##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
December 31, 2005 or
 o
    
    Transition report pursuant to section 12 or 15(d) of the Securities Exchange Act of 1934 for 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
(I.R.S. Employer Identification No.)102 South Main Street, Greenville, South Carolina
    
    29601(Address of principal executive offices)
    
    (Zip Code)
 (864) 255-7900
 Securities registered pursuant to Section 12(b) of the Act:
 None
    
    None(Title of Each Class)
    
    (Name of each exchange on which registered)
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
 þ o
 o þ
 þ o
 o
 þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



INDEX
 PagePART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    9Item 1B.
    
    Unresolved Staff Comments
    
    
    11Item 2.
    
    Properties
    
    
    11Item 3.
    
    Legal Proceedings
    
    
    11Item 4.
    
    Submission of Matters to a Vote of Shareholders
    
    
    11PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Shareholder Matters, and Issuer
Purchases of Equity Securities
    
    
    12Item 6.
    
    Selected Financial Data
    
    
    14Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    58Item 8.
    
    Financial Statements and Supplementary Data
    
    
    59Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    119Item 9A.
    
    Controls and Procedures
    
    
    119Item 9B.
    
    Other Information
    
    
    120PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    121Item 11.
    
    Executive Compensation
    
    
    121Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    121Item 13.
    
    Certain Relationships and Related Transactions
    
    
    121Item 14.
    
    Principal Accountant Fees and Services
    
    
    121PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    121EX-10.7EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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PART I
 
 Item 1.
Business
 The Company
     Available Information
  Subsidiary Banks
  Carolina First Bank.
  1




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
    
    the Greenville and Anderson metropolitan area (located in the Upstate region of South Carolina);
    
    the Hendersonville and Asheville metropolitan area (located in the Western region of North Carolina);
    
    the Rock Hill, or greater South Charlotte, metropolitan area (located in the Piedmont region of South Carolina);
    
    the Columbia metropolitan area (located in the Midlands region of South Carolina);
    
    the Myrtle Beach, Georgetown, and Wilmington metropolitan areas (located in Coastal
region of South Carolina and North Carolina ); and
    
    the Charleston and Hilton Head metropolitan areas (located in the lower Coastal
region of South Carolina).
   Mercantile Bank
 
    
    the Orlando metropolitan area (located in the Central Florida region);
    
    the Tampa Bay metropolitan area (located in the Tampa Bay region);
    
    the Gainesville metropolitan area (located in the North Central region);
    
    the Jacksonville metropolitan area (located in the North Florida region); and
    
    the Palm Beach County, Miami-Dade County, and Broward County area (located in the South Florida region).
   Non-Bank Subsidiaries
  American Pensions, Inc.
 Bowditch Insurance Corporation.
 Carolina First Community Development Corporation.
 2




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##### Table of Contents



Koss Olinger.
 REIT Subsidiaries.
 South Group Insurance Services, Inc.
 South Financial Asset Management, Inc.
 Summit Title, LLC.
 Business Segments
  Competition
    Employees
  3




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Monetary Policy
   Impact of Inflation
  Supervision and Regulation
 General
  The South Financial Group.
   4




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Carolina First Bank and Mercantile Bank.
 5




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Other Regulations.
 Dividends
  Capital Adequacy
 TSFG.
 Carolina First Bank and Mercantile Bank.
 6




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##### Table of Contents




    
    Increasing the number of risk weight categories to which credit exposures may be assigned;
    
    Expanding the use of external credit ratings as an indicator of credit risk for externally-rated exposures;
    
    Expanding the range of collateral and guarantors that may qualify a loan for lower risk weights;
    
    Using loan-to-value ratios, credit assessments, and other broad measures of credit
risk for assigning risk-weights to residential mortgages;
    
    Modifying the credit conversion factor for various commitments, including those with
an original maturity of under one year;
    
    Requiring that certain loans 90 days or more past due or in a non-accrual status be
assigned to a higher risk weight category;
    
    Modifying the risk-based capital requirements for certain commercial real estate
exposures;
    
    Increasing the risk sensitivity of capital requirements for other types of retail,
multifamily, small business, and commercial exposures; and
    
    Assessing a risk-based capital charge to reflect the risks in securitizations with
early amortization provisions that are backed by revolving retail exposures.
  Deposit Insurance Assessments
  Other Safety and Soundness Regulations
 Prompt Corrective Action.
 Brokered Deposits.
 7




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##### Table of Contents



Transactions Between TSFG, its Subsidiaries, and Affiliates
    Anti-Money Laundering Legislation
  Sarbanes-Oxley
  Future Legislation
  8




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##### Table of Contents



Additional Information
  
 Item 1A.
Risk Factors
  TSFG has experienced significant growth in commercial real estate loans,
 TSFG has a lower level of core deposits and a higher level of wholesale funding, relative to
its peer institutions.
 TSFG has experienced significant growth through acquisitions, which could, in some
circumstances, adversely affect net income.
   TSFG has various anti-takeover measures that could impede the takeover of TSFG.
 TSFG has certain geographic concentrations.
 9




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TSFGs controls and procedures may fail or be circumvented.
 TSFGs information systems may experience an interruption or breach in security.
 TSFG continually encounters technological change.
 TSFG is subject to liquidity risk.
 TSFG is subject to interest rate risk.
 TSFG has credit and market risk resulting from the use of derivatives.
 10




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TSFG is exposed to credit risk in its lending activities
 
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
    
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Shareholders
  11




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PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities
 Market for Common Stock and Related Matters
  Three Months EndedDecember 31
    
    
    September 30
    
    
    June 30
    
    
    March 312005Common stock price:High
    
    $
    30.28
    
    
    $
    30.25
    
    
    $
    30.92
    
    
    $
    32.98Low
    
    
    25.40
    
    
    
    26.52
    
    
    
    25.93
    
    
    
    29.64Close
    
    
    27.54
    
    
    
    26.84
    
    
    
    28.42
    
    
    
    30.54Cash dividend declared
    
    
    0.17
    
    
    
    0.16
    
    
    
    0.16
    
    
    
    0.16Volume traded
    
    
    14,860,208
    
    
    
    18,177,782
    
    
    
    18,953,656
    
    
    
    16,230,430
 Three Months EndedDecember 31
    
    
    September 30
    
    
    June 30
    
    
    March 312004Common stock price:High
    
    $
    32.61
    
    
    $
    29.59
    
    
    $
    30.18
    
    
    $
    31.09Low
    
    
    27.95
    
    
    
    26.41
    
    
    
    25.85
    
    
    
    27.00Close
    
    
    32.53
    
    
    
    28.20
    
    
    
    28.37
    
    
    
    29.59Cash dividend declared
    
    
    0.16
    
    
    
    0.15
    
    
    
    0.15
    
    
    
    0.15Volume traded
    
    
    16,947,410
    
    
    
    20,775,558
    
    
    
    24,615,808
    
    
    
    17,570,520
 Unregistered Sales of Securities
     12




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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 ISSUER PURCHASES OF EQUITY SECURITIES
 Total
    
    
    MaximumNumber of
    
    
    Number ofShares Purchased
    
    
    Shares thatTotal
    
    
    Average
    
    
    as Part
    
    
    May Yet BeNumber
    
    
    Price
    
    
    of Publicly
    
    
    Purchasedof Shares
    
    
    Paid per
    
    
    Announced Plans
    
    
    Under Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    Programs(2)October 1, 2005 to October 31, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    1,289,502November 1, 2005 to November 30, 2005
    
    
    3,230
    (1)
    
    
    29.85
    
    
    
    
    
    
    
    1,289,502December 1, 2005 to December 31, 2005
    
    
    5,918
    (1)
    
    
    29.53
    
    
    
    
    
    
    
    1,289,502Total
    
    
    9,148
    
    
    $
    29.64
    
    
    
    
    
    
    
    1,289,502
 
 (1)
    
    These shares were canceled in connection with option exercises. Pursuant to TSFGs
stock option plans, participants may exercise stock options by surrendering shares of TSFG
common stock owned by the participants as payment of the option exercise price. Shares
surrendered by participants are repurchased pursuant to the terms of the applicable stock
option plan and not pursuant to publicly announced share repurchase programs.(2)
    
    In February of 2003, TSFG announced a stock repurchase program authorizing TSFG to
repurchase up to 1 million shares of its common stock. In April of 2003, TSFG announced a
stock repurchase program authorizing TSFG to repurchase up to 1 million shares of its common
stock. Neither of these stock repurchase programs has an expiration date and each respective
program will expire upon completion of repurchases totaling the amount authorized to
repurchase. At December 31, 2005, there are 289,502 shares remaining under the February 2003
authorization and 1 million shares under the April 2003 authorization.  13




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Item 6. Selected Financial Data
  SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(dollars and shares (except per share data) in thousands)
 Five-YearYears Ended December 31,
    
    
    Compound2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000
    
    
    Growth RateIncome Statement DataNet interest income
    
    $
    409,056
    
    
    $
    335,841
    
    
    $
    250,890
    
    
    $
    210,143
    
    
    $
    173,023
    
    
    $
    167,111
    
    
    
    19.6
    %Noninterest income
    
    
    55,210
    
    
    
    124,877
    
    
    
    100,739
    
    
    
    74,563
    
    
    
    55,686
    
    
    
    48,545
    
    
    
    2.6Total revenue
    
    
    464,266
    
    
    
    460,718
    
    
    
    351,629
    
    
    
    284,706
    
    
    
    228,709
    
    
    
    215,656
    
    
    
    16.6Provision for credit losses
    
    
    40,592
    
    
    
    34,987
    
    
    
    20,581
    
    
    
    22,266
    
    
    
    22,045
    
    
    
    23,378
    
    
    
    11.7Noninterest expenses
    
    
    328,053
    
    
    
    250,244
    
    
    
    207,170
    
    
    
    162,840
    
    
    
    140,820
    
    
    
    181,538
    
    
    
    12.6Income from continuing operations
    
    
    70,217
    
    
    
    119,998
    
    
    
    83,583
    
    
    
    65,239
    
    
    
    41,819
    
    
    
    6,989
    
    
    
    58.6Net income
    
    
    69,821
    
    
    
    119,508
    
    
    
    83,583
    
    
    
    63,833
    
    
    
    42,101
    
    
    
    6,989
    
    
    
    58.5Per Common Share DataBasic:Income from continuing operations
    
    $
    0.96
    
    
    $
    1.86
    
    
    $
    1.70
    
    
    $
    1.56
    
    
    $
    0.99
    
    
    $
    0.16
    
    
    
    43.1
    %Net income
    
    
    0.95
    
    
    
    1.85
    
    
    
    1.70
    
    
    
    1.53
    
    
    
    1.00
    
    
    
    0.16
    
    
    
    42.8
    %Diluted:Income from continuing operations
    
    
    0.94
    
    
    
    1.81
    
    
    
    1.66
    
    
    
    1.53
    
    
    
    0.98
    
    
    
    0.16
    
    
    
    42.5Net income
    
    
    0.94
    
    
    
    1.80
    
    
    
    1.66
    
    
    
    1.49
    
    
    
    0.98
    
    
    
    0.16
    
    
    
    42.5Average common shares outstanding:Basic
    
    
    73,307
    
    
    
    64,592
    
    
    
    49,204
    
    
    
    41,715
    
    
    
    42,098
    
    
    
    42,908
    
    
    
    11.3Diluted
    
    
    74,595
    
    
    
    66,235
    
    
    
    50,328
    
    
    
    42,715
    
    
    
    42,824
    
    
    
    43,551
    
    
    
    11.4Book value (December 31)
    
    $
    19.90
    
    
    $
    19.56
    
    
    $
    16.46
    
    
    $
    13.76
    
    
    $
    11.12
    
    
    $
    11.04
    
    
    
    12.5Market price (December 31)
    
    
    27.54
    
    
    
    32.53
    
    
    
    27.75
    
    
    
    20.66
    
    
    
    17.75
    
    
    
    13.25
    
    
    
    15.8Cash dividends declared
    
    
    0.65
    
    
    
    0.61
    
    
    
    0.57
    
    
    
    0.50
    
    
    
    0.45
    
    
    
    0.41
    
    
    
    9.7Balance Sheet Data (Year End)Total assets
    
    $
    14,319,285
    
    
    $
    13,798,689
    
    
    $
    10,724,715
    
    
    $
    7,939,960
    
    
    $
    6,029,557
    
    
    $
    5,220,639
    
    
    
    22.4
    %Securities
    
    
    3,159,617
    
    
    
    4,310,088
    
    
    
    4,007,571
    
    
    
    2,572,186
    
    
    
    1,643,395
    
    
    
    899,544
    
    
    
    28.6Loans held for investment
    
    
    9,439,395
    
    
    
    8,107,757
    
    
    
    5,732,205
    
    
    
    4,434,011
    
    
    
    3,730,250
    
    
    
    3,722,552
    
    
    
    20.5Allowance for loan losses
    
    
    107,767
    
    
    
    96,434
    
    
    
    72,811
    
    
    
    69,625
    
    
    
    44,090
    
    
    
    42,939
    
    
    
    20.2Intangible assets
    
    
    691,758
    
    
    
    611,450
    
    
    
    353,079
    
    
    
    242,182
    
    
    
    97,140
    
    
    
    107,254
    
    
    
    45.2Deposits
    
    
    9,234,437
    
    
    
    7,670,944
    
    
    
    6,032,238
    
    
    
    4,585,927
    
    
    
    3,604,664
    
    
    
    3,894,662
    
    
    
    18.8Long-term debt
    
    
    1,922,151
    
    
    
    2,972,270
    
    
    
    2,711,699
    
    
    
    1,221,511
    
    
    
    411,294
    
    
    
    318,326
    
    
    
    43.3Shareholders equity
    
    
    1,486,907
    
    
    
    1,393,460
    
    
    
    972,299
    
    
    
    651,683
    
    
    
    458,383
    
    
    
    468,653
    
    
    
    26.0Balance Sheet Data (Averages)Total assets
    
    $
    14,752,973
    
    
    $
    12,208,069
    
    
    $
    9,261,657
    
    
    $
    6,496,692
    
    
    $
    5,459,475
    
    
    $
    5,032,700
    
    
    
    24.0
    %Securities (excludes unrealized gains
(losses) on available for sale securities)
    
    
    4,388,351
    
    
    
    4,158,202
    
    
    
    3,471,324
    
    
    
    1,850,798
    
    
    
    1,125,602
    
    
    
    875,876
    
    
    
    38.0Loans held for investment
    
    
    8,848,279
    
    
    
    6,909,545
    
    
    
    4,864,168
    
    
    
    3,969,786
    
    
    
    3,759,786
    
    
    
    3,545,336
    
    
    
    20.1Total earning assets
    
    
    13,307,956
    
    
    
    11,101,951
    
    
    
    8,425,590
    
    
    
    5,924,077
    
    
    
    4,928,970
    
    
    
    4,450,016
    
    
    
    24.5Deposits
    
    
    8,631,714
    
    
    
    6,899,366
    
    
    
    5,144,412
    
    
    
    3,852,776
    
    
    
    3,687,822
    
    
    
    3,699,553
    
    
    
    18.5Shareholders equity
    
    
    1,463,125
    
    
    
    1,164,004
    
    
    
    709,791
    
    
    
    499,579
    
    
    
    484,022
    
    
    
    479,800
    
    
    
    25.0Performance RatiosNet interest margin (tax-equivalent)
    
    
    3.12
    %
    
    
    3.06
    %
    
    
    3.01
    %
    
    
    3.59
    %
    
    
    3.55
    %
    
    
    3.81
    %Return on average assets
    
    
    0.47
    
    
    
    0.98
    
    
    
    0.90
    
    
    
    0.98
    
    
    
    0.77
    
    
    
    0.14Return on average equity
    
    
    4.77
    
    
    
    10.27
    
    
    
    11.78
    
    
    
    12.78
    
    
    
    8.70
    
    
    
    1.46Tangible equity to tangible assets
    
    
    5.83
    
    
    
    5.93
    
    
    
    5.97
    
    
    
    5.32
    
    
    
    6.09
    
    
    
    7.07Dividend payout ratio
    
    
    69.15
    
    
    
    33.89
    
    
    
    34.34
    
    
    
    33.56
    
    
    
    45.92
    
    
    
    256.25Asset QualityNonperforming assets
    
    $
    43,977
    
    
    $
    55,976
    
    
    $
    60,774
    
    
    $
    74,186
    
    
    $
    43,857
    
    
    $
    21,514
    
    
    
    15.4Nonperforming assets as a % of loans
held for investment and foreclosed
property
    
    
    0.47
    %
    
    
    0.69
    %
    
    
    1.06
    %
    
    
    1.67
    %
    
    
    1.17
    %
    
    
    0.58
    %Net charge-offs to average loans
held for investment
    
    
    0.36
    
    
    
    0.46
    
    
    
    0.62
    
    
    
    0.49
    
    
    
    0.54
    
    
    
    0.39Allowance for loan losses as a % of
loans held for investment
    
    
    1.14
    
    
    
    1.19
    
    
    
    1.27
    
    
    
    1.57
    
    
    
    1.18
    
    
    
    1.15Allowance for credit losses as a % of
loans held for investment
    
    
    1.16
    
    
    
    1.20
    
    
    
    1.28
    
    
    
    1.58
    
    
    
    1.20
    
    
    
    1.16Operations DataBranch offices
    
    
    172
    
    
    
    154
    
    
    
    134
    
    
    
    117
    
    
    
    90
    
    
    
    94Employees (full-time equivalent)
    
    
    2,607
    
    
    
    2,308
    
    
    
    1,918
    
    
    
    1,700
    
    
    
    1,346
    
    
    
    1,374
 14




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Forward-Looking Statements
  
    
    risks from changes in economic, monetary policy, and industry conditions;
    
    changes in interest rates, 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 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);
    
    level, composition, and repricing characteristics of the securities portfolio;
    
    deposit growth, change in the mix or type of deposit products;
    
    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;
    
    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;
    
    significant delay or inability to execute strategic initiatives designed to grow revenues;
    
    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.
  15




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Non-GAAP Financial Information
  Overview
  
    
    Carolina First Bank, the largest South Carolina-headquartered commercial bank, operating
in South Carolina and North Carolina, and on the Internet under the brand name, Bank
CaroLine; and
    
    Mercantile Bank, a Florida-headquartered bank, operating in Florida.
       
    
    Total loans held for investment increased 16.4%, or 12.6% excluding the impact of loans acquired through mergers; and
 16




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
    
    Customer deposits (total deposits less brokered deposits) increased 22.3%, or 17.2%
excluding the impact of deposits acquired through mergers.
       Critical Accounting Policies and Estimates
  17




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##### Table of Contents



Allowance for Loan Losses and Reserve for Unfunded Lending Commitments
     Derivatives and Hedging Activities
  Fair Value of Certain Financial Instruments
   18




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Income Taxes
    Accounting for Acquisitions
  19




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20




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Acquisitions and Sales
  Table 1
Summary of Completed Acquisitions
(dollars in thousands)
 Purchase
    
    IdentifiableAcquisition
    
    Total
    
    Shares
    
    Price Paid
    
    IntangibleDate
    
    Assets(1)
    
    Issued
    
    in Cash
    
    Assets(2)
    
    Goodwill(2)Bank AcquisitionsPointe Bank
Boca Raton, Florida
    
    
    05/06/05
    
    
    $
    432,550
    
    
    
    2,193,941
    
    
    $
    24,495
    
    
    $
    6,689
    
    
    $
    64,475CNB Florida
Lake City, Florida
    
    
    07/16/04
    
    
    
    839,148
    
    
    
    5,312,974
    
    
    
    
    
    
    
    11,312
    
    
    
    117,367Florida Banks
Jacksonville, Florida
    
    
    07/16/04
    
    
    
    1,023,290
    
    
    
    5,418,890
    
    
    
    
    
    
    
    5,982
    
    
    
    138,724MountainBank Financial Corporation
Hendersonville, North Carolina
    
    
    10/03/03
    
    
    
    943,394
    
    
    
    5,485,293
    
    
    
    
    
    
    
    12,113
    
    
    
    87,618Insurance Agency/Other AcquisitionsLossing Insurance Agency
Ocala, Florida
    
    
    11/01/05
    
    
    
    476
    
    
    
    
    
    
    
    5,004
    
    
    
    2,184
    
    
    
    3,664Bowditch Insurance Corporation
Jacksonville, Florida
    
    
    06/06/05
    
    
    
    713
    
    
    
    87,339
    (3)
    
    
    2,040
    
    
    
    2,276
    
    
    
    3,238Koss Olinger
Gainesville, Florida
    
    
    04/04/05
    
    
    
    287
    
    
    
    56,398
    (4)
    
    
    4,718
    
    
    
    1,742
    
    
    
    3,229Summit Title, LLC
Hendersonville, North Carolina
    
    
    04/12/04
    
    
    
    86
    
    
    
    10,571
    (5)
    
    
    
    
    
    
    55
    
    
    
    211Allied Assurance
Columbia, South Carolina
    
    
    09/22/03
    
    
    
    95
    
    
    
    5,534
    (6)
    
    
    
    
    
    
    
    
    
    
    173American Pensions, Inc.
Mount Pleasant, South Carolina
    
    
    04/30/03
    
    
    
    348
    
    
    
    159,839
    
    
    
    
    
    
    
    1,050
    
    
    
    3,237
 
 (1)
    
    Book value at the acquisition date.(2)
    
    Carrying amount (identifiable intangible assets are not reported net of accumulated
amortization) at December 31, 2005.(3)
    
    TSFG agreed to issue annual earn-out shares for each of May 31, 2006, 2007, 2008 and
2009, based on targeted earnings achievement. The shares would have a maximum total value of
approximately $1.9 million.(4)
    
    TSFG agreed to issue earn-out shares on May 17, 2010 based on earnings achievement.
The base earn-out shares would have a total value of $3 million for achievement of the minimum
performance target, with potential additional earn-out shares based on achievement of higher
performance levels.(5)
    
    TSFG agreed to issue annual earn-out shares, valued at the time of issuance at
$66,906, for each of April 12, 2006, 2007, and 2008, based on revenue retention and earnings
achievement.(6)
    
    TSFG agreed to issue annual earn-out shares, valued at the time of issuance at
approximately $45,000, for each of August 31, 2006 and 2007, based on revenue retention.  Branch Acquisition
  21




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Pending Acquisition
  Sales
   Balance Sheet Review
 Loans
     22




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Table 2
Loan Portfolio Composition
(dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Commercial, financial and agricultural
    
    $
    1,936,963
    
    
    $
    1,584,198
    
    
    $
    1,358,409
    
    
    $
    913,368
    
    
    $
    742,218Real estate  construction (1)
    
    
    1,497,605
    
    
    
    1,007,061
    
    
    
    619,124
    
    
    
    570,265
    
    
    
    532,037Real estate  residential mortgages (1-4 family)
    
    
    1,493,317
    
    
    
    1,278,310
    
    
    
    940,744
    
    
    
    643,941
    
    
    
    551,119Commercial secured by real estate (1)
    
    
    3,441,576
    
    
    
    3,109,242
    
    
    
    2,146,650
    
    
    
    1,765,103
    
    
    
    1,400,466Consumer
    
    
    1,069,934
    
    
    
    1,128,946
    
    
    
    667,278
    
    
    
    541,210
    
    
    
    503,901Lease financing receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    509Loans held for investment
    
    $
    9,439,395
    
    
    $
    8,107,757
    
    
    $
    5,732,205
    
    
    $
    4,434,011
    
    
    $
    3,730,250Percentage of Loans Held for InvestmentCommercial, financial and agricultural
    
    
    20.5
    %
    
    
    19.5
    %
    
    
    23.7
    %
    
    
    20.6
    %
    
    
    19.9
    %Real estate  construction (1)
    
    
    15.9
    
    
    
    12.4
    
    
    
    10.8
    
    
    
    12.9
    
    
    
    14.3Real estate  residential mortgages (1-4 family)
    
    
    15.8
    
    
    
    15.8
    
    
    
    16.4
    
    
    
    14.5
    
    
    
    14.8Commercial secured by real estate (1)
    
    
    36.5
    
    
    
    38.4
    
    
    
    37.5
    
    
    
    39.8
    
    
    
    37.5Consumer
    
    
    11.3
    
    
    
    13.9
    
    
    
    11.6
    
    
    
    12.2
    
    
    
    13.5Lease financing receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (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. 23




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Table 3
Loan Portfolio Composition Based on Loan Purpose
(dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Commercial LoansCommercial and industrial
    
    $
    2,323,461
    
    
    $
    2,077,646
    
    
    $
    1,591,157
    
    
    $
    1,178,955
    
    
    $
    1,055,747Owner  occupied real estate (1)
    
    
    801,953
    
    
    
    825,582
    
    
    
    634,604
    
    
    
    733,819
    
    
    
    627,412Commercial real estate
    
    
    3,933,927
    
    
    
    3,246,729
    
    
    
    2,071,242
    
    
    
    1,420,252
    
    
    
    1,085,7507,059,341
    
    
    
    6,149,957
    
    
    
    4,297,003
    
    
    
    3,333,026
    
    
    
    2,768,909Consumer LoansIndirect  sales finance
    
    
    916,318
    
    
    
    790,372
    
    
    
    586,325
    
    
    
    420,294
    
    
    
    340,484Direct retail
    
    
    568,588
    
    
    
    466,484
    
    
    
    306,476
    
    
    
    273,419
    
    
    
    302,992Home equity
    
    
    564,865
    
    
    
    535,988
    
    
    
    384,037
    
    
    
    243,648
    
    
    
    151,5702,049,771
    
    
    
    1,792,844
    
    
    
    1,276,838
    
    
    
    937,361
    
    
    
    795,046Mortgage Loans
    
    
    330,283
    
    
    
    164,956
    
    
    
    158,364
    
    
    
    163,624
    
    
    
    166,295Total loans held for investment
    
    $
    9,439,395
    
    
    $
    8,107,757
    
    
    $
    5,732,205
    
    
    $
    4,434,011
    
    
    $
    3,730,250Percentage of Loans Held for InvestmentCommercial and industrial
    
    
    24.6
    %
    
    
    25.6
    %
    
    
    27.8
    %
    
    
    26.6
    %
    
    
    28.3
    %Owner  occupied real estate (1)
    
    
    8.5
    
    
    
    10.3
    
    
    
    11.1
    
    
    
    16.6
    
    
    
    16.8Commercial real estate
    
    
    41.7
    
    
    
    40.0
    
    
    
    36.0
    
    
    
    32.0
    
    
    
    29.1Consumer
    
    
    21.7
    
    
    
    22.1
    
    
    
    22.3
    
    
    
    21.1
    
    
    
    21.3Mortgage
    
    
    3.5
    
    
    
    2.0
    
    
    
    2.8
    
    
    
    3.7
    
    
    
    4.5Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    In Table 2, 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. Commercial and industrial loans
 Owner-occupied real estate loans
 Commercial real estate loans
 Indirect  sales finance loans
 Direct retail consumer loans
 24




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Home equity loans
 Mortgage loans
   25




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##### Table of Contents



Table 4
Commercial Real Estate Loans
(dollars in thousands)
 December 31, 2005
    
    
    December 31, 2004% of
    
    
    
    
    
    
    % ofBalance
    
    
    Total
    
    
    Balance
    
    
    TotalCommercial Real Estate Loans by Geographic DiversificationWestern North Carolina (Hendersonville/Asheville)
    
    $
    736,269
    
    
    
    18.7
    %
    
    $
    545,533
    
    
    
    16.8
    %Tampa Bay Florida
    
    
    463,842
    
    
    
    11.8
    
    
    
    330,130
    
    
    
    10.2Upstate South Carolina (Greenville)
    
    
    384,699
    
    
    
    9.8
    
    
    
    358,693
    
    
    
    11.0North Coastal South Carolina (Myrtle Beach)
    
    
    371,221
    
    
    
    9.4
    
    
    
    376,494
    
    
    
    11.6Midlands South Carolina (Columbia)
    
    
    356,766
    
    
    
    9.1
    
    
    
    291,139
    
    
    
    9.0Northeast Florida (Jacksonville)
    
    
    319,482
    
    
    
    8.1
    
    
    
    244,989
    
    
    
    7.5North Central Florida
    
    
    307,044
    
    
    
    7.8
    
    
    
    256,642
    
    
    
    7.9Central Florida (Orlando)
    
    
    273,470
    
    
    
    6.9
    
    
    
    245,398
    
    
    
    7.6South Coastal South Carolina (Charleston)
    
    
    249,808
    
    
    
    6.4
    
    
    
    264,178
    
    
    
    8.1South Florida (Ft. Lauderdale)
    
    
    219,240
    
    
    
    5.6
    
    
    
    102,969
    
    
    
    3.2Greater South Charlotte South Carolina (Rock Hill)
    
    
    124,960
    
    
    
    3.2
    
    
    
    110,965
    
    
    
    3.4Marion, Florida
    
    
    127,126
    
    
    
    3.2
    
    
    
    91,349
    
    
    
    2.8Other (1)
    
    
    
    
    
    
    
    
    
    
    28,250
    
    
    
    0.9Total commercial real estate loans
    
    $
    3,933,927
    
    
    
    100.0
    %
    
    $
    3,246,729
    
    
    
    100.0
    %Commercial Real Estate Loans by Product TypeCommercial construction/development
    
    $
    1,413,956
    
    
    
    35.9
    %
    
    $
    965,838
    
    
    
    29.7
    %Mixed use
    
    
    436,055
    
    
    
    11.1
    
    
    
    313,612
    
    
    
    9.71-4 family residential investment property
    
    
    330,760
    
    
    
    8.4
    
    
    
    328,558
    
    
    
    10.1Residential construction
    
    
    280,541
    
    
    
    7.1
    
    
    
    152,988
    
    
    
    4.7Undeveloped land
    
    
    271,922
    
    
    
    6.9
    
    
    
    301,165
    
    
    
    9.3Retail
    
    
    260,990
    
    
    
    6.6
    
    
    
    266,584
    
    
    
    8.2Multi-family residential
    
    
    218,591
    
    
    
    5.6
    
    
    
    171,929
    
    
    
    5.3Hotel/motel
    
    
    184,351
    
    
    
    4.7
    
    
    
    242,525
    
    
    
    7.5Other (1)
    
    
    536,761
    
    
    
    13.7
    
    
    
    503,530
    
    
    
    15.5Total commercial real estate loans
    
    $
    3,933,927
    
    
    
    100.0
    %
    
    $
    3,246,729
    
    
    
    100.0
    %
 
 (1)
    
    Other includes all loans in categories smaller than the lowest percentages shown
above.Note: At December 31, 2005 and 2004, average loan size for commercial real estate loans totaled
$415,000 and $370,000, respectively. 26




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Table 5
Selected Loan Maturity and Interest Sensitivity
(dollars in thousands)
 Over One But
    
    OverOne Year
    
    Less Than
    
    Fiveor Less
    
    Five Years
    
    Years
    
    TotalCommercial secured by real estate
    
    $
    198,520
    
    
    $
    1,744,729
    
    
    $
    1,498,327
    
    
    $
    3,441,576Commercial, financial and agricultural
    
    
    502,026
    
    
    
    987,123
    
    
    
    447,814
    
    
    
    1,936,963Real estateconstruction
    
    
    267,642
    
    
    
    1,031,993
    
    
    
    197,970
    
    
    
    1,497,605Total of loans with:Floating interest rates (1)
    
    
    886,729
    
    
    
    2,734,394
    
    
    
    1,363,254
    
    
    
    4,984,377Predetermined interest rates
    
    
    81,459
    
    
    
    1,029,451
    
    
    
    780,857
    
    
    
    1,891,767
 
 (1)
    
    TSFG has entered into swaps to hedge the forecasted interest income from certain
prime-based commercial loans.  Table 6
Loan Relationships Greater than $10 Million
 Outstanding Principal BalancePercentage ofNumber
    
    Total
    
    
    
    
    
    Loans Heldof Borrowers
    
    Commitment
    
    Amount
    
    for InvestmentDecember 31, 2005
    
    
    157
    
    
    $2.6 billion
    
        $1.6 billion
    
    
    16.4
    %December 31, 2004
    
    
    90
    
    
    1.5 billion
    
    0.9 billion
    
    
    11.3
   Credit Quality
  27




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Table 7
Credit Quality Indicators
(dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Loans held for investment
    
    $
    9,439,395
    
    
    $
    8,107,757
    
    
    $
    5,732,205
    
    
    $
    4,434,011
    
    
    $
    3,730,250Allowance for loan losses
    
    
    107,767
    
    
    
    96,434
    
    
    
    72,811
    
    
    
    69,625
    
    
    
    44,090Allowance for credit losses (1)
    
    
    109,350
    
    
    
    96,918
    
    
    
    73,287
    
    
    
    70,275
    
    
    
    44,587Nonaccrual loans  commercial (2)
    
    $
    25,145
    
    
    $
    38,015
    
    
    $
    47,137
    
    
    $
    61,206
    
    
    $
    35,245Nonaccrual loans  consumer
    
    
    3,417
    
    
    
    2,312
    
    
    
    2,686
    
    
    
    2,384
    
    
    
    3,643Nonaccrual loans  mortgage (3)
    
    
    4,693
    
    
    
    4,755
    
    
    
    
    
    
    
    
    
    
    
    Restructured loans still accruing interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total nonperforming loans
    
    
    33,255
    
    
    
    45,082
    
    
    
    49,823
    
    
    
    63,590
    
    
    
    38,888Foreclosed property (other real estate owned and
personal property repossessions) (4)
    
    
    10,722
    
    
    
    10,894
    
    
    
    10,951
    
    
    
    10,596
    
    
    
    4,969Total nonperforming assets
    
    
    43,977
    
    
    
    55,976
    
    
    
    60,774
    
    
    
    74,186
    
    
    
    43,857Loans past due 90 days or more (mortgage and
consumer with interest accruing) (3)
    
    $
    4,548
    
    
    $
    3,764
    
    
    $
    3,960
    
    
    $
    5,414
    
    
    $
    10,482Total nonperforming assets as a percentage of loans
held for investment and foreclosed property
    
    
    0.47
    %
    
    
    0.69
    %
    
    
    1.06
    %
    
    
    1.67
    %
    
    
    1.17
    %Allowance for loan losses to nonperforming loans
    
    
    3.24
    x
    
    
    2.14
    x
    
    
    1.46
    x
    
    
    1.09
    x
    
    
    1.13
    x
 
 (1)
    
    As of December 31, 2005, the reserve for unfunded lending commitments has been
reclassified from the allowance for loan losses to other liabilities. The allowance for
credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending
commitments. The provision for credit losses is the sum of the provision for loan losses and
the provision for unfunded lending commitments. Amounts presented for prior periods have been
reclassified to conform to the 2005 presentation.(2)
    
    At December 31, 2005 and 2004, nonaccrual loans  commercial included $1.9 million
and $4.7 million, respectively, in restructured loans.(3)
    
    Effective September 30, 2004, TSFG began placing residential mortgage loans in
nonaccrual status when they become 150-days delinquent. Previously, these loans were not
placed in nonaccrual status (unless impairment was evident), but any associated accrued
interest was reserved.(4)
    
    At December 31, 2005, personal property repossessions totaled $850,000 and were
included in nonperforming assets. Personal property repossessions totaled $652,000, $1.0
million, $1.3 million, and $2.7 million at December 31, 2004, 2003, 2002, and 2001,
respectively, and were excluded from nonperforming assets.   Allowance for Loan Losses and Reserve for Unfunded Lending Commitments
  28




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29




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Table 8
Summary of Loan Loss Experience
(dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Allowance for loan losses, beginning of year
    
    $
    96,434
    
    
    $
    72,811
    
    
    $
    69,625
    
    
    $
    44,090
    
    
    $
    42,939Purchase accounting adjustments
    
    
    3,741
    
    
    
    20,682
    
    
    
    12,690
    
    
    
    22,973
    
    
    
    Allowance adjustment for loans sold
    
    
    
    
    
    
    (506
    )
    
    
    
    
    
    
    (12
    )
    
    
    (230
    )Charge-offs:Commercial, financial and agricultural
    
    
    23,188
    
    
    
    20,882
    
    
    
    18,474
    
    
    
    6,680
    
    
    
    8,346Real estateconstruction
    
    
    1,329
    
    
    
    2,513
    
    
    
    3,049
    
    
    
    3,206
    
    
    
    1,885Secured by real estate
    
    
    8,751
    
    
    
    6,822
    
    
    
    5,444
    
    
    
    5,509
    
    
    
    3,896Consumer
    
    
    5,946
    
    
    
    6,786
    
    
    
    7,657
    
    
    
    8,161
    
    
    
    9,027Credit cards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total loans charged-off
    
    
    39,214
    
    
    
    37,003
    
    
    
    34,624
    
    
    
    23,556
    
    
    
    23,154Recoveries:Commercial, financial and agricultural
    
    
    4,651
    
    
    
    2,762
    
    
    
    1,997
    
    
    
    1,970
    
    
    
    1,553Real estateconstruction
    
    
    548
    
    
    
    719
    
    
    
    109
    
    
    
    444
    
    
    
    195Secured by real estate
    
    
    1,313
    
    
    
    984
    
    
    
    1,399
    
    
    
    255
    
    
    
    164Consumer
    
    
    801
    
    
    
    1,006
    
    
    
    860
    
    
    
    1,348
    
    
    
    990Credit cards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total loans recovered
    
    
    7,313
    
    
    
    5,471
    
    
    
    4,365
    
    
    
    4,017
    
    
    
    2,902Net charge-offs
    
    
    31,901
    
    
    
    31,532
    
    
    
    30,259
    
    
    
    19,539
    
    
    
    20,252Additions through provision expense
    
    
    39,493
    
    
    
    34,979
    
    
    
    20,755
    
    
    
    22,113
    
    
    
    21,633Allowance for loan losses, end of year
    
    $
    107,767
    
    
    $
    96,434
    
    
    $
    72,811
    
    
    $
    69,625
    
    
    $
    44,090Average loans held for investment
    
    $
    8,848,279
    
    
    $
    6,909,545
    
    
    $
    4,864,168
    
    
    $
    3,969,786
    
    
    $
    3,759,786Loans held for investment (period end)
    
    
    9,439,395
    
    
    
    8,107,757
    
    
    
    5,732,205
    
    
    
    4,434,011
    
    
    
    3,730,250Net charge-offs as a percentage of average loans
held for investment
    
    
    0.36
    %
    
    
    0.46
    %
    
    
    0.62
    %
    
    
    0.49
    %
    
    
    0.54
    %Allowance for loan losses as a percentage of loans
held for investment
    
    
    1.14
    
    
    
    1.19
    
    
    
    1.27
    
    
    
    1.57
    
    
    
    1.18
 Table 9
Composition of Allowance for Loan Losses
(dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Commercial, financial and agricultural
    
    $
    23,658
    
    
    $
    20,077
    
    
    $
    16,568
    
    
    $
    15,831
    
    
    $
    8,784Real estate  construction
    
    
    16,640
    
    
    
    12,763
    
    
    
    7,551
    
    
    
    9,883
    
    
    
    6,292Real estate  residential mortgages (1-4 family)
    
    
    3,965
    
    
    
    2,092
    
    
    
    804
    
    
    
    796
    
    
    
    731Commercial secured by real estate
    
    
    43,387
    
    
    
    39,404
    
    
    
    26,182
    
    
    
    30,589
    
    
    
    16,562Consumer
    
    
    14,525
    
    
    
    17,325
    
    
    
    18,162
    
    
    
    11,166
    
    
    
    9,804Unallocated
    
    
    5,592
    
    
    
    4,773
    
    
    
    3,544
    
    
    
    1,360
    
    
    
    1,917Total
    
    $
    107,767
    
    
    $
    96,434
    
    
    $
    72,811
    
    
    $
    69,625
    
    
    $
    44,090
   30




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Securities
  Table 10
Investment Securities Portfolio Composition
(dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Trading Account(at fair value)U.S. Treasury
    
    $
    22
    
    
    $
    
    
    
    $
    
    
    
    $
    5
    
    
    $
    U.S. Government agencies
    
    
    137
    
    
    
    
    
    
    
    460
    
    
    
    345
    
    
    
    1,142State and municipal
    
    
    1,243
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    4351,402
    
    
    
    
    
    
    
    480
    
    
    
    350
    
    
    
    1,577Securities Available for Sale(at fair value)U.S. Treasury
    
    
    182,468
    
    
    
    234,538
    
    
    
    246,659
    
    
    
    254,121
    
    
    
    503,191U.S. Government agencies
    
    
    656,442
    
    
    
    930,046
    
    
    
    866,968
    
    
    
    833,900
    
    
    
    106,983Mortgage-backed securities
    
    
    1,688,862
    
    
    
    2,502,440
    
    
    
    2,375,557
    
    
    
    1,193,080
    
    
    
    817,237State and municipal
    
    
    373,892
    
    
    
    272,535
    
    
    
    127,181
    
    
    
    56,402
    
    
    
    12,092Other investments:Corporate bonds
    
    
    112,246
    
    
    
    141,970
    
    
    
    148,517
    
    
    
    77,707
    
    
    
    69,127Federal Home Loan Bank (FHLB) stock
    
    
    67,553
    
    
    
    72,733
    
    
    
    50,411
    
    
    
    42,990
    
    
    
    23,690Federal National Mortgage Association preferred stock
    
    
    
    
    
    
    50,062
    
    
    
    54,678
    
    
    
    
    
    
    
    Community bank stocks
    
    
    10,067
    
    
    
    14,899
    
    
    
    23,487
    
    
    
    16,802
    
    
    
    13,059Federal Home Loan Mortgage Corporation preferred stock
    
    
    
    
    
    
    11,990
    
    
    
    12,130
    
    
    
    
    
    
    
    Netbank, Inc. common stock
    
    
    
    
    
    
    122
    
    
    
    4,778
    
    
    
    7,018
    
    
    
    12,314Other equity investments
    
    
    4,037
    
    
    
    3,508
    
    
    
    5,628
    
    
    
    6,924
    
    
    
    3,2933,095,567
    
    
    
    4,234,843
    
    
    
    3,915,994
    
    
    
    2,488,944
    
    
    
    1,560,986Securities Held to Maturity(at amortized cost)State and municipal
    
    
    62,548
    
    
    
    75,145
    
    
    
    90,745
    
    
    
    82,789
    
    
    
    80,729Other investments
    
    
    100
    
    
    
    100
    
    
    
    352
    
    
    
    103
    
    
    
    10362,648
    
    
    
    75,245
    
    
    
    91,097
    
    
    
    82,892
    
    
    
    80,832Total
    
    $
    3,159,617
    
    
    $
    4,310,088
    
    
    $
    4,007,571
    
    
    $
    2,572,186
    
    
    $
    1,643,395
    31




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32




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Table 11
Investment Securities Maturity Schedule
(dollars in thousands)
 Available for Sale  Fair Value
 After One
    
    
    After Five
    
    
    
    
    
    
    NoWithin
    
    
    But Within
    
    
    But Within
    
    
    After
    
    
    ContractualOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten Years
    
    
    Maturity(1)
    
    
    TotalU.S. Treasury
    
    $
    15,100
    
    
    $
    143,137
    
    
    $
    24,231
    
    
    $
    
    
    
    $
    
    
    
    $
    182,468U.S. Government agencies
    
    
    
    
    
    
    37,673
    
    
    
    372,875
    
    
    
    245,894
    
    
    
    
    
    
    
    656,442Mortgage-backed securities
    
    
    1,080
    
    
    
    572,723
    
    
    
    489,154
    
    
    
    625,905
    
    
    
    
    
    
    
    1,688,862State and municipal
    
    
    37,007
    
    
    
    154,531
    
    
    
    172,596
    
    
    
    9,758
    
    
    
    
    
    
    
    373,892Other investments
    
    
    1,925
    
    
    
    52,204
    
    
    
    58,633
    
    
    
    
    
    
    
    81,141
    
    
    
    193,903$
    55,112
    
    
    $
    960,268
    
    
    $
    1,117,489
    
    
    $
    881,557
    
    
    $
    81,141
    
    
    $
    3,095,567Weighted Average YieldU.S. Treasury
    
    
    3.10
    %
    
    
    4.12
    %
    
    
    3.81
    %
    
    
    
    %
    
    
    
    %
    
    
    4.00
    %U.S. Government agencies
    
    
    
    
    
    
    4.60
    
    
    
    5.27
    
    
    
    5.60
    
    
    
    
    
    
    
    5.35Mortgage-backed securities
    
    
    4.73
    
    
    
    4.72
    
    
    
    4.69
    
    
    
    4.46
    
    
    
    
    
    
    
    4.61State and municipal
    
    
    1.89
    
    
    
    2.60
    
    
    
    3.43
    
    
    
    4.35
    
    
    
    
    
    
    
    2.96Other investments
    
    
    2.81
    
    
    
    4.11
    
    
    
    5.53
    
    
    
    
    
    
    
    n/a
    
    
    
    4.742.31
    %
    
    
    4.26
    %
    
    
    4.71
    %
    
    
    4.77
    %
    
    
    
    %
    
    
    4.54
    %Held to Maturity  Amortized
CostState and municipal
    
    $
    9,095
    
    
    $
    37,746
    
    
    $
    14,963
    
    
    $
    744
    
    
    $
    
    
    
    $
    62,548Other investments
    
    
    
    
    
    
    50
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    100$
    9,095
    
    
    $
    37,796
    
    
    $
    15,013
    
    
    $
    744
    
    
    $
    
    
    
    $
    62,648Weighted Average YieldState and municipal
    
    
    3.11
    %
    
    
    3.58
    %
    
    
    3.67
    %
    
    
    3.38
    %
    
    
    
    %
    
    
    3.53
    %Other investments
    
    
    
    
    
    
    4.50
    
    
    
    6.45
    
    
    
    
    
    
    
    
    
    
    
    5.483.11
    %
    
    
    3.58
    %
    
    
    3.68
    %
    
    
    3.38
    %
    
    
    
    %
    
    
    3.53
    %
 
 (1)
    
    These securities have no contractual maturity or yield and accordingly are excluded
from the Other Investments yield calculation, as well as the overall Available for Sale
yield calculation. Community Bank Stocks.
 Intangible Assets
  Derivative Financial Instruments
 33
    Table of Contents    Table 12
Summary of Derivative Assets and Liabilities
(dollars in thousands)
 December 31, 2005
    
    
    December 31, 2004Fair Value
    
    
    Notional
    
    
    Fair Value
    
    
    NotionalAsset
    
    
    Liability
    
    
    Amount
    
    
    Asset
    
    
    Liability
    
    
    AmountCash Flow HedgesInterest rate swaps associated with
borrowing activities
    
    $
    1,785
    
    
    $
    
    
    
    $
    278,500
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest rate swaps associated with
lending activities
    
    
    422
    
    
    
    1,515
    
    
    
    435,000
    
    
    
    
    
    
    
    
    
    
    
    Fair Value HedgesInterest rate swaps associated with
deposit taking activities
    
    
    48
    
    
    
    29,315
    
    
    
    1,111,170
    
    
    
    364
    
    
    
    5,737
    
    
    
    154,721Other DerivativesFuture contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    20,000Forward foreign currency contracts
    
    
    482
    
    
    
    482
    
    
    
    31,715
    
    
    
    5,465
    
    
    
    5,465
    
    
    
    112,519Options, interest rate swaps and other
    
    
    3,988
    
    
    
    11,656
    
    
    
    221,453
    
    
    
    7,606
    
    
    
    27,141
    
    
    
    1,259,455$
    6,725
    
    
    $
    42,968
    
    
    $
    2,077,838
    
    
    $
    13,441
    
    
    $
    38,343
    
    
    $
    1,546,695
 Customer Hedging Programs.
  Fair Value Hedges.
  34




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##### Table of Contents



Cash Flow Hedges.
  Trading.
 Mortgage Loan Commitments and Forward Sales Commitments.
  Credit Risk of Derivative Financial Instruments.
 35




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##### Table of Contents



Deposits
   36




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##### Table of Contents



Table 13
Types of Deposits
(dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Noninterest-bearing demand deposits
    
    $
    1,512,508
    
    
    $
    1,237,877
    
    
    $
    882,129
    
    
    $
    743,174
    
    
    $
    524,437Interest-bearing checking
    
    
    1,109,297
    
    
    
    816,933
    
    
    
    699,956
    
    
    
    679,747
    
    
    
    618,236Money market accounts
    
    
    2,290,134
    
    
    
    2,704,287
    
    
    
    2,237,299
    
    
    
    1,017,095
    
    
    
    758,243Savings accounts
    
    
    187,101
    
    
    
    192,769
    
    
    
    159,013
    
    
    
    156,204
    
    
    
    112,227Total transaction accounts
    
    
    5,099,040
    
    
    
    4,951,866
    
    
    
    3,978,397
    
    
    
    2,596,220
    
    
    
    2,013,143Time deposits under $100,000
    
    
    1,401,469
    
    
    
    836,386
    
    
    
    794,802
    
    
    
    863,506
    
    
    
    904,295Time deposits of $100,000 or more
    
    
    1,395,247
    
    
    
    665,820
    
    
    
    557,588
    
    
    
    587,913
    
    
    
    545,531Customer deposits (1)
    
    
    7,895,756
    
    
    
    6,454,072
    
    
    
    5,330,787
    
    
    
    4,047,639
    
    
    
    3,462,969Brokered deposits
    
    
    1,338,681
    
    
    
    1,216,872
    
    
    
    701,451
    
    
    
    538,288
    
    
    
    141,695Total deposits
    
    $
    9,234,437
    
    
    $
    7,670,944
    
    
    $
    6,032,238
    
    
    $
    4,585,927
    
    
    $
    3,604,664Percentage of DepositsNoninterest-bearing demand deposits
    
    
    16.4
    %
    
    
    16.1
    %
    
    
    14.6
    %
    
    
    16.2
    %
    
    
    14.6
    %Interest-bearing checking
    
    
    12.0
    
    
    
    10.6
    
    
    
    11.6
    
    
    
    14.8
    
    
    
    17.2Money market accounts
    
    
    24.8
    
    
    
    35.3
    
    
    
    37.1
    
    
    
    22.2
    
    
    
    21.0Savings accounts
    
    
    2.0
    
    
    
    2.5
    
    
    
    2.7
    
    
    
    3.4
    
    
    
    3.1Total transaction accounts
    
    
    55.2
    
    
    
    64.5
    
    
    
    66.0
    
    
    
    56.6
    
    
    
    55.9Time deposits under $100,000
    
    
    15.2
    
    
    
    10.9
    
    
    
    13.2
    
    
    
    18.8
    
    
    
    25.1Time deposits of $100,000 or more
    
    
    15.1
    
    
    
    8.7
    
    
    
    9.2
    
    
    
    12.8
    
    
    
    15.1Customer deposits (1)
    
    
    85.5
    
    
    
    84.1
    
    
    
    88.4
    
    
    
    88.2
    
    
    
    96.1Brokered deposits
    
    
    14.5
    
    
    
    15.9
    
    
    
    11.6
    
    
    
    11.8
    
    
    
    3.9Total deposits
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    TSFG defines customer deposits as total deposits less brokered deposits.    Elevate
  37




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##### Table of Contents



Table 14
Maturity Distribution of Time Deposits of $100,000 or More
(dollars in thousands)
 Three months or less
    
    $
    360,290Over three through six months
    
    
    250,750Over six through twelve months
    
    
    405,935Over twelve months
    
    
    378,272Total outstanding
    
    $
    1,395,247
 Borrowed Funds
  Table 15
Types of Borrowings
(dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Short-Term BorrowingsFederal funds purchased and repurchase agreements
    
    $
    1,421,301
    
    
    $
    1,583,495
    
    
    $
    834,866
    
    
    $
    1,110,840
    
    
    $
    1,269,538FHLB advances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,600
    
    
    
    98,000Commercial paper
    
    
    32,933
    
    
    
    29,405
    
    
    
    36,949
    
    
    
    37,609
    
    
    
    26,902Treasury, tax and loan note
    
    
    20,131
    
    
    
    14,111
    
    
    
    11,781
    
    
    
    14,444
    
    
    
    25,060Lines of credit and other
    
    
    
    
    
    
    
    
    
    
    7,349
    
    
    
    
    
    
    
    1,474,365
    
    
    
    1,627,011
    
    
    
    890,945
    
    
    
    1,192,493
    
    
    
    1,419,500Long-Term BorrowingsRepurchase agreements
    
    
    821,000
    
    
    
    1,665,134
    
    
    
    1,494,800
    
    
    
    400,000
    
    
    
    FHLB advances
    
    
    852,140
    
    
    
    1,057,167
    
    
    
    989,500
    
    
    
    806,920
    
    
    
    371,290Subordinated notes
    
    
    155,695
    
    
    
    155,695
    
    
    
    135,075
    
    
    
    11,000
    
    
    
    37,344Manditorily redeemable preferred stock of subsidiary
    
    
    89,800
    
    
    
    89,800
    
    
    
    89,800
    
    
    
    
    
    
    
    Employee stock ownership plan note payable
    
    
    500
    
    
    
    800
    
    
    
    1,100
    
    
    
    1,400
    
    
    
    1,675Note payable
    
    
    865
    
    
    
    900
    
    
    
    927
    
    
    
    968
    
    
    
    985Purchase accounting premiums, net of amortization
    
    
    2,151
    
    
    
    2,774
    
    
    
    497
    
    
    
    1,223
    
    
    
    Total long-term debt
    
    
    1,922,151
    
    
    
    2,972,270
    
    
    
    2,711,699
    
    
    
    1,221,511
    
    
    
    411,294Debt associated with trust preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,500
    
    
    
    31,000Total long-term borrowings
    
    
    1,922,151
    
    
    
    2,972,270
    
    
    
    2,711,699
    
    
    
    1,317,011
    
    
    
    442,294Total borrowings
    
    
    3,396,516
    
    
    
    4,599,281
    
    
    
    3,602,644
    
    
    
    2,509,504
    
    
    
    1,861,794Brokered deposits, included in deposits
    
    
    1,338,681
    
    
    
    1,216,872
    
    
    
    701,451
    
    
    
    538,288
    
    
    
    141,695Total wholesale borrowings
    
    $
    4,735,197
    
    
    $
    5,816,153
    
    
    $
    4,304,095
    
    
    $
    3,047,792
    
    
    $
    2,003,489Total wholesale borrowings as a percentage of total assets
    
    
    33.1
    %
    
    
    42.2
    %
    
    
    40.1
    %
    
    
    38.4
    %
    
    
    33.2
    %
  38




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Table 16
Short-Term Borrowings
(dollars in thousands)
 Maximum
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    InterestOutstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rate atat any
    
    
    Average
    
    
    Average
    
    
    Ending
    
    
    YearYear Ended December 31,
    
    Month End
    
    
    Balance
    
    
    Interest Rate
    
    
    Balance
    
    
    End2005Federal funds purchased and repurchase agreements
    
    $
    1,724,812
    
    
    $
    1,450,488
    
    
    
    3.20
    %
    
    $
    1,421,301
    
    
    
    4.15
    %FHLB advances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury, tax and loan note
    
    
    183,001
    
    
    
    43,002
    
    
    
    4.28
    
    
    
    20,131
    
    
    
    3.06Commercial paper
    
    
    35,085
    
    
    
    31,045
    
    
    
    3.51
    
    
    
    32,933
    
    
    
    4.42Line of credit to unaffiliated bank and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,524,535
    
    
    
    3.24
    %
    
    $
    1,474,365
    
    
    
    4.13
    %2004Federal funds purchased and repurchase agreements
    
    $
    1,715,306
    
    
    $
    1,275,936
    
    
    
    1.37
    %
    
    $
    1,583,495
    
    
    
    2.14
    %FHLB advances
    
    
    205,000
    
    
    
    17,084
    
    
    
    0.56
    
    
    
    
    
    
    
    Treasury, tax and loan note
    
    
    110,377
    
    
    
    17,740
    
    
    
    0.43
    
    
    
    14,111
    
    
    
    1.75Commercial paper
    
    
    39,743
    
    
    
    38,321
    
    
    
    2.86
    
    
    
    29,405
    
    
    
    2.79Line of credit to unaffiliated bank and other
    
    
    7,349
    
    
    
    1,249
    
    
    
    5.53
    
    
    
    
    
    
    
    $
    1,350,330
    
    
    
    1.40
    %
    
    $
    1,627,011
    
    
    
    2.15
    %2003Federal funds purchased and repurchase agreements
    
    $
    1,062,102
    
    
    $
    886,480
    
    
    
    1.14
    %
    
    $
    834,866
    
    
    
    0.96
    %FHLB advances
    
    
    5,000
    
    
    
    2,292
    
    
    
    4.25
    
    
    
    
    
    
    
    Treasury, tax and loan note
    
    
    18,387
    
    
    
    7,155
    
    
    
    0.57
    
    
    
    11,781
    
    
    
    0.57Commercial paper
    
    
    39,431
    
    
    
    37,880
    
    
    
    3.02
    
    
    
    36,949
    
    
    
    2.81Line of credit to unaffiliated bank and other
    
    
    7,350
    
    
    
    1,837
    
    
    
    3.03
    
    
    
    7,349
    
    
    
    2.85$
    935,644
    
    
    
    1.22
    %
    
    $
    890,945
    
    
    
    1.05
    %
     39




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##### Table of Contents



Capital Resources and Dividends
      
    
    Increasing the number of risk weight categories to which credit exposures may be assigned;
    
    Expanding the use of external credit ratings as an indicator of credit risk for externally-rated exposures;
    
    Expanding the range of collateral and guarantors that may qualify a loan for lower risk weights;
    
    Using loan-to-value ratios, credit assessments, and other broad measures of credit
risk for assigning risk-weights to residential mortgages;
    
    Modifying the credit conversion factor for various commitments, including those with
original maturity of under one year;
    
    Requiring that certain loans 90 days or more past due or in a non-accrual status be
assigned a higher risk weight category;
    
    Modifying the risk-based capital requirements for certain commercial real estate
exposures;
    
    Increasing the risk sensitivity of capital requirements for other types of retail,
multifamily, small business, and commercial exposures; and
    
    Assessing a risk-based capital charge to reflect the risks in securitizations with
early amortization provisions that are backed by revolving retail exposures.
   40




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##### Table of Contents



Table 17
Capital Ratios
 Well CapitalizedDecember 31, 2005
    
    RequirementTSFGTotal risk-based capital
    
    
    10.45
    %
    
    
    n/aTier 1 risk-based capital
    
    
    8.86
    
    
    
    n/aLeverage ratio
    
    
    7.07
    
    
    
    n/aCarolina First BankTotal risk-based capital
    
    
    10.74
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    
    8.38
    
    
    
    6.00Leverage ratio
    
    
    6.26
    
    
    
    5.00Mercantile BankTotal risk-based capital
    
    
    10.68
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    
    7.78
    
    
    
    6.00Leverage ratio
    
    
    6.85
    
    
    
    5.00
     Results of Operations
 Net Interest Income
  41




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##### Table of Contents



Table 18
Comparative Average Balances  Yields and Costs
(dollars in thousands)
 Years Ended December 31,2005
    
    
    2004
    
    
    2003Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateAssetsEarning assetsLoans (1)
    
    $
    8,883,837
    
    
    $
    568,222
    
    
    
    6.40
    %
    
    $
    6,927,336
    
    
    $
    376,742
    
    
    
    5.44
    %
    
    $
    4,915,437
    
    
    $
    280,609
    
    
    
    5.71
    %Investment securities, taxable (2)
    
    
    4,000,697
    
    
    
    173,657
    
    
    
    4.34
    
    
    
    3,876,099
    
    
    
    157,171
    
    
    
    4.05
    
    
    
    3,334,410
    
    
    
    128,060
    
    
    
    3.84Investment securities, nontaxable (2) (3)
    
    
    387,654
    
    
    
    17,297
    
    
    
    4.46
    
    
    
    282,103
    
    
    
    12,446
    
    
    
    4.41
    
    
    
    136,914
    
    
    
    7,661
    
    
    
    5.60Total investment securities
    
    
    4,388,351
    
    
    
    190,954
    
    
    
    4.35
    
    
    
    4,158,202
    
    
    
    169,617
    
    
    
    4.08
    
    
    
    3,471,324
    
    
    
    135,721
    
    
    
    3.91Federal funds sold and interest-bearing
bank balances
    
    
    35,768
    
    
    
    1,175
    
    
    
    3.29
    
    
    
    16,413
    
    
    
    229
    
    
    
    1.40
    
    
    
    38,829
    
    
    
    479
    
    
    
    1.23Total earning assets
    
    
    13,307,956
    
    
    $
    760,351
    
    
    
    5.71
    
    
    
    11,101,951
    
    
    $
    546,588
    
    
    
    4.92
    
    
    
    8,425,590
    
    
    $
    416,809
    
    
    
    4.95Non-earning assets
    
    
    1,445,017
    
    
    
    
    
    
    
    
    
    
    
    1,106,118
    
    
    
    
    
    
    
    
    
    
    
    836,067Total assets
    
    $
    14,752,973
    
    
    
    
    
    
    
    
    
    
    $
    12,208,069
    
    
    
    
    
    
    
    
    
    
    $
    9,261,657Liabilities and Shareholders EquityLiabilitiesInterest-bearing liabilitiesInterest-bearing depositsInterest-bearing checking
    
    $
    942,073
    
    
    $
    8,758
    
    
    
    0.93
    
    
    $
    735,461
    
    
    $
    3,641
    
    
    
    0.50
    
    
    $
    645,836
    
    
    $
    3,824
    
    
    
    0.59Savings
    
    
    191,727
    
    
    
    678
    
    
    
    0.35
    
    
    
    183,403
    
    
    
    633
    
    
    
    0.35
    
    
    
    154,202
    
    
    
    674
    
    
    
    0.44Money market
    
    
    2,640,614
    
    
    
    63,069
    
    
    
    2.39
    
    
    
    2,513,187
    
    
    
    41,031
    
    
    
    1.63
    
    
    
    1,614,190
    
    
    
    26,775
    
    
    
    1.66Time deposits, excluding brokered deposits
    
    
    2,125,474
    
    
    
    64,605
    
    
    
    3.04
    
    
    
    1,445,302
    
    
    
    32,619
    
    
    
    2.26
    
    
    
    1,410,297
    
    
    
    36,723
    
    
    
    2.60Total interest-bearing customer deposits (4)
    
    
    5,899,888
    
    
    
    137,110
    
    
    
    2.32
    
    
    
    4,877,353
    
    
    
    77,924
    
    
    
    1.60
    
    
    
    3,824,525
    
    
    
    67,996
    
    
    
    1.78Brokered deposits
    
    
    1,346,608
    
    
    
    59,579
    
    
    
    4.42
    
    
    
    983,831
    
    
    
    46,944
    
    
    
    4.77
    
    
    
    551,930
    
    
    
    28,110
    
    
    
    5.09Total interest-bearing deposits
    
    
    7,246,496
    
    
    
    196,689
    
    
    
    2.71
    
    
    
    5,861,184
    
    
    
    124,868
    
    
    
    2.13
    
    
    
    4,376,455
    
    
    
    96,106
    
    
    
    2.20Borrowings
    
    
    4,514,098
    
    
    
    148,552
    
    
    
    3.29
    
    
    
    4,034,522
    
    
    
    81,523
    
    
    
    2.02
    
    
    
    3,262,645
    
    
    
    67,132
    
    
    
    2.06Total interest-bearing liabilities
    
    
    11,760,594
    
    
    $
    345,241
    
    
    
    2.94
    
    
    
    9,895,706
    
    
    $
    206,391
    
    
    
    2.09
    
    
    
    7,639,100
    
    
    $
    163,238
    
    
    
    2.14Noninterest-bearing liabilitiesNoninterest-bearing deposits
    
    
    1,385,218
    
    
    
    
    
    
    
    
    
    
    
    1,038,182
    
    
    
    
    
    
    
    
    
    
    
    767,957Other noninterest-bearing liabilities
    
    
    144,036
    
    
    
    
    
    
    
    
    
    
    
    110,177
    
    
    
    
    
    
    
    
    
    
    
    101,911Total liabilities
    
    
    13,289,848
    
    
    
    
    
    
    
    
    
    
    
    11,044,065
    
    
    
    
    
    
    
    
    
    
    
    8,508,968Minority
interest in
 consolidated subsidiary(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,898Shareholders equity
    
    
    1,463,125
    
    
    
    
    
    
    
    
    
    
    
    1,164,004
    
    
    
    
    
    
    
    
    
    
    
    709,791Total liabilities and shareholders equity
    
    $
    14,752,973
    
    
    
    
    
    
    
    
    
    
    $
    12,208,069
    
    
    
    
    
    
    
    
    
    
    $
    9,261,657Net interest income (tax equivalent)
    
    
    
    
    
    $
    415,110
    
    
    
    3.12
    %
    
    
    
    
    
    $
    340,197
    
    
    
    3.06
    %
    
    
    
    
    
    $
    253,571
    
    
    
    3.01
    %Less: tax-equivalent adjustment (3)
    
    
    
    
    
    
    6,054
    
    
    
    
    
    
    
    
    
    
    
    4,356
    
    
    
    
    
    
    
    
    
    
    
    2,681Net interest income
    
    
    
    
    
    $
    409,056
    
    
    
    
    
    
    
    
    
    
    $
    335,841
    
    
    
    
    
    
    
    
    
    
    $
    250,890Total cost
of 
customer 
deposits (6)
    
    
    7,285,106
    
    
    
    137,110
    
    
    
    1.88
    
    
    
    5,915,535
    
    
    
    77,924
    
    
    
    1.32
    
    
    
    4,592,482
    
    
    
    67,996
    
    
    
    1.48Total cost
of
 wholesale
 borrowings (7)
    
    
    5,860,706
    
    
    
    208,131
    
    
    
    3.55
    
    
    
    5,018,353
    
    
    
    128,467
    
    
    
    2.56
    
    
    
    3,814,575
    
    
    
    95,242
    
    
    
    2.50
 
 (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)
    
    TSFG defines interest-bearing customer deposits as total interest-bearing deposits less brokered deposits.(5)
    
    The minority interest in consolidated subsidiary pertains to the REIT preferred stock, which qualifies as regulatory capital and pays cumulative dividends. Effective
July 1, 2003, in accordance with the adoption of SFAS 150, TSFG reclassified these amounts to long-term debt.(6)
    
    Customer deposits include total deposits less brokered deposits.(7)
    
    Wholesale borrowings include borrowings and brokered deposits.Note: Average balances are derived from daily balances. 42




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##### Table of Contents



Table 19
Rate/Volume Variance Analysis
(dollars in thousands)
 2005 Compared to 2004
    
    
    2004 Compared to 2003Total
    
    
    Change in
    
    
    Change in
    
    
    Total
    
    
    Change in
    
    
    Change inChange
    
    
    Volume
    
    
    Rate
    
    
    Change
    
    
    Volume
    
    
    RateEarning assetsLoans
    
    $
    191,480
    
    
    $
    117,945
    
    
    $
    73,535
    
    
    $
    96,133
    
    
    $
    109,980
    
    
    $
    (13,847
    )Investment securites, taxable
    
    
    16,486
    
    
    
    5,164
    
    
    
    11,322
    
    
    
    29,111
    
    
    
    21,668
    
    
    
    7,443Investment securites, nontaxable
    
    
    4,851
    
    
    
    4,708
    
    
    
    143
    
    
    
    4,785
    
    
    
    6,691
    
    
    
    (1,906
    )Federal funds sold and interest-
bearing bank balances
    
    
    946
    
    
    
    440
    
    
    
    506
    
    
    
    (250
    )
    
    
    (306
    )
    
    
    56Total interest income
    
    
    213,763
    
    
    
    128,257
    
    
    
    85,506
    
    
    
    129,779
    
    
    
    138,033
    
    
    
    (8,254
    )Interest-bearing liabilitiesInterest-bearing depositsInterest-bearing checking
    
    
    5,117
    
    
    
    1,241
    
    
    
    3,876
    
    
    
    (183
    )
    
    
    491
    
    
    
    (674
    )Savings
    
    
    45
    
    
    
    29
    
    
    
    16
    
    
    
    (41
    )
    
    
    115
    
    
    
    (156
    )Money market
    
    
    22,038
    
    
    
    2,175
    
    
    
    19,863
    
    
    
    14,256
    
    
    
    14,684
    
    
    
    (428
    )Time deposits
    
    
    31,986
    
    
    
    18,416
    
    
    
    13,570
    
    
    
    (4,104
    )
    
    
    892
    
    
    
    (4,996
    )Total interest-bearing customer deposits(1)
    
    
    59,186
    
    
    
    21,861
    
    
    
    37,325
    
    
    
    9,928
    
    
    
    16,182
    
    
    
    (6,254
    )Brokered deposits
    
    
    12,635
    
    
    
    16,258
    
    
    
    (3,623
    )
    
    
    18,834
    
    
    
    20,712
    
    
    
    (1,878
    )Total interest-bearing deposits
    
    
    71,821
    
    
    
    38,119
    
    
    
    33,702
    
    
    
    28,762
    
    
    
    36,894
    
    
    
    (8,132
    )Borrowings
    
    
    67,029
    
    
    
    10,659
    
    
    
    56,370
    
    
    
    14,391
    
    
    
    15,617
    
    
    
    (1,226
    )Total interest expense
    
    
    138,850
    
    
    
    48,778
    
    
    
    90,072
    
    
    
    43,153
    
    
    
    52,511
    
    
    
    (9,358
    )Net interest income
    
    $
    74,913
    
    
    $
    79,479
    
    
    $
    (4,566
    )
    
    $
    86,626
    
    
    $
    85,522
    
    
    $
    1,104
 
 (1)
    
    TSFG defines customer deposits as total deposits less brokered deposits.Note: Changes that are not solely attributable to volume or rate have been allocated to volume and
rate on a pro-rata basis.     43




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##### Table of Contents



Provision for Credit Losses
   Noninterest Income
  Table 20
Components of Noninterest Income
(dollars in thousands)
 Years Ended December 31,2005
    
    
    2004
    
    
    2003Service charges on deposit accounts
    
    $
    42,645
    
    
    $
    36,332
    
    
    $
    30,856Debit card income
    
    
    6,548
    
    
    
    4,211
    
    
    
    2,370Customer service fee income
    
    
    4,049
    
    
    
    2,956
    
    
    
    2,240Total customer fee income
    
    
    53,242
    
    
    
    43,499
    
    
    
    35,466Retail investment services
    
    
    6,902
    
    
    
    4,722
    
    
    
    5,181Insurance income
    
    
    7,447
    
    
    
    4,520
    
    
    
    3,565Trust and investment management income
    
    
    4,819
    
    
    
    3,779
    
    
    
    3,283Benefits administration fees
    
    
    2,693
    
    
    
    2,298
    
    
    
    1,360Total wealth management income
    
    
    21,861
    
    
    
    15,319
    
    
    
    13,389Change in fair value of interest rate swaps
    
    
    (13,278
    )
    
    
    2,550
    
    
    
    (14,237
    )Net cash settlement of interest rate swaps
    
    
    10,360
    
    
    
    27,560
    
    
    
    19,486(Loss) gain on trading and certain other derivative activities
    
    
    (335
    )
    
    
    3,209
    
    
    
    1,843Total (loss) gain on trading and derivative activities
    
    
    (3,253
    )
    
    
    33,319
    
    
    
    7,092Bank-owned life insurance income
    
    
    11,608
    
    
    
    11,215
    
    
    
    8,320Merchant processing income
    
    
    9,817
    
    
    
    8,653
    
    
    
    7,214Mortgage banking income
    
    
    7,434
    
    
    
    6,106
    
    
    
    10,481Impairment of perpetual preferred stock
    
    
    
    
    
    
    (10,367
    )
    
    
    (Loss) gain on sale of available for sale securities
    
    
    (54,978
    )
    
    
    6,998
    
    
    
    11,080Gain on equity investments
    
    
    2,839
    
    
    
    4,723
    
    
    
    5,376Gain on disposition of assets and liabilities
    
    
    
    
    
    
    2,350
    
    
    
    601Other
    
    
    6,640
    
    
    
    3,062
    
    
    
    1,720Total noninterest income
    
    $
    55,210
    
    
    $
    124,877
    
    
    $
    100,739
  44




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##### Table of Contents



Table 21
Components of Mortgage Banking Income
(dollars in thousands)
 Years Ended December 31,2005
    
    
    2004
    
    
    2003Origination income and secondary marketing operations
    
    $
    8,262
    
    
    $
    6,833
    
    
    $
    12,734Mortgage servicing loss, net of related amortization and subservicing payments
    
    
    (828
    )
    
    
    (936
    )
    
    
    (2,235
    )Recovery (impairment) on mortgage servicing rights
    
    
    
    
    
    
    209
    
    
    
    (18
    )Total mortgage banking income
    
    $
    7,434
    
    
    $
    6,106
    
    
    $
    10,481
  45




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##### Table of Contents



Noninterest Expenses
   Table 22
Components of Noninterest Expense
(dollars in thousands)
 2005
    
    
    2004
    
    
    2003Salaries and wages
    
    $
    117,850
    
    
    $
    89,141
    
    
    $
    78,243Employee benefits
    
    
    34,802
    
    
    
    29,269
    
    
    
    22,535Occupancy
    
    
    27,764
    
    
    
    21,878
    
    
    
    18,925Furniture and equipment
    
    
    23,301
    
    
    
    20,938
    
    
    
    17,922Professional services
    
    
    22,820
    
    
    
    14,026
    
    
    
    11,157Advertising and business development
    
    
    8,627
    
    
    
    6,318
    
    
    
    4,367Merchant processing expense
    
    
    7,943
    
    
    
    6,811
    
    
    
    5,622Telecommunications
    
    
    5,802
    
    
    
    4,834
    
    
    
    4,815Amortization of intangibles
    
    
    8,637
    
    
    
    6,043
    
    
    
    3,433Merger-related costs
    
    
    4,009
    
    
    
    7,866
    
    
    
    5,127Employment contract buyouts
    
    
    10,327
    
    
    
    1,080
    
    
    
    512Contribution to foundation
    
    
    683
    
    
    
    
    
    
    
    Impairment loss (recovery) from write-down of assets
    
    
    917
    
    
    
    (277
    )
    
    
    268Conservation grant of land
    
    
    
    
    
    
    3,350
    
    
    
    Loss on early extinguishment of debt
    
    
    7,101
    
    
    
    1,429
    
    
    
    2,699Other
    
    
    47,470
    
    
    
    37,538
    
    
    
    31,545Total noninterest expenses
    
    $
    328,053
    
    
    $
    250,244
    
    
    $
    207,170
  46




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##### Table of Contents



Income Taxes
   Fourth Quarter Summary
   47




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Enterprise Risk Management
   48




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##### Table of Contents




    
    Board oversightThe Board approves risk strategies, policies and parameters; and the
Board directly, or through the Risk Policy Committee, receives regular updates on the key
risks.
    
    Decision-makingThe Enterprise Risk and Capital Management Group, with help from other
functions, designs information processing systems for decision-making to ensure alignment
of business objectives, risk tolerance, and resources and to confirm that there is a
balance between risk and reward for business line management.
    
    AccountabilityBusiness units are responsible for managing risks within their areas, and
the Risk Policy Committee allocates capital in line with their risk profiles.
    
    Independent reviewAll significant risk-taking activities are subject to oversight by
the Risk Policy Committee, the Enterprise Risk and Capital Management Group, and other
units independent of the business lines that generate the risk.
    
    Audit reviewInternal Audit reports independently to the Audit Committee of the Board on
the effectiveness of risk management procedures and on the extent to which internal
controls are in place and being followed.
   Market Risk and Asset/Liability Management
 Market Risk Management.
 
    
    assets and liabilities (including derivative positions) may mature or reprice at different times;
    
    assets and liabilities may reprice at the same time but by different amounts;
    
    short-term and long-term interest rates may change by different amounts;
    
    remaining maturities of assets or liabilities may shorten or lengthen as interest rates change;
    
    the fair value of assets and liabilities may adjust by varying amounts; and
    
    changes in interest rates may have an indirect impact on loan and deposit demand, credit
quality, and other sources of earnings.
    49




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
    
    the timing, magnitude and frequency of interest rate changes;
    
    changes in market conditions;
    
    differences in the yields on earning assets and costs of interest-bearing liabilities; and
    
    actions taken by TSFG to counter such changing market conditions.
 Interest Sensitivity Analysis.
 
    
    a static balance sheet;
    
    as assets and liabilities mature or reprice they are reinvested at current rates and
keep the same characteristics (i.e., remain as they were either variable or fixed rate);
    
    mortgage backed securities prepayments are based on historical industry data;
    
    loan prepayments are based upon historical bank specific analysis;
    
    deposit retention and average lives are based on historical bank specific analysis;
    
    whether callable assets and liabilities are called are based on the implied forward
yield curve for each interest rate scenario; and
    
    management takes no action to counter any change.
  Table 23
Net Interest Income at Risk Analysis
 Annualized Hypothetical Percentage Change inNet Interest IncomeDecember 31,Interest Rate Scenario
    
    2005
    
    20042.00 % (1)
    
    
    2.79
    %
    
    
    (0.86
    )%1.00 (1)
    
    
    1.55
    
    
    
    (0.11
    )Flat
    
    
    
    
    
    
    (1.00) (1)
    
    
    (3.35
    )
    
    
    (3.65
    )Forward Yield Curve(2)
    
    
    (2.24
    )
    
    
    1.00
 
 (1)
    
    The increase 100 and 200 basis points and decrease 100 basis points interest
rate scenarios assume a simultaneous and parallel change in interest rates along the entire
yield curve.(2)
    
    The forward yield curve represents market expectations for interest rates and does
not assume an instantaneous shift in all yield curves. 50




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Table 24
Economic Value of Equity Risk Analysis
 Annualized Hypothetical Percentage Change inEconomic Value of EquityDecember 31,Interest Rate Scenario
    
    2005
    
    20042.00 % (1)
    
    
    (6.41
    )%
    
    
    0.78
    %1.00 (1)
    
    
    (1.51
    )
    
    
    1.18Flat
    
    
    
    
    
    

    (1.00) (1)
    
    
    (3.15
    )
    
    
    (4.72
    )
 
 (1)
    
    The increase 100 and 200 basis points and decrease 100 basis points interest
rate scenarios assume a simultaneous and parallel change in interest rates along the entire
yield curve.  
    
    Utilization of institution specific prepayment assumptions on commercial and consumer loans;
    
    Utilization of institution specific deposit repricing betas, average lives and premiums;
    
    Refinement in the evaluation of call dates on callable instruments; and
    
    Improvement in the cash flows for loans with varying payment schedules.
  
    
    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;
    
    the flat scenarios are base case and are not indicative of historical results;
    
    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 (i.e.,
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.
 Derivatives and Hedging Activities.
  51




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Economic Risk
  Credit Risk
  Liquidity Risks
  Operational Risk
   Compliance and Litigation Risks
   52




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##### Table of Contents



Off-Balance Sheet Arrangements
  Lending Commitments.
    Derivatives.
  Liquidity
  53




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Table 25
Contractual Obligations
(dollars in thousands)
 Payments Due by PeriodLessthan 1
    
    
    1-3
    
    
    4-5
    
    
    After 5Total
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    YearsTime deposits
    
    $
    4,135,397
    
    
    $
    2,569,552
    
    
    $
    434,346
    
    
    $
    286,094
    
    
    $
    845,405Short-term borrowings
    
    
    1,474,365
    
    
    
    1,474,365
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    1,920,000
    
    
    
    16,337
    
    
    
    3,089
    
    
    
    238,113
    
    
    
    1,662,461Operating leases
    
    
    166,775
    
    
    
    15,365
    
    
    
    28,755
    
    
    
    22,650
    
    
    
    100,005Total contractual cash obligations
    
    $
    7,696,537
    
    
    $
    4,075,619
    
    
    $
    466,190
    
    
    $
    546,857
    
    
    $
    2,607,871
      54




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##### Table of Contents



Recently Adopted Accounting Pronouncements
 Accounting for Certain Loans or Debt Securities Acquired in a Transfer
  Meaning of Other-Than-Temporary Impairment
  Accounting Changes and Error Corrections
   Share-Based Payment
  
    
    Employee awards with cash-based settlement or repurchase features, such as a stock
appreciation right with a cash-settlement option;
 55




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
    
    Awards for a fixed dollar amount settleable in the companys stock;
    
    Share-based awards with a net-settlement feature for an amount in excess of the minimum tax withholding; and
    
    Awards that vest or become exercisable based on the achievement of a condition other
than service, performance, or market condition.
  
    
    Share-based awards with net-settlement features for minimum tax withholdings;
    
    Awards that permit a cashless exercise using a broker unrelated to the employer;
    
    Awards containing a put feature that give employees the right to require the company to
repurchase the shares at fair value, when the employee bears the risks and rewards normally
associated with ownership for six months or longer.
  Accounting for Nonmonetary Transactions
  Consolidation of Limited Partnerships
  Concentration of Credit Risk
  Proposed Accounting Pronouncements
 Income Taxes
  56




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##### Table of Contents



Financial Instruments
  Business Combinations
  Regulatory Matters
   57




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures about Market Risk
  58




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 MANAGEMENTS STATEMENT OF FINANCIAL RESPONSIBILITY
     -s- Mack I. Whittle. Jr.
    
    -s- Timothy K. SchoolsMack I. Whittle, Jr.
    
    Timothy K. SchoolsPresident and
    
    Executive Vice PresidentChief Executive Officer
    
    and Chief Financial Officer
 59




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##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
    Accounting for Derivative Instruments and Hedging Activities (SFAS 133)
   -s- Mack I. Whittle. Jr.
    
    -s- Timothy K. SchoolsMack I. Whittle, Jr.
    
    Timothy K. SchoolsPresident and
    
    Executive Vice PresidentChief Executive Officer
    
    and Chief Financial Officer
 60




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 The Board of Directors and Shareholders
The South Financial Group, Inc.:
     Accounting for Derivative Instruments and Hedging Activities
(SFAS 133)
  61




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(KPMG LLP)
 
 62




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 The Board of Directors and Shareholders
The South Financial Group, Inc.:
     (KPMG LLP)
 
 63




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THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 December 31,2005
    
    
    2004AssetsCash and due from banks
    
    $
    341,195
    
    
    $
    199,847Interest-bearing bank balances
    
    
    21,510
    
    
    
    4,669SecuritiesTrading
    
    
    1,402
    
    
    
    Available for sale
    
    
    3,095,567
    
    
    
    4,234,843Held to maturity (market value $62,697 in 2005 and $76,552 in 2004)
    
    
    62,648
    
    
    
    75,245Total securities
    
    
    3,159,617
    
    
    
    4,310,088LoansLoans held for sale
    
    
    37,171
    
    
    
    21,302Loans held for investment
    
    
    9,439,395
    
    
    
    8,107,757Allowance for loan losses
    
    
    (107,767
    )
    
    
    (96,434
    )Net loans
    
    
    9,368,799
    
    
    
    8,032,625Premises and equipment, net
    
    
    193,574
    
    
    
    170,648Accrued interest receivable
    
    
    70,838
    
    
    
    65,174Goodwill
    
    
    647,907
    
    
    
    571,853Other intangible assets
    
    
    43,851
    
    
    
    39,597Other assets
    
    
    471,994
    
    
    
    404,188$
    14,319,285
    
    
    $
    13,798,689Liabilities and Shareholders EquityLiabilitiesDepositsNoninterest-bearing
    
    $
    1,512,508
    
    
    $
    1,237,877Interest-bearing
    
    
    7,721,929
    
    
    
    6,433,067Total deposits
    
    
    9,234,437
    
    
    
    7,670,944Federal funds purchased and repurchase agreements
    
    
    1,421,301
    
    
    
    1,583,495Other short-term borrowings
    
    
    53,064
    
    
    
    43,516Long-term debt
    
    
    1,922,151
    
    
    
    2,972,270Accrued interest payable
    
    
    54,401
    
    
    
    31,943Other liabilities
    
    
    147,024
    
    
    
    103,061Total liabilities
    
    
    12,832,378
    
    
    
    12,405,229Shareholders 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 74,721,461 shares in 2005 and 71,252,346 shares in 2004
    
    
    74,721
    
    
    
    71,252Surplus
    
    
    1,151,005
    
    
    
    1,056,185Retained earnings
    
    
    309,768
    
    
    
    288,002Guarantee of employee stock ownership plan debt and nonvested restricted stock
    
    
    (2,687
    )
    
    
    (3,483
    )Common stock held in trust for deferred compensation
    
    
    (1,404
    )
    
    
    (901
    )Deferred compensation payable in common stock
    
    
    1,404
    
    
    
    901Accumulated other comprehensive loss, net of tax
    
    
    (45,900
    )
    
    
    (18,496
    )Total shareholders equity
    
    
    1,486,907
    
    
    
    1,393,460$
    14,319,285
    
    
    $
    13,798,689
  64




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THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Interest IncomeInterest and fees on loans
    
    $
    568,222
    
    
    $
    376,742
    
    
    $
    280,609Interest and dividends on securities:Taxable
    
    
    173,657
    
    
    
    157,171
    
    
    
    128,060Exempt from federal income taxes
    
    
    11,243
    
    
    
    8,090
    
    
    
    4,980Total interest and dividends on securities
    
    
    184,900
    
    
    
    165,261
    
    
    
    133,040Interest on short-term investments
    
    
    1,175
    
    
    
    229
    
    
    
    479Total interest income
    
    
    754,297
    
    
    
    542,232
    
    
    
    414,128Interest ExpenseInterest on deposits
    
    
    196,689
    
    
    
    124,868
    
    
    
    96,106Interest on short-term borrowings
    
    
    49,381
    
    
    
    18,908
    
    
    
    11,419Interest on long-term debt
    
    
    99,171
    
    
    
    62,615
    
    
    
    55,713Total interest expense
    
    
    345,241
    
    
    
    206,391
    
    
    
    163,238Net Interest Income
    
    
    409,056
    
    
    
    335,841
    
    
    
    250,890Provision for Credit Losses
    
    
    40,592
    
    
    
    34,987
    
    
    
    20,581Net interest income after provision for credit losses
    
    
    368,464
    
    
    
    300,854
    
    
    
    230,309Noninterest Income
    
    
    55,210
    
    
    
    124,877
    
    
    
    100,739Noninterest Expenses
    
    
    328,053
    
    
    
    250,244
    
    
    
    207,170Income before income taxes, minority interest and discontinued operations
    
    
    95,621
    
    
    
    175,487
    
    
    
    123,878Income taxes
    
    
    25,404
    
    
    
    55,489
    
    
    
    38,283Income before minority interest and discontinued operations
    
    
    70,217
    
    
    
    119,998
    
    
    
    85,595Minority interest in consolidated subsidiary, net of income tax
    
    
    
    
    
    
    
    
    
    
    (2,012
    )Income from continuing operations
    
    
    70,217
    
    
    
    119,998
    
    
    
    83,583Discontinued operations, net of income tax
    
    
    (396
    )
    
    
    (490
    )
    
    
    Net Income
    
    $
    69,821
    
    
    $
    119,508
    
    
    $
    83,583Average Common Shares Outstanding, Basic
    
    
    73,307
    
    
    
    64,592
    
    
    
    49,204Average Common Shares Outstanding, Diluted
    
    
    74,595
    
    
    
    66,235
    
    
    
    50,328Per Common Share, BasicIncome from continuing operations
    
    $
    0.96
    
    
    $
    1.86
    
    
    $
    1.70Discontinued operations
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    Net income
    
    $
    0.95
    
    
    $
    1.85
    
    
    $
    1.70Per Common Share, DilutedIncome from continuing operations
    
    $
    0.94
    
    
    $
    1.81
    
    
    $
    1.66Discontinued operations
    
    
    
    
    
    
    (0.01
    )
    
    
    Net income
    
    $
    0.94
    
    
    $
    1.80
    
    
    $
    1.66
  65




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THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME
(dollars in thousands, except per share data)
 Retained
    
    
    AccumulatedShares of
    
    
    
    
    
    
    
    
    
    
    Earnings
    
    
    OtherCommon
    
    
    Common
    
    
    
    
    
    
    and
    
    
    ComprehensiveStock
    
    
    Stock
    
    
    Surplus
    
    
    Other*
    
    
    Income (Loss)
    
    
    TotalBalance, December 31, 2002
    
    
    47,347,375
    
    
    $
    47,347
    
    
    $
    427,448
    
    
    $
    152,738
    
    
    $
    24,150
    
    
    $
    651,683Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,583
    
    
    
    
    
    
    
    83,583Other comprehensive loss, net of tax of $16,461
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,296
    )
    
    
    (31,296
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,287Cash dividends declared ($0.57 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,327
    )
    
    
    
    
    
    
    (29,327
    )Common stock activity:Issuance of stock, net
    
    
    6,325,000
    
    
    
    6,325
    
    
    
    154,758
    
    
    
    
    
    
    
    
    
    
    
    161,083Acquisitions
    
    
    5,634,760
    
    
    
    5,635
    
    
    
    139,074
    
    
    
    454
    
    
    
    
    
    
    
    145,163Repurchase of stock
    
    
    (1,274,808
    )
    
    
    (1,275
    )
    
    
    (27,283
    )
    
    
    
    
    
    
    
    
    
    
    (28,558
    )Exercise of stock options, including
income tax benefit of $2,358
    
    
    792,757
    
    
    
    793
    
    
    
    11,708
    
    
    
    
    
    
    
    
    
    
    
    12,501Dividend reinvestment plan
    
    
    135,330
    
    
    
    135
    
    
    
    2,921
    
    
    
    
    
    
    
    
    
    
    
    3,056Restricted stock plan
    
    
    66,860
    
    
    
    67
    
    
    
    3,232
    
    
    
    (1
    )
    
    
    
    
    
    
    3,298Employee stock purchase plan
    
    
    23,511
    
    
    
    23
    
    
    
    373
    
    
    
    
    
    
    
    
    
    
    
    396Director compensation
    
    
    13,590
    
    
    
    14
    
    
    
    330
    
    
    
    
    
    
    
    
    
    
    
    344Common stock purchased by trust for
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )
    
    
    
    
    
    
    (151
    )Deferred compensation payable in common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    151Miscellaneous
    
    
    
    
    
    
    
    
    
    
    227
    
    
    
    146
    
    
    
    
    
    
    
    373Balance, December 31, 2003
    
    
    59,064,375
    
    
    
    59,064
    
    
    
    712,788
    
    
    
    207,593
    
    
    
    (7,146
    )
    
    
    972,299Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,508
    
    
    
    
    
    
    
    119,508Other comprehensive loss, net of tax of $6,667
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,350
    )
    
    
    (11,350
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,158Cash dividends declared ($0.61 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,594
    )
    
    
    
    
    
    
    (41,594
    )Common stock activity:Acquisitions
    
    
    10,754,557
    
    
    
    10,754
    
    
    
    318,733
    
    
    
    241
    
    
    
    
    
    
    
    329,728Exercise of stock options, including
income tax benefit of $5,421
    
    
    1,098,105
    
    
    
    1,098
    
    
    
    17,042
    
    
    
    
    
    
    
    
    
    
    
    18,140Dividend reinvestment plan
    
    
    117,660
    
    
    
    118
    
    
    
    3,135
    
    
    
    
    
    
    
    
    
    
    
    3,253Restricted stock plan
    
    
    197,607
    
    
    
    198
    
    
    
    3,901
    
    
    
    (1,478
    )
    
    
    
    
    
    
    2,621Employee stock purchase plan
    
    
    11,393
    
    
    
    11
    
    
    
    306
    
    
    
    
    
    
    
    
    
    
    
    317Director compensation
    
    
    8,659
    
    
    
    9
    
    
    
    240
    
    
    
    
    
    
    
    
    
    
    
    249Common stock purchased by trust for
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (750
    )
    
    
    
    
    
    
    (750
    )Deferred compensation payable in common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    
    
    
    
    750Miscellaneous
    
    
    (10
    )
    
    
    
    
    
    
    40
    
    
    
    249
    
    
    
    
    
    
    
    289Balance, December 31, 2004
    
    
    71,252,346
    
    
    
    71,252
    
    
    
    1,056,185
    
    
    
    284,519
    
    
    
    (18,496
    )
    
    
    1,393,460Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,821
    
    
    
    
    
    
    
    69,821Other comprehensive loss, net of tax of $16,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,404
    )
    
    
    (27,404
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,417Cash dividends declared ($0.65 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,055
    )
    
    
    
    
    
    
    (48,055
    )Common stock activity:Acquisitions
    
    
    2,341,462
    
    
    
    2,341
    
    
    
    75,054
    
    
    
    241
    
    
    
    
    
    
    
    77,636Exercise of stock options, including
income tax benefit of $4,306
    
    
    890,757
    
    
    
    891
    
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    15,391Dividend reinvestment plan
    
    
    129,176
    
    
    
    129
    
    
    
    3,335
    
    
    
    
    
    
    
    
    
    
    
    3,464Restricted stock plan
    
    
    75,218
    
    
    
    75
    
    
    
    899
    
    
    
    314
    
    
    
    
    
    
    
    1,288Employee stock purchase plan
    
    
    17,903
    
    
    
    18
    
    
    
    458
    
    
    
    
    
    
    
    
    
    
    
    476Director compensation
    
    
    14,599
    
    
    
    15
    
    
    
    413
    
    
    
    
    
    
    
    
    
    
    
    428Common stock purchased by trust for
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (503
    )
    
    
    
    
    
    
    (503
    )Deferred compensation payable in common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    503
    
    
    
    
    
    
    
    503Miscellaneous
    
    
    
    
    
    
    
    
    
    
    161
    
    
    
    241
    
    
    
    
    
    
    
    402Balance, December 31, 2005
    
    
    74,721,461
    
    
    $
    74,721
    
    
    $
    1,151,005
    
    
    $
    307,081
    
    
    $
    (45,900
    )
    
    $
    1,486,907
 
 *
    
    Other includes guarantee of employee stock ownership plan debt, nonvested restricted stock, and deferred compensation.  66




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THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Cash Flows from Operating ActivitiesNet income
    
    $
    69,821
    
    
    $
    119,508
    
    
    $
    83,583Adjustments to reconcile net income to net cash provided by
operating activitiesDepreciation, amortization, and accretion, net
    
    
    50,265
    
    
    
    52,733
    
    
    
    54,180Provision for credit losses
    
    
    40,592
    
    
    
    34,987
    
    
    
    20,581Impairment of perpetual preferred stock
    
    
    
    
    
    
    10,367
    
    
    
    Loss (gain) on sale of available for sale securities
    
    
    54,978
    
    
    
    (6,998
    )
    
    
    (11,080
    )Gain on equity investments
    
    
    (2,839
    )
    
    
    (4,723
    )
    
    
    (5,376
    )Loss (gain) on trading and certain derivative activities
    
    
    13,613
    
    
    
    (5,759
    )
    
    
    12,394Gain on disposition of assets and liabilities
    
    
    
    
    
    
    (2,350
    )
    
    
    (601
    )Gain on sale of loans
    
    
    (6,607
    )
    
    
    (6,818
    )
    
    
    (7,734
    )(Gain) loss on disposition of premises and equipment
    
    
    (458
    )
    
    
    161
    
    
    
    (64
    )Loss on disposition of other real estate owned
    
    
    43
    
    
    
    485
    
    
    
    712Contribution to foundation
    
    
    683
    
    
    
    
    
    
    
    Conservation grant of land
    
    
    
    
    
    
    3,350
    
    
    
    Impairment loss (recovery) from write-down of assets
    
    
    917
    
    
    
    (277
    )
    
    
    449Impairment (recovery) loss from write-down of mortgage servicing rights
    
    
    
    
    
    
    (209
    )
    
    
    18Loss on early extinguishment of debt
    
    
    7,101
    
    
    
    1,429
    
    
    
    2,699Deferred income tax (benefit) expense
    
    
    (11,854
    )
    
    
    9,433
    
    
    
    (7,993
    )Minority interest in consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    2,012Trading account assets, net
    
    
    (1,077
    )
    
    
    549
    
    
    
    (1,403
    )Origination of loans held for sale
    
    
    (526,490
    )
    
    
    (557,445
    )
    
    
    (620,154
    )Sale of loans held for sale and principal repayments
    
    
    514,755
    
    
    
    625,684
    
    
    
    668,282Other assets, net
    
    
    (44,777
    )
    
    
    (33,959
    )
    
    
    (10,963
    )Other liabilities, net
    
    
    58,730
    
    
    
    (11,046
    )
    
    
    4,056Net cash provided by operating activities
    
    
    217,396
    
    
    
    229,102
    
    
    
    183,598Cash Flows from Investing ActivitiesSale of securities available for sale
    
    
    2,903,526
    
    
    
    1,826,897
    
    
    
    1,717,382Maturity, redemption, call, or principal repayments of securities available for sale
    
    
    992,708
    
    
    
    1,417,347
    
    
    
    2,343,755Maturity, redemption, call, or principal repayments of securities held to maturity
    
    
    12,385
    
    
    
    15,114
    
    
    
    37,260Purchase of securities available for sale
    
    
    (2,869,204
    )
    
    
    (3,617,212
    )
    
    
    (5,466,725
    )Purchase of securities held to maturity
    
    
    
    
    
    
    
    
    
    
    (42,238
    )Purchase of bank-owned life insurance
    
    
    
    
    
    
    (15,000
    )
    
    
    (25,000
    )Origination of loans held for investment, net of principal repayments
    
    
    (1,069,808
    )
    
    
    (982,225
    )
    
    
    (570,435
    )Sale of other real estate owned
    
    
    7,850
    
    
    
    12,477
    
    
    
    14,904Sale of premises and equipment
    
    
    11,338
    
    
    
    4,166
    
    
    
    2,620Sale of long-lived assets held for sale
    
    
    
    
    
    
    908
    
    
    
    Purchase of premises and equipment
    
    
    (51,577
    )
    
    
    (30,749
    )
    
    
    (16,494
    )Disposition of assets and liabilities, net
    
    
    
    
    
    
    (1,394
    )
    
    
    (5,738
    )Cash equivalents acquired for branch acquisition
    
    
    
    
    
    
    6,919
    
    
    
    Cash equivalents acquired, net of payment for purchase acquisitions
    
    
    71,101
    
    
    
    241,215
    
    
    
    31,435Net cash provided by (used for) investing activities
    
    
    8,319
    
    
    
    (1,121,537
    )
    
    
    (1,979,274
    )
  67




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THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Cash Flows from Financing ActivitiesDeposits, net
    
    $
    1,240,031
    
    
    $
    91,591
    
    
    $
    677,018Federal funds purchased and repurchase agreements, net
    
    
    (208,523
    )
    
    
    629,351
    
    
    
    (291,182
    )Other short-term borrowings, net
    
    
    8,458
    
    
    
    (13,563
    )
    
    
    (33,838
    )Issuance of long-term debt
    
    
    1,638,743
    
    
    
    1,321,134
    
    
    
    1,295,295Payment of long-term debt
    
    
    (2,708,239
    )
    
    
    (1,094,134
    )
    
    
    (69,756
    )Prepayment penalty on early extinguishment of debt
    
    
    (7,101
    )
    
    
    (1,429
    )
    
    
    (2,699
    )Issuance of common stock, net
    
    
    
    
    
    
    
    
    
    
    161,083Cash dividends paid on common stock
    
    
    (46,750
    )
    
    
    (39,068
    )
    
    
    (27,089
    )Cash dividends paid on minority interest
    
    
    
    
    
    
    
    
    
    
    (3,997
    )Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (28,558
    )Other common stock activity
    
    
    15,855
    
    
    
    16,827
    
    
    
    14,312Net cash (used for) provided by financing activities
    
    
    (67,526
    )
    
    
    910,709
    
    
    
    1,690,589Net change in cash and cash equivalents
    
    
    158,189
    
    
    
    18,274
    
    
    
    (105,087
    )Cash and cash equivalents at beginning of year
    
    
    204,516
    
    
    
    186,242
    
    
    
    291,329Cash and cash equivalents at end of year
    
    $
    362,705
    
    
    $
    204,516
    
    
    $
    186,242Supplemental Cash Flow DataInterest paid
    
    $
    311,935
    
    
    $
    178,350
    
    
    $
    139,640Income taxes paid
    
    
    45,072
    
    
    
    57,863
    
    
    
    37,217Significant non-cash investing and financing transactions:Debt associated with trust preferred securities transferred
to long-term debt
    
    
    
    
    
    
    
    
    
    
    115,500Minority interest in consolidated subsidiary reclassified to
long-term debt
    
    
    
    
    
    
    
    
    
    
    89,800Change in unrealized loss on available for sale securities
    
    
    (44,111
    )
    
    
    (18,017
    )
    
    
    (47,757
    )Loans transferred to other real estate owned
    
    
    8,323
    
    
    
    10,868
    
    
    
    16,070Security sales, redemptions and calls settled subsequent to period-end
    
    
    2,569
    
    
    
    
    
    
    
    Business combinations:Fair value of assets acquired (includes cash and cash equivalents)
    
    
    515,276
    
    
    
    2,117,114
    
    
    
    1,043,995Fair value of common stock issued and stock options recognized
    
    
    (77,636
    )
    
    
    (329,728
    )
    
    
    (145,163
    )Basis of stock investment in acquiree, shares canceled effective with the
acquisition closing date
    
    
    
    
    
    
    (8,970
    )
    
    
    Cash paid
    
    
    (36,257
    )
    
    
    (4
    )
    
    
    (24
    )Liabilities assumed
    
    
    401,383
    
    
    
    1,778,412
    
    
    
    898,808
  68




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##### Table of Contents



THE SOUTH FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Summary of Significant Accounting Policies
  Nature of Operations
  Accounting Estimates and Assumptions
  Principles of Consolidation
   69




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##### Table of Contents



Reclassifications
  Business Combinations
  Cash and Cash Equivalents
  Securities
      70




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##### Table of Contents



Loans Held for Sale
   Loans Held for Investment
    71




---



##### Table of Contents



Allowance for Loan Losses and Reserve for Unfunded Lending Commitments
    Concentrations of Credit Risk
  Premises and Equipment
   Impairment of Long-Lived Assets
   72




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##### Table of Contents



Intangible Assets
    Mortgage Servicing Rights
  Derivative Financial Instruments and Hedging Activities
   73




---



##### Table of Contents



74




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##### Table of Contents



Other Investments
     75




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##### Table of Contents



Bank-Owned Life Insurance
  Foreclosed Property
   Debt Issuance Costs
  Borrowed Funds
  Commitments and Contingencies
  Deposit Accounts
   76




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##### Table of Contents



Income Taxes
   Comprehensive Income
  Stock-Based Compensation
   77




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##### Table of Contents



2005
    
    
    2004
    
    
    2003Net IncomeNet income, as reported
    
    $
    69,821
    
    
    $
    119,508
    
    
    $
    83,583Deduct:Total stock-based employee compensation expense
determined under fair value based method for
all option awards, net of income tax
    
    
    (2,381
    )
    
    
    (2,452
    )
    
    
    (2,822
    )Pro forma net income
    
    $
    67,440
    
    
    $
    117,056
    
    
    $
    80,761Basic Earnings Per ShareAs reported
    
    $
    0.95
    
    
    $
    1.85
    
    
    $
    1.70Pro forma
    
    
    0.92
    
    
    
    1.81
    
    
    
    1.64Diluted Earnings Per ShareAs reported
    
    $
    0.94
    
    
    $
    1.80
    
    
    $
    1.66Pro forma
    
    
    0.90
    
    
    
    1.77
    
    
    
    1.60
  2005
    
    
    2004
    
    
    2003Expected life (in years)
    
    
    6.71
    
    
    
    7.09
    
    
    
    7.25Expected volatility
    
    
    30.40
    %
    
    
    34.85
    %
    
    
    33.77
    %Risk-free interest rate
    
    
    4.30
    
    
    
    3.78
    
    
    
    3.51Expected dividend yield
    
    
    2.20
    
    
    
    2.04
    
    
    
    2.80Weighted-average fair value of options granted
during the period
    
    $
    8.79
    
    
    $
    10.62
    
    
    $
    7.69
 Per Share Data
  Business Segments
  Risk and Uncertainties
  78




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##### Table of Contents



Recently Adopted Accounting Pronouncements
 Accounting for Certain Loans or Debt Securities Acquired in a Transfer
  Meaning of Other-Than-Temporary Impairment
  Accounting Changes and Error Corrections
   Share-Based Payment
  
    
    Employee awards with cash-based settlement or repurchase features, such as a stock
appreciation right with a cash-
 79




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##### Table of Contents



settlement option;
    
    Awards for a fixed dollar amount settleable in the companys stock;
    
    Share-based awards with a net-settlement feature for an amount in excess of the minimum tax withholding; and
    
    Awards that vest or become exercisable based on the achievement of a condition other
than service, performance, or market condition.
  
    
    Share-based awards with net-settlement features for minimum tax withholdings;
    
    Awards that permit a cashless exercise using a broker unrelated to the employer;
    
    Awards containing a put feature that give employees the right to require the company to
repurchase the shares at fair value, when the employee bears the risks and rewards normally
associated with ownership for six months or longer.
  Accounting for Nonmonetary Transactions
  Consolidation of Limited Partnerships
  Concentration of Credit Risk
  Proposed Accounting Pronouncements
 Income Taxes
  80




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##### Table of Contents



Financial Instruments
  Business Combinations
  Regulatory Matters
   81




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##### Table of Contents



Note 2. Accumulated Other Comprehensive (Loss) Income
  2005
    
    
    2004
    
    
    2003Unrealized (Losses) Gains on Available for Sale SecuritiesBalance at beginning of year
    
    $
    (18,496
    )
    
    $
    (7,146
    )
    
    $
    24,150Other comprehensive income (loss):Unrealized holding losses arising during the period
    
    
    (96,250
    )
    
    
    (16,663
    )
    
    
    (31,301
    )Income tax benefit
    
    
    35,605
    
    
    
    6,260
    
    
    
    10,480Less:
Reclassification adjustment for losses (gains) included in net income
    
    
    52,139
    
    
    
    (1,354
    )
    
    
    (16,456
    )Income tax (benefit) expense
    
    
    (19,348
    )
    
    
    407
    
    
    
    5,981(27,854
    )
    
    
    (11,350
    )
    
    
    (31,296
    )Balance at end of year
    
    
    (46,350
    )
    
    
    (18,496
    )
    
    
    (7,146
    )Unrealized Gains on Cash Flow HedgesBalance at beginning of year
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income:Unrealized gain on change in fair values
    
    
    692
    
    
    
    
    
    
    
    Income tax expense
    
    
    (242
    )
    
    
    
    
    
    
    450
    
    
    
    
    
    
    
    Balance at end of year
    
    
    450
    
    
    
    
    
    
    
    $
    (45,900
    )
    
    $
    (18,496
    )
    
    $
    (7,146
    )Total other comprehensive loss
    
    $
    (27,404
    )
    
    $
    (11,350
    )
    
    $
    (31,296
    )Net income
    
    
    69,821
    
    
    
    119,508
    
    
    
    83,583Comprehensive income
    
    $
    42,417
    
    
    $
    108,158
    
    
    $
    52,287
 82




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##### Table of Contents



Note 3. Supplemental Financial Information to Consolidated Statements of Income
  2005
    
    
    2004
    
    
    2003Noninterest IncomeService charges on deposit accounts
    
    $
    42,645
    
    
    $
    36,332
    
    
    $
    30,856Debit card income
    
    
    6,548
    
    
    
    4,211
    
    
    
    2,370Customer service fee income
    
    
    4,049
    
    
    
    2,956
    
    
    
    2,240Total customer fee income
    
    
    53,242
    
    
    
    43,499
    
    
    
    35,466Retail investment services
    
    
    6,902
    
    
    
    4,722
    
    
    
    5,181Insurance income
    
    
    7,447
    
    
    
    4,520
    
    
    
    3,565Trust and investment management income
    
    
    4,819
    
    
    
    3,779
    
    
    
    3,283Benefits administration fees
    
    
    2,693
    
    
    
    2,298
    
    
    
    1,360Total wealth management income
    
    
    21,861
    
    
    
    15,319
    
    
    
    13,389(Loss) gain on trading and derivative activities
    
    
    (3,253
    )
    
    
    33,319
    
    
    
    7,092Bank-owned life insurance income
    
    
    11,608
    
    
    
    11,215
    
    
    
    8,320Merchant processing income
    
    
    9,817
    
    
    
    8,653
    
    
    
    7,214Mortgage banking income
    
    
    7,434
    
    
    
    6,106
    
    
    
    10,481Impairment of perpetual preferred stock
    
    
    
    
    
    
    (10,367
    )
    
    
    (Loss) gain on sale of available for sale securities
    
    
    (54,978
    )
    
    
    6,998
    
    
    
    11,080Gain on equity investments
    
    
    2,839
    
    
    
    4,723
    
    
    
    5,376Gain on disposition of assets and liabilities
    
    
    
    
    
    
    2,350
    
    
    
    601Other
    
    
    6,640
    
    
    
    3,062
    
    
    
    1,720Total noninterest income
    
    $
    55,210
    
    
    $
    124,877
    
    
    $
    100,739Noninterest ExpensesSalaries and wages
    
    $
    128,177
    
    
    $
    90,221
    
    
    $
    78,755Employee benefits
    
    
    34,802
    
    
    
    29,269
    
    
    
    22,535Occupancy
    
    
    27,764
    
    
    
    21,878
    
    
    
    18,925Furniture and equipment
    
    
    23,301
    
    
    
    20,938
    
    
    
    17,922Professional services
    
    
    22,820
    
    
    
    14,026
    
    
    
    11,012Advertising and business development
    
    
    8,627
    
    
    
    6,318
    
    
    
    4,367Merchant processing expense
    
    
    7,943
    
    
    
    6,811
    
    
    
    5,622Telecommunications
    
    
    5,802
    
    
    
    4,834
    
    
    
    4,815Amortization of intangibles
    
    
    8,637
    
    
    
    6,043
    
    
    
    3,433Merger-related costs
    
    
    4,009
    
    
    
    7,866
    
    
    
    5,127Contribution to foundation
    
    
    683
    
    
    
    
    
    
    
    Impairment loss (recovery) from write-down of assets
    
    
    917
    
    
    
    (277
    )
    
    
    268Conservation grant of land
    
    
    
    
    
    
    3,350
    
    
    
    Loss on early extinguishment of debt
    
    
    7,101
    
    
    
    1,429
    
    
    
    2,699Other
    
    
    47,470
    
    
    
    37,538
    
    
    
    31,690Total noninterest expenses
    
    $
    328,053
    
    
    $
    250,244
    
    
    $
    207,170
 83




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##### Table of Contents



Note 4. Business Combinations
 Pointe Financial Corporation
    May 6, 2005Purchase price
    
    $
    97,926Fair value of net assets acquired, net of direct acquisition costs and deferred income taxes
    
    
    26,762Excess of purchase price over fair value of net assets acquired
    
    
    71,164Core deposit intangible
    
    
    6,689Goodwill
    
    $
    64,475
   Lossing Insurance Agency
  Bowditch Insurance Corporation
  84




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##### Table of Contents



Koss Olinger
  CNB Florida Bancshares, Inc. and Florida Banks, Inc.
     Summit Title, LLC
  MountainBank Financial Corporation
  85




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##### Table of Contents



Allied Assurance
  American Pensions, Inc.
  Amortization of Premiums and Discounts
  86




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##### Table of Contents



Pro Forma Financial Information
  Year Ended December 31,2004
    
    
    2003Net interest income
    
    $
    368,760
    
    
    $
    333,731Noninterest income, excluding wholesale mortgage banking income
    
    
    127,713
    
    
    
    115,428Wholesale mortgage banking income
    
    
    2,266
    
    
    
    12,124Employment contract termination costs resulting from business combination
and paid by acquiree
    
    
    9,749
    
    
    
    9,749Net income
    
    
    105,562
    
    
    
    90,277Per common share:Net income, basic
    
    
    1.50
    
    
    
    1.41Net income, diluted
    
    
    1.46
    
    
    
    1.36
  Note 5. Branch Acquisition
  Note 6. Disposition of Assets and Liabilities
    87




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##### Table of Contents



Note 7. Discontinued Operations
  Note 8. Restrictions on Cash and Due From Banks
   88




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##### Table of Contents



Note 9. Securities
  2005Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueSecurities Available for SaleU.S. Treasury
    
    $
    184,211
    
    
    $
    103
    
    
    $
    1,846
    
    
    $
    182,468U.S. Government agencies
    
    
    666,078
    
    
    
    572
    
    
    
    10,208
    
    
    
    656,442Mortgage-backed securities
    
    
    1,745,088
    
    
    
    329
    
    
    
    56,555
    
    
    
    1,688,862State and municipals
    
    
    379,686
    
    
    
    419
    
    
    
    6,213
    
    
    
    373,892Other investments
    
    
    194,139
    
    
    
    2,170
    
    
    
    2,406
    
    
    
    193,903$
    3,169,202
    
    
    $
    3,593
    
    
    $
    77,228
    
    
    $
    3,095,567Securities Held to MaturityState and municipals
    
    $
    62,548
    
    
    $
    567
    
    
    $
    518
    
    
    $
    62,597Other investments
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100$
    62,648
    
    
    $
    567
    
    
    $
    518
    
    
    $
    62,697
 2004Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueSecurities Available for SaleU.S. Treasury
    
    $
    236,804
    
    
    $
    288
    
    
    $
    2,554
    
    
    $
    234,538U.S. Government agencies
    
    
    934,442
    
    
    
    1,187
    
    
    
    5,583
    
    
    
    930,046Mortgage-backed securities
    
    
    2,530,056
    
    
    
    3,911
    
    
    
    31,527
    
    
    
    2,502,440State and municipals
    
    
    272,949
    
    
    
    1,475
    
    
    
    1,889
    
    
    
    272,535Other investments
    
    
    290,116
    
    
    
    5,951
    
    
    
    783
    
    
    
    295,284$
    4,264,367
    
    
    $
    12,812
    
    
    $
    42,336
    
    
    $
    4,234,843Securities Held to MaturityState and municipals
    
    $
    75,145
    
    
    $
    1,488
    
    
    $
    181
    
    
    $
    76,452Other investments
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100$
    75,245
    
    
    $
    1,488
    
    
    $
    181
    
    
    $
    76,552
  89




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##### Table of Contents



December 31, 2005Amortized
    
    
    EstimatedCost
    
    
    Fair ValueSecurities Available for SaleDue in one year or less
    
    $
    55,379
    
    
    $
    55,112Due after one year through five years
    
    
    986,347
    
    
    
    960,268Due after five years through ten years
    
    
    1,142,451
    
    
    
    1,117,489Due after ten years
    
    
    905,882
    
    
    
    881,557No contractual maturity
    
    
    79,143
    
    
    
    81,141$
    3,169,202
    
    
    $
    3,095,567Securities Held to MaturityDue in one year or less
    
    $
    9,095
    
    
    $
    9,091Due after one year through five years
    
    
    37,796
    
    
    
    37,940Due after five years through ten years
    
    
    15,013
    
    
    
    14,944Due after ten years
    
    
    744
    
    
    
    722No contractual maturity
    
    
    
    
    
    
    $
    62,648
    
    
    $
    62,697
  2005
    
    
    2004
    
    
    2003Gross realized gains
    
    $
    6,003
    
    
    $
    15,394
    
    
    $
    19,132Gross realized losses
    
    
    (58,142
    )
    
    
    (3,673
    )
    
    
    (2,676
    )Net (loss) gain on available for sale securities and equity investments
    
    $
    (52,139
    )
    
    $
    11,721
    
    
    $
    16,456Sale proceeds
    
    $
    2,903,526
    
    
    $
    1,826,897
    
    
    $
    1,717,382
    90




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##### Table of Contents



2005Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesSecurities Available for SaleU.S. Treasury
    
    $
    128,771
    
    
    $
    136
    
    
    $
    51,590
    
    
    $
    1,710
    
    
    $
    180,361
    
    
    $
    1,846U.S. Government agencies
    
    
    478,059
    
    
    
    7,975
    
    
    
    50,368
    
    
    
    2,233
    
    
    
    528,427
    
    
    
    10,208Mortgage-backed securities
    
    
    938,640
    
    
    
    33,544
    
    
    
    584,212
    
    
    
    23,011
    
    
    
    1,522,852
    
    
    
    56,555State and municipals
    
    
    199,300
    
    
    
    2,801
    
    
    
    141,907
    
    
    
    3,412
    
    
    
    341,207
    
    
    
    6,213Other investments
    
    
    66,092
    
    
    
    1,355
    
    
    
    32,746
    
    
    
    1,051
    
    
    
    98,838
    
    
    
    2,406$
    1,810,862
    
    
    $
    45,811
    
    
    $
    860,823
    
    
    $
    31,417
    
    
    $
    2,671,685
    
    
    $
    77,228Securities Held to MaturityState and municipals
    
    $
    9,847
    
    
    $
    188
    
    
    $
    16,084
    
    
    $
    330
    
    
    $
    25,931
    
    
    $
    518
 2004Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesSecurities Available for SaleU.S. Treasury
    
    $
    176,438
    
    
    $
    1,553
    
    
    $
    46,394
    
    
    $
    1,001
    
    
    $
    222,832
    
    
    $
    2,554U.S. Government agencies
    
    
    435,567
    
    
    
    3,335
    
    
    
    111,766
    
    
    
    2,248
    
    
    
    547,333
    
    
    
    5,583Mortgage-backed securities
    
    
    1,340,913
    
    
    
    19,459
    
    
    
    621,984
    
    
    
    12,068
    
    
    
    1,962,897
    
    
    
    31,527State and municipals
    
    
    130,403
    
    
    
    1,210
    
    
    
    44,037
    
    
    
    679
    
    
    
    174,440
    
    
    
    1,889Other investments
    
    
    51,524
    
    
    
    591
    
    
    
    14,317
    
    
    
    192
    
    
    
    65,841
    
    
    
    783$
    2,134,845
    
    
    $
    26,148
    
    
    $
    838,498
    
    
    $
    16,188
    
    
    $
    2,973,343
    
    
    $
    42,336Securities Held to MaturityState and municipals
    
    $
    13,786
    
    
    $
    37
    
    
    $
    12,116
    
    
    $
    144
    
    
    $
    25,902
    
    
    $
    181
    91




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##### Table of Contents



Note 10. Loans
  2005
    
    
    2004Commercial, financial and agricultural
    
    $
    1,936,963
    
    
    $
    1,584,198Real estate  construction
    
    
    1,497,605
    
    
    
    1,007,061Real estate  residential mortgages (1-4 family)
    
    
    1,493,317
    
    
    
    1,278,310Commercial secured by real estate
    
    
    3,441,576
    
    
    
    3,109,242Consumer
    
    
    1,069,934
    
    
    
    1,128,946Loans held for investment
    
    
    9,439,395
    
    
    
    8,107,757Loans held for sale
    
    
    37,171
    
    
    
    21,302Allowance for loan losses
    
    
    (107,767
    )
    
    
    (96,434
    )Net loans
    
    $
    9,368,799
    
    
    $
    8,032,625Included in the above:Nonaccrual loans
    
    $
    33,255
    
    
    $
    45,082Loans past due 90 days still accruing interest
    
    $
    4,548
    
    
    $
    3,764
   2005
    
    2004
    
    2003Impaired loans (year end)
    
    $
    16,911
    
    
    $
    28,836
    
    
    $
    47,137Related allowance (year end)
    
    
    4,336
    
    
    
    11,129
    
    
    
    9,689Interest income recognized
    
    
    
    
    
    
    
    
    
    
    Foregone interest
    
    
    1,200
    
    
    
    1,935
    
    
    
    2,887
    92




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##### Table of Contents



Note 11. Allowance for Credit Losses
  2005
    
    
    2004
    
    
    2003Allowance for loan lossesBalance at beginning of year
    
    $
    96,434
    
    
    $
    72,811
    
    
    $
    69,625Purchase accounting adjustments
    
    
    3,741
    
    
    
    20,682
    
    
    
    12,690Allowance adjustment for loans sold
    
    
    
    
    
    
    (506
    )
    
    
    Provision for loan losses
    
    
    39,493
    
    
    
    34,979
    
    
    
    20,755Loans charged off
    
    
    (39,214
    )
    
    
    (37,003
    )
    
    
    (34,624
    )Recoveries of loans previously charged off
    
    
    7,313
    
    
    
    5,471
    
    
    
    4,365Balance at end of year
    
    $
    107,767
    
    
    $
    96,434
    
    
    $
    72,811Reserve for unfunded lending commitmentsBalance at beginning of year
    
    $
    484
    
    
    $
    476
    
    
    $
    650Provision for (reversal of) unfunded lending commitments
    
    
    1,099
    
    
    
    8
    
    
    
    (174
    )Balance at end of year
    
    $
    1,583
    
    
    $
    484
    
    
    $
    476Allowance for credit lossesBalance at beginning of year
    
    $
    96,918
    
    
    $
    73,287
    
    
    $
    70,275Purchase accounting adjustments
    
    
    3,741
    
    
    
    20,682
    
    
    
    12,690Allowance adjustment for loans sold
    
    
    
    
    
    
    (506
    )
    
    
    Provision for credit losses
    
    
    40,592
    
    
    
    34,987
    
    
    
    20,581Loans charged off
    
    
    (39,214
    )
    
    
    (37,003
    )
    
    
    (34,624
    )Recoveries of loans previously charged off
    
    
    7,313
    
    
    
    5,471
    
    
    
    4,365Balance at end of year
    
    $
    109,350
    
    
    $
    96,918
    
    
    $
    73,287
 Note 12. Premises and Equipment
  2005
    
    
    2004Land and land improvements
    
    $
    39,171
    
    
    $
    33,031Buildings
    
    
    73,391
    
    
    
    72,201Furniture, fixtures and equipment
    
    
    112,141
    
    
    
    91,231Capitalized software
    
    
    23,146
    
    
    
    20,725Leasehold improvements
    
    
    39,515
    
    
    
    31,349Construction in progress
    
    
    3,599
    
    
    
    4,476290,963
    
    
    
    253,013Less accumulated depreciation and amortization
    
    
    97,389
    
    
    
    82,365$
    193,574
    
    
    $
    170,648
  93




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##### Table of Contents



Note 13. Long-Lived Assets Held For Sale
     Note 14. Goodwill
  Carolina
    
    
    MercantileFirst Bank
    
    
    Bank
    
    
    Other
    
    
    TotalBalance, December 31, 2003
    
    $
    206,780
    
    
    $
    107,369
    
    
    $
    10,346
    
    
    $
    324,495Purchase accounting adjustments
    
    
    (379
    )
    
    
    254,846
    
    
    
    (466
    )
    
    
    254,001Dispositions
    
    
    
    
    
    
    
    
    
    
    (6,643
    )
    
    
    (6,643
    )Balance, December 31, 2004
    
    
    206,401
    
    
    
    362,215
    
    
    
    3,237
    
    
    
    571,853Purchase accounting adjustments
    
    
    366
    
    
    
    75,688
    
    
    
    
    
    
    
    76,054Balance, December 31, 2005
    
    $
    206,767
    
    
    $
    437,903
    
    
    $
    3,237
    
    
    $
    647,907
 th
 94




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##### Table of Contents



Note 15. Other Intangible Assets
  2005
    
    
    2004Core deposit intangible
    
    $
    58,895
    
    
    $
    52,206Less accumulated amortization
    
    
    (25,143
    )
    
    
    (18,463
    )33,752
    
    
    
    33,743Non-compete agreement intangible
    
    
    5,672
    
    
    
    5,672Less accumulated amortization
    
    
    (2,430
    )
    
    
    (1,099
    )3,242
    
    
    
    4,573Customer list intangible
    
    
    7,797
    
    
    
    1,595Less accumulated amortization
    
    
    (940
    )
    
    
    (314
    )6,857
    
    
    
    1,281$
    43,851
    
    
    $
    39,597
  2005
    
    
    2004
    
    
    2003Core deposit intangible
    
    $
    6,680
    
    
    $
    5,080
    
    
    $
    3,098Non-compete agreement intangible
    
    
    1,331
    
    
    
    805
    
    
    
    203Customer list intangible
    
    
    626
    
    
    
    158
    
    
    
    132Total amortization expense of intangible assets
    
    $
    8,637
    
    
    $
    6,043
    
    
    $
    3,433
  Non-Core
    
    
    Compete
    
    
    CustomerDeposit
    
    
    Agreement
    
    
    ListIntangible
    
    
    Intangible
    
    
    Intangible
    
    
    Total2006
    
    $
    6,361
    
    
    $
    1,306
    
    
    $
    1,110
    
    
    $
    8,7772007
    
    
    5,663
    
    
    
    1,149
    
    
    
    980
    
    
    
    7,7922008
    
    
    4,684
    
    
    
    529
    
    
    
    847
    
    
    
    6,0602009
    
    
    3,830
    
    
    
    256
    
    
    
    737
    
    
    
    4,8232010
    
    
    3,396
    
    
    
    2
    
    
    
    644
    
    
    
    4,042Aggregate total for all years thereafter
    
    
    9,818
    
    
    
    
    
    
    
    2,539
    
    
    
    12,357$
    33,752
    
    
    $
    3,242
    
    
    $
    6,857
    
    
    $
    43,851
 Note 16. Mortgage Servicing Rights
  2005
    
    
    2004Balance at beginning of year
    
    $
    1,105
    
    
    $
    1,781MSRs amortized
    
    
    (690
    )
    
    
    (885
    )MSRs impairment recovery from the valuation of MSRs
    
    
    
    
    
    
    209Balance at end of year
    
    $
    415
    
    
    $
    1,105
  95




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##### Table of Contents



Note 17. Derivative Financial Instruments and Hedging Activities
  December 31, 2005
    
    
    December 31, 2004Fair Value
    
    
    Notional
    
    
    Fair Value
    
    
    NotionalAsset
    
    
    Liability
    
    
    Amount
    
    
    Asset
    
    
    Liability
    
    
    AmountCash Flow HedgesInterest rate swaps associated with
borrowing activities
    
    $
    1,785
    
    
    $
    
    
    
    $
    278,500
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest rate swaps associated with
lending activities
    
    
    422
    
    
    
    1,515
    
    
    
    435,000
    
    
    
    
    
    
    
    
    
    
    
    Fair Value HedgesInterest rate swaps associated with
deposit taking activities
    
    
    48
    
    
    
    29,315
    
    
    
    1,111,170
    
    
    
    364
    
    
    
    5,737
    
    
    
    154,721Other DerivativesFuture contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    20,000Forward foreign currency contracts
    
    
    482
    
    
    
    482
    
    
    
    31,715
    
    
    
    5,465
    
    
    
    5,465
    
    
    
    112,519Options, interest rate swaps and other
    
    
    3,988
    
    
    
    11,656
    
    
    
    221,453
    
    
    
    7,606
    
    
    
    27,141
    
    
    
    1,259,455$
    6,725
    
    
    $
    42,968
    
    
    $
    2,077,838
    
    
    $
    13,441
    
    
    $
    38,343
    
    
    $
    1,546,695
    96




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##### Table of Contents



Note 18. Deposits
  2005
    
    
    2004Noninterest-bearing demand deposits
    
    $
    1,512,508
    
    
    $
    1,237,877Interest-bearing checking
    
    
    1,109,297
    
    
    
    816,933Money market accounts
    
    
    2,290,134
    
    
    
    2,704,287Savings accounts
    
    
    187,101
    
    
    
    192,769Total transaction accounts
    
    
    5,099,040
    
    
    
    4,951,866Time deposits under $100,000
    
    
    1,401,469
    
    
    
    836,386Time deposits of $100,000 or more
    
    
    1,395,247
    
    
    
    665,820Customer deposits
    
    
    7,895,756
    
    
    
    6,454,072Brokered deposits
    
    
    1,338,681
    
    
    
    1,216,872Total deposits
    
    $
    9,234,437
    
    
    $
    7,670,944
  2006
    
    $
    2,569,5522007
    
    
    312,4672008
    
    
    121,8792009
    
    
    128,1582010
    
    
    157,936Thereafter
    
    
    845,405$
    4,135,397
  97




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##### Table of Contents



Note 19. Income Taxes
  2005
    
    
    2004
    
    
    2003Income before minority interest and discontinued operations
    
    $
    25,404
    
    
    $
    55,489
    
    
    $
    38,283Dividends on minority interest in consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    (1,096
    )Discontinued operations
    
    
    (216
    )
    
    
    (264
    )
    
    
    Shareholders equityChange in unrealized gains on fair value of cash flow hedges
    
    
    242
    
    
    
    
    
    
    
    Change in unrealized losses on available for sale securities
    
    
    (16,257
    )
    
    
    (6,667
    )
    
    
    (16,461
    )$
    9,173
    
    
    $
    48,558
    
    
    $
    20,726
  2005
    
    
    2004
    
    
    2003CurrentU.S. Federal
    
    $
    34,138
    
    
    $
    41,295
    
    
    $
    42,140State and local
    
    
    3,120
    
    
    
    4,761
    
    
    
    4,13637,258
    
    
    
    46,056
    
    
    
    46,276DeferredU.S. Federal
    
    
    (11,105
    )
    
    
    8,808
    
    
    
    (8,117
    )State and local
    
    
    (749
    )
    
    
    625
    
    
    
    124(11,854
    )
    
    
    9,433
    
    
    
    (7,993
    )Total income tax expense
    
    $
    25,404
    
    
    $
    55,489
    
    
    $
    38,283
  2005
    
    
    2004
    
    
    2003Income tax expense at federal statutory rate
    
    $
    33,467
    
    
    $
    61,420
    
    
    $
    43,357State income tax, net of federal benefit
    
    
    1,541
    
    
    
    3,501
    
    
    
    2,769Increase (decrease) resulting from:Subsidiary stock, recognition of basis difference
    
    
    (2,444
    )
    
    
    
    
    
    
    (4,571
    )Bank-owned life insurance
    
    
    (4,063
    )
    
    
    (3,926
    )
    
    
    (2,912
    )Nontaxable municipal interest
    
    
    (3,433
    )
    
    
    (2,632
    )
    
    
    (1,621
    )Basis difference on gain on sale of substantially all of the assets and
liabilities of Community National Bank
    
    
    
    
    
    
    2,246
    
    
    
    Income tax credits
    
    
    (170
    )
    
    
    (436
    )
    
    
    (97
    )Dividends received deduction
    
    
    (341
    )
    
    
    (871
    )
    
    
    (501
    )Change in federal and state valuation allowance for deferred income
tax assets
    
    
    (190
    )
    
    
    47
    
    
    
    2,550Other, net
    
    
    1,037
    
    
    
    (3,860
    )
    
    
    (691
    )$
    25,404
    
    
    $
    55,489
    
    
    $
    38,283
  98




---



##### Table of Contents



2005
    
    
    2004Deferred Income Tax AssetsLoan loss allowance deferred for income tax purposes
    
    $
    39,126
    
    
    $
    35,070Unrealized losses on securities available for sale
    
    
    27,285
    
    
    
    11,028Compensation expense deferred for income tax reporting purposes
    
    
    15,397
    
    
    
    10,449Federal capital loss carryforward
    
    
    6,947
    
    
    
    8,034Unrealized losses on fair value of derivatives not qualifying for hedge accounting
    
    
    12,875
    
    
    
    4,275Excess basis of MSRs for income tax purposes over financial reporting purposes
    
    
    1,632
    
    
    
    1,886State net operating loss carryforwards
    
    
    2,085
    
    
    
    1,251Excess basis of securities for income tax purposes over financial reporting purposes
    
    
    919
    
    
    
    1,112Environmental remediation costs
    
    
    16
    
    
    
    231Federal net operating loss carryforward
    
    
    885
    
    
    
    176Other
    
    
    7,148
    
    
    
    3,854114,315
    
    
    
    77,366Less valuation allowance
    
    
    6,178
    
    
    
    6,368108,137
    
    
    
    70,998Deferred Income Tax LiabilitiesExcess basis of intangible assets for financial reporting purposes over income tax basis
    
    
    23,588
    
    
    
    20,918Income tax depreciation in excess of book depreciation
    
    
    10,270
    
    
    
    9,849Excess basis of prepaid and deferred expenses for financial reporting purposes over
income tax basis
    
    
    7,757
    
    
    
    8,482Unrealized gains on cash flow hedges and fair value of derivatives deferred for income
tax reporting purposes
    
    
    242
    
    
    
    Excess carrying value of assets acquired for financial reporting purposes over income
tax basis
    
    
    847
    
    
    
    232Employee benefits deduction accelerated for income tax reporting purposes
    
    
    
    
    
    
    Income tax bad debt reserve recapture adjustment
    
    
    20
    
    
    
    3942,724
    
    
    
    39,520Net deferred income tax assets
    
    $
    65,413
    
    
    $
    31,478
  2005
    
    
    2004Balance at beginning of year
    
    $
    31,478
    
    
    $
    21,091Purchase accounting acquisitions
    
    
    6,066
    
    
    
    13,153Income tax benefit from change in unrealized losses on available for sale securities
    
    
    16,257
    
    
    
    6,667Income tax expense from change in fair values on cash flow hedges
    
    
    (242
    )
    
    
    Deferred income tax (expense) benefit on continuing operations
    
    
    11,854
    
    
    
    (9,433
    )Balance at end of year
    
    $
    65,413
    
    
    $
    31,478
    99




---



##### Table of Contents



Note 20. Short-Term Borrowed Funds
  2005


    
    2004Amount
    
    Rate
    
    Amount
    
    RateFederal funds purchased and repurchase agreements
    
    $
    1,421,301
    
    
    
    4.15
    %
    
    $
    1,583,495
    
    
    
    2.14
    %Treasury, tax and loan note
    
    
    20,131
    
    
    
    3.06
    
    
    
    14,111
    
    
    
    1.75Commercial paper
    
    
    32,933
    
    
    
    4.42
    
    
    
    29,405
    
    
    
    2.79$
    1,474,365
    
    
    
    4.13
    %
    
    $
    1,627,011
    
    
    
    2.15
    %
   2005
    
    
    2004Federal funds purchased and repurchase agreements
    
    $
    1,724,812
    
    
    $
    1,715,306Treasury, tax and loan note
    
    
    183,001
    
    
    
    110,377Commercial paper
    
    
    35,085
    
    
    
    39,743FHLB advances
    
    
    
    
    
    
    205,000Line of credit to unaffiliated bank and other
    
    
    
    
    
    
    7,349Aggregate short-term borrowings
    
    
    1,761,125
    
    
    
    1,769,005
   2005
    
    
    2004
    
    
    2003Federal funds purchased and repurchase agreements
    
    $
    46,426
    
    
    $
    17,568
    
    
    $
    10,080Treasury, tax and loan note
    
    
    1,841
    
    
    
    80
    
    
    
    41Commercial paper
    
    
    1,090
    
    
    
    1,095
    
    
    
    1,145FHLB advances
    
    
    
    
    
    
    96
    
    
    
    97Line of credit to unaffiliated bank and other
    
    
    24
    
    
    
    69
    
    
    
    56$
    49,381
    
    
    $
    18,908
    
    
    $
    11,419
 100




---



##### Table of Contents



Note 21. Unused Lines of Credit
    101




---



##### Table of Contents



Note 22. Long-Term Debt
  2005
    
    
    2004FHLB advances; fixed interest rates ranging from 3.12% to 6.27% due from 2006 to 2018,
notwithstanding certain earlier call dates; collateralized by a blanket lien on qualifying
loans secured by first mortgages on one-to-four family residences valued at $420.7 million
and mortgage-backed securities valued at $697.9 million; initial maturity of one year or
greater; interest payable quarterly
    
    $
    852,140
    
    
    $
    1,057,167Repurchase agreements; variable rates ranging from 2.74% to 3.99%
due from 2010 to 2015, notwithstanding certain earlier call dates; collateralized by
securities of the United States government or its agencies, which are held by
third-party safekeepers, and corporate bonds valued at $862.2 million; interest payable quarterly
    
    
    821,000
    
    
    
    1,665,134Subordinated Notes; due June 26, 2033; unsecured; interest payable quarterly
and at maturity at a rate per annum equal to three-month LIBOR plus 3.10% (not to exceed
11.75% through June 26, 2008); balance can be prepaid in whole or in part after
June 26, 2008 at accrued and unpaid interest plus outstanding principal (1)
    
    
    3,093
    
    
    
    3,093Subordinated Notes; due December 26, 2032; unsecured; interest payable quarterly
and at maturity at a rate per annum equal to three-month LIBOR plus 3.25% (not to
exceed 11.75% through December 26, 2007); balance can be prepaid in whole or in part after
December 26, 2007 at accrued and unpaid interest plus outstanding principal
(1)
    
    
    3,093
    
    
    
    3,093Subordinated Notes; due November 7, 2032; unsecured; interest payable semi-annually
and at maturity at a rate per annum equal to three-month LIBOR plus 3.45% (not to
exceed 12.5% through November 7, 2007); balance can be prepaid in whole or in part after
November 7, 2007 at accrued and unpaid interest plus outstanding principal
(1)
    
    
    22,681
    
    
    
    22,681Subordinated Notes; due October 7, 2032; unsecured; interest payable quarterly
and at maturity at a rate per annum equal to three-month LIBOR plus 3.65% (not to
exceed 12.5% through July 7, 2007); balance can be prepaid in whole or in part on or after
July 7, 2007 at accrued and unpaid interest plus outstanding principal (1)
    
    
    25,774
    
    
    
    25,774Subordinated Notes; due July 30, 2032; unsecured; interest payable semi-annually
and at maturity at a rate per annum equal to six-month LIBOR plus 3.625% (not to exceed
12.0% through July 30, 2007); balance can be prepaid in whole or in part after July 30, 2007
at accrued and unpaid interest plus outstanding principal (1)
    
    
    18,042
    
    
    
    18,042Subordinated Notes; due June 30, 2032; unsecured; interest payable quarterly
and at maturity at a rate per annum equal to three-month LIBOR plus 3.65% (not to exceed
12.0% through June 30, 2007); balance can be prepaid in whole or in part after June 30, 2007
at accrued and unpaid interest plus outstanding principal (1)
    
    
    20,619
    
    
    
    20,619Subordinated Notes; due June 30, 2032; unsecured; interest payable quarterly
and at maturity at a rate per annum equal to three-month LIBOR plus 3.65% (not to exceed
12.0% through June 30, 2007); balance can be prepaid in whole or in part after
June 30, 2007 at accrued and unpaid interest plus outstanding principal (1)
    
    
    4,124
    
    
    
    4,124Subordinated Notes; due April 22, 2032; unsecured; interest payable semi-annually
and at maturity at a rate per annum equal to six-month LIBOR plus 3.70% (not to exceed
11.0% through April 22, 2007); balance can be prepaid in whole or in part after
April 22, 2007 at accrued and unpaid interest plus outstanding principal (1)
    
    
    4,124
    
    
    
    4,124Subordinated Notes; due December 18, 2031; unsecured; interest payable quarterly
and at maturity at a rate per annum equal to three-month LIBOR plus 3.60% (not to
exceed 12.5% through December 18, 2006); balance can be prepaid in whole or in part after
December 18, 2006 at accrued and unpaid interest plus outstanding principal
(1)
    
    
    6,186
    
    
    
    6,186
 102




---



##### Table of Contents



2005
    
    
    2004Subordinated Notes; due December 8, 2031; unsecured; interest payable semi-annually
and at maturity at a rate per annum equal to six-month LIBOR plus 3.75% (not to exceed
11.0% through December 8, 2006); balance can be prepaid in whole or in part after
December 8, 2006 at accrued and unpaid interest plus outstanding principal
(1)
    
    
    31,959
    
    
    
    31,959Subordinated Notes; due December 17, 2013; unsecured; interest payable quarterly
and at maturity at a rate per annum equal to three-month LIBOR plus 2.83%;
balance can be prepaid on December 17, 2008 at par plus accrued and unpaid interest
    
    
    10,000
    
    
    
    10,000Subordinated Notes; due December 20, 2006; unsecured; interest payable
semi-annually of each year and at maturity at a rate per annum of 6.33%
    
    
    6,000
    
    
    
    6,000Mandatory redeemable preferred stock of subsidiary; redeemable May 31, 2012;
unsecured; dividends payable quarterly and at maturity at a rate per annum equal to
three-month LIBOR plus 3.50% (2)
    
    
    38,500
    
    
    
    38,500Mandatory redeemable preferred stock of subsidiary; redeemable January 31, 2031;
unsecured; dividends payable quarterly and at maturity at a rate per annum equal to
11.125% (2)
    
    
    26,300
    
    
    
    26,300Mandatory redeemable preferred stock of subsidiary; redeemable January 31, 2011;
preferred stock can be redeemed in whole or part on or after December 8, 2005; unsecured;
dividends payable quarterly and at maturity at a rate per annum equal to
three-month LIBOR plus 3.00% (2)
    
    
    25,000
    
    
    
    25,000Employee stock ownership plan note payable to RBC/Centura Bank; due July 23, 2007;
collateralized by 37,006 shares of TSFG stock valued at approximately
$1.0 million; interest at Centura Banks prime rate less 1.25% with monthly
principal payments of $25,000
    
    
    500
    
    
    
    800Note payable; interest at 12.50% due December 31, 2012; collateralized by a United
States Treasury note valued at $2.1 million; with current annual payments of
approximately $232,000
    
    
    865
    
    
    
    9001,920,000
    
    
    
    2,969,496Purchase accounting premiums, net of amortization
    
    
    2,151
    
    
    
    2,774$
    1,922,151
    
    
    $
    2,972,270
 
 (1)
    
    The balance can be prepaid in whole (but not in part) at any time within a
specified number of days (as defined in the indenture) following the occurrence of a tax
event, an investment company event, or a capital treatment event at a special redemption
price (as defined in the indenture).(2)
    
    The balance can be redeemed in whole or in part following the occurrence of a tax
or capital event (as defined in the terms of the preferred stock).  2006
    
    $
    16,3372007
    
    
    2422008
    
    
    2,8472009
    
    
    155,0532010
    
    
    83,060Thereafter
    
    
    1,662,461$
    1,920,000
   103




---



##### Table of Contents



Note 23. Minority Interest in Consolidated Subsidiary
       104




---



##### Table of Contents



Note 24. Contingent Liabilities and Commitments
 Legal Proceedings
  Recourse Reserve
  Lease Commitments
  2006
    
    $
    15,3652007
    
    
    15,0132008
    
    
    13,7422009
    
    
    11,9712010
    
    
    10,679Thereafter
    
    
    100,005$
    166,775
  Lending Commitments and Guarantees
    105




---



##### Table of Contents



Loan commitments:Commercial, financial, agricultural, and other
    
    $
    880,294Commercial secured by real estate
    
    
    902,728Home equity loans
    
    
    464,233Standby letters of credit
    
    
    192,586Documentary letters of credit
    
    
    776Unused business credit card lines
    
    
    19,225
    Note 25. Capital Stock
    106




---



##### Table of Contents



Note 26. Regulatory Capital Requirements
     To Be Well CapitalizedUnder PromptFor Capital Adequacy
    
    
    Corrective ActionActual
    
    
    Purposes
    
    
    Provisions2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004TSFGTier 1 capital
    
    $
    1,001,841
    
    
    $
    961,294
    
    
    $
    452,321
    
    
    $
    406,206
    
    
    
    n/a
    
    
    
    n/aTotal risk-based capital
    
    
    1,181,672
    
    
    
    1,130,749
    
    
    
    904,641
    
    
    
    812,413
    
    
    
    n/a
    
    
    
    n/aTier 1 capital ratio
    
    
    8.86
    %
    
    
    9.47
    %
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    n/a
    
    
    
    n/aTotal risk-based capital ratio
    
    
    10.45
    
    
    
    11.13
    
    
    
    8.00
    
    
    
    8.00
    
    
    
    n/a
    
    
    
    n/aLeverage ratio
    
    
    7.07
    
    
    
    7.34
    
    
    
    4.00
    
    
    
    4.00
    
    
    
    n/a
    
    
    
    n/aCarolina First BankTier 1 capital
    
    $
    574,184
    
    
    $
    565,664
    
    
    $
    273,988
    
    
    $
    258,039
    
    
    $
    410,982
    
    
    $
    387,059Total risk-based capital
    
    
    735,467
    
    
    
    722,552
    
    
    
    547,976
    
    
    
    516,078
    
    
    
    684,971
    
    
    
    645,098Tier 1 capital ratio
    
    
    8.38
    %
    
    
    8.77
    %
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    6.00
    %Total risk-based capital ratio
    
    
    10.74
    
    
    
    11.20
    
    
    
    8.00
    
    
    
    8.00
    
    
    
    10.00
    
    
    
    10.00Leverage ratio
    
    
    6.26
    
    
    
    6.31
    
    
    
    4.00
    
    
    
    4.00
    
    
    
    5.00
    
    
    
    5.00Mercantile BankTier 1 capital
    
    $
    357,736
    
    
    $
    323,110
    
    
    $
    184,031
    
    
    $
    152,642
    
    
    $
    276,047
    
    
    $
    228,963Total risk-based capital
    
    
    491,438
    
    
    
    449,575
    
    
    
    368,062
    
    
    
    305,284
    
    
    
    460,078
    
    
    
    381,606Tier 1 capital ratio
    
    
    7.78
    %
    
    
    8.47
    %
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    6.00
    %Total risk-based capital ratio
    
    
    10.68
    
    
    
    11.78
    
    
    
    8.00
    
    
    
    8.00
    
    
    
    10.00
    
    
    
    10.00Leverage ratio
    
    
    6.85
    
    
    
    7.23
    
    
    
    4.00
    
    
    
    4.00
    
    
    
    5.00
    
    
    
    5.00
 Note 27. Restriction of Dividends from Subsidiaries
  107




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##### Table of Contents



Note 28. Average Share Information
  2005
    
    
    2004
    
    
    2003BasicAverage common shares outstanding (denominator)
    
    
    73,307,403
    
    
    
    64,592,317
    
    
    
    49,204,173DilutedAverage common shares outstanding
    
    
    73,307,403
    
    
    
    64,592,317
    
    
    
    49,204,173Dilutive potential common shares
    
    
    1,287,223
    
    
    
    1,642,854
    
    
    
    1,124,180Average diluted shares outstanding (denominator)
    
    
    74,594,626
    
    
    
    66,235,171
    
    
    
    50,328,353
  2005
    
    
    2004
    
    
    2003Number
    
    Range of
    
    
    Number
    
    
    Range of
    
    
    Number
    
    
    Range ofof shares
    
    Exercise Prices
    
    
    of shares
    
    
    Exercise Prices
    
    
    of shares
    
    
    Exercise Prices236,698
    
    $
    29.06 to $29.40
    
    
    
    25,180
    
    
    $
    29.93 to $30.35
    
    
    
    393,639
    
    
    $
    24.10 to $26.9461,419
    
    $
    29.93 to $31.26
    
    
    
    33,489
    
    
    $
    31.26
    
    
    
    504,950
    
    
    $
    27.50420,995
    
    $
    31.96
    
    
    
    515,710
    
    
    $
    31.96
    
    
    
    105,788
    
    
    $
    28.03 to $31.26
 Note 29. Stock Compensation Plans
  2004 Long-Term Incentive Plan
  108




---



##### Table of Contents



2005
    
    
    2004Restricted shares granted to employees
    
    
    82,401
    
    
    
    Restricted shares canceled
    
    
    (2,072
    )
    
    
    80,329
    
    
    
    Weighted-average fair value of restricted stock granted during the year
    
    $
    30.54
    
    
    $
    Compensation expense recognized (in thousands)
    
    $
    550
    
    
    $
    1,253
  Restricted Stock Plan
   2005
    
    
    2004
    
    
    2003Restricted shares granted to employees
    
    
    
    
    
    
    210,145
    
    
    
    69,805Restricted shares canceled
    
    
    (7,088
    )
    
    
    (12,538
    )
    
    
    (2,945
    )(7,088
    )
    
    
    197,607
    
    
    
    66,860Weighted-average fair value of restricted stock granted during the year
    
    $
    
    
    
    $
    28.31
    
    
    $
    21.42Compensation expense recognized (in thousands)
    
    $
    738
    
    
    $
    1,368
    
    
    $
    3,298
 Stock Option Plans
  109




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding, January 1
    
    
    4,740,973
    
    
    $
    20.52
    
    
    
    4,240,795
    
    
    $
    18.66
    
    
    
    3,962,518
    
    
    $
    16.05Granted:Price = Fair Value
    
    
    337,650
    
    
    
    28.82
    
    
    
    813,270
    
    
    
    30.87
    
    
    
    915,659
    
    
    
    25.52Price > Fair Value
    
    
    
    
    
    
    
    
    
    
    11,760
    
    
    
    27.98
    
    
    
    
    
    
    
    Price < Fair Value (from acquisitions)
    
    
    360,081
    
    
    
    9.82
    
    
    
    998,176
    
    
    
    12.21
    
    
    
    331,886
    
    
    
    10.12Cancelled
    
    
    (266,209
    )
    
    
    27.67
    
    
    
    (154,300
    )
    
    
    24.05
    
    
    
    (150,722
    )
    
    
    18.53Exercised
    
    
    (926,831
    )
    
    
    13.13
    
    
    
    (1,168,728
    )
    
    
    12.90
    
    
    
    (818,546
    )
    
    
    10.26Outstanding, December 31
    
    
    4,245,664
    
    
    $
    21.45
    
    
    
    4,740,973
    
    
    $
    20.52
    
    
    
    4,240,795
    
    
    $
    18.66Exercisable, December 31
    
    
    2,958,760
    
    
    $
    18.86
    
    
    
    2,944,270
    
    
    $
    17.37
    
    
    
    2,629,173
    
    
    $
    16.64
  Options Outstanding
    
    
    Options ExercisableWeighted-Number
    
    
    Average
    
    
    Weighted-
    
    
    Number
    
    
    Weighted-of Option
    
    
    Remaining
    
    
    Average
    
    
    of Option
    
    
    AverageRange of Exercise Prices
    
    Shares
    
    
    Contractual
    
    
    Exercise
    
    
    Shares
    
    
    ExerciseLow/High Outstanding
    
    Outstanding
    
    
    Life (in yrs.)
    
    
    Price
    
    
    Exercisable
    
    
    Price$1.49/$3.19
    
    
    5,487
    
    
    
    7.2
    
    
    $
    1.49
    
    
    
    5,487
    
    
    $
    1.49$3.1961/$6.392
    
    
    39,221
    
    
    
    1.3
    
    
    
    5.46
    
    
    
    39,221
    
    
    
    5.46$6.3921/$9.588
    
    
    297,098
    
    
    
    3.6
    
    
    
    8.39
    
    
    
    297,098
    
    
    
    8.39$9.5881/$12.784
    
    
    307,764
    
    
    
    4.9
    
    
    
    11.38
    
    
    
    307,764
    
    
    
    11.38$12.7841/$15.98
    
    
    351,814
    
    
    
    3.3
    
    
    
    14.23
    
    
    
    351,314
    
    
    
    14.23$15.9801/$19.176
    
    
    527,172
    
    
    
    5.3
    
    
    
    17.88
    
    
    
    465,024
    
    
    
    17.87$19.1761/$22.372
    
    
    963,148
    
    
    
    4.9
    
    
    
    21.32
    
    
    
    728,493
    
    
    
    21.37$22.3721/$25.568
    
    
    295,038
    
    
    
    4.3
    
    
    
    24.15
    
    
    
    273,988
    
    
    
    24.15$25.5681/$28.764
    
    
    710,310
    
    
    
    7.5
    
    
    
    27.59
    
    
    
    343,413
    
    
    
    27.58$28.7641/$31.96
    
    
    748,612
    
    
    
    8.6
    
    
    
    30.93
    
    
    
    146,958
    
    
    
    31.344,245,664
    
    
    
    5.7
    
    
    $
    21.45
    
    
    
    2,958,760
    
    
    $
    18.86
 Note 30. Employee Benefits
   110




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##### Table of Contents



111




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##### Table of Contents



Note 31. Merger-Related and Direct Acquisition Costs
  2005
    
    
    2004
    
    
    2003Merger-Related CostsCompensation-related expenses
    
    $
    833
    
    
    $
    2,533
    
    
    $
    823System conversion costs
    
    
    906
    
    
    
    1,505
    
    
    
    1,196Travel
    
    
    491
    
    
    
    910
    
    
    
    214Impairment loss from write-down of assets
    
    
    
    
    
    
    
    
    
    
    181Advertising
    
    
    729
    
    
    
    214
    
    
    
    542Other
    
    
    1,050
    
    
    
    2,704
    
    
    
    2,171$
    4,009
    
    
    $
    7,866
    
    
    $
    5,127Direct Acquisition CostsInvestment banking and professional fees
    
    $
    2,808
    
    
    $
    5,432
    
    
    $
    2,257Contract and lease terminations
    
    
    1,078
    
    
    
    8,547
    
    
    
    875Severance
    
    
    312
    
    
    
    1,094
    
    
    
    6,486$
    4,198
    
    
    $
    15,073
    
    
    $
    9,618
   Note 32. Related Party Transactions
   Note 33. Fair Value of Financial Instruments
  112




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##### Table of Contents



2005
    
    2004Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial AssetsCash and due from banks
    
    $
    341,195
    
    
    $
    341,195
    
    
    $
    199,847
    
    
    $
    199,847Interest-bearing bank balances
    
    
    21,510
    
    
    
    21,510
    
    
    
    4,669
    
    
    
    4,669Trading securities
    
    
    1,402
    
    
    
    1,402
    
    
    
    
    
    
    
    Securities available for sale
    
    
    3,095,567
    
    
    
    3,095,567
    
    
    
    4,234,843
    
    
    
    4,234,843Securities held to maturity
    
    
    62,648
    
    
    
    62,697
    
    
    
    75,245
    
    
    
    76,552Net loans
    
    
    9,368,799
    
    
    
    9,375,917
    
    
    
    8,032,625
    
    
    
    8,150,559Derivative assets
    
    
    6,725
    
    
    
    6,725
    
    
    
    13,441
    
    
    
    13,441Financial LiabilitiesDeposits
    
    
    9,234,437
    
    
    
    8,691,573
    
    
    
    7,670,944
    
    
    
    7,683,671Federal funds purchased and repurchase agreements
    
    
    1,421,301
    
    
    
    1,421,301
    
    
    
    1,583,495
    
    
    
    1,583,495Other short-term borrowings
    
    
    53,064
    
    
    
    53,064
    
    
    
    43,516
    
    
    
    43,516Long-term debt
    
    
    1,922,151
    
    
    
    1,921,082
    
    
    
    2,972,270
    
    
    
    2,993,712Derivative liabilities
    
    
    42,968
    
    
    
    42,968
    
    
    
    38,343
    
    
    
    38,343
 Note 34. Business Segments
  113




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##### Table of Contents



Carolina
    
    Mercantile
    
    
    
    
    
    EliminatingFirst Bank
    
    Bank
    
    Other
    
    Entries
    
    TotalYear Ended December 31, 2005Net interest income
    
    $
    254,690
    
    
    $
    164,919
    
    
    $
    (10,553
    )
    
    $
    
    
    
    $
    409,056Provision for credit losses
    
    
    31,554
    
    
    
    9,057
    
    
    
    (19
    )
    
    
    
    
    
    
    40,592Noninterest income
    
    
    26,231
    
    
    
    23,247
    
    
    
    92,650
    
    
    
    (86,918
    )
    
    
    55,210Noninterest expenses
    
    
    197,812
    
    
    
    118,015
    
    
    
    99,144
    
    
    
    (86,918
    )
    
    
    328,053Merger-related costs (a)
    
    
    
    
    
    
    4,009
    
    
    
    
    
    
    
    
    
    
    
    4,009Amortization of intangibles (a)
    
    
    3,177
    
    
    
    5,314
    
    
    
    146
    
    
    
    
    
    
    
    8,637Income tax expense
    
    
    12,571
    
    
    
    18,762
    
    
    
    (5,929
    )
    
    
    
    
    
    
    25,404Discontinued operations, net of income tax
    
    
    
    
    
    
    (396
    )
    
    
    
    
    
    
    
    
    
    
    (396
    )Net income
    
    
    38,984
    
    
    
    41,936
    
    
    
    (11,099
    )
    
    
    
    
    
    
    69,821December 31, 2005Total assets
    
    $
    9,026,550
    
    
    $
    5,701,350
    
    
    $
    1,700,523
    
    
    $
    (2,109,138
    )
    
    $
    14,319,285Total loans
    
    
    5,695,119
    
    
    
    3,871,447
    
    
    
    
    
    
    
    (90,000
    )
    
    
    9,476,566Total deposits
    
    
    5,646,031
    
    
    
    3,647,630
    
    
    
    
    
    
    
    (59,224
    )
    
    
    9,234,437Year Ended December 31, 2004Net interest income
    
    $
    239,253
    
    
    $
    103,272
    
    
    $
    (6,684
    )
    
    $
    
    
    
    $
    335,841Provision for credit losses
    
    
    27,591
    
    
    
    7,387
    
    
    
    9
    
    
    
    
    
    
    
    34,987Noninterest income
    
    
    97,331
    
    
    
    20,510
    
    
    
    79,948
    
    
    
    (72,912
    )
    
    
    124,877Noninterest expenses
    
    
    163,018
    
    
    
    74,110
    
    
    
    86,028
    
    
    
    (72,912
    )
    
    
    250,244Merger-related costs (a)
    
    
    779
    
    
    
    7,010
    
    
    
    77
    
    
    
    
    
    
    
    7,866Amortization of intangibles (a)
    
    
    3,170
    
    
    
    2,658
    
    
    
    215
    
    
    
    
    
    
    
    6,043Income tax expense
    
    
    44,710
    
    
    
    16,757
    
    
    
    (5,978
    )
    
    
    
    
    
    
    55,489Discontinued operations, net of income tax
    
    
    
    
    
    
    (490
    )
    
    
    
    
    
    
    
    
    
    
    (490
    )Net income
    
    
    101,265
    
    
    
    25,038
    
    
    
    (6,795
    )
    
    
    
    
    
    
    119,508December 31, 2004Total assets
    
    $
    9,242,495
    
    
    $
    4,870,675
    
    
    $
    1,609,685
    
    
    $
    (1,924,166
    )
    
    $
    13,798,689Total loans
    
    
    5,021,721
    
    
    
    3,197,326
    
    
    
    1,197
    
    
    
    (91,185
    )
    
    
    8,129,059Total deposits
    
    
    4,688,851
    
    
    
    3,043,772
    
    
    
    
    
    
    
    (61,679
    )
    
    
    7,670,944
 
 (a)
    
    Included in noninterest expenses 114




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##### Table of Contents



Carolina
    
    Mercantile
    
    
    
    
    
    EliminatingFirst Bank
    
    Bank
    
    Other
    
    Entries
    
    TotalYear Ended December 31, 2003Net interest income
    
    $
    197,263
    
    
    $
    59,325
    
    
    $
    (5,698
    )
    
    $
    
    
    
    $
    250,890Provision for credit losses
    
    
    13,588
    
    
    
    7,068
    
    
    
    (75
    )
    
    
    
    
    
    
    20,581Noninterest income
    
    
    73,489
    
    
    
    19,078
    
    
    
    66,467
    
    
    
    (58,295
    )
    
    
    100,739Noninterest expenses
    
    
    144,296
    
    
    
    51,187
    
    
    
    69,982
    
    
    
    (58,295
    )
    
    
    207,170Merger-related costs (a)
    
    
    2,781
    
    
    
    2,303
    
    
    
    43
    
    
    
    
    
    
    
    5,127Amortization of intangibles (a)
    
    
    1,753
    
    
    
    1,559
    
    
    
    121
    
    
    
    
    
    
    
    3,433Income tax expense
    
    
    35,106
    
    
    
    6,274
    
    
    
    (3,097
    )
    
    
    
    
    
    
    38,283Minority interest in consolidated subsidiary,
net of tax
    
    
    (2,010
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    (2,012
    )Net income
    
    
    75,752
    
    
    
    13,872
    
    
    
    (6,041
    )
    
    
    
    
    
    
    83,583
 
 (a)
    
    Included in noninterest expenses Note 35. Parent Company Financial Information
  Condensed Balance Sheets
 December 31,2005
    
    
    2004AssetsCash and due from banks
    
    $
    57,752
    
    
    $
    51,790Investment in subsidiaries:Bank subsidiaries
    
    
    1,572,638
    
    
    
    1,462,472Nonbank subsidiaries
    
    
    5,014
    
    
    
    17,165Total investment in subsidiaries
    
    
    1,577,652
    
    
    
    1,479,637Receivable from subsidiaries
    
    
    75
    
    
    
    2,710Other investments
    
    
    11,092
    
    
    
    15,311Other assets
    
    
    48,029
    
    
    
    41,397$
    1,694,600
    
    
    $
    1,590,845Liabilities and Shareholders EquityAccrued expenses and other liabilities
    
    $
    26,952
    
    
    $
    19,577Payables to subsidiaries
    
    
    1,613
    
    
    
    1,908Borrowed funds
    
    
    33,433
    
    
    
    30,205Subordinated debt
    
    
    145,695
    
    
    
    145,695Shareholders equity
    
    
    1,486,907
    
    
    
    1,393,460$
    1,694,600
    
    
    $
    1,590,845
 115




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##### Table of Contents



Condensed Statements of Income
 Years Ended December 31,2005
    
    
    2004
    
    
    2003IncomeEquity in undistributed net income of subsidiaries
    
    $
    48,292
    
    
    $
    37,854
    
    
    $
    43,558Dividend income from subsidiaries
    
    
    31,189
    
    
    
    84,638
    
    
    
    43,750Gain on equity investments
    
    
    3,239
    
    
    
    6,056
    
    
    
    3,785Interest income from subsidiaries
    
    
    336
    
    
    
    277
    
    
    
    275Sundry
    
    
    11,774
    
    
    
    5,134
    
    
    
    5,91794,830
    
    
    
    133,959
    
    
    
    97,285ExpensesInterest on borrowed funds
    
    
    10,950
    
    
    
    8,149
    
    
    
    7,016Sundry
    
    
    19,342
    
    
    
    10,853
    
    
    
    8,34730,292
    
    
    
    19,002
    
    
    
    15,363Income before taxes
    
    
    64,538
    
    
    
    114,957
    
    
    
    81,922Income tax benefit
    
    
    (5,283
    )
    
    
    (4,551
    )
    
    
    (1,661
    )Net income
    
    $
    69,821
    
    
    $
    119,508
    
    
    $
    83,583
 Condensed Statements of Cash Flows
 Years Ended December 31,2005
    
    
    2004
    
    
    2003Operating ActivitiesNet income
    
    $
    69,821
    
    
    $
    119,508
    
    
    $
    83,583Adjustments to reconcile net income to net cash provided by operationsEquity in undistributed net income of subsidiaries
    
    
    (48,292
    )
    
    
    (37,854
    )
    
    
    (43,558
    )Gain on disposition of equity investments
    
    
    (3,239
    )
    
    
    (6,056
    )
    
    
    (3,785
    )Contribution to foundation
    
    
    683
    
    
    
    
    
    
    
    Other assets, net
    
    
    (3,468
    )
    
    
    (2,739
    )
    
    
    (11,790
    )Other liabilities, net
    
    
    7,024
    
    
    
    (5,515
    )
    
    
    13,013Net cash provided by operating activities
    
    
    22,529
    
    
    
    67,344
    
    
    
    37,463Investing ActivitiesDistribution from (investment in) subsidiaries
    
    
    2,048
    
    
    
    (37,279
    )
    
    
    (132,096
    )Loans to subsidiaries, net
    
    
    3,628
    
    
    
    (1,697
    )
    
    
    1,794Proceeds from disposition of equity investments
    
    
    9,269
    
    
    
    7,282
    
    
    
    4,023Purchase of equity investments
    
    
    (3,845
    )
    
    
    (3,018
    )
    
    
    (4,425
    )Net cash provided by (used for) investing activities
    
    
    11,100
    
    
    
    (34,712
    )
    
    
    (130,704
    )Financing ActivitiesBorrowings, net
    
    
    3,228
    
    
    
    (15,094
    )
    
    
    1,290Issuance of common stock, net
    
    
    
    
    
    
    
    
    
    
    161,083Cash dividends paid
    
    
    (46,750
    )
    
    
    (39,068
    )
    
    
    (27,089
    )Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (28,558
    )Other
    
    
    15,855
    
    
    
    16,827
    
    
    
    14,312Net cash (used for) provided by financing activities
    
    
    (27,667
    )
    
    
    (37,335
    )
    
    
    121,038Net change in cash and cash equivalents
    
    
    5,962
    
    
    
    (4,703
    )
    
    
    27,797Cash and cash equivalents at beginning of year
    
    
    51,790
    
    
    
    56,493
    
    
    
    28,696Cash and cash equivalents at end of year
    
    $
    57,752
    
    
    $
    51,790
    
    
    $
    56,493
 116




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##### Table of Contents



Note 36. Quarterly Financial Data (Unaudited)
  2005 Quarterly Financial Data
 Three Months EndedDecember 31
    
    
    September 30
    
    
    June 30
    
    
    March 31Interest income
    
    $
    204,412
    
    
    $
    194,735
    
    
    $
    184,901
    
    
    $
    170,249Interest expense
    
    
    99,479
    
    
    
    91,146
    
    
    
    82,616
    
    
    
    72,000Net interest income
    
    
    104,933
    
    
    
    103,589
    
    
    
    102,285
    
    
    
    98,249Provision for credit losses
    
    
    10,833
    
    
    
    8,853
    
    
    
    9,944
    
    
    
    10,962Noninterest (loss) income
    
    
    (24,960
    )
    
    
    16,428
    
    
    
    50,471
    
    
    
    13,271Noninterest expenses
    
    
    100,973
    
    
    
    81,035
    
    
    
    79,535
    
    
    
    66,510(Loss) income before taxes and discontinued operations
    
    
    (31,833
    )
    
    
    30,129
    
    
    
    63,277
    
    
    
    34,048Income tax (benefit) expense
    
    
    (15,436
    )
    
    
    9,039
    
    
    
    20,565
    
    
    
    11,236(Loss) income from continuing operations
    
    
    (16,397
    )
    
    
    21,090
    
    
    
    42,712
    
    
    
    22,812Discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (396
    )Net (loss) income
    
    $
    (16,397
    )
    
    $
    21,090
    
    
    $
    42,712
    
    
    $
    22,416Per common share, basic:(Loss) income from continuing operations
    
    $
    (0.22
    )
    
    $
    0.28
    
    
    $
    0.58
    
    
    $
    0.32Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Net (loss) income
    
    $
    (0.22
    )
    
    $
    0.28
    
    
    $
    0.58
    
    
    $
    0.31Per common share, diluted:(Loss) income from continuing operations
    
    $
    (0.22
    )
    
    $
    0.28
    
    
    $
    0.57
    
    
    $
    0.32Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Net (loss) income
    
    $
    (0.22
    )
    
    $
    0.28
    
    
    $
    0.57
    
    
    $
    0.31
 117




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##### Table of Contents



2004 Quarterly Financial Data
 Three Months EndedDecember 31
    
    
    September 30
    
    
    June 30
    
    
    March 31Interest income
    
    $
    160,039
    
    
    $
    147,218
    
    
    $
    117,961
    
    
    $
    117,014Interest expense
    
    
    62,915
    
    
    
    55,134
    
    
    
    45,080
    
    
    
    43,262Net interest income
    
    
    97,124
    
    
    
    92,084
    
    
    
    72,881
    
    
    
    73,752Provision for credit losses
    
    
    10,829
    
    
    
    9,440
    
    
    
    6,996
    
    
    
    7,722Noninterest income
    
    
    19,082
    
    
    
    48,266
    
    
    
    10,163
    
    
    
    47,366Noninterest expenses
    
    
    68,649
    
    
    
    69,858
    
    
    
    54,466
    
    
    
    57,271Income before taxes and discontinued operations
    
    
    36,728
    
    
    
    61,052
    
    
    
    21,582
    
    
    
    56,125Income taxes
    
    
    13,009
    
    
    
    18,316
    
    
    
    7,175
    
    
    
    16,989Income from continuing operations
    
    
    23,719
    
    
    
    42,736
    
    
    
    14,407
    
    
    
    39,136Discontinued operations, net of tax
    
    
    (325
    )
    
    
    (165
    )
    
    
    
    
    
    
    Net income
    
    $
    23,394
    
    
    $
    42,571
    
    
    $
    14,407
    
    
    $
    39,136Per common share, basic:Income from continuing operations
    
    $
    0.33
    
    
    $
    0.62
    
    
    $
    0.24
    
    
    $
    0.66Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.33
    
    
    $
    0.62
    
    
    $
    0.24
    
    
    $
    0.66Per common share, diluted:Income from continuing operations
    
    $
    0.32
    
    
    $
    0.61
    
    
    $
    0.24
    
    
    $
    0.64Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.32
    
    
    $
    0.61
    
    
    $
    0.24
    
    
    $
    0.64
 118




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
  (a)
    
    At December 31, 2005, TSFGs management, under the supervision and with the
participation of TSFGs Chief Executive Officer and Chief Financial Officer, evaluated
our disclosure controls and procedures as currently in effect. Based on this
evaluation, TSFGs management concluded that as of December 31, 2005, TSFG had a
material weakness in its internal control over financial reporting as described below
and as a result has concluded that TSFGs disclosure controls and procedures were not
effective. Management identified the following material weakness in internal control
over financial reporting:TSFG had ineffective policies and procedures related to the accounting for certain
derivative financial instruments in accordance with Statement of Financial Accounting
Standard No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133). Specifically, TSFG did not have personnel possessing sufficient technical
expertise related to the application of the provisions of SFAS 133 or with sufficient
understanding of derivative instruments. This deficiency resulted in errors in the
Companys accounting for derivatives. This deficiency results in more than a remote
likelihood that a material misstatement of the Companys annual or interim financial
statements would not be prevented or detected.(b)
    
    (1) Statement of managements responsibility for maintaining adequate internal controls:See Managements Statement of Responsibility included in Item 8 of this Annual Report
on Form 10-K. See also Managements Report on Internal Control Over Financial
Reporting included in Item 8 of this Annual Report on Form 10-K.(2) Statement identifying the framework utilized by management to assess internal
control:
See Managements Report on Internal Control Over Financial Reporting included in Item
8 of this Annual Report on Form 10-K.(3) Managements assessment of the effectiveness of internal control:See Managements Report on Internal Control Over Financial Reporting included in Item
8 of this Annual Report on Form 10-K.(4) Statement that the independent registered public accounting firm has issued
an attestation report on managements assessment of internal control:
See Managements Report on Internal Control Over Financial Reporting included in Item
8 of this Annual Report on Form 10-K.(c)
    
    Attestation report of KPMG LLP, an independent registered public
accounting firm, on TSFGs assessment of the effectiveness of its internal control over
financial reporting:See Report of Independent Registered Public Accounting Firm included in Item 8 of
this Annual Report on Form 10-K.(d)
    
    Changes in internal control over financial reporting:TSFG continually assesses the adequacy of its internal control over financial
reporting and enhances its controls in response to internal control assessments and
internal and external audit and regulatory
recommendations.
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##### Table of Contents



We have implemented several important changes in our internal control over financial
reporting related to our accounting for derivatives during 2005, some of which were
formalized and enhanced during the fourth quarter. These actions include:
 
    
    Enhancing risk management policies and procedures related
to reviewing derivative transactions;
    
    Reviewing policies and procedures related to the
initiation and subsequent review of hedge strategies;
    
    Engaging a third party consultant to provide ongoing
expertise related to hedge documentation at inception and
ongoing monitoring, and to assist management in evaluating
the appropriateness of the accounting for these transactions
in accordance with Generally Accepted Accounting Principles;
    
    Changing policies and procedures to limit the Companys
use of the short-cut method.
  
 Item 9B. Other Information
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PART III
 
 Item 10.
    
    Directors and Executive Officers of the Registrant
    
 Item 11.
    
    Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  
 Item 13.
    
    Certain Relationships and Related Transactions
  
 Item 14.
    
    Principal Accountant Fees and Services
  
 PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules
   
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Exhibit No.
    
    Description of Exhibit
    
    Location3.1
    
    Articles of Incorporation.
    
    Incorporated by reference to Exhibits 3.1 and 3.2 of
TSFGs Quarterly Report on Form 10-Q for the three
months ended March 31, 2004, Commission File No.
15083.3.2
    
    Amended and Restated Bylaws of TSFG
    
    Incorporated by reference to Exhibit 3.1 of TSFGs
Current Report on Form 8-K dated August 17, 2005,
Commission File No. 0-150834.1
    
    Specimen TSFG Common Stock certificate
    
    Incorporated by Reference to Exhibit 4.1 of TSFGs
Registration Statement on Form S-1, Commission File
No. 33-74704.2
    
    Articles of Incorporation, as amended
    
    Included as Exhibit 3.14.3
    
    Bylaws
    
    Included as Exhibit 3.24.4
    
    Amended and Restated Common Stock Dividend
Reinvestment Plan
    
    Incorporated by reference to the Prospectus in
TSFGs Registration Statement on Form S-3,
Commission File No. 333-11240410.1*
    
    TSFG Amended and Restated Restricted Stock Agreement
Plan, as amended
    
    Incorporated by reference to Exhibit 99.1 from
TSFGs Registration Statement on Form S-8,
Commission File No. 33-82668/82670; Exhibit 10.1.1
from TSFGs Annual Report on Form 10-K for the year
ended December 31, 2001; Exhibit 10.1.2 from TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2001; and Exhibit 10.1.1 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2002.10.2*
    
    TSFG Employee Stock Ownership Plan
    
    Incorporated by reference to Exhibit 10.2 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 0-1508310.3*
    
    TSFG Amended and Restated Stock Option Plan, as
amended
    
    Incorporated by reference to Exhibit 10.2 of TSFGs
Quarterly Report on Form 10-Q for the quarter ended
March 30, 1998, Commission File No. 0-15083;
Exhibit 10.3.2 of TSFGs Registration Statement on
Form S-4, Commission File No. 333-32590;
Exhibit 10.3.3 of TSFGs Annual Report on Form 10-K
for the year ended December 31, 2001, Commission
File No. 0-15083; and Exhibit 10.3.4 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2001, Commission File No. 0-1508310.4*
    
    TSFG Salary Reduction Plan
    
    Incorporated by reference to Exhibit 28.1 of TSFGs
Registration Statement on Form S-8, Commission File
No. 33-2542410.5*
    
    Noncompetition, Severance and Employment Agreement
dated October 13, 2000, by and between TSFG and
Mack I. Whittle, Jr.:
    
    Incorporated by reference to Exhibit 10.5 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 200110.6*
    
    Noncompetition, Severance and Employment Agreement
dated October 13, 2000, by and between TSFG and
William S. Hummers III, as amended
    
    Incorporated by reference to Exhibit 10.6 of TSFGs
Annual Report on Form 10-K for year ended December
31, 2001 and Exhibit 99.1 of TSFGs Current Report
on Form 8-K filed January 19, 2006.
 123




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit
    
    Location10.7*
    
    Noncompetition, Severance and Employment Agreement
dated as of May 30, 2001, by and between TSFG and
James W. Terry, Jr.
    
    Filed herewith10.8*
    
    Noncompetition, Severance and Employment Agreement
dated as of January 1, 2002, by and between TSFG and
John C. DuBose
    
    Incorporated by reference to Exhibit 10.8 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 200110.9*
    
    Noncompetition, Severance and Employment Agreement
dated as of March 31, 2000, by and between TSFG and
Andrew B. Cheney
    
    Incorporated by reference to Exhibit 10.10 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2001 and Exhibit 99.1 of TSFGs Current Report
on Form 8-K dated December 7, 200510.10*
    
    TSFG Short-Term Performance Plan
    
    Incorporated by reference to Exhibit 10.3 of TSFGs
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, Commission File No. 0-1508310.11*
    
    TSFG Amended and Restated 2001Long-Term Incentive
Plan
    
    Incorporated by reference to Exhibit 10.14 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2001, Commission File No. 0-1508310.12*
    
    Amended and Restated TSFG Employee Stock Purchase
Plan
    
    Incorporated by reference to Exhibit 10.1 of TSFGs
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000, Commission File No. 1508310.13*
    
    TSFG Directors Stock Option Plan
    
    Incorporated by reference to Exhibit 99.1 from
TSFGs Registration Statement on Form S-8,
Commission File No. 33-82668/8267010.14*
    
    TSFG Amended and Restated Fortune 50 Plan
    
    Incorporated by reference to the Prospectus in
TSFGs Registration Statement on Form S-8,
Commission File No. 333-3194810.15*
    
    Carolina First Bank Supplemental Executive
Retirement Plan
    
    Incorporated by reference to Exhibit 10.20 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2001, Commission File No. 0-1508310.16*
    
    Supplemental Executive Retirement Agreements between
TSFG and Mack I. Whittle, Jr., William S. Hummers
III, John C. DuBose, Andrew B. Cheney and James W.
Terry, Jr.
    
    Incorporated by reference to Exhibit 10.25 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2003, Commission File No. 0-1508310.17*
    
    TSFG 2004 Long Term Incentive Plan
    
    Incorporated by reference to Exhibit 10.25 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2002, Commission File No. 0-1508310.18*
    
    TSFG Executive Deferred Compensation Plan
    
    Incorporated by reference to Exhibit 10.27 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2002, Commission File No. 0-1508310.19*
    
    Form of Grant for TSFG 2004-2006 Long-Term Incentive
Plan  Restricted Stock Unit Award Agreement
    
    Incorporated by reference to Exhibit 10.23 of TSFGs
Annual Report on Form 10-K for the year ended
December 31, 2004 filed on March 15, 200510.20*
    
    Management Incentive Compensation Plan Targets
    
    Incorporated by reference to Form 8-K filed on
February 28, 2006, Commission File No. 0-1508310.21*
    
    Noncompetition, Severance and
Employment Agreements between TSFG and each of William P. Crawford,
Jr., J.W. Davis, Mary A. Jeffrey, Timothy K. Schools, Kendall L.
Spencer and Michael W. Sperry
    
    Incorporated by reference to
Exhibits 10.1, 10.2, 10.3, 10.5, 10.6 and 10.7 of TSFGs
Quarterly Report on Form 10-Q for the quarter ended September 30,
200410.22*
    
    Supplemental Executive Retirement
Agreements between TSFG and each of William P.
Crawford, Jr., Mary A. Jeffrey, Timothy K. Schools,
Kendall L. Spencer, and Michael W. Sperry
    
    Incorporated by reference to
Exhibits 10.8, 10.9, 10.11, 10.12 and 10.13 of TSFGs
Quarterly Report on
Form 10-Q for the quarter ended
September 30, 2004


11.1
    
    Statement of Computation of Earnings Per Share.
    
    Filed herewith as Note 28 of the Notes to
Consolidated Financial Statements21.1
    
    Subsidiaries of TSFG
    
    Filed herewith22.1
    
    Proxy Statement for the 2006 Annual Meeting of
Shareholders
    
    Future filing incorporated by reference pursuant to
General Instruction G(3)23.1
    
    Consent of KPMG LLP
    
    Filed herewith
 124




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit
    
    Location31.1
    
    Certification of 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 2002.
    
    Filed herewith31.2
    
    Certification of 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 2002.
    
    Filed herewith32.1
    
    Certification of Chief Executive Officer pursuant
to 18 U.S.C. 1350, as adopted pursuant to section
906 of the Sarbanes Oxley Act of 2002.
    
    Filed herewith32.2
    
    Certification of Principal Financial Officer
pursuant to 18 U.S.C. 1350, as adopted pursuant to
section 906 of the Sarbanes Oxley Act of 2002.
    
    Filed herewith
 
 *
    
    This is a management contract or compensatory plan.  Type
    
    Date Filed
    
    Reporting Purpose
  125




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SIGNATURES
  The South Financial Group, Inc.
 Name
    
    Title
    
    Date/s/ Mack I. Whittle, Jr.
    
    President and Chief Executive Officer
    
    March 13, 2006Mack I. Whittle, Jr./s/ Timothy K. Schools
    
    Executive Vice President
    
    March 13, 2006Timothy K. Schools
    
    (Principal Accounting and Chief Financial Officer)
  Name
    
    Title
    
    Date/s/ Mack I. Whittle, Jr.
    
    Chairman and Director
    
    March 13, 2006Mack I. Whittle, Jr./s/ William P. Brant
    
    Director
    
    March 13, 2006William P. Brant/s/ J. W. Davis
    
    Director
    
    March 13, 2006J. W. Davis/s/ C. Claymon Grimes, Jr.
    
    Director
    
    March 13, 2006C. Claymon Grimes, Jr./s/ M. Dexter Hagy
    
    Director
    
    March 13, 2006M. Dexter Hagy/s/ William S. Hummers III
    
    Director
    
    March 13, 2006William S. Hummers III/s/ Challis M. Lowe
    
    Director
    
    March 13, 2006Challis M. Lowe/s/
Darla Moore
    
    Director
    
    March 13, 2006Darla Moore/s/ Jon W. Pritchett
    
    Director
    
    March 13, 2006Jon W. Pritchett
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##### Table of Contents



Name
    
    Title
    
    Date/s/ H. Earle Russell, Jr.
    
    Director
    
    March 13, 2006H. Earle Russell, Jr./s/ Charles B. Schooler
    
    Director
    
    March 13, 2006Charles B. Schooler/s/ Edward J. Sebastian
    
    Director
    
    March 13, 2006Edward J. Sebastian/s/ John C. B. Smith, Jr.
    
    Director
    
    March 13, 2006John C. B. Smith, Jr./s/ William R. Timmons III
    
    Director
    
    March 13, 2006William R. Timmons III/s/ Samuel H. Vickers
    
    Director
    
    March 13, 2006Samuel H. Vickers/s/ David C. Wakefield III
    
    Director
    
    March 13, 2006David C. Wakefield III
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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description10.7
    
    Noncompetition, Severance and Employment Agreement dated as of
May 30, 2001, by and between TSFG and James W. Terry, Jr.21.1
    
    Subsidiaries of TSFG23.1
    
    Consent of KPMG LLP31.1
    
    Certification of 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 2002.31.2
    
    Certification of 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 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
1350, as adopted pursuant to section 906 of the Sarbanes Oxley
Act of 2002.32.2
    
    Certification of Principal Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to section 906 of the
Sarbanes Oxley Act of 2002.
 128