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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

Commission File Number: 0-15083

(864) 255-7900
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
(Title of Class)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes |X|       No |   |.

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     |X|

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes |X| No |_|.

        The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, computed by reference to the closing price of such stock on June 30, 2003, was approximately $1.0 billion.

        The number of shares of the Registrant’s common stock, $1.00 par value, outstanding on March 1, 2004 was 59,534,491.

DOCUMENTS INCORPORATED BY REFERENCE

The Exhibit Index begins on page 102.

CROSS REFERENCE INDEX

PART I

Item 1.     Business

The Company

        The South Financial Group, Inc. is a South Carolina corporation headquartered in Greenville, South Carolina. “TSFG” refers to The South Financial Group, Inc. and its subsidiaries, except where the context requires otherwise. It was formed in 1986 and is a financial holding company, as defined by the Gramm-Leach-Bliley Act of 1999. TSFG operates principally through Carolina First Bank, a South Carolina chartered commercial bank, and Mercantile Bank, a Florida chartered commercial bank.

        TSFG’s subsidiaries provide a full range of financial services, including cash management, insurance, investments, mortgage, and trust services, designed to meet substantially all of the financial needs of its customers. TSFG currently conducts business through 76 branch offices in South Carolina, 24 in North Carolina, 34 in northern and central Florida and one in Virginia. At December 31, 2003, TSFG had $10.7 billion in assets, $5.8 billion in loans, $6.0 billion in deposits, $979.9 million in shareholders’ equity, and $1.6 billion in market capitalization.

        TSFG began its operations in 1986 with the de novo opening of Carolina First Bank in Greenville. Its opening was undertaken, in part, in response to opportunities resulting from the takeovers of several South Carolina-based banks by larger southeastern regional bank holding companies in the mid-1980s. In the late 1990‘s, TSFG perceived a similar opportunity in northern and central Florida where banking relationships were in a state of flux due to the acquisition of several larger Florida banks. In 1999, TSFG entered the Florida market with the same strategy of capitalizing on the environment created by these acquisitions.

        TSFG has pursued a strategy of growth through internal expansion and the acquisition of financial institutions and branch locations in selected market areas. TSFG targets markets for expansion that exceed the Southeastern and United States medians for household growth and per capita income growth. TSFG has emphasized internal growth through the acquisition of market share from the large out-of-state bank holding companies. It attempts to acquire market share by providing quality banking services and personal service to individuals and business customers. Since inception, TSFG has consummated 15 acquisitions of financial institutions, four non-bank financial service providers, and two insurance agencies. Approximately 40% of TSFG’s growth has come from acquisitions. On January 20, 2004, TSFG signed a definitive agreement to acquire CNB Florida Bancshares, Inc. (“CNB”), which operates 16 branch offices in Northeast Florida and had approximately $820 million in total assets at December 31, 2003.

        At December 31, 2003 and 2002, TSFG had no non-consolidated special purpose entities.

Subsidiary Banks

        TSFG manages its banking subsidiaries by dividing its franchise into 9 banking markets, each run by a market president. This structure allows TSFG to operate like a community bank focusing on personal customer service. However, because of the size of the overall organization, TSFG’s subsidiary banks can also offer a full range of sophisticated products and services more typical of larger regional banks.

        Carolina First Bank. Carolina First Bank, headquartered in Greenville, South Carolina, engages in a general banking business through Carolina First Bank/South Carolina, which serves South Carolina and coastal North Carolina, and Carolina First Bank/North Carolina, which serves western North Carolina. Carolina First Bank operated through 100 branches with $8.5 billion in assets, $4.4 billion in loans, and $4.5 billion in deposits at December 31, 2003.

        Carolina First Bank/South Carolina operated through 81 branches with $3.7 billion in loans and $3.8 billion in deposits at December 31, 2003. It currently focuses its operations in the following five principal market areas:

• the Greenville and Anderson metropolitan area (located in the Upstate region of South Carolina);
• the Rock Hill, or greater South Charlotte, metropolitan area (located in the Piedmont region of South Carolina);
• the Columbia metropolitan area (located in the Midlands region of South Carolina);
• the Myrtle Beach, Georgetown, and Wilmington metropolitan areas (located in Coastal region of South Carolina and North Carolina ); and

• the Charleston and Hilton Head metropolitan areas (located in the lower Coastal region of South Carolina).

        These principal market areas represent the largest Metropolitan Statistical Areas in the state. In addition, approximately one-fourth of Carolina First Bank/South Carolina’s branch locations are in other counties, which are not a part of these metropolitan areas.

        Carolina First Bank/North Carolina operated through 19 branch offices in western North Carolina with $654.5 million in loans and $641.3 million in deposits at December 31, 2003. It currently concentrates its operations in the Hendersonville and Ashville metropolitan areas.

        Myrtle Beach and Hilton Head Island are coastal resort areas that serve a significant number of tourists primarily during the summer months. Because of the seasonal nature of these market areas, most of the businesses, including financial institutions, are subject to moderate swings in activity between the winter and summer months. Otherwise, Carolina First Bank’s business is not subject to significant seasonal factors.

        Carolina First Bank targets small and middle market businesses and consumers in its market areas. Carolina First Bank provides a full range of commercial and consumer banking services, including deposit accounts, secured and unsecured loans through direct and indirect channels, residential mortgage originations, cash management programs, trust functions, safe deposit services, and certain insurance and brokerage services. In 1999, Carolina First Bank began offering Internet banking services, including bill payment, through Carolina First Bank’s web site and Bank CaroLine, an Internet-only banking product. The Federal Deposit Insurance Corporation (“FDIC”) insures Carolina First Bank’s deposits, limited to $100,000 per depositor.

        Mercantile Bank. Mercantile Bank, headquartered in Orlando, Florida, engages in a general banking business through 34 branches with $2.3 billion in assets at December 31, 2003. It currently focuses on three principal Florida market areas:

• the Orlando metropolitan area (located in the Central Florida region);
• the Tampa Bay metropolitan area (located in the Tampa Bay region); and
• the Jacksonville metropolitan area (located in the North Florida region).

        TSFG entered Florida in 1999 with two acquisitions in central Florida and a de novo branch in Jacksonville. It operated as Citrus Bank, the name of the larger acquired company, until 2002. In 2002, TSFG expanded into the Tampa Bay market with the acquisitions of Gulf West Banks, Inc. (“Gulf West”), the bank holding company for Mercantile Bank, and Central Bank of Tampa. Following the Gulf West acquisition, TSFG changed the name of its Florida banking operation to Mercantile Bank.

        Mercantile Bank targets small and middle market businesses and consumers in its market areas. Mercantile Bank provides a full range of commercial and consumer banking services, including deposit accounts, secured and unsecured loans through direct and indirect channels, residential mortgage originations, cash management programs, trust functions, safe deposit services, and certain insurance and brokerage services. In 2000, Mercantile Bank began offering Internet banking services, including bill payment, through Mercantile Bank’s web site. The FDIC insures Mercantile Bank’s deposits, limited to $100,000 per depositor.

        Community National Bank. TSFG also owns Community National Bank, headquartered in Pulaski, Virginia, which engages in a general community-oriented commercial and consumer banking business through one branch office and one loan production office in Pulaski, Virginia. This stand-alone banking subsidiary was acquired as part of TSFG’s acquisition of MountainBank Financial Corporation (“MBFC” or “MountainBank”), which closed on October 3, 2003. Community National Bank is outside TSFG’s geographic market focus. Accordingly, on February 3, 2004, TSFG entered into a definitive asset sale agreement to sell substantially all of the assets and liabilities of Community National Bank.

Non-Bank Subsidiaries

        TSFG has a number of non-bank subsidiaries. The following describes certain of these subsidiaries.

        American Pensions, Inc. In 2003, TSFG acquired American Pensions, Inc. (“API”), which is a benefit plan administrator headquartered in Mount Pleasant, South Carolina. At December 31, 2003, API had 215 corporate accounts and managed $256.4 million in plan assets.

        Carolina First Community Development Corporation. In 2003, Carolina First Bank formed a new subsidiary, Carolina First Community Development Corporation (“CFCDC”), to underwrite future low-income community business loans. CFCDC has been certified by the Department of the Treasury as a qualified Community Development Entity and meets the eligibility requirements for participation in the New Markets Tax Credit Program.

        CF Investment Company. CF Investment Company (“CF Investment”), headquartered in Greenville, South Carolina, is licensed through the Small Business Administration, as a Small Business Investment Company. CF Investment’s principal focus is investing in companies that have a bank-related technology or service that TSFG or its subsidiaries can use. As of December 31, 2003, CF Investment had invested $1.8 million in three companies. The estimated fair value for these investments, which are recorded in other assets, approximates the cost basis.

        CF Technology Services Company. In January 2000, TSFG formed CF Technology Services Company (“CF Technology”), which is headquartered in Lexington, South Carolina. It is responsible for substantially all of TSFG’s technology requirements and related matters. Its mission is to create customer and shareholder value by developing and delivering superior technology and financial-based products and services. CF Technology strives to provide competitive advantages, increase revenue, produce efficiencies, and strengthen customer relationships through innovative use of information technology. CF Technology has adopted state-of-the-art security and business recovery processes to safeguard vital corporate assets and information.

        Gardner Associates, Inc. In 2002, TSFG acquired Gardner Associates, Inc., which operates an insurance agency business primarily in the Midlands area of South Carolina. It intends to utilize Gardner Associates, Inc. as a platform to build its insurance-related business in that market area.

        REIT Subsidiaries. In 2001 and 2003, TSFG formed three real estate investment trust subsidiaries (“REITs”), which have issued preferred and debt securities to institutional investors as a means of raising capital. They do not engage in other activities apart from the internal management of their assets and liabilities.

        South Financial Asset Management, Inc. In December 2002, TSFG formed South Financial Asset Management, Inc. (“SFAM”) for the purpose of engaging in an asset management business. SFAM is a registered investment advisor and targets large endowments, pension funds and similar entities for fund management. SFAM is majority-owned by TSFG, but has a minority interest equity holder.

Business Segments

        Item 8, Note 33 to the Consolidated Financial Statements discusses TSFG’s business segments, which information is incorporated herein by reference.

Economic and Industry-Wide Risk Factors

        TSFG’s revenue and credit performance is impacted by U.S. and specifically Southeastern economic conditions, including but not limited to the level of interest rates, price compression, competition, bankruptcy filings and unemployment rates, as well as political policies, regulatory guidelines and general developments. TSFG remains diversified in its products and customers and continues to monitor the economic situations in all areas of operations to achieve growth and limit risk.

        Credit risk, an industry-wide factor, is the potential for financial loss resulting from the failure of a borrower or counterparty to honor its financial or contractual obligation. Credit risk arises in many of TSFG’s business activities, most prominently in its lending activities, derivative activities, security transactions, and when TSFG acts as an intermediary on behalf of its customers and other third parties. TSFG has a risk management system based on policies and control processes designed to help ensure compliance with those policies.

        TSFG’s business is also subject to market risk, which arises in the normal course of business and includes liquidity risk and price risk. Liquidity risk is the risk that an individual or entity, will be unable to meet a financial commitment to a customer, creditor, or investor when due. Price risk is the risk to earnings that arises from changes in interest rates, equity and commodity prices, and in their implied volatilities.

        Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or external events. It includes reputation and franchise risks associated with business practices or market conduct that TSFG may undertake. TSFG has an operational risk management system based on policies and control processes that are designed to help ensure compliance with those policies. These policies and control processes comply with the Gramm-Leach-Bliley Act and other regulatory guidance.

        The economic outlook appears to be improving for 2004 and is generally viewed as stable. Management views this news favorably, but realizes that economic forecasts are not always reliable. TSFG is positioned to benefit from potential improvement in the economy.

Competition

        Each of TSFG’s markets is highly competitive with the largest banks in their respective state represented. The competition among the various financial institutions is based upon a variety of factors including interest rates offered on deposit accounts, interest rates charged on loans, credit and service charges, the quality of services rendered, the convenience of banking facilities and, in the case of loans to large commercial borrowers, relative lending limits. In addition to banks and savings associations, TSFG competes with other financial institutions, such as securities firms, insurance companies, credit unions, leasing companies, and finance companies.

        The banking industry continues to consolidate, which presents opportunities for TSFG to gain new business. However, consolidation may further intensify competition if additional financial services companies enter TSFG’s market areas through the acquisition of local financial institutions.

        Size gives larger banks certain advantages in competing for business from large commercial customers. These advantages include higher lending limits and the ability to offer services in other areas of South Carolina, North Carolina, Florida, and the Southeastern region. As a result, TSFG concentrates its efforts on small- to medium-sized businesses and individuals. TSFG believes it competes effectively in this market segment by offering quality, personal service.

Employees

        At December 31, 2003, TSFG and its subsidiaries employed 1,918 full-time equivalent employees. TSFG provides a variety of benefit programs including retirement and stock ownership plans as well as health, life, disability, and other insurance. TSFG also maintains training, educational, and affirmative action programs designed to prepare employees for positions of increasing responsibility. TSFG believes that its relations with employees are good.

Web Site Access to TSFG’s Filings with the Securities and Exchange Commission

        All of TSFG’s electronic filings with the Securities and Exchange Commission (“SEC”), including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are made available at no cost on TSFG’s web site, www.thesouthgroup.com, through the Investor Relations link. TSFG’s SEC filings are also available through the SEC’s web site at www.sec.gov.

Monetary Policy

        The policies of regulatory authorities, including the Board of Governors of the Federal Reserve System (the “Federal Reserve”) affect TSFG’s earnings. An important function of the Federal Reserve is regulation of the money supply. Various methods employed by the Federal Reserve include open market operations in U.S. Government securities, changes in the target Federal funds rate on bank borrowings, and changes in reserve requirements against member bank deposits. The Federal Reserve uses these methods in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits. The use of these methods may also affect interest rates charged on loans or paid on deposits.

        The monetary policies of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Due to the changing conditions in the national economy and money markets, as well as the effect of actions by monetary and fiscal authorities, TSFG can make no prediction as to the future impact that changes in interest rates, securities, deposit levels, or loan demand may have on its business and earnings.

Impact of Inflation

        Unlike most industrial companies, the assets and liabilities of financial institutions such as TSFG’s subsidiaries are primarily monetary in nature. As a result, interest rates generally have a more significant impact on the performance of a financial institution than the effects of general levels of inflation. TSFG strives to manage the effects of inflation through its asset/liability management processes.

Supervision and Regulation

      General

        TSFG and its subsidiaries are extensively regulated under federal and state law. To the extent that the following information describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. Any change in applicable laws may have a material effect on TSFG’s business and prospects. TSFG’s operations may be affected by possible legislative and regulatory changes and by the monetary policies of the United States.

        The South Financial Group. TSFG, a financial holding company and bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”), is subject to regulation and supervision by the Federal Reserve. Under the BHCA, TSFG’s activities and those of its subsidiaries are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries or engaging in any other activity that the Federal Reserve determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The BHCA prohibits TSFG from acquiring direct or indirect control of more than 5% of any class of outstanding voting stock, or substantially all of the assets of any bank, or merging or consolidating with another bank holding company without prior approval of the Federal Reserve. The BHCA prohibits TSFG from engaging in or from acquiring ownership or control of more than 5% of the outstanding voting stock of any company engaged in a nonbanking business unless such business is determined by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be properly incident thereto.

        Beginning June 1, 1997, a bank headquartered in one state was authorized to merge with a bank headquartered in another state, as long as neither of the states had opted out of such interstate merger authority prior to such date. After a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where a bank headquartered in that state could have established or acquired branches under applicable federal or state law.

        The Federal Deposit Insurance Act, as amended (“FDIA”), authorizes the merger or consolidation of any Bank Insurance Fund (“BIF”) member with any Savings Association Insurance Fund (“SAIF”) member, the assumption of any liability by any BIF member to pay any deposits of any SAIF member or vice versa, or the transfer of any assets of any BIF member to any SAIF member in consideration for the assumption of liabilities of such BIF member or vice versa, provided that certain conditions are met. In the case of any acquiring, assuming or resulting depository institution which is a BIF member, such institution will continue to make payment of SAIF assessments on the portion of liabilities attributable to any acquired, assumed or merged SAIF-insured institution (or, in the case of any acquiring, assuming or resulting depository institution which is a SAIF member, that such institution will continue to make payment of BIF assessments on the portion of liabilities attributable to any acquired, assumed or merged BIF-insured institution).

        In addition, the “cross-guarantee” provisions of the FDIA require insured depository institutions under common control to reimburse the FDIC for any loss suffered by either the SAIF or the BIF as a result of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly controlled insured depository institution in danger of default. The FDIC may decline to enforce the cross-guarantee provisions if it determines that a waiver is in the best interest of the SAIF or the BIF, or both. The FDIC’s claim for damages is superior to claims of stockholders of the insured depository institution or its holding company but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions.

        Law and regulatory policy impose a number of obligations and restrictions on bank holding companies and their depository institution subsidiaries that are designed to minimize potential loss exposure to the depositors of such depository institutions and to the FDIC insurance funds. Current federal law requires a bank holding company to guarantee the compliance of any insured depository institution subsidiary that may become “undercapitalized” with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of the institution’s total assets at the time the institution became undercapitalized, or (ii) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan. The Federal Reserve requires a bank holding company to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such policy. The Federal Reserve also has the authority under the BHCA to require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal law grants federal bank regulatory authorities additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.

        The Gramm-Leach-Bliley Act of 1999 (“GLB”) covers a broad range of issues, including a repeal of most of the restrictions on affiliations among depository institutions, securities firms and insurance companies. GLB also permits bank holding companies to elect to become financial holding companies. A financial holding company may engage in or acquire companies that engage in a broad range of financial services, including securities activities such as underwriting, dealing, investment and merchant banking, insurance underwriting and sales, and brokerage activities. In order to become a financial holding company, the bank holding company and all of its affiliated depository institutions must be well-capitalized, well-managed, and have at least a satisfactory Community Reinvestment Act rating. TSFG became a financial holding company in 2001.

        GLB adopts a system of functional regulation under which the Federal Reserve Board is confirmed as the umbrella regulator for bank holding companies, but bank holding company affiliates are to be principally regulated by functional regulators such as the FDIC for state nonmember bank affiliates, the Securities and Exchange Commission for securities affiliates and state insurance regulators for insurance affiliates. GLB repeals the broad exemption of banks from the definitions of “broker” and “dealer” for purposes of the Securities Exchange Act of 1934, but identifies a set of specific activities, including traditional bank trust and fiduciary activities, in which a bank may engage without being deemed a “broker”, and a set of activities in which a bank may engage without being deemed a “dealer”.

        GLB contains extensive customer privacy protection provisions, which require the institution to provide notice of the privacy policies and provide the opportunity to opt-out of many disclosures of personal information. Additionally, GLB limits the disclosure of customer account numbers or other similar account identifiers for marketing purposes.

        TSFG, through its banking subsidiaries, is also subject to regulation by the South Carolina and Florida state banking authorities. TSFG must receive the approval of these state authorities prior to engaging in the acquisitions of banking or nonbanking institutions or assets. It also must file periodic reports with these authorities showing its financial condition and operations, management, and intercompany relationships between TSFG and its subsidiaries.

        Carolina First Bank and Mercantile Bank. Carolina First Bank and Mercantile Bank are FDIC-insured, state-chartered banking corporations and are subject to various statutory requirements and rules and regulations promulgated and enforced primarily by the FDIC, South Carolina State Board of Financial Institutions in the case of Carolina First Bank, and State of Florida Department of Banking and Finance in the case of Mercantile Bank. These statutes, rules, and regulations relate to insurance of deposits, required reserves, allowable investments, loans, mergers, consolidations, issuance of securities, payment of dividends, establishment of branches and other aspects of the business of Carolina First Bank and Mercantile Bank. The FDIC has broad authority to prohibit Carolina First Bank or Mercantile Bank from engaging in what it determines to be unsafe or unsound banking practices. In addition, federal law imposes a number of restrictions on state-chartered, FDIC-insured banks, and their subsidiaries. These restrictions range from prohibitions against engaging as a principal in certain activities to the requirement of prior notification of branch closings. Carolina First Bank and Mercantile Bank are not members of the Federal Reserve System.

        Carolina First Bank and Mercantile Bank are subject to the requirements of the Community Reinvestment Act (“CRA”). The CRA requires that financial institutions have an affirmative and ongoing obligation to meet the credit needs of their local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. Each financial institution’s efforts in meeting community credit needs are evaluated as part of the examination process pursuant to three assessment factors. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility.

        CF Investment Company. CF Investment is licensed through the Small Business Administration as a Small Business Investment Company. It is subject to regulation and supervision by the Small Business Administration.

        Other Regulations. Interest and certain other charges collected or contracted for by TSFG subsidiaries are subject to state usury laws and certain federal laws concerning interest rates. TSFG’s loan operations are also subject to certain federal laws applicable to credit transactions, such as the federal Truth-In-Lending Act governing disclosures of credit terms to consumer borrowers. The deposit operations of Carolina First Bank and Mercantile Bank are also subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records, and the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve to implement that act, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic services.

      Dividends

        The holders of TSFG’s common stock are entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available therefore. As a legal entity separate and distinct from its subsidiaries, TSFG depends on the payment of dividends from its subsidiaries for its revenues. Current federal law prohibits, except under certain circumstances and with prior regulatory approval, an insured depository institution from paying dividends or making any other capital distribution if, after making the payment or distribution, the institution would be considered “undercapitalized,” as that term is defined in applicable regulations. South Carolina and Florida banking regulations restrict the amount of dividends that the subsidiary banks can pay to TSFG, and may require prior approval before declaration and payment of any excess dividend.

      Capital Adequacy

       TSFG.   The Federal Reserve has adopted risk-based capital guidelines for bank holding companies. Under these guidelines, the minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) is 8%. At least half of the total capital is required to be “tier 1 capital,” principally consisting of common stockholders’ equity, non-cumulative preferred stock, a limited amount of cumulative perpetual preferred stock, and mandatorily redeemable preferred stock, less certain goodwill items. The remainder (tier 2 capital) may consist of a limited amount of subordinated debt and intermediate-term preferred stock, certain hybrid capital instruments and other debt securities, perpetual preferred stock, and a limited amount of the allowance for loan losses. In addition to the risk-based capital guidelines, the Federal Reserve has adopted a minimum tier 1 (leverage) capital ratio under which a bank holding company must maintain a minimum level of tier 1 capital (as determined under applicable rules) to average total consolidated assets of at least 3% in the case of bank holding companies which have the highest regulatory examination ratios and are not contemplating significant growth or expansion. All other bank holding companies, including TSFG, are required to maintain a ratio of at least 4.0%. At December 31, 2003, TSFG’s capital levels exceeded both the risk-based capital guidelines and the applicable minimum leverage capital ratio.

        Carolina First Bank and Mercantile Bank. Carolina First Bank and Mercantile Bank are subject to capital requirements imposed by the FDIC. The FDIC requires state-chartered nonmember banks to comply with risk-based capital standards substantially similar to those required by the Federal Reserve, as described above. The FDIC also requires state-chartered nonmember banks to maintain a minimum leverage ratio similar to that adopted by the Federal Reserve. Under the FDIC’s leverage capital requirement, state nonmember banks that (i) receive the highest rating during the examination process and (ii) are not anticipating or experiencing any significant growth are required to maintain a minimum leverage ratio of 3% of tier 1 capital to total assets; all other banks, including Carolina First Bank and Mercantile Bank, are required to maintain an absolute minimum leverage ratio of not less than 4%. As of December 31, 2003, Carolina First Bank and Mercantile Bank exceeded each of the applicable regulatory capital requirements.

      Deposit Insurance Assessments

        Carolina First Bank and Mercantile Bank are subject to insurance assessments imposed by the FDIC. The FDIC has a risk-based assessment schedule where the actual assessment to be paid by each FDIC-insured institution is based on the institution’s assessment risk classification. This classification is determined based on whether the institution is considered “well capitalized,” “adequately capitalized” or “undercapitalized,” as such terms have been defined in applicable federal regulations adopted to implement the prompt corrective action provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), and whether such institution is considered by its supervisory agency to be financially sound or to have supervisory concerns. The assessment rate for the first quarter 2004 is 0.0152% (annualized) for both BIF-insured deposits and SAIF-insured deposits. This rate is set quarterly and may change during the year. Carolina First Bank’s total deposits that were formerly associated with thrift institutions (approximately 30% of total deposits) are subject to SAIF insurance assessments imposed by the FDIC.

      Other Safety and Soundness Regulations

        Prompt Corrective Action. Current law provides the federal banking agencies with broad powers to take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon the capitalization of the institutions. Under uniform regulations defining such capital levels issued by each of the federal banking agencies, a bank is considered “well capitalized” if it has (i) a total risk-based capital ratio of 10% or greater, (ii) a tier 1 risk-based capital ratio of 6% or greater, (iii) a leverage ratio of 5% or greater, and (iv) is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure. An “adequately capitalized” bank is defined as one that has (i) a total risk-based capital ratio of 8% or greater, (ii) a tier 1 risk-based capital ratio of 4% or greater, and (iii) a leverage ratio of 4% or greater. A bank is considered (A) “undercapitalized” if it has (i) a total risk-based capital ratio of less than 8%, (ii) a tier 1 risk-based capital ratio of less than 4% or (iii) a leverage ratio of less than 4%; (B) “significantly undercapitalized” if the bank has (i) a total risk-based capital ratio of less than 6%, (ii) a tier 1 risk-based capital ratio of less than 3%, or (iii) a leverage ratio of less than 3%; and (C) “critically undercapitalized” if the bank has a ratio of tangible equity to total assets equal to or less than 2%. As of December 31, 2003, Carolina First Bank and Mercantile Bank each met the definition of well capitalized.

        Brokered Deposits. Current federal law also regulates the acceptance of brokered deposits by insured depository institutions to permit only a “well capitalized” depository institution to accept brokered deposits without prior regulatory approval. Under FDIC regulations, “well capitalized” insured depository institutions may accept brokered deposits without restriction, “adequately capitalized” insured depository institutions may accept brokered deposits with a waiver from the FDIC (subject to certain restrictions on payments of interest rates) while “undercapitalized” insured depository institutions may not accept brokered deposits.

      Transactions Between TSFG, Its Subsidiaries, and Affiliates

        TSFG’s subsidiaries are subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders or any related interest of such persons. Extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated persons; and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. Aggregate limitations on extensions of credit also may apply. TSFG’s subsidiaries are also subject to certain lending limits and restrictions on overdrafts to such persons.

        Subsidiary banks of a bank holding company are subject to certain restrictions imposed by the Federal Reserve Act on extensions of credit to the bank holding company or its nonbank subsidiaries, on investments in their securities and on the use of their securities as collateral for loans to any borrower. Such restrictions may limit TSFG’s ability to obtain funds from its bank subsidiaries for its cash needs, including funds for acquisitions, interest, and operating expenses. Certain of these restrictions are not applicable to transactions between a bank and a savings association owned by the same bank holding company, provided that every bank and savings association controlled by such bank holding company complies with all applicable capital requirements without relying on goodwill.

        In addition, under the BHCA and certain regulations of the Federal Reserve, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property, or furnishing of services.

      Sarbanes-Oxley Act of 2002

        On July 30, 2002, the Sarbanes-Oxley Act of 2002 was signed into law. It mandated sweeping reforms and implemented a number of requirements for public companies. TSFG has complied with the reforms and new requirements, which included the following:

• It mandated the creation of the Public Company Accounting Oversight Board to oversee audits of public companies.
• It implemented a variety of requirements designed to ensure greater auditor independence, including the prohibition of certain services, which auditors had traditionally provided to clients.
• It mandated a variety of requirements regarding audit committees, including that they be entirely independent, that their scope and responsibility be expanded, particularly with respect to the oversight of the outside auditor, and that they establish procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. It mandates that issuers disclose whether at least one member of the committee is a “financial expert.”
• It amended existing SEC rules to require that changes in equity ownership by directors, officers, and 10% stockholders be reported more promptly, generally by the end of the second business day following the trade (subject to limited exceptions).
• It mandated that CEOs and CFOs certify that the financial information in each annual and quarterly report fairly presents in all material respects the financial condition and results of operations of the issuer as of, and for, the periods presented in the report, and establish and maintain internal controls designed to ensure discovery of material information.
• It adopted rules relating to disclosure of all material off-balance sheet transactions and obligations. It also implemented a variety of rules regarding the presentation of pro-forma financial information in any press release or other public disclosure that was “non-GAAP.”
• It mandates that issuers disclose whether they have adopted a code of ethics for senior executives and any waivers or changes in the code.
• It requires that CEOs and CFOs disgorge incentive compensation and profits from their sales of company securities after restatement of financial information, and prohibits issuers from extending credit to any director or executive officer (subject to limited exceptions).
• It prohibits directors and executive officers from transacting in company equity securities received in connection with employment during any pension fund blackout of such equity.
• It mandates that the SEC review each issuer’s periodic reports at least once every three years.
• It accelerates the time schedule during which Forms 10-K and 10-Q and 8-K must be filed. It also expanded the items reportable under Form 8-K.
• It issued new requirements regarding the obligations of attorneys to report evidence of a material violation of securities law or breach of fiduciary duty to the issuer’s chief legal counsel or chief executive officer, and ultimately to the Board of Directors.
• It adopts new rules regarding statutes of limitation and penalties with respect to securities law violations.

        On May 27, 2003, final rules and amendments, which govern management’s reporting on internal control over financial reporting and certification of disclosures in Exchange Act periodic reports, were signed into law. For TSFG, these rules take effect for the year ended December 31, 2004. Among the reforms and new requirements, which will be included in TSFG’s 2004 annual report, are the following:

• It requires a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting.
• It requires a statement identifying the framework used by management to evaluate the effectiveness of internal control over financial reporting.
• Management discusses its assessment of the effectiveness of internal control over financial reporting.
• It requires a statement that the issuer’s independent auditor has issued an attestation report on management’s assessment.

        These final rules and amendments to the Sarbanes-Oxley Act will have a meaningful impact on TSFG’s operations, TSFG does not believe that it will be affected by the aforementioned reforms and amendments in ways, which are materially different or more onerous than other public companies of similar size and nature.

Item 2.     Properties

        TSFG’s principal executive offices are located at 102 South Main Street, Greenville, South Carolina. TSFG leases approximately 111,000 square feet of this location, which also houses Carolina First Bank’s Greenville main office branch. The majority of TSFG’s administrative functions presently reside at this location. TSFG owns a 100,000 square foot building in Lexington, South Carolina, the headquarters for CF Technology, which houses the technology, operations, and mortgage departments. TSFG leases the land for the CF Technology building under a 30 year lease. In addition, TSFG leases non-banking office space in 12 locations in South Carolina and Florida.

        At December 31, 2003, TSFG operated 135 branch offices, including 76 in South Carolina, 24 in North Carolina, 34 in Florida and one in Virginia. Of these locations, TSFG or one of its subsidiaries owns 74 locations, which includes eight locations with land leases, and leases 60 locations. In addition, TSFG leases one mortgage loan office and one stand alone ATM location.

        TSFG believes that its physical facilities are adequate for its current operations.

Item 3.     Legal Proceedings

        See Item 8, Note 22 to the Consolidated Financial Statements for a discussion of legal proceedings, which information is incorporated herein by reference.

Item 4.     Submission of Matters to a Vote of Shareholders

        No matter was submitted to a vote of security holders by solicitation of proxies or otherwise during the fourth quarter of 2003.

PART II

Item 5.     Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity
                Securities

Market for Common Stock and Related Matters.

        TSFG’s common stock trades on The Nasdaq Stock Market under the symbol TSFG. At December 31, 2003, TSFG had 8,896 shareholders of record and 59,064,375 shares outstanding. See Item 7, “Capital Resources and Dividends” and Item 8, Notes 26 and 27 to the Consolidated Financial Statements for a discussion of capital stock and dividends, which information is incorporated herein by reference.

Unregistered Sales of Securities

        None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

ISSUER PURCHASES OF EQUITY SECURITIES

(1)     These shares were canceled in connection with option exercises.

Item 6.        Selected Financial Data

        The following selected financial data should be read in conjunction with TSFG's consolidated financial statements and the accompanying notes presented elsewhere herein.

SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(dollars in thousands, except share data)