Carolina First owner looks at options

GREENVILLE — The South Financial Group is taking steps to reverse its course, and its chief executive says he is confident his Carolina First subsidiary will raise the additional capital required by federal regulators.

'The only way to fix things is to face them and call them like they are and move on,' H. Lynn Harton, also South Financial's president, told The Greenville News last week.

Harton said that options for raising capital include private investment, a public stock offering and strategic partnerships. He is optimistic about investor activity because of signs that economic conditions have improved, capital markets are opening up and stock and bond markets are improving.

The regulatory requirements will strengthen the company, Harton said. In the meantime, it's business as usual at the Greenville-based bank, he said.

'Particularly given the environment, prepping the company for success long term, we've done extremely well,' Harton said. 'If you look at our internal measures of clarity of vision, they're stronger than they have absolutely ever been.'

He said his management team has stressed to employees, shareholders and customers that it was no surprise that federal regulators stepped in recently with an order to strengthen Carolina First's financial position.

The bank's consent order with the Federal Deposit Insurance Corp. sets deadlines for raising capital levels and mandates a reduction in the amount of assets considered 'substandard' and 'doubtful.'

Bank officials wouldn't specify how much capital they need to raise.

A central issue behind the need for more capital, said Harton, has been 'the misfortune' of having too many real estate loans, with a large percentage in Florida, 'during the worst real estate recession of the last 50 years.'

Shareholders at South Financial's annual meeting next week will be asked to approve an increase in the number of shares of the company's common stock.

South Financial's board also is proposing to shareholders a reverse stock split to raise the per share trading price of the company's stock so it maintains compliance with NASDAQ listing requirements.

A reverse stock split would reduce the number of shares of South Financial's common stock outstanding. Increasing the market price of the stock would make it more attractive to a broader range of institutional and other investors, the company said in a regulatory filing.

Carolina First had 110 banking offices as of March 31, with about seven branches in the Charleston area. It also controls the naming rights to the College of Charleston basketball arena.

As of last year, South Financial and its subsidiaries had 2,214 full-time employees, according to regulatory filings.

South Financial recently reported its ninth consecutive quarterly loss, a deficit that has added up to about $1.4 billion over the past two years. In January, the company suspended all dividends to conserve cash.

The Post and Courier contributed to this report.

The Greenville News