President of Carolina First resigns

By Dick Hughes  

JANUARY 8, 2009 11:21 a.m. (0)

The president of Carolina First resigned effective June 10 and the company has reshuffled its top management.

The South Financial Group, the Greenville-based holding company that owns Carolina First, reported to the Securities and Exchange Commission that Maurice J. Spagnoletti, 55, resigned in a jointly negotiated settlement. Spagnoletti, who joined Carolina First as president two years ago,also had been responsible for the group's mortgage operations. A replacement for Spagnoletti was not named.

The shake-up in management comes during difficult times for The South Financial Group and its subsidiary banks, Carolina First, which operates 79 branches in South Carolina and 27 in North Carolina, and Mercantile Bank, which has 71 locations in Florida.

The credit crunch and collapse of the real estate market, particularly with the group's portfolio of commercial loans in Florida, hit the company hard, and it reported a loss of $201 million in the first quarter ofthis year. Seventy percent of the loss was attributed to Mercantile. The company expects "elevated credit losses in our loan portfolio... to continue through 2008 and into 2009."

The value of the company's stock, which is publicly traded on Nasdaq, has fallen around 80 percent since it reached a 52-week high of $24.79 on Sept. 9. The day after its first quarter earnings report on April 22, the stock dropped from $10.87 to $7.63 with 11.5 million shares - five times the average volume - changing hands. The fall has continued, and Monday the company closed at $4.60.

To conserve and raise cash, the company banked $52 million by cutting its quarterly dividend effective Aug. 1 from 19 cents per share to a penny, raised $250 million by selling preferred shares that eventually are to be converted to common shares and issued $100 million in subordinated debt.

In a filing with the Securities and Exchange Commission, the company said the company's management was realigned to create a three-member operating council, "lessening the number of reports to" Chief Executive OfficerMack I. Whittle Jr., 59.

Whittle, who founded the company in 1986, is the largest individual shareholder.

"In connection with these and related organizational changes, the company expects to record non-operating charges for contractual arrangements, including payments to Mr. Spagnoletti, of up to approximately $3 million," the company reported to the SEC.

Spagnoletti's base salary was $350,000, but with various stock awards, option awards, incentives and other compensation, the bank estimated his total compensation for the year at $933,909.

On June 9, the day before he left the company, Spagnoletti purchased 10,000 South Financial shares on the open market for $48,500. That left Spagnoletti with 30,577 shares, according to the SEC's account of insider trading.

As part of the negotiated severance, Spagnoletti will be paid $857,500 in cash. The company also agreed to fully vest common stock awarded as a 2007 bonus, buy his house in Greenville for $1.16 million, pay up to $50,000 in moving expenses and cover his health insurance premium for six months. He bought his house in Collins Creek almost two years ago for $1.1 million, according to Greenville County property records.

Spagnoletti was entitled to all but $352,000 of the total cash settlement and the health insurance benefit under a provision in the company's employment contract that sets terms "if the company terminates executive's employment." The employment agreement was reached when he joined the company in May 2006 after six years at Fifth Third Bank of Indiana, where he was president of its Indianapolis subsidiary.

The severance agreement stipulates that the parties not speak ill of one another.

To form the operating council, the company promoted three relatively new officers: James Gordon, who joined the company as chieffinancial officer in January 2007; H. Lynn Harton, who joined as executive vice president for risk management in January 2007, and Christopher T. Holmes, who came aboard as executive vice president for retail banking in January 2006.

Gordon retains responsibility as chief financial officer; Holmes remains in charge of retail banking, and Harton takes over as commercial banking officer. They were elevated to senior executive vice presidencies and report, individually and as a committee, to Whittle. Robert A. Edwards was promoted to executive vice president and chief risk officer. He, too, reports to Whittle.

The South Financial Group has scheduled a special shareholders meeting July 18 for a vote to convert to common shares the 250,000shares of preferred stock issued in May. The meeting will be held at 10:30 a.m.at Poinsett Plaza, Greenville. Conversion would add 38.5 million shares to the 72.8 million common shares outstanding.