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January 19
The stock of South Financial Group Inc. fell sharply Wednesday, after the Greenville, S.C., company reported a $340.8 million third-quarter loss because of loan trouble.
Though the $12.3 billion-asset South Financial raised $280 million of capital during the quarter, the loss shrank its tangible common equity ratio by a hefty 82 basis points from June, to 5.25%, a level that some analysts considered worrisome.
Still, its regulatory capital ratios remained healthy. The loss included a $200 million noncash charge related to a valuation allowance for deferred tax assets.
Citing a spike in chargeoffs, the company increased its provision for credit losses 71% from the second quarter and 165% from the year earlier, to $224.2 million.
The net loan chargeoffs totaled $168.6 million, or 7.31% annualized of average loans held for investment. South Financial said that it has been aggressively selling and resolving problem loans and that these efforts resulted in $60 million of the chargeoffs.
As a result nonperforming loans held for investment shrank 7% from the second quarter, to $431.8 million, or 4.87% of loans held for investment.
The company said it is conducting a goodwill impairment analysis that could deepen the quarterly loss. It had $202 million of goodwill related to its Carolina First banking segment as of Sept. 30.
The results included $17.3 million of preferred dividends paid during the quarter, with $5.2 million of the dividends being for the Treasury Department's shares.
On a conference call Wednesday, James Gordon, South Financial's chief financial officer, said the company has not asked regulators about converting the government investment to common stock.
The $340.8 million loss available to common shareholders follows a $111.5 million loss in the second quarter. South Financial lost $31.3 million in the third quarter of 2008.
The company reported after the market closed Tuesday, and its stock sank 29.4% Wednesday, to $1.01.
