The following pages provide selected financial information for 2002. Please consult The South Financial Group’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission for a discussion and analysis of financial condition and results of operations.

Earnings Overview
The South Financial Group reported record earnings for 2002. For 2002, earnings per diluted share totaled $1.38, a 41% increase from $0.98 per diluted share for 2001. Net income for 2002 was $59.2 million, up 41% from $41.9 million for 2001.

Higher net interest income, fee income initiatives, efficiency improvements, and a more favorable effective tax rate contributed to the increases in net income and earnings per diluted share. Net interest income increased from a higher net interest margin and 20% growth in average earning assets.

The following table summarizes noninterest income and noninterest expenses, both before and after gains on asset sales and non-operating items.

Forward-Looking Statements and Non-GAAP Financial Information
This annual report contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. Please refer to The South Financial Group’s Annual Report on Form 10-K for the year ended December 31, 2002, for a more thorough description of the types of risks and uncertainties that may affect management’s forward-looking statements. The South Financial Group undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report.

This Annual Report to Shareholders also contains financial information determined by methods other than in accordance with Generally Accepted Accounting Principles (“GAAP”). The South Financial Group’s management uses these non-GAAP measures in their analysis of TSFG’s performance. In particular, a number of measures presented adjust GAAP information to exclude the effects of non-operating items, such as merger-related costs, gains or losses on asset sales, non-operating expenses, and the amortization of intangibles for “cash basis” performance measures. Since these items and their impact on TSFG’s performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is necessary for a clearer understanding of the operating results of TSFG. These disclosures should not be viewed as a substitute for GAAP operating results, and furthermore, TSFG’s non-GAAP measures may not necessarily be comparable to non-GAAP performance measures of other companies.

The following table reconciles reported net income (GAAP) to two non-GAAP measures: operating earnings and operating earnings on a cash basis.