Interim president, CEO takes personal approach

GREENVILLE — On his resume, Lynn Harton says he has the proven ability to create change and drive improved performance in organizations ranging in asset size from $13 billion to $100 billion.

As interim president and chief executive of The South Financial Group, a Greenville-based bank holding company, Harton, 47, is relying on every bit of that experience to carry him through his latest challenge.

It's been five weeks since Harton was named South Financial's interim CEO to replace company founder Mack Whittle, who retired.

Harton is a candidate to permanently succeed Whittle, but he said he is too busy trying to turn around South Financial's financial fortunes to worry unnecessarily about when the company's board of directors will make that decision.

"My commitment to the board was that I'm here no matter what you do," Harton said in a recent interview. "Their commitment to me was that if they did bring someone in, and it wasn't me, it would be someone that shared my vision."

That vision, Harton said, is to create "one team, one bank, one mission."

It doesn't mean South Financial will be "the Wal-Mart of banking," he said. But he is determined to eliminate what he said is a "silo" approach in which each business unit functions almost to the exclusion of the others.

"We deliver wealth-management products, consumer products, business products, commercial products," he said. "But they all come together to an individual. Everything is personal."

Harton, who grew up in Asheboro, N.C., said he learned that lesson from his dad, Herb, who died earlier this year.

Herb Harton was a "great American story" — the first one in his family to go to college, the younger Harton said.

His grandfather was a sharecropper and drove a laundry truck, Harton said. And all he could give his dad when he went to college was $20 "and a car that he paid $5 and a pig for," Harton said.

But Herb Harton worked his way through college and then operated a successful Allstate insurance business for years.

"He did it with that exact kind of personal service," the younger Harton said.

For instance, a customer with a claim wouldn't just be directed to a toll-free telephone number.

"He would not give out that 1-800 number," Lynn Harton said. "He'd say, 'You've got to come in, sit down with me. I'm going to call them directly. I'm going to do your claim for you. I'm going to make sure that you get the rental car that they're not going to tell you you're qualified for. I'm going to make sure you get the most back for you. I'm going to take care of you like nobody else will.'

"He didn't say this, but it would be the truth. You'd walk out of there with an extra policy that you didn't have when you walked in."

In South Financial's case, however, the company has gone down a path where "each one of those business units almost became their own business unit, and they didn't want to share," Harton said.

"So if I happened to bank you in the private-banking area and you needed a business loan, maybe I don't share you with the business group because I'm not part of one bank and one team," he said. "Well, now you are. We broke down those silos and now all those lines of business are integrated at our bank president level."

The bank presidents "are the integrators," Harton said. "They make sure that all those teams work together. The customer's first. Whatever they need, we bring to them. There's no internal competition."

His business approach has been forged as South Financial's chief commercial banking officer, his job before Harton became interim CEO.

At South Financial, he also has been chief risk and credit officer.

Previously, he was chief credit officer for Regions Financial Corp., where he led the merger and integration of credit organizations and processes in the merger of Regions Financial and Union

Planters.

Earlier, he held various leadership roles at BB&T.

While he has battle-tested skills, these days he is drawing on every reserve of his banking experience. South Financial is working through one of its more difficult periods, with problems in its loan portfolio, primarily in Florida, driving down its share price.

South Financial, the largest publicly traded bank holding company based in South Carolina, posted a third-quarter net loss of $25 million, or 43 cents per diluted share. That doubled the second-quarter loss.

Net loan charge-offs in the third quarter totaled $75.4 million, or 2.87 percent of average loans held for investment, an increase from $47 million, or 1.81 percent, for the second quarter. Approximately 59 percent, or $44.6 million, of the third quarter 2008 net loan charge-offs related to residential construction loans, with nearly 90 percent of the charge-offs in Florida.

As of Sept. 30, South Financial had about $13.7 billion in total assets.

Over the past several years, the company, which operates Carolina First Bank, has worked to target middle-market and small businesses and retail customers.

However, as the company made acquisitions or hired new employees, "We would bring in people that wanted to re-create whatever bank it was they came from," Harton said.

"We didn't probably spend the time we needed to in making sure that their vision and what they wanted to create really fit into who we were and who we wanted to be," he said.

"That's a natural thing that people do when you grow, right? And here's the thing," he said. "I don't want to re-create anything."

"I want to create TSFG," he said.

Harton recently created a 10-person executive management team to replace the company's three-person operating council and named a new president of South Financial's Florida operations.

Company officials also said they have taken steps to fortify South Financial's balance sheet by raising additional capital and identifying and dealing with problem loans.

Additionally, the U.S. Treasury Department has invested $347 million in the company as part of the government's efforts to stabilize the financial system and spur lending.

"We're not going to be the most convenient bank," Harton says. "We've got 180 branches. We compete against banks that might have 180 branches in one market. But what we can be is — we can be more personal and we can deliver more plain talk. We can know you better and we can do what I think a real banker does, is provide advice."

John C.B. Smith Jr., South Financial's chairman and lead independent director, said earlier this month that the search for a permanent CEO is continuing.

He wouldn't discuss specific candidates but said, "I think it's been pretty publicly acknowledged" that Harton is among them.

At one point, Smith said he had hoped a decision would be made by the end of the year.

But he later told The Greenville News, "It's more important to have the right person than to proceed according to some set schedule or proceed precipitously. We are proceeding with the search, and I will say that things are going well internally now."

"Lynn Harton is doing a great job as an interim CEO," Smith said. "That gives us the luxury of having a little bit more time to proceed with the search."

In the meantime, Harton is focused on improving South Financial's profitability.

"This is not a hard business," he said. "It's not complex, and the difference is some people do things, some people talk about them. We want to be known as a bank that does things."

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