635
    
    
    
    257,580
    
    
    
    2.5Commercial construction
    
    
    120,077
    
    
    
    25,633
    
    
    
    39,540
    
    
    
    52,236
    
    
    
    24,734
    
    
    
    14,550
    
    
    
    22,355
    
    
    
    299,125
    
    
    
    2.9Residential construction
    
    
    52,348
    
    
    
    36,994
    
    
    
    69,540
    
    
    
    34,569
    
    
    
    43,563
    
    
    
    1,311
    
    
    
    17,469
    
    
    
    255,794
    
    
    
    2.5Residential condo
    
    
    30,781
    
    
    
    107,395
    
    
    
    8,680
    
    
    
    3,930
    
    
    
    19,279
    
    
    
    23,307
    
    
    
    72,078
    
    
    
    265,450
    
    
    
    2.6Undeveloped land
    
    
    43,134
    
    
    
    50,701
    
    
    
    73,898
    
    
    
    82,461
    
    
    
    84,407
    
    
    
    62,571
    
    
    
    69,900
    
    
    
    467,072
    
    
    
    4.5Total CRE Loans
    
    $
    814,044
    
    
    $
    570,105
    
    
    $
    843,578
    
    
    $
    458,269
    
    
    $
    640,575
    
    
    $
    281,378
    
    
    $
    548,573
    
    
    $
    4,156,522
    
    
    
    40.4
    %CRE Loans as %
of Total Loans HFI
    
    
    7.9
    %
    
    
    5.6
    %
    
    
    8.2
    %
    
    
    4.5
    %
    
    
    6.2
    %
    
    
    2.7
    %
    
    
    5.3
    %
    
    
    40.4
    %
  30




---



##### Table of Contents



Credit Quality
   31




---



##### Table of Contents



Table 6
Credit Quality Indicators
(dollars in thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007Loans held for investment
    
    $
    10,275,653
    
    
    $
    9,898,134
    
    
    $
    10,213,420Allowance for loan losses
    
    
    174,420
    
    
    
    113,736
    
    
    
    126,427Allowance for credit losses (1)
    
    
    177,016
    
    
    
    114,822
    
    
    
    128,695Nonaccrual loans  commercial and industrial(2)
    
    
    27,069
    
    
    
    9,681
    
    
    
    25,944Nonaccrual loans  owner  occupied real estate (2)
    
    
    6,325
    
    
    
    5,197
    
    
    
    4,085Nonaccrual loans  commercial real estate (2)
    
    
    171,795
    
    
    
    21,525
    
    
    
    36,634Nonaccrual loans  consumer
    
    
    8,723
    
    
    
    4,195
    
    
    
    7,911Nonaccrual loans  mortgage
    
    
    8,445
    
    
    
    2,624
    
    
    
    5,617Restructured loans accruing interest
    
    
    1,433
    
    
    
    
    
    
    
    1,440Total nonperforming loans
    
    
    223,790
    
    
    
    43,222
    
    
    
    81,631Foreclosed property (other real estate owned and personal
property repossessions)
    
    
    8,227
    
    
    
    3,572
    
    
    
    8,276Total nonperforming assets
    
    $
    232,017
    
    
    $
    46,794
    
    
    $
    89,907Loans past due 90 days or more (mortgage and consumer
with interest accruing)
    
    $
    9,588
    
    
    $
    193
    
    
    $
    5,349Total nonperforming assets as a percentage of loans held for
investment and foreclosed property
    
    
    2.26
    %
    
    
    0.47
    %
    
    
    0.88
    %Allowance for loan losses to nonperforming loans
    
    
    0.78
    x
    
    
    2.63
    x
    
    
    1.55
    x
 
 (1)
    
    The allowance for credit losses is the sum of the allowance for loan losses and the
reserve for unfunded lending commitments.(2)
    
    At March 31, 2008, December 31, 2007, and March 31, 2007, commercial nonaccrual
loans included $197,000, $218,000, and $1.9 million, respectively, in restructured loans.   32




---



##### Table of Contents



Table 7
Commercial Real Estate Nonaccrual Loans
(dollars in thousands)
 March 31, 2008 CRE Nonaccrual Loans (NAL) by GeographySC, Excl
    
    
    Coastal
    
    
    Western
    
    
    Central
    
    
    North
    
    
    South
    
    
    Tampa
    
    
    Total
    
    
    % ofCoastal
    
    
    SC
    
    
    NC
    
    
    FL
    
    
    FL
    
    
    FL
    
    
    Bay
    
    
    CRE NAL
    
    
    NALCRE Nonaccrual Loans by
Product TypeCompleted income property
    
    $
    1,157
    
    
    $
    1,061
    
    
    $
    5,990
    
    
    $
    9,340
    
    
    $
    664
    
    
    $
    
    
    
    $
    107
    
    
    $
    18,319
    
    
    
    8.2
    %Residential A&D
    
    
    421
    
    
    
    5,523
    
    
    
    10,438
    
    
    
    15,235
    
    
    
    11,916
    
    
    
    250
    
    
    
    10,731
    
    
    
    54,514
    
    
    
    24.5Commercial A&D
    
    
    
    
    
    
    
    
    
    
    616
    
    
    
    901
    
    
    
    
    
    
    
    
    
    
    
    17,975
    
    
    
    19,492
    
    
    
    8.8Commercial construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential construction
    
    
    1,692
    
    
    
    2,206
    
    
    
    4,828
    
    
    
    4,043
    
    
    
    842
    
    
    
    11
    
    
    
    
    
    
    
    13,622
    
    
    
    6.1Residential condo
    
    
    
    
    
    
    3,671
    
    
    
    
    
    
    
    2,081
    
    
    
    
    
    
    
    9,249
    
    
    
    32,465
    
    
    
    47,466
    
    
    
    21.3Undeveloped land
    
    
    
    
    
    
    
    
    
    
    2,055
    
    
    
    1,698
    
    
    
    6,038
    
    
    
    8,501
    
    
    
    90
    
    
    
    18,382
    
    
    
    8.3Total CRE Nonaccrual Loans
    
    $
    3,270
    
    
    $
    12,461
    
    
    $
    23,927
    
    
    $
    33,298
    
    
    $
    19,460
    
    
    $
    18,011
    
    
    $
    61,368
    
    
    $
    171,795
    
    
    
    77.3
    %CRE Nonaccrual Loans as %
of Total Nonaccrual Loans
    
    
    1.5
    %
    
    
    5.6
    %
    
    
    10.8
    %
    
    
    15.0
    %
    
    
    8.7
    %
    
    
    8.1
    %
    
    
    27.6
    %
    
    
    77.3
    %
  Table 8
Commercial Real Estate Loans Past Due 30 Days or More (excluding nonaccruals)
(dollars in thousands)
 March 31, 2008
    
    
    December 31, 2007Balance
    
    
    % of CRE
    
    
    Balance
    
    
    % of CRENorth Carolina
    
    $
    6,489
    
    
    
    0.15
    %
    
    $
    10,029
    
    
    
    0.24
    %South Carolina
    
    
    1,617
    
    
    
    0.04
    
    
    
    1,889
    
    
    
    0.05Florida
    
    
    32,349
    
    
    
    0.78
    
    
    
    14,383
    
    
    
    0.34Total CRE loans past due 30 days or more
    
    $
    40,455
    
    
    
    0.97
    %
    
    $
    26,301
    
    
    
    0.63
    %
  Table 9
Impaired Loans
(dollars in thousands)
 At and For the
    
    At and For theThree Months
    
    Year EndedEnded March 31,
    
    December 31,2008
    
    2007
    
    2007Impaired loans
    
    $
    206,621
    
    
    $
    36,403
    
    
    $
    68,102Average investment in impaired loans
    
    
    132,525
    
    
    
    35,445
    
    
    
    40,360Related allowance
    
    
    32,070
    
    
    
    7,716
    
    
    
    11,340Foregone interest
    
    
    4,324
    
    
    
    882
    
    
    
    3,437
  33




---



##### Table of Contents



Table 10
Potential Problem Loans
(dollars in thousands)
 March 31, 2008Outstanding Principal BalancePercentage ofNumber of
    
    
    
    
    
    
    Loans Held forLoans
    
    
    Amount
    
    
    InvestmentLarge potential problem loans ($5 million or more)
    
    
    13
    
    
    $
    116,124
    
    
    
    1.13
    %Small potential problem loans (less than $5 million)
    
    
    900
    
    
    
    259,483
    
    
    
    2.53Total potential problem loans (1)
    
    
    913
    
    
    $
    375,607
    
    
    
    3.66
    %
 
 (1)
    
    Includes commercial and industrial, commercial real estate, and owner-occupied real
estate. Allowance for Loan Losses and Reserve for Unfunded Lending Commitments
      Level I
    
    General allowance calculated based upon historical lossesLevel II
    
    Specific reserves for individually impaired loansLevel III
    
    Subjective/judgmental adjustments for economic and other risk factorsUnfunded
    
    Reserves for off-balance sheet (unadvanced) exposureUnallocated
    
    Represents the imprecision inherent in the previous calculationsTotal
    
    Represents summation of all reserves
 Level I Reserves.
 34




---



##### Table of Contents



Level II Reserves.
  Level III Reserves.
    35




---



##### Table of Contents



Reserve for Unfunded Commitments.
 Unallocated Reserves.
      36




---



##### Table of Contents



Table 11
Summary of Loan and Credit Loss Experience
(dollars in thousands)
 At and For the
    
    
    At and For theThree Months
    
    
    Year EndedEnded March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007Allowance for loan losses, beginning of year
    
    $
    126,427
    
    
    $
    111,663
    
    
    $
    111,663Net charge-offs:Loans charged-off
    
    
    (27,583
    )
    
    
    (8,611
    )
    
    
    (59,408
    )Loans recovered
    
    
    2,612
    
    
    
    1,732
    
    
    
    6,847(24,971
    )
    
    
    (6,879
    )
    
    
    (52,561
    )Additions to allowance through provision expense
    
    
    72,964
    
    
    
    8,952
    
    
    
    67,325Allowance for loan losses, end of period
    
    $
    174,420
    
    
    $
    113,736
    
    
    $
    126,427Reserve for unfunded lending commitments, beginning of year
    
    $
    2,268
    
    
    $
    1,025
    
    
    $
    1,025Provision for unfunded lending commitments
    
    
    328
    
    
    
    61
    
    
    
    1,243Reserve for unfunded lending commitments, end of period
    
    $
    2,596
    
    
    $
    1,086
    
    
    $
    2,268Allowance for credit losses, beginning of year
    
    $
    128,695
    
    
    $
    112,688
    
    
    $
    112,688Net charge-offs:Loans charged-off
    
    
    (27,583
    )
    
    
    (8,611
    )
    
    
    (59,408
    )Loans recovered
    
    
    2,612
    
    
    
    1,732
    
    
    
    6,847(24,971
    )
    
    
    (6,879
    )
    
    
    (52,561
    )Additions to allowance through provision expense
    
    
    73,292
    
    
    
    9,013
    
    
    
    68,568Allowance for credit losses, end of period
    
    $
    177,016
    
    
    $
    114,822
    
    
    $
    128,695Average loans held for investment
    
    $
    10,221,424
    
    
    $
    9,783,328
    
    
    $
    9,985,751Loans held for investment, end of period
    
    
    10,275,653
    
    
    
    9,898,134
    
    
    
    10,213,420Net charge-offs as a percentage of average loans held for
investment (annualized)
    
    
    0.98
    %
    
    
    0.29
    %
    
    
    0.53
    %Allowance for loan losses as a percentage of loans held
for investment
    
    
    1.70
    
    
    
    1.15
    
    
    
    1.24Allowance for credit losses as a percentage of loans held
for investment
    
    
    1.72
    
    
    
    1.16
    
    
    
    1.26Allowance for loan losses to nonperforming loans
    
    
    0.78
    x
    
    
    2.63
    x
    
    
    1.55
    x
  37




---



##### Table of Contents



Table 12
Commercial Real Estate Net Charge-Offs
(dollars in thousands)
 Three Months Ended March 31, 2008 CRE Net Charge-Offs (NCO) by GeographySC, Excl
    
    
    Coastal
    
    
    Western
    
    
    Central
    
    
    North
    
    
    South
    
    
    Tampa
    
    
    Total
    
    
    % ofCoastal
    
    
    SC
    
    
    NC
    
    
    FL
    
    
    FL
    
    
    FL
    
    
    Bay
    
    
    CRE NCO
    
    
    NCOCRE Net Charge-Offs by
Product TypeCompleted income property
    
    $
    (18
    )
    
    $
    
    
    
    $
    280
    
    
    $
    
    
    
    $
    (1
    )
    
    $
    
    
    
    $
    53
    
    
    $
    314
    
    
    
    1.3
    %Residential A&D
    
    
    189
    
    
    
    
    
    
    
    239
    
    
    
    
    
    
    
    4,947
    
    
    
    
    
    
    
    
    
    
    
    5,375
    
    
    
    21.5Commercial A&D
    
    
    (4
    )
    
    
    
    
    
    
    311
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,307
    
    
    
    5.2Commercial construction
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    (0.2
    )Residential construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential condo
    
    
    
    
    
    
    
    
    
    
    252
    
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    1,500
    
    
    
    3,252
    
    
    
    13.0Undeveloped land
    
    
    
    
    
    
    
    
    
    
    737
    
    
    
    703
    
    
    
    2,291
    
    
    
    
    
    
    
    (1,144
    )
    
    
    2,587
    
    
    
    10.4Total CRE Net Charge-Offs
    
    $
    167
    
    
    $
    
    
    
    $
    1,774
    
    
    $
    703
    
    
    $
    7,237
    
    
    $
    1,500
    
    
    $
    1,409
    
    
    $
    12,790
    
    
    
    51.2
    %CRE Net Charge-Offs as %
of Total Net Charge-Offs
    
    
    0.7
    %
    
    
    0.0
    %
    
    
    7.1
    %
    
    
    2.8
    %
    
    
    29.0
    %
    
    
    6.0
    %
    
    
    5.6
    %
    
    
    51.2
    %
 Securities
  38




---



##### Table of Contents



Table 13
Investment Securities Portfolio Composition
(dollars in thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007Available for Sale(at fair value)U.S. Treasury
    
    $
    28,798
    
    
    $
    167,295
    
    
    $
    27,592U.S. Government agencies
    
    
    337,775
    
    
    
    657,708
    
    
    
    503,571Agency mortgage-backed securities
    
    
    1,343,108
    
    
    
    1,246,384
    
    
    
    1,088,427Private label mortgage-backed securities
    
    
    16,209
    
    
    
    
    
    
    
    State and municipal
    
    
    279,788
    
    
    
    315,372
    
    
    
    302,586Other investments:Corporate bonds
    
    
    18,270
    
    
    
    98,454
    
    
    
    20,380Federal Home Loan Bank (FHLB) stock
    
    
    39,795
    
    
    
    44,119
    
    
    
    35,333Community bank stocks
    
    
    3,170
    
    
    
    12,210
    
    
    
    4,988Other equity investments
    
    
    2,985
    
    
    
    4,505
    
    
    
    3,3352,069,898
    
    
    
    2,546,047
    
    
    
    1,986,212Held to Maturity(at amortized cost)State and municipal
    
    
    31,228
    
    
    
    46,117
    
    
    
    39,451Other investments
    
    
    240
    
    
    
    100
    
    
    
    24031,468
    
    
    
    46,217
    
    
    
    39,691Total
    
    $
    2,101,366
    
    
    $
    2,592,264
    
    
    $
    2,025,903Total securities as a percentage of total assets
    
    
    15.3
    %
    
    
    18.3
    %
    
    
    14.6
    %Percentage of Total Securities PortfolioU.S. Treasury
    
    
    1.4
    %
    
    
    6.5
    %
    
    
    1.4
    %U.S. Government agencies
    
    
    16.1
    
    
    
    25.4
    
    
    
    24.8Agency mortgage-backed securities
    
    
    63.9
    
    
    
    48.1
    
    
    
    53.7Private label mortgage-backed securities
    
    
    0.8
    
    
    
    
    
    
    
    State and municipal
    
    
    14.8
    
    
    
    13.9
    
    
    
    16.9Other investments
    
    
    3.0
    
    
    
    6.1
    
    
    
    3.2Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
      39




---



##### Table of Contents



40




---



##### Table of Contents



Table 14
Investment Securities Portfolio Credit Risk Profile
(dollars in thousands)
 March 31, 2008
    
    
    December 31, 2007Balance
    
    
    % of Total
    
    
    Balance
    
    
    % of TotalGovernment and agencyU.S. Treasury
    
    $
    28,798
    
    
    
    1.4
    %
    
    $
    27,592
    
    
    
    1.4
    %U.S. Government agencies
    
    
    337,775
    
    
    
    16.1
    
    
    
    503,571
    
    
    
    24.9Agency mortgage-backed securities (MBS) (1)
    
    
    1,343,108
    
    
    
    63.9
    
    
    
    1,088,427
    
    
    
    53.7Federal Home Loan Bank Stock
    
    
    39,795
    
    
    
    1.9
    
    
    
    35,333
    
    
    
    1.7Total government and agency
    
    
    1,749,476
    
    
    
    83.3
    
    
    
    1,654,923
    
    
    
    81.7State and municipal(2)(3)(4)Pre-funded with collateral or AAA-rated backed by
Texas Permanent School Fund
    
    
    203,025
    
    
    
    9.7
    
    
    
    214,675
    
    
    
    10.6Underlying issuer or collateral rated A or better (including
South Carolina State Aid)
    
    
    88,511
    
    
    
    4.2
    
    
    
    102,187
    
    
    
    5.1Underlying issuer or collateral rated BBB
    
    
    7,142
    
    
    
    0.3
    
    
    
    12,930
    
    
    
    0.6Non-rated
    
    
    12,338
    
    
    
    0.6
    
    
    
    12,245
    
    
    
    0.6Total state and municipal
    
    
    311,016
    
    
    
    14.8
    
    
    
    342,037
    
    
    
    16.9Corporate bondsAA or A-rated
    
    
    5,119
    
    
    
    0.2
    
    
    
    17,068
    
    
    
    0.8BBB-rated
    
    
    13,151
    
    
    
    0.6
    
    
    
    3,312
    
    
    
    0.2Total corporate bonds
    
    
    18,270
    
    
    
    0.8
    
    
    
    20,380
    
    
    
    1.0Private label mortgage-backed securities(1)AAA-rated
    
    
    16,209
    
    
    
    0.8
    
    
    
    
    
    
    
    Total private label mortgage-backed securities
    
    
    16,209
    
    
    
    0.8
    
    
    
    
    
    
    
    Community bank stocks and other
    
    
    6,395
    
    
    
    0.3
    
    
    
    8,563
    
    
    
    0.4Total securities
    
    $
    2,101,366
    
    
    
    100.0
    %
    
    $
    2,025,903
    
    
    
    100.0
    %Percent of total securities:(3)Rated A or higher
    
    
    
    
    
    
    98.2
    %
    
    
    
    
    
    
    98.2
    %Investment grade
    
    
    
    
    
    
    99.1
    
    
    
    
    
    
    
    99.0
 
 (1)
    
    Current policies restrict MBS/CMO purchases to agency-backed and a small percent of
private-label securities and prohibit securities collateralized by sub-prime assets.(2)
    
    At March 31, 2008 and December 31, 2007, state and municipal securities include
$31.5 million and $39.5 million, respectively, of securities held to maturity at amortized
cost.(3)
    
    Ratings shown above do not reflect the benefit of guarantees by bond insurers or the
State of South Carolina. At March 31, 2008, $38.8 million of municipal bonds are guaranteed
by bond insurers and approximately $44.5 million are guaranteed by the State of South
Carolina. At December 31, 2007, $43.5 million of municipal bonds are guaranteed by bond
insurers and approximately $55 million are guaranteed by the State of South Carolina.(4)
    
    At March 31, 2008, the breakdown by current bond rating is as follows: $203.0
million pre-funded with collateral or AAA-rated backed by Texas Permanent School Fund, $15.3
million AAA-rated, $82.1 million AA or A-rated, $4.5 million BBB-rated, and $6.1 million
non-rated.Note: Within each category, securities are ordered based on risk assessment from lowest to
highest. TSFG holds no collateralized debt obligations. Community Bank Stocks.
 41




---



##### Table of Contents



Goodwill
 th
  Derivative Financial Instruments
   Deposits
   42




---



##### Table of Contents



Table 15
Type of Deposits
(dollars in thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007Noninterest-bearing demand deposits
    
    $
    1,108,623
    
    
    $
    1,286,800
    
    
    $
    1,127,657Interest-bearing checking
    
    
    1,162,374
    
    
    
    1,198,714
    
    
    
    1,117,850Money market accounts
    
    
    2,182,709
    
    
    
    2,374,242
    
    
    
    2,188,261Savings accounts
    
    
    155,337
    
    
    
    184,283
    
    
    
    158,092Time deposits under $100,000
    
    
    1,408,593
    
    
    
    1,320,108
    
    
    
    1,442,030Time deposits of $100,000 or more
    
    
    1,557,927
    
    
    
    1,609,572
    
    
    
    1,496,270Customer deposits (1)
    
    
    7,575,563
    
    
    
    7,973,719
    
    
    
    7,530,160Brokered deposits
    
    
    1,875,969
    
    
    
    1,977,489
    
    
    
    2,258,408Total deposits
    
    $
    9,451,532
    
    
    $
    9,951,208
    
    
    $
    9,788,568Percentage of DepositsNoninterest-bearing demand deposits
    
    
    11.7
    %
    
    
    12.9
    %
    
    
    11.5
    %Interest-bearing checking
    
    
    12.3
    
    
    
    12.0
    
    
    
    11.4Money market accounts
    
    
    23.1
    
    
    
    23.9
    
    
    
    22.4Savings accounts
    
    
    1.6
    
    
    
    1.8
    
    
    
    1.6Time deposits under $100,000
    
    
    14.9
    
    
    
    13.3
    
    
    
    14.7Time deposits of $100,000 or more
    
    
    16.5
    
    
    
    16.2
    
    
    
    15.3Customer deposits (1)
    
    
    80.1
    
    
    
    80.1
    
    
    
    76.9Brokered deposits
    
    
    19.9
    
    
    
    19.9
    
    
    
    23.1Total deposits
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    TSFG defines customer deposits as total deposits less brokered deposits. Table 16
Type of Customer Funding
(dollars in thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007Customer deposits (1)
    
    $
    7,575,563
    
    
    $
    7,973,719
    
    
    $
    7,530,160Customer sweep accounts(2)
    
    
    631,214
    
    
    
    479,698
    
    
    
    648,311Customer funding
    
    $
    8,206,777
    
    
    $
    8,453,417
    
    
    $
    8,178,471
 
 (1)
    
    TSFG defines customer deposits as total deposits less brokered deposits.(2)
    
    TSFG includes customer sweep accounts in short-term borrowings on its consolidated
balance sheet.   43




---



##### Table of Contents



Borrowed Funds
  44




---



##### Table of Contents



Table 17
Type of Borrowed Funds
(dollars in thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007Short-Term BorrowingsFederal funds purchased and repurchase agreements
    
    $
    541,022
    
    
    $
    1,016,470
    
    
    $
    206,216Customer sweep accounts
    
    
    631,214
    
    
    
    479,698
    
    
    
    648,311Federal Reserve borrowings
    
    
    200,000
    
    
    
    
    
    
    
    FHLB advances
    
    
    
    
    
    
    75,000
    
    
    
    Commercial paper
    
    
    29,582
    
    
    
    35,584
    
    
    
    30,828Treasury, tax and loan note
    
    
    515,632
    
    
    
    781
    
    
    
    752,195Total short-term borrowings
    
    
    1,917,450
    
    
    
    1,607,533
    
    
    
    1,637,550Long-Term BorrowingsRepurchase agreements
    
    
    200,000
    
    
    
    200,000
    
    
    
    200,000FHLB advances
    
    
    324,080
    
    
    
    328,107
    
    
    
    223,087Subordinated notes
    
    
    216,704
    
    
    
    188,871
    
    
    
    216,704Mandatorily redeemable preferred stock of subsidiary
    
    
    56,800
    
    
    
    89,800
    
    
    
    56,800Note payable
    
    
    775
    
    
    
    818
    
    
    
    786Employee stock ownership plan note payable
    
    
    
    
    
    
    125
    
    
    
    Purchase accounting premiums, net of amortization
    
    
    858
    
    
    
    1,569
    
    
    
    963Total long term borrowings
    
    
    799,217
    
    
    
    809,290
    
    
    
    698,340Total borrowings
    
    
    2,716,667
    
    
    
    2,416,823
    
    
    
    2,335,890Less: Customer sweep accounts
    
    
    (631,214
    )
    
    
    (479,698
    )
    
    
    (648,311
    )Add: Brokered deposits (1)
    
    
    1,875,969
    
    
    
    1,977,489
    
    
    
    2,258,408Total wholesale borrowings
    
    $
    3,961,422
    
    
    $
    3,914,614
    
    
    $
    3,945,987
 
 (1)
    
    TSFG includes brokered deposits in total deposits on its consolidated balance
sheet.       45




---



##### Table of Contents



Capital Resources and Dividends
       46




---



##### Table of Contents



Table 18
Capital Ratios
 WellCapitalizedMarch 31, 2008
    
    RequirementTSFGTotal risk-based capital
    
    
    10.88
    %
    
    

n/aTier 1 risk-based capital
    
    
    9.33
    
    

      
n/aLeverage ratio
    
    
    8.16
    
    
    

n/aCarolina First BankTotal risk-based capital
    
    
    10.69
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    
    8.91
    
    
    
    6.00Leverage ratio
    
    
    7.77
    
    
    
    5.00
    Earnings Review
 Net Interest Income
  47




---



##### Table of Contents



Table 19
Comparative Average Balances  Yields and Costs
(dollars in thousands)
 Three Months Ended March 31,2008
    
    
    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateAssetsEarning assetsLoans (1)
    
    $
    10,235,518
    
    
    $
    171,228
    
    
    
    6.73
    %
    
    $
    9,813,010
    
    
    $
    186,628
    
    
    
    7.71
    %Investment securities, taxable (2)
    
    
    1,749,423
    
    
    
    20,392
    
    
    
    4.66
    
    
    
    2,414,896
    
    
    
    28,825
    
    
    
    4.78Investment securities, nontaxable (2) (3)
    
    
    326,318
    
    
    
    4,143
    
    
    
    5.08
    
    
    
    383,804
    
    
    
    4,689
    
    
    
    4.89Total investment securities
    
    
    2,075,741
    
    
    
    24,535
    
    
    
    4.73
    
    
    
    2,798,700
    
    
    
    33,514
    
    
    
    4.79Federal funds sold and interest-bearing
bank balances
    
    
    8,716
    
    
    
    72
    
    
    
    3.32
    
    
    
    8,331
    
    
    
    141
    
    
    
    6.86Total earning assets
    
    
    12,319,975
    
    
    $
    195,835
    
    
    
    6.39
    
    
    
    12,620,041
    
    
    $
    220,283
    
    
    
    7.06Non-earning assets
    
    
    1,524,930
    
    
    
    
    
    
    
    
    
    
    
    1,528,013Total assets
    
    $
    13,844,905
    
    
    
    
    
    
    
    
    
    
    $
    14,148,054Liabilities and Shareholders EquityLiabilitiesInterest-bearing liabilitiesInterest-bearing depositsInterest-bearing checking
    
    $
    1,155,418
    
    
    $
    4,653
    
    
    
    1.62
    
    
    $
    1,187,239
    
    
    $
    5,935
    
    
    
    2.03Savings
    
    
    156,848
    
    
    
    427
    
    
    
    1.09
    
    
    
    178,940
    
    
    
    706
    
    
    
    1.60Money market
    
    
    2,193,504
    
    
    
    16,633
    
    
    
    3.05
    
    
    
    2,377,771
    
    
    
    23,537
    
    
    
    4.01Time deposits, excluding brokered deposits
    
    
    2,953,364
    
    
    
    33,651
    
    
    
    4.58
    
    
    
    2,893,638
    
    
    
    35,581
    
    
    
    4.99Brokered deposits
    
    
    1,934,922
    
    
    
    21,742
    
    
    
    4.52
    
    
    
    1,771,081
    
    
    
    22,720
    
    
    
    5.20Total interest-bearing deposits
    
    
    8,394,056
    
    
    
    77,106
    
    
    
    3.69
    
    
    
    8,408,669
    
    
    
    88,479
    
    
    
    4.27Customer sweep accounts
    
    
    684,752
    
    
    
    5,472
    
    
    
    3.21
    
    
    
    453,928
    
    
    
    4,981
    
    
    
    4.45Other borrowings (4)
    
    
    1,922,959
    
    
    
    19,101
    
    
    
    4.00
    
    
    
    2,270,120
    
    
    
    30,644
    
    
    
    5.47Total interest-bearing liabilities
    
    
    11,001,767
    
    
    $
    101,679
    
    
    
    3.72
    
    
    
    11,132,717
    
    
    $
    124,104
    
    
    
    4.52Noninterest-bearing liabilitiesNoninterest-bearing deposits
    
    
    1,083,505
    
    
    
    
    
    
    
    
    
    
    
    1,230,320Other noninterest-bearing liabilities
    
    
    194,655
    
    
    
    
    
    
    
    
    
    
    
    233,248Total liabilities
    
    
    12,279,927
    
    
    
    
    
    
    
    
    
    
    
    12,596,285Shareholders equity
    
    
    1,564,978
    
    
    
    
    
    
    
    
    
    
    
    1,551,769Total liabilities and shareholders equity
    
    $
    13,844,905
    
    
    
    
    
    
    
    
    
    
    $
    14,148,054Net interest income (tax-equivalent)
    
    
    
    
    
    $
    94,156
    
    
    
    3.07
    %
    
    
    
    
    
    $
    96,179
    
    
    
    3.08
    %Less: tax-equivalent adjustment (3)
    
    
    
    
    
    
    1,450
    
    
    
    
    
    
    
    
    
    
    
    1,641Net interest income
    
    
    
    
    
    $
    92,706
    
    
    
    
    
    
    
    
    
    
    $
    94,538Supplemental data:Customer funding(5)
    
    $
    8,227,391
    
    
    $
    60,836
    
    
    
    2.97
    %
    
    $
    8,321,836
    
    
    $
    70,740
    
    
    
    3.45
    %Wholesale borrowings(6)
    
    
    3,857,881
    
    
    
    40,843
    
    
    
    4.26
    
    
    
    4,041,201
    
    
    
    53,364
    
    
    
    5.36Total funding(7)
    
    $
    12,085,272
    
    
    $
    101,679
    
    
    
    3.38
    %
    
    $
    12,363,037
    
    
    $
    124,104
    
    
    
    4.07
    %
 
 (1)
    
    Nonaccrual loans are included in average balances for yield computations.(2)
    
    The average balances for investment securities exclude the unrealized 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)
    
    During the three months ended March 31, 2008, TSFG capitalized $329,000 of interest in conjunction with the construction of its expanded
corporate facilities.(5)
    
    Customer funding includes total deposits (total interest-bearing plus noninterest-bearing deposits) less brokered deposits plus customer sweep
accounts.(6)
    
    Wholesale borrowings include borrowings less customer sweep accounts plus brokered deposits. For purposes of this table, wholesale borrowings
equal the sum of other borrowings and brokered deposits, as customer sweep accounts are presented separately.(7)
    
    Total funding includes customer funding and wholesale borrowings.Note:
    
    Average balances are derived from daily balances. 48




---



##### Table of Contents



Provision for Credit Losses
   49




---



##### Table of Contents



Noninterest Income
  Table 20
Components of Noninterest Income
(dollars in thousands)
 Three Months EndedMarch 31,2008
    
    
    2007Service charges on deposit accounts
    
    $
    10,429
    
    
    $
    10,613Debit card income, net
    
    
    1,876
    
    
    
    1,567Customer service fee income
    
    
    1,331
    
    
    
    1,291Total customer fee income
    
    
    13,636
    
    
    
    13,471Insurance income
    
    
    3,060
    
    
    
    3,297Retail investment services, net
    
    
    1,546
    
    
    
    1,714Trust and investment management income
    
    
    1,666
    
    
    
    1,594Benefits administration fees
    
    
    756
    
    
    
    742Total wealth management income
    
    
    7,028
    
    
    
    7,347Bank-owned life insurance income
    
    
    3,147
    
    
    
    2,851Gain on Visa IPO share redemption
    
    
    1,904
    
    
    
    Mortgage banking income
    
    
    1,485
    
    
    
    2,069Merchant processing income, net
    
    
    857
    
    
    
    735Gain (loss) on securities
    
    
    396
    
    
    
    (1,385
    )Gain on certain derivative activities
    
    
    12
    
    
    
    97Other
    
    
    2,451
    
    
    
    1,785Total noninterest income
    
    $
    30,916
    
    
    $
    26,970
   50




---



##### Table of Contents



Noninterest Expenses
  Table 21
Components of Noninterest Expenses
(dollars in thousands)
 Three Months EndedMarch 31,2008
    
    
    2007Salaries and wages, excluding contract buyouts
and severance
    
    $
    34,853
    
    
    $
    35,072Employee benefits
    
    
    9,298
    
    
    
    9,759Occupancy
    
    
    8,623
    
    
    
    8,608Furniture and equipment
    
    
    6,383
    
    
    
    6,462Professional services
    
    
    3,527
    
    
    
    4,103Advertising and business development
    
    
    2,471
    
    
    
    1,931Regulatory assessments
    
    
    2,077
    
    
    
    428Amortization of intangibles
    
    
    1,658
    
    
    
    2,001Telecommunications
    
    
    1,423
    
    
    
    1,393Loss on early extinguishment of debt
    
    
    547
    
    
    
    Goodwill impairment
    
    
    188,431
    
    
    
    Visa-related litigation
    
    
    (863
    )
    
    
    Employment contract buyouts and severance
    
    
    
    
    
    
    1,760Other
    
    
    9,751
    
    
    
    9,960Total noninterest expenses
    
    $
    268,179
    
    
    $
    81,477
        51




---



##### Table of Contents



Income Taxes
  Enterprise Risk Management
  Credit Risk
  Liquidity Risks
  Market Risk and Asset/Liability Management
  Interest Sensitivity Analysis.
 
    
    a static balance sheet for net interest income analysis;
    
    as assets and liabilities mature or reprice they are reinvested at current rates and
keep the same characteristics (i.e., remain as either variable or fixed rate) for net
income analysis;
    
    mortgage backed securities prepayments are based on historical industry data;
    
    loan prepayments are based upon historical bank-specific analysis and historical
industry data;
    
    deposit retention and average lives are based on historical bank-specific analysis;
    
    whether callable/puttable assets and liabilities are called/put is based on the implied
forward yield curve for each interest rate scenario; and
    
    management takes no action to counter any change.
  52




---



##### Table of Contents



Table 22
Net Interest Income at Risk Analysis
 Annualized Hypothetical Percentage Change inNet Interest IncomeMarch 31,2008
    
    2007Interest Rate Scenario(1)2.00%
    
    
    (0.4
    )%
    
    
    (0.3
    )%1.00
    
    
    (0.1
    )
    
    
    (0.1
    )Flat
    
    
    
    
    
    
    (1.00)
    
    
    0.1
    
    
    
    0.3(2.00)
    
    
    (0.1
    )
    
    
    0.6
 
 (1)
    
    Net interest income sensitivity is shown for gradual rate shifts over a 12 month
period.  Table 23  Economic Value of Equity Risk Analysis
 Annualized Hypothetical Percentage Change inEconomic Value of EquityMarch 31,2008
    
    2007Interest Rate Scenario(1)2.00%
    
    
    (5.9)
    %
    
    
    (11.8)
    %1.00
    
    
    (2.5
    )
    
    
    (5.3
    )Flat
    
    
    
    
    
    
    (1.00)
    
    
    (1.5
    )
    
    
    1.4(2.00)
    
    
    (9.0
    )
    
    
    (3.4
    )
 
 (1)
    
    The rising 100 and 200 basis point and falling 100 and 200 basis point interest rate
scenarios assume an instantaneous and parallel change in interest rates along the entire yield
curve.  
    
    the flat scenarios are base case and are not indicative of historical results;
    
    they do not project an increase or decrease in net interest income or the fair value of
net assets, but rather the risk to net interest income and the fair value of net assets
because of changes in interest rates;
    
    they present the balance sheet in a static position; however, when assets and
liabilities mature or reprice, they do not necessarily keep the same characteristics (e.g.,
variable or fixed interest rate);
    
    the computation of prospective effects of hypothetical interest rate changes are based
on numerous assumptions and should not be relied upon as indicative of actual results; and
    
    the computations do not contemplate any additional actions TSFG could undertake in
response to changes in interest rates.
 Off-Balance Sheet Arrangements
  53




---



##### Table of Contents



Lending Commitments.
 Derivatives.
  Liquidity
      54




---



##### Table of Contents



Table 24
Contractual Obligations
(dollars in thousands)
 Payments Due by PeriodRemainder
    
    
    2009
    
    
    2011of
    
    
    and
    
    
    and
    
    
    AfterTotal
    
    
    2008
    
    
    2010
    
    
    2012
    
    
    2012Time deposits
    
    $
    4,842,489
    
    
    $
    3,118,881
    
    
    $
    926,381
    
    
    $
    279,423
    
    
    $
    517,804Short-term borrowings
    
    
    1,917,450
    
    
    
    1,917,450
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    798,359
    
    
    
    2,856
    
    
    
    168,166
    
    
    
    259,179
    
    
    
    368,158Operating leases
    
    
    192,854
    
    
    
    14,948
    
    
    
    36,132
    
    
    
    30,412
    
    
    
    111,362Expanded corporate facilities contracts
    
    
    19,690
    
    
    
    19,572
    
    
    
    118
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    7,770,842
    
    
    $
    5,073,707
    
    
    $
    1,130,797
    
    
    $
    569,014
    
    
    $
    997,324
      55




---



##### Table of Contents



Recently Adopted/Issued Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls over Financial Reporting
  56




---



##### Table of Contents



Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Issuer Purchases of Equity Securities
 ApproximateTotal
    
    
    Dollar Value ofNumber of
    
    
    Shares thatShares Purchased
    
    
    May Yet BeTotal
    
    
    Average
    
    
    as Part
    
    
    PurchasedNumber
    
    
    Price
    
    
    of Publicly
    
    
    Under Plans orof Shares
    
    
    Paid per
    
    
    Announced Plans
    
    
    Programs (2)Period
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    (in thousands)January 1, 2008 to January 31, 2008
    
    
    13,143
    (1)
    
    $
    14.56
    
    
    
    
    
    
    $
    88,024February 1, 2008 to February 29, 2008
    
    
    1,574
    (1)
    
    
    16.19
    
    
    
    
    
    
    
    88,024March 1, 2008 to March 31, 2008
    
    
    122
    (1)
    
    
    14.86
    
    
    
    
    
    
    
    88,024Total
    
    
    14,839
    
    
    $
    14.74
    
    
    
    
    
    
    $
    88,024
 
 (1)
    
    These shares were canceled in connection with exercise of options, vesting of
restricted stock, or distribution from the deferred compensation plan. Pursuant to TSFGs
stock option plans, participants may exercise stock options by surrendering shares of TSFG
common stock the participants already own or, in some cases, by surrendering fully vested
stock options as payment of the option exercise price. Pursuant to TSFGs restricted stock
plans, participants may tender shares of vested restricted stock as payment for taxes due at
the time of vesting. Pursuant to TSFGs Executive Deferred Compensation Plan, participants
may tender shares of stock as payment for taxes due at the time of distribution. Shares
surrendered by participants of these plans are repurchased at current market value pursuant to
the terms of the applicable stock option, restricted stock, or deferred compensation plan and
not pursuant to publicly announced share repurchase programs.(2)
    
    In August 2007, the Board of Directors amended and restated TSFGs existing stock
repurchase authorization to be an aggregate of $100.0 million, which expires if unused on or
before June 30, 2008. At March 31, 2008, there was $88.0 million remaining under this
authorization. 
 57




---



##### Table of Contents



Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Securities Holders
  Proposal #1  Election of Directors
 Voting shares in favorWithheld#
    
    %
    
    AuthorityMichael R. Hogan
    
    
    59,144,716
    
    
    
    87.6
    %
    
    
    8,407,270Jon W. Pritchett
    
    
    59,356,413
    
    
    
    87.9
    %
    
    
    8,195,573Edward J. Sebastian
    
    
    58,581,359
    
    
    
    86.7
    %
    
    
    8,970,627John C.B. Smith, Jr.
    
    
    58,851,814
    
    
    
    87.1
    %
    
    
    8,700,172Mack I. Whittle, Jr.
    
    
    55,885,790
    
    
    
    82.7
    %
    
    
    11,666,196
   Proposal #2  Approve Amendments to Articles of Incorporation to replace supermajority voting
provisions with majority voting provisions.
 Proposal #3  Approve Amendments to Articles of Incorporation to Phase Out TSFGs Classified
Board Structure.
 Proposal #4  To Approve TSFGs Stock Option Plan, including to increase the shares available
for issuance thereunder by 500,000.
 Proposal #5  Approve TSFGs Long Term Incentive Plan.
 Proposal #6  Approve TSFGs Management Performance Incentive Plan
 Proposal #7  A shareholder proposal requiring an annual, non-binding shareholder vote to
ratify executive compensation.
 Proposal #8  Ratification of Auditors.
 
 Item 5. Other Information
  58




---



##### Table of Contents



Item 6. Exhibits
 3.1
    
    Articles of Amendment, effective May 8, 2008; incorporated by reference to Exhibit 3.1
of TSFGs Current Report on Form 8-K dated May 8, 20083.2
    
    Articles of Amendment, effective May 12, 200810.1
    
    Stock Option Plan, effective May 12, 200831.1
    
    Certificate of the Principal Executive Officer pursuant to Rule 13a-14a/15(d)-14(a) of
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certificate of the Principal Financial Officer pursuant to Rule 13a-14a/15(d)-14(a) of
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1+
    
    Certificate of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2+
    
    Certificate of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 Note for non-filed versions of this Form 10-Q
  59




---



##### Table of Contents



SIGNATURES
  The South Financial Group, Inc.Date: May 12, 2008
    /s/ James R. GordonJames R. GordonExecutive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer) 60