The South Financial Group Reports Second Quarter Results

The South Financial Group, Inc. (NASDAQ: TSFG) today reported a second quarter 2010 net loss available to common shareholders of $314.9 million, or $(1.46) per diluted share. Included in second quarter 2010 results is a non-operating, non-cash goodwill impairment charge of $214.1 million, or $(0.99) per diluted share, representing the write-off of remaining goodwill amounts attributable to TSFG’s Carolinas Banking segment and insurance operations. The net loss available to common shareholders, excluding the goodwill impairment charge, of $100.8 million, or $(0.47) per diluted share, compares to a net loss available to common shareholders of $85.8 million, or $(0.40) per diluted share, for first quarter 2010. Reconciliations of GAAP-reported results to operating results are provided in the attached financial highlights.

“Our second quarter results are in line with our previous forecasts, with credit costs remaining elevated as expected given the continuing economic cycle,” said H. Lynn Harton, President and CEO of The South Financial Group. “Our previously announced merger with TD Bank is progressing well through the various approval processes and we currently anticipate the transaction closing in September, subject to shareholder and regulatory approval,” added Harton.

Key points for second quarter included:

-- GAAP results include net gains on sales of securities and a non-cash goodwill impairment charge

• TSFG sold $255 million of available-for-sale securities during the second quarter and is in the process of liquidating a significant portion of the remaining investment portfolio to enhance capital and liquidity subsequent to June 30, 2010; these actions resulted in a net gain of $10.5 million during the second quarter
• A $214.1 million non-cash goodwill impairment charge related to the write-off of the remaining goodwill amounts attributable to the Carolinas Banking segment and insurance operations based on the implied valuation of TSFG using the proposed merger consideration; this non-operating, non-cash charge did not significantly impact our operations, liquidity or regulatory capital

-- Based on capital ratios at June 30, 2010, Carolina First Bank is considered “adequately capitalized” under applicable regulatory definitions

• At June 30, 2010, TSFG’s preliminary Tier 1 capital ratio, Total risk-based capital ratio and Leverage ratio were 8.52%, 10.24% and 6.11%, respectively, and Carolina First Bank’s preliminary regulatory capital ratios were 8.24%, 9.85%, and 5.90%, respectively (compared to the “adequately capitalized” requirements of 4.00%, 8.00% and 4.00%, respectively)
• Tangible common equity ratio declined to 2.33% from 2.90% at March 31, 2010
• Tangible common book value per common share was $1.25 at June 30, 2010, down from $1.64 at March 31, 2010
• The proposed merger is expected to provide TSFG with the additional capital required by our previously disclosed regulatory orders, which require capital levels in excess of the regulatory “well-capitalized” thresholds

-- Credit costs continue to stabilize in our Florida markets while the Carolinas continue to show deterioration primarily related to on-going residential construction stress

• Nonperforming loans increased to $460.6 million from $374.2 million in first quarter 2010
• Net charge-offs were consistent with expectations, increasing to $93.7 million from $87.8 million in the prior quarter
• Florida-related commercial nonperforming loans declined modestly, reflecting the fifth consecutive quarterly decline while net charge-offs improved for the third consecutive quarter; however, nonperforming loans and net charge-offs in the Carolinas increased from last quarter, reflecting the continued deterioration in TSFG’s coastal South Carolina and western North Carolina residential construction portfolios
• The provision for credit losses of $113.9 million was in line with management expectations and exceeded net charge-offs by $20.2 million, increasing the allowance for credit losses to 5.23% of loans held for investment compared to 4.75% in first quarter 2010
• Potential problem loans decreased to $885.8 million from $944.3 million at March 31, 2010
• Loan sales continued to decline from 2009 levels and further declined from $55 million in first quarter 2010 to $22 million during second quarter 2010
• Nonaccrual inflows were $229 million for second quarter 2010, compared to $110 million for first quarter 2010
• Following is a summary of quarterly trends in nonperforming loans and net charge-offs:

		Nonperforming Loans										Net Charge-Offs
		2Q 2010			1Q 2010			4Q 2009				2Q 2010			1Q 2010			4Q 2009
Commercial
South Carolina		$	170.1		$	108.9		$	120.0			$	31.6		$	19.5		$	43.1
North Carolina			106.9			79.7			84.9				31.7			13.0			18.0
Florida			147.4			148.2			156.7				19.7			44.3			61.8
Consumer			4.5			6.1			7.2				5.3			6.3			9.1
Lot Loans			11.3			9.3			9.1				3.5			2.9			5.1
Mortgage			20.4			22.0			21.1				1.9			1.6			5.8
Total		$	460.6		$	374.2		$	399.0			$	93.7		$	87.8		$	142.9

“Credit quality continues to reflect the ongoing stress in the residential construction sector and movement from Florida into coastal South Carolina and western North Carolina. The retail portfolios reflect ongoing economic stabilization but improvement remains subdued,” stated Rob Edwards, Chief Credit Officer.