South Financial Lays Out Growth Plans for Florida
By Laurie Kulikowski
Thursday, November 18, 2004


South Financial Group Inc. of Greenville, S.C., plans to build and buy branches and make whole-bank acquisitions in Florida to boost revenue, its president and chief executive says.

The $13.7 billion-asset company wants to open 10 to 15 branches in Jacksonville, Tampa, Orlando, and south Florida by 2006, Mack I. Whittle Jr. said last week at a Sandler O'Neill & Partners LP conference in Palm Beach Gardens, Fla.

On Oct. 28, South Financial announced a $101.5 million deal for the 10-branch Pointe Financial Corp. of Boca Raton, Fla. But Mr. Whittle said acquisitions alone "don't always contribute to the kind of earnings growth that we look for."

South Financial caters to small-business customers with less than $25 million in credit needs. It has 153 branches - 100 in the Carolinas and 53 in Florida. It has said it is also looking to expand on the Georgia coast, where it has no branches.

Andrew B. Cheney, the president of its Florida subsidiary Mercantile Bank, said Monday in a telephone interview that buying some former SouthTrust Corp. branches could help it meet its goals in the state. Wachovia Corp. bought SouthTrust on Nov. 1.

Mr. Whittle said Tuesday that South Financial also plans to hire former SouthTrust and National Commerce Finance Corp. executives. (SunTrust Banks Inc. bought National Commerce, of Memphis Oct. 1.) He spoke Tuesday at an investors' conference in New York sponsored by Merrill Lynch & Co.

Kenneth H. Thomas, a bank consultant who founded in Miami, said South Financial "desperately" needs to expand its branch network in its Florida markets.

"Too many banks have focused on just the west coast" of Florida, he said.

In the southern part of the state, where the company has only two branches, it needs at least 50 to be a player, Mr. Thomas said. The Pointe Financial deal, which is to close in the second quarter, would bring it 10.

Mr. Cheney said South Financial will also push cross-selling initiatives in Florida. It plans to double its staff of mortgage originators in the state, from 20 currently, and hire more securities and insurance brokers, he said.

South Financial's Mercantile Bank will also try to boost its treasury management business as it branches out in the state, Mr. Cheney said.

Mr. Whittle said last week at the Sandler conference that he is looking at cross-sales to help boost fee revenue to at least 25% of total revenue by 2006, from 20% now.

The company sold 1.6 products per customer household three years ago, now sells 3.5, and would like to hit 4.5 by the end of 2006, he said at Tuesday's conference.

Christopher W. Marinac, an analyst with FIG Partners LLC in Atlanta, said South Financial's stock has gotten more attention as the company has increased its share of the Florida market. "There is real liquidity," he said. Its shares have risen nearly 16% since the beginning of the year.

But Mr. Marinac said South Financial has suffered high staff turnover in its older Florida markets, such as Tampa, as it imposed a commercial bank mindset on community banks it bought.

That could be a problem as it expands further in the state, he said. Since 1999 the company has bought six banking companies in Florida; Pointe would be the seventh.

Mr. Marinac said South Financial's success in executing its strategy will determine how long it stays independent. Officials have said they have no plans to sell the company soon. 


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