A We set aggressive profitability goals, and we’re poised to reach them. First, we operate in markets with superior demographics. We’re uniquely positioned to capitalize on the high growth and high per capita income in these areas. In addition, we expect commercial loan growth to pick up
in the coming months. Also, we expect improvements in our credit quality to approach historical levels. Finally, a key facet of our strategic plan is to accelerate noninterest income growth, as we manage that area of our operations to “best practice” goals.

Q Why do you expect commercial loan growth
to pick up?

A We anticipate that our commercial loan growth will be concentrated in our Florida markets, in Rock Hill – an outstanding market just outside of Charlotte – and in the coastal markets of the Carolinas. Our recent entry into the Tampa Bay area provides opportunities to expand existing relationships due to higher lending limits. We are also forecasting excellent growth related to our home equity product and indirect loans in Florida. In November 2002, we completed the rollout of Elevate’s Business-to-Business banking process and are building our sales culture on the commercial side.

A We are building a customer-focused sales culture at The South Financial Group. Simply put, Elevate helps us know our customers better and serve them more efficiently. And it’s working. The number of households we serve increased 27% since the inception of Elevate – 14% excluding the 2002 mergers. And we ended 2002 with an average of 2.92 products per household. This exceeded our goal of 2.5 and represented a dramatic improvement from the 1.6 products per household before the Elevate process. We expect similar levels of success from the November 2002 commercial customer rollout of Elevate.

A As we build our sales culture, we have undertaken several noninterest income initiatives. We successfully established a Sales and Service Center in 2002. Last year, the Center had 280,000 inbound and outbound calls and e-mails, and sold more than 14,000 products. We are adding mortgage origination and brokerage employees, and we are managing them to best practice revenue goals. At the end of 2002, we had 40 mortgage originators, up from 33 in January, with 60% exceeding our best practice goal. For brokerage, we ended 2002 with 17 producers, up from 12 in January, with 40% exceeding our best practice goal. That’s progress. We are also expanding our insurance services, pursuing in-market insurance agency acquisitions, and growing cash management services.

A We will remain very disciplined in our approach to mergers and consider them only if they meet our strict merger criteria. Specifically, the target must exhibit a similar banking culture to ours; it must strategically enhance our franchise; it must be accretive to cash EPS within 12 months; and it must help us achieve performance goals. Our 2002 mergers met these requirements. In 2002, we demonstrated our ability to smoothly integrate mergers, convert operating systems, and capture the promised results. We’ll do the same in future mergers. We have a systematic, proven methodology for excellent execution.

A In a word – yes. We’ve structured our company as a network of community market areas. Currently, we have nine. Each community market area – which is less than $1 billion in assets – is run by a Market President who is familiar with the area and the customers within it. This allows us to keep our decision-making close to the customer and gives our banks a local feel. Behind the scenes, however, customers benefit from a centralized operating system, technological sophistication, and the product depth of a larger organization. Most importantly, we rely on our core values to maintain our personalized style. Simply, they allow us to remain a community bank, while at the same time, offering big bank services.