EMERGENT GROUP INC, S-1/A, 1996-05-24

EMERGENT GROUP INC
S-1/A, 1996-05-24
PERSONAL CREDIT INSTITUTIONS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996.

REGISTRATION NO. 333-01393
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

EMERGENT GROUP, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
SOUTH CAROLINA 6162 57-0513287
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

15 SOUTH MAIN STREET, SUITE 750
GREENVILLE, SOUTH CAROLINA 29601
(864) 235-8056
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN M. STERLING, JR., CHIEF EXECUTIVE OFFICER
EMERGENT GROUP, INC.
15 SOUTH MAIN STREET, SUITE 750
GREENVILLE, SOUTH CAROLINA 29601
(864) 235-8056
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:

<TABLE>
<S> <C>
JAMES M. SHOEMAKER, JR., ESQ. GLENN W. STURM, ESQ.
WILLIAM P. CRAWFORD, JR., ESQ. JEFFREY A. ALLRED, ESQ.
WYCHE, BURGESS, FREEMAN & PARHAM, P.A. NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
POST OFFICE BOX 728 1201 PEACHTREE STREET, SUITE 2200
GREENVILLE, SOUTH CAROLINA 29602-0728 ATLANTA, GEORGIA 30361
(864) 242-8200 (TELEPHONE) (404) 817-6106 (TELEPHONE)
(864) 235-8900 (FACSIMILE) (404) 817-6050 (FACSIMILE)
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT PRICE(1) FEE(2)(3)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock............................ 3,517,850 $14.00 $49,249,900 $16,982.72
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</TABLE>

(1) Includes 458,850 shares subject to the Underwriters' over-allotment option.

(2) Determined pursuant to Rule 457(a) under the Securities Act of 1933, as
amended, solely for the purpose of calculating the registration fee.

(3) Of this amount, $15,705.83 was paid with the initial filing of this
Registration Statement.

---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

EMERGENT GROUP, INC.

CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)

<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ ----------------------------------------- -----------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................. Outside Front Cover Page; Inside Front
and Outside Back Cover Pages; Cross
Reference Sheet
2. Inside Front and Outside Back Cover Pages
of Prospectus.......................... Available Information; Inside Front and
Outside Back Cover Pages; Additional
Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges..... Prospectus Summary; Risk Factors;
Selected Consolidated Financial and
Operating Data
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Underwriting
6. Dilution................................. Dilution
7. Selling Security Holders................. Principal and Selling Shareholders
8. Plan of Distribution..................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered............................. Description of Securities
10. Interests of Named Experts and Counsel... Experts; Legal Matters
11. Information With Respect to the
Registrant............................. Prospectus Summary; Price Range of Common
Stock; Dividends; Capitalization;
Selected Consolidated Financial and
Operating Data; The Company;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Consolidated Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED MAY 23, 1996

PROSPECTUS

3,059,000 SHARES

EMERGENT GROUP, INC.

COMMON STOCK

Of the 3,059,000 shares of common stock, $.05 par value per share (the
"Common Stock"), offered hereby (the "Offering"), 2,000,000 shares are being
sold by Emergent Group, Inc. (the "Company") and 1,059,000 shares are being sold
by certain shareholders of the Company (the "Selling Shareholders"). See
"Principal and Selling Shareholders." The Company will not receive any of the
proceeds from the sale of the shares by the Selling Shareholders.

Prior to this Offering, there has been limited trading of the Common Stock
on the over-the-counter Bulletin Board under the market symbol "EMGG." Bid and
ask quotations are obtained from the National Daily Quotation Service. It is
currently anticipated that the public offering price will be between $12.00 and
$14.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the public offering price. In connection with this
Offering, the Company has applied for quotation of the Common Stock on the
Nasdaq National Market and has received preliminary approval of such
application, subject to compliance with further conditions under the trading
symbol "EMER."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS
OF THE COMMON STOCK OFFERED HEREBY.

---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
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Total(3).......................... $ $ $ $
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</TABLE>

(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $500,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
458,850 additional shares of Common Stock solely to cover over-allotments,
if any. If the option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

---------------------

The shares of Common Stock are offered subject to receipt and acceptance by
the several Underwriters, to prior sale, and to the Underwriters' right to
reject any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that certificates for the shares will be
available for delivery on or about , 1996.

---------------------

J.C. BRADFORD & CO.
RAYMOND JAMES & ASSOCIATES, INC.
WHEAT FIRST BUTCHER SINGER

, 1996.
<PAGE> 4

A MAP OF THE UNITED STATES SHOWING THE LOCATIONS OF THE COMPANY'S OFFICES.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048 and
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon the payment of fees at prescribed rates.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere herein. Unless otherwise indicated, all information in this
Prospectus has been adjusted to reflect a one-for-three reverse stock split of
the Common Stock effective June 9, 1995 and a two-for-one stock split effected
in the form of a 100% stock dividend on the Common Stock effective March 1,
1996. Unless otherwise indicated, the information in this Prospectus assumes
that the Underwriters' over-allotment option is not exercised. Unless the
context requires otherwise, all references to the Company shall include the
Company and all of its subsidiaries. Prospective investors should carefully
consider the information set forth under the heading "Risk Factors."

THE COMPANY

Emergent Group, Inc. is a diversified financial services company
headquartered in Greenville, South Carolina which originates, services and sells
residential mortgage loans ("Mortgage Loans"), small business loans ("SBA
Loans") and used automobile loans ("Auto Loans"). The Company makes
substantially all of its loans to borrowers who may have limited access to
credit or who may be considered credit-impaired by conventional lending
standards ("non-prime borrowers"). The Company commenced its lending operations
in 1991 and has experienced significant loan growth over the past several years.
During the years 1993, 1994 and 1995 and the three months ended March 31, 1996,
the Company originated $63.6 million, $150.0 million, $249.5 million and $85.0
million in loans, respectively. Of the Company's loan originations in 1995,
$192.8 million were Mortgage Loans, $39.6 million were SBA Loans and $17.1
million were Auto Loans. For the years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1996, the Company's pre-tax income from
continuing operations was $663,000, $2.4 million, $4.9 million and $1.4 million,
respectively.

The Company's Mortgage Loan operation (the "Mortgage Loan Division") makes
Mortgage Loans primarily to owners of single family residences who use the loan
proceeds for such purposes as debt consolidation, home improvements and
educational expenditures. Approximately 93% of the Company's Mortgage Loans are
secured by first mortgages, with the balance being secured by second mortgages.
The Mortgage Loans generally have initial principal balances ranging from
$25,000 to $100,000 (with an average initial principal balance in 1995 of
approximately $46,000) and fixed rates of interest ranging from 9% to 16% per
annum (with an average interest rate earned in 1995 of 12.10%). Substantially
all of the Mortgage Loans have been originated on a wholesale basis by the
Company through independent mortgage brokers and mortgage bankers (collectively,
the "Mortgage Bankers") and are funded by the Company at closing in either the
Company's name or the Mortgage Banker's name (in the latter case with the
Company taking an assignment of the Mortgage Banker's interest). During 1995,
the Company originated Mortgage Loans in connection with approximately 196
Mortgage Bankers. The Company has established strategic alliance agreements with
First Greensboro Home Equity, Inc., Prime Investors, Inc. and Amerifund Group,
Inc. (the "Principal Mortgage Bankers"), which require that the Principal
Mortgage Bankers refer to the Company all of the loans they originate which meet
the Company's underwriting criteria. In 1995, the Principal Mortgage Bankers
originated 75% of the Company's Mortgage Loans by principal amount. The Mortgage
Loan Division has experienced significant growth over the past several years.
During 1993, 1994 and 1995 and the first quarter of 1996, Mortgage Loan
originations totaled $20.5 million, $99.4 million, $192.8 million and $68.0
million, respectively. A majority of the Mortgage Loans are sold on a
non-recourse basis to institutional investors.

The Company's SBA Loan operation (the "SBA Loan Division") makes SBA Loans
to small businesses primarily for the acquisition or refinancing of property,
plant and equipment, working capital or debt consolidation. The SBA Loans are
secured by real or personal property and have initial principal balances ranging
from $100,000 to $1.2 million (with an average initial principal balance in 1995
of $363,000) and variable interest rates limited to a maximum of 2.75% over the
lowest prime lending rate published in The Wall Street Journal. The U.S. Small
Business Administration (the "SBA") guarantees approximately 75% of the original
principal amount of the SBA Loans, up to a maximum guarantee amount of $750,000.
The Company sells participations representing the SBA-guaranteed portion of all
of its SBA Loans (the "SBA Loan Participations") in the secondary market. In
connection with such sales, the Company receives, in addition to excess
servicing revenue, cash premiums of approximately 10% of the guaranteed portion
being sold. SBA Loans are originated directly by the Company's loan officers in
its 11 branch offices and are primarily generated through referral sources such
as commercial loan and real estate brokers ("Commercial Loan Brokers") located
in its market areas. Approximately 75% of the SBA Loans originated in 1995 were
originated through Commercial Loan Brokers. During 1993, 1994 and 1995 and the
first quarter of 1996, SBA Loan originations totaled $37.9 million, $43.1
million, $39.6 million and $11.7 million, respectively. The Company believes
that it was among the ten largest SBA Loan lenders in the United States, by
principal amount of SBA Loans approved, for the SBA's fiscal year ended
September 30, 1995.

The Company's Auto Loan operation (the "Auto Loan Division") makes loans to
non-prime borrowers for the purchase of used automobiles. Substantially all of
the Auto Loans are made directly by the Company to purchasers of automobiles who
are referred to the Company by automobile dealers ("Dealers"). Less than 10% of
the Auto Loans made in 1995 were indirect loans purchased from Dealers. The Auto
Loans generally

3
<PAGE> 6

have initial principal balances ranging from $3,000 to $10,000 (with an average
initial principal balance in 1995 of approximately $5,000), terms generally
ranging from 24 to 48 months, and fixed interest rates generally ranging from
18% to 36% per annum (with an average yield in 1995 of 27.40%). The Auto Loan
Division operates through eight locations and in 1995 originated Auto Loans in
connection with approximately 200 Dealers. During 1993, 1994 and 1995 and the
first quarter of 1996, Auto Loan originations totaled $5.2 million, $7.5
million, $17.1 million and $5.3 million, respectively.

In June 1995, the Company securitized approximately $17 million of loans,
which consisted of the unguaranteed portions of SBA Loans, and in March 1996
securitized approximately $16 million in Auto Loans. The Company expects to
continue to pursue securitization transactions in the future as a means of
providing a lower cost of funds and reducing interest rate risk.

The Company's business strategy is to be a diversified financial services
company that meets the credit needs of borrowers in what the Company believes to
be under-served credit markets. Key elements of the Company's business strategy
are to:

-- Maintain a "high velocity" capital strategy whereby loans are generally
sold within 10 to 40 days of origination, thereby enabling the Company to
recognize gain on the sale of its loans and quickly redeploy its capital,
as well as reduce its interest rate risk, default risk and borrowing
costs.

-- Respond quickly to customer credit requests by utilizing a decentralized
loan approval process, while ensuring consistent credit quality through
uniform underwriting guidelines and procedures.

-- Utilize a proactive underwriting process whereby the Company may
restructure credit requests in order to cause them to meet the Company's
underwriting criteria.

-- Achieve profitability goals by maximizing interest margins and
emphasizing effective monitoring and collection of loans.

The Company's growth strategy is to continue to expand all areas of its
lending operations, emphasizing profitability and return on equity, rather than
asset growth. Key elements of the Company's growth strategy are to:

-- Increase loan originations from the Principal Mortgage Bankers and enter
into additional strategic alliances with other Mortgage Bankers, as well
as increase the number of relationships with other referral sources such
as Commercial Loan Brokers and Dealers.

-- Expand Mortgage Loan originations by establishing direct lending
operations through retail offices (i.e. lending operations where the
Company lends directly to the customer without using a Mortgage Banker).

-- Expand its SBA Loan operations by utilizing its "Preferred Lender"
status to minimize response time and maximize SBA Loan production.

-- Increase its penetration in existing markets and expand geographically
by opening additional locations, particularly in the SBA Loan Division
and the Auto Loan Division.

-- Pursue the acquisition of businesses in the financial services industry
(although no agreements or understandings relating to any acquisitions
are presently pending).

The Company was incorporated in 1968 and until 1990, engaged principally in
railroad-related operations. Prior to 1990, the Company incurred significant
losses which resulted in net operating losses. In December 1990, current
management acquired control of the Company and implemented a strategic plan to
acquire profitable businesses which could utilize such net operating losses.
Pursuant to such strategy, the Company acquired certain financial services
companies in 1991 and an apparel manufacturer in 1993. In 1994, the Company made
a strategic decision to divest all non-financial operations and to focus
exclusively on the financial services industry. In accordance with such
strategy, the Company has completed its divestiture of its apparel-related and
transportation-related operations.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,000,000 shares
Common Stock offered by the
Selling Shareholders....................... 1,059,000 shares
Common Stock to be outstanding after
the Offering............................... 8,602,520 shares(1)
Use of proceeds.............................. To repay indebtedness of approximately $22
million and for general corporate purposes,
including the funding of loan demand. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol....... EMER
</TABLE>

- ---------------

(1) Excludes (i) 339,000 shares of Common Stock issuable upon the exercise of
options granted pursuant to the Company's existing stock option plans, (ii)
121,742 shares of Common Stock issuable upon the exercise of outstanding
warrants and (iii) 10,500 shares of Common Stock issuable pursuant to stock
grants made pursuant to the Company's Restricted Stock Agreement Plan. See
"Management."

4
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Interest and servicing revenue..... $ 4,064 $ 6,980 $ 7,983 $ 10,903 $ 15,639 $ 3,368 $ 4,860
Gain on sale of loans(1)........... -- 1,686 3,605 6,450 9,169 1,220 3,018
Other revenues..................... 96 342 458 842 1,470 234 405
-------- -------- --------- --------- --------- --------- ---------
Total revenues................. 4,160 9,008 12,046 18,195 26,278 4,822 8,283
Expenses:
Interest expense................... 2,399 4,315 5,073 5,879 8,527 1,727 2,740
Provision for credit losses(2)..... 83 349 686 2,510 2,480 489 910
General and administrative
expenses......................... 2,265 4,698 5,624 7,359 10,419 2,109 3,228
-------- -------- --------- --------- --------- --------- ---------
Total expenses................. 4,747 9,362 11,383 15,748 21,426 4,325 6,878
Income (loss) from continuing
operations(3)(4)................. (595) (249) 937 1,792 4,581 485 1,349
Income (loss) from discontinued
operations(3).................... 344 685 260 546 (3,924) (316) --
Net income (loss)(3)............... (251) 436 1,197 2,338 657 169 1,349
======== ======== ========= ========= ========= ========= =========
Income (loss) per share from
continuing operations(3)(4)...... (0.11) (0.04) 0.14 0.27 0.69 0.07 0.20
Income (loss) per share from
discontinued operations(3)....... 0.06 0.12 0.04 0.08 (0.59) (0.05) --
-------- -------- --------- --------- --------- --------- ---------
Net income (loss) per share(3)..... $ (0.05) $ 0.08 $ 0.18 $ 0.35 $ 0.10 $ 0.02 $ 0.20
======== ======== ========= ========= ========= ========= =========
Weighted average outstanding
equivalent shares (in
thousands)....................... 5,660 5,639 6,552 6,689 6,668 6,699 6,680
Supplemental earnings per share:(5)
Income per share from continuing
operations....................... -- -- -- -- $ 0.55 -- $ 0.16
Income (loss) from discontinuing
operations....................... -- -- -- -- (0.47) -- --
--------- ---------
Net income per share............... -- -- -- -- $ 0.08 -- $ 0.16
========= =========
OPERATING DATA:
Total loans originated or
purchased.......................... $ 18,361 $ 57,282 $ 63,633 $ 150,044 $ 249,507 $ 48,830 $ 84,993
Total loans sold..................... -- 10,827 31,052 85,772 153,055 31,102 66,918
Total loans securitized.............. -- -- -- -- 17,063 -- 16,107
Total loans serviced (period end).... 41,250 68,489 106,898 156,524 213,851 167,934 230,478
Total loans receivable (period
end)............................... 39,870 56,785 66,279 94,479 125,775 98,493 117,315
Weighted average interest rate
earned............................. 14.23% 14.19% 12.83% 13.51% 14.04% 13.83% 14.31%
Weighted average interest rate
paid............................... 7.69 7.74 7.24 6.94 7.57 6.28 8.11
Allowance for credit losses as a % of
average serviced loans(6).......... 4.69 2.15 1.72 2.37 2.45 2.12 2.40
Net charge-offs as a % of average
serviced loans(2)(6)............... 0.83 0.68 1.29 2.37 1.44 1.26 0.47
General and administrative expenses
as a % of average serviced loans... 8.24 8.56 6.41 5.59 5.63 5.24 4.66
</TABLE>

<TABLE>
<CAPTION>
AT MARCH 31, 1996
-------------------------
ACTUAL AS ADJUSTED(7)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Loans receivable........................................................................ $ 92,071 $ 92,071
Mortgage loans held for sale............................................................ 25,244 25,244
Total assets............................................................................ 139,631 143,722
Total indebtedness...................................................................... 123,886 104,055
Total stockholders' equity.............................................................. 11,395 35,317
</TABLE>

- ---------------

(1) These amounts represent gains recorded on the sale of SBA Loan
Participations and on the sale of Mortgage Loans.
(2) Approximately 90% of the amount in 1994 relates to the writedown to market
of certain foreclosed properties associated with speculative construction
loans made by the Mortgage Loan Division prior to its acquisition by the
Company. Speculative construction loans are no longer being made by the
Company.
(3) Includes the impact of the utilization of the Company's net operating loss
carryforward, which totaled approximately $23 million at December 31, 1995.
(4) The amount set forth with respect to the year ended December 31, 1993
includes $113,000 ($0.01 per share) which reflects the cumulative effect of
a change in the method of accounting for income taxes.

(5) Supplemental earnings per share (as adjusted) reflects the issuance of
1,692,000 shares of Common Stock, the proceeds of which are to be used to
repay $22 million in Company debt. These amounts were calculated based on
total weighted average shares of 8,360,000 at December 31, 1995 and
8,371,570 shares at March 31, 1996.

(6) Average serviced loans includes all portfolio Mortgage Loans and Auto Loans,
all securitized loans, and the unguaranteed portion of SBA Loans, but
excludes the guaranteed portion of the SBA Loans.
(7) Adjusted to reflect the sale by the Company of 2,000,000 shares at an
assumed public offering price of $13.00 and the application of the estimated
net proceeds thereof as described under "Use of Proceeds."

5
<PAGE> 8

RISK FACTORS

Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following risk factors in
evaluating an investment in the Common Stock offered hereby.

CREDITWORTHINESS OF SUB-PRIME BORROWERS AND RISK OF DEFAULT

Substantially all of the Company's loans are made in the non-prime credit
market, which is comprised of borrowers who are deemed to be credit-impaired due
to various factors. These factors include, among others, the manner in which
they have managed previous credit, the absence or limited extent of their prior
credit history or their limited financial resources. Consequently, the Company's
loans, relative to consumer, commercial and mortgage loans to prime borrowers,
involve a significantly higher probability of default and greater servicing and
collection costs. The Company's profitability depends upon its ability to
properly evaluate the creditworthiness of non-prime borrowers and to efficiently
service and collect its loan portfolio. There can be no assurance that the
performance of the Company's loan portfolio will be maintained, that the
Company's systems and controls will continue to be adequate or that the rate of
future defaults and/or losses will be consistent with prior experience or at
levels that will maintain the Company's profitability. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Allowance for Credit Losses and Credit Loss Experience."

The Company is exposed to the risk of loan delinquencies and defaults,
particularly with respect to loans retained in its portfolio. With respect to
loans to be sold on a non-recourse basis, the Company is at risk for loan
delinquencies and defaults on such loans while they are held by the Company
pending such sale. Following the sale of such loans, the Company's loan
delinquency and default risk with respect to such loan is limited to those
circumstances in which it is required to repurchase such loan due to a breach of
a representation or warranty in connection with the whole loan sale. This risk
with respect to breaches of representations or warranties also exists for loans
sold through securitization. In addition, in securitization transactions, the
subordinate and/or residual certificates bear the risk of default for the entire
pool of securitized loans to the extent of such certificates' value.
Accordingly, the value of the subordinate and/or residual certificates retained
by the Company would be impaired to the extent of losses on the securitized
loans. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Allowance for Credit Losses and Credit Loss
Experience."

POTENTIAL LOSS OF FIRST GREENSBORO

The Company has been notified by one of its Principal Mortgage Bankers,
First Greensboro Home Equity, Inc. ("First Greensboro"), that it is discussing
the sale of all or part of its business to a third party, and that such sale may
result in First Greensboro's breach of its strategic alliance agreement with the
Company. Such contract terminates, if not renewed, on December 31, 1997. In the
event that a third party makes an offer to purchase First Greensboro which is
acceptable to First Greensboro, the Company would have the right of first
refusal to acquire First Greensboro on the same terms offered by a third party.
In the event that the Company did not exercise such right of first refusal and
First Greensboro effected an early termination of its strategic alliance
agreement with the Company (whether in connection with a sale to a third party
or otherwise), then the strategic alliance agreement provides for damages to the
Company upon wrongful termination. The Company believes that the strategic
alliance agreement provides for minimum damages of approximately $5.5 million
(although no assurance can be given as to the ultimate amount that might be
collected by the Company). The Company also believes that under South Carolina
law it may be entitled to additional damages to the extent such damages can be
demonstrated. The Company cannot determine which option it will pursue or what
impact this situation may have on the Company until further actions, if any, are
taken by First Greensboro. In the event this strategic alliance agreement is
terminated, the Company's Mortgage Loan originations would be materially and
adversely affected.

ECONOMIC CONDITIONS

The Company's business may be adversely affected by periods of economic
slowdown or recession which may be accompanied by decreased demand for consumer
credit and declining collateral values. Any material

6
<PAGE> 9

decline in real estate values reduces the ability of borrowers to use home
equity to support borrowings and increases the loan-to-value ratios of Mortgage
Loans previously made by the Company, thereby weakening collateral coverage and
increasing the possibility of a loss in the event of default. Furthermore,
delinquencies, foreclosures and losses generally increase during economic
slowdowns or recessions. Because of the Company's focus on borrowers who are
unable or unwilling to obtain financing from conventional lending sources, the
actual rates of delinquencies, foreclosures and losses on such loans could be
higher under adverse economic conditions than those experienced in the lending
industry in general. In addition, any sustained period of such increased
delinquencies, foreclosures or losses could adversely affect the pricing of the
Company's loan sales, whether through whole loan sales or securitizations. In
the event that pools of loans sold and serviced by the Company experience higher
delinquencies, foreclosures or losses than anticipated, the Company's
operations, profitability or financial condition could be adversely affected.

GEOGRAPHIC CONCENTRATION

Approximately 70% and 60% of the Mortgage Loans in 1995 and the first
quarter of 1996, respectively, were made to borrowers in North Carolina and
South Carolina, and substantially all of the Auto Loans are made to borrowers in
South Carolina. In the event of an economic slowdown in either or both of these
states, the Company's operations, profitability or financial condition could be
materially and adversely affected. See "Business -- Mortgage Loan
Division -- Mortgage Loan Origination."

LOSS OF MORTGAGE BANKERS RELATIONSHIPS

The Company's business of originating Mortgage Loans depends in large part
upon its ability to establish and maintain relationships with Mortgage Bankers.
For the year ended December 31, 1995 and the first quarter of 1996,
substantially all of the Company's Mortgage Loans were originated in connection
with Mortgage Bankers. Of the approximately 196 Mortgage Bankers that were
responsible for the origination of Mortgage Loans during the first quarter of
1996, First Greensboro, AmeriFund Group, Inc. ("AmeriFund") and Prime Investors,
Inc. ("Prime"), which constituted the Principal Mortgage Bankers, accounted for
approximately $58.3 million, or 86%, of the Mortgage Loans. First Greensboro
accounted for approximately 65% of the Mortgage Loans originated during the
first quarter of 1996, while AmeriFund and Prime accounted for 9% and 1%,
respectively, in the first quarter of 1996. The Company expects that the
percentage of Mortgage Loans during the remainder of 1996 which are originated
in connection with the Principal Mortgage Bankers will equal or exceed the
corresponding percentage in the first quarter of 1996. The Company has strategic
alliance agreements in place with the Principal Mortgage Bankers which provide
that the Principal Mortgage Bankers must first offer to the Company the right to
fund all of their loans which meet the Company's underwriting criteria before
offering such loans to other parties. These agreements have terms ranging from
two to five years and are scheduled to terminate beginning in December 1997.
Furthermore, each agreement provides for certain minimum termination fees upon
wrongful termination. Although the Company will seek to renew these agreements
at the end of their terms, there can be no assurance that such agreements will
be renewed or that loan volumes will be maintained. In the event of the wrongful
termination of the Company's relationship with one or more Mortgage Bankers
associated with a material amount of the Company's Mortgage Loans, including the
Principal Mortgage Bankers, the Company's operations, profitability or financial
condition could be materially and adversely affected. See "Business -- Mortgage
Loan Division -- Mortgage Loan Origination."

NO AGREEMENTS WITH CERTAIN MORTGAGE BANKERS

Except for the agreements with the Principal Mortgage Bankers, there are no
contractual arrangements between the Company and its Mortgage Bankers with
respect to the Mortgage Banker's referrals of Mortgage Loans to the Company.
Accordingly, any such Mortgage Banker could decline to utilize the Company to
originate and fund its loans. In the event that a large number of Mortgage
Bankers representing a material amount of Mortgage Loans were to determine not
to utilize the Company, the Company's operations, profitability or financial
condition could be materially and adversely affected.

7
<PAGE> 10

ADEQUACY OF ALLOWANCE FOR CREDIT LOSSES

There are certain risks inherent in making all loans, including risks with
respect to the period of time over which loans may be repaid, risks resulting
from changes in economic and industry conditions, risks inherent in dealing with
individual borrowers and, in the case of a collateralized loan, risks resulting
from uncertainties as to the future value of the collateral. The Company
maintains an allowance for credit losses based on, among other things,
historical experience, an evaluation of economic conditions and regular reviews
of delinquencies and loan portfolio quality. Although management considers the
allowance appropriate and adequate to cover possible losses in the loan
portfolio, management's judgment is based upon a number of assumptions about
future events, which are believed to be reasonable, but which may or may not
prove valid. Thus, there can be no assurance that charge-offs in future periods
will not exceed the allowance for credit losses or that additional increases in
the allowance for credit losses will not be required. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation -- Allowance for Credit Losses and Credit Loss Experience."

AVAILABILITY OF FUNDING SOURCES

The Company, like most financial service companies, has a constant need for
capital to finance its lending activities. Historically, the Company has funded
the majority of its lending activities from the cash flow generated from
operations and through borrowing pursuant to its existing credit facilities (the
"Credit Facilities"), by selling senior notes and subordinated debentures
bearing fixed rates of interest ("Debentures"), and by selling a substantial
portion of the loans it originates. In the event that the Company were unable to
sell its loans in the secondary markets, its Credit Facilities were terminated,
the Company were unable to sell Debentures, or holders of Debentures were
unwilling to renew their Debentures, the Company's operations, profitability or
financial condition could be materially and adversely affected. In particular,
the Credit Facilities contain a number of financial covenants, including, but
not limited to, covenants with respect to debt to net worth ratios, delinquent
loans, and minimum adjusted tangible net worth. In the event that the Company's
financial performance were to deteriorate materially, the Company's ability to
borrow under the Credit Facilities or renew the Credit Facilities could be
impaired. Furthermore, there can be no assurance that the Company's existing
lenders will agree to refinance such debt, that other lenders will be willing to
extend lines of credit to the Company or that funds otherwise generated from
operations will be sufficient to satisfy such obligations. Future financing may
involve the issuance of additional Common Stock or other securities, including
securities convertible into or exercisable for Common Stock, and any such
issuance may dilute the equity interest of purchasers of the Common Stock
offered hereby. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

As of March 31, 1996, the Company had aggregate unused borrowing
availability under the Credit Facilities of approximately $32.9 million. The
Company may increase borrowings under the lines up to a maximum of $148 million,
depending upon the total amount of loans outstanding. In the event that the
Company is unable to sell loans or increase its borrowing capacity, its
operations, profitability or financial condition would be materially and
adversely affected.

After completion of this Offering, the Company will have only a minimal
amount of authorized shares which are available for issuance. The Company
intends to propose at its next annual meeting of shareholders an increase in the
Company's authorized Common Stock. Although the Company believes that it will
obtain the necessary shareholder approval to increase its authorized Common
Stock, no assurance of such fact may be given. In the event that such approval
is not received, the Company would not have sufficient authorized shares to
issue in connection with acquisitions or to raise additional capital by issuing
additional stock.

LOSS OF ABILITY TO SELL LOANS

A significant portion of the Company's profits are generated through the
sale of loans. To the extent that the Company is unable to sell its loans, the
Company's operations, profitability or financial condition could be materially
and adversely affected.

8
<PAGE> 11

GENERAL LENDING RISKS

The lending business is subject to various business risks, including, but
not limited to, the following: (1) the risk that borrowers will not satisfy
their debt service payments, including interest charges and principal
amortization obligations; (2) the risk that appraisals of properties securing
loans originated or purchased by the Company will not reflect the property's
actual value, either due to valuation errors or fluctuations in the value of
real estate and that, upon liquidation of real estate owned or other collateral
securing loans, the Company may suffer a loss; and (3) the risk that
environmentally hazardous substances could be discovered on real properties
acquired by the Company in foreclosure and that the Company might be required to
remove such substances from the affected properties at its sole cost or that the
value of the properties would otherwise be impaired. Also, increases in interest
rates after the origination of fixed rate loans and prior to the sale of such
loans may cause such loans to decrease in value. A decrease in interest rates
also could cause an increase in the rate at which outstanding fixed rate loans
are prepaid, reducing the period of time during which the Company receives its
net interest margin and servicing revenue with respect to such prepaid loans.
With respect to SBA Loans, unanticipated prepayments and/or defaults also have
the effect of reducing servicing revenue associated with the excess servicing
receivables created at the time the SBA Loan Participations are sold.

DEPENDENCE ON FEDERAL PROGRAMS AND RELATED AGREEMENTS

A portion of the Company's business is dependent upon the continuation of
various federally funded programs, such as the SBA loan program. Of the total
loans originated by the Company during the year ended December 31, 1995,
approximately 16% by principal amount were SBA Loans. The discontinuation,
elimination or significant reduction of guarantee levels or any modification of
the qualification criteria or the permissible loan purposes under any of these
federal programs could have a material adverse effect on the Company's
operations or financial condition. In addition, in the event that the Company
were to lose its status as a "Preferred Lender," the SBA Loan Division could be
materially and adversely affected. See "Business -- SBA Loan Division."

During 1995, the SBA reviewed the funding available for the guarantee of
SBA Loans under the government's SBA lending program and in connection with such
review instituted a number of changes, which included the implementation of
$500,000 as the maximum loan amount that could be made under the SBA program,
and the preclusion of the use of SBA Loans for purposes of refinancing most
forms of existing debt. These two major changes were ultimately rescinded in
connection with certain other changes in the SBA program instituted in October
1995. However, these temporary changes had a material adverse effect on the SBA
Loan Division's loan volume for 1995. Although the permanent changes instituted
with respect to SBA Loans in October 1995 are not expected to have a material
adverse effect on the SBA Loan Division in the future, the SBA's actions in 1995
illustrate the potential for governmental regulation having a material effect on
the Company's operations. The agreement pursuant to which the SBA has agreed to
guarantee SBA loans made by the Company may be terminated by either the Company
or the SBA on 10 days prior written notice to the other party. The termination
or non-renewal of this agreement or any change in the SBA program could have a
material adverse effect on the Company's operations, profitability or financial
condition. See "Business -- SBA Loan Division" and "Business -- Regulation."

LOSS OF NET OPERATING LOSS CARRYFORWARD

As a result of operating losses incurred by the Company under prior
management, the Company generated significant net operating loss carryforwards
(the "NOL"). At March 31, 1996, the amount of the NOL remaining and available to
the Company was approximately $23 million. The NOL expires, to the extent that
it is not utilized to offset income, in varying amounts annually through 2001.
Federal tax laws provide that net operating loss carryforwards are restricted or
eliminated upon certain changes of control. In the future, it is possible that a
change of control could occur and that the Company could lose the benefits of
the NOL. In the event that the Company lost the NOL, the Company's earnings
would be materially and adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Tax
Considerations -- The NOL."

9
<PAGE> 12

INTEREST RATE SENSITIVITY

The Company is subject to certain interest rate risks, particularly with
respect to its Mortgage Loans and Auto Loans, which bear fixed rates of interest
and are principally funded with variable rate debt. In the event that interest
rates change dramatically in a relatively short period of time, the Company's
interest spread and certain premiums received upon the sale of loans would
decrease, which could materially and adversely affect the Company's operations,
profitability or financial condition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

COMPETITION

The non-prime market is very fragmented and highly competitive. The Company
believes that there are numerous traditional sources of credit providing, or
capable of providing, financing which are not currently serving the Company's
market segment. Historically, commercial banks, savings and loans, credit
unions, financing subsidiaries of automobile manufacturers and other lenders
providing traditional financing (many of which are larger, have significantly
greater financial resources and have relationships with established captive
transaction networks) have not consistently served the Company's market segment.
If one or more of such traditional sources of credit were to enter the Company's
market segment, the Company's operations, profitability or financial condition
could be materially adversely affected. In addition, if the Company were to
experience increased competition from other traditional or non-traditional
sources of credit, such increased competition may result in a reduction in the
interest rates charged borrowers or a reduction in the volume of originated
loans. A reduction in such interest rates or loan volume could materially
adversely affect the Company's operations, profitability or financial condition.
See "Business -- Competition."

REGULATION OF LENDING ACTIVITIES AND CHANGING REGULATORY ENVIRONMENT

The operations of the Company are subject to extensive regulation by
federal, state and local governmental authorities and are subject to various
laws and judicial and administrative decisions imposing various requirements and
restrictions, including among other things, regulating credit granting
activities, establishing maximum interest rates, insurance coverages and
charges, requiring disclosures to customers, governing secured transactions and
setting collection, repossession and claims handling procedures and other trade
practices. Furthermore, there can be no assurance that more restrictive laws,
rules and regulations will not be adopted in the future which could make
compliance much more difficult or expensive, restrict the Company's ability to
originate or purchase loans, or otherwise adversely affect the operations,
profitability or financial condition of the Company. See
"Business -- Regulation."

CONCENTRATION OF VOTING CONTROL IN MANAGEMENT

After completion of the Offering, the Company's Board of Directors and
executive officers ("Company Management") will beneficially own or otherwise
control an aggregate of approximately 19% of the outstanding Common Stock
(approximately 18% if the Underwriters' over-allotment option is exercised in
full). Therefore, Company Management, if they were to act in concert, would be
able to exercise significant influence with respect to the election of the Board
of Directors of the Company and all matters submitted to shareholders. See
"Principal and Selling Shareholders."

DEPENDENCE UPON KEY EXECUTIVES

The Company's growth and development to date have been dependent upon the
services of certain members of its senior management. The loss of the services
of one or more of such members of senior management could have a material
adverse effect on the Company. See "Management."

ABSENCE OF PRIOR MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE

Although the Company's Common Stock has been traded on the over-the-counter
Bulletin Board under the market symbol "EMGG," there has generally been no
liquid public market for the Common Stock in the several years prior to the
Offering. The Company has filed an application seeking to have the Common Stock

10
<PAGE> 13

listed for quotation on the Nasdaq National Market and has received preliminary
approval of such application, subject to compliance with further conditions.
However, there can be no assurance that an active trading market will develop
or, if developed, will be sustained following the Offering. Because of the
relatively illiquid market for the Common Stock prior to the Offering, the price
of the Common Stock offered hereby will be determined solely by negotiations
among the Company, the Selling Shareholders, and J.C. Bradford & Co., Raymond
James & Associates, Inc. and Wheat, First Securities, Inc., as representatives
(the "Representatives") of the several underwriters named in this prospectus
(the "Underwriters") and may bear no relationship to the market price of the
Common Stock after the Offering. See "Underwriting."

From time to time after this Offering, there may be significant volatility
in the market price for the Common Stock. Quarterly operating results of the
Company or of other similar companies, changes in general conditions in the
economy, consumer delinquency and default rates generally, the financial markets
or the industry in which the Company operates, natural disasters, litigation
developments or other developments affecting the Company or its competitors
could cause the market price of the Common Stock to fluctuate substantially. In
addition, in recent years the stock market has experienced extreme price and
volume fluctuations. This volatility has had a significant effect on the market
prices of securities issued by many companies for reasons unrelated to their
operating performance.

SHARES AVAILABLE FOR FUTURE SALE

Upon the closing of the Offering, the Company will have 8,602,520 shares of
Common Stock outstanding, of which the 3,059,000 shares offered hereby will be
freely tradeable. In addition, 2,584,986 shares of Common Stock not subject to
the lock-up described below are freely tradeable.

Directors and executive officers of the Company and certain shareholders of
the Company's Common Stock holding an aggregate of 2,958,534 million shares have
agreed not to sell or otherwise dispose of their Common Stock for a period of
180 days following the closing date of this Offering without the prior written
consent of the Representatives of the Underwriters and the Company. When such
lock-up restrictions lapse, such shares of Common Stock may be sold in the
public market or otherwise disposed of, subject to compliance with applicable
securities laws. Sales of a substantial number of shares of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for the Common Stock. At this time, the Company is unaware of any party
who expects to seek a waiver of such 180-day lock-up agreement.

DILUTION

Investors in the Offering will experience immediate and substantial
dilution of $9.29 per share (based on an assumed public offering price of $13.00
per share), and current shareholders will receive a material increase in the net
tangible book value of their shares of Common Stock. See "Dilution."

11
<PAGE> 14

THE COMPANY

The Company is a diversified financial services company headquartered in
Greenville, South Carolina which originates, services and sells Mortgage Loans,
SBA Loans, and Auto Loans. The Company makes substantially all of its loans to
non-prime borrowers. The Company also serves as investment manager for Reedy
River Ventures, L.P. and Palmetto Seed Capital Fund, L.P. (collectively, the
"Venture Funds").

The Company was incorporated in South Carolina in 1968 under the name
Golden Tye Corporation and conducted operations related to the railroad
transportation industry (the "Transportation Segment"). During the period from
1980 through 1990, the Company's business suffered significant operating losses.
In December 1990, approximately 40% of the Company's equity was acquired by a
small group of investors, including the Company's current Chairman and Chief
Executive Officer. In connection with such acquisition, a substantially new
Board of Directors was elected and new executive officers were appointed. In
1991, the Company changed its name to Emergent Group, Inc. and began operating
its financial services business (the "Financial Services Segment").

The Company began its transformation to a financial services company with
its acquisition of Carolina Investors, Inc. ("CII") in May 1991. At the time of
acquisition, CII had approximately $32 million in Mortgage Loans, and did not
sell any loans in the secondary market. Since the Company acquired CII, it has
expanded its Mortgage Loan Division significantly. In particular, the Mortgage
Loan Division has significantly increased its loan originations, principally
through establishing relationships with Mortgage Bankers. During 1993, 1994 and
1995 and the first quarter of 1996, Mortgage Loan originations totaled $20.5
million, $99.4 million, $192.8 million, and $68.0 million, respectively.
Furthermore, in 1994 the Mortgage Loan Division began selling a majority of its
loans originated in connection with Mortgage Bankers. During 1994 and 1995 and
the first quarter of 1996, the Mortgage Loan Division sold $54.6 million, $127.6
million and $54.8 million, respectively, in Mortgage Loans.

The Company formed Emergent Business Capital, Inc. ("EBC") in December 1991
for the purpose of acquiring substantially all of the assets, including the SBA
license, of an inactive SBA lender. Immediately following this acquisition, EBC
operated through one location and had $1.6 million in serviced loans receivable
of which $1.4 million had been sold in the secondary markets. Since the
Company's acquisition of EBC in 1991, its SBA Loan Division has expanded its
operations such that it now operates through 11 locations. In addition to
selling the SBA Loan Participations, the SBA Loan Division recently securitized
approximately $17 million in loans receivable consisting of the unguaranteed
portions of SBA Loans. During 1994 and 1995 and the first quarter of 1996, the
SBA Loan Division originated $43.1 million, $39.6 million and $11.7 million,
respectively, in SBA Loans. At December 31, 1994 and 1995 and March 31, 1996,
the SBA Loan Division serviced $87.9 million, $108.0 million and $116.2 million,
respectively, in SBA Loans.

The Company acquired Premier Financial Services, Inc. ("Premier") in May
1991 and The Loan Pro$, Inc. ("Loan Pro$") in July 1991. At the time of
acquisition, Loan Pro$ had $1.8 million in loans receivable and operated through
one location, and Premier had approximately $3 million in loans receivable and
operated through three locations. Since the Company acquired Premier and Loan
Pro$, it has expanded its Auto Loan Division significantly. During 1994 and 1995
and the first quarter of 1996, the Auto Loan Division originated $7.5 million,
$17.1 million and $5.3 million, respectively, in Auto Loans. The Auto Loan
Division currently operates through a total of seven locations.

In January 1993, as part of the Company's strategy of acquiring businesses
to utilize the NOL, the Company acquired Young Generations, Inc., a North
Carolina corporation ("YGI"), which was engaged in the design, manufacture and
marketing of children's apparel (the "Apparel Segment"). Subsequent to 1993, the
Company decided to focus Company resources and attention solely on its core
financial services operations. In accordance with such strategy, in 1995, the
Company discontinued its Transportation Segment and Apparel Segment operations
through the sale of Transportation Segment assets and the sale of YGI to YGI's
management team. The Company does not anticipate making any acquisitions not
related to the financial services industry.

12
<PAGE> 15

The Company's principal executive offices are located at 15 South Main
Street, Suite 750, Greenville, South Carolina 29601, and its telephone number is
(864) 235-8056.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company are estimated to be approximately $23.7
million (2,458,850 shares and $29.2 million if the Underwriters' over-allotment
option is exercised in full), after deducting the underwriting discount and
estimated Offering expenses, based upon an assumed public offering price of
$13.00 a share. Of the net proceeds of this Offering, approximately $22 million
will be used to repay outstanding indebtedness under the Credit Facilities and
the balance will be used for general corporate purposes, including the funding
of the Company's loan demand. The indebtedness expected to be repaid with the
proceeds of this Offering had a weighted average interest rate at March 31, 1996
of 8.50% and maturity dates ranging from April 1996 to December 1998.

As part of its growth strategy, the Company may use a portion of the net
proceeds for acquisitions of businesses in the financial services industry.
Although the Company is engaged from time to time in discussions relating to
possible acquisitions, no agreements or understandings relating to any
acquisitions are presently pending.

In connection with the repayment of indebtedness referenced above, the
Company is not terminating the relevant Credit Facilities and, accordingly,
would expect, in the future, to borrow under such Credit Facilities in order to
fund additional loan demand. The amount of such additional borrowing will
depend, among other things, upon the Company's loan demand and profitability.

The Company will receive no proceeds from the sale of the shares sold by
the Selling Shareholders.

DIVIDEND POLICY

The Company has not paid cash dividends on any shares of capital stock
since 1990, and after the Offering intends to retain its earnings to support the
growth and development of its business. Accordingly, it does not anticipate
paying any cash dividends in the foreseeable future. Any future dividend
payments would also depend upon the financial condition, funding requirements
and earnings of the Company, as well as other factors that the Board of
Directors may deem relevant. In addition, the ability of the Company to pay
dividends depends substantially upon its ability to receive dividends from its
subsidiaries. The Credit Facilities prohibit the Company's subsidiaries from
paying dividends to the Company (although management fees may be paid).
Accordingly, the Company's access to funds for the purpose of paying dividends
may be limited.

13
<PAGE> 16

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the over-the-counter Bulletin Board
under the market symbol "EMGG." However, for significant periods of time over
the past several years, there has been no established public trading market for
the Common Stock. As a result, prices reported for the Common Stock reflect the
relative lack of liquidity and may not be reliable indicators of market value.

The following table sets forth, for the periods indicated, the high and low
bid prices for the Company's Common Stock as reported by National Daily
Quotation Service. The prices given may represent quotations between dealers
which do not include retail mark-ups, mark-downs or commissions and do not
necessarily represent actual transactions.

<TABLE>
<CAPTION>
COMMON STOCK
--------------
CALENDAR YEAR HIGH LOW
- ------------------------------------------------------------------------------ ------ -----
<S> <C> <C>
1994
First Quarter............................................................... $ 0.75 $0.75
Second Quarter.............................................................. 0.75 0.63
Third Quarter............................................................... 0.75 0.63
Fourth Quarter.............................................................. 1.13 0.63
1995
First Quarter............................................................... $ 1.13 $0.56
Second Quarter.............................................................. 1.88 0.75
Third Quarter............................................................... 5.50 1.75
Fourth Quarter.............................................................. 6.50 2.00
1996
First Quarter............................................................... $ 9.00 $4.00
Second Quarter (through May 6, 1996)........................................ 14.00 9.00
</TABLE>

Bid and ask quotations with respect to the Common Stock may be obtained
from the National Daily Quotation Service. On May 6, 1996, the last reported
sales price of the Common Stock, as obtained from the Bloomberg quotation
service, was $14.00. On May 6, 1996, there were 464 holders of record of Common
Stock and 6,510,168 shares of Common Stock outstanding. In connection with this
Offering, the Company has applied for quotation of the Common Stock on the
Nasdaq National Market under the trading symbol "EMER."

14
<PAGE> 17

DILUTION

The net tangible book value of the Company at March 31, 1996 was
$8,005,898, or $1.23 per share of Common Stock. Net tangible book value per
share represents the amount of the Company's total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding. Net
tangible book value dilution per share to new investors represents the
difference between the amount per share paid by purchasers of shares of Common
Stock in the Offering and the pro forma net tangible book value per share of
Common Stock immediately after completion of the Offering.

After giving effect to the sale of 2,000,000 shares of Common Stock offered
by the Company hereby (at an assumed public offering price of $13.00 per share),
and after deducting the underwriting discount and other estimated expenses to be
paid by the Company in connection with this Offering, and after the application
of the estimated net proceeds therefrom, the pro forma net tangible book value
of the Company as of March 31, 1996 would have been $31,928,330, or $3.71 per
share of Common Stock. This represents an immediate increase in net tangible
book value of $2.48 to existing shareholders and an immediate dilution in net
tangible book value of $9.29 per share to purchasers of Common Stock in this
Offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share............................... $13.00
Net tangible book value per share before the Offering............... $1.23
Increase in net tangible book value per share attributable to new
investors........................................................ 2.48
Pro forma net tangible book value per share after the Offering........ 3.71
------
Dilution per share to new investors................................... $ 9.29
======
</TABLE>

Assuming the Underwriters' over-allotment option is exercised in full, pro
forma net tangible book value per share after the Offering would be $4.18 per
share, the increase in pro forma net tangible book value of shares owned by
existing shareholders would be $2.95 per share, and the dilution per share to
new investors after the Offering would be $8.82 per share.

The foregoing assumes no exercise of outstanding stock options or warrants.
At March 31, 1996, a total of 699,664 shares are authorized for issuance under
the Company's stock option plans. At March 31, 1996, options to purchase an
aggregate of 14,834 shares with a weighted average exercise price of $3.88 were
outstanding and exercisable under such stock option plans. At March 31, 1996,
options to purchase an additional 214,672 shares were outstanding but were not
exercisable. At March 31, 1996, the Company also had warrants outstanding which
entitled the holders thereof to purchase an aggregate of 121,742 shares. On
January 29, 1996, the Company adopted the Restricted Stock Agreement Plan which
provides for the grant of up to 100,000 shares of restricted stock to
non-employee directors. To the extent outstanding options and warrants are
exercised, or shares reserved for future issuance are issued, there will be
further dilution to new investors. See "Management."

15
<PAGE> 18

CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1996 (i) on a historical basis and (ii) as adjusted to reflect the sale by
the Company of the 2,000,000 shares of Common Stock offered hereby at an assumed
public offering price of $13.00 per share and the application of the estimated
net proceeds therefrom as described in "Use of Proceeds." This table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Consolidated Financial
Statements and the Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Indebtedness:
Debentures(1).......................................................... $104,055 $104,055
Notes payable to banks, including under the Credit Facilities(2)(3).... 19,831 -0-
-------- --------
Total indebtedness............................................. 123,886 104,055
-------- --------
Shareholders' equity:
Common Stock, $.05 par value; 30,000,000 authorized shares; 6,510,168
shares issued and outstanding; 8,602,520 shares issued and
outstanding as adjusted............................................. 325 430
Additional paid-in capital............................................. 6,788 30,605
Retained earnings...................................................... 4,282 4,282
-------- --------
Total shareholders' equity..................................... 11,395 35,317
-------- --------
Total capitalization........................................... $135,281 $139,372
======== ========
</TABLE>

- ---------------

(1) The Debentures are comprised of senior notes and subordinated debentures
bearing fixed rates of interest which are sold by CII only to South
Carolina residents. At March 31, 1996, there were $87.8 million of senior
notes and $16.2 million of subordinated debentures outstanding bearing
aggregate weighted average interest rates of 8% and 5%, respectively. Both
senior notes and subordinated debentures are subordinate in priority to the
Credit Facilities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

(2) The Company's Credit Facilities provide for aggregate borrowings of up to
$148.0 million, subject to certain borrowing base limitations which at
March 31, 1996, would have allowed additional borrowing of $32.9 million.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

(3) The Company anticipates that upon the consummation of the Offering, Notes
payable to banks, including under the Credit Facilities will be in excess
of $22 million, thereby allowing the Company to utilize $22 million of the
net proceeds of this Offering to pay down such indebtedness.

16
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following unaudited selected consolidated financial and operating data
at and for the five years ended December 31, 1995 are derived from the audited
financial statements of the Company. The data for the three months ended March
31, 1995 and 1996 are unaudited. The data set forth below is qualified by
reference to, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and Notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Interest and servicing revenue.................... $ 4,064 $ 6,980 $ 7,983 $ 10,903 $ 15,639 $ 3,368 $ 4,860
Gain on sale of loans (1)......................... -- 1,686 3,605 6,450 9,169 1,220 3,018
Other revenues.................................... 96 342 458 842 1,470 234 405
------- ------- -------- -------- -------- -------- --------
Total revenues............................ 4,160 9,008 12,046 18,195 26,278 4,822 8,283
Interest expense:
Interest on notes payable....................... 41 218 419 848 2,303 416 800
Interest on Debentures.......................... 2,358 4,097 4,654 5,031 6,224 1,311 1,940
------- ------- -------- -------- -------- -------- --------
Total interest expense.................... 2,399 4,315 5,073 5,879 8,527 1,727 2,740
Provision for credit losses(2).................... 83 349 686 2,510 2,480 489 910
General and administrative expenses............... 2,265 4,698 5,624 7,359 10,419 2,109 3,228
Income (loss) from continuing operations before
minority interest, income taxes and cumulative
effect of change in accounting principle........ (587) (354) 663 2,447 4,852 497 1,405
Income taxes...................................... (2) (130) (186) 609 190 4 44
------- ------- -------- -------- -------- -------- --------
Income (loss) from continuing operations before
minority interest and cumulative effect of
change in accounting principle(3)............... (585) (224) 849 1,838 4,662 493 1,361
Minority interest................................. (10) (25) (25) (46) (81) (8) (12)
------- ------- -------- -------- -------- -------- --------
Income from continuing operations before
cumulative effect of change in accounting
principle(3).................................... (595) (249) 824 1,792 4,581 485 1,349
Income (loss) from discontinued operations........ 344 685 260 546 (3,924) (316) --
Cumulative effect of change in accounting
principle....................................... -- -- 113 -- -- -- --
------- ------- -------- -------- -------- -------- --------
Net income (loss)......................... $ (251) $ 436 $ 1,197 $ 2,338 $ 657 $ 169 $ 1,349
======= ======= ======== ======== ======== ======== ========
Income per share from continuing operations....... (0.11) (0.04) 0.13 0.27 0.69 0.07 0.20
Income per share from discontinued operations..... 0.06 0.12 0.04 0.08 (0.59) (0.05) --
Cumulative effect per share of change in
accounting principle............................ -- -- 0.01 -- -- -- --
------- ------- -------- -------- -------- -------- --------
Net income (loss) per share(4)............ $ (0.05) $ 0.08 $ 0.18 $ 0.35 $ 0.10 $ 0.02 $ 0.20
======= ======= ======== ======== ======== ======== ========
Weighted average outstanding equivalent shares (in
thousands)...................................... 5,660 5,639 6,552 6,689 6,668 6,699 6,680
OPERATING DATA:
Total loans originated or purchased............. $18,361 $57,282 $ 63,633 $150,044 $249,507 $ 48,830 $ 84,993
Total loans sold................................ -- 10,827 31,052 85,772 153,055 31,102 66,918
Total loans securitized......................... -- -- -- -- 17,063 -- 16,107
Total loans serviced (period end)............... 41,250 68,489 106,898 156,524 213,851 167,934 230,478
Total loans receivable (period end)............. 39,870 56,785 66,279 94,479 125,775 98,493 117,315
Weighted average interest rate earned........... 14.23% 14.19% 12.83% 13.51% 14.04% 13.83% 14.31%
Weighted average interest rate paid............. 7.69 7.74 7.24 6.94 7.57 6.28 8.11
Allowance for credit losses as a % of average
serviced loans(5)............................. 4.69 2.15 1.72 2.37 2.45 2.12 2.40
Net charge-offs as a % of average serviced
loans(2)(5)................................... 0.83 0.68 1.29 2.37 1.44 1.26 0.47
General and administrative expenses as a % of
average serviced loans........................ 8.24 8.56 6.41 5.59 5.63 5.24 4.66
BALANCE SHEET DATA (PERIOD END):
Loans receivable.................................. $39,870 $56,785 $ 66,279 $ 91,736 $103,865 $ 90,379 $ 92,071
Mortgage loans held for sale...................... -- -- -- 3,662 22,593 8,114 25,244
Total assets...................................... 53,562 70,359 84,279 109,448 144,931 114,870 139,631
Total indebtedness................................ 48,492 64,840 76,195 99,012 134,850 99,245 123,886
Shareholders' equity.............................. 4,635 5,057 7,362 9,700 9,885 9,869 11,395
</TABLE>

- ---------------

(1) These amounts represent gains on the sale of SBA Loan Participations and on
the sale of Mortgage Loans.
(2) Approximately 90% of the amount in 1994 relates to the writedown to market
of certain foreclosed properties associated with speculative construction
loans made by the Mortgage Loan Division prior to its acquisition by the
Company. Speculative construction loans are no longer being made by the
Company.
(3) The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," effective January 1, 1993. The adoption
of SFAS No. 109 had the cumulative effect of (i) increasing the Company's
net income in 1993 by $113,000 and (ii) reducing the Company's effective tax
rate from approximately 45% to approximately 22%. The Company recognized no
deferred tax benefits of operating loss carryforwards as a result of the
adoption of SFAS No. 109.
(4) See "Supplemental Earnings Per Share" in the Summary Consolidated Financial
and Operating Data on page 5.
(5) Average serviced loans includes all portfolio Mortgage Loans and Auto Loans,
all securitized loans, and the unguaranteed portion of SBA Loans, but
excludes the guaranteed portion of the SBA Loans.

17
<PAGE> 20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the preceding
"Selected Consolidated Financial and Operating Data" and the other historical
and pro forma financial statements of the Company, including the notes thereto,
appearing elsewhere herein. As used herein, "Discontinued Operations" refers to
the Company's Transportation Segment and Apparel Segment. Unless otherwise
noted, the discussion contained herein relates to the continuing operations of
the Company, which consist of its Financial Services Segment operations.

GENERAL

The Company is a diversified financial services company headquartered in
Greenville, South Carolina which makes Mortgage Loans, SBA Loans and Auto Loans.
Prior to current management's acquisition of control of the Company in December
1990, the Company was primarily engaged in its Transportation Segment
operations. Under previous management, the Company incurred significant losses
which resulted in the NOL. In 1991, current management implemented a strategic
plan to acquire profitable businesses which could utilize the NOL. Pursuant to
such strategy, the Company acquired CII, Premier, EBC and Loan Pro$ in 1991 and
YGI in 1993. In 1994, the Company made a strategic decision to divest all
nonfinancial operations and to focus exclusively on the financial services
industry. In accordance with such strategy, the Company completed its
divestiture of its Apparel Segment and Transportation Segment operations in
1995.

The Company's total serviced loans receivable increased from $106.9 million
at December 31, 1993 to $156.5 million at December 31, 1994 to $213.9 million at
December 31, 1995 and to $230.4 million at March 31, 1996. Mortgage Loans
increased during all such periods principally as a result of an increase in the
number of Mortgage Bankers originating loans through the Mortgage Loan Division,
as well as increased loan volume from existing Mortgage Bankers. SBA Loans
increased during 1994 due to the opening of additional offices, as well as a
result of an increase in the number of Commercial Loan Brokers which refer SBA
Loans to the SBA Loan Division. In 1995, the SBA adopted certain policies, such
as the temporary implementation of a maximum SBA Loan amount of $500,000 and the
temporary prohibition of the use of SBA Loan proceeds for certain refinancings
(which temporary limitations were removed in October 1995). Consequently, SBA
Loan volume in 1995 was relatively unchanged from the 1994 level. Auto Loans
increased during all such periods principally as a result of an increase in
number of loan production offices and successful efforts at establishing
additional dealer relationships.

The following table sets forth certain data relating to the Company's loans
at and for the periods indicated:

18
<PAGE> 21

<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
AT AND FOR THE YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SBA LOANS:
SBA Loans originated................... $ 37,867 $ 43,123 $ 39,560 $ 8,535 $ 11,671
Total SBA Loans (period end)........... 17,933 25,845 19,937 23,211 18,383
Total serviced SBA Loans (period
end)................................ 58,552 87,890 108,013 92,653 116,158
Average SBA Loans...................... 13,956 21,889 22,891 24,528 19,160
Average serviced SBA Loans............. 40,117 73,221 97,952 90,271 112,085
Average interest rate earned(1)........ 9.73% 11.29% 12.70% 13.43% 12.30%
AUTO LOANS:
Auto Loans originated.................. $ 5,230 $ 7,547 $ 17,148 $ 3,490 $ 5,282
Total Auto Loans (period end).......... 6,011 8,483 17,673 10,375 4,819
Total serviced Auto Loans (period
end)................................ 6,011 8,483 17,673 10,375 20,205
Average Auto Loans..................... 5,179 7,247 13,078 9,429 11,246
Average serviced Auto Loans............ 5,179 7,247 13,078 9,429 18,939
Average interest rate earned(1)........ 28.33% 28.28% 27.40% 26.07% 25.82%
TOTAL LOANS:
Total loans receivable (period end).... $ 66,279 $ 94,479 $125,775 $ 98,493 $117,317
Total serviced loans receivable (period
end)................................ 106,898 156,524 213,851 167,934 230,478
</TABLE>

- ---------------

(1) Averages are computed using beginning and ending balances for the period
presented.

PROFITABILITY

The principal components of the Company's profitability are (1) the net
interest and servicing revenue associated with the Company's loans receivable
and serviced loans, which is the excess of interest and fees earned on its
serviced loans receivable over interest expense paid on borrowed funds
associated with such serviced loans receivable, (2) gain resulting from the sale
of its Mortgage Loans and (3) the premium received in connection with the sale
of the SBA Loan Participations and the related servicing revenue.

The following table sets forth, for the periods indicated, certain
information derived from the Company's Consolidated Financial Statements
expressed as a percentage of total revenues.

<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Interest and servicing revenue..................... 66.3% 59.9% 59.5% 69.8% 58.7%
Gain on sale of loans.............................. 30.0 35.4 34.9 25.3 36.4
Other revenues..................................... 3.7 4.7 5.6 4.9 4.9
----- ----- ----- ----- -----
Total revenues........................... 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== =====
Interest expense................................... 42.1 32.3 32.5 35.8 33.1
General and administrative expenses................ 46.7 40.4 39.6 43.7 39.0
Provision for credit losses........................ 5.7 13.8 9.4 10.2 11.0
----- ----- ----- ----- -----
Income from continuing operations before income
taxes............................................ 5.5 13.5 18.5 10.3 16.9
Income taxes....................................... (1.6) 2.9 0.8 0.1 0.5
Minority interest.................................. (0.2) (0.3) (0.3) (0.1) (0.1)
Discontinued operations............................ 2.1 2.6 (14.9) (6.6) --
Cumulative effect of change in accounting
principle........................................ 0.9 -- -- -- --
----- ----- ----- ----- -----
Net income............................... 9.9% 12.9% 2.5% 3.5% 16.3%
===== ===== ===== ===== =====
</TABLE>

19
<PAGE> 22

RESULTS OF OPERATIONS

Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995

Total revenues increased $3.5 million, or 73%, from $4.8 million for the
three month period ended March 31, 1995 to $8.3 million for the three month
period ended March 31, 1996. The increase in revenues resulted principally from
increases in interest and servicing revenue and gain on sale of loans.

Interest and servicing revenue increased $1.5 million, or 45%, from $3.4
million for the three month period ended March 31, 1995 to $4.9 million for the
three month period ended March 31, 1996. This increase was due principally to
the growth in the serviced loan portfolio of the Mortgage and Auto Loan
Divisions. Interest and servicing revenue earned by the Mortgage Loan Division
increased $797,000, or 35%, from $2.3 million for the three month period ended
March 31, 1995 to $3.1 million for the three month period ended March 31, 1996.
Interest and servicing revenue earned by the SBA Loan Division increased
$99,000, or 12%, from $823,000 for the three month period ended March 31, 1995
to $922,000 for the three month period ended March 31, 1996. This increase
resulted from continued growth in serviced SBA Loans and from the removal of the
temporary change in the SBA policy reducing the maximum loan amount to $500,000
which negatively impacted the Company's SBA Loan originations during the three
month period ended March 31, 1995. Interest and servicing revenue earned by the
Auto Loan Division increased $604,000, or 98%, from $615,000 for the three month
period ended March 31, 1995 to $1.2 million for the three month period ended
March 31, 1996. The increase in interest and servicing revenue for the Auto Loan
Division was due to the growth of its loan portfolio.

Gain on sale of loans increased $1.8 million, or 147%, from $1.2 million
for the three month period ended March 31, 1995 to $3.0 million for the three
month period ended March 31, 1996. Gain on sale of loans was generated by the
sale of Mortgage Loans and SBA Loan Participations. The increase resulted
principally from increased sales of Mortgage Loans associated with the increased
loan originations of the Mortgage Loan Division.

Other revenues increased $171,000, or 73%, from $234,000 for the three
month period ended March 31, 1995 to $405,000 for the three month period ended
March 31, 1996. Other revenues is comprised principally of origination and
processing fees, insurance commissions and management fees paid in connection
with the management of the Venture Funds. The increase in other revenues
resulted principally from the increase in the Company's loan originations, as
well as from increased management fees paid by the Venture Funds.

Total expenses increased $2.6 million, or 59%, from $4.3 million for the
three month period ended March 31, 1995 to $6.9 million for the three month
period ended March 31, 1996. Total expenses are comprised of interest expense,
provision for credit losses and general and administrative expenses.

Interest expense increased $1.0 million, or 59%, from $1.7 million for the
three month period ended March 31, 1995 to $2.7 million for the three month
period ended March 31, 1996. The increase was due principally to increased
borrowings by the Mortgage and SBA Loan Divisions associated with increased loan
originations. Total borrowings attributable to the Mortgage Loan Division, both
under the Credit Facilities and in connection with the sale of Debentures,
increased $29.2 million, or 36%, from $82.0 million at March 31, 1995 to $111.2
million at March 31, 1996. Total borrowings attributable to the SBA Loan
Division increased $1.6 million, or 14%, from $11.1 million at March 31, 1995 to
$12.7 million for the three month period ended March 31, 1996. This increase in
debt resulted principally from the loan origination activity for the three month
period ended March 31, 1996 as compared to the same period in 1995. This
increase in loan originations was due principally to the elimination of the
SBA's $500,000 loan limitation in October 1995. Total borrowings attributable to
the Auto Loan Division decreased $5.2 million, or 100%, from $5.2 million at
March 31, 1995 to $0 at March 31, 1996. This decrease was due to the repayment
of all bank debt with proceeds of the securitization of $14.5 million of Auto
Loans in March 1996.

Provision for credit losses increased $421,000, or 86%, from $489,000 in
the three months ended March 31, 1995 to $910,000 in the three months ended
March 31, 1996. The provision was made to maintain the general reserves for
credit losses associated with loan growth, as well as to fund specific reserves
for possible losses associated with particular loans. This increase in the
provision for credit losses was due

20
<PAGE> 23

principally to the increase in the Company's serviced loan portfolio from $98.5
million at March 31, 1995 to $117.3 million at March 31, 1996, an increase of
19%.

General and administrative expense increased $1.1 million, or 53%, from
$2.1 million for the three month period ended March 31, 1995 to $3.2 million for
the three month period ended March 31, 1996 principally as a result of increased
personnel costs in the Mortgage Loan Division due to the continued expansion in
the servicing and underwriting areas, and increased expenses associated with the
opening of three new loan production offices by the Auto Loan Division. General
and administrative expense decreased from 5.2% of average serviced loans at
March 31, 1995 to 4.7% at March 31, 1996, principally as a result of the
increase in serviced loans for the three month period ended March 31, 1996. This
decrease in general and administrative expense as a percentage of serviced loans
was partially offset by the costs associated with the expansion of the Mortgage
Loan Division's servicing operations in anticipation of increased originations
of Mortgage Loans, including Mortgage Loans which may be sold servicing
retained.

Income from continuing operations increased $864,000, or 178%, from
$485,000 for the three months ended March 31, 1995 to $1.3 million for the three
month period ended March 31, 1996. The improvement in income was due principally
to increased growth and profitability of the Mortgage Loan Division as a result
of increased gain on sale of loans and interest and servicing revenue.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Total revenues increased $8.1 million, or 44%, from $18.2 million in 1994
to $26.3 in 1995. The increase in revenues resulted principally from increases
in interest and servicing revenue and gain on sale of loans.

Interest and servicing revenue increased $4.7 million, or 43%, from $10.9
million in 1994 to $15.6 million in 1995. This increase was due principally to
the growth in the serviced loan portfolio of the Mortgage Loan Division.
Interest and servicing revenue earned by the Mortgage Loan Division increased
$2.4 million, or 38%, from $6.3 million in 1994 to $8.7 million in 1995.
Interest and servicing revenue earned by the SBA Loan Division increased
$382,000, or 15%, from $2.5 million in 1994 to $2.9 million in 1995. This
increase resulted from continued growth in serviced SBA Loans, despite the
temporary changes in the SBA policies which negatively impacted the Company's
SBA Loan originations. Interest and servicing revenue earned by the Auto Loan
Division increased $1.5 million, or 71%, from $2.1 million in 1994 to $3.6
million in 1995. The increase in interest and servicing revenue for the Auto
Loan Division was due to the growth of its loan portfolio.

Gain on sale of loans increased $2.7 million, or 42%, from $6.5 million in
1994 to $9.2 million in 1995. Gain on sale of loans was generated by the sale of
Mortgage Loans and SBA Loan Participations. The increase resulted principally
from increased sales of Mortgage Loans associated with the increased loan
originations of the Mortgage Loan Division.

Other revenues increased $627,000, or 74%, from $842,000 in 1994 to $1.5
million in 1995. Other revenues is comprised principally of origination and
processing fees, insurance commissions and management fees paid in connection
with the management of the Venture Funds. The increase in other revenues
resulted principally from the increase in the Company's loan originations, as
well as from increased management fees paid by the Venture Funds.

Total expenses increased $5.6 million, or 36%, from $15.8 million in 1994
to $21.4 million in 1995. Total expenses are comprised of interest expense,
provision for credit losses and general and administrative expenses.

Interest expense increased $2.6 million, or 44%, from $5.9 million in 1994
to $8.5 million in 1995. The increase was due principally to increased
borrowings by the Mortgage and Auto Loan Divisions associated with increased
loan originations. Total borrowings attributable to the Mortgage Loan Division,
both under the Credit Facilities and in connection with the sale of Debentures,
increased $27.7 million, or 36%, from $77.5 million at December 31, 1994 to
$105.2 million at December 31, 1995. Interest expense in the Mortgage Loan
Division increased $1.6 million, or 31% from $5.1 million in 1994 to $6.7
million in 1995. Total borrowings attributable to the SBA Loan Division
increased $456,000, or 3%, from $14.4 million at December 31, 1994 to $14.8
million at December 31, 1995. This increase in debt resulted principally from
current year loan origination activity, partially offset by a reduction to
outstanding debt due to the

21
<PAGE> 24

securitization transaction completed in June 1995. Interest expense in the SBA
Loan Division increased $553,000, or 117% from $471,000 in 1994 to $1.02 million
in 1995. Total borrowings attributable to the Auto Loan Division increased $7.0
million, or 241%, from $2.9 million at December 31, 1994 to $9.9 million at
December 31, 1995. Interest expense in the Auto Loan Division increased
$500,000, or 189% from $264,000 in 1994 to $764,000 in 1995.

Provision for credit losses remained stable at $2.5 million in 1994 and in
1995. The provision was made to maintain the general reserves for credit losses
associated with loan growth, as well as to fund specific reserves for possible
losses associated with particular loans. In 1994, the majority of the provision
resulted from the writedown to market value of certain foreclosed properties in
the amount of $1.7 million. These foreclosed properties related principally to
speculative construction loans made by CII prior to its acquisition by the
Company. Speculative construction loans are no longer being made by the Company.

General and administrative expense increased $3.0 million, or 40%, from
$7.4 million in 1994 to $10.4 million in 1995 principally as a result of
increased personnel costs of $1.7 million due primarily to the continued
expansion in the servicing and underwriting areas, increased legal, audit and
professional fees of $504,000 associated with the Company's stock tender offer
in February 1995 and other corporate transactions, and increased expenses of
$477,000 associated with the opening of three new loan production offices by the
Auto Loan Division. General and administrative expense increased from 5.59% of
average serviced loans in 1994 to 5.63% in 1995, principally as a result of the
increase in the Mortgage Loan Division's servicing operations in anticipation of
increased originations of Mortgage Loans, including Mortgage Loans which may be
sold servicing retained.

Income from continuing operations increased $2.8 million, or 155%, from
$1.8 million in 1994 to $4.6 million in 1995. The improvement in income was due
principally to increased growth and profitability of the Mortgage Loan Division.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

Total revenues increased $6.2 million, or 52%, from $12.0 million in 1993
to $18.2 million in 1994. The increase in revenues resulted principally from
increases in interest and servicing revenue and gain on sale of loans.

Interest and servicing revenue increased $2.9 million, or 36%, from $8.0
million in 1993 to $10.9 million in 1994. This increase was due principally to
growth in serviced loans receivable in the Mortgage and SBA Loan Divisions.
Interest and servicing revenue earned by the Mortgage Loan Division increased
$1.2 million, or 24%, from $5.1 million in 1993 to $6.3 million in 1994.
Interest and servicing revenue earned by the SBA Loan Division increased $1.1
million, or 79%, from $1.4 million in 1993 to $2.5 million in 1994.

Gain on sale of loans increased $2.9 million, or 81%, from $3.6 million in
1993 to $6.5 million in 1994. Gain on sale of loans resulted from the sale of
Mortgage Loans and SBA Loan Participations. The increase resulted principally
from increased sales associated with the increased loan originations of the
Mortgage and SBA Loan Divisions.

Other revenues increased $384,000, or 84%, from $458,000 in 1993 to
$842,000 in 1994. Other revenues were comprised principally of management fees
paid in connection with origination and processing fees, insurance commissions
and the management of the Venture Funds. The increase in other revenues resulted
principally from the increase in the Company's loan originations.

Total expenses increased $4.3 million, or 38%, from $11.4 million in 1993
to $15.7 million in 1994. Total expenses are comprised of interest expense,
provision for credit losses, and general and administrative expenses. This
increase was due in part to the increase in interest expense as a result of
increased borrowing to fund increases in loan volume at the Mortgage and SBA
Loan Divisions. The increase in total expenses also resulted from an increase in
the provision for credit losses, which was associated with the writedown to
market value of certain foreclosed properties.

22
<PAGE> 25

Interest expense increased $806,000, or 16%, from $5.1 million in 1993 to
$5.9 million in 1994. The increase was due principally to increased borrowings
by the Mortgage Loan Division and the SBA Loan Division which were associated
with increased loan originations. Total borrowings attributable to the Mortgage
Loan Division, both under the Credit Facilities and in connection with the sale
of Debentures, increased $7.6 million, or 11%, from $69.9 million at December
31, 1993 to $77.5 million at December 31, 1994. Interest expense in the Mortgage
Loan Division increased $456,000, or 10% from $4.7 million in 1993 to $5.1
million in 1994. Total borrowings attributable to the SBA Loan Division
increased $12.7 million, or 747%, from $1.7 million at December 31, 1993 to
$14.4 million at December 31, 1994. Interest expense in the SBA Loan Division
increased $359,000, or 321% from $112,000 in 1993 to $471,000 in 1994.

Provision for credit losses increased $1.8 million, or 262%, from $686,000
in 1993 to $2.5 million in 1994. This increase resulted from growth in the
Company's loan portfolio and the $1.7 million writedown to market of certain
foreclosed properties included in the Company's real estate held for sale. This
unusually high writedown related principally to speculative construction loans
made by CII prior to its acquisition by the Company. Speculative construction
loans are no longer being made by the Company.

General and administrative expense increased $1.7 million, or 30%, from
$5.7 million in 1993 to $7.4 million in 1994, principally as a result of
increased expenses of $251,000 associated with the opening of a new loan
production office by the Auto Loan Division and $800,000 associated with the
general expansion of the Mortgage and SBA Loan Divisions' operations. General
and administrative expense decreased from 6.41% of average serviced loans in
1993 to 5.59% in 1994, principally as a result of the increase in the volume of
loan originations, principally in the Mortgage Loan and SBA Loan Divisions.

Income from continuing operations increased $968,000, or 117%, from
$824,000 in 1993 to $1.8 million in 1994. The improvement in income was due
principally to increased growth and profitability of the Mortgage Loan Division.

DISCONTINUED OPERATIONS

Transportation Segment

In connection with the Company's strategic plan to focus its business
efforts on the Financial Services Segment, the Company divested its
Transportation Segment operations during 1994 and 1995. As a result, the
Transportation Segment has been classified as discontinued operations, and,
accordingly, the Consolidated Financial Statements and the related Notes of the
Company segregate continuing and discontinued operations. The Transportation
Segment had pre-tax income of $422,000 in 1993 and $2.8 million in 1994, and a
loss of $333,000 in 1995. The profits in 1993 and 1994 resulted principally from
gains on the sale of boxcars and other assets. Operating revenues for the
Transportation Segment were $1.7 million in 1993, $1.4 million in 1994, and
$390,000 in 1995. These decreases in revenues were due principally to the
progressive sale of assets associated with the Transportation Segment. The
Company does not believe that there are material liabilities, contingent or
otherwise, with respect to its Transportation Segment.

Apparel Segment

In connection with the Company's strategic plan to focus its business
efforts on the Financial Services Segment, the Company sold all of the
outstanding stock of YGI in exchange for a non-recourse note in September 1995,
thereby divesting its Apparel Segment operations. In connection with the sale of
YGI, the Company wrote off all amounts due the Company from YGI as intercompany
debt and amounts due to the Company from the purchasers of the YGI stock, which
amounts totaled $3.9 million, net of income taxes of $156,000. The Company wrote
off these amounts due to its concern over a decline in YGI's operating profits
and the related impact on YGI's and the purchasers' ability to repay these
obligations. As a result of the sale of YGI, the operating results of the
Apparel Segment have been classified as discontinued operations. The Company
remains contingently liable for its guaranty of certain bank loans and trade
accounts payable which existed prior to the sale of YGI and which at April 30,
1996 totaled $564,000 and were secured by substantially all of YGI's assets.
Management does not anticipate any significant charges to future earnings as a
result of these guarantees.

23
<PAGE> 26

The Apparel Segment had net losses of $163,000 in 1993, $31,000 in 1994 and
$1.3 million in 1995. The net loss in 1994 was decreased by the receipt of $1.25
million in life insurance proceeds due to the death of YGI's President. The
Apparel Segment had revenues of $11.5 million in 1993, $12.2 million in 1994,
and $7.3 million in 1995.

ALLOWANCE FOR CREDIT LOSSES AND CREDIT LOSS EXPERIENCE

To provide for credit losses, the Company charges against current earnings
an amount necessary to maintain the allowance for credit losses at levels
expected to cover future losses of principal. At March 31, 1996 the total
allowance for credit losses for the Company was $3.3 million, including $1.4
million reserved for potential losses relating to the Company's securitized SBA
and Auto Loans. This compares to an allowance for credit losses at December 31,
1993, 1994 and 1995 of $952,000, $1.7 million and $2.6 million, respectively
including $773,000 reserved for potential losses relating to the Company's
securitized SBA Loans in 1995, respectively. The increase in the allowance
resulted from corresponding increases in the Company's serviced loans
receivable, rather than in connection with specific loans or circumstances.

The allowance for credit losses is a composite of the allowance for credit
losses of the Mortgage Loan Division, the SBA Loan Division and the Auto Loan
Division. The Mortgage Loan Division currently maintains an allowance for credit
losses equal to approximately 1.0% of its loan portfolio; the SBA Loan Division
currently maintains an allowance for credit losses equal to approximately 3.0%
of the unguaranteed portion of its loan portfolio; and the Auto Loan Division
currently maintains an allowance for credit losses equal to approximately 5.0%
of its loan portfolio. In addition, each subsidiary may establish a specific
reserve for a particular loan that is deemed by management to be a potential
problem loan where full recovery is questionable.

The table below summarizes certain information with respect to the
Company's allowance for credit losses and the composition of charge-offs and
recoveries for each of the periods indicated.

SUMMARY OF ALLOWANCE FOR CREDIT LOSSES
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
AT AND FOR THE YEAR ENDED ENDED MARCH
DECEMBER 31, 31,
----------------------------- --------------
1993 1994 1995 1996
----- ------- ------- --------------
<S> <C> <C> <C> <C>
Allowance for credit losses at beginning of
period......................................... $ 976 $ 952 $ 1,730 $ 2,647
Total loans charged-off.......................... (787) (1,808) (1,718) (363)
Total loans recovered............................ 77 76 155 72
----- ------- ------- --------------
Net charge-offs........................ (710) (1,732) (1,563) (291)
Provision charged to expense..................... 686 2,510 2,480 910
----- ------- ------- --------------
Allowance for credit losses at end of period..... 952 1,730 2,647 3,266
Allowance for losses on asset-backed
securities..................................... -- -- (773) (1,381)
----- ------- ------- --------------
Allowance for credit losses at end of period, net
of allowance for losses on asset-backed
securities..................................... $ 952 $ 1,730 $ 1,874 $ 1,885
===== ======= ======= ===========
</TABLE>

The Company considers its allowance for credit losses to be adequate in
view of the Company's loss experience and the secured nature of most of the
Company's outstanding loans. Although management considers the allowance
appropriate and adequate to cover possible losses in the loan portfolio,
management's judgment is based upon a number of assumptions about future events,
which are believed to be reasonable, but which may or may not prove valid. Thus,
there can be no assurance that charge-offs in future periods will not exceed the
allowance for possible credit losses or that additional increases in the
allowance for possible credit losses will not be required.

Management closely monitors portfolio delinquency to measure the quality of
its loan portfolio and the potential for credit losses. The Company's policy is
to place a loan on non-accrual status after it becomes

24
<PAGE> 27

90 days past due, or sooner if the interest is deemed uncollectible. Collection
efforts on charged-off loans continue until the obligation is satisfied or until
it is determined such obligation is not collectible or the cost of continued
collection efforts will exceed the potential recovery. Recoveries of previously
charged-off loans are credited to the allowance for credit losses.

The following table sets forth the Company's allowance for credit losses at
the end of the periods indicated ended December 31, 1993, 1994 and 1995, the
credit loss experience over the periods indicated, and delinquent loan
information at the dates indicated for loans receivable at least 90 days past
due.

<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
AT AND FOR THE YEAR ENDED MARCH
ENDED DECEMBER 31, 31,
----------------------- --------------
1993 1994 1995 1996
----- ----- ----- --------------
<S> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES AS A % OF LOANS RECEIVABLE:
Mortgage Loan Division.................................. 0.70% 1.23% 0.93% 0.97%
SBA Loan Division(1).................................... 4.26 4.11 4.62 5.36
Auto Loan Division(5)................................... 2.92 3.00 4.03 4.59
Total allowance for credit losses as a % of
total loans receivable........................ 1.60 2.00 2.04 2.32
NET CHARGE-OFFS AS A % OF AVERAGE LOANS RECEIVABLE(2):
Mortgage Loan Division(3)............................... 1.05% 2.96% 1.04% 0.08%
SBA Loan Division(1).................................... 0.05 0.21 1.48 0.01
Auto Loan Division(5)................................... 5.03 2.53 3.68 1.16
Total net charge-offs as a % of total average
loans receivable.............................. 1.29 2.37 1.44 0.21
LOANS RECEIVABLE PAST DUE 90 DAYS OR MORE AS A % OF LOANS
RECEIVABLE:
Mortgage Loan Division.................................. 7.08% 2.96% 3.67% 3.08%
SBA Loan Division(1).................................... 0.09 -- 0.99 1.23
Auto Loan Division(4)(5)................................ 5.69 0.64 0.77 2.12
Total loans receivable past due 90 days or more
as a % of total loans receivable.............. 5.62 2.12 2.78 2.57
TOTAL ALLOWANCE FOR CREDIT LOSSES AS A % OF LOANS
RECEIVABLE PAST DUE 90 DAYS OR MORE:.................... 28.44% 94.20% 73.21% 90.02%
</TABLE>

- ---------------

(1) The percentage is based on the total serviced unguaranteed SBA Loans
outstanding.
(2) Average loans receivable have been determined by using beginning and ending
balances for the period presented.
(3) Approximately 90% of the amount in 1994 relates to the writedown to market
of certain foreclosed properties associated with speculative construction
loans made by the Mortgage Loan Division prior to its acquisition by the
Company. Speculative construction loans are no longer being made by the
Company.
(4) The amount in 1993 relates primarily to consumer loans on personal property
made prior to the Company's acquisition of Premier.

(5) The percentage is based on the total serviced Auto Loans outstanding.

25
<PAGE> 28

The following table illustrates the Company's delinquency and charge-off
experience with respect to Mortgage Loans, SBA Loans and Auto Loans:

MORTGAGE LOAN DELINQUENCIES AND CHARGE-OFFS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
AT AND FOR THE YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------------- --------------
1993 1994 1995 1996
------- ------- ------- --------------
<S> <C> <C> <C> <C>
Serviced Mortgage Loan delinquencies:
30-59 days past due..................................... 8.09% 7.96% 7.75% 5.86%
60-89 days past due..................................... 2.05 2.87 1.80 1.57
Over 90 days past due................................... 7.08 2.96 3.67 3.08
In-substance foreclosure.................................. 6.32 3.87 1.26 1.96
Mortgage Loans charged-off, net, as a % of average
Mortgage Loans.......................................... 1.05% 2.96% 1.04% 0.08%
Mortgage Loans charged-off, net........................... $ 446 $ 1,518 $ 771 $ 70
Mortgage Loans (period end)............................... 42,335 60,151 88,165 93,332
Average Mortgage Loans.................................... 42,397 51,243 74,158 90,748
</TABLE>

SBA LOAN DELINQUENCIES AND CHARGE-OFFS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
AT AND FOR THE YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------------- --------------
1993 1994 1995 1996
------- ------- ------- --------------
<S> <C> <C> <C> <C>
Serviced unguaranteed SBA Loan delinquencies:
30-59 days past due..................................... 1.10% 1.17% 2.97% 4.34%
60-89 days past due..................................... -- -- 4.47 1.91
Over 90 days past due................................... 0.09 -- 0.99 1.23
In-substance foreclosure.................................. -- -- 1.54 1.05
SBA Loans charged-off, net, as a % of average serviced
unguaranteed SBA Loans.................................. 0.05% 0.21% 1.48% 0.01%
SBA Loans charged-off, net................................ $ 4 $ 31 $ 311 $ 1
Average serviced unguaranteed SBA Loans................... 7,635 14,545 21,018 25,444
Serviced SBA Loans (period end)........................... 58,552 87,890 108,013 116,158
Serviced unguaranteed SBA Loans (period end).............. 11,238 17,852 24,184 26,703
</TABLE>

AUTO LOAN DELINQUENCIES AND CHARGE-OFFS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
AT AND FOR THE YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------------- --------------
1993 1994 1995(2) 1996
------ ------ ------- --------------
<S> <C> <C> <C> <C>
Serviced Auto Loan delinquencies:
30-59 days past due.................................... 2.80% 2.29% 9.39% 8.20%
60-89 days past due.................................... 1.02 0.79 2.68 3.00
Over 90 days past due.................................. 5.69(1) 0.64 0.77 2.12
Auto Loans charged-off, net, as a % of average serviced
Auto Loans............................................. 5.03% 2.53% 3.68% 1.16%
Auto Loans charged-off, net.............................. $ 260 $ 183 $ 481 $ 219
Auto Loans (period end).................................. 6,011 8,483 17,673 4,819
Average serviced Auto Loans.............................. 5,179 7,247 13,078 18,939
Serviced Auto Loans (period end)......................... 6,011 8,483 17,673 20,204
</TABLE>

- ---------------

(1) Relates primarily to consumer loans on personal property made prior to the
Company's acquisition of Premier.
(2) In September 1995, the Company modified its financial reporting software
package for the Auto Loan Division. Prior to that time, the Company's
software did not report a loan as past due until the first day of the month
after the loan became 30 days past due. The modified software package
records loans past due during the month the loan becomes past due.
Therefore, after modification of its software, the Company's loans that
were past due shifted one past-due category (e.g., from current to 30 days
past due, or from 60 to 90 days past due.)

26
<PAGE> 29

LIQUIDITY AND CAPITAL RESOURCES

The Company's business requires continued access to short- and long-term
sources of debt financing and equity capital. The Company's cash requirements
arise from loan originations and purchases, repayments of debt upon maturity,
payments of operating and interest expenses, expansion activities and capital
expenditures. The Company's primary sources of liquidity are cash flow from
operations, sales of the loans it originates and purchases, proceeds from the
sale of Debentures, borrowings under the Credit Facilities and proceeds from
securitizations of loans. While the Company believes that such sources of funds
will be adequate to meet its liquidity requirements, no assurance of such fact
may be given. The Offering proceeds will result in an increase in shareholders'
equity, which management believes will facilitate the Company's ability to
obtain additional borrowings to fund future loan demand.

Shareholders' equity increased from $7.4 million at December 31, 1993 to
$9.7 million at December 31, 1994, to $9.9 million at December 31, 1995 and to
$11.4 million at March 31, 1996. Each of these increases resulted principally
from the retention of income by the Company.

Cash and cash equivalents increased from $278,000 at December 31, 1994 to
$1.6 million at December 31, 1995 and to $1.8 million at March 31, 1996. Cash
provided by (used in) operating activities decreased from $16.7 million in 1994
to $(9.9) million in 1995 and to $9.6 million for the three month period ended
March 31, 1996; cash used in investing activities decreased from $41.4 million
in 1994 to $23.2 million in 1995 and to $3.5 million in the first quarter of
1996; and cash provided by (used in) financing activities increased from $20.0
million in 1994 to $34.4 million in 1995 and decreased to $(5.9) million in the
first quarter of 1996. The decrease in cash provided by operations was due
principally to loans held for sale which were originated but not yet sold as of
December 31, 1995. Cash used in investing activities was principally for the net
increase in loans originated with the expectation of holding the loans until
maturity. Cash provided by financing activities was due principally to the
increase in borrowing, both under the Credit Facilities and through the sale of
the Debentures.

Cash and cash equivalents decreased from $5.0 million at December 31, 1993
to $278,000 at December 31, 1994. Cash provided by operating activities
increased from $1.6 million in 1993 to $16.7 million in 1994; cash used in
investing activities increased from $11.8 million in 1993 to $41.4 million in
1994; and cash provided by financing activities increased from $10.9 million in
1993 to $20.0 million in 1994. The increase in cash provided by operations was
due primarily to an increase in loans sold. Cash used in investing activities
was principally for the net increase in loans originated with the expectation of
holding the loans until maturity. Cash provided by financing activities was due
principally to the increase in borrowing, both under the Credit Facilities and
through the sale of the Debentures.

At March 31 1996, the Company's Credit Facilities were comprised of credit
facilities of $90 million for the Mortgage Loan Division which had aggregate
unused borrowing availability of $28.2 million, credit facilities of $32 million
for the SBA Loan Division which had aggregate unused borrowing availability of
$1.8 million (the "SBA Loan Division Facility"), and credit facilities of $26
million for the Auto Loan Division which had aggregate unused borrowing
availability of $2.9 million (the "Auto Loan Division Facility"). In March 1996,
the Company entered into a $70 million credit facility having a one year term
with First Union National Bank of North Carolina, which is included in the
credit facilities for the Mortgage Loan Division (collectively, the "Mortgage
Loan Division Facility"). At March 31, 1996, $7.2 million bearing interest at
the lender's prime rate was outstanding under the Mortgage Loan Division
Facility, $12.7 million bearing interest at the lender's prime rate was
outstanding under the SBA Loan Division Facility, and no amounts were
outstanding under the Auto Loan Division Facilities. The Credit Facilities have
terms ranging from one to three years and are otherwise terminable in the event
of uncured defaults. However, such Credit Facilities are renewable upon the
mutual agreement of the Company and the respective lender.

Each of the Credit Facilities contain a number of financial covenants,
including, but not limited to, covenants with respect to certain debt to equity
ratios, delinquent loans, and minimum adjusted tangible net worth. The Credit
Facilities also contain certain other covenants, including, but not limited to,
covenants that impose limitations on the Company with respect to declaring or
paying dividends, making payments with

27
<PAGE> 30

respect to certain subordinated debt, and making certain changes to its equity
capital structure. The Company believes that it is currently in material
compliance with these covenants.

The Company sells substantially all of its Mortgage Loans originated
through the Principal Mortgage Bankers and the SBA Loan Participations. During
1994, 1995 and the three-months ended March 31, 1996, the Company sold $54.6
million, $127.6 million and $54.8 million, respectively, of Mortgage Loans and
$31.2 million, $25.4 million and $12.1 million, respectively, of SBA Loan
Participations.

In June 1995, the Company securitized approximately $17 million of loans
representing the unguaranteed portions of the SBA Loans and in March 1996, the
Company securitized approximately $16 million of Auto Loans. Although
securitizations provide liquidity, the Company has utilized securitizations
principally to provide a lower cost of funds and reduce interest rate risk.
Additional liquidity is not a material factor in the Company's determination to
pursue securitizations. In connection with its SBA Loan and Auto Loan
securitizations, the Company has retained subordinated certificates representing
interests in the transferred loans equal to approximately 10% of the loans
transferred. See "Business -- SBA Loan Division -- Securitization of SBA Loans."

CII engages in the sale of the Debentures. The Debentures are comprised of
senior notes and subordinated debentures bearing fixed rates of interest which
are sold by CII only to South Carolina residents. The offering of the Debentures
is registered under South Carolina securities law and exempt from federal
registration under the federal intrastate exemption. CII conducts its operations
so as to qualify for the safe harbor provisions of Rule 147 promulgated pursuant
to the Securities Act of 1933, as amended, (the "Securities Act") which requires
that, among other things, at least 80% of the proceeds from the Debentures must
be loaned by CII to South Carolina borrowers. At March 31, 1996, CII had an
aggregate of $87.9 million of senior notes outstanding bearing a weighted
average interest rate of 8%, and an aggregate of $16.2 million of subordinated
debentures bearing a weighted average interest rate of 5%. Both senior notes and
subordinated debentures are subordinate in priority to the Mortgage Loan
Division Credit Facility. Substantially all of the Debentures have one year
maturities. The Company expects that after the Offering, it will continue the
offering of the Debentures for the immediate future.

TAX CONSIDERATIONS -- THE NOL

As a result of the operating losses incurred by the Company under prior
management, the Company generated the NOL. At March 31, 1996, the amount of the
NOL remaining and available to the Company was approximately $23 million. The
NOL expires, to the extent that it is not utilized to offset income, in varying
amounts annually through 2001.

Federal tax laws provide that net operating loss carryforwards are
restricted or eliminated upon certain changes of control. Applicable federal tax
laws provide that a 50% "change of control," which is calculated over a rolling
three year period, would cause the loss of substantially all of the NOL.
Although the calculation of the "change of control" is factually difficult to
determine, upon the consummation of this Offering, the Company believes that it
will have had a maximum cumulative change of control of 33% during the relevant
three year period.

No net deferred tax asset was recognized with respect to the NOL for the
years ended December 31, 1993, 1994 and 1995 or for the three months ended March
31, 1996. A valuation allowance equal to the NOL was applied to the NOL in each
of the years ended December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1996. A valuation allowance of approximately $7.7 million was
applied to the tax effect of the NOL for the year ended December 31, 1995.

ACCOUNTING CONSIDERATIONS

In connection with the Company's sale of SBA Loan Participations, the
Company accounts for the servicing revenue in excess of that defined as "normal"
servicing revenue in accordance with Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 65 as excess
servicing receivable. This asset is amortized against servicing revenue over the
life of the loan to which

28
<PAGE> 31

it relates. In the event that the related loan is prepaid or the related
borrower defaults on such loan, the balance of the excess servicing receivable
is charged against servicing revenue in the period in which the prepayment or
default occurs.

The Company has engaged in securitizations of loans. The net interest rate
spread received by the Company is recorded as excess servicing fees when
received over the life of the transaction.

The Company complies with the provisions of Emerging Issues Task Force
("EITF") 88-11 dealing with income recognition on the sales of loans. EITF 88-11
requires that the amount of gain or loss recognized on the sale of a portion of
a loan be based on the relative fair values of the loan portion sold and the
loan portion retained. For the Company, EITF 88-11 primarily impacts the amount
of gain recognized by the Company on the sale of the SBA Loan Participations. As
a result of the Company's accounting treatment described above, a portion of the
cash premiums received are deferred and recognized as income over the remaining
term of the retained unguaranteed portion of the loan.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS AND REGULATORY POLICIES

In March 1995, the FASB issued SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The statement
requires that long-lived assets and certain identified intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The statement is effective for the Company for the fiscal year
ending December 31, 1996 and does not have a significant impact on the Company's
financial statements.

In May 1995, the FASB issued SFAS 122, "Accounting For Mortgage Servicing
Rights," which amends SFAS No. 65, "Accounting For Mortgage Banking Activities."
This statement allows the capitalization of servicing-related costs associated
with mortgage loans that are originated for sale, and to create servicing assets
for such loans. Prior to this statement, originated mortgage servicing rights
were generally accorded off-balance sheet treatment. The statement is effective
for the Company for the fiscal year ending December 31, 1996. The adoption does
not have a material effect on the Company's financial condition or results of
operations.

The FASB issued SFAS No. 123, "Accounting For Stock-based Compensation," in
October 1995. This statement supersedes APB Opinion No. 25, "Accounting For
Stock Issued To Employees" and establishes financial accounting and reporting
standards for stock-based employee compensation plans. Those plans include all
arrangements by which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock. The statement also applies
to transactions in which an entity issues its equity instruments to acquire
goods or services from nonemployees.

A new method of accounting for stock-based compensation arrangements with
employees is established by SFAS 123. The new method is a fair value based
method rather than the intrinsic value based method that is contained in APB
Opinion 25. However, SFAS 123 does not require an entity to adopt the new fair
value based method for purposes of preparing its basic financial statements.
Entities are allowed (1) to continue to use the APB Opinion 25 method or (2) to
adopt the SFAS 123 fair value based method. The selected method would apply to
all of the entity's compensation plans and transactions.

SFAS 123 requires that an employer's financial statements include certain
disclosures about stock-based employee compensation arrangements regardless of
the method used to account for them. The accounting requirements of this
statement are effective for transactions entered into in fiscal years that begin
after December 15, 1995, though they may be adopted at issuance. The disclosure
requirements are effective for financial statements for fiscal years beginning
after December 15, 1995, or for an earlier fiscal year for which this statement
is initially adopted for recognizing compensation cost. The Company has elected
to continue use of the method prescribed by APB 25 for recording stock-based
compensation and will provide pro forma disclosures in its annual financial
statements as prescribed by SFAS 123.

29
<PAGE> 32

The FASB issued on October 24, 1995 a proposed statement of financial
accounting standards "Accounting For Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." FASB's objective is to develop consistent
accounting standards for such transactions, including determining when financial
assets should be considered sold and removed from the statement of financial
position and when related revenues and expenses should be recognized. This
approach focuses on analyzing the components of financial asset transfers and
requires each party to a transfer to recognize the financial assets it controls
and liabilities it has incurred and remove such assets from the statement of
financial position when control over them has been relinquished. In its present
form the statement will have minimal impact on the accounting practices of the
Company.

INFLATION

Unlike most industrial companies, the assets and liabilities of financial
services companies such as the Company are primarily monetary in nature.
Therefore, interest rates have a more significant effect on the Company's
performance than do the general levels of inflation in the price of goods and
services. While the Company's noninterest income and expense and the interest
rates earned and paid are affected by the rate of inflation, the Company
believes that the effects of inflation are generally manageable through
asset/liability management. See "-- Liquidity and Capital Resources" and
"-- Interest Rate Sensitivity."

INTEREST RATE SENSITIVITY

Asset/liability management is the process by which the Company monitors and
controls the mix and maturities of its assets and liabilities. The essential
purpose of asset/liability management is to ensure adequate liquidity and to
maintain an appropriate balance between interest sensitive assets and
liabilities.

The Company's asset/liability management varies by division. In general,
with respect to the Mortgage Division, the Company sells substantially all of
its Mortgage Loans on a monthly basis. Furthermore, commitments to a prospective
borrower for a Mortgage Loan do not extend beyond 45 days. In the event that
economic conditions necessitate a change in rate, such rate change is
communicated to potential borrowers and the Company's published rates are
adjusted. In addition, the Company may from time to time enter into forward
commitments to sell residential first mortgage loans to reduce risk associated
with originating and holding loans for sale.

With respect to the SBA Loans, the Company only originates variable rate
loans, which adjust on the first day of each calendar quarter. Therefore,
interest rate risk exists for a maximum period of 60 days, due to the SBA Loan
Division Credit Facility having a variable rate which adjusts monthly.

With respect to the Auto Loans, the Company's rate spread is in excess of
20% and is fixed. The Company believes that this interest rate spread provides
adequate margin to allow for any potential increase in interest rates.

The Company's average interest rates earned for the year ended December 31,
1995 and for the three months ended March 31, 1996 were 14.00% and 13.83%,
respectively computed on a simple average monthly basis. The Company's average
interest rates paid for the year ended December 31, 1995 and for the three
months ended March 31, 1996 were 7.57% and 6.28%, respectively, which resulted
in an average interest rate spread of 6.43% and 7.55%, respectively.

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<PAGE> 33

BUSINESS

GENERAL

Emergent Group, Inc. is a diversified financial services company
headquartered in Greenville, South Carolina which originates, services and sells
Mortgage Loans, SBA Loans, and Auto Loans. The Company also serves as investment
manager for the Venture Funds. Substantially all of the Company's loans are made
to non-prime borrowers. The Company commenced its lending operations in 1991 and
has experienced significant loan growth over the past several years. During
1993, 1994 and 1995 and the first quarter of 1996, the Company originated $63.6
million, $150.0 million, $249.5 million and $85.0 million in loans,
respectively. Of the Company's loan originations in 1995, $192.8 million were
Mortgage Loans, $39.6 million were SBA Loans and $17.1 million were Auto Loans.
For the years ended December 31, 1993, 1994 and 1995 and the three months ended
March 31, 1996, the Company's pre-tax income from continuing operations was
$663,000, $2.4 million, $4.9 million and $1.4 million, respectively.

BUSINESS STRATEGY

The Company's business strategy is to be a diversified financial services
company that meets the credit needs of borrowers in what the Company believes to
be under-served credit markets. The key elements of the Company's business
strategy are as follows:

-- Emphasis on Profitability Rather than Asset Growth. The Company will
continue to focus on increasing earnings and equity, rather than
increasing total assets. The Company believes that it can maximize its
return on assets and equity by maintaining a "high velocity" capital
strategy, whereby loans are made and sold within 10 to 40 days of
origination. Recycling its capital in this manner enables the Company to
recognize gains on the sale of its loans and quickly redeploy its
capital, as well as reduce its interest rate risk, default risk and
borrowing costs. In addition, the Company plans to continue to focus its
operations in high-margin loan products, while maintaining a low-cost
operation.

-- Decentralized Loan Approval. The Company believes that one of the most
important factors to customers is the length of time between the lender's
initial contact with the customer and the disbursement of loan proceeds.
Accordingly, the Company emphasizes minimizing the length of time
involved in the lending process, without sacrificing credit quality. It
attempts to accomplish this goal, in part, by fostering an
entrepreneurial, decentralized management culture and by maintaining
up-to-date MIS systems for loan production, asset quality management and
servicing. In the Mortgage Loan Division, the Company has an expedited
review process with respect to loans submitted by the Principal Mortgage
Bankers, which results in a final credit determination generally within
two business days. Also, in the SBA Loan Division, the Company uses its
"Preferred Lender" status, as well as specially-trained officers who
handle only SBA Loans, to shorten the loan approval process. Furthermore,
the SBA Loan Division maintains relatively autonomous regional offices
which have significant underwriting capabilities and credit authority.

-- Proactive Underwriting Process. The Company takes a proactive approach
to its loan underwriting process. Because the Company's borrowers are
generally non-prime borrowers, standardized credit scoring and
underwriting criteria are not always meaningful in assessing a credit.
Consequently, the Company attempts to employ experienced, trained
underwriters who analyze each application independently and have the
ability to craft a loan package which, where possible, meets the needs of
the borrower but provides the Company with adequate security.
Underwriting adjustments often suggested by Company underwriters include
requiring a guarantor or co-borrower with better credit history and/or
additional disposable income, lowering the loan-to-value ratio,
increasing the interest rate, securing additional collateral and lowering
the loan amount.

-- Uniform Credit Guidelines and Procedures. The Company attempts to
mitigate the risks associated with non-prime borrowers by utilizing
uniform guidelines and procedures for evaluating credit applications in
connection with its loan originations. This is designed to complement the
Company's decentralized management strategy by ensuring consistent credit
quality. The Company's guidelines

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<PAGE> 34

and procedures relate to such matters as the borrower's stability of
residence, employment history, credit history, capacity to pay, total
income, discretionary income and debt ratios, as well as the value of the
collateral. With respect to its SBA Loans, the Company's guidelines and
procedures also emphasize factors pertaining to the business of the
borrower, such as business plans, historical and projected financial
statements and strength of management.

-- Corporate Monitoring and Supervision of Operations. The Company has in
place corporate policies designed to monitor and ensure continued quality
of credit underwriting and servicing and to evaluate management in each
of the Mortgage, SBA and Auto Loan Divisions. Such policies include
on-site audits of loan files and underwriting and servicing procedures at
each branch office as well as continuous evaluation of general portfolio
credit and performance quality, the effectiveness of business development
efforts and branch office profitability. The Company's MIS systems
provide management with reports on a continuous basis which contain
operational information from each of the Mortgage, SBA and Auto Loan
Divisions, including the volume of loan originations, delinquency
experience and foreclosure and repossession activities.

GROWTH STRATEGY

The Company's growth strategy is to continue to expand all areas of its
lending operations, while emphasizing profitability and return on equity, rather
than asset growth. The key elements in the Company's growth strategy are as
follows:

-- New Strategic Alliances in the Mortgage Loan Division. The Company will
attempt to continue to increase the number of Mortgage Bankers with whom
it has a business relationship and to identify and establish additional
strategic alliances with Mortgage Bankers. The Company offers additional
services to these strategic alliance Mortgage Bankers, such as providing
capital through arrangements similar to warehouse lending and additional
MIS and accounting services, which are designed to increase their loan
originations. The Company expects to establish two to three additional
strategic alliances per year over the next three years. The Company does
not expect to have contractual arrangements regarding future loan
originations with any Mortgage Bankers except for the Mortgage Bankers
with whom the Company has strategic alliance agreements.

-- Increase in SBA Lending. The Company plans to expand its SBA Loan
operations by utilizing its "Preferred Lender" status to minimize its
response time and maximize its loan production. The Company has been
designated as a "Preferred Lender" by the SBA, which gives the Company
the authority to approve a loan and to obligate the SBA to guarantee the
loan without submitting an application to the SBA for credit review.
Preferred Lender status will enable the Company to enter more easily
additional SBA districts in 1996 and future years.

-- Additional Offices and Locations. The Company plans to increase its
penetration of existing markets and expand geographically by opening
additional locations. In 1996, the Company anticipates opening two
additional locations in each of the Mortgage Loan and Auto Loan Divisions
and three additional locations, including a regional office, in the SBA
Loan Division. The Company expects that one additional office in each
Division will be opened by June 30, 1996 and the balance of the offices
will be opened in the second half of 1996. The Company does not expect
that these additional offices, in the aggregate, will have a significant
impact on loan volume until 1997. In the future, the Company will
continue to target for expansion areas which have favorable demographics
or where the Company has identified qualified individuals who are
available to effectively manage additional locations.

-- Selected Acquisitions. The Company intends to pursue the acquisition of
businesses in the financial services industry. The Company believes that
each of the non-prime Mortgage Loan, SBA Loan and Auto Loan areas will
present significant opportunities for growth and expansion through
acquisitions. Although the Company is engaged from time to time in
discussions relating to possible acquisitions, no agreements or
understandings relating to any acquisitions are presently pending.

-- Retail Lending Operations. In April 1996, the Company established a
retail mortgage lending operation headquartered in Indianapolis, Indiana.
The Company expects this retail lending operation to operate through
three offices by the end of 1996 and believes that it will have a
favorable impact on

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<PAGE> 35

its Mortgage Loan originations. The Company's retail lending strategy is
to utilize direct mail advertising, and telephone with a limited number
of offices, thereby avoiding substantial cost in establishing a
multi-office operation.

-- New Mortgage Loan Products. The Company will consider new loan products
and sources of loans. The Company began offering FHA Title I home
improvement loans ("FHA Title I Loans") in late 1995. Although the
Company has originated a relatively small amount of these loans to date,
the Company believes that such loans represent significant potential for
growth. The Company will continue to explore new loan products that offer
earnings potential in the non-prime Mortgage Loan area.

ANTICIPATED GROWTH IN 1996

The Company expects to experience significant growth in 1996. Apart from
general expansion of its lending operations, the Company expects its Mortgage
Loan originations to increase in 1996 because it expects to have strategic
alliance agreements in place with all three Principal Mortgage Bankers during
the entire year. The Company did not enter into strategic alliance agreements
with two of the Principal Mortgage Bankers until the third and fourth quarters
of 1995, respectively. Consequently, the Company did not have the benefit of all
Principal Mortgage Bankers (under strategic alliance agreements) during the
entire 12 months of 1995. Also, in the second quarter of 1996 the Company
entered into strategic alliance agreements with two additional mortgage bankers,
which is expected to favorably impact Mortgage Loan originations in 1996.

The Company also expects its Mortgage Loan originations to increase as a
result of its establishment of a direct retail lending operation in May 1996 in
Indianapolis, Indiana. The Company's retail lending strategy is to utilize
direct mail, advertising, and telephone with a limited number of offices,
thereby avoiding substantial cost in establishing a multi-office operation. A
second retail office is expected to be opened in the third quarter of 1996.

The Company also expects that its SBA Loan originations will increase in
1996 because of the removal of certain temporary SBA regulations in place for a
substantial part of 1995, which materially impaired the Company's 1995 SBA Loan
origination levels. These temporary regulations limited the maximum SBA Loan
amount to $500,000 and prohibited the use of SBA Loan proceeds for certain
refinancings.

One factor which could adversely affect anticipated growth in 1996 is the
potential loss of First Greensboro as a strategic alliance partner. As described
above in "Risk Factors -- Potential Loss of First Greensboro," the Company has
been notified by First Greensboro that it is discussing the sale of all or part
of its business to a third party, and that such sale may result in First
Greensboro's breach of its strategic alliance agreement with the Company. In the
event this strategic alliance agreement is terminated, the Company's Mortgage
Loan originations would be materially and adversely affected. See "Risk
Factors -- Potential Loss of First Greensboro."

MORTGAGE LOAN DIVISION

Overview

The Company's mortgage lending activities consist primarily of originating,
selling and servicing Mortgage Loans which are secured by owner-occupied,
single-family residential properties. Substantially all of the Company's
Mortgage Loans are made to refinance existing mortgages and for debt
consolidation, home improvements, educational expenses and a variety of other
purposes. The Mortgage Loans generally are secured by a first lien, have
principal balances ranging from $25,000 to $100,000, and bear fixed interest
rates generally ranging in 1995 and the first quarter of 1996 from 9% to 16% per
annum. Most Mortgage Loans provide for equal monthly payments over their terms,
which generally range from 15 to 30 years.

Substantially all of the Mortgage Loans are made to non-prime borrowers.
These borrowers generally have limited access to credit or are considered to be
credit-impaired by conventional lenders such as thrift institutions and
commercial banks. These conventional lending sources generally impose stringent
and inflexible loan underwriting guidelines and generally require a longer
period of time, as compared to the

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<PAGE> 36

Company, to approve and fund loans. The Company believes that its customers
require or seek a high degree of personalized service and swift response to
their loan applications. Furthermore, the Company believes that its customers
generally focus more on the amount of the monthly payment, rather than the
interest rate charged. Consequently, the Company's customers many times are
willing to pay higher interest rates, assuming the amount of the monthly payment
is otherwise acceptable. Furthermore, because the Company's customers are
generally credit-impaired for one or more reasons, the customers are not in a
position to obtain better rates from traditional lending institutions.

The Mortgage Loan Division has experienced significant growth over the past
several years. For the years ended December 31, 1993, 1994 and 1995 and the
three months ended March 31, 1996, Mortgage Loan originations totaled $20.5
million, $99.4 million, $192.8 million and $68.0 million, respectively.

In 1995, the Company diversified its Mortgage Loan products to include FHA
Title I Loans and second mortgage primary-financing-only loans made to finance
closing costs associated with first Mortgage Loans made by the Company ("PFO
Loans"). The Company's FHA Title I Loans have principal amounts up to $25,000,
provide for equal monthly payments over terms ranging from 5 to 15 years, bear
fixed interest rates generally ranging in 1995 and the first quarter of 1996
from 15% to 18% per annum, and are 90% guaranteed by the Department of Housing
and Urban Development. PFO Loans have principal amounts ranging from $5,000 to
$15,000 and, in the first quarter of 1996, had a weighted average interest rate
of approximately 16% per annum. All of the Company's PFO Loans are sold on a
nonrecourse basis in the secondary market. During 1995 and the first quarter of
1996, the Company originated an immaterial amount of FHA Title I Loans and $9.0
million and $3.8 million, respectively, of PFO Loans.

The Company originates Mortgage Loans through Mortgage Bankers primarily
located in South Carolina, North Carolina and Florida and through three Company
locations in South Carolina which make Mortgage Loans directly to borrowers.
Officers in the Mortgage Loan Division headquarters in Pickens, South Carolina
are responsible for maintaining relationships with the Mortgage Bankers.

The Mortgage Loan Division is managed by a Chief Operating Officer who
oversees other senior division officers who are responsible for the various
aspects of the operations of the Mortgage Loan Division such as underwriting,
servicing, loan origination and sale of Debentures. The Chief Operating Officer
reports to the Chief Executive Officer of the Mortgage Loan Division, who
oversees the operations of the Mortgage Loan Division but is generally not
involved in the division's day to day operations. The Chief Executive Officer of
the Mortgage Loan Division also serves as the Chief Operating Officer of the
Company.

Industry

Although there exist no official estimates of the size of the non-prime
mortgage industry, the Company believes that the potential non-prime home equity
market is approximately $240 billion. The Company believes that the non-prime
mortgage industry is highly fragmented, with no single lender having a
significant portion of the market. However, many of the providers of financing
to the non-prime mortgage industry are publicly-traded specialty financial
companies.

Non-prime borrowers may be generally considered "credit-impaired" because
their loan application is characterized by one or more of the following: (1)
inadequate collateral, (2) insufficient debt coverage, (3) problems with
employment history, (4) a limited or unfavorable credit history, or (5)
self-employment. Certain lenders in the non-prime market may internally classify
borrowers (generally with letters from A to D) according to the perceived credit
quality of the loan. However, the Company does not believe that there are
uniform guidelines among various non-prime lenders with respect to the
classification of borrowers. See "Business -- Mortgage Loan
Division -- Underwriting Classifications."

Under the Company's underwriting guidelines, Mortgage Loans are generally
classified into four categories: A, B, C and D. These categories are further
divided into subcategories, depending on various underwriting criteria. These
underwriting standards are under continual review and are subject to revision by
Company management. The majority of the Company's borrowers do not fit into one
category. Rather, such borrowers generally have some characteristics of one or
more classifications. Accordingly, there is a significant degree of

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<PAGE> 37

subjectivity in determining which rates and other loan terms will be offered.
The following is a general description of the basic categories in the Company's
Mortgage Loan underwriting process as currently in effect.

Under the Company's "A" category for owner-occupied Mortgage Loans, the
prospective borrower generally can have no more than one payment on mortgage
debt paid 30 days late during the preceding 12 month period, a debt-to-income
ratio of no more than 50% and no bankruptcy, judgment or liens within the
preceding 2 years. The maximum loan amount is $250,000. Loan-to-value ratios
range from 65% to 90%, are determined by the loan amount and credit history
which, in turn, determines the interest rate charged on the loan. In the case of
no-income-qualifier loans, the loan-to-value ratio is 70% and the potential
borrower must be able to provide proof of a minimum two years of
self-employment. Loan applicants with less favorable credit ratings generally
are offered loans with higher interest rates and lower loan-to-value ratios than
applicants with more favorable credit ratings.

Under the Company's "B" category for owner-occupied Mortgage Loans, the
prospective borrower can have no more than two payments on mortgage-debt paid 30
days late during the preceding 12 month period, a debt-to-income ratio of no
more than 50% and no bankruptcy within the preceding 24 month period with a
reestablished credit history. The maximum loan amount is $250,000. Loan-to-value
ratios range from 75% to 85%, are determined by the loan amount and credit
history which, in turn, determines the interest rate charged on the loan. In the
case of no income-qualifier loans, the loan-to-value ratio cannot exceed 70% and
the potential borrower must be able to provide proof of self employment for a
minimum of two years. No-income-qualifier loan applicants must also have had no
bankruptcy within the past 24 month period and have reestablished their credit
history.

Under the Company's "C" category for owner-occupied Mortgage Loans, the
prospective borrower can have no more than three payments on mortgage debt paid
30 days late during the preceding 12 month period or no more than one payment on
mortgage debt paid 60 days late during the preceding 12 month period, a
debt-to-income ratio of no more than 55% and no bankruptcy within the preceding
24 month period with a reestablished credit history. The maximum loan amount is
$250,000. Loan-to-value ratios range from 70% to 80%, are determined by the loan
amount and credit history which, in turn, determines the interest rate charged
on the loan. The potential borrower may have had some payments 30 days or 60
days late on revolving or installment debt, but must bring such debt current
prior to the loan being made or with the proceeds of the Mortgage Loan.

Under the Company's "D" category for owner-occupied Mortgage Loans, the
prospective borrower can have no payments on mortgage debt more than four months
past due, a debt-to-income ratio of no more than 55% and no active bankruptcy.
The potential borrower can have no foreclosures in their credit history. The
maximum loan amount is $250,000. The loan-to-value ratio ranges from 65% to 70%,
is determined by the loan amount and credit history which, in turn, determines
the interest rate charged on the loan. The borrower must bring any delinquent
installment or revolving debt current prior to the loan being made or with the
proceeds of the loan, except that the borrower cannot use in excess of 10% of
the proceeds or $10,000, whichever is smaller, to bring the delinquent debt
current.

During 1995, approximately 37% of the Company's Mortgage Loans were
classified as "A" loans, 37% were "B" loans, 20% were "C" loans and 6% were "D"
loans. During the first quarter of 1996, approximately 45% of the Company's
Mortgage Loans were classified as "A" loans, 35% were "B" loans, 17% were "C"
loans and 3% were "D" loans.

Mortgage Loan Origination

Substantially all of the Mortgage Loans have been originated on a wholesale
basis by the Company through Mortgage Bankers with whom the Company has a
relationship (although the Company does not have contractual arrangements
regarding future loan origination with any mortgage bankers except for the
Principal Mortgage Bankers). As a wholesale originator of Mortgage Loans, the
Company funds the Mortgage Loans at closing, although the Mortgage Loans may be
closed in either the Company's name or in the name of the Mortgage Banker with
the Company taking an assignment of the Mortgage Banker's interest. During 1994
and

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<PAGE> 38

1995 and the first quarter of 1996, the Company originated loans through
approximately 65, 120 and 196 Mortgage Bankers, respectively, which are located
principally in North Carolina and South Carolina. Of the approximately 120 and
196 Mortgage Bankers who were responsible for origination of Mortgage Loans in
1995 and the first quarter of 1996, the Principal Mortgage Bankers accounted for
approximately $145 million, or 75%, of the Company's Mortgage Loans originated
in 1995 and approximately $58.3 million, or 86%, of the Company's Mortgage Loans
originated in the first quarter of 1996.

In 1994, the Company began seeking to enter into "strategic alliance"
agreements with Mortgage Bankers that were believed by the Company to be able to
consistently generate large volumes of quality mortgage loans. These strategic
alliance agreements require that the Principal Mortgage Bankers must first offer
to the Company the right to fund all of their loans which meet the Company's
underwriting criteria before offering such loans to other parties. The Principal
Mortgage Bankers are accorded additional services, information and authority by
the Company, including the provision of capital through arrangements similar to
warehouse lending and the provision of additional MIS and accounting services.
These strategic alliance agreements have terms ranging from two to five years
and are scheduled to terminate beginning in December 1997. The Company believes
that these strategic alliances are an important factor in providing a higher
level of customer service. To date, the Company has entered into strategic
alliances with the three Principal Mortgage Bankers. The first strategic
alliance was established in the first quarter of 1994 and the second and third
strategic alliances were established in the third and fourth quarters of 1995,
respectively.

Except for the agreements with the Principal Mortgage Bankers and two other
Mortgage Bankers with which the Company has strategic alliance agreements, there
are no contractual arrangements between the Company and its Mortgage Bankers
with respect to the Mortgage Banker's referrals of Mortgage Loans to the
Company.

The Company has been notified by First Greensboro that it is discussing the
sale of all or part of its business to a third party, and that such sale may
result in First Greensboro's breach of its strategic alliance agreement with the
Company. In the event this strategic alliance contract is terminated, the
Company's Mortgage Loan origination would be materially and adversely affected.
See "Risk Factors -- Potential Loss of First Greensboro."

The Company plans to increase the number of Mortgage Bankers with which it
is affiliated. The Company also seeks to identify specific Mortgage Bankers
either from its group of affiliated Mortgage Bankers or from unaffiliated
Mortgage Bankers and enter into strategic alliance agreements with these
parties.

During 1994 and 1995, Mortgage Loan originations by state were as follows:

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF MORTGAGE LOANS ORIGINATED DURING THE YEAR
ENDED
DECEMBER 31, AND FOR THE THREE MONTH PERIOD ENDED MARCH 31,
1996
---------------------------------------------------------------
STATE 1994 % 1995 % 1996 %
- ----------------------------------- ------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
North Carolina..................... $49,100 49.4% $ 97,400 50.5% $ 26,121 38.4%
South Carolina..................... 42,600 42.9 37,600 19.5 14,917 21.9
Florida............................ -- 0.0 16,200 8.4 11,829 17.4
Arkansas........................... 3,600 3.6 9,700 5.0 2,555 3.8
Virginia........................... 400 0.4 9,600 5.0 6,265 9.2
Tennessee.......................... 1,900 1.9 8,800 4.6 3,231 4.7
All other states (13 states)....... 1,800 1.8 13,500 7.0 3,082 4.6
------- ----- -------- ----- -------- -----
Total.................... $99,400 100.0% $192,800 100.0% $ 68,000 100.0%
======= ===== ======== ===== ======== =====
</TABLE>

In April 1996, the Company established a direct retail lending operation in
Indianapolis, Indiana. Through this office, the Company expects to target
Mortgage Loan borrowers in the Midwest. The Company's retail lending strategy is
to utilize direct mail, advertising, and telephone with a limited number of
offices, thereby avoiding substantial cost in establishing a multi-office
operation. A second retail office is expected to

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<PAGE> 39

be opened in the third quarter of 1996. The Company believes that this retail
lending operation will favorably impact Mortgage Loan origination in 1996.

Application and Approval Process

The application and approval process for Mortgage Loans depends upon the
specific Mortgage Bankers involved in the origination process. Loans originated
through the Principal Mortgage Bankers are initially evaluated and underwritten
by the officers of the Principal Mortgage Bankers, who are required to follow
the Company's underwriting procedures. After the Principal Mortgage Bankers have
gathered the necessary underwriting information and evaluated and approved the
application, summary information regarding the loan and a funding request is
forwarded to the Company for review on an expedited basis, which review is
generally completed within two business days. After approval by the Company, the
loan package is forwarded to an attorney or title company for closing. In the
origination process, the Principal Mortgage Banker makes standard
representations and warranties with respect to the Mortgage Loan, as well as a
representation that the Mortgage Loan meets the Company's underwriting criteria.
With respect to loans originated through Mortgage Bankers other than the
Principal Mortgage Bankers, the necessary underwriting information is gathered
by both the Mortgage Banker and the Mortgage Loan Division's credit department.
After review and evaluation, an officer in the credit department makes the final
credit decision.

The Company attempts to grant approvals of loans quickly to borrowers
meeting the Company's underwriting criteria. Loan officers are trained to
structure loans that meet the applicant's needs, while satisfying the Company's
lending criteria. If an applicant does not meet the lending criteria, the loan
officer may offer to make a smaller loan, request additional collateral, or
request that the borrower obtain a co-borrower or guarantor.

Mortgage Loans are generally made in amounts ranging from $25,000 to
$100,000, with the maximum amount generally being $200,000. In limited
instances, Mortgage Loans are made in excess of this limit. However, such loans
must be approved by a senior officer and have two independent appraisals. The
maximum amount that the Company will lend to a particular borrower is determined
by a number of factors including the applicant's creditworthiness, the value of
the borrower's equity in the real estate and the ratio of such equity to the
home's appraised value.

Creditworthiness is assessed through a variety of means, including
calculating standard debt to income ratios, examining the applicant's credit
history through standard credit reporting bureaus, verifying an applicant's
employment status and income, and checking the applicant's payment history with
respect to the first mortgage, if any, on the property. The Company uses several
procedures to verify information obtained from an applicant. The applicant's
outstanding balance and payment history on any senior mortgage is verified by
calling the senior mortgage lender. In order to verify an applicant's employment
status and income, the Company generally obtains a written statement from the
applicant's employer.

In the case of owner-occupied property, the loan amount generally may not
exceed 80% of the appraised value of the property, less any balance outstanding
on any existing mortgages. In non-owner-occupied properties, the loan amount
generally may not exceed 75% of the appraised value of the property, less any
balance outstanding on any existing mortgages. In limited instances, the Company
makes loans which have loan-to-value ratios greater than 80%. However, such
loans are generally made only to borrowers deemed by the Company to have a
higher degree of creditworthiness (i.e., superior credit history, stable,
high-income employment and low gross debt ratios), when compared to its typical
borrowers. It is the Company's current policy that such loans do not exceed
$250,000. Approximately 90% of the Company's Mortgage Loans are secured by
owner-occupied property.

The Company generally requires a physical inspection of collateral by a
Company officer if the loan is under $15,000 or an independent appraisal if the
loan is greater than $15,000. Loans in excess of $200,000 require two
independent appraisals. The Company generally requires title insurance for real
estate loans in excess of $15,000. For real estate loans less than $15,000, the
Company generally requires an insured certificate of title from a title abstract
company. The Company generally requires real estate improvements to

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be fully insured as to fire and other commonly insured-against risks and
regularly monitors its loans to ensure that insurance is maintained for the
period of the loan.

In connection with Mortgage Loans, the Company collects nonrefundable
underwriting fees, late charges and various other fees, depending on state law.
Other fees charged, where allowable, include those related to credit reports,
lien searches, title insurance and recordings, prepayment fees and appraisal
fees.

Sale of Mortgage Loans

The Company began selling Mortgage Loans in 1994 and for the years ended
December 31, 1994 and 1995 and the three months ended March 31, 1996, the
Company sold $54.6 million, $127.6 million and $54.8 million, respectively, of
Mortgage Loans, respectively. The Mortgage Loans to be sold are generally
packaged in pools of approximately $10 million and offered to several potential
purchasers for the purpose of obtaining bids. After obtaining bids, the pool is
generally sold to the highest bidder. Historically, the Mortgage Loans have been
sold servicing released (i.e., without retention of the servicing rights and
associated revenues) and on a non-recourse basis, with customary representations
and warranties.

In connection with the sale of Mortgage Loans, the Mortgage Loan Division
receives premiums generally ranging from 4% to 8% of the principal amount of the
Mortgage Loan being sold, depending on prevailing interest rates and the term of
the loan. During 1994 and 1995 and the first quarter of 1996, the weighted
average premiums on the Mortgage Loans sold were 5.91%, 7.04% and 6.58%,
respectively. For the years ended December 31, 1994 and 1995, premiums
recognized by the Company in connection with the sale of Mortgage Loans were
$2.4 million and $6.0 million, respectively. Purchasers of Mortgage Loan pools
are typically large financial institutions, many of which purchase the Mortgage
Loans for inclusion in larger pools of loans which, in turn, are sold to
institutional investors.

Mortgage Loan Servicing

The Company services the Mortgage Loans that are not sold, but historically
has not retained the servicing on Mortgage Loans sold. However, in the future,
the Company may retain servicing on Mortgage Loans sold. Servicing includes
collecting payments from borrowers, accounting for principal and interest,
contacting delinquent borrowers, ensuring that insurance is in place, monitoring
payment of real estate property taxes, and supervising foreclosures and
bankruptcies in the event of unremedied defaults.

Delinquencies and Collections

Collection efforts generally begin when an account is over seven days past
due. At that time, the Company attempts to contact the borrower to determine the
reason for the delinquency and cause the account to become current. After an
account becomes 15 days past due, weekly letters are sent to the borrower. In
general, at 30 days past due, a right to cure letter is sent; at 61 days a
five-day demand letter is sent; and at 68 days, the account is turned over to an
attorney. If the status of the account continues to deteriorate, the Company
undertakes an analysis to determine the appropriate action. In limited
circumstances, when a borrower is experiencing difficulty in making timely
payments, the Company may temporarily adjust the borrower's payment schedule
without changing the loan's delinquency status. The determination of how to work
out a delinquent loan is based upon a number of factors, including the
borrower's payment history and the reason for the current inability to make
timely payments.

When a loan is 90 days past due in accordance with its original terms, it
is placed on non-accrual status and foreclosure proceedings are generally
initiated. In connection with such foreclosure, the loan and the facts
surrounding its delinquency are reviewed, and the underlying property may be
reappraised. Regulations and practices regarding foreclosure and the rights of
the mortgagor in default vary greatly from state to state. If deemed
appropriate, the Company will bid in its loan amount at the foreclosure sale or
accept a deed in lieu of foreclosure. The real estate owned portfolio, which is
carried at the lower of carrying value or appraised fair market value less
estimated cost to sell, totaled $4.1 million at March 31, 1996.

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SBA LOAN DIVISION

Overview

The Company formed EBC in December 1991 for the purpose of acquiring
substantially all of the assets, including the SBA license, of an inactive SBA
lender. EBC is one of approximately 12 non-bank entities in the United States
possessing a license to make SBA Loans. Substantially all of the Company's SBA
Loans are made under Section 7(a) ("Section 7(a) Loans") of the Small Business
Act of 1953, as amended (the "Small Business Act"). However, the Company,
through a subsidiary, began making loans in 1995 pursuant to Section 504
("Section 504 Loans") of the Small Business Act (the "Section 504 Loan
Program").

During 1993, 1994 and 1995 and the first quarter of 1996, the Company
originated $37.9 million, $43.1 million, $39.6 million and $11.7 million,
respectively, in Section 7(a) Loans. Management believes that during the SBA's
fiscal year ended September 30, 1995, the Company was among the ten largest SBA
Loan lenders in the nation based on principal amount of Section 7(a) Loans
approved by the SBA.

During 1995 the Company made approximately $3 million in Section 504 Loans
and none were made in the first quarter of 1996. The Company expects that it
will continue to focus its SBA lending efforts on Section 7(a) Loans, although
future regulatory changes could alter such decision.

The SBA Loan Division operates through a total of 11 offices, seven of
which are staffed by Company employees and four of which are staffed by
independent loan representatives. The Company's SBA operations are divided into
four regions: (1) the Southeastern Region, which is headquartered in Greenville,
South Carolina, (2) the Gulf Coast Region, which is headquartered in Panama
City, Florida, (3) the Central States Region, which is headquartered in Wichita,
Kansas, and (4) the Rocky Mountain Region, which is headquartered in Denver,
Colorado.

The SBA Loan Division is managed by a President who oversees the four
regional vice presidents. These regional vice presidents are responsible for the
day-to-day operations within their respective regions, including loan
origination and underwriting activities. The President is also responsible for
the servicing operations of the SBA Loan Division. The President reports to the
Chief Executive Officer of the SBA Loan Division, who oversees the operations of
the SBA Loan Division but is generally not involved in the division's day to day
operations. The Chief Executive Officer of the SBA Loan Division also serves as
the Chief Operating Officer of the Company.

SBA Loan Customers

The Company's SBA Loan customers are commercial businesses which may
generally be considered to be non-prime borrowers insofar as they generally do
not have access to traditional bank financing. Such financing may be unavailable
because of a variety of factors, including inadequate collateral, insufficient
debt coverage, lack of management experience or an unfavorable credit history.

The Company's SBA Loans are made only to potential borrowers who meet
defined criteria of the SBA as to the definition of a "small business." These
criteria differ based upon the industry in which the potential borrower
operates. The portion of the loan guaranteed by the SBA, the term of the loan
and the range of interest rates charged are also defined by the SBA. The Company
underwrites SBA loans on these SBA criteria, as well as by assessing the
available collateral, personal guarantees, and projected earnings and cash flow
of the small business on a case by case basis.

SBA Loan Program Participation

Section 7(a) Loan Program. Section 7(a) Loans are term loans made to
commercial businesses which qualify under SBA regulations as "small businesses."
These loans are primarily for the acquisition or refinancing of property, plant
and equipment, working capital or debt consolidation.

The SBA administers three levels of lender participation in its Section
7(a) Loan program. Under the first level of lender participation, known as the
Guaranteed Participant Program, the lender gathers and processes data from
applicants and forwards it, along with its request for the SBA's guaranty, to
the local SBA

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office. The SBA then completes an independent analysis and makes its decision on
the loan application. SBA turnaround time on such applications can vary greatly,
depending on its backlog of loan applications. Under the second level of lender
participation, known as the Certified Lender Program, the lender (the "Certified
Lender") gathers and processes the application and makes its request to the SBA,
as in the Guaranteed Participant Program procedure. The SBA then performs a
review of the lender's credit analysis on an expedited basis, which review is
generally completed within three working days. The SBA requires that lenders
originate loans meeting certain portfolio quality and volume criteria before
authorizing lenders to participate as Certified Lenders. Authorization is
granted by the SBA on a district-by-district basis. Under the third level of
lender participation, known as the Preferred Lender Program, the lender has the
authority to approve a loan and to obligate the SBA to guarantee the loan
without submitting an application to the SBA for credit review. However, the
lender (the "Preferred Lender") is required to secure confirmation from the SBA
that the applicant qualifies as a small business. Such confirmation generally
takes less than 24 hours. The standards established for participants in the
Preferred Lender Program, the SBA's highest designation, are more stringent than
those for participants in the Certified Lender Program and involve meeting
additional portfolio quality and volume requirements.

The Company has been designated a Preferred Lender by the SBA in 27 of the
65 SBA districts. These districts are all of the SBA districts in which the
Company is deemed to be an "active" lender by the SBA. Virtually all of the
Company's SBA Loans are made in these districts. The determination of whether a
lender attains Preferred Lender status is determined by the Associate
Administrator for Financial Assistance (the "AA/FA"). In making its decision,
the SBA considers whether the lender (1) has the required ability to process,
close, service and liquidate loans; (2) has the ability to develop and analyze
complete loan packages; and (3) has a satisfactory performance history with the
SBA. The AA/FA may suspend or revoke Preferred Lender status for reasons such as
loan performance unacceptable to the SBA, failure to make the required number of
loans under the expedited procedures, or violations of applicable statutes,
regulations or published SBA policies and procedures.

Section 504 Program. The Section 504 Program differs from the Section 7(a)
Loan program in both structure and size of loans. Section 504 loans generally
range in principal amount from $1 million to $2.25 million and are made in
connection with a state chartered certified development corporation. Section 504
Loans are generally commercial development-related loans which, in the case of
construction loans, are initially funded entirely by the SBA-licensed lender
(such as the Company). Upon completion of the construction phase of the project,
a significant portion of the total loan (generally approximately 55%) is repaid
by the certified development corporation. This repayment is funded by the SBA
through the purchase of a fixed rate debenture issued by the certified
development corporation. This purchased portion of the loan is subordinated to
the first mortgage loan (held by the SBA-licensed lender). Consequently, the
SBA-licensed lender has a loan which has a very favorable loan-to-value ratio.
The acquisition of existing properties is generally funded 50% by the
SBA-licensed lender (in a first mortgage position), 40% by the certified
development corporation (in a subordinate lien position), with the remaining 10%
provided by the borrower. The approval process for Section 504 Loans is similar
to the first level of lender participation with respect to Section 7(a) Loan
program except that the certified development company presents the loan to the
SBA (after it has been approved by the SBA-licensed lender and the certified
development company). Upon presentation, the SBA completes its independent
analysis of the loan and makes its credit decision. SBA turnaround time on such
applications can vary greatly, depending on its backlog of loan applications.

SBA Guarantees

Under the Preferred Lender Program, the SBA guarantees up to 80% on loans
of $100,000 or less, and up to 75% on loans in excess of $100,000. However, the
SBA's maximum guaranty per borrower under any SBA Loan is $750,000.

In the event of a default by a borrower on an SBA Loan, if the SBA
establishes that any resulting loss is attributable to a failure by the Company
to comply with SBA policies and procedures in connection with the origination,
documentation or funding of the loan, the SBA may seek recovery of funds from
the Company. With respect to SBA Loan Participations which have been sold, the
SBA first will honor its guarantee and

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then seek compensation from the Company in the event that a loss is deemed to be
attributable to such failure to comply with SBA policies and procedures. To
date, the SBA has not sought recovery from the Company on any of its SBA Loans.

SBA Loan Origination and Approval

In the past five years, the Company's SBA Loan origination offices have
made loans in 23 states and the District of Columbia. The Company's SBA Loans
generally range in size from $100,000 to $1.2 million. Average loan size for
originations during 1995 and the first quarter of 1996 was $332,000 and
$507,000, respectively. The SBA Loans generally have a variable rate of interest
which is limited to a maximum of 275 basis points over the lowest prime lending
rate published in The Wall Street Journal adjusted on the first day of each
calendar quarter.

Although the Company originates SBA Loans through direct contact between
its loan officers and potential borrowers, a substantial portion of the
Company's SBA Loans are generated by Commercial Loan Brokers who generally are
paid referral fees. The Company does not have any contractual agreements with
any of these brokers obligating them to refer loans to the Company. In 1995, the
Company originated SBA Loans in connection with approximately 35 Commercial Loan
Brokers, and no Commercial Loan Broker accounted for more than 15% of the
Company's SBA Loans. The Company also attempts to maintain strong relationships
with commercial banks, attorneys, accountants and other potential loan referral
sources.

The majority of the Company's SBA Loan originations have been for the
acquisition or refinance of property, plant and equipment, working capital or
debt consolidation. A number of SBA Loans were made to business franchisees in
connection with the acquisition of national franchises. All SBA Loans are
secured, generally by all assets of the borrower, including any real property.
In connection with the SBA Loans, the Company generally obtains the guarantee of
the principals involved in the business, which is often secured by real
property.

All SBA Loans originated by the Company are evidenced by variable rate
notes which adjust quarterly, require payment monthly and are scheduled to
amortize fully over their stated term. SBA Loans originated by the Company have
terms ranging from seven to 25 years depending upon the use of proceeds, with a
weighted average term of approximately 16 years. Generally, seven-year loans are
made for working capital, 10-year loans for equipment and 25-year loans for real
estate.

Applicants for SBA Loans are generally required to provide historical
financial statements for three years and/or projected statements of operations
for two years. They are also generally required to provide proof of equity,
personal guarantees and assignments of affiliated leases and life insurance.
Credit reports are generally obtained from independent credit reporting agencies
for all applicants. These reports are reviewed by SBA Loan Division's credit
officers. Independent appraisals are generally required on real estate pledged
as collateral.

All loans made by the SBA Loan Division must be approved by the regional
vice president and one other loan officer. All loans in excess of $1 million
must also be approved by either the President or Executive Vice President of the
SBA Loan Division. After approval by such officers, the loan application is
produced and forwarded to the SBA office servicing the location of the
applicant. If the loan is being made in a district where the SBA Loan Division
is certified as a Preferred Lender, no prior credit approval of the SBA is
required before the loan transaction can be consummated. However, if the loan is
being made in a district where the SBA Loan Division is not certified as a
Preferred Lender, the loan cannot be made until the SBA office approves the
loan, issues an authorization letter and assigns a loan number.

Multiple Disbursements of SBA Loans

The Company funds certain of its SBA Loans on a multiple disbursement
basis. In particular, when part of the use of proceeds of a loan is for the
construction or improvement of real property, the loan may require multiple
disbursements over a lengthy period of time. At March 31, 1996, the Company had
$10.3 million of outstanding SBA Loans in various stages of multiple
disbursements, of which $5.7 million had been disbursed.

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The length of time necessary to complete the disbursement process for multiple
disbursement loans is generally six to twelve months.

SBA Loan Sales

Upon final disbursement of the proceeds of each SBA Loan, the Company
obtains bids in the secondary market for the SBA Loan Participation associated
with that SBA Loan. The SBA Loan Participation is generally sold to the highest
bidder. The Company retains the unguaranteed portion of the loan and the
servicing rights to the entire loan. The SBA Loan Division sells the SBA Loan
Participations generally to financial institutions or other institutional
investors. Purchasers of the SBA Loan Participations share ratably with the SBA
Loan Division (holding the unguaranteed portion) with respect to all principal
collected from the borrowers with respect to the SBA Loans. SBA lenders are
required to pay a fee of 50 basis points per annum to the SBA on the outstanding
balance of the guaranteed portion of all loans.

In connection with the sale of SBA Loan Participations, the SBA Loan
Division receives, in addition to additional servicing revenue, cash premiums of
approximately 10% of the guaranteed portion being sold. During 1993, 1994 and
1995 and the first quarter of 1996, the weighted average premiums on the SBA
Loan Participations sold, together with the additional servicing revenue,
aggregated 13.75%, 11.79%, 13.75% and 14.39%, respectively, of the SBA Loan
Participations sold. For the years ended December 31, 1993, 1994 and 1995 and
the three months ended March 31, 1996, premiums recognized by the Company in
connection with the sale of SBA Loan Participations were $3.6 million, $4.0
million, $3.9 million and $832,000, respectively.

The SBA has contracted with Colson Services Corp. ("Colson Services") to
serve as the exclusive fiscal and transfer agent for the SBA Loan Participations
sold in the secondary market. The Company collects payments from borrowers and
remits to Colson Services amounts due to investors. Colson Services then remits
such amounts to the investors and administers the transfer of SBA Loan
Participations from one investor to another.

Securitization of SBA Loans

Historically, the Company retained the unguaranteed portions of its SBA
Loans. However, in 1995, the Company securitized approximately $17 million of
the unguaranteed portions of its SBA Loans. The securitization was effected
through a grantor trust (the "Trust"), the ownership of which was represented by
Class A and Class B certificates. The Class A certificates were purchased by
investors, while the Company retained the Class B certificates. These
certificates give the holders thereof the right to receive payments and other
recoveries attributable to unguaranteed portion of the SBA Loans held by the
Trust. The Class B Certificates represent approximately 10% of the principal
amount of the SBA Loans transferred in the securitization and are subordinate in
payment and all other respects to the Class A Certificates. Accordingly, in the
event that payments received by the Trust are not sufficient to pay certain
expenses of the Trust and the required principal and interest payments due on
the Class A Certificates, the Company, as holder of the Class B Certificates,
would not be entitled to receive principal or interest payments due thereon.

The Company serves as master servicer for the Trust and, accordingly,
forwards payments received on account of the SBA Loans held by the Trust to the
trustee of the Trust, which, in turn, pays the holders of the certificates in
accordance with the terms of and priorities set forth in the securitization
documents. Because the transfer of the SBA Loans to the Trust constitutes a sale
of the underlying SBA loans, no liability is created on the Company's
Consolidated Financial Statements. However, the Company has the obligation to
repurchase the SBA Loans from the Trust in the event that certain
representations made with respect to the transferred SBA Loans are breached or
in the event of certain defaults by the Company, as master servicer. The Class A
certificates received a rating of Aaa from Moody's Investors Service, Inc. The
Class B Certificates were not rated. In connection with the securitization, the
SBA Loan Division received funds substantially equal to the Class A
certificates' percentage of the total principal amount of the SBA Loans
transferred to the Trust.

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If available, the Company intends to continue to pursue securitization
transactions in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

Loan Servicing

The Company services substantially all the SBA Loans it originates.
Servicing includes collecting payments from borrowers and remitting payments
with respect to the SBA Loan Participations to Colson Services, accounting for
principal and interest, contacting delinquent borrowers and supervising
foreclosures. The Company initially reviews loan files to confirm that the loans
were originated in accordance with SBA regulations. Thereafter, the Company
conducts periodic reviews of the borrower's financial condition and typically
conducts field visits to the borrower's place of business at least once a year.

Delinquency and Collection

When an SBA Loan becomes delinquent, the Company contacts the borrower to
determine the circumstances of the delinquency and attempts to maintain close
contact with the borrower until the loan is brought current or is liquidated.
When an SBA Loan becomes 60 days past due, the Company is required to notify the
SBA of such delinquency. Generally, after a loan becomes 90 days delinquent, the
Company places the loan on non-accrual status, delivers a default notice and
begins the legal process of foreclosure and liquidation, upon notification to
and approval by the SBA. Foreclosure proceedings are generally conducted by the
lender, although where the SBA Loan was not made by a Preferred Lender, the SBA
has the right to conduct the foreclosure. Any loss after foreclosure and
liquidation is allocated pro rata between the guaranteed and the unguaranteed
portions of the SBA Loan. Generally, after an SBA Loan becomes 60 to 90 days
past due, the SBA, upon the request of the servicer of the SBA Loan, repurchases
the guaranteed portion of the principal balance of the SBA Loan from the holder,
together with accrued interest covering a period of up to 120 days.

AUTO LOAN DIVISION

Overview

The Company's Auto Loan Division makes loans directly to non-prime
borrowers for the purchase of used automobiles. Substantially all of the Auto
Loans are made directly by the Company through referrals from Dealers located in
South Carolina. Less than 10% of the Auto Loans originated in 1995 were
"indirect" loans purchased from Dealers, all of which were located in South
Carolina. Of the Dealers which referred loans to the Company in 1995 and the
first quarter of 1996, the Company estimates that half of such Dealers were
franchised Dealers and half were independent Dealers.

The non-prime consumer automobile market is comprised of borrowers who
generally do not have access to other conventional sources of automobile credit
because they do not meet the credit standards imposed by other lenders. As a
result of its borrowers' credit status, the Company charges relatively high
rates of interest to such consumers, which, in 1995 and the first quarter of
1996, generally ranged from 18% to 36%. By contrast, banks, thrift institutions,
and financing subsidiaries of manufacturers and retailers generally impose more
stringent, objective credit requirements and generally charge lower interest
rates based on the prevailing interest rate environments at the time of
origination.

The Company began making Auto Loans with its acquisition of 80% of the
common stock of Loan Pro$ in 1991. At the time of acquisition, Loan Pro$ had
$1.8 million in loans and operated through one location. The Company also
acquired Premier in 1991. At the time of acquisition, Premier had approximately
$3 million in loans, which were principally personal property loans, and
operated through three locations. During 1993, the Company decided to terminate
Premier's unsecured personal property loan operation and focus its lending
efforts on secured automobile lending. The Company currently operates its Auto
Loan Division through seven locations, and at December 31, 1995, had a total of
$18 million of serviced Auto Loans, substantially all of which were made in
connection with the purchase of automobiles. The Company's long-term strategy is
to grow the Auto Loan Division, and in connection with such strategy, expects to
open

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two new offices during 1996. During 1993, 1994 and 1995 and the first quarter of
1996, the Auto Loan originations totaled $5.2 million, $7.5 million, $17.1
million and $5.3 million, respectively.

The Auto Loan Division is managed by the presidents of Loan Pro$ and
Premier. These individuals oversee the branch managers of each loan production
office and are generally responsible for the performance of their respective
companies. These individuals report to the Chief Executive Officer of the Auto
Loan Division, who is also the Chief Operating Officer of the Company.

Although Premier and Loan Pro$ have substantially similar operations, the
Company has maintained their separate existence because Loan Pro$ is not a
wholly-owned subsidiary. The president of Loan Pro$ retained a 20% equity
interest in Loan Pro$ at the time of its acquisition by the Company.

Industry

The automobile finance industry is the second largest consumer finance
market in the United States, estimated by the Federal Reserve Board to have been
a $325 billion market in terms of outstanding automobile installment credit at
the end of 1994. The non-prime portion of the automobile finance market is
estimated to be between $30 billion and $50 billion and is highly fragmented.
Many large financial service entities, such as commercial banks, savings and
loans, credit unions and captive finance companies do not consistently provide
financing to the non-prime market. In many cases, those organizations electing
to remain in the automobile finance business have migrated toward higher credit
quality customers in order to reduce collection and processing costs and to
maintain higher levels of credit quality. Many of the largest providers of
financing to the non-prime automobile finance market are the publicly-traded
specialty automobile finance companies. The Company estimates that these
companies collectively have less than a 15% market share. The remainder is
primarily comprised of privately-held finance companies and Dealers who provide
financing programs directly to the consumer.

Non-prime borrowers in the automobile finance market may be generally
considered "credit-impaired" because their loan application is characterized by
one or more of the following: (1) inadequate collateral, (2) insufficient debt
coverage, (3) problems with employment history, (4) a limited or unfavorable
credit history or (5) self-employment. Certain lenders in the non-prime market
may internally classify borrowers (generally with letters from A to D) according
to the perceived credit quality of the loan. However, the Company does not
believe that there are uniform guidelines among various non-prime lenders with
respect to the classification of auto loan borrowers.

The Company does not utilize a category rating system with respect to its
Auto Loans. Rather, such loans are underwritten independently based on criteria
such as the age and wholesale value of the automobile, the borrower's past
credit history and the availability of cosigners and/or guarantors for the loan.
The interest rates charged on Auto Loans are determined by the loan officer
after reviewing the potential borrower's credit history.

Direct Auto Loans and Related Products

Substantially all of the Company's Auto Loans are made directly by the
Company to consumers in connection with purchases of used automobiles. This is
in contrast to "indirect lending," where lenders purchase loans from Dealers
that have already been originated by such Dealers.

The Auto Loans are generally fixed rate loans, with interest rates ranging
from 18% to 36% per annum, depending on the model year of the automobile being
financed and the creditworthiness of the borrower. At March 31, 1996, the Auto
Loans had a weighted average interest rate earned of 27.4%. The amount financed
on Auto Loans generally ranges from $3,000 to $10,000 (with an average initial
principal balance in 1995 and the first quarter of 1996 of approximately
$5,000), and the repayment terms generally range from 24 to 48 months, depending
upon the amount financed. The interest rate which may be charged by the Company
is regulated by state law. See "-- Regulation." The age of the vehicles financed
generally ranges from four to six years. The Company's underwriting guidelines
generally provide that the amount of the Auto Loan may not exceed 105% of
National Auto Dealers Association wholesale value of the vehicle being financed.

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In connection with its Auto Loans, the Company offers credit life and
accident and health insurance products for which it receives commissions. These
insurance products are sold by branch managers who are licensed representatives
of an unaffiliated insurance company. During 1995, insurance was sold in
connection with approximately 50% of the total number of Auto Loans originated.
During 1995 and the first quarter of 1996, the Company recognized $140,000 and
$42,000, respectively, in commissions in connection with the sale of insurance
products.

Relationships with Dealers

Substantially all of the Company's Auto Loans are originated by referrals
from Dealers located in or around the localities served by the Company. In a
typical situation, the dealer will bring a customer who wishes to purchase an
automobile, along with the automobile, to an Auto Loan Division branch location.
At the branch location, the branch manager (or a person designated by the branch
manager) will examine the automobile and make a final credit determination with
respect to the customer. In dealing with the Company, Dealers become familiar
with the Company's lending policies and procedures and develop the ability to
screen potential applicants for credit who are unlikely to be approved by the
Company. The Company attempts to establish and maintain its relationships with
Dealers by making prompt credit determinations and by offering quality,
consistent and dependable service. New dealer relationships are secured
principally through personal contact by branch managers.

During 1995 and the first quarter of 1996, the Company originated Auto
Loans in connection with approximately 200 Dealers. In 1995 and the first
quarter of 1996, no single dealer accounted for a material portion of the
Company's Auto Loans. The Company has no formal agreements with any Dealers
under its direct lending program.

Direct Auto Lending Procedures

The initial credit screening on potential Auto Loan customers is performed
by the Dealers based on the Company's lending policies and procedures. Final
credit decisions involving less than $10,000 are made by the branch managers,
who interview borrowers in person, examine the automobile and perform other
verification procedures. Auto Loans in amounts greater than $10,000 require the
approval of the branch manager and one other member of the Auto Loan Division's
senior management.

The Company's credit review process requires the completion of a
standardized credit application with information on the applicant's background,
employment and credit history. The Company obtains a credit report on the
applicant from an independent reporting service and obtains verification of the
applicant's employment and wages from his or her employer. Branch managers are
encouraged to apply their knowledge of local conditions and collateral values
and their personal experience in making credit decisions. The Company does not
use a "scoring" system or other inflexible, standardized credit criteria.
Nevertheless, the Company estimates that approximately 50% of all applicants are
denied credit by the Company, generally because of their credit histories or
because their income levels will not, in the Company's judgment, support the
amount of credit sought. If the credit is approved, standardized financing
documents are executed between the customer and the Company. In connection with
all Auto Loans, the automobile is pledged as collateral and the Company obtains
the certificate of title to the automobile, on which its lien is recorded. The
Company generally retains keys on the financed automobiles. The customer
receives a payment coupon book and instructions on remitting monthly payments to
the Company.

The Company considers refinancing of its existing loans on a case-by-case
basis. The Company generally does not refinance delinquent loans unless it
determines that refinancing is not likely to increase the credit risk.

Indirect Lending Operations

In 1995, the Company began an indirect automobile lending program. Under
this program, certain approved dealerships are provided underwriting criteria
and guidelines by the Company. The dealerships close and fund the loans to the
borrowers. The manager of the Company's local office is then given an
opportunity to purchase the loan from the dealer based on the office managers'
credit decision and verification procedures.

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Loans are purchased from the Dealer at a discount from the principal amount of
the loan. This discount, which is not refundable to the Dealer, averaged 7% in
the first quarter of 1996. Less than 10% of the Auto Loans originated in the
first quarter of 1996 were generated under this indirect lending program.

Servicing, Collection and Delinquencies

The Company's borrowers are expected to remit their monthly payments using
the payment coupon book provided to them at the time the credit is extended.
Consequently, the Company does not issue monthly statements to borrowers. If a
payment is not received within five days after its due date, the Company
telephones the borrower, and attempts to maintain weekly contact thereafter
until the loan is brought current. If a payment is not received within 11 days
after its due date, the borrower is sent a right to cure letter. In certain
instances, the automobile is picked up and stored by the Company after the right
to cure letter has been received. After 30 days, the branch manager contacts the
borrower. After 45 to 60 days, at the discretion of the branch manager, the
Company generally repossesses the automobile. In certain instances, borrowers
are permitted to recover their repossessed vehicles if they cure defaults under
their loan.

Repossessed automobiles are usually offered for sale by the Company through
independent Dealers. If such efforts are unsuccessful, the automobiles are sold
at public auction. The time between repossession and public sale generally
ranges from one to three months.

COMPETITION

The financial services industry, including the markets in which the Company
operates, is highly competitive. Competition is based on the type of loan,
interest rates, and service. Traditional competitors in the financial services
industry include commercial banks, credit unions, thrift institutions, credit
card issuers, consumer and commercial finance companies, and leasing companies,
many of which have considerably greater financial and marketing resources than
the Company. Moreover, substantial national financial services networks have
been formed by major brokerage firms, insurance companies, retailers and bank
holding companies. The Company believes that it competes effectively by
providing competitive rates, and efficient, complete services.

The Company faces significant competition in connection with its Mortgage
Loan operations, principally from national companies which focus their efforts
on making mortgage loans to non-prime borrowers. These competitors include The
Money Store, Ford Consumer Finance Company, The Associates, and ContiFinancial
Corporation. Each of these companies has considerably greater financial and
marketing resources than the Company. Although these large national companies
compete in the mortgage loan industry, the industry, as a whole, is highly
fragmented and no one company has a large percentage of the total mortgage loan
market. The Company attempts to maintain its competitiveness by establishing
strong relationships with Mortgage Bankers. Although the Company believes that
it has been successful in this regard, in the event that the Company's
competitors are able to weaken the relationships between the Company and its
Mortgage Bankers, including the Principal Mortgage Bankers, the Company's
operations would be materially and adversely affected. Conventional lenders,
such as banks and thrifts, are not believed to be significant competitors of the
Company because they are generally reluctant to make loans to non-prime
borrowers. See "Business -- Mortgage Loans -- Mortgage Loan Origination."

The Company faces significant competition in all markets in which it makes
SBA Loans. The Company's major competitors vary from region to region. However,
its primary competitors are small independent banks and large companies such as
The Money Store, AT&T Capital Corp. and Heller First Capital. Because SBA Loan
interest rates and terms offered by lenders are relatively uniform, the Company
believes that the principal source of competition in making SBA Loans relates to
the quality of service provided by the lender and the relationships established
with the borrower. In addition, the Company believes that it is important that
it maintain good relations with the Commercial Loan Brokers which are a
significant source of SBA Loan originations.

The consumer finance business, and the Auto Loan business in particular, is
highly competitive. Because the Company's Auto Loan business is limited to a
particular area of the consumer finance industry and

46
<PAGE> 49

because the Company's customer base consists of individuals who generally do not
have access to other traditional sources of consumer credit, the Company usually
does not compete directly with banks, savings and loans, financing subsidiaries
of manufacturers and retailers of automobiles, and other traditional consumer
financing sources with respect to Auto Loans. However, in each market where the
Company operates, there are generally a number of other non-prime lenders that
compete for the Auto Loans, including local finance companies. Certain of these
non-prime lenders are larger and have greater resources than the Company. These
companies include Mercury Finance Company, First Merchants Acceptance
Corporation and Regional Acceptance Corporation. Furthermore, the Company
believes that conventional lenders are increasingly seeking to operate in the
non-prime consumer market. Such additional competition could have a material
adverse effect on the Company and its ability to attract customers. The Company
believes that the principal bases for competition in the Auto Loan business are
the monthly payment amount, the speed of the credit determination process and
the general level of service provided to the Dealers. Accordingly, the Company
believes that it is important that it maintain good relationships with its
associated Dealers.

REGULATION

General

The Company's operations are subject to extensive local, state and federal
regulations including, but not limited to, the following federal statutes and
regulations promulgated thereunder: the Small Business Act, the Small Business
Investment Act of 1958, as amended (the "SBIA"), Title 1 of the Consumer Credit
Protection Act of 1968, as amended (including certain provisions thereof
commonly known as the "Truth-in-Lending Act" or "TILA"), the Equal Credit
Opportunity Act of 1974, as amended (the "ECOA"), the Fair Credit Reporting Act
of 1970, as amended (the "FCRA"), the Fair Debt Collection Practices Act, as
amended, the Real Estate Settlement Procedures Act (the "RESPA") and the
National Housing Act, as amended. In addition, the Company is subject to state
laws and regulations with respect to the amount of interest and other charges
which lenders can collect on loans (e.g., usury laws).

Although most states do not regulate commercial loans, a few states do
require licensing of lenders, limitations on interest rates and other charges,
adequate disclosure of certain contract terms and limitations on certain
collection practices and creditor remedies. Authorities in those states that
regulate the Company's SBA Loan activities may conduct audits of the books,
records and practices of the Company. The Company is licensed to do business in
each state in which it does business and in which such licensing is required and
believes it is in compliance in all material respects with these regulations.
The Company is also required to comply with certain portions of the ECOA which
are applicable to commercial loans, including SBA Loans. The Company must comply
with ECOA's prohibition against discrimination on the basis of race, color, sex,
age or marital status and with the portion of Regulation B under the ECOA that
requires lenders to advise loan applicants of the reasons their credit request
was declined or subject to other adverse action.

In the judgment of management, existing statutes and regulations have not
had a materially adverse effect on the business done by the Company. However, it
is not possible to forecast the nature of future legislation, regulations,
judicial decisions, orders or interpretations, nor their impact upon the future
business, financial condition or prospects of the Company.

The Company believes that it is in substantial compliance with state and
federal laws and regulations governing its lending activities. However, there
can be no assurance that the Company will not inadvertently violate one or more
of such laws and regulations. Such violations may result in actions for damages,
claims for refunds of payments made, certain fines and penalties, injunctions
against certain practices, and the potential forfeiture of rights to repayment
of loans. Further, adverse changes in the laws or regulations to which the
Company's business is subject, or in the interpretation thereof, could have a
material adverse effect on the Company's business.

Mortgage Loans

Mortgage lending laws generally require licensing of the lender,
limitations on the amount, duration and charges for various categories of loans,
adequate disclosure of certain contract terms and limitations on certain

47
<PAGE> 50

collection practices and creditor remedies. Many states have usury laws which
limit interest rates, although the limits generally are considerably higher than
current interest rates. State regulatory authorities may conduct audits of the
books, records and practices of the Company's operations. The Company is
licensed to do business in each state in which it does business and in which
such licensing is required and believes it is in compliance in all material
respects with these regulations.

The Company's Mortgage Loan and FHA Title I Loan origination activities are
subject to TILA. TILA contains disclosure requirements designed to provide
consumers with uniform, understandable information with respect to the terms and
conditions of loans and credit transactions in order to give them the ability to
compare credit terms. TILA also guarantees consumers a three-day right to cancel
certain credit transactions, including any refinanced mortgage or junior
mortgage loan on a consumer's primary residence. The Company believes that it is
in substantial compliance in all material respects with TILA.

The Company is also required to comply with the ECOA, which, in part,
prohibits creditors from discriminating against applicants on the basis of race,
color, sex, age or marital status. ECOA restricts creditors from obtaining
certain types of information from loan applicants. It also requires certain
disclosures by the lender regarding consumer rights and requires lenders to
advise applicants who are turned down for credit of the reasons therefor. In
instances where a loan applicant is denied credit or the rate or charge for a
loan is increased as a result of information obtained from a consumer credit
agency, another statute, the FCRA, requires the lender to supply the applicant
with the name and address of the reporting agency. Under RESPA, disclosures to
certain borrowers are required to be made within prescribed time frames. Good
faith estimates of applicable closing costs are also required.

The Company's involvement in FHA Title I guaranteed lending activities
requires compliance with the regulatory and reporting requirements of the FHA.
The FHA only guarantees loans that comply with certain stated standards.

SBA Loans

The SBA Loans made by the SBA Loan Division are governed by federal
statutes (the Small Business Act and SBIA) and may be subject to regulation by
certain states. These federal statutes and regulations specify the types of
loans and loan amounts which are eligible for the SBA's guaranty as well as the
servicing requirements imposed on the lender to maintain SBA guarantees.

Auto Loans

The Company's Auto Loan business is subject to extensive supervision and
regulation under state and federal laws and regulations, which, among other
things, require that the Company obtain and maintain certain licenses and
qualifications, regulate the interest rates, fees and other charges the Company
is allowed to charge, limit or prescribe certain other terms of the Company's
loans, require specified disclosures to consumers, govern the sale and terms of
insurance products offered by the Company and the insurers for which it acts as
agent, and define the Company's rights to repossess and sell collateral.

The Company's Auto Loan business is currently limited to South Carolina and
is therefore subject to certain South Carolina laws and regulations, including
the South Carolina Consumer Protection Code (the "SC Code"). With respect to
their direct lending activities, Premier and Loan Pro$ are each licensed under
the SC Code as a "supervised lender" (a lender making consumer loans at interest
rates in excess of 12% per annum), subject to regulation by the Consumer Finance
Division of the State Board of Financial Institutions and by the South Carolina
Department of Consumer Affairs. These state regulatory agencies audit the
Company's local offices from time to time, and each state agency performs an
annual compliance audit of the Company's operations.

The SC Code and the regulations thereunder generally do not limit the
finance charges that may be contracted for with respect to loans having a cash
advance exceeding $600, but require supervised lenders to file schedules showing
maximum finance charges for each category and amount of supervised loans. Such
schedules must express finance charges in terms of annual percentage rates
determined in accordance with

48
<PAGE> 51

TILA, and must be conspicuously posted in each location where loans are
originated in the format and with certain notices set forth in regulations
promulgated under the SC Code. The SC Code and regulations thereunder also,
among other things, limit or regulate closing costs, insurance premiums,
delinquency, deferral, refinancing, consolidation and conversion fees and other
additional charges which may be assessed in connection with consumer loans,
prescribe certain disclosures and notices to borrowers and cosigners, prescribe
maximum repayment terms for loans of $1,000 or less, define and limit creditors'
remedies on default, and prescribe certain record-keeping and reporting
procedures and requirements, and regulate other aspects of consumer finance
transactions, including permitted collateral, application of payments, limits on
scheduled balloon payments, rebates on prepayments, certain terms, disclosures
and formalities in the loan contract, and other matters.

The SC Code contains provisions similar to the foregoing which are
applicable to consumer credit sale transactions in which a consumer's purchase
of goods or services is financed by the seller or by the seller's assignment of
the retail installment sale contract to another lender. These provisions are
applicable to the Company's indirect financing of automobile purchases. The SC
Code provides that the seller effecting the credit sale is responsible for
licensing and compliance with respect to loans originated in connection with
credit sales, and does not impose on the assignee any obligation of the seller
with respect to events occurring before the assignment. However, upon the
assignment, the Company is subject to the provisions governing credit sales. The
Company believes that it and the dealers from which it accepts assignment of
consumer loans are in substantial compliance with the provisions of the SC Code
governing credit sales.

The Company's Auto Loan business is also subject to extensive federal
regulation in connection with its consumer loans, including TILA, ECOA and FCRA
and the regulations thereunder, and certain rules of the Federal Trade
Commission. These laws and regulations are referenced above under
"--Regulation -- Mortgage Loans." The Company's Auto Loan business is also
subject to the rules of the Federal Trade Commission, which limit the types of
property a creditor may accept as collateral to secure a consumer loan and
provide for the preservation of the consumer's claims and defenses when a
consumer obligation is assigned to a subsequent holder.

EMPLOYEES

At March 31, 1996, the Company employed a total of 174 full-time equivalent
employees. The Company believes that its relations with its employees are good.

PROPERTIES

The Company's headquarters are located at 15 South Main Street, Suite 750,
Greenville, South Carolina and are leased. The Company owns three locations and
leases 10 locations. None of the leases or properties owned is believed to be
material to the Company's operations. The Company believes that its leased and
owned locations are suitable and adequate for their intended purposes. The
Company would expect to lease or purchase any properties necessary for any
expansion.

LEGAL PROCEEDINGS

The Company and its subsidiaries are, from time to time, parties to various
legal actions arising in the normal course of business. Management believes that
there is no proceeding threatened or pending against the Company or any of its
subsidiaries that, if determined adversely, would have a materially adverse
effect on the operations, profitability or financial condition of the Company or
any of its subsidiaries.

49
<PAGE> 52

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the names and ages of the Company's
executive officers and directors, the positions and offices with the Company
held by each such person, and the period that each such person has served as an
executive officer or director of the Company.

<TABLE>
<CAPTION>
DIRECTOR OR
NAME AGE POSITION WITH THE COMPANY OFFICER SINCE
- ----------------------------------------- --- ----------------------------------- -------------
<S> <C> <C> <C>
John M. Sterling, Jr. ................... 57 Chief Executive Officer, President 1991
and Chairman of the Board
Keith B. Giddens......................... 41 Executive Vice President, Chief 1992
Operating Officer and Director
Robert S. Davis.......................... 49 Vice President, Chief Financial 1990
Officer and Director
Kevin J. Mast............................ 35 Treasurer 1995
Clarence B. Bauknight(1)(2).............. 59 Director 1995
Tecumseh Hooper, Jr.(2).................. 48 Director 1991
Jacob H. Martin(1)....................... 77 Director 1991
Buck Mickel(1)........................... 70 Director 1991
Porter B. Rose(2)........................ 53 Director 1991
</TABLE>

- ---------------

(1) Members of the Compensation Committee.
(2) Members of the Audit Committee.

John M. Sterling, Jr. was elected President, CEO and Chairman of the Board
of the Company in January 1991. Mr. Sterling was Chairman of the Board and CEO
of Modern Office Machines, Inc. ("MOM") from 1981 through August 1992. Since
November 1993, Mr. Sterling has served as President of the corporate general
partner of Palmetto Seed Capital Fund, L.P. ("PSC"), which invests primarily in
early stage South Carolina companies. Mr. Sterling has served as General Partner
and Manager of Reedy River Ventures, L.P. ("RRV"), which is a SBIC licensed by
the SBA. PSC and RRV are currently managed by the Company. Mr. Sterling also
serves on the Board of Directors of Datastream Systems, Inc. and several private
companies.

Keith B. Giddens has served as Executive Vice President and Chief Operating
Officer of the Company since November 1995, and CEO of CII, Premier, Loan Pro$
and EBC since the date of their respective acquisitions by the Company in 1991.
Mr. Giddens was a partner in the public accounting firm of Ernst & Young from
October 1988 through April 1991 and a Senior Manager at such firm from October
1984 through September 1988.

Robert S. Davis has served as Vice President and Chief Financial Officer of
the Company since January 1991, as Treasurer from 1992 to 1995, as Vice
President of Finance from November 1989 through June 1990, as President and
Treasurer from June through December 1990, and as Corporate Controller from 1986
through November 1989. Prior to 1986, Mr. Davis was Chief Financial Officer of
Alexander's Wholesale Distributors, Inc., a catalog retailer of consumer goods.

Kevin J. Mast has served as Treasurer of the Company since November 1995,
Executive Vice President and Chief Financial Officer of EBC since April 1992,
Chief Financial Officer of Loan Pro$ and Premier since April 1995 and Treasurer
of CII since April 1995. From June 1991 to October 1992, Mr. Mast served as
Executive Vice President and Chief Financial Officer of Citizens Bank & Trust
Co. and its parent company Business Banc of America. Prior to that time, Mr.
Mast was an audit manager at Ernst & Young where he specialized in the audits of
financial institutions.

Clarence B. Bauknight has been Chairman of the Board and CEO of Builderway,
Inc. since 1976. Builderway, Inc. is engaged in the business of distribution and
retail sale of building supplies and appliances.

50
<PAGE> 53

Mr. Bauknight has also served since 1978 as Chairman of the Board and CEO of
Enterprise Computer Systems, Inc. which is engaged in the development of
computer software for the building supply industry. Mr. Bauknight also serves on
the Board of Directors of Builder Marts of America, Inc., a building supply
company. Mr. Bauknight was a founder of all three of these companies.

Tecumseh Hooper, Jr. served as Treasurer of the Company from January 1991
through 1992. Mr. Hooper has served as President of MOM, which is engaged in the
sale of office equipment and supplies, since 1982. Since October 1994, Mr.
Hooper has also been the Southeast Regional Director for Alco Office Products,
MOM's parent company.

Jacob H. Martin was Chairman of Standard Car Truck Company from January
1989 until May 1, 1995, when he retired from this position. Standard Car Truck
Company is engaged in the business of designing, manufacturing and selling
railroad equipment. Mr. Martin also served as Chairman of the Board of
Enterprise Finance Company ("EFC") and as Chairman of the Board of Freight Car
Building and Supply Company ("FCBSC") until May 1995, when he retired from these
positions. EFC and FCBSC are engaged in the finance business and railway
equipment accessories business, respectively. Prior to 1989, Mr. Martin was a
partner of the law firm of Martin, Craig, Chester & Sonnenschein in Chicago,
Illinois. Mr. Martin is presently of-counsel to that firm.

Buck Mickel has served since 1989 as Chairman of the Board and Chief
Executive Officer of RSI Holdings, Inc., which, since 1989 has engaged in the
distribution of outdoor power and turf care equipment and in the office supply
business. Mr. Mickel has served in various executive positions, including Vice
Chairman of the Board of Fluor Corporation, a construction firm, from which he
resigned in 1987, and Chairman of the Board of Daniel International Corporation,
a construction firm and a subsidiary of Fluor Corporation, from which he
resigned in 1987. Mr. Mickel also serves on the Board of Directors of Fluor
Corporation, Monsanto Company, NationsBank Corporation, Liberty Corporation,
Duke Power Company, Delta Woodside Industries, Inc. and Insignia Financial
Group, Inc.

Porter B. Rose has been President of Liberty Insurance Services, Inc.
("Liberty Services") since January 1995, President of Liberty Investment Group,
Inc. ("Liberty Group") since April 1992, and Chairman of Liberty Capital
Advisors, Inc. ("Liberty Capital") and Liberty Properties Group, Inc. ("Liberty
Properties") since January 1987 (collectively, the "Liberty Subsidiaries"). Mr.
Rose served as President of Liberty Capital from January 1987 to April 1992 and
as Executive Vice President of Investments for Liberty Life Insurance Company
from 1983 through 1987. The Liberty Subsidiaries are engaged in property
development and the management of investment portfolios for Liberty Corporation,
its subsidiaries and other clients.

All directors of the Company serve one year terms and until the election
and qualification of their respective successors. The Company's executive
officers are appointed by the Board of Directors and serve at the discretion of
the Board.

Meetings, Committees and Compensation of the Board of Directors

During fiscal 1995, the Company's Board of Directors met four times. Each
director attended more than 75% of the total number of meetings of the Board of
Directors and all committees on which he served.

The Board of Directors has an Executive Committee, the function of which is
to make decisions between meetings of the Board of Directors pursuant to
authority delegated by the Board of Directors. The current members of the
Executive Committee are Mr. Sterling, Mr. Rose and Mr. Mickel. The Executive
Committee met twice during 1995.

The Board of Directors also has an Audit Committee, which is responsible
for reviewing and making recommendations regarding the Company's engagement of
independent auditors, the annual audit of the Company's financial statements and
the Company's internal accounting practices and policies. The current members of
the Audit Committee are Mr. Hooper, Mr. Bauknight and Mr. Rose. The Audit
Committee met once during 1995.

51
<PAGE> 54

The Board of Directors also has a Compensation Committee, the function of
which is to make recommendations to the Board of Directors as to the salaries
and bonuses of the officers of the Company. The current members of the
Compensation Committee are Mr. Bauknight, Mr. Mickel and Mr. Martin. The
Compensation Committee met once during 1995.

The Board of Directors has a Risk Oversight Committee, the function of
which is to review the operations of the Company with a view toward assessing
various Company risks, including asset/liability risk, interest rate risk,
credit risk and liquidity risk. The current members of the Risk Oversight
Committee are Mr. Bauknight, Mr. Rose and Mr. Hooper. This Committee, which was
formed in November 1995, has met once since inception.

The Board of Directors does not have a Nominating Committee. The functions
of a nominating committee are performed by the Board of Directors as a whole.

Non-management Board members receive a director's fee of $24,000 per year,
half of which is payable in cash and half of which is payable in restricted
stock. The directors also automatically receive annual grants of options to
purchase 666 shares of Common Stock under the Company's 1995 Director Stock
Option Plan.

EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

The following table shows the cash compensation paid by the Company, as
well as certain other compensation paid or accrued, to the Company's Chief
Executive Officer and to the executive officers of the Company who earned in
excess of $100,000 per year in compensation (in all capacities) for the years
ending December 31, 1995, 1994 and 1993 (collectively, the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
AWARDS
ANNUAL COMPENSATION -----------------------
------------------------------------- SECURITIES PAYOUTS
OTHER RESTRICTED UNDERLYING ------- ALL OTHER
NAME AND SALARY BONUS ANNUAL STOCK OPTIONS/ LTIP COMPENSATION
PRINCIPAL POSITION YEAR (1)($) ($) COMPENSATION(2) AWARDS SARS(#) PAYOUTS (3)($)
- ------------------------ ---- --------- ------- --------------- ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John M. Sterling, Jr.... 1995 186,992 110,000 -- -- 30,000 -- 3,234
Chairman, CEO and 1994 178,437 70,000 -- -- -- -- 3,234
President 1993 170,303 50,000 -- -- 33,334 -- 3,148
Keith B. Giddens........ 1995 173,923 100,000 -- -- 74,000 -- 2,835
Executive Vice 1994 165,900 65,000 -- -- 20,000 -- 2,572
President and COO 1993 157,698 45,000 -- -- 33,334 -- 1,470
Robert S. Davis......... 1995 93,796 43,000 -- -- 33,334 -- 2,663
Vice President and 1994 88,137 33,000 -- -- 20,000 -- 2,168
Chief Financial 1993 83,793 25,000 -- -- 33,334 -- 2,285
Officer
Kevin J. Mast........... 1995 93,461 25,000 -- -- 22,668 -- 2,698
Treasurer 1994 82,978 10,000 -- -- -- -- 2,005
1993 75,972 12,513 -- -- -- -- 808
</TABLE>

- ---------------

(1) A portion of total salary may have been deferred, at the option of the
employee, pursuant to the Company's 401(k) plan.
(2) Certain amounts may have been expended by the Company which may have had
value as a personal benefit to the executive officer. However, the total
value of such benefits did not exceed the lesser of $50,000 or 10% of the
annual salary and bonus of such executive officer.
(3) Amounts shown under "All Other Compensation" consist of contributions during
fiscal year 1995, 1994, and 1993 to the Company's 401(k) plan in the amount
shown to match pre-tax elective deferral contributions (included under
salary) made by the executive officers to the plan.

52
<PAGE> 55

Restricted Stock Agreement and Stock Option Plans

The Company has in place the Emergent Group, Inc. Stock Option Plan, the
1995 Officer and Employee Stock Option Plan, the 1995 Director Stock Option Plan
and the Restricted Stock Agreement Plan. At December 31, 1995, a total of
699,664 shares were authorized for issuance under these stock plans. At December
31, 1995, options to purchase an aggregate of 83,532 shares with a weighted
average exercise price of $4.26 were outstanding and exercisable under such
stock option plans. At December 31, 1995, options to purchase an additional
255,468 shares were outstanding but were not exercisable. The Restricted Stock
Agreement Plan was adopted in January 1996 and provides for the grant of up to
100,000 shares of restricted stock to non-employee directors. Since its
adoption, restricted stock agreements with respect to a total of 10,500 shares
have been granted.

Option Grants in Last Fiscal Year

The following table sets forth certain information with respect to options
to purchase Common Stock granted to the Named Executive Officers during fiscal
1995.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------------- ANNUAL RATES
PERCENT OF OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO OPTION TERM
UNDERLYING EMPLOYEES EXERCISE PRICE EXPIRATION ----------------
NAME OPTIONS GRANTED IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------------- --------------- -------------- -------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
John M. Sterling, Jr......... 30,000 12.7% 5.09 10-31-05 73,309 207,181
Keith B. Giddens............. 50,000 21.2 1.32 1-13-05 41,507 105,187
24,000 10.2 4.63 10-31-05 69,807 176,905
Robert S. Davis.............. 13,334 5.6 1.32 1-13-05 11,069 28,051
20,000 8.5 4.63 10-31-05 58,173 147,421
Kevin J. Mast................ 6,668 2.8 1.32 1-13-05 5,535 14,028
16,000 6.8 4.63 10-31-05 46,538 117,937
</TABLE>

53
<PAGE> 56

Fiscal Year End Option Values

The following table sets forth certain information with respect to options
to purchase Common Stock held by the Named Executive Officers as to the number
of shares covered by both exercisable and unexercisable stock options exercised
in 1995. Also reported are the values for the "in-the-money" options which
represent the positive spread between the exercise price of any such existing
stock option and the year-end fair market value of the Common Stock.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR- END AT FISCAL
(#) YEAR-END
------------------ ------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------- --------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C>
John M. Sterling, Jr................... 26,000 167,670 -- / -- /
37,334 $ 177,567(1)
Keith B. Giddens....................... 5,400 39,812 37,400 / $ 256,427 /
84,534 $ 546,007(1)
Robert S. Davis........................ 4,400 32,439 30,266 / $ 208,381 /
52,002 $ 324,290(1)
Kevin J. Mast.......................... 4,536 21,811 -- / -- /
18,132 $ 87,158(1)
</TABLE>

- ---------------

(1) The indicated value is based on exercise prices ranging from $1.09 to $5.09
per share and a per share value at December 31, 1995 of $8.46.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Over the past several years, the Company has provided management services
to RRV. Certain of the Company's officers and directors, namely John M.
Sterling, Jr., Buck Mickel, Tecumseh Hooper, Jr. and Clarence B. Bauknight, are
partners of RRV. During 1994 and 1995, RRV paid the Company $35,000 and
$250,000, respectively, in management fees. The Company expects that fees paid
by RRV to the Company in 1996 will be approximately $125,000. In October 1995,
the Company became an investor in RRV, with an investment of $1 million, and
became its general partner.

Certain officers, directors and employees of the Company held Debentures
which at December 31, 1995 aggregated approximately $1.1 million. These
Debentures were purchased on terms which were the same as those available to
purchasers not affiliated with the Company.

54
<PAGE> 57

PRINCIPAL AND SELLING SHAREHOLDERS

The information set forth below is furnished as of April 3, 1996, with
respect to Common Stock owned beneficially or of record by (i) persons known to
the Company to be the beneficial owner of more than 5% of the Common Stock as of
that date, (ii) each of the Directors individually, (iii) each of the Named
Executive Officers, (iv) the Selling Shareholders and (v) all Directors and
executive officers as a group. Unless otherwise noted, each person has sole
voting and investment power with respect to such person's shares owned. All
share amounts in the table include shares which are not outstanding but which
are the subject of options exercisable in the 60 days following the date hereof.
All percentages are calculated based on the total number of outstanding shares,
plus the number of shares for the particular person or group which are not
outstanding but which are the subject of options or other convertible securities
exercisable or convertible in the 60 days following the date hereof. For
purposes of this table, the term "Common Stock" includes Common Stock, as well
as any shares of the Company's Class A Common Stock held by the referenced
person(s) or entity(ies).

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING AFTER OFFERING
------------------------- -------------------------
PERCENT OF SHARES PERCENT OF
NAME AND ADDRESS OF COMMON SHARES BEING COMMON SHARES
BENEFICIAL OWNER NUMBER OUTSTANDING OFFERED NUMBER OUTSTANDING
- ---------------------------------------- --------- ------------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
John M. Sterling, Jr.(1)................ 900,622 13.8% 80,000 820,622 9.6%
C. Thomas Wyche (2)..................... 210,531 3.2% 58,700 151,831 1.8%
John Hancock Mutual Life Ins. Co.(3).... 550,970 8.3% 550,970 -- --
Enterprise Finance Company(4)........... 327,996 5.0% 250,000 77,996 0.9%
Charles C. Mickel....................... 300,510 4.6% 40,000 260,510 3.1%
Minor M. Shaw........................... 265,086 4.1% 20,000 245,086 2.9%
Buck Mickel(5).......................... 248,358 3.8% 20,000 228,358 2.7%
Buck A. Mickel.......................... 248,490 3.8% 20,000 228,490 2.7%
Keith B. Giddens(6)..................... 171,368 2.6% -- 171,368 2.0%
Tecumseh Hooper, Jr.(7)................. 171,562 2.6% 11,000 160,562 1.9%
Clarence B. Bauknight(8)................ 156,048 2.4% -- 156,048 1.8%
Robert S. Davis(9)...................... 64,666 1.0% -- 64,666 0.8%
Porter B. Rose(7)....................... 17,332 0.3% -- 17,332 0.2%
Kevin J. Mast........................... 10,032 0.1% 8,330 1,702 --
Jacob H. Martin(7)...................... 666 -- -- 666 --
Sterling Family Limited
Partnership(10)....................... 797,168 12.2% 80,000 717,168 8.4%
All Directors and Executive Officers as
a group (9 persons)................... 1,740,654 26.3% 119,330 1,621,324 18.8%
</TABLE>

- ---------------

(1) The address of John M. Sterling, Jr. is P.O. Box 17526, Greenville, SC
29606. Includes 32,688 shares owned by Mr. Sterling directly. Also includes
797,168 shares owned by a partnership whose partners are Mr. Sterling, his
spouse and his three adult children. Includes 70,786 shares of Common Stock
owned by a trust of which Mr. Sterling is the sole trustee, as to which Mr.
Sterling disclaims beneficial ownership.

(2) The address of C. Thomas Wyche is P.O. Box 728, Greenville, SC 29602.
Includes 85,042 shares owned by Mr. Wyche directly, and 125,489 shares
owned by Mr. Wyche's spouse. Also includes the right to acquire 400 shares
at $5.09 pursuant to currently exercisable stock options.

(3) The address of John Hancock Mutual Life Insurance Co. is P.O. Box 111,
Boston, MA 02118. Includes the right to acquire 92,354 shares of Common at
$2.63 per share pursuant to currently exercisable stock purchase warrants.
(4) The address of Enterprise Finance Company is 865 Busse Highway, Park Ridge,
IL 60068.
(5) Includes 11,998 shares owned by Mr. Mickel directly. Also includes 236,360
shares owned by Mr. Mickel's spouse, as to which shares he disclaims
beneficial ownership. Also includes the right to acquire 666 shares at
$10.38 per share pursuant to currently exercisable stock options.

(6) Includes 134,368 shares owned by Mr. Giddens directly. Also includes 21,004
shares owned by Mr. Giddens' spouse, as to which shares he disclaims
beneficial ownership. Also includes 15,996 shares owned by a trust
administered by Mr. Giddens' spouse for his three children.

(7) Includes the right to acquire 666 shares at $9.43 per share pursuant to
currently exercisable stock options.
(8) Includes 155,382 shares owned by a partnership whose partners are Mr.
Bauknight, his spouse and his two adult children. Also includes the right
to acquire 666 shares at $9.43 pursuant to currently exercisable stock
options.
(9) Includes the right to acquire 2,842 shares at $4.82 per share pursuant to
currently exercisable stock options.

(10) The address of the Sterling Family Limited Partnership is P.O. Box 17526,
Greenville, SC 29606.

55
<PAGE> 58

DESCRIPTION OF SECURITIES

COMMON STOCK

The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, of which 6,510,168 were issued and outstanding as of the date
hereof.

All shares of Common Stock currently outstanding are fully paid and
nonassessable, not subject to redemption and without preemptive or other rights
to subscribe for or purchase any proportionate part of any new or additional
issues of any class or of securities convertible into stock of any class.
Holders of Common Stock are entitled to one vote per share in all matters to be
voted on by shareholders and have cumulative voting rights. The holders of
Common Stock are entitled to receive cash dividends equally on a per share basis
if and when such dividends are declared from time to time by the Board of
Directors of the Company in its discretion from funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share with each other on a
ratable basis as a single class in the net assets of the Company available for
distribution after payment of liabilities and satisfaction of any preferential
rights of holders of preferred stock and have no rights to convert their Common
Stock into any other securities.

The Company's Articles of Incorporation provide that shareholders may
cumulate votes for the election of directors.

CERTAIN PROVISIONS OF BYLAWS AND ARTICLES OF INCORPORATION

The Company's Bylaws provide that the Board of Directors shall be at least
three and not more than nine persons. The Board of Directors is currently
comprised of eight persons.

The Company's Board of Directors are exempt under the Company's Articles of
Incorporation from personal monetary liability to the extent permitted by
Section 33-2-102(e) of the South Carolina Business Corporation Act of 1988, as
amended (the "South Carolina Corporation Act"). This statutory provision
provides that a director of the corporation shall not be personally liable to
the corporation or any of its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision shall not be deemed
to eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involved gross negligence, intentional
misconduct, or a knowing violation of law, (iii) imposed under Section 33-8-330
of the South Carolina Corporation Act (improper distribution to shareholder), or
(iv) for any transaction from which the director derived an improper personal
benefit.

As noted above, the Company's Articles of Incorporation provide that
shareholders may cumulate votes for the election of directors.

SOUTH CAROLINA ANTITAKEOVER STATUTES

Business Combinations Act. Generally, the South Carolina Corporation Act
prohibits certain South Carolina corporations, including those whose securities
are listed on the Nasdaq system, from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (iii) on or after such date the business combination is
approved by the board and by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, owns (or within three
years did own) 15% or more of the corporation's voting stock. A South Carolina
corporation may "opt out" from the application of these Code

56
<PAGE> 59

provisions through a provision in its articles of incorporation or by-laws. The
Company has not "opted out" from the application of these Code provisions.

Control Share Acquisition Act. The South Carolina Control Share
Acquisition Act provides that upon the acquisition by a person of certain
threshold percentages of stock (20%, 33% and 50%), a shareholders' meeting must
be held in order to determine whether or not to confer voting rights upon such
acquiring person's shares. An affirmative vote of holders of a majority of all
outstanding company's stock (excluding shares held by the acquiring person,
company officers and company employees who are also directors of the company) is
required to confer voting rights upon such acquiring person's shares.

TRANSFER AGENT

The transfer agent for the Common Stock is First Union National Bank.

57
<PAGE> 60

UNDERWRITING

Pursuant to the Underwriting Agreement and subject to the terms and
conditions thereof, the Underwriters named below, acting through the
Representatives, have agreed, severally, to purchase from the Company and the
Selling Shareholders the number of shares of Common Stock set forth below
opposite their respective names.

<TABLE>
<CAPTION>
NAME OF UNDERWRITER NUMBER OF SHARES
- ----------------------------------------------------------------------------- ----------------
<S> <C>
J.C. Bradford & Co...........................................................
Wheat, First Securities, Inc.................................................
Raymond James & Associates, Inc..............................................

----------------
Total.............................................................. 3,059,000
=============
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the shares of Common
Stock offered hereby (other than those subject to the over-allotment option
described below) if any of such shares are purchased. In the event of a default
by any Underwriter, the Underwriting Agreement provides that, if the number of
shares of Common Stock any defaulting Underwriter agreed but failed or refused
to purchase is not more than one-tenth of the aggregate number of shares of
Common Stock offered hereby, the purchase commitments of the non-defaulting
Underwriters may be increased. If the non-defaulting Underwriters do not agree
to purchase the shares allocated to such defaulting Underwriter, the
Underwriting Agreement may be terminated.

The Representatives have advised the Company and the Selling Shareholders
that the several Underwriters propose initially to offer the shares of Common
Stock to the public at the public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the Offering, the public offering price and such concessions may
be changed. The Representatives have informed the Company that the Underwriters
do not intend to confirm sales to accounts over which they exercise
discretionary authority.

The Offering of the Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of shares.

The Company has granted the Underwriters an option, exercisable not later
than 30 days from the date of the effectiveness of the Offering, to purchase up
to an aggregate of 458,850 additional shares of Common Stock to cover
over-allotments, if any. To the extent that the Underwriters exercise such
option, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the table above
bears to the total number of shares in such table and the Company will be
obligated, pursuant to the

58
<PAGE> 61

option, to sell such shares to the Underwriters. If purchased, the Underwriters
will sell these additional shares on the same terms as those on which the
2,829,000 shares are being offered.

Although traded on the over-the-counter Bulletin Board, the market for the
Common Stock prior to the Offering has not been liquid. Consequently, the public
offering price will be determined by negotiation among the Company, the Selling
Shareholders and the Representatives. In determining such price, consideration
will be given to, among other things, the trading prices for the Common Stock on
the Bulletin Board, the financial and operating history and trends of the
Company, the experience of its management, the position of the Company in its
industry, the Company's prospects and the Company's financial results. In
addition, consideration will be given to the status of the securities markets,
market conditions for new offerings of securities and the prices of similar
securities of comparable companies.

The Company, its directors and executive officers and certain Shareholders
of the Company have each agreed with the Underwriters that they will not offer,
sell or contract to sell, or otherwise dispose of directly or indirectly, or
announce the offering of, or exercise any registration rights with respect to,
or register, cause to be registered or announce the registration or intended
registration of, any shares of Common Stock, or any stock option or other
security or agreement convertible with or exchangeable for, any shares of Common
Stock for a period of 180 days from the date of this Prospectus, without the
prior written consent of the Representatives, except for (a) the Common Stock
offered hereby; (b) in the case of the Company, (i) Common Stock issued pursuant
to any employee or director benefit plan or (ii) issuances of Common Stock upon
the conversion of securities or the exercise of warrants outstanding on the date
the Underwriting Agreement is executed; (c) in the case of directors, executive
officers and certain shareholders of the Company, the exercise of stock options
pursuant to benefit plans described herein and shares of Common Stock disposed
of as bona fide gifts, and (d) in the case of certain shareholders, registered
shares of Common Stock acquired in the public market after the Offering.

The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters and controlling persons, if any,
against certain civil liabilities, including liabilities under the Securities
Act, or will contribute to payments the Underwriters or any such controlling
persons may be required to make in respect thereof.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Wyche, Burgess, Freeman & Parham, P.A.,
Greenville, South Carolina. At May 1, 1996, members of Wyche, Burgess, Freeman &
Parham, P.A. beneficially owned an aggregate of 404,115 shares of Common Stock.
Counsel for the Underwriters is Nelson Mullins Riley & Scarborough, L.L.P.,
Atlanta, Georgia.

EXPERTS

The Consolidated Financial Statements of the Company as of December 31,
1995 and 1994 and for each of the three years in the period ended December 31,
1995 included in this Prospectus and elsewhere in the Registration Statement,
have been audited by Elliott, Davis & Company, L.L.P., independent certified
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendments thereto) on Form S-1 under the Securities
Act (the "Registration Statement") with respect to the Common Stock offered
hereby. This Prospectus, which constitutes part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto, to which reference is hereby made.
Certain items were omitted in accordance with the rules and

59
<PAGE> 62

regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete; with respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.

The Registration Statement, including the exhibits and schedules thereto,
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, its New
York Regional Office, 7 World Trade Center, New York, New York 10048 and its
Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained
by mail at prescribed rates. Requests should be directed to the SEC's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.

60
<PAGE> 63

INDEX TO FINANCIAL STATEMENTS

AUDITED FINANCIAL STATEMENTS:

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1995 and 1996 (unaudited)...................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1993,
1994 and 1995 and the three months ended March 31, 1996 (unaudited)................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994
and 1995 and the three months ended March 31, 1995 and 1996 (unaudited)............. F-6
Notes To Consolidated Financial Statements............................................ F-8
</TABLE>

F-1
<PAGE> 64

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Shareholders and Board of Directors

EMERGENT GROUP, INC. AND SUBSIDIARIES

Greenville, South Carolina

We have audited the accompanying consolidated balance sheets of EMERGENT
GROUP, INC. AND SUBSIDIARIES as of December 31, 1994 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
EMERGENT GROUP, INC. AND SUBSIDIARIES as of December 31, 1994 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.

ELLIOTT, DAVIS AND COMPANY, L.L.P.

Greenville, South Carolina

January 31, 1996

F-2
<PAGE> 65

EMERGENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1994 1995 1996
-------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Cash and cash equivalents................................................ $ 278 $ 1,560 $ 1,795
Short-term investments................................................... 597 -- --
Restricted cash.......................................................... -- 912 2,984
Receivables
Loans receivable....................................................... 91,736 103,865 92,071
Mortgage loans held for sale........................................... 3,662 22,593 25,244
Excess servicing receivable............................................ 1,872 2,054 2,223
Accrued interest receivable............................................ 927 1,571 1,635
Other receivables...................................................... 701 1,626 1,029
-------- -------- ---------
98,898 131,709 122,202
Less allowance for credit losses....................................... (1,730) (1,874) (1,885 )
Less unearned discount................................................. (1,359) (610) (1,054 )
-------- -------- ---------
95,809 129,225 119,263
Investment in asset-backed securities, net of allowance for loss of $773
(1995)................................................................. -- 565 2,185
Property and equipment................................................... 2,670 4,327 4,723
Less accumulated depreciation.......................................... (608) (957) (1,110 )
-------- -------- ---------
2,062 3,370 3,613
Excess of cost over net assets of acquired businesses, net of accumulated
amortization of $419 (1994) and $597 (1995)............................ 2,991 2,865 2,819
Real estate and personal property acquired through foreclosure........... 3,603 3,742 4,140
Deposit base intangibles, net of accumulated amortization of $412 (1994)
and $525 (1995)........................................................ 712 600 572
Net assets of discontinued operations.................................... 2,505 77 61
Other assets............................................................. 891 2,015 2,199
-------- -------- ---------
Total assets.................................................... $109,448 $144,931 $139,631
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable to banks and other, including $100 in 1994 to related
parties.............................................................. $ 17,520 $ 31,633 $ 19,831
Investor Savings:
Notes payable to investors, including $722 in 1994 and $820 in 1995
to related parties.................................................. 56,497 82,132 87,879
Subordinated debentures, including $69 in 1994 and $53 in 1995 to
related parties..................................................... 20,998 16,185 16,176
-------- -------- ---------
Total investor savings.......................................... 77,495 98,317 104,055
Accrued liabilities.................................................... 2,843 3,090 1,911
Remittance due to loan participants.................................... 683 1,188 1,667
Accrued interest payable............................................... 471 622 564
-------- -------- ---------
3,997 4,900 4,142
-------- -------- ---------
Total liabilities............................................... 99,012 134,850 128,028
Minority interest........................................................ 736 196 208
Commitments and contingencies
Shareholders' equity
Common stock, par value $.05 a share -- authorized 400,000 shares in
1994 and 4,000,000 shares in 1995, issued 200,575 in 1994 and 121,000
in 1995.............................................................. 10 6 6
Class A common stock, par value $.05 a share -- authorized 20,000,000
shares in 1994 and 6,666,667 shares in 1995; issued 9,803,438 shares
in 1994 and 6,276,474 shares in 1995................................. 490 314 319
Capital in excess of par value......................................... 6,924 6,632 6,788
Retained earnings...................................................... 2,276 2,933 4,282
-------- -------- ---------
Total shareholders' equity...................................... 9,700 9,885 11,395
-------- -------- ---------
Total liabilities and shareholders' equity...................... $109,448 $144,931 $139,631
========= ========= =========
</TABLE>

See Notes to Consolidated Financial Statements which are

an integral part of these statements.

F-3
<PAGE> 66

EMERGENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Interest, servicing and finance charges........... $ 7,983 $ 10,903 $ 15,639 $ 3,368 $ 4,860
Gain on sale of loans............................. 3,605 6,450 9,169 1,220 3,018
Management fees................................... 81 320 570 80 111
Other revenues.................................... 377 522 900 154 294
--------- --------- --------- --------- ---------
Total revenues............................. 12,046 18,195 26,278 4,822 8,283
--------- --------- --------- --------- ---------
EXPENSES
Interest.......................................... 5,073 5,879 8,527 1,727 2,740
Provision for credit losses....................... 686 2,510 2,480 489 910
Salaries and fringe benefits...................... 3,106 4,001 5,691 1,212 1,824
Business development.............................. 515 626 653 111 107
General and administrative expense................ 2,003 2,732 4,075 786 1,297
--------- --------- --------- --------- ---------
Total expenses............................. 11,383 15,748 21,426 4,325 6,878
--------- --------- --------- --------- ---------
Income from continuing operations before income
taxes, minority interest and cumulative effect
of change in accounting principle............. 663 2,447 4,852 497 1,405
Provision (benefit) for income taxes
Current........................................... 59 266 149 31 72
Deferred.......................................... (245) 343 41 (27) (28)
--------- --------- --------- --------- ---------
(186) 609 190 4 44
--------- --------- --------- --------- ---------
Income from continuing operations before
minority interest and cumulative effect of
change in accounting principle................ 849 1,838 4,662 493 1,361
Minority interest in earnings of subsidiary......... (25) (46) (81) (8) (12)
--------- --------- --------- --------- ---------
Income from continuing operations before
cumulative effect of change in accounting
principle..................................... 824 1,792 4,581 485 1,349
Discontinued transportation and apparel
manufacturing segments
Gain (loss) from operations, net of income tax.... 257 (2,022) (1,573) (316) --
Gain (loss) on disposal of segments, net of income
tax............................................. 3 2,568 (2,351) -- --
--------- --------- --------- --------- ---------
260 546 (3,924) (316) --
--------- --------- --------- --------- ---------
Cumulative effect of change in method of accounting
for income taxes.................................. 113 -- -- -- --
--------- --------- --------- --------- ---------
Net income...................................... $ 1,197 $ 2,338 $ 657 $ 169 $ 1,349
========= ========= ========= ========= =========
Income (loss) per share of common stock
Continuing operations............................. $ 0.13 $ 0.27 $ 0.69 $ 0.07 $ 0.20
Discontinued operations........................... 0.04 0.08 (0.59) (0.05) --
Cumulative effect of change in accounting
method.......................................... 0.01 -- -- -- --
--------- --------- --------- --------- ---------
$ 0.18 $ 0.35 $ 0.10 $ 0.02 $ 0.20
========= ========= ========= ========= =========
Computed on the weighted average number of shares,
options and warrants outstanding.................. 6,551,508 6,688,734 6,668,192 6,699,266 6,679,229
========= ========= ========= ========= =========
</TABLE>

See Notes to Consolidated Financial Statements which are

an integral part of these statements.

F-4
<PAGE> 67

EMERGENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

AND THREE MONTHS ENDED MARCH 31, 1996

<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK CAPITAL
----------------- ------------------- IN
SHARES SHARES EXCESS OF RETAINED
ISSUED AMOUNT ISSUED AMOUNT PAR VALUE EARNINGS
-------- ------ ---------- ------ --------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992........... 169,664 $ 8 8,288,814 $ 415 $ 5,893 $ (1,259)
Issuance of shares in exchange for
minority interest in
subsidiaries...................... 4,218 1 206,667 10 133 --
Redemption of stock purchase
warrants.......................... -- -- -- -- (3) --
Issuance of shares as payment for
purchase of a subsidiary.......... 26,693 1 1,307,957 65 901 --
Net income............................. -- -- -- -- -- 1,197
-------- ------ ---------- ------ --------- --------
Balance at December 31, 1993........... 200,575 10 9,803,438 490 6,924 (62)
Net income............................. -- -- -- -- -- 2,338
-------- ------ ---------- ------ --------- --------
Balance at December 31, 1994........... 200,575 10 9,803,438 490 6,924 2,276
Shares issued, formerly held by
subsidiary........................ -- -- 24,700 1 15 --
Shares purchased through Tender
Offer............................. (19,377) (1) (467,288) (23 ) (535) --
Shares retired through reverse stock
split............................. (121,204) (6) (6,242,275) (312 ) 309 --
Shares issued on exercise of stock
options........................... 506 -- 19,662 1 79 --
Two for one stock split in the form
of a stock dividend............... 60,500 3 3,138,237 157 (160) --
Net income............................. -- -- -- -- -- 657
-------- ------ ---------- ------ --------- --------
Balance at December 31, 1995........... 121,000 6 6,276,474 314 6,632 2,933
Shares issued on exercise of stock
options (unaudited).................. 2,026 -- 110,668 5 156 --
Net income for three months ended March
31, 1996 (unaudited)................. -- -- -- -- -- 1,349
-------- ------ ---------- ------ --------- --------
Balance at March 31, 1996
(unaudited).......................... 123,026 $ 6 6,387,142 $ 319 $ 6,788 $ 4,282
======== ====== ========= ====== ======= =======
</TABLE>

See Notes to Consolidated Financial Statements which are

an integral part of these statements.

F-5
<PAGE> 68

EMERGENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
-------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................... $ 1,197 $ 2,338 $ 657 169 $ 1,349
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities
Depreciation and amortization......... 558 783 938 155 233
Provision for credit losses........... 686 2,510 2,480 488 910
Loss on sale of investments........... -- 66 -- -- --
Loss on disposal of property and
equipment........................... 4 5 44 -- --
Net increase in deferred loan costs... -- -- (171) -- 445
Net increase (decrease) in deferred
gain on sale........................ 744 453 (853) 254 --
Loans originated -- held for sale..... (31,882) (73,709) (173,985) (32,158) (69,672)
Principal proceeds from loans sold.... 31,052 85,693 144,861 31,102 65,844
Proceeds from securitization of
loans............................... -- -- 15,357 -- 13,489
Payments to securitization trustee for
cash reserve........................ -- -- (612) -- (1,519)
Minority interest in earnings of
subsidiary.......................... 19 7 81 8 12
Changes in operating assets and
liabilities increasing(decreasing)
cash
Excess servicing receivable......... (411) (1,460) (183) (13) (169)
Remittance due loan participants.... 304 295 505 138 (176)
Accrued interest payable............ 35 30 103 -- (57)
Accrued liabilities................. (58) 913 877 (1,120) (1,178)
Accrued interest receivable......... 23 (193) (644) (74) (63)
Other assets........................ (577) 242 (923) 149 128
Net cash provided by (used in)
operating activities of
discontinued operations.......... (100) (1,253) 1,592 224 15
-------- -------- --------- -------- --------
Net cash provided by (used in)
operating activities............. 1,594 16,720 (9,876) (678) 9,591
-------- -------- --------- -------- --------
INVESTING ACTIVITIES
Loans originated -- held for
investment.......................... (36,460) (74,937) (74,363) (14,655) (16,786)
Principal payments received on loans
not sold............................ 26,094 31,786 50,329 12,099 12,958
Principal payments received on
asset-backed securities............. -- -- 177 -- 48
Additional investment in subsidiary... -- -- (359) -- --
Purchase of investment in
partnership......................... -- -- (1,000) -- --
Increase in note receivable from
former subsidiary................... -- -- (200) -- --
Cash paid for acquisition, net of cash
purchased........................... (830) -- -- -- --
Reduction in goodwill of subsidiary... -- 85 -- -- --
Purchase of short-term investments.... (947) -- -- -- --
</TABLE>

F-6
<PAGE> 69

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
-------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Proceeds from sale of short-term
investments......................... 1,000 581 614 400 --
Proceeds from sale of real estate and
personal property acquired through
foreclosure......................... 557 1,128 3,401 560 751
Proceeds from sale of property and
equipment........................... 8 -- -- -- --
Purchase of property and equipment.... (227) (479) (1,732) (181) (395)
Rent received on real estate acquired
through foreclosure................. 36 87 85 32 32
Improvements and related costs
incurred on real estate acquired
through foreclosure................. (286) (477) (205) (82) (60)
Net cash provided by (used in)
investing activities of discontinued
operations.......................... (743) 806 31 97 --
-------- -------- --------- -------- --------
Net cash used in investing
activities.......................... (11,798) (41,420) (23,222) (1,730) (3,452)
-------- -------- --------- -------- --------
FINANCING ACTIVITIES
Advances under bank lines of credit... 19,583 104,622 179,381 34,513 76,861
Payments on bank lines of credit...... (23,869) (91,839) (164,989) (33,328) (88,663)
Net increase in notes payable to
investors........................... 10,971 13,496 25,635 8,715 5,746
Net (decrease) increase in
subordinated debentures............. 3,637 (5,826) (4,812) (6,366) (10)
Payments on long-term debt and capital
leases.............................. -- (280) (279) -- --
Cash paid for stock purchased in
tender offer........................ -- -- (568) -- --
Proceeds from exercise of stock
options............................. -- -- 52 -- 162
Cash paid for redemption of stock
purchase warrant.................... (3) -- -- -- --
Increase (decrease) in note payable to
minority shareholder................ 2 (50) -- -- --
Payments on mortgage payable.......... -- (80) -- -- --
Net cash provided by (used in)
financing activities of discontinued
operations.......................... 610 (25) (40) (221) --
-------- -------- --------- -------- --------
Net cash provided by financing
activities.......................... 10,931 20,018 34,380 3,313 (5,904)
-------- -------- --------- -------- --------
Net increase (decrease) in cash and
cash equivalents.................... 727 (4,682) 1,282 905 235
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR..................................... 4,233 4,960 278 278 1,560
-------- -------- --------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR..... $ 4,960 $ 278 $ 1,560 $ 1,183 $ 1,795
======== ======== ========= ======== ========
</TABLE>

See Notes to Consolidated Financial Statements which are an integral part of
these statements.

F-7
<PAGE> 70

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PREPARATION

The consolidated financial statements as of March 31, 1996 and for the
three-month periods ended March 31, 1995 and 1996 are unaudited. These financial
statements are prepared in accordance with the SEC's rules regarding interim
financial statements and therefore do not contain all disclosures required by
generally accepted accounting principles for annual financial statements. These
financial statements as of March 31, 1996 and for the three-month periods ended
March 31, 1995 and 1996, in management's opinion, contain all known adjustments
necessary to present fairly the financial position, results of operations and
cash flows of the Company.

CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries, each of which is wholly-owned except The Loan Pro$, Inc.
("Loan Pro$") which is 80% owned. All significant intercompany items and
transactions have been eliminated in consolidation.

The Company and its subsidiaries are primarily engaged in the business of
originating, selling and servicing first and second residential mortgage loans,
commercial loans partially guaranteed by the United States Small Business
Administration ("SBA") and loans collateralized by pre-owned automobiles. The
funds for these loans are obtained principally through the issuance of notes
payable and subordinated debentures to investors, and utilization of various
lines of credit with banks.

Substantially all of the Company's mortgage and automobile loans are made
to non-prime borrowers. These borrowers generally have limited access to credit
or are otherwise considered to be credit impaired by conventional lenders.

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
differ from those estimates. These estimates include, among other things,
anticipated prepayments on loans sold with servicing retained, valuation of real
estate owned, and determination of the allowance for credit losses.

Minority interest represents minority shareholders' proportionate share of
the equity and earnings of Loan Pro$.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets. Estimated lives are 15 to 40 years for buildings and improvements
and 3 to 7 years for furniture, fixtures and equipment. Additions to property
and equipment and major replacements or improvements are capitalized at cost.
Maintenance, repairs and minor replacements are expensed when incurred.

AMORTIZATION

The excess of cost over related net assets of businesses acquired is
amortized using the straight-line method principally over 25 years. On a
periodic basis, the Company reviews goodwill for events or changes in
circumstances that may indicate that the carrying amount of goodwill may not be
recoverable. The Company utilizes discounted estimated future cash flows of the
purchased subsidiary in determining any impairment on the excess of cost over
the related net assets.

Deposit base intangibles associated with the acquisition of certain
subsidiaries are amortized using the straight-line method over 10 years, based
on the estimated remaining life of the existing deposit base assumed, as
calculated from a core deposit base study performed by a third party at the time
of acquisition of the

F-8
<PAGE> 71

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

subsidiary. On a periodic basis, management assesses the recoverability of the
deposit base intangible. Such assessments encompass a projection of future
earnings from the deposit base as compared to original expectations and the
actual nonrenewal of investor savings upon maturity, based upon a discounted
cash flow analysis. If an assessment of the deposit base intangible indicates
that its recoverability is impaired, a charge to the statement of income for the
most recent period is recorded for the amount of such impairment.

INCOME TAXES

The Company and its subsidiaries file a consolidated Federal income tax
return. Deferred income taxes arise principally from depreciation, unrealized
gains on loans held for sale, amortization of deposit base intangibles and
allowances for credit losses.

STATEMENT OF CASH FLOWS

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

The Company foreclosed on or repossessed property used to collateralize
loans receivable in the amount of $5,345,000 in 1993, $3,362,000 in 1994 and
$3,955,000 in 1995.

The Company sold real estate held for sale by issuing loans to the buyers
in the amount of $1,050,000 in 1993, $611,000 in 1994 and $689,000 in 1995.

The Company paid income taxes of $60,000 in 1993, $214,000 in 1994 and
$267,000 in 1995. The Company paid interest of $5,271,000 in 1993, $5,967,000 in
1994 and $8,397,000 in 1995.

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is based on management's ongoing evaluation
of the serviced loan portfolio and reflects an amount that, in management's
opinion, is adequate to absorb losses in the existing portfolio. In evaluating
the portfolio, management takes into consideration numerous factors, including
current economic conditions, prior loan loss experience, the composition of the
serviced loan portfolio, and management's estimate of anticipated credit losses.
Loans are charged against the allowance at such time as they are determined to
be losses. Subsequent recoveries are credited to the allowance.

Management considers the year-end allowance appropriate and adequate to
cover possible losses in the serviced loan portfolio; however, management's
judgment is based upon a number of assumptions about future events, which are
believed to be reasonable, but which may or may not prove to be valid. Thus,
there can be no assurance that charge-offs in future periods will not exceed the
allowance for credit losses or that additional increases in the allowance for
credit losses will not be required.

ACCOUNTING FOR IMPAIRED LOANS

The allowance for credit losses is a composite of the allowance for credit
losses of the Mortgage Loan Division, the Small Business Division and the Auto
Loan Division. The Company currently maintains an allowance for credit losses on
its mortgage loans equal to approximately 0.75%, approximately 3% on the
unguaranteed portion of its SBA loans and approximately 4.0% of its auto loans.
In addition, each subsidiary may establish a specific reserve for a particular
loan that is deemed by management to be a potential problem loan where full
recovery is questionable.

When an impaired loan is identified by the portfolio management department
of the Company to have risk characteristics that are unique to an individual
borrower, the Company assesses a specific allowance on a loan-by-loan basis each
month. The general allowance is calculated on a monthly basis using historical
statistics.

Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 114 (Accounting by Creditors for Impairment of a
Loan). SFAS 114 requires that the allowance for credit losses for impaired loans
(as defined) be measured based on the present value of expected future

F-9
<PAGE> 72

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

cash flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. SFAS 114 also changed the
treatment of "in-substance foreclosed" properties to require that properties
should be included as other real estate owned when legal possession of the
property has been obtained. Accordingly, the Company transferred $2,674,000 and
$2,327,000 (net of allowance of $297,000) of in-substance foreclosed properties
from other real estate owned to loans receivable at December 31, 1993 and 1994,
respectively. The adoption of SFAS 114 had no effect on net income or
shareholders' equity.

The Company's policy is to evaluate impaired loans based on the fair value
of the collateral. Interest income from impaired loans is recorded using the
cash method.

REAL ESTATE AND PERSONAL PROPERTY ACQUIRED THROUGH FORECLOSURE

Real estate and personal property acquired through foreclosure represent
properties foreclosed upon or repossessed in the normal course of business and
is valued at the lower of cost or net realizable value. Costs related to the
development and improvement of the properties are capitalized whereas those
costs relating to holding the properties are charged to expense.

INTEREST INCOME

Interest income on loans receivable is recognized using the interest
method. Accrual of interest is discontinued when a loan is over 90 days past due
and the collateral is determined to be inadequate or when foreclosure
proceedings begin. Loan fees and issuance commissions are amortized into income
over the life of the loan, using the interest method.

GAIN ON SALE OF LOANS

The Company sells participations representing the SBA-guaranteed portion of
all of its SBA Loans (the "SBA Loan Participations") in the secondary market. In
connection with such sales, the Company receives excess servicing revenue and
typically receives a cash premium of approximately 10% related to the guaranteed
portion being sold. In accordance with Emerging Issues Task Forces ("EITF")
88-11 a portion of the cash premium received from the sale of the guaranteed
portion of the SBA loan is deferred as an unearned discount against the
remaining unguaranteed portion of the loan based on the relative fair values of
those portions to the total loan and the remainder is recognized as income at
the time of the sale. The resulting unearned discount is accreted into interest
income over the life of the loan using the interest method. The weighted average
interest rate inherent in the carrying value of the excess servicing receivable
is 10% at December 31, 1995.

Mortgage loans consist principally of first and second residential
mortgages originated principally throughout North Carolina, South Carolina and
the remaining southeastern United States, and are stated at the principal amount
outstanding if held for investment purposes. Non-refundable loan fees and direct
costs associated with the origination or purchase of loans are deferred and
netted against outstanding loan balances. Mortgage loans held for sale are
carried at the lower of aggregate cost or market. Origination fees on mortgage
loans held for sale are deferred until the time of sale and are included in the
computation of the gain on, or loss from, the sale of the related loans. The
cost of mortgage loans held for sale is the face value of the mortgage notes
adjusted for the net deferred fees and costs that are recognized upon sale.
Mortgage loans are sold servicing released and on a nonrecourse basis, with
customary representations and warranties. In connection with the sale of
mortgage loans, the Company receives cash premiums generally ranging from 4% to
8% of the principal amount of the mortgage loan being sold.

Loans sold through securitizations with servicing retained are sold at or
near par with the Company retaining a participation in the cash flows. Excess
servicing receivable is calculated using prepayments, default, and interest rate
assumptions that market participants would use for similar instruments. The
excess servicing receivable recognized at the time of sale does not exceed that
amount which would be received if it were sold

F-10
<PAGE> 73

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in the marketplace. The excess servicing receivable is written down to the
present value of the remaining estimated future cash flows exceeding normal
servicing fees at each balance sheet date using the same discount rate used in
the original calculation. The Company's excess servicing fees from its
securitization transactions are recognized over the life of the related
transaction.

REMITTANCE DUE LOAN PARTICIPANTS AND SERVICING FEE INCOME

The Company retains the servicing rights on SBA guaranteed loan
participations sold on the secondary market, for which it receives monthly a
minimum of 1% of the outstanding principal balance. The Company receives the
payments from the borrowers and records the portion relating to the sold
participation as a liability. The participation portion is remitted to Colson
Services Corp., the exclusive Fiscal and Transfer Agent for the guaranteed
portion of SBA loans sold in the secondary market, by the 3rd business day of
the following month.

MANAGEMENT FEES

The Company serves as investment manager for two Venture Funds for which it
receives management fees. The Company recognizes the management fees on the
accrual basis.

EXCESS SERVICING RECEIVABLE

An excess servicing receivable is recognized on SBA guaranteed loan
participation sales in which a servicing fee in excess of the normal servicing
fee is retained. The amount is determined based on the difference between the
actual sales price and the estimated sales price that would have been obtained
if a normal servicing fee rate had been specified. The excess servicing
receivable is amortized on a loan by loan basis against servicing income over
the life of the loan using the interest method. The Company monthly assesses its
excess servicing receivable for any impairment on a disaggregated basis based on
predominate risk factors such as prepayment, default and the discount rate.
(Note 4)

BORROWER COMMITMENT DEPOSITS

The Company generally receives a commitment deposit from its applicants for
SBA loans prior to closing. The commitment deposits are recorded as a liability
when received, and are reduced for any direct expenses paid to a third party
incurred in making the loan. Any deposit in excess of these direct expenses is
refunded to the borrower at the time of, or subsequent to, the loan closing.
Borrower commitment deposits are included in accrued liabilities.

NET INCOME PER SHARE OF COMMON STOCK

The Company's shareholders approved a one-for-three reverse split of the
Company's Common and Class A Common Stock in June 1995. Effective January 29,
1996, the Company declared a two for one stock split effected in the form of a
100% stock dividend on the Common Stock and Class A Common Stock. The weighted
average number of shares of Common and Class A Common Stock have been restated
for all periods presented to reflect these stock splits.

Net income per share is computed on the weighted average number of shares
of Common Stock and Common Stock equivalents outstanding during each year,
6,551,508 shares (1993), 6,688,734 shares (1994), 6,668,192 shares (1995),
consisting of Common and Class A Common shares.

RECLASSIFICATIONS

Certain previously reported amounts have been reclassified to conform to
current year presentation. Such reclassifications had no effect on net income or
shareholders' equity.

F-11
<PAGE> 74

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company maintains its primary checking accounts with three principal
banks and maintains overnight investments in reverse repurchase agreements with
those same banks. The amounts maintained in the checking accounts are insured by
the Federal Deposit Insurance Corporation ("FDIC") up to $100,000. At December
31, 1995, the amounts maintained in the overnight investments in reverse
repurchase agreements, which are not insured by the FDIC, totaled $791,000.
These investments were collateralized by U.S. Government securities held by the
banks. At December 31, 1994, the amount maintained in the overnight investments
in reverse repurchase agreements totaled $378,000. These investments were also
collateralized by U. S. Government securities held by the banks.

3. LOANS RECEIVABLE

The following is a summary of loans receivable by type of loan:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- --------
(IN THOUSANDS)
<S> <C> <C>
Mortgage Loans:
Real estate loans on personal residences...................... $46,961 $ 56,722
Real estate loans on rental property.......................... 2,415 3,867
Construction loans............................................ 5,639 2,934
Notes receivable from related parties......................... 169 363
------- --------
55,184 63,886
SBA loans....................................................... 25,845 19,937
Automobile loans................................................ 8,483 17,673
Other loans..................................................... 2,224 2,369
------- --------
$91,736 $103,865
======= ========
</TABLE>

Notes receivable from related parties included advances of $54,000 (1994)
and $261,000 (1995) and repayments of $8,000 (1994) and $67,000 (1995).

Real estate loans generally have contractual maturities of 12 to 360 months
with an average interest rate at December 31, 1994 and 1995 of approximately
12%. Construction loans generally have contractual maturities of 12 months with
an average interest rate at December 31, 1994 and 1995 of approximately 12%. SBA
loans range in maturity from 7 years to 25 years depending on the use of
proceeds. Interest rates on SBA loans are variable, adjusted on the first day of
each calendar quarter and are generally prime plus 2.75%. The average interest
rate at December 31, 1994 and 1995 for SBA loans was 11.5% and 10%,
respectively. Automobile loans have maturities generally not exceeding 60 months
with fixed interest rates averaging 28% in 1994 and 1995. At December 31, 1994
and 1995, approximately $3,145,000 (net of an allowance for impaired loans of
$297,000) and $3,950,000 (net of an allowance for impaired loans of $73,000),
respectively, of loans receivable were impaired.

Loans sold and serviced for others at December 31, 1994 and 1995 were
approximately $62,046,000 and $88,077,000, respectively, and are not included in
assets in the accompanying balance sheets.

The Company's portfolio of SBA loans receivable is diversified by industry
type. At December 31, 1995, the largest concentration of SBA loans was to
servicing and manufacturing companies, which comprised approximately 23% and
17%, respectively, of the SBA serviced portfolio. Approximately 23%, 16%, 16%
and 13% of the serviced SBA loan portfolio at December 31, 1995 consisted of
loans to borrowers located in Florida, Kansas, South Carolina and Colorado,
respectively. The majority of the Company's other types of loans were to
borrowers located in South Carolina. In addition, during 1995 the Company
originated mortgage

F-12
<PAGE> 75

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

loans principally in the southeastern United States, with 51% of originations in
South Carolina, 20% in North Carolina and the remainder distributed through the
remaining southeastern states.

An analysis of the allowance for credit losses is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1994 1995
----- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year.............................. $ 976 $ 952 $ 1,730
Provision for credit losses............................... 686 2,510 2,480
Net charge offs........................................... (710) (1,732) (1,563)
----- ------- -------
Balance at end of year.................................... 952 1,730 2,647
Less allowance for loss on asset-backed securities........ -- -- (773)
----- ------- -------
Balance at end of year.................................... $ 952 $ 1,730 $ 1,874
===== ======= =======
</TABLE>

As of December 31, loans totaling $2,110,000 (1993), $1,433,000 (1994) and
$5,145,000 (1995) were on non-accrual status. The associated interest income not
recognized on these non-accrual loans was approximately $146,000 during 1993,
$45,000 during 1994 and $164,000 during 1995.

4. EXCESS SERVICING RECEIVABLE

The activity in the excess servicing receivable is summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year....................................... $ 412 $1,872
Additional gain on sale of loans................................. 1,942 1,095
Amortization against servicing revenues.......................... (482) (913)
------ ------
Balance, end of year............................................. $1,872 $2,054
====== ======
</TABLE>

The weighted average interest rate inherent in the carrying value of the
excess servicing receivable is 10% at December 31, 1995. During 1994, the
Company changed its estimated normal servicing rate to more closely reflect the
industry standard in accordance with Emerging Issues Task Force Consensus 94-9.
The effect of this change was to increase 1994 income by approximately $490,000.

The carrying value of the excess servicing receivable approximates fair
value.

5. INVESTMENT IN ASSET-BACKED SECURITIES

In 1995, the Company securitized $17,063,000 of the unguaranteed portions
of its SBA loans. The securitization was effected through a grantor trust (the
"Trust"), the ownership of which was represented by Class A and Class B
certificates. The Class A certificates were purchased by investors, while the
Company retained the Class B certificates. The Company classifies its Class B
certificates as trading securities under SFAS 115, and they are carried at fair
market value. These certificates are carried on the balance sheet as
asset-backed securities in the net amount of $565,000. This amount is net of
$773,000 allowance for loss. These certificates give the holders thereof the
right to receive payments and other recoveries attributable to the unguaranteed
portion of SBA loans held by the Trust. The Class B certificates represent
approximately 10% of the principal amount of the SBA loans transferred in the
securitization and are subordinate in payment and all other respects to the
Class A certificates. Accordingly, in the event that payments received by the
Trust are not sufficient to pay certain expenses of the Trust and the required
principal and interest payments due on

F-13
<PAGE> 76

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Class A certificates, the Company, as holder of the Class B certificates,
would not be entitled to receive principal or interest payments due thereon. The
Company is required to establish and maintain cash reserve and collection
accounts with a trustee in connection with the securitization. These accounts
are shown as restricted cash of $912,000 on the Company's consolidated balance
sheets. Although securitizations provide liquidity, the Company has utilized
securitizations principally to provide a lower cost of funds and to reduce
interest rate risk. The Company's excess servicing fees from the transaction are
recognized over the life of the transaction.

The Company serves as master servicer for the Trust and, accordingly,
forwards payments received on account of the SBA loans held by the Trust to the
trustee, which, in turn, pays the holders of the certificates in accordance with
the terms of and priorities set forth in the securitization documents. Because
the transfer of the SBA loans to the Trust constitutes a sale of the underlying
SBA loans, no liability is created on the Company's Consolidated Financial
Statements. However, the Company has the obligation to repurchase the SBA Loans
from the Trust in the event that certain representations made with respect to
the transferred SBA loans are breached or in the event of certain defaults by
the Company, as master servicer. The Class A certificates received a rating of
Aaa from Moody's Investors Service, Inc. The Class B certificates were not
rated. In connection with the securitization, the Company received a cash
payment of $15,357,000.

6. PROPERTY AND EQUIPMENT

The following is a summary of property and equipment:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 228 $ 228
Buildings and leasehold improvements............................. 1,063 1,162
Equipment........................................................ 105 264
Furniture and fixtures........................................... 1,274 2,673
------ ------
$2,670 $4,327
====== ======
</TABLE>

Depreciation expense was $678,000, $694,000, and $769,000 in 1993, 1994 and
1995, respectively.

7. REAL ESTATE AND PERSONAL PROPERTY ACQUIRED THROUGH FORECLOSURE

An analysis of real estate and personal property acquired through
foreclosure is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Balance at beginning of year..................................... $2,848 $3,603
Loan foreclosures and improvements............................... 3,889 4,160
Dispositions, net................................................ (3,134) (4,021)
------ ------
Balance at end of year........................................... $3,603 $3,742
====== ======
</TABLE>

F-14
<PAGE> 77

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. NOTES PAYABLE

Notes payable are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
A. $ 2,865 $ 6,892
Notes payable under revolving credit agreements, with
interest at the bank's prime rate (8.5% at December 31,
1995) maturing March 31, 1996..............................
B. Notes payable under lines of credit, with interest at the -- 9,911
bank's prime rate plus 3/4% (9.25)% at December 31, 1995)
maturing in December 1997..................................
C. 14,376 14,830
Notes payable under lines of credit, with interest at the
bank's prime rate (8.5% at December 31, 1995) maturing
December 29, 1998..........................................
279 --
Note payable in equal annual principal installments plus 8%
interest...................................................
------- -------
$17,520 $31,633
======= =======
- ---------
A.
Under the terms of revolving credit agreements, the mortgage lending
subsidiaries of the Company may borrow up to a maximum of $20,000,000 with
interest at the bank's prime rate payable monthly. The note is collateralized by
loans receivable. The agreements, among other matters, require the total unpaid
balance of such pledged loans receivable to be a maximum of $25,000,000, a
specified debt to net worth ratio, minimum tangible net worth and restrictions
on the payment of dividends. The Company is in compliance with such restrictive
covenants. The revolving credit agreements mature on March 31, 1996. At December
31, 1995, $8,958,000 was available under these lines of credit.
B. Under the terms of the lines of credit, the automobile lending subsidiaries of
the Company may borrow up to a maximum of $26,000,000 with interest at the
bank's prime rate plus three-quarters of one percent payable monthly. The notes
are collateralized by loans receivable. The terms of the agreements state that
advances under the lines of credit cannot exceed 85% of the aggregate unpaid
principal balance of outstanding notes receivable which are no more than sixty
days past due. The agreements, among other matters, require minimum debt to
tangible net worth ratios, minimum interest coverage ratios, minimum loss
reserves, maximum debt to borrowing base restrictions, and restrictions on the
payment of dividends. At December 31, 1995, the automobile lending subsidiaries
were in compliance with such restrictive covenants and $4,308,000 was available
under these lines of credit. These agreements mature in December, 1997.
C. Under the terms of the lines of credit, the commercial lending subsidiaries of
the Company may borrow up to a maximum of $32,000,000 with interest at the
bank's prime rate. The lines are limited to 100% of the outstanding balance of
the guaranteed portion of SBA 7(a) loans, 80% of the outstanding balance of the
unguaranteed portion of SBA 7(a) loans, and 50% of SBA 504 loans as defined in
the loan agreements. The agreements, among other matters, require minimum
tangible net worth ratios, maximum ratios of total liabilities to tangible net
worth, minimum interest coverage ratios, limitations on the amount of capital
expenditures in any fiscal year, and restrictions on the payment of dividends.
At December 31, 1995, these subsidiaries were in compliance with such
restrictive covenants and $933,000 was available under these lines of credit.
These agreements mature in December, 1998.
</TABLE>

F-15
<PAGE> 78

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Annual aggregate maturities of notes payable at December 31, 1995 are as
follows (in thousands):

The Company currently has a commitment from a lender with respect to a new
credit facility in the amount of $70,000,000. It is expected that this facility
will be in place by the end of February, 1996.

9. INVESTOR SAVINGS

Investor savings are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
A. Notes payable to investors.................................. $56,497 $82,132
B. Subordinated debentures..................................... 20,998 16,185
------- -------
$77,495 $98,317
======= =======
- ---------------
Notes payable to investors are issued in any denomination greater than $10,000
and are registered under the South Carolina Uniform Securities Act. The notes
mature from three months to three years from date of issuance. Interest is
payable monthly, quarterly or at maturity at the option of the investors.
Interest rates on the notes are fixed until maturity and range from 6% to 10% at
A. December 31, 1994 and 7% to 9% at December 31, 1995. The notes are subordinated
to all bank debt, and are senior to subordinated debentures.
Subordinated debentures are issued in any denomination greater than $100 and are
registered under the South Carolina Uniform Securities Act. The subordinated
debentures normally mature in one year from date of issuance and have an interest
B. rate ranging from 5% to 6% quarterly. The debentures are subordinated to all bank
debt and notes payable to investors.
</TABLE>

At December 31, 1994 and 1995, notes payable to investors and subordinated
debentures include an aggregate of approximately $11,043,000 and $17,080,000,
respectively, of individual investments exceeding $100,000.

The investor savings at December 31, 1995 mature as follows:

10. LEASES

The Company leases various property and equipment, office space and
automobiles under operating leases.

F-16
<PAGE> 79

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a schedule by year of future minimum rental payments for
all operating leases that have initial or remaining noncancellable terms in
excess of one year (in thousands):

Total rental expense was approximately $974,000 in 1994 and $901,000 in
1995,

11. MANAGEMENT AGREEMENTS

The Company manages two Venture Funds. The Company receives management fees
equal to two and one-half percent of the total assets under management in each
Venture Fund with an aggregate minimum management fee of $445,000 annually. The
Company received management fees of $570,000 from the Venture Funds during 1995.
The Company may also receive incentive management fees of 15% and 20%,
respectively, from the two Venture Funds, of the net portfolio profits of each
Venture Fund, as defined.

The Company is a General Partner of one of the Venture Funds and, during
1995, made a $1,000,000 investment into the partnership. This partnership has
significant common principals with the Company.

12. OTHER ASSETS AND ACCRUED LIABILITIES

Other assets include the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1994 1995
---- ------
(IN
THOUSANDS)
<S> <C> <C>
Debt issuance costs, net.............................................. $ 68 $ 666
Investments, at cost.................................................. 12 1,012
Deferred tax benefits................................................. 172 196
Other................................................................. 639 141
---- ------
$891 $2,015
==== ======
</TABLE>

Accumulated amortization for other assets was approximately $1,083,000 in 1994
and $1,253,000 in 1995.

Accrued liabilities include the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Taxes accrued and withheld........................................... $ 177 $ --
Income taxes......................................................... 159 302
Deferred fees income................................................. 483 13
Accrued professional fees............................................ 20 141
Accounts payable..................................................... 278 208
Borrower commitment deposits......................................... 402 356
Accrued salaries and wages........................................... 186 289
Other................................................................ 1,138 1,781
------ ------
$2,843 $3,090
====== ======
</TABLE>

F-17
<PAGE> 80

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. SHAREHOLDERS' EQUITY

The Company has two classes of capital stock, Common Stock and Class A
Common Stock. The two classes have identical rights except for certain
restrictions on the transferability of the Class A Common Stock to holders of
4.5% or more of the Company's outstanding capital stock (Common and Class A
Common Stock).

On May 21, 1981, the shareholders approved a stock option plan and on May
22, 1984, the shareholders approved an increase in the number of shares of
Common Stock which may be granted from 250,000 to 500,000. Under the terms of
the plan, the Company may grant options to key employees and directors to
purchase up to a total of 500,000 shares of its $.05 par value Common Stock. The
option price is the fair market value at date of grant. The options expire five
years from date of grant, are not transferable other than on death, and are
exercisable 20% on the date of grant and 20% per year on a cumulative basis for
each year subsequent to the date of grant. No shares are available for grant
under this stock option plan.

On June 9, 1995, the shareholders approved a stock option plan under which
the Board of Directors may issue 11,334 shares of Common Stock and 555,354
shares of Class A Common Stock. Under the terms of the plan, the Company may
grant options to key employees to purchase up to a total of 566,668 shares of
its $.05 par value Common and Class A Common Stock. The option price is the fair
market value at date of grant. The options expire five years from date of grant,
are not transferable other than on death, and are exercisable 20% on the date of
grant and 20% per year on a cumulative basis for each year subsequent to the
date of grant. The options available for grant under the plan consist of 6,612
Common Stock options and 324,048 Class A Common Stock options at December 31,
1995.

Also on June 9, 1995, the shareholders approved a stock option plan under
which each nonemployee member of the Board of Directors receives options to
purchase 14 shares of Common Stock and 652 shares of Class A Common Stock each
December 31 beginning in 1995 through 1999. The terms of the plan are identical
to the employee stock option plan approved on June 9, 1995. The options
available for grant under this plan consist of 597 Common Stock options and
29,407 Class A Common Stock options at December 31, 1995.

On June 9, 1995 the shareholders of the Company approved a one-for-three
reverse split of the Common and Class A Common Stock. The certificates for
previously issued Common and Class A Common Stock were canceled and were
forfeited by the holder in order for the holder to receive replacement
certificates for the after reverse split shares. The shareholders also
authorized the increase of post reverse split authorized shares of Common Stock
to 4,000,000 shares. The Company issued to all shareholders certificates for
one-third of their Common and Class A Common shares as of June 9, 1995 upon the
shareholder presenting their existing shares. No fractional shares were issued
as a result of the one-for-three reverse stock split. All fractional shares were
redeemed at an equivalent price of $1.25 per share.

The Company offered to buy from the shareholders up to 20,000 shares of
Common Stock and up to 980,000 shares of Class A Common Stock for the period
March 31, through May 8, 1995 at a price of $1.15 per share. As a result of this
offer, the Company purchased 19,377.38 shares of Common Stock and 467,287.96
shares of Class A Common Stock at an aggregate cost of approximately $560,000.

F-18
<PAGE> 81

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Activity in stock options is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1994 1995
------- -------
<S> <C> <C>
Options outstanding, beginning of year $1.09 per share)........ 133,333 140,000
Issued at:
$1.09 per share.............................................. 40,000 --
$1.32 per share.............................................. -- 80,006
$4.625 per share............................................. -- 124,000
$5.09 per share.............................................. -- 32,000
$9.44 per share.............................................. -- 2,664
$10.39 per share............................................. -- 666
Expired or canceled.......................................... (33,333) --
Exercised:
$1.09 per share.............................................. -- (29,800)
$1.32 per share.............................................. -- (1,336)
$4.625 per share............................................. -- (3,200)
$5.09 per share.............................................. -- (6,000)
------- -------
Options outstanding, end of year............................. 140,000 339,000
======= =======
Exercisable, end of year....................................... 56,000 83,532
======= =======
Available for grant, end of year............................... 82,667 330,660
======= =======
</TABLE>

Warrants have been issued and are outstanding at December 31 as follows:

<TABLE>
<CAPTION>
1994 1995
---------------- ----------------
COMMON CLASS A COMMON CLASS A
------ ------- ------ -------
<S> <C> <C> <C> <C>
$2.625 per share................................ 4,870 238,618 2,434 119,308
====== ======= ====== =======
</TABLE>

These warrants are 100% exercisable at December 31, 1995. Fifty percent of
the 1994 warrants outstanding expired on December 31, 1995. The 1995 outstanding
warrants expire on December 31, 1996. No warrants were exercised or issued in
1994 or 1995.

14. SALE OF SUBSIDIARY

In connection with the Company's strategic plan to focus its business
efforts on financial services, the Company divested its apparel segment
operations, which was comprised solely of the operations of Young Generations,
Inc. ("YGI"). On September 30, 1995, the Company sold all of the outstanding
stock (the "stock sale") of YGI to fifteen individuals (the "Buyers"), who were
members of YGI's management team. As a result, the loss on the sale of the stock
and operating results of the apparel segment have been classified as
discontinued operations. The results of operations have been restated to exclude
the Apparel Manufacturing segment from continuing operations.

The Company sold the stock for $600,000 under a non-recourse promissory
note from the buyers. As a result of the sale, the Company wrote-off all amounts
due from YGI resulting in a charge of $3,580,300, net of income taxes of
$67,700, reported as a loss from discontinued operations and have valued the
note receivable at $1 due to concern over a decline in operating profits and the
related impact on the buyers' source of cash to pay the note. The Company
remains contingently liable for the guaranty of certain bank loans and trade
accounts payable which existed prior to the stock sale which do not exceed
$715,000. Management does not anticipate any significant charges to future
earnings as a result of these guarantees.

F-19
<PAGE> 82

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The apparel segment, which consists solely of the operations of YGI, had
net losses of $163,000 in 1993, $31,000 in 1994 and $1.3 million for the nine
months ended September 30, 1995. The net loss in 1994 was decreased by the
receipt of $1.25 million in life insurance proceeds due to the death of YGI's
president. YGI had revenues of $11.5 million in 1993, $12.2 million in 1994 and
$7.3 million for the nine months ended September 30, 1995.

15. DISCONTINUED OPERATIONS

The Company's operations in the Apparel and Transportation segments were
discontinued during 1995. The sale of the apparel segment is discussed further
in Note 14. In July 1994 the Company sold an operating railroad for $940,000. In
connection with this sale, the Company received $20,000 cash, and a note
receivable of $920,000, payable in semi-annual payments over five years, with an
interest rate of 10%. In November 1994, the Company assigned the rights to
boxcars in a lease with a Class I railroad for $1,174,000 cash. The Company sold
additional railcars in June 1995 for $111,000 cash.

At December 31, 1995, the Company had remaining net assets in the
transportation segment of $77,000, which the Company anticipates will be sold
during 1996 at or above their carrying value.

The results of operations have been restated to exclude these segments from
continuing operations.

Revenues applicable to the discontinued operations were:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Apparel manufacturing...................................... $11,456 $12,140 $7,263
Transportation............................................. 1,712 1,407 390
</TABLE>

Income from operations and gain (loss) on disposal attributable to the
discontinued segments is reported net of income tax expense of:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Apparel manufacturing...................................... $18 $(158) $(22)
Transportation............................................. 23 306 (53)
</TABLE>

F-20
<PAGE> 83

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net assets of discontinued operations were comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 106 $ --
Accounts receivable, net......................................... 196 --
Inventories, net................................................. 2,738 --
Property and equipment, net...................................... 1,332 153
Other assets..................................................... 398 80
------ ------
4,770 233
LIABILITIES
Notes payable.................................................... 918 --
Other liabilities................................................ 1,347 156
------ ------
2,265 156
------ ------
Net assets of discontinued operations............................ $2,505 $ 77
====== ======
</TABLE>

Gain (loss) from operations, net of income tax, consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1993 1994 1995
----- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Apparel manufacturing segment............................... $(163) $(1,949) $(1,253)
Transportation segment...................................... 420 (73) (320)
----- ------- -------
$ 257 $(2,022) $(1,573)
===== ======= =======
</TABLE>

Gain (loss) on disposal of segments, net of income taxes, consists of the
following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1993 1994 1995
----- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Apparel manufacturing segment............................... $ -- $ -- $(2,324)
Transportation segment...................................... 3 2,568 (27)
----- ------- -------
$ 3 $ 2,568 $(2,351)
===== ======= =======
</TABLE>

F-21
<PAGE> 84

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. INCOME TAXES

A reconciliation of the provision for Federal and state income taxes and
the amount computed by applying the statutory Federal income tax rate to income
before income taxes, minority interest and cumulative effect of change in
accounting principal is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1993 1994 1995
----- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory Federal rate applied to pre-tax income from
continuing operations...................................... $ 225 $ 832 $1,650
State income taxes, net...................................... 51 311 3
Alternative Minimum Tax on proceeds from life insurance...... -- 25 --
Nondeductible expenses....................................... -- 3 5
Benefit of operating loss carryforward....................... (453) (630) (1,566)
Amortization of excess cost over net assets of acquired
businesses................................................. 63 69 62
Other........................................................ (72) (1) 36
----- ----- ------
$(186) $ 609 $ 190
===== ===== ======
</TABLE>

The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes", effective January 1, 1993. This
statement supersedes Accounting Principles Board Statement No. 11, under which
the Company has previously been recognizing income tax expense. The cumulative
effect of adopting SFAS No. 109 had the effect of increasing the Company's 1993
net income by approximately $113,000. The Company's effective tax rate was
reduced from approximately 45% to approximately 22% as a result of the adoption
of SFAS No. 109. The Company recognized no deferred tax benefits of operating
loss carryforwards as a result of the adoption of SFAS No. 109.

Provision (benefit) for income taxes is comprised of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1993 1994 1995
----- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal.................................................... $ 46 $ 117 $ 100
State...................................................... 13 149 49
----- ----- ------
59 266 149
Deferred
Federal.................................................... (191) 242 27
State...................................................... (54) 101 14
----- ----- ------
Total........................................................ (245) 343 41
Federal.................................................... (145) 359 127
State...................................................... (41) 250 63
----- ----- ------
$(186) $ 609 $ 190
===== ===== ======
</TABLE>

Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax

F-22
<PAGE> 85

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

purposes, and (b) operating loss carryforwards. The tax effects of significant
items comprising the Company's net deferred tax asset are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Differences between book and tax basis of property............. $ (108) $ (269)
Other.......................................................... (3) --
Deferred tax assets:
Differences between book and tax basis of deposit base
intangibles................................................. 130 165
Allowance for credit losses.................................... 737 1,202
Write-off of notes receivable.................................. -- 1,386
Unrealized gain on loans to be sold............................ 152 382
Deferred tax asset related to discontinued operations.......... 707 --
Operating loss carryforward (net of valuation allowance)....... (1,443) (2,670)
------- -------
Net deferred tax asset......................................... $ 172 $ 196
======= =======
</TABLE>

No net deferred tax asset was recognized as to the capital loss
carryforwards for the years ended December 31, 1994 and 1995. A valuation
allowance equal to these loss carryforwards was applied to each such
carryforward as of December 31, 1994 and 1995. A valuation allowance of
approximately $7,700,000 was applied to the tax effect of the net operating loss
carryforward for the year ended December 31, 1995.

As of December 31, 1995, the Company has available Federal net operating
loss carryforwards of approximately $23,000,000 expiring in 1996 through 2001.

17. OPERATIONS AND INDUSTRY SEGMENTS

The Financial Services segment was active in 1993, 1994 and 1995 in making
first and second mortgage loans, small business loans, construction loans and
pre-owned automobile loans.

The Apparel Manufacturing segment was active in 1993 and 1994 in the
design, manufacture and marketing of dresses for children. The Company sold YGI,
the sole component of the segment as of September 30, 1995 and as a result, the
Apparel Manufacturing segment is shown on the statements of income as
discontinued operations.

The Transportation segment was active in 1993 and 1994 in boxcar leasing,
short-line railroad operations and railcar repair shop operations. The Company
sold Peninsula Terminal Company in July 1994 and assigned the rights to boxcars
in the lease with a Class I railroad in November 1994. The Company sold
additional railcars in 1995 and as a result, the Transportation segment is shown
on the statements of income as discontinued operations.

The Company's customers include investors within the State of South
Carolina, first and second residential mortgage borrowers principally in South
Carolina and North Carolina, commercial borrowers throughout the United States
and preowned automobile borrowers principally in South Carolina.

18. TRANSACTIONS WITH RELATED PARTIES

The Company engaged in the following related party transactions:

The Company obtains legal services from a firm, certain members of which,
when considered in the aggregate, own 824,928 shares of the Company's capital
stock. One member of the firm may be deemed to share investment and voting power
with respect to 501,960 shares of the Company's capital stock owned by a

F-23
<PAGE> 86

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

South Carolina partnership, of which his spouse and three adult children are
partners and 70,788 shares of the Company's capital stock owned by a Trust, of
which he is the Grantor. Total charges for these services were $82,000 (1993),
$118,000 (1994), and $234,000 (1995). Approximately $17,000 (1994) and $0 (1995)
of accounts payable are payable to this law firm.

The Company provided management services to a company with significant
common shareholders for which it received fees of $35,000 in 1993 and 1994 and
$250,000 in 1995.

Notes payable to investors and subordinated debentures include amounts due
to officers, directors and key employees of approximately $1,124,000, $791,000
and $873,000 at December 31, 1993, 1994 and 1995, respectively. The Company also
has notes receivable from related parties. (Note 3)

19. EMPLOYEE RETIREMENT PLAN

The Company has a matched savings plan under Section 401(k) of the Internal
Revenue Code covering employees meeting certain eligibility requirements. The
plan provides for employee and Company contributions, subject to certain
limitations. Company matching contributions are 35% of employee contributions to
a maximum of 6% of compensation for each employee. The Company's contributions
under the plan totaled approximately $52,000 in 1993, $95,000 in 1994 and
$76,000 in 1995.

20. RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." The statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The statement is effective
for the Company for the fiscal year ending December 31, 1996 and does not have a
significant impact on the Company's financial statements.

In May 1995, the FASB issued SFAS 122, "Accounting for Mortgage Servicing
Rights," which amends SFAS No. 65, "Accounting for Mortgage Banking Activities.
This statement allows the capitalization of servicing-related costs associated
with mortgage loans that are originated for sale, and to create servicing assets
for such loans. Prior to this statement, originated mortgage servicing rights
were generally accorded off-balance sheet treatment. The statement is effective
for the company for the fiscal year ending December 31, 1996. The adoption does
not have a material effect on the company's financial condition or results of
operations.

The FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," in
October 1995. This statement supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees" and establishes financial accounting and reporting
standards for stock-based employee compensation plans. SFAS 123 requires that an
employer's financial statements include certain disclosures about stock-based
employee compensation arrangements regardless of the method used to account for
them. The accounting requirements of this statement are effective for
transactions entered into in fiscal years that begin after December 15, 1995.
Though they may be adopted at issuance, the disclosure requirements are
effective for financial statements for fiscal years beginning after December 15,
1995, or for an earlier fiscal year for which this statement is initially
adopted for recognizing compensation cost. The Company has elected to continue
use of the method prescribed by APB 25 for recording stock-based compensation
and will provide pro forma disclosures in its annual financial statements as
prescribed by SFAS 123.

The FASB issued on October 24, 1995, a proposed statement of financial
accounting standard "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." FASB's objective is to develop consistent
accounting standards for those transactions, including determining when
financial assets should be considered sold and derecognized from the statement
of financial position and when

F-24
<PAGE> 87

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

related revenues and expenses should be recognized. The approach focuses on
analyzing the components of financial asset transfers and requires each party to
a transfer to recognize the financial assets it controls and liabilities it has
incurred and derecognize assets when control over them has been relinquished. In
its present form the statement will have minimal impact on the accounting
practices of the Company, as this proposed statement does not mandate a change
from the Company's current method of accounting for securitization transactions.

21. CONTINGENCIES AND LOAN COMMITMENTS

The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These instruments expose the Company to credit risk in excess of the amount
recognized in the balance sheet.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments. Total credit exposure at December 31,
1995 related to these items is summarized below:

<TABLE>
<CAPTION>
CONTRACT
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Loan commitments:
Approved loan commitments.............................................. $ 79,906
Unadvanced portion of loans............................................ 4,251
--------------
Total loan commitments....................................... $ 84,157
===========
</TABLE>

Loan commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract. Loan
commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained upon
extension of credit is based on management's credit evaluation of the
counterparty. Collateral held is primarily residential property. Interest rates
on loan commitments are a combination of fixed and variable.

Commitments outstanding at December 31, 1995 consist of adjustable and
fixed rate loans of $38,866,000 and $45,291,000, respectively, at rates ranging
from 10% to 13%. Commitments to originate loans generally expire within 30 days
to 60 days.

There is also a contingent purchase price agreement in place amounting to
2 1/2% of net income of a subsidiary not to exceed $125,000 through 1996. Any
payments of the contingent purchase price will increase the excess of cost over
net assets of acquired businesses. The amount paid or accrued under this
arrangement was $23,000, $47,000 and $9,000 in 1993, 1994 and 1995,
respectively.

From time to time, the Company or its subsidiaries are defendants in legal
actions involving claims arising in the normal course of its business. The
Company believes that, as a result of its legal defenses and insurance
arrangements, none of these actions, if decided adversely, would have a material
effect on the business, financial condition, results of operations or cash flows
of the Company taken as a whole.

The Company may from time to time enter into forward commitments to sell
residential first mortgage loans to reduce risk associated with originating and
holding loans for sale. At December 31, 1995, the Company had no outstanding
forward commitment contracts.

F-25
<PAGE> 88

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has accrued $164,000 for two former operating locations to
record the potential liability for environmental contamination at these two
sites. The Company believes that the total cost for this environmental liability
will not exceed the amount accrued.

22. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS 107, "Disclosures about Fair Value of Financial Instruments" requires
disclosure of fair value information whether or not recognized in the balance
sheet, when it is practicable to estimate the fair value. SFAS 107 defines a
financial instrument as cash, evidence of an ownership interest in an entity or
contractual obligations which require the exchange of cash or financial
instruments. Certain items are specifically excluded from the disclosure
requirements, including the Company's common stock, property and equipment and
other assets and liabilities.

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

Cash and Cash Equivalents and Short-Term Investments

For these short-term instruments, the carrying amount is a reasonable
estimate of fair value.

Receivables

For residential mortgage loans, SBA loans and automobile loans fair value
is estimated using the market prices received on recent sales or securitizations
of these loans in the secondary market.

Mortgage Loans Held for Sale

Fair value for mortgage loans held for sale is determined using the
anticipated premium to be derived from the sale of the mortgage loans in the
secondary market.

Excess Servicing Receivable

Fair value of the excess servicing receivable is determined based on the
discounted present value of the remaining excess estimated future cash flows
using estimated prepayment and default rates and discount rates anticipated in
similar instruments.

Investment in Asset-Backed Securities

Fair value of the investment in asset-backed securities approximates the
carrying amount. Fair value is determined based on the discounted present value
of the remaining estimated future cash flows attributable to the related
investment in asset-backed securities using estimated prepayment and default
rates and discount rates anticipated in similar instruments.

Investor Savings

Due to their short-term maturity, usually one year, the fair value of the
notes due investors and subordinated debentures is the current carrying amount.

Notes Payable to Banks and Other

The fair value of notes payable to banks and other approximates the
carrying amount. Rates with similar terms and maturities currently available to
the Company are used to estimate fair value of existing debt.

F-26
<PAGE> 89

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Commitments to Extend Credit

The fair value of commitments to extend credit is determined by using the
anticipated market prices that the loans will generate in the secondary market.

The estimated fair values of the Company's financial instruments at
December 31, were as follows:

<TABLE>
<CAPTION>
1995
-------------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Financial Assets:
Cash and cash equivalents...................................... $ 1,560 $ 1,560
Loans receivable -- net........................................ 103,865 107,520
Mortgage loans held for sale................................... 22,593 23,526
Excess servicing receivable.................................... 2,054 2,054
Investment in asset-backed securities.......................... 1,477 1,477
Financial Liabilities
Investor savings:
Notes due to investors...................................... $ 82,132 $ 82,132
Subordinated debentures..................................... 16,185 16,185
Notes payable to banks and other............................... 31,633 31,633
Commitments to extend credit................................... 84,157 89,711
</TABLE>

23. PARENT COMPANY FINANCIAL INFORMATION

The following is condensed financial information of Emergent Group, Inc.
(parent company only):

CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................................. $ 110 $ 363
Short-term investments..................................................... 597 --
Receivable from subsidiaries............................................... 4,016 --
Property and equipment, net................................................ 180 139
Investment in subsidiaries, net of allowance of $2,100 in 1994............. 5,215 9,195
Notes receivable, net...................................................... 920 683
Other investments.......................................................... -- 1,000
Other assets............................................................... 255 234
------- -------
$11,293 $11,614
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued expenses and other liabilities..................................... $ 1,593 $ 1,729
Shareholders' equity....................................................... 9,700 9,885
------- -------
$11,293 $11,614
======= =======
</TABLE>

F-27
<PAGE> 90

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
----------------------------
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Interest......................................................... $ 103 $ 158 $ 313
Gain on disposal of assets....................................... 4 -- 66
Management fees.................................................. 216 455 570
Other............................................................ 22 6 42
------ ------ ------
345 619 991
EXPENSES
Interest......................................................... 369 255 152
General and administrative....................................... 801 1,537 862
Other............................................................ 40 231 --
------ ------ ------
1,210 2,023 1,014
------ ------ ------
Loss from continuing operations before income taxes.............. (865) (1,404) (23)
Income tax expense (benefit)..................................... (556) 468 (23)
Discontinued operations
Income from operations, net of income tax...................... 625 467 12
Gain (loss) on disposal........................................ -- 672 (2,391)
------ ------ ------
625 1,139 (2,379)
Equity in income of subsidiaries................................. 768 3,071 3,036
Cumulative effect of change in method of accounting for income
taxes.......................................................... 113 -- --
------ ------ ------
Net income....................................................... $1,197 $2,338 $ 657
====== ====== ======
</TABLE>

F-28
<PAGE> 91

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1993 1994 1995
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................................... $1,197 $ 2,338 $ 657
Adjustments to reconcile net income to net cash provided by
(used in) operating activities
Depreciation and amortization................................ 358 367 26
Gain on sale of property and equipment....................... (4) (2,187) (66)
Reserve for devaluation of subsidiary........................ -- 2,100 --
Gain on sale of subsidiary................................... -- (585) (1,257)
Decrease (increase) in due from subsidiaries................. (97) (813) 306
Increase in investment in subsidiaries....................... (904) (2,358) (3,323)
Write-off of notes receivable from discontinued operations... -- -- 3,648
Revenues recorded under an assigned operating lease.......... (789) (657) --
Interest expense from assignment of an operating lease....... 297 207 --
Decrease (increase) in other assets.......................... 435 (83) 59
(Decrease) increase in other liabilities..................... (311) 1,186 (272)
------ ------- -------
Cash provided by (used in) operating activities................ 182 (485) (222)
------ ------- -------
INVESTING ACTIVITIES
Cash received in advances from subsidiaries.................... 700 250 3,891
Loans advanced to subsidiary................................... (400) (907) (2,041)
Payments to subsidiary on loans................................ -- -- (300)
Payments received from subsidiaries............................ 100 -- --
Proceeds from sale of short-term investments................... 1,000 350 597
Purchase of short-term investments............................. (947) -- --
Cash paid for purchase of subsidiary........................... (836) -- --
Purchase of property and equipment............................. (8) (21) (25)
Proceeds from sale of property and equipment................... 4 1,201 112
Proceeds from sale of subsidiary............................... -- 20 --
Loan advance to former subsidiary.............................. -- -- (200)
Payments received on notes receivable.......................... -- -- 236
Purchase of investment in partnership.......................... -- -- (1,000)
------ ------- -------
Cash provided by (used in) investing activities................ (387) 893 1,270
------ ------- -------
FINANCING ACTIVITIES
Payments made on notes payable................................. (279) (279) (279)
Purchase of stock purchase warrants............................ (3) -- --
Purchase of stock under Tender Offer........................... -- -- (568)
Proceeds from exercise of stock options........................ -- -- 52
------ ------- -------
Cash used in financing activities.............................. (282) (279) (795)
------ ------- -------
Net increase (decrease) in cash and cash equivalents........... (487) 129 253
Cash at the beginning of the year.............................. 468 (19) 110
------ ------- -------
Cash at the end of the year.................................... $ (19) $ 110 $ 363
====== ======= =======
</TABLE>

F-29
<PAGE> 92

EMERGENT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

24. SUBSEQUENT EVENT (UNAUDITED)

In March of 1996, the Company securitized $16,107,000 of auto loans. The
securitization was effected through a grantor trust (the "Trust"), the ownership
of which was represented by Class A and Class B certificates. The Class A
certificate was purchased by an investor, while the Company retained the Class B
certificate. The Company has classified its Class B certificates as trading
securities under SFAS 115 and such certificates are carried at fair value. These
certificates, in addition to the Class B certificates held by the Company
pursuant to the securitization of the unguaranteed portions of its SBA loans in
1995, are carried on the balance sheet as asset-backed securities in the amount
of $2,185,000 which is net of $1,382,000 allowance for losses. These
certificates give the holders thereof the right to receive payments and other
recoveries attributable to the loans held by the Trust. The Class B certificates
represent approximately 10% of the principal amount of the loans transferred in
the securitization and are subordinate in payment and all other aspects to the
Class A certificates. Accordingly, in the event that payments received by the
Trust are not sufficient to pay certain expenses of the Trust and the required
principal and interest payments due on the Class A certificates, the Company, as
holder of the Class B certificates, would not be entitled to receive principal
or interest payments due thereon.

The Class A certificates for the Auto securitization received a rating of
Aaa from Moody's Investors Service, Inc. In addition, the Class A certificates
for the Auto securitization received a rating of AAA from Standards and Poors
ratings group, and were guaranteed by Financial Security Assurance, Inc. The
Class B certificates were not rated. In connection with the Auto securitization,
the Company received cash proceeds, net of securitization costs, of $14,195,000.

F-30
<PAGE> 93

------------------------------------------------------
------------------------------------------------------

NO DEALER, SALESPERSON, OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
ANY SELLING SHAREHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON OR IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE SUCH DATE.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 12
Use of Proceeds....................... 13
Dividend Policy....................... 13
Price Range of Common Stock........... 14
Dilution.............................. 15
Capitalization........................ 16
Selected Consolidated Financial and
Operating Data...................... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 31
Management............................ 50
Principal and Selling Shareholders.... 55
Description of Securities............. 56
Underwriting.......................... 58
Legal Matters......................... 59
Experts............................... 59
Additional Information................ 59
Index to Financial Statements......... F-1
</TABLE>

------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------

3,059,000 SHARES

EMERGENT GROUP, INC.

COMMON STOCK
-------------------------
PROSPECTUS
-------------------------

J.C. BRADFORD & CO.
RAYMOND JAMES & ASSOCIATES, INC.
WHEAT FIRST BUTCHER SINGER
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 94

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table itemizes the expenses incurred by the Company in
connection with the registration, issuance and distribution of the Common Stock
offered hereby, other than the underwriting discount. All the amounts shown are
estimates except the Securities and Exchange Commission registration fee, the
National Association of Securities Dealers, Inc. fee and the Nasdaq listing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................... $ 16,983
National Association of Securities Dealers, Inc. filing fee....................... 4,942
Nasdaq listing fee................................................................ 17,500
Printing and engraving............................................................ 60,000
Legal fees and expenses........................................................... 90,000
Accounting fees and expenses...................................................... 45,000
Blue Sky qualifications, related legal fees and expenses.......................... 30,000
Transfer Agent and Registrar's fees............................................... 20,000
Miscellaneous expenses............................................................ 215,575
--------
Total................................................................... $500,000
========
</TABLE>

ITEM 14: INDEMNIFICATION OF DIRECTORS AND OFFICERS

Reference is made to other sections in Chapter 8, Article 5 of Title 33 of
the 1976 Code of Laws of South Carolina, as amended (the "South Carolina Code"),
which provides as follows:

Section 33-8-510. Authority to Indemnify. (a) Except as provided in
subsection (d), a corporation may indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred in
the proceeding if: (1) he conducted himself in good faith; and (2) he
reasonably believed: (i) in the case of conduct in his official capacity
with the corporation, that his conduct was in its best interest; and (ii)
in all other cases, that his conduct was at least not opposed to its best
interest; and (3) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.

(b) A director's conduct with respect to an employee benefit plan for
a purpose he reasonably believed to be in the interests of the participants
in and beneficiaries of the plan is conduct that satisfies the requirement
of subsection (a)(2)(ii).

(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of
conduct described in this section.

(d) A corporation may not indemnify a director under this section: (1)
in connection with a proceeding by or in the right of the corporation in
which the director was adjudged liable to the corporation; or (2) in
connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity, in which he
was adjudged liable on the basis that personal benefit was improperly
received by him.

(e) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.

Section 33-8-520. Mandatory Indemnification. Unless limited by its
articles of incorporation, a corporation shall indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with
the proceeding.

II-1
<PAGE> 95

Section 33-8-530. Advance for Expenses. (a) A corporation may pay
for or reimburse the reasonable expenses incurred by a director who is a
party to a proceeding in advance of final disposition of the proceeding if:
(1) the director furnishes the corporation a written affirmation of his
good faith belief that he has met the standard of conduct described in
Section 33-8-510; (2) the director furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay the advance if
it is ultimately determined that he did not meet the standard of conduct;
and (3) a determination is made that the facts then known to those making
the determination would not preclude indemnification under this subchapter.

(b) The undertaking required by subsection (a)(2) must be an unlimited
general obligation of the director but need not be secured and may be
accepted without reference to financial ability to make repayment.

(c) Determinations and authorizations of payments under this section
must be made in the manner specified in Section 33-8-550.

Section 33-8-540. Court-Ordered Indemnification. Unless a
corporation's articles of incorporation provide otherwise, a director of
the corporation who is a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court
of competent jurisdiction. On receipt of an application, the court after
giving any notice the court considers necessary may order indemnification
if it determines: (1) the director is entitled to mandatory indemnification
under Section 33-8-520, in which case the court also shall order the
corporation to pay the director's reasonable expenses incurred to obtain
court-ordered indemnification; or (2) the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not he met the standard of conduct set forth in Section 33-8-510
or was adjudged liable as described in Section 33-8-510(d), but if he was
adjudged so liable his indemnification is limited to reasonable expenses
incurred.

Section 33-8-550. Determination and Authorization of
Indemnification. (a) A corporation may not indemnify a director under
Section 33-8-510 unless authorized in the specific case after a
determination has been made that indemnification of the director is
permissible in the circumstances because he has met the standard of conduct
set forth in Section 33-8-510.

(b) The determination must be made: (1) by the board of directors by
majority vote of a quorum consisting of directors not at the time parties
to the proceeding; (2) if a quorum cannot be obtained under subdivision
(1), by majority vote of a committee duly designated by the board of
directors (in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to the
proceeding; (3) by special legal counsel: (i) selected by the board of
directors or its committee in the manner prescribed in item (1) or (2); or
(ii) if a quorum of the board of directors cannot be obtained under
subdivision (1) and a committee cannot be designated under subdivision (2),
selected by majority vote of the full board of directors (in which
selection directors who are parties may participate); or (4) by the
shareholders, but shares owned by or voted under the control of directors
who are at the time parties to the proceeding may not be voted on the
determination.

(c) Authorization of indemnification and evaluation as to
reasonableness of expenses must be made in the same manner as the
determination that indemnification is permissible, except that, if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to the reasonableness of expenses must be
made by those entitled under subsection (b)(3) to select counsel.

Section 33-8-560. Indemnification of officers, employees, and
agents. Unless a corporation's articles of incorporation provide
otherwise: (1) an officer of the corporation who is not a director is
entitled to mandatory indemnification under Section 33-8-520, and is
entitled to apply for court-ordered indemnification under Section 33-8-540,
in each case to the same extent as a director; (2) the corporation may
indemnify and advance expenses under this subchapter to an officer,
employee, or agent of the corporation who is not a director to the same
extent as to a director; and (3) a corporation also may indemnify and
advance expenses to an officer, employee, or agent who is not a director to
the extent,

II-2
<PAGE> 96

consistent with public policy that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of
directors, or contract.

Section 33-8-570. Insurance. A corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the corporation, or who while a director, officer,
employee, or agent of the corporation, is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise, trust, employee
benefit plan, or other enterprise, against liability asserted against or
incurred by him in that capacity or arising from his status as a director,
officer, employee, or agent, whether or not the corporation would have
power to indemnify him against the same liability under Section 33-8-510 or
33-8-520.

Chapter 8, Article 5 of the South Carolina Code also permits a corporation
to purchase and maintain insurance on behalf of a person who is or was an
officer or director. The Company maintains directors' and officers' liability
insurance.

The Company's Bylaws provide that the Company shall, to the fullest extent
permitted by Section 33-13-180 of the South Carolina Code from time to time,
indemnify all persons whom it may indemnify pursuant thereto. The Company's
Bylaws further provide that the Company may purchase insurance to effect such
indemnification.

Reference is made to Chapter 2 of Title 33 of the 1976 Code of Laws of
South Carolina, as amended, respecting the limitation in a corporation's
articles of incorporation of the personal liability of a director for breach of
the director's fiduciary duty. Reference is made to the Company's Articles of
Amendment filed with the South Carolina Secretary of State on May 26, 1989 which
state:

A director of the corporation shall not be personally liable to the
corporation or any of its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision shall not be
deemed to eliminate or limit the liability of a director (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involved gross
negligence, intentional misconduct, or a knowing violation of law, (iii)
imposed under Section 33-8-330 of the South Carolina Business Corporation
Act of 1988 (improper distribution to shareholder), or (iv) for any
transaction from which the director derived an improper personal benefit.

ITEM 15: RECENT SALES OF UNREGISTERED SECURITIES

For the three years immediately preceding the date hereof, Emergent Group,
Inc. has not sold any securities that were not registered under the Securities
Act of 1933, as amended, except as follows:

In the past three years, the Company has issued options to purchase an
aggregate of 378,536 shares of Common Stock to a total of 16 Company
officers and, upon exercise of certain of these options, issued Common
Stock and Class A Common Stock in accordance with the terms thereof. These
options were issued pursuant to Company stock option plans. These
securities were exempt from federal registration under Section 4(2) of the
Securities Act.

In 1996, the Company issued 10,500 shares of restricted stock to
certain of its directors under the Company's Restricted Stock Agreement
Plan. These securities were exempt from federal registration under Section
4(2) of the Securities Act.

II-3
<PAGE> 97

ITEM 16: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) Exhibits ("*" indicates previously filed exhibits)

<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Amended and Restated Articles of Incorporation dated September 20, 1978:
Incorporated by reference to Exhibit 3.1 of the Company's Registration Statement
on Form S-1, Commission File No. 2-62723 (the "1978 Registration Statement").
3.2 -- Articles of Amendment as filed with the Secretary of State of South Carolina on
June 5, 1984: Incorporated by reference to Item 6(a) of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1984, Commission File No.
0-8909.
3.3 -- Articles of Amendment as filed with the Secretary of State of South Carolina on
December 27, 1985: Incorporated by reference to Current Report on Form 8-K dated
January 2, 1986, Commission File No. 0-8909.
3.4 -- Articles of Amendment as filed with the Secretary of State of South Carolina on
August 23, 1991: Incorporated herein by reference to Quarterly Report on Form
10-Q for the quarter ended September 30, 1991, Commission File No. 0-8909.
3.5 -- Restated By-Laws: Incorporated by reference to Exhibit 3.2 of the 1978
Registration Statement.
3.6 -- Amendment to Bylaws: Incorporated by reference to Quarterly Report on Form 10-Q
for the quarter ended September 30, 1991, Commission File No. 0-8909.
3.7 -- Form of Warrant: Incorporated herein by reference to the Company's Report on Form
10-K for the year ended December 31, 1985, File No. 0-8909.
3.8 -- Articles of Amendment as filed with the Secretary of State of South Carolina on
April 19, 1996: Incorporated by reference to Exhibit 3.1 in the Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996, Commission File No. 0-8909.
4.1 -- See Exhibits 3.1 through 3.7.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding legality of shares of
the Company.*
10.1 -- Emergent Group, Inc. Stock Option Plan.*
10.2 -- 1995 Officer and Employee Stock Option Plan: Incorporated by reference to an
exhibit filed with the Company's 1995 Notice of Annual Meeting and Proxy
Statement, Commission File No. 0-8909.
10.3 -- 1995 Director Stock Option Plan: Incorporated by reference to an exhibit filed
with the Company's 1995 Notice of Annual Meeting and Proxy Statement.
10.4 -- 1995 Restricted Stock Agreement Plan.*
10.5 -- Agreement between Carolina Investors, Inc. and First Greensboro Home Equity, Inc.
(subject to pending application under Rule 406 of Regulation C).
10.6 -- Agreement between Carolina Investors, Inc. and Prime Investors, Inc. (subject to
pending application under Rule 406 of Regulation C).
10.7 -- Agreement between Carolina Investors, Inc. and AmeriFund Group, Inc. (subject to
pending application under Rule 406 of Regulation C).
10.8 -- Loan and Security Agreement dated December 19, 1993 between BankAmerica Business
Credit, Inc. and The Loan Pro$, Inc.*
10.9 -- Loan and Security Agreement dated April 10, 1995 between BankAmerica Business
Credit, Inc. and Premier Financial Services, Inc.*
10.10 -- Loan and Security Agreement dated December 29, 1993 between NationsBank of
Georgia and Emergent Business Capital, as amended.*
10.11 -- Loan and Security Agreement dated October 10, 1995 between NationsBank of Georgia
and Emergent Commercial Mortgage.*
</TABLE>

II-4
<PAGE> 98

<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <C> <S>
10.12 -- Mortgage Loan Warehousing Agreement dated November 22, 1994 between First Union
National Bank of North Carolina and Carolina Investors, Inc.*
10.13 -- Mortgage Loan Warehousing Agreement dated March 6, 1996 between First Union
National Bank of North Carolina and Emergent Mortgage Corporation, as amended.
Incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995. Commission File No. 0-8909.
10.14 -- The Pooling and Servicing Agreement dated as of June 29, 1995 between Emergent
Business Capital, Inc., as Seller and Servicer, and First Union National Bank of
North Carolina, as Trustee: Incorporated by reference to Exhibit 28.1 to the
Company's Current Report on Form 8-K dated June 29, 1995, Commission File No.
0-8909.
10.15 -- Certificate Purchase Agreement between the Placement Agent, as initial purchaser,
and the Company: Incorporated by reference to Exhibit 28.1 to the Company's
Current Report on Form 8-K dated June 29, 1995, Commission File No. 0-8909.
10.16 -- Amendment to Loan and Security Agreement dated April 10, 1995 between BankAmerica
Business Credit, Inc. and Premier Financial Services, Inc.
10.17 -- Amendment to Loan and Security Agreement dated December 29, 1993 between
NationsBank of Georgia and Emergent Business Capital.
10.18 -- Amendment to Mortgage Loan Warehousing Agreement dated November 22, 1994 between
First Union National Bank of North Carolina and Carolina Investors, Inc.
21.1 -- Listing of subsidiaries.*
24.1 -- Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in Exhibit 5.1.
24.2 -- Consent of Elliott, Davis & Company, L.L.P.: Contained in Part II at II-7.
25.1 -- The Power of Attorney*
</TABLE>

(B) Financial Statement Schedules. Not applicable

ITEM 17: UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(b) The undersigned Registrant hereby undertakes that:

(1) for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 99

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 2 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Greenville, State
of South Carolina, on May 22, 1996.

EMERGENT GROUP, INC.

By: /s/ JOHN M. STERLING, JR.
------------------------------------
John M. Sterling, Jr.,
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- -------------
<C> <S> <C>
/s/ JOHN M. STERLING, JR. Chairman of the Board of May 22, 1996
- --------------------------------------------- Directors; CEO (principal
John M. Sterling, Jr. executive officer)

/s/ KEITH B. GIDDENS * Director; Executive Vice May 22, 1996
- --------------------------------------------- President; Chief Operating
Keith B. Giddens Officer
/s/ ROBERT S. DAVIS * Director; Chief Financial Officer May 22, 1996

- --------------------------------------------- (principal financial and
Robert S. Davis accounting officer)

/s/ CLARENCE B. BAUKNIGHT * Director May 22, 1996
- ---------------------------------------------
Clarence B. Bauknight

/s/ JACOB H. MARTIN * Director May 22, 1996
- ---------------------------------------------
Jacob H. Martin

/s/ PORTER B. ROSE * Director May 22, 1996
- ---------------------------------------------
Porter B. Rose

/s/ BUCK MICKEL * Director May 22, 1996
- ---------------------------------------------
Buck Mickel

/s/ TECUMSEH HOOPER, JR. * Director May 22, 1996
- ---------------------------------------------
Tecumseh Hooper, Jr.

*By: /s/ JOHN M. STERLING, JR.
- ---------------------------------------------
John M. Sterling, Jr.,
Attorney-in-fact
</TABLE>

II-6
<PAGE> 100

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 31, 1996, in the Amendment No. 2 to
Registration Statement (Form S-1) and related Prospectus of Emergent Group, Inc.
for the registration of 3,059,000 shares of its Common Stock.

ELLIOTT, DAVIS & COMPANY, L.L.P.

Greenville, South Carolina

May 23, 1996

<PAGE> 101

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Amended and Restated Articles of Incorporation dated September 20, 1978:
Incorporated by reference to Exhibit 3.1 of the Company's Registration Statement
on Form S-1, Commission File No. 2-62723 (the "1978 Registration Statement").
3.2 -- Articles of Amendment as filed with the Secretary of State of South Carolina on
June 5, 1984: Incorporated by reference to Item 6(a) of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1984, Commission File No.
0-8909.
3.3 -- Articles of Amendment as filed with the Secretary of State of South Carolina on
December 27, 1985: Incorporated by reference to Current Report on Form 8-K dated
January 2, 1986, Commission File No. 0-8909.
3.4 -- Articles of Amendment as filed with the Secretary of State of South Carolina on
August 23, 1991: Incorporated herein by reference to Quarterly Report on Form
10-Q for the quarter ended September 30, 1991, Commission File No. 0-8909.
3.5 -- Restated By-Laws: Incorporated by reference to Exhibit 3.2 of the 1978
Registration Statement.
3.6 -- Amendment to Bylaws: Incorporated by reference to Quarterly Report on Form 10-Q
for the quarter ended September 30, 1991, Commission File No. 0-8909.
3.7 -- Form of Warrant: Incorporated herein by reference to the Company's Report on Form
10-K for the year ended December 31, 1985, File No. 0-8909.
3.8 -- Articles of Amendment as filed with the Secretary of State of South Carolina on
April 19, 1996: Incorporated herein by reference to Exhibit 3.1 in the Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996, Commission File No.
0-8909.
4.1 -- See Exhibits 3.1 through 3.7.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding legality of shares of
the Company.*
10.1 -- Emergent Group, Inc. Stock Option Plan.*
10.2 -- 1995 Officer and Employee Stock Option Plan: Incorporated by reference to an
exhibit filed with the Company's 1995 Notice of Annual Meeting and Proxy
Statement, Commission File No. 0-8909.
10.3 -- 1995 Director Stock Option Plan: Incorporated by reference to an exhibit filed
with the Company's 1995 Notice of Annual Meeting and Proxy Statement.
10.4 -- 1995 Restricted Stock Agreement Plan.*
10.5 -- Agreement between Carolina Investors, Inc. and First Greensboro Home Equity, Inc.
(subject to pending application under Rule 406 of Regulation C).
10.6 -- Agreement between Carolina Investors, Inc. and Prime Investors, Inc. (subject to
pending application under Rule 406 of Regulation C).
10.7 -- Agreement between Carolina Investors, Inc. and AmeriFund Group, Inc. (subject to
pending application under Rule 406 of Regulation C).
10.8 -- Loan and Security Agreement dated December 19, 1993 between BankAmerica Business
Credit, Inc. and The Loan Pro$, Inc.*
10.9 -- Loan and Security Agreement dated April 10, 1995 between BankAmerica Business
Credit, Inc. and Premier Financial Services, Inc.*
10.10 -- Loan and Security Agreement dated December 29, 1993 between NationsBank of
Georgia and Emergent Business Capital, as amended.*
</TABLE>

<PAGE> 102

<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <C> <S>
10.11 -- Loan and Security Agreement dated October 10, 1995 between NationsBank of Georgia
and Emergent Commercial Mortgage.*
10.12 -- Mortgage Loan Warehousing Agreement dated November 22, 1994 between First Union
National Bank of North Carolina and Carolina Investors, Inc.*
10.13 -- Mortgage Loan Warehousing Agreement dated March 6, 1996 between First Union
National Bank of North Carolina and Emergent Mortgage Corporation, as amended.
Incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995. Commission File No. 0-8909.
10.14 -- The Pooling and Servicing Agreement dated as of June 29, 1995 between Emergent
Business Capital, Inc., as Seller and Servicer, and First Union National Bank of
North Carolina, as Trustee: Incorporated by reference to Exhibit 28.1 to the
Company's Current Report on Form 8-K dated June 29, 1995, Commission File No.
0-8909.
10.15 -- Certificate Purchase Agreement between the Placement Agent, as initial purchaser,
and the Company: Incorporated by reference to Exhibit 28.1 to the Company's
Current Report on Form 8-K dated June 29, 1995, Commission File No. 0-8909.
10.16 -- Amendment to Loan and Security Agreement dated April 10, 1995 between BankAmerica
Business Credit, Inc. and Premier Financial Services, Inc.
10.17 -- Amendment to Loan and Security Agreement dated December 29, 1993 between
NationsBank of Georgia and Emergent Business Capital.
10.18 -- Amendment to Mortgage Loan Warehousing Agreement dated November 22, 1994 between
First Union National Bank of North Carolina and Carolina Investors, Inc.
21.1 -- Listing of subsidiaries.*
24.1 -- Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in Exhibit 5.1.
24.2 -- Consent of Elliott, Davis & Company, L.L.P.: Contained in Part II at II-7.
25.1 -- The Power of Attorney*
</TABLE>

* Previously filed

<PAGE> 1

EXHIBIT 10.5

REVISED AND RESTATED AGREEMENT

THIS REVISED AND RESTATED AGREEMENT is entered into by and between
Emergent Mortgage Corp. ("EMC"),Carolina Investors, Inc. ("CII"),
CambridgeBanc, Inc. ("CB")(collectively "EMC") and First Greensboro Home
Equity, Inc. and its subsidiary, First Greensboro Home Equity of Arkansas, Inc.
(collectively "FGHE").

RECITALS

1. As of January 1, 1996, the parties wish to revise and restate
their Agreement entered into in June of 1994.

2. FGHE is in the business of making home equity loans and
providing credit underwriting to residents of North Carolina, South Carolina,
Arkansas, and such other states as the parties may agree to from time to time,
secured by first and second residential mortgages.

3. EMC is willing to provide funds with which certain loans
originated by FGHE ("Qualified Mortgages") may be closed and funded, with each
such loan to be immediately assigned to EMC at closing, in consideration of the
funds so advanced by EMC.

4. EMC will attempt to package and sell blocks of Qualified
Mortgages except as set forth herein. CONFIDENTIAL PORTION DELETED.

AGREEMENT

1. Funding of Loans. From time to time during the term of this
Agreement, FGHE will submit Loan Approval Information and Funding Requests to
EMC substantially in the form of the attached Exhibits A1 and A2 with respect
to Qualified Mortgages. Each such Funding Request will be submitted not less
than two (2) days prior to the proposed closing date or funding date, whichever
applies, of such Qualified Mortgage and EMC will promptly advise FGHE of its
approval or disapproval, which shall be within EMC's sole discretion, of each
such Funding Request.

a. For purposes of this Agreement, the term "Qualified Mortgage"
means a first or second mortgage home loan which is made by
FGHE and closed by FGHE's attorney in compliance with all
applicable federal, state and local statutes, rules and
regulations and which meets the underwriting criteria of this
Agreement set forth on Exhibit B, as such underwriting
criteria may be modified from time to time by the parties.
EMC shall be entitled to audit FGHE's credit underwriting
standards and practices on a quarterly basis upon fifteen (15)
day prior written notice.

b. Upon EMC's approval of a Funding Request for a Qualified
Mortgage, FGHE shall retain an approved attorney, listed on
the attached Exhibit C (such list of approved attorneys may be
amended and supplemented from time to time by mutual agreement
of the parties) to close such Qualified Mortgage and shall
direct such attorney as follows:

(i) The Qualified Mortgage shall be closed with FGHE as
Lender (except North

<PAGE> 2

Carolina Second Mortgages, which will be closed in
EMC's name) in compliance with all applicable
statutes, rules and regulations, with the
documentation listed on the attached Exhibit D and
such additional documentation as such attorney deems
necessary or advisable to comply with applicable law
(all such documentation is referred to herein
collectively as "Loan Documents"), to document
adequately the loan and to record and perfect the
Lender's security interest and lien over all
collateral for the loan.

(ii) Not less than CONFIDENTIAL PORTION DELETED
business days prior to the Qualified Mortgage closing
or funding date, whichever applies, such attorney
will request funding of such loan by providing a
certificate to EMC substantially in the form of
Exhibit E, which certificate shall be transmitted to
EMC by facsimile and overnight mail.

(iii) Upon receipt of the aforesaid closing attorney's
certificate with respect to an approved Qualified
Mortgage, EMC shall fund the amount of such loan by
wire transfer or Automated Clearing House Transfer to
the closing attorney's account.

(iv) Upon the closing of a Qualified Mortgage, FGHE will
provide the closing attorney with a duly executed
assignment of such Qualified Mortgage to EMC
substantially in the form of Exhibit F.

(v) No later than the first business day following the
closing or funding date, whichever applies, of a
Qualified Mortgage, the closing attorney shall
forward to EMC by overnight mail, the original
Mortgage Note signed by the borrower, a certified
copy of the assignment of such Qualified Mortgage
(Note and Mortgage) to EMC and a copy of the Mortgage
as executed by the Borrower, certified by the closing
attorney to be a true and correct copy, including a
recorder's receipt showing recordation of such
Mortgage in the appropriate governmental office.

(vi) The remaining Loan Documents will be forwarded by
the Closing Attorney to FGHE which will promptly, and
in any event prior to the expiration of
CONFIDENTIAL PORTION DELETED days, deliver such
Loan Documents to EMC; with exception of the Recorded
Assignment and Mortgage which will be delivered to
EMC prior to the expiration of 30 days, unless delay
is requested of and authorized by EMC for reasonable
cause.

2. Sale of Loans. EMC will package blocks of Qualified Mortgages
and sell them to institutional buyers on a monthly basis. CONFIDENTIAL PORTION
DELETED In soliciting bids for the blocks of Qualified Mortgages, EMC will
communicate with FGHE and seek its comments prior to notifying the ultimate
purchaser.

a. CONFIDENTIAL PORTION DELETED

<PAGE> 3

b. The term "Loss" shall mean the amount of any shortfall between
the sales proceeds received by EMC and the total amount of
advances made to fund the closing of such loans (less any
principal repayments received by EMC from the borrowers of
such loans).

c. CONFIDENTIAL PORTION DELETED shall retain all interest on
loans which accrues through the date of sale of such loan,
regardless of whether such interest is paid by the borrower or
handled as a prorated item upon the sale of such loans.

d. EMC shall render an accounting to FGHE of each block of loans
sold, specifying the loans included in such block, the
identity of the buyer, the purchase price and terms of the
sale, and the CONFIDENTIAL PORTION DELETED Upon reasonable
notice to EMC, FGHE shall have the right, at its own expense,
to inspect the books and records of EMC in order to confirm
the accuracy of such accountings.

2.1 Unsold Blocks of Qualified Mortgages. In the event that EMC
chooses not to sell a block of Qualified Mortgages pursuant to 2. above, but
instead wishes to hold such block as part of its own portfolio, then when the
"average holding period" of Qualified Mortgages in such block has exceeded one
month, CONFIDENTIAL PORTION DELETED

a. The term "average holding period", as used herein means the
median elapsed term of all of the Qualified Mortgages in a
block, measured from the date on which each Qualified Mortgage
was funded to or for the benefit of the borrower, eg. the
average holding period exceeds one month when one-half or more
of the Qualified Mortgages have an elapsed term of 30 days or
more.

3. Primary Financing Only ("PFO Loans).

"PFO" loans are defined as second mortgage loans closed in
conjunction with a first mortgage loan. FGHE shall close and
EMC shall purchase "PFO" loans based upon criteria in Exhibit
B.

a. During the time EMC holds each such loan, the parties
agree that:

(i) EMC will remit to FGHE CONFIDENTIAL PORTION
DELETED, as a fee for servicing the "PFO"
loans.

(ii) FGHE will service any delinquent loans and
process any necessary foreclosure or other
collection actions, at its own expense;
CONFIDENTIAL PORTION DELETED

4. Title I Loans.

The parties agree when FGHE is licensed as an approved Title I
Lender that:

3
<PAGE> 4

a. FGHE will originate and close Title I Loans in its
name following the underwriting criteria as set forth
in Exhibit B, and such underwriting criteria may be
modified from time to time by the parties.

b. CambridgeBanc, a sister company of EMC, willfund the
Title I Loans, with FGHE immediately assigning to
CambridgeBanc at closing such Title I Loans in
consideration for the funds so advanced by
CambridgeBanc.

c. Title I Loans originated and closed under the
underwriting guidelines as set forth in Exhibit B
shall be considered "Qualified Mortgages" under the
agreement and all other terms of this agreement shall
apply to the Title I Loans closed under this
agreement.

5. Wholesale Loans (Non-Retail Loans)

The parties agree to the following:

a. In order to help FGHE start a wholesale loan program,
CONFIDENTIAL PORTION DELETED EMC shall have the
right to audit FGHE's CONFIDENTIAL PORTION DELETED
on a quarterly basis.

6. Representations and Warranties.

a. EMC hereby represents and warrants as follows:

(i) EMC is a corporation duly organized, validly existing
and in good standing under the laws of South Carolina
and is qualified to do business in each other
jurisdiction in which such qualification is required
or where EMC maintains an office or does substantial
business.

(ii) All corporate actions required to be taken by or on
behalf of EMC to authorize its execution of this
Agreement and the performance of its obligations
hereunder have been fully and properly taken. The
execution and consummation of this Agreement and the
transactions contemplated hereby do not and will not
violate any corporate charter, bylaw, contract,
indenture, agreement, covenant or understanding by
which EMC is bound or to which is a party, or any
applicable law or regulation; or require the consent
of any governmental authority (unless such consent
has been obtained).

(iii) EMC is in compliance with all applicable laws and
regulations. There are no actions, suits or
proceedings pending, or, to the knowledge of EMC,
threatened against EMC in any court or before any
administrative or regulatory agency the adverse
outcome of which EMC would have a material adverse
effect on the assets and business of EMC.

4
<PAGE> 5

b. FGHE hereby represents and warrants as follows:

(i) First Greensboro Home Equity, Inc. is a corporation
duly organized, validly existing and in good standing
under the laws of North Carolina and is qualified to
do business in South Carolina, North Carolina and
Arkansas and in each other jurisdiction in which such
qualification is required or where it maintains an
office or does substantial business. First
Greensboro Home Equity of Arkansas, Inc. is a
corporation duly organized, validly existing and in
good standing under the laws of North Carolina and is
qualified to do business in Arkansas and in each
other jurisdiction in which such qualification is
required.

(ii) FGHE possesses all necessary licenses and meets all
other legal requirements to lend funds giving rise to
Qualified Mortgages and to sell Qualified Mortgages
to EMC.

(iii) All corporate actions required to be taken by or on
behalf of FGHE to authorize its execution of this
Agreement and the performance of its obligations
hereunder have been fully and properly taken. The
execution and consummation of this Agreement and the
Qualified Mortgages contemplated hereby do not and
will not violate any corporate charter, bylaw,
contract, indenture, agreement, covenant or
understanding by which EMC is bound or to which is a
party, or any applicable law or regulation; or
require the consent of any governmental authority
(unless such consent has been obtained).

(iv) FGHE is in compliance with all applicable laws and
regulations. There are no actions, suits or
proceedings pending, or, to the knowledge of FGHE,
threatened against FGHE in any court or before any
administrative or regulatory agency the adverse
outcome of which FGHE would have a material adverse
effect on the assets and business of FGHE.

(v) No fee or other charges shall be made by FGHE with
respect to any loan hereunder except for fees which
are reasonable and customary in the locality for the
services provided and which are imposed in full
compliance with all applicable federal, state and
local laws and regulations.

(vi) The owners of FGHE, including all beneficial owners,
are listed on Exhibit G. Each such owner agrees by
execution of this Agreement that it will not sell,
assign or transfer any of its ownership interest in
FGHE to anyone other than those persons listed in
Exhibit G without first offering such interest to
EMC, in writing, upon the same terms and conditions
as the proposed sale, assignment or transfer to a
third party. EMC shall have ten (10) days after the
receipt of such offer to accept such offer. FGHE
agrees that it will not sell, assign or transfer all
or substantially all of its assets without first
offering such assets to EMC, in writing, upon the
same terms and conditions as such proposed sale.

<PAGE> 6

(vii) FGHE will offer to EMC under this Agreement all of
the Qualified Mortgages which it underwrites or
generates, up to $ CONFIDENTIAL PORTION DELETED
face amount per month, but not less than
CONFIDENTIAL PORTION DELETED face amount per
month, unless both EMC and FGHE agree otherwise, by
written amendment of this Agreement.

(c) Representations and warranties with respect to Qualified
Mortgages. At the time of transfer and conveyance of each
Qualified Mortgage to EMC, FGHE hereby represents and warrants
to EMC (which representations and warranties shall survive the
purchase and shall continue in full force and effect until
such Qualified Mortgages are paid in full) with respect to
each such Qualified Mortgage, as follows:

(i) FGHE is the sole and lawful owner of the Qualified
Mortgage and EMC will receive good and marketable
title thereto free and clear of any and all liens,
encumbrances, claims and rights of any party
whatsoever.

(ii) No previous transfer or assignment of the Qualified
Mortgage will be effective and no other party has any
option of first refusal or other arrangement to
acquire, directly or indirectly, the Qualified
Mortgage.

(iii) All Qualified Mortgage Loan Documents (i) conform to
all applicable laws and regulations; (ii) are true,
valid, genuine and complete in all respects; (iii)
are enforceable against borrower in accordance with
their terms; and (iv) are subject to no defense,
claim or disability, counterclaim, offset or pending
bankruptcy. No defense, claim, disability,
counterclaim, or offset as described above will arise
against EMC by virtue of the sale of the Qualified
Mortgage or assignment of the Qualified Mortgage
Documents under this Agreement. No suit, foreclosure
or any other legal action or preceding has been
brought by FGHE in accordance with its handling of
the Qualified Mortgages.

(iv) All Qualified Mortgage Loan Documents are completed
in compliance with all applicable laws and
regulations, and all computations made with respect
to any Qualified Mortgages are accurate.

(v) Each action taken by FGHE with respect to the
Qualified Mortgage and each Note, loan application,
agreement, form, letter, notice, statement, or other
materials used by FGHE in connection with the
origination, servicing and sale of each such
Qualified Mortgage, complies in all material respects
with all applicable laws and regulations, including
without limitation: the Consumer Credit Protection
Act and Regulation Z under Title I thereof; laws
respecting obtaining and/or using credit reports and
other information concerning individuals (including,
without limitation, the Fair Credit Reporting Act);
the Equal Credit Opportunity Act and Regulation B
thereunder; laws relating to unfair, deceptive, or
unconscionable acts and practices; laws governing the
sale of insurance (including, without limitation,
credit life insurance); federal laws

6
<PAGE> 7

and regulations relating to such Qualified Mortgages
(including without limitation, the Real Estate
Settlement Practices Act, as amended); the Flood
Disaster Protection Act; and all applicable federal,
state and local statutes, regulations, ordinances,
and administrative rulings.

(vi) There is due and owing on the Qualified Mortgage the
amount represented by FGHE to be due thereon.

(vii) With respect to each Qualified Mortgage which is a
deed of trust, a trustee, duly qualified under
applicable law to serve as such, has been properly
designated, serving and named in such deed of trust.
Except in connection with a trustee's sale after
default by the obligor, no fees or expenses are
payable by FGHE to the trustee under any deed of
trust.

(viii) The Qualified Mortgage has not arisen from a renewal
granted for the purpose of concealing from EMC a
delinquency, and no collateral purporting to secure
the Note has been repossessed or disposed of or
foreclosed against by FGHE. No officer, director,
partner, employee or agent of FGHE (or of any
assignor of the Qualified Mortgage or of any broker
referring the Borrower under the Qualified Mortgage),
nor the FGHE has received any direct or indirect
benefit, fee, commission or other consideration or
value from any Borrower or from anyone else in
connection with the Qualified Mortgage (other than as
disclosed to EMC in writing); nor has any such person
made, directly or indirectly, any payment on the Note
or on any of its officers, directors, partners,
employees or agents has made any agreement with any
Borrower providing for any variation of the interest
rate, schedules of payment or other terms and
conditions of the Note; and neither FGHE or any of
its officers, directors, partners, employees or
agents has received a request for approval of, or
notice of any proposed assumption, loss draft or
payoff of, the Qualified Mortgage.

(ix) A lender's title insurance policy regarding each
Qualified Mortgage became effective as of the
origination of such Qualified Mortgage, is, and shall
be, valid and is, and shall remain, in full force and
effect; such title insurance shows whether any prior
lien secures an open-end obligation requiring future
advances; any such insurance policy has been issued
by a title insurer qualified to do business in the
state in which the real property subject to a
Qualified Mortgage is located, insuring the priority
of the lien of the loan in the original principal
amount of such loan, which policy is in the then
current American Land Title Association or a state
land title association form customarily used in the
state in which the insured property is located.

(x) The real property under each Qualified Mortgage is
insured, under standard homeowner's hazard and
casualty insurance policies, with appropriate
mortgagee clauses, for an amount equal to the loan
amount or more.

7
<PAGE> 8

(xi) All real estate appraisals made in connection with
each Qualified Mortgage shall have been performed in
accordance with industry standards in the appraising
industry in the area where the appraised property is
located. Any disputes regarding appraisal accuracy
shall be submitted to an impartial appraiser,
appointed by EMC, whose judgment shall be
determinative as to the accuracy of any appraisal.

(xii) There shall be no homestead or other exemption
available to the obligor of any Qualified Mortgage
which would interfere with the right to sell at a
trustee's sale or the right to foreclosure.

(xiii) There shall be no holder in due course claim or any
claim against any third party available to the
obligor of any Qualified Mortgage which would
interfere with the Mortgagee's right to enforce the
Qualified Mortgage, to sell at a trustee's sale, or
the right to foreclosure.

(xiv) FGHE shall be responsible for the misfeasance,
malfeasance or fraudulent acts of its employees or
agents.

(xv) The Qualified Mortgage is secured by a valid and
subsisting first or second priority lien or security
interest on the property as reflected in the Loan
Documents, and such lien or security interest in or
on Borrower's real and personal property
collateralizing the Note (including fixtures) is
valid and has been properly filed, recorded (or
received by the title insurance company for
recording) or otherwise perfected in accordance with
applicable law; and the Qualified Mortgage is insured
by a mortgage title insurance policy (or commitment
for same, the conditions having been satisfied).

(xvi) Each of the above representations and warranties (a)
applies to any and all Qualified Mortgages sold to
EMC hereunder; (b) is for the benefit of EMC and each
of its successors and assigns; (c) continues in full
force and effect for so long as the Note remains
outstanding and for such time as EMC is subject to
any risk of loss or liability as to any Qualified
Mortgage purchased from FGHE hereunder; (d) is in
addition to any other specific warranties contained
elsewhere herein; and (e) is made by FGHE on its
behalf and on the behalf of any third party
originator of any Qualified Mortgage which may be
sold hereunder in accordance with Section 2.

7. Limited Power of Attorney.

a) FGHE hereby makes, constitutes and appoints EMC, its
successors and assigns, as FGHE's true and lawful attorneys,
with full power substitution in name of FGHE or otherwise,
whether in relation to real, personal, tangible or intangible
property, to do any and all of the following:

8
<PAGE> 9

(i) To bill, demand, sue for, receive, collect, sign,
endorse, assign or comprise any and all notes,
checks, money orders or monies due on any Qualified
Mortgages sold to EMC, and to receive, sign, endorse,
or assign any orders, certificates, insurance
policies and all benefits under any other instruments
or documents as may from time to time be necessary or
appropriate to accomplish the sales and transfers
provided for by this Agreement;

(ii) To complete, execute and record any assignment or
other document, including financing statements
covering any such collateral;

(iii) To exercise or perform any act, power or duty that
FGHE has or would have in connection with the
Qualified Mortgages purchased by EMC, or which are
reasonable in order to protect EMC's interest in the
collateral securing said Qualified Mortgage.

b. FGHE agrees that the foregoing powers are coupled with an
interest and are irrevocable notwithstanding FGHE's
dissolution, merger, consolidation or other corporate
reorganization or structural change or any other reason
whatsoever.

c. FGHE will, at EMC's reasonable request from time to time,
execute one or more appropriate separate instruments
evidencing the powers granted EMC in this Section, in form
suitable for recordation.

5. Opinion of Counsel; Certified Resolutions.

a. Prior to the time that EMC first purchases any Qualified
Mortgages from FGHE under this Agreement, FGHE shall provide
to EMC an Opinion of Counsel to FGHE, in form and substance
satisfactory to EMC, stating that as of the date of such
Opinion:

(i) FGHE (a) is a corporation duly organized, validly
existing, and in good standing under the laws of the
state of its incorporation or organization; (b) has
the requisite power and authority and the legal right
to conduct its business as now and heretofore
conducted; (c) has all necessary licenses, permits,
consents or approvals from or by, has made all
necessary filings with, and has given all necessary
notices to, all governmental authorities having
jurisdiction, to the extent required to conduct its
business as now conducted in all locations where it
conducts business, and to the extent necessary to
assure the enforceability of each Note and Mortgage
in any location in which any mortgaged property is
located; and (d) is in compliance with its
certificate of incorporation and bylaws or other
governing documents.

(ii) The execution, delivery and performance of this
Agreement and all instruments and documents delivered
or to be delivered by FGHE pursuant to this
Agreement, and the origination and sale by FGHE of
each Qualified Mortgage hereunder (a) are within
FGHE's corporate power and authority; (b) have been

9
<PAGE> 10

duly authorized by all necessary or proper corporate
action; (c) are not in contravention of any provision
of FGHE's certificate of incorporation or bylaws; (d)
will not violate any law or regulation or any order
or decree of any court or governmental authority; (e)
will not conflict with or result in the breach of, or
constitute a default with respect to, any agreement
or other instrument to which FGHE is a party or by
which FGHE of any of its property is bound; and (f)
do not require any filing or registration with, or
the consent or approval of, any governmental
authority or any other person which has not been made
or obtained previously.

(iii) This Agreement has been duly executed and delivered
by FGHE, and is a valid, legal and binding obligation
of FGHE enforceable in accordance with its terms
except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership,
moratorium or other laws relating to or affecting the
rights of creditors generally, and by general
principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity
or at law).

(iv) No action, claim, or proceeding is now pending or, to
the knowledge of counsel, threatened against FGHE at
law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any federal,
state, or local government or of any agency or
subdivision thereof or before any arbitrator or panel
of arbitrators which, if adversely determined, (a)
would result in a liability of FGHE in an amount
greater than $10,000, (b) questions the validity of
any Note or Security Instrument, or (c) could, wither
individually or in the aggregate, result in any
material adverse change in the business, operations,
property or financial or other condition of FGHE.

b. Certified copies of any resolution or document of consent of
the board of directors or other appropriate governing body of
FGHE authorizing the execution of this Agreement and the
performance of its obligations hereunder, and evidencing the
authority of the executing officer(s) to execute this
Agreement and all other documents, instruments and
certificates related hereto and to the transactions
contemplated hereunder.

9. Meetings and Financial Statement. The principal officers of
EMC and FGHE agree to meet on a quarterly or more frequent basis to discuss all
information pertinent to this Agreement, its implementation and continuation.
Each party will provide the other with copies of its quarterly financial
statements, including balance sheet, income statement and statement of changes
in financial position, all within 30 days of the close of each fiscal quarter.

10. Term of Agreement; Damages For Wrongful Termination or Breach.

a. The term of this Agreement shall be three (3) years. Either
party shall be entitled to terminate this Agreement upon
twelve (12) months prior written notice given to the other

<PAGE> 11

party, provided that such notice is given after December 31,
1996.

b. If either party causes a Wrongful Termination of this
Agreement, as defined below or fails to cure a material breach
of its obligations hereunder within 30 days after written
demand by the other party, then the other party (the "Injured
Party") shall be entitled to recover from such party, as
damages, an amount equal to the total CONFIDENTIAL PORTION
DELETED earned by the Injured Party under this Agreement
during the preceding twelve (12) months.

c. A Wrongful Termination shall include any termination other
than:

(i) Termination by mutual written agreement of the
parties;

(ii) Termination by EMC in the event that CONFIDENTIAL
PORTION DELETED

(iii) Termination by twelve (12) months prior written
notice to the other party, provided that such notice
is given after December 31, 1996.

11. Notices. Any notice or demand which is required or permitted
to be given by a provision of this Agreement shall be deemed to have been
sufficiently given if either served personally or sent by prepaid first class,
registered or certified mail, addressed to the party at its address set forth
below:

Buyer: Dennis W. Canupp
Emergent Mortgage Corp.
208 Garvin Street
P.O. Box 998
Pickens, SC 29671

Seller: W.C. "Buddy" Jordan
First Greensboro Home Equity, Inc.
1500 Pinecroft Road Suite 200
Greensboro, NC 27407

Either party may change its address by written notice to the other.

12. Entire Agreement. This Agreement contains the entire agreement

of the parties with respect to the subject matter hereof and there are no
representations, inducements or other provisions other than those expressed in
writing herein. All changes, additions or deletions hereto must be made in
writing and signed by each of the parties hereto.

13. No Agency. This Agreement and transactions entered into
pursuant hereto shall not create between the parties a relationship agency,
legal representation, joint venture, partnership or employment, and the parties
agree that neither party is in any way authorized to make any contract,
agreement, warranty or representation, or to create any obligations, express or
implied, on behalf

<PAGE> 12

of the others.

14. Survival of Provisions. All of the covenants, agreements,
representations and warranties made herein by the parties hereto shall survive
and continue in effect after the termination of the Agreement or the
consummation of the transactions contemplated hereby. This Agreement may be
executed in counterparts, all of which, taken together, shall constitute one
and the same instrument.

15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina and any
applicable federal laws. In event of litigation, parties irrevocably designate
venue as Pickens County, South Carolina.

Carolina Investors, Inc.

By:
-----------------------------------

-----------------------------------, CEO

Attest:

- -------------------------
Secretary

Emergent Mortgage Corp.

By:
-----------------------------------

-----------------------------------, President

<PAGE> 13

Attest:

- -------------------------
Secretary

CambridgeBanc, Inc.

By:
------------------------------------

, President
------------------------------------
Attest:

- -------------------------
Secretary

First Greensboro Home Equity, Inc.

By:
-----------------------------------

-----------------------------------
(Title)
Attest: (Corporate Seal)

- -------------------------
Secretary

First Greensboro Home Equity
of Arkansas, Inc.

By:
------------------------------------

------------------------------------
(Title)
Attest: (Corporate Seal)

- -------------------------
Secretary

Direct & Beneficial Owners of FGHE

13
<PAGE> 14

----------------------------------

<PAGE> 15

EXHIBITS

A1. Loan Approval Information
A2. Funding Request
B. Underwriting Criteria
C. Approved Attorneys
D. Loan Documentation
E. Closing Attorney Certificate
F. Assignment of Qualified Mortgage

G. Owners of EMC

<PAGE> 1

EXHIBIT 10.6

AGREEMENT

THIS AGREEMENT is entered into by and between Carolina Investors, Inc.
("CII") and Prime Investors, Inc. ("Prime").

RECITALS

1. Prime is in the business of making home equity loans and
providing credit underwriting to residents of South Carolina and such other
states as the parties may agree to from time to time, secured by first and
second residential mortgages.

2. CII is willing to provide funds with which certain loans
originated by Prime ("Qualified Mortgages") may be closed and funded, with each
such loan to be immediately assigned to CII at closing, in consideration of the
funds so advanced by CII.

3. CII will attempt to package and sell blocks of Qualified
Mortgages except as set forth herein. CONFIDENTIAL PORTIONS DELETED

AGREEMENT

1. Funding of Loans. From time to time during the term of this
Agreement, Prime will submit Loan Approval Information and Funding Requests to
CII substantially in the form of the attached Exhibits A1 and A2 with respect
to Qualified Mortgages. Each such Funding Request will be submitted not less
than two (2) days prior to the proposed closing date or funding date, whichever
applies, of such Qualified Mortgage and CII will promptly advise Prime of its
approval or disapproval, which shall be within CII's sole discretion, of each
such Funding Request.

a. For purposes of this Agreement, the term "Qualified Mortgage"
means a first or second mortgage home loan which is made by
Prime and closed by Prime's attorney in compliance with all
applicable federal, state and local statutes, rules and
regulations and which meets the underwriting criteria of this
Agreement set forth on Exhibit B, as such underwriting
criteria may be modified from time to time by the parties.
CII shall be entitled to audit Prime's credit underwriting
standards and practices on a quarterly basis upon fifteen (15)
day prior written notice.

b. Upon CII's approval of a Funding Request for a Qualified
Mortgage, Prime shall retain an approved attorney, listed on
the attached Exhibit C (such list of approved attorneys may be
amended and supplemented from time to time by mutual agreement
of the parties) to close such Qualified Mortgage and shall
direct such attorney as follows:

(i) The Qualified Mortgage shall be closed with Prime as
Lender in compliance with all applicable statutes,
rules and regulations, with the documentation listed
on the attached Exhibit D and such additional
documentation as such attorney deems necessary or
advisable to comply with applicable law (all such
documentation is referred to herein collectively as
"Loan Documents"), to document adequately the loan
and to record and perfect the Lender's security
interest and lien over all collateral for the loan.

<PAGE> 2

(ii) Not less than CONFIDENTIAL PORTIONS DELETED
business days prior to the Qualified Mortgage closing
or funding date, whichever applies, such attorney
will request funding of such loan by providing a
certificate to CII substantially in the form of
Exhibit E, which certificate shall be transmitted to
CII by facsimile and overnight mail.

(iii) Upon receipt of the aforesaid closing attorney's
certificate with respect to an approved Qualified
Mortgage, CII shall fund the amount of such loan by
wire transfer or Automated Clearing House Transfer to
the closing attorney's account.

(iv) Upon the closing of a Qualified Mortgage, Prime will
provide the closing attorney with a duly executed
assignment of such Qualified Mortgage to CII
substantially in the form of Exhibit F.

(v) No later than the first business day following the
closing or funding date, whichever applies, of a
Qualified Mortgage, the closing attorney shall
forward to CII by overnight mail, the original
Mortgage Note signed by the borrower, a certified
copy of the assignment of such Qualified Mortgage
(Note and Mortgage) to CII and a copy of the Mortgage
as executed by the Borrower, certified by the closing
attorney to be a true and correct copy, including a
recorder's receipt showing recordation of such
Mortgage in the appropriate governmental office.

(vi) The remaining Loan Documents will be forwarded by
the Closing Attorney to Prime which will promptly,
and in any event prior to the expiration of
CONFIDENTIAL PORTIONS DELETED days, deliver such Loan
Documents to CII; with exception of the Recorded
Assignment and Mortgage which will be delivered to
CII prior to the expiration of 30 days, unless delay
is requested of and authorized by CII for reasonable
cause.

(vii) Notwithstanding the foregoing, in the event that the
Qualified Mortgage is a construction/permanent loan
or a multiple disbursement home improvement loan,
then the amount funded at closing and any subsequent
draws will be based upon CII's normal operating
procedures which are attached hereto as Exhibit G.
The sale of such loans under 2 below will not occur
until the construction loan or home improvement loan
is fully disbursed and converted to permanent status.

2. Sale of Loans. CII will package blocks of Qualified Mortgages
and sell them to institutional buyers on a monthly basis.

CONFIDENTIAL PORTIONS DELETED

<PAGE> 3

b. The term "Loss" shall mean the amount of any shortfall between
the sales proceeds received by CII and the total amount of
advances made to fund the closing of such loans (less any
principal repayments received by CII from the borrowers of
such loans).

c. CONFIDENTIAL PORTIONS DELETED shall retain all
interest on loans which accrues through the date of sale of
such loan, regardless of whether such interest is paid by the
borrower or handled as a prorated item upon the sale of such
loans.

d. CII shall render an accounting to Prime of each block of loans
sold, specifying the loans included in such block, the
identity of the buyer, the purchase price and terms of the
sale, CONFIDENTIAL PORTIONS DELETED Upon reasonable notice
to CII, Prime shall have the right, at its own expense, to
inspect the books and records of CII in order to confirm the
accuracy of such accountings.

2.1 Unsold Blocks of Qualified Mortgages. In the event that CII
chooses not to sell a block of Qualified Mortgages pursuant to 2. above, but
instead wishes to hold such block as part of its own portfolio, then
CONFIDENTIAL PORTIONS DELETED

a. The term "average holding period", as used herein means the
median elapsed term of all of the Qualified Mortgages in a
block, measured from the date on which each Qualified Mortgage
was funded to or for the benefit of the borrower, e.g. the
average holding period exceeds one month when one-half or more
of the Qualified Mortgages have an elapsed term of 30 days or
more.

3. Primary Financing Only ("PFO") Loans. "PFO" loans are defined
as second mortgage loans closed in conjunction with a first mortgage loan.
Prime shall close and CII shall purchase "PFO" loans based upon the criteria as
outlined in Exhibit H. CONFIDENTIAL PORTIONS DELETED

4. Representations and Warranties.

a. CII hereby represents and warrants as follows:

(i) CII is a corporation duly organized, validly existing
and in good standing under the laws of South Carolina
and is qualified to do business in each other
jurisdiction in which such qualification is required
or where CII maintains an office or does substantial
business.

(ii) All corporate actions required to be taken by or on
behalf of CII to authorize its execution of this
Agreement and the performance of its obligations
hereunder have been fully and properly taken. The
execution and consummation of this Agreement and the
transactions contemplated hereby do not and will not
violate any corporate charter, bylaw, contract,
indenture, agreement, covenant or understanding by
which CII is bound or to which is a party, or any
applicable law or regulation; or require the consent
of any governmental authority (unless such

3
<PAGE> 4

consent has been obtained).

(iii) CII is in compliance with all applicable laws and
regulations. There are no actions, suits or
proceedings pending, or, to the knowledge of CII,
threatened against CII in any court or before any
administrative or regulatory agency the adverse
outcome of which CII would have a material adverse
effect on the assets and business of CII.

b. Prime hereby represents and warrants as follows:

(i) Prime Investors, Inc. is a corporation duly
organized, validly existing and in good standing
under the laws of South Carolina and is qualified to
do business in South Carolina and in each other
jurisdiction in which such qualification is required
or where it maintains an office or does substantial
business.

(ii) Prime possesses all necessary licenses and meets all
other legal requirements to lend funds giving rise to
Qualified Mortgages and to sell Qualified Mortgages
to CII.

(iii) All corporate actions required to be taken by or on
behalf of Prime to authorize its execution of this
Agreement and the performance of its obligations
hereunder have been fully and properly taken. The
execution and consummation of this Agreement and the
Qualified Mortgages contemplated hereby do not and
will not violate any corporate charter, bylaw,
contract, indenture, agreement, covenant or
understanding by which Prime is bound or to which is
a party, or any applicable law or regulation; or
require the consent of any governmental authority
(unless such consent has been obtained).

(iv) Prime is in compliance with all applicable laws and
regulations. There are no actions, suits or
proceedings pending, or, to the knowledge of Prime,
threatened against Prime in any court or before any
administrative or regulatory agency the adverse
outcome of which Prime would have a material adverse
effect on the assets and business of Prime.

(v) No fee or other charges shall be made by Prime with
respect to any loan hereunder except for fees which
are reasonable and customary in the locality for the
services provided and which are imposed in full
compliance with all applicable federal, state and
local laws and regulations.

(vi) The owners of Prime, including all beneficial owners,
are listed on Exhibit I. Each such owner agrees by
execution of this Agreement that it will not sell,
assign or transfer any of its ownership interest in
Prime to anyone other than those persons listed in
Exhibit I without first offering such interest to
CII, in writing, upon the same terms and conditions
as the proposed sale, assignment or transfer to a
third party. CII shall have ten (10) days after the
receipt of such

4
<PAGE> 5

offer to accept such offer. Prime agrees that it
will not sell, assign or transfer all or
substantially all of its assets without first
offering such assets to CII, in writing, upon the
same terms and conditions as such proposed sale.

(vii) Prime will offer to CII under this Agreement all of
the Qualified Mortgages which it underwrites or
generates, up to CONFIDENTIAL PORTIONS DELETED
face amount per month, but not less than
CONFIDENTIAL PORTIONS DELETED face amount per
month, unless both CII and Prime agree otherwise, by
written amendment of this Agreement.

(viii) During the term of this Agreement, Prime shall not
make loans

CONFIDENTIAL PORTIONS DELETED

(c) Representations and warranties with respect to Qualified
Mortgages. At the time of transfer and conveyance of each
Qualified Mortgage to CII, Prime hereby represents and
warrants to CII (which representations and warranties shall
survive the purchase and shall continue in full force and
effect until such Qualified Mortgages are paid in full) with
respect to each such Qualified Mortgage, as follows:

(i) Prime is the sole and lawful owner of the Qualified
Mortgage and CII will receive good and marketable
title thereto free and clear of any and all liens,
encumbrances, claims and rights of any party
whatsoever.

(iii) All Qualified Mortgage Loan Documents (i) conform to
all applicable laws and regulations; (ii) are true,
valid, genuine and complete in all respects; (iii)
are enforceable against borrower in accordance with
their terms; and (iv) are subject to no defense,
claim or disability, counterclaim, offset or pending
bankruptcy. No defense, claim, disability,
counterclaim, or offset as described above will arise
against CII by virtue of the sale of the Qualified
Mortgage or assignment of the Qualified Mortgage
Documents under this Agreement. No suit, foreclosure
or any other legal action or preceding has been
brought by Prime in accordance with its handling of
the Qualified Mortgages.

(iv) All Qualified Mortgage Loan Documents are completed
in compliance with all applicable laws and
regulations, and all computations made with respect
to any Qualified Mortgages are accurate.

(v) Each action taken by Prime with respect to the
Qualified Mortgage and each Note, loan application,
agreement, form, letter, notice, statement, or other
materials used by Prime in connection with the
origination, servicing and sale of

5
<PAGE> 6

each such Qualified Mortgage, complies in all
material respects with all applicable laws and
regulations, including without limitation: the
Consumer Credit Protection Act and Regulation Z under
Title I thereof; laws respecting obtaining and/or
using credit reports and other information concerning
individuals (including, without limitation, the Fair
Credit Reporting Act); the Equal Credit Opportunity
Act and Regulation B thereunder; laws relating to
unfair, deceptive, or unconscionable acts and
practices; laws governing the sale of insurance
(including, without limitation, credit life
insurance); federal laws and regulations relating to
such Qualified Mortgages (including without
limitation, the Real Estate Settlement Practices Act,
as amended); the Flood Disaster Protection Act; and
all applicable federal, state and local statutes,
regulations, ordinances, and administrative rulings.

(vi) There is due and owing on the Qualified Mortgage the
amount represented by Prime to be due thereon.

(viii) The Qualified Mortgage has not arisen from a renewal
granted for the purpose of concealing from CII a
delinquency, and no collateral purporting to secure
the Note has been repossessed or disposed of or
foreclosed against by Prime. No officer, director,
partner, employee or agent of Prime (or of any
assignor of the Qualified Mortgage or of any broker
referring the Borrower under the Qualified Mortgage),
nor Prime has received any direct or indirect
benefit, fee, commission or other consideration or
value from any Borrower or from anyone else in
connection with the Qualified Mortgage (other than as
disclosed to CII in writing); nor has any such person
made, directly or indirectly, any payment on the Note
or on any of its officers, directors, partners,
employees or agents has made any agreement with any
Borrower providing for any variation of the interest
rate, schedules of payment or other terms and
conditions of the Note; and neither Prime or any of
its officers, directors, partners, employees or
agents has received a request for approval of, or
notice of any proposed assumption, loss draft or
payoff of, the Qualified Mortgage.

6
<PAGE> 7

amount of such loan, which policy is in the then
current American Land Title Association or a state
land title association form customarily used in the
state in which the insured property is located.

(xi) All real estate appraisals made in connection with
each Qualified Mortgage shall have been performed in
accordance with industry standards in the appraising
industry in the area where the appraised property is
located. Any disputes regarding appraisal accuracy
shall be submitted to an impartial appraiser,
appointed by CII, whose judgment shall be
determinative as to the accuracy of any appraisal.

(xii) There shall be no homestead or other exemption
available to the obligor of any Qualified Mortgage
which would interfere with the right to sell at a
trustee's sale or the right to foreclosure.

(xiv) Prime shall be responsible for the misfeasance,
malfeasance or fraudulent acts of its employees or
agents.

(xvi) Each of the above representations and warranties (a)
applies to any and all Qualified Mortgages sold to
CII hereunder; (b) is for the benefit of CII and each
of its successors and assigns; (c) continues in full
force and effect for so long as the Note remains
outstanding and for such time as CII is subject to
any risk of loss or liability as to any Qualified
Mortgage purchased from Prime hereunder; (d) is in
addition to any other specific warranties contained
elsewhere herein; and (e) is made by Prime on its
behalf and on the behalf of any third party
originator of any Qualified Mortgage which may be
sold hereunder in accordance with Section 2.

7
<PAGE> 8

5. Limited Power of Attorney.

a) Prime hereby makes, constitutes and appoints CII, its
successors and assigns, as PrimE's true and lawful attorneys,
with full power substitution in name of Prime or otherwise,
whether in relation to real, personal, tangible or intangible
property, to do any and all of the following:

(i) To bill, demand, sue for, receive, collect, sign,
endorse, assign or comprise any and all notes,
checks, money orders or monies due on any Qualified
Mortgages sold to CII, and to receive, sign, endorse,
or assign any orders, certificates, insurance
policies and all benefits under any other instruments
or documents as may from time to time be necessary or
appropriate to accomplish the sales and transfers
provided for by this Agreement;

(ii) To complete, execute and record any assignment or
other document, including financing statements
covering any such collateral;

(iii) To exercise or perform any act, power or duty that
Prime has or would have in connection with the
Qualified Mortgages purchased by CII, or which are
reasonable in order to protect CII's interest in the
collateral securing said Qualified Mortgage.

b. Prime agrees that the foregoing powers are coupled with an
interest and are irrevocable notwithstanding Prime's
dissolution, merger, consolidation or other corporate
reorganization or structural change or any other reason
whatsoever.

c. Prime will, at CII's reasonable request from time to time,
execute one or more appropriate separate instruments
evidencing the powers granted CII in this Section, in form
suitable for recordation.

6. Opinion of Counsel; Certified Resolutions.

a. Prior to the time that CII first purchases any Qualified
Mortgages from Prime under this Agreement, Prime shall provide
to CII an Opinion of Counsel to Prime, in form and substance
satisfactory to CII, stating that as of the date of such
Opinion:

(i) Prime (a) is a corporation duly organized, validly
existing, and in good standing under the laws of the
state of its incorporation or organization; (b) has
the requisite power and authority and the legal right
to conduct its business as now and heretofore
conducted; (c) has all necessary licenses, permits,
consents or approvals from or by, has made all
necessary filings with, and has given all necessary
notices to, all governmental authorities having
jurisdiction, to the extent required to conduct its
business as now conducted in all locations where it
conducts business, and to the extent necessary to
assure the enforceability of

8
<PAGE> 9

each Note and Mortgage in any location in which any
mortgaged property is located; and (d) is in
compliance with its certificate of incorporation and
bylaws or other governing documents.

(ii) The execution, delivery and performance of this
Agreement and all instruments and documents delivered
or to be delivered by Prime pursuant to this
Agreement, and the origination and sale by Prime of
each Qualified Mortgage hereunder (a) are within
Prime's corporate power and authority; (b) have been
duly authorized by all necessary or proper corporate
action; (c) are not in contravention of any provision
of Prime's certificate of incorporation or bylaws;
(d) will not violate any law or regulation or any
order or decree of any court or governmental
authority; (e) will not conflict with or result in
the breach of, or constitute a default with respect
to, any agreement or other instrument to which Prime
is a party or by which Prime of any of its property
is bound; and (f) do not require any filing or
registration with, or the consent or approval of, any
governmental authority or any other person which has
not been made or obtained previously.

(iii) This Agreement has been duly executed and delivered
by Prime, and is a valid, legal and binding
obligation of Prime enforceable in accordance with
its terms except as such enforcement may be limited
by bankruptcy, insolvency, reorganization,
receivership, moratorium or other laws relating to or
affecting the rights of creditors generally, and by
general principles of equity (regardless of whether
such enforcement is considered in a proceeding in
equity or at law).

(iv) No action, claim, or proceeding is now pending or, to
the knowledge of counsel, threatened against Prime at
law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any federal,
state, or local government or of any agency or
subdivision thereof or before any arbitrator or panel
of arbitrators which, if adversely determined, (a)
would result in a liability of Prime in an amount
greater than $10,000, (b) questions the validity of
any Note or Security Instrument, or (c) could, wither
individually or in the aggregate, result in any
material adverse change in the business, operations,
property or financial or other condition of Prime.

b. Certified copies of any resolution or document of consent of
the board of directors or other appropriate governing body of
Prime authorizing the execution of this Agreement and the
performance of its obligations hereunder, and evidencing the
authority of the executing officer(s) to execute this
Agreement and all other documents, instruments and
certificates related hereto and to the transactions
contemplated hereunder.

7. Meetings and Financial Statement. The principal officers of
CII and Prime agree to meet on a quarterly or more frequent basis to discuss
all information pertinent to this Agreement, its implementation and
continuation. Each party will provide the other with copies of its quarterly
financial statements, including balance sheet, income statement and statement
of changes in financial position, all within 30 days of the close of each
fiscal quarter.

9
<PAGE> 10

8. Term of Agreement; Damages For Wrongful Termination or Breach.

a. The term of this Agreement shall be five (5) years. Either
party shall be entitled to terminate this Agreement upon
twelve (12) months prior written notice given to the other
party, provided that such notice is given after November 1,
2000.

b. If either party causes a Wrongful Termination of this
Agreement, as defined below or fails to cure a material breach
of its obligations hereunder within 30 days after written
demand by the other party, then the other party (the "Injured
Party") shall be entitled to recover from such party, as
damages, an amount equal to the CONFIDENTIAL PORTIONS
DELETED earned by the Injured Party under this
Agreement during the preceding twelve (12) months.

c. A Wrongful Termination shall include any termination other
than:

(i) Termination by mutual written agreement of the
parties;

(ii) Termination by CII in the event that
CONFIDENTIAL PORTIONS DELETED.

(iii) Termination by twelve (12) months prior written
notice to the other party, provided that such notice
is given after November 1, 2000.

9. Notices. Any notice or demand which is required or permitted
to be given by a provision of this Agreement shall be deemed to have been
sufficiently given if either served personally or sent by prepaid first class,
registered or certified mail, addressed to the party at its address set forth
below:

Buyer: Dennis W. Canupp
Carolina Investors, Inc.
208 Garvin Street
P.O. Box 998
Pickens, SC 29671

Seller: Kelly Ahrens
Prime Investors, Inc.
1447 E. Main Street
Spartanburg, SC 29307

Either party may change its address by written notice to the other.

10. Entire Agreement. This Agreement contains the entire agreement
of the parties with respect to the subject matter hereof and there are no
representations, inducements or other provisions other than those expressed in
writing herein. All changes, additions or deletions hereto must be made in
writing and signed by each of the parties hereto.

10
<PAGE> 11

11. No Agency. This Agreement and transactions entered into
pursuant hereto shall not create between the parties a relationship agency,
legal representation, joint venture, partnership or employment, and the parties
agree that neither party is in any way authorized to make any contract,
agreement, warranty or representation, or to create any obligations, express or
implied, on behalf of the others.

12. Survival of Provisions. All of the covenants, agreements,
representations and warranties made herein by the parties hereto shall survive
and continue in effect after the termination of the Agreement or the
consummation of the transactions contemplated hereby. This Agreement may be
executed in counterparts, all of which, taken together, shall constitute one
and the same instrument.

13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina and any
applicable federal laws. In event of litigation, parties irrevocably designate
venue as Pickens County, South Carolina.

Carolina Investors, Inc.

By:
------------------------------------

CEO
------------------------------------,

Attest:

- -----------------------
Secretary

Prime Investors, Inc.

By:
-----------------------------------

-----------------------------------
(Title)
Attest: (Corporate Seal)

- -----------------------
Secretary

11
<PAGE> 12

EXHIBITS

A1. Loan Approval Information
A2. Funding Request
B. Underwriting Criteria
C. Approved Attorneys
D. Loan Documentation
E. Closing Attorney Certificate
F. Assignment of Qualified Mortgage
G. Procedures for Construction, Multi Disbursement and Home Improvement
Loans
H. Primary Financing Only ("PFO")
I. Owners of Prime
J. Carolina Investors Brokers

<PAGE> 1

EXHIBIT 10.7

AGREEMENT

THIS AGREEMENT is entered into by and between Carolina Investors, Inc.
("CII") and Amerifund Group, Inc. ("Amerifund").

RECITALS

1. Amerifund is in the business of making home equity loans and
providing credit underwriting to residents of FloridA and such other states as
the parties may agree to from time to time, secured by first and second
residential mortgages.

2. CII is willing to provide funds with which certain loans
originated by Amerifund ("Qualified Mortgages") may be closed and funded, with
each such loan to be immediately assigned to CII at closing, in consideration
of the funds so advanced by CII.

3. CII will attempt to package and sell blocks of Qualified
Mortgages and/or securitize them.

CONFIDENTIAL PORTION DELETED

AGREEMENT

1. Funding of Loans; Expansion Opportunities. During the term of
this Agreement, Amerifund will submit Loan Approval Information and Funding
Requests to CII substantially in the form of the attached Exhibits A1 and A2
with respect to Qualified Mortgages. Amerifund will be obligated to sell and
CII will be obligated to purchase all "Qualified Mortgages" which meet the
Underwriting Criteria on the attached Exhibit B. Each such Funding Request
will be submitted not less than two (2) days prior to the proposed closing date
or funding date, whichever applies, of such Qualified Mortgage.

a. For purposes of this Agreement, the term "Qualified Mortgage"
means a first or second mortgage home loan which is made by
Amerifund and closed by Amerifund's Closing Agent in
compliance with all applicable federal, state and local
statutes, rules and regulations and which meets the
underwriting criteria of this Agreement set forth on Exhibit
B, as such underwriting criteria may be modified from time to
time by CII to satisfy market requirements or as otherwise
agreed to by the parties. CII shall be entitled to audit
Amerifund's credit underwriting standards and practices on a
monthly basis upon fifteen (15) day prior written notice.

b. Upon CII's approval of a Funding Request for a Qualified
Mortgage, Amerifund shall retain an approved attorney or title
company ("Closing Agent"), listed on the attached Exhibit C
(such list of approved attorneys or title companies may be
amended and supplemented from time to time by mutual agreement
of the parties) to close such Qualified Mortgage and shall
direct such Closing Agent as follows:

<PAGE> 2

(i) The Qualified Mortgage shall be closed with Amerifund
as Lender in compliance with all applicable statutes,
rules and regulations, with the documentation listed
on the attached Exhibit D and such additional
documentation as such Closing Agent deems necessary
or advisable to comply with applicable law (all such
documentation is referred to herein collectively as
"Loan Documents"), to document adequately the loan
and to record and perfect the lender's security
interest and lien over all collateral for the loan.

(ii) Not less than CONFIDENTIAL PORTION DELETED
business days prior to the Qualified Mortgage closing
or funding date, whichever applies, such Closing
Agent will request funding of such loan by providing
a certificate to CII substantially in the form of
Exhibit E, which certificate shall be transmitted to
CII by facsimile and overnight mail.

(iii) Upon receipt of the aforesaid Closing Agent's
certificate with respect to an approved Qualified
Mortgage, CII shall fund the amount of such loan by
wire transfer or by Automated Clearing House
Transfer.

(iv) Upon the closing of a Qualified Mortgage, Amerifund
will provide the Closing Agent with a duly executed
assignment of such Qualified Mortgage to CII
substantially in the form of Exhibit F.

(V) No later than the first business day following the
closing or funding date, whichever applies, of a
Qualified Mortgage, the Closing Agent shall forward
to CII by overnight mail, the original Mortgage Note
signed by the borrower, a certified copy of the
assignment of such Qualified Mortgage (Note and
Mortgage) to CII and a copy of the Mortgage as
executed by the Borrower, certified by the Closing
Agent to be a true and correct copy, including a
recorder's receipt showing recordation of such
Mortgage in the appropriate governmental office.

(vi) The remaining Loan Documents will be forwarded by
the Closing Agent to Amerifund which will promptly,
and in any event prior to the expiration of
CONFIDENTIAL PORTION DELETED days, deliver such
Loan Documents to CII; with the exception of the
Recorded Assignment and Mortgage which will be
delivered to CII prior to the expiration of 30 days,
unless an extension is requested of and authorized by
CII for reasonable cause.

(vii) Notwithstanding the above, in the event that the
Qualified Mortgage is a construction/permanent loan
or a multiple disbursement home improvement loan,
then the amount funded at closing and any subsequent
draws will be based upon CII's normal operating
procedures which are attached as Exhibit G. The sale
of such loans under 2 below will not occur until the
construction loan or home improvement loan is fully
disbursed and converted to permanent status.

c. Expansion Into Additional Geographic Areas.

2
<PAGE> 3

(i)

(ii)

(iii) CONFIDENTIAL PORTIONS DELETED

(iv)

(v)

2. Sale of Loans. CII will package blocks of Qualified Mortgages and
sell them to institutional buyers on a monthly basis or securitize them.
CONFIDENTIAL PORTIONS DELETED

a. CONFIDENTIAL PORTIONS DELETED

b. CII shall retain all interest on loans which accrues through
the date of sale of such loan, regardless of whether such
interest is paid by the borrower or handled as a prorated item
upon the sale of such loans.

c. CII shall render an accounting to Amerifund of each block of
loans sold, specifying the loans included in such block, the
identity of the buyer, the purchase price and terms of the
sale, CONFIDENTIAL PORTIONS DELETED. Upon reasonable notice
to CII, Amerifund shall have the right, at its own expense, to
inspect the books and records of CII in order to confirm the
accuracy of such accountings.

2.1 Securitization of Loans. If the Qualified Mortgages are
securitized by CII (CII will give notice to Amerifund prior to the delivery of
a block of loans), then CONFIDENTIAL PORTIONS DELETED

2.2 Unsold Blocks of Qualified Mortgages.

CONFIDENTIAL PORTIONS DELETED

3. Representations and Warranties.

a. CII hereby represents and warrants as follows:

3
<PAGE> 4

(iv) CII will provide accounting and computer services to
Amerifund for the term of this Agreement and at a
monthly fee agreeable to by both parties.

(v) CII will not preclude Amerifund from geographic
expansion to other states, except as provided in
section 3. b. (viii).

(vi) CII will purchase all Qualified Mortgages in
accordance with the terms of this Agreement.

(vii) After Amerifund notifies CII in writing of an
Expansion Opportunity pursuant to 1(c) above, CII
agrees that it will not enter into negotiations with
third parties identified in such notice during the
term of this Agreement plus 6 months, unless
Amerifund gives its written consent which should not
be unreasonably withheld.

(viii) Except for Bay Bank in Panama City, CII will not
offer, nor enter into, an Agreement similar to this
with any Florida based lender or broker.

b. Amerifund hereby represents and warrants as follows:

(i) Amerifund Group, Inc. is a corporation duly
organized, validly existing and in good standing
under the laws of Florida and is qualified to do
business in Florida and in each other jurisdiction in
which such qualification is required or where it
maintains an office or does substantial business.

(ii) Amerifund possesses all necessary licenses and meets
all other legal requirements to lend funds giving
rise to Qualified Mortgages and to sell Qualified
Mortgages to CII.

(iii) All corporate actions required to be taken by or on
behalf of Amerifund to

4
<PAGE> 5

authorize its execution of this Agreement and the
performance of its obligations hereunder have been
fully and properly taken. The execution and
consummation of this Agreement and the Qualified
Mortgages contemplated hereby do not and will not
violate any corporate charter, bylaw, contract,
indenture, agreement, covenant or understanding by
which Amerifund is bound or to which is a party, or
any applicable law or regulation; or require the
consent of any governmental authority (unless such
consent has been obtained).

(iv) Amerifund is in compliance with all applicable laws
and regulations. There are no actions, suits or
proceedings pending, or, to the knowledge of
Amerifund, threatened against Amerifund in any court
or before any administrative or regulatory agency the
adverse outcome of which Amerifund would have a
material adverse effect on the assets and business of
Amerifund.

(v) No fee or other charges shall be made by Amerifund
with respect to any loan hereunder except for fees
which are reasonable and customary in the locality
for the services provided and which are imposed in
full compliance with all applicable federal, state
and local laws and regulations.

(vi) The owners of Amerifund, including all beneficial
owners and others, are listed on Exhibit H. Each
such person agrees by execution of this Agreement
that it will not sell, assign or transfer any of its
ownership interest in Amerifund to anyone other than
those persons listed in Exhibit H without first
offering such interest to CII, in writing, upon the
same terms and conditions as the proposed sale,
assignment or transfer to a third party. CII shall
have ten (10) days after the receipt of such offer to
accept such offer. Amerifund agrees that it will not
sell, assign or transfer all or substantially all of
its assets without first offering such assets to CII,
in writing, upon the same terms and conditions as
such proposed sale.

(vii) Amerifund will offer to CII under this Agreement
CONFIDENTIAL PORTIONS DELETED of the Qualified
Mortgages which it underwrites or generates each
month, unless both CII and Amerifund agree otherwise,
by written amendment to this Agreement.

(viii) During the term of this Agreement, Amerifund shall
not make loans in the State of CONFIDENTIAL PORTIONS
DELETED through non-employee brokers except for
broker loans solicited through CONDIDENTIAL
PORTIONS DELETED of Charlotte, NC.

(ix) In the event of the death of Gregory N. Warren, the
Estate of Gregory N. Warren will have the option to
sell the stock of Amerifund to CII and CII will have
the obligation to purchase such stock provided there
is some form of written agreement requiring a
majority of the key employees to continue with
Amerifund and, if this is the case, CII will
compensate such key employees in a manner similar to
the way they were compensated by Amerifund. In the
event of the disability or retirement of Gregory N.
Warren, CII will have the option to purchase the
stock of Amerifund owned by Gregory N. Warren in
accordance

5
<PAGE> 6

with the aforementioned provisions. The price will
be determined by a valuation professional selected by
Amerifund and a third valuation professional selected
by the other two. The three such valuation
professionals, by majority vote, shall agree upon the
value ofthe stock to be purchased hereunder.

(x) Amerifund will grant CII the right to use its Loan
Tracking Program pursuant to license in the form of
that attached as Exhibit I.

(c) Representations and warranties with respect to Qualified
Mortgages. At the time of transfer and conveyance of each
Qualified Mortgage to CII, Amerifund hereby represents and
warrants to CII (which representations and warranties shall
survive the purchase and shall continue in full force and
effect until such Qualified Mortgages are paid in full) with
respect to each such Qualified Mortgage, as follows:

(i) Amerifund is the sole and lawful owner of the
Qualified Mortgage and CII will receive good and
marketable title thereto free and clear of any and
all liens, encumbrances, claims and rights of any
party whatsoever.

(iii) All Qualified Mortgage Loan Documents (i) conform to
all applicable laws and regulations; (ii) are true,
valid, genuine and complete in all respects; (iii)
are enforceable against borrower in accordance with
their terms; and (iv) are subject to no defense,
claim or disability, counterclaim, offset or pending
bankruptcy. No defense, claim, disability,
counterclaim, or offset as described above will arise
against CII by virtue of the sale of the Qualified
Mortgage or assignment of the Qualified Mortgage
Documents under this Agreement. No suit, foreclosure
or any other legal action or preceding has been
brought by Amerifund in accordance with its handling
of the Qualified Mortgages.

(iv) All Qualified Mortgage Loan Documents are completed
in compliance with all applicable laws and
regulations, and all computations made with respect
to any Qualified Mortgages are accurate.

(v) Each action taken by Amerifund with respect to the
Qualified Mortgage and each Note, loan application,
agreement, form, letter, notice, statement, or other
materials used by Amerifund in connection with the
origination, servicing and sale of each such
Qualified Mortgage, complies in all material respects
with all applicable laws and regulations, including
without limitation: the Consumer Credit Protection
Act and Regulation Z under Title I thereof; laws
respecting obtaining and/or using credit reports and
other information concerning individuals (including,
without limitation, the Fair Credit Reporting Act);
the Equal Credit Opportunity Act and Regulation B
thereunder; laws relating to unfair, deceptive, or
unconscionable acts and practices; laws governing the
sale of insurance

6
<PAGE> 7

(including, without limitation, credit life
insurance); federal laws and regulations relating to
such Qualified Mortgages (including without
limitation, the Real Estate Settlement Practices Act,
as amended); the Flood Disaster Protection Act; and
all applicable federal, state and local statutes,
regulations, ordinances, and administrative rulings.

(vi) There is due and owing on the Qualified Mortgage the
amount represented by Amerifund to be due thereon.

(viii) The Qualified Mortgage has not arisen from a renewal
granted for the purpose of concealing from CII a
delinquency, and no collateral purporting to secure
the Note has been repossessed or disposed of or
foreclosed against by Amerifund. No officer,
director, partner, employee or agent of Amerifund (or
of any assignor of the Qualified Mortgage or of any
broker referring the Borrower under the Qualified
Mortgage), nor the Amerifund has received any direct
or indirect benefit, fee, commission or other
consideration or value from any Borrower or from
anyone else in connection with the Qualified Mortgage
(other than as disclosed to CII in writing); nor has
any such person made, directly or indirectly, any
payment on the Note or on any of its officers,
directors, partners, employees or agents has made any
agreement with any Borrower providing for any
variation of the interest rate, schedules of payment
or other terms and conditions of the Note; and
neither Amerifund or any of its officers, directors,
partners, employees or agents has received a request
for approval of, or notice of any proposed
assumption, loss draft or payoff of, the Qualified
Mortgage.

(xi) All real estate appraisals made in connection with
each Qualified Mortgage shall

7
<PAGE> 8

have been performed in accordance with industry
standards in the appraising industry in the area
where the appraised property is located. Any
disputes regarding appraisal accuracy shall be
submitted to an impartial appraiser, appointed by
CII, whose judgment shall be determinative as to the
accuracy of any appraisal.

(xii) There shall be no homestead or other exemption
available to the obligor of any Qualified Mortgage
which would interfere with the right to sell at a
trustee's sale or the right to foreclosure.

(xiv) Amerifund shall be responsible for the misfeasance,
malfeasance or fraudulent acts of its employees or
agents.

(xvi) Each of the above representations and warranties (a)
applies to any and all Qualified Mortgages sold to
CII hereunder; (b) is for the benefit of CII and each
of its successors and assigns; (c) continues in full
force and effect for so long as the Note remains
outstanding and for such time as CII is subject to
any risk of loss or liability as to any Qualified
Mortgage purchased from AmerifunD hereunder; (d) is
in addition to any other specific warranties
contained elsewhere herein; and (e) is made by
Amerifund on its behalf and on the behalf of any
third party originator of any Qualified Mortgage
which may be sold hereunder in accordance with
Section 2.

4. CONFIDENTIAL PORTIONS DELETED

5. Limited Power of Attorney.

a) Amerifund hereby makes, constitutes and appoints CII, its
successors and assigns, as Amerifund's true and lawful
attorneys, with full power substitution in name of Amerifund
or otherwise, whether in relation to real, personal, tangible
or intangible property, to do any and all of the following:

(i) To bill, demand, sue for, receive, collect, sign,
endorse, assign or comprise any

8
<PAGE> 9

and all notes, checks, money orders or monies due on
any Qualified Mortgages sold to CII, and to receive,
sign, endorse, or assign any orders, certificates,
insurance policies and all benefits under any other
instruments or documents as may from time to time be
necessary or appropriate to accomplish the sales and
transfers provided for by this Agreement;

(ii) To complete, execute and record any assignment or
other document, including financing statements
covering any such collateral;

(iii) To exercise or perform any act, power or duty that
Amerifund has or would have in connection with the
Qualified Mortgages purchased by CII, or which are
reasonable in order to protect CII's interest in the
collateral securing said Qualified Mortgage.

b. Amerifund agrees that the foregoing powers are coupled with an
interest and are irrevocable notwithstanding Amerifund's
dissolution, merger, consolidation or other corporate
reorganization or structural change or any other reason
whatsoever.

c. Amerifund will, at CII's reasonable request from time to time,
execute one or more appropriate separate instruments
evidencing the powers granted CII in this Section, in form
suitable for recordation.

6. Opinion of Counsel; Certified Resolutions.

a. Prior to the time that CII first purchases any Qualified
Mortgages from Amerifund under this Agreement, Amerifund shall
provide to CII an Opinion of Counsel to Amerifund, in form and
substance satisfactory to CII, stating that as of the date of
such Opinion:

(i) Amerifund (a) is a corporation duly organized,
validly existing, and in good standing under the laws
of the state of its incorporation or organization;
(b) has the requisite power and authority and the
legal right to conduct its business as now and
heretofore conducted; (c) has all necessary licenses,
permits, consents or approvals from or by, has made
all necessary filings with, and has given all
necessary notices to, all governmental authorities
having jurisdiction, to the extent required to
conduct its business as now conducted in all
locations where it conducts business, and to the
extent necessary to assure the enforceability of each
Note and Mortgage in any location in which any
mortgaged property is located; and (d) is in
compliance with its certificate of incorporation and
bylaws or other governing documents.

(ii) The execution, delivery and performance of this
Agreement and all instruments and documents delivered
or to be delivered by Amerifund pursuant to this
Agreement, and the origination and sale by Amerifund
of each Qualified Mortgage hereunder (a) are within
Amerifund's corporate power and authority; (b) have
been duly authorized by all necessary or proper
corporate action; (c) are not in contravention of any
provision of Amerifund's certificate of incorporation
or bylaws; (d) will not violate any law or regulation
or any order or decree of any

9
<PAGE> 10

court or governmental authority; (e) will not
conflict with or result in the breach of, or
constitute a default with respect to, any agreement
or other instrument to which Amerifund is a party or
by which Amerifund of any of its property is bound;
and (f) do not require any filing or registration
with, or the consent or approval of, any governmental
authority or any other person which has not been made
or obtained previously.

(iii) This Agreement has been duly executed and delivered
by Amerifund, and is a valid, legal and binding
obligation of Amerifund enforceable in accordance
with its terms except as such enforcement may be
limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other laws relating to or
affecting the rights of creditors generally, and by
general principles of equity (regardless of whether
such enforcement is considered in a proceeding in
equity or at law).

(iv) No action, claim, or proceeding is now pending or, to
the knowledge of counsel, threatened against
Amerifund at law, in equity or otherwise, before any
court, board, commission, agency or instrumentality
of any federal, state, or local government or of any
agency or subdivision thereof or before any
arbitrator or panel of arbitrators which, if
adversely determined, (a) would result in a liability
of Amerifund in an amount greater than $10,000, (b)
questions the validity of any Note or Security
Instrument, or (c) could, wither individually or in
the aggregate, result in any material adverse change
in the business, operations, property or financial or
other condition of Amerifund.

b. Certified copies of any resolution or document of consent of
the board of directors or other appropriate governing body of
Amerifund authorizing the execution of this Agreement and the
performance of its obligations hereunder, and evidencing the
authority of the executing officer(s) to execute this
Agreement and all other documents, instruments and
certificates related hereto and to the transactions
contemplated hereunder.

7. Meetings and Financial Statement. The principal officers of
CII and Amerifund agree to meet on a quarterly or more frequent basis to
discuss all information pertinent to this Agreement, its implementation and
continuation. Each party will provide the other with copies of its monthly
financial statements, including balance sheet, income statement and statement
of changes in financial position, all within 30 days of the close of each
month.

8. Term of Agreement; Damages For Wrongful Termination or Breach.

10
<PAGE> 11

recover from such party, as damages, an amount equal to the
CONFIDENTIAL PORTIONS DELETED earned by the Injured Party
under this Agreement during the preceding twelve (12) months.

c. A Wrongful Termination shall include any termination other
than:

(i) Termination by mutual written agreement of the
parties;

(ii) Termination by CII in the event that
CONFIDENTIAL PORTIONS DELETED

(iii) Termination by twelve (12) months prior written
notice to the other party, provided that such notice

is given after August 1, 1999.

Buyer: Dennis W. Canupp
Carolina Investors, Inc.
208 Garvin Street
P.O. Box 998
Pickens, SC 29671

Seller: Gregory N. Warren
Amerifund Group, Inc.
163 E. Morse Blvd. 2nd Floor

Winter Park, Florida 32789

Either party may change its address by written notice to the other.

12. Survival of Provisions. All of the covenants, agreements,
representations and warranties

11
<PAGE> 12

made herein by the parties hereto shall survive and continue in effect after
the termination of the Agreement or the consummation of the transactions
contemplated hereby. This Agreement may be executed in counterparts, all of
which, taken together, shall constitute one and the same instrument.

13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina and any
applicable federal laws.

Carolina Investors, Inc.

By:
------------------------------
, CEO
------------------------------
Attest:

- ----------------------------
Secretary

Amerifund Group, Inc.

By:
-----------------------------

-----------------------------
(Title)
Attest: (Corporate Seal)

- ------------------------------
Secretary

12
<PAGE> 13

Direct & Beneficial Owners of Amerifund

----------------------------------
Gregory N. Warren

----------------------------------
Jana Batey

----------------------------------
Diane Warren

----------------------------------
Randall Warren

----------------------------------
David Warren

----------------------------------
Judith Isaason

----------------------------------
David Isaason

13
<PAGE> 14

EXHIBITS

A1. Loan Approval Information
A2. Funding Request
B. Underwriting Criteria
C. Approved Closing Agents
D. Loan Documentation
E. Closing Attorney Certificate
F. Assignment of Qualified Mortgage
G. Procedures for Construction Multi Disbursement and Home Improvement
Loans

H. Owners of AMERIFUND and Others

I. License Agreement for Loan Tracking Program
J. Calculation of Profit or Loss
K. Approved Appraiser List

<PAGE> 1

EXHIBIT 10.16

The Company hereby undertakes to provide to the Commission upon request, copies
of any schedules and exhibits to this Loan and Security Agreement dated April
10, 1995 between BankAmerica Business Credit, Inc. and Premier Financial
Services, Inc.

<PAGE> 2

AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT

This Amendment No. 1 to Loan and Security Agreement ("Amendment") is
entered into as of January 16, 1996, by and between BankAmerica Business
Credit, Inc., a Delaware corporation ("Lender"), and Premier Financial
Services, Inc. ("Borrower"), a South Carolina corporation.

RECITALS

This Amendment is entered into in reference to the following facts:

(a) Borrower and Lender entered into a certain Loan and
Security Agreement, dated as of April 10, 1995 (the Loan and Security
Agreement, as amended, modified, and supplemented prior to the date hereof
being hereinafter referred to as the "Loan Agreement"). The Loan Agreement and
all other documents evidencing the loan documented thereby and the security
therefore are hereinafter collectively referred to as the "Loan Documents." All
capitalized terms, not expressly defined herein, shall have the meanings
ascribed thereto in the Loan Documents.

(b) Borrower's Obligations under the Loan Documents have
been guaranteed by Carolina Investors, Inc., a South Carolina corporation, and
Emergent Financial Corporation, a South Carolina corporation (individually,
"Guarantor" and collectively, "Guarantors"), under Continuing Guaranties, dated
April 10, 1995.

(c) Borrower desires to amend the Loan Agreement. Lender
is willing to amend the Loan Agreement subject to the terms and conditions
contained herein.

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto hereby agree as follows.

ARTICLE ONE - AMENDMENTS TO LOAN AGREEMENT

1.1 Amendment of Section 1.2. Section 1.2 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:

"1.2 Adjusted Tangible Net Worth means, at any date, the
remainder of (a) net book value (after deducting related depreciation,
obsolescence, amortization, valuation, and other proper reserves as
determined in accordance with GAAP) at which the Adjusted Tangible
Assets of Borrower would be shown on a balance sheet of Borrower at
such date prepared in accordance with GAAP, minus (b) the amount at
which its liabilities (other than capital stock, surplus, and retained
earnings) would be shown on such balance sheet and the Repossession
Inventory Adjustment, and including as liabilities all reserves for
contingencies

-1-
<PAGE> 3

and other potential liabilities which would be shown on such balance
sheet or disclosed in the footnotes thereto."

1.2 Amendment of Section 1.8. Section 1.8 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:

"1.8 Availability shall mean, as of any date of
calculation, the Advance Rate multiplied by the aggregate amount of
all Net Contract Payments to be made under all of Borrower's Eligible
Contracts."

1.3 Deletion of Subsections 1.24 l and n. Subsections 1.24 l and
1.24 n of the Loan Agreement are hereby deleted from the Loan Agreement in
their entirety and shall be of no further force or effect.

1.4 Amendment of Section 1.54. Section 1.54 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:

"1.54 Total Credit Facility shall mean $6,000,000."

1.5 Amendment of Article One. Article One of the Loan Agreement
is hereby amended by the addition of 11 new sections, numbered 1.56, through
and including 1.66, which shall read in their entirety as follows:

"1.56 Adjusted Net Earnings from Operations means, with
respect to any fiscal period of Borrower, Borrower's net income after
provision for income taxes for such fiscal period, as determined in
accordance with GAAP and reported on the financial statement for such
period, less any and all of the following included in such net income:
(a) gain arising from the sale of capital assets; (b) gain arising
from any write-up in the book value of any asset; (c) earnings of any
corporation, substantially all the assets of which have been acquired
by Borrower in any manner, to the extent realized by such other
corporation prior to the date of acquisition; (d) earnings of any
business entity in which Borrower has an ownership interest unless
(and only to the extent) such earnings shall actually have been
received by Borrower in the form of cash distributions; (e) earnings
of any person to which assets of Borrower shall have been sold,
transferred or disposed of, or into which Borrower shall have been
merged or which has been a party with Borrower to any consolidation or
other form of reorganization, prior to the date of such transaction;
(f) gain arising from the acquisition of any debt or equity security
of Borrower or from cancellation or forgiveness of Debt; and (g) gain
arising from extraordinary items, as determined in accordance with
GAAP, or from any other nonrecurring transaction.

1.57 "Interest Coverage Ratio" means, for any period, the
ratio of (a) Adjusted Net Earnings from Operations for such period
plus the sum of the

-2-
<PAGE> 4

following to the extent deducted in computing Adjusted Net Earnings
from Operations: (i) tax expense and (ii) total interest expense over
(b) total interest expense during such period.

1.58 Actual Charge Off Percent means, as of any date of
calculation, the percent (rounded to the nearest whole percent)
resulting from dividing (a) the aggregate amount of all of Borrower's
Net Charge Off's during each of the twelve (12) months immediately
preceding the date of calculation, by (b) the average monthly amount
of Borrower's Net Contracts Payments outstanding as of the last day of
each of those twelve (12) months.

1.59 Advance Rate means (a) eighty-five percent (85%)
minus (b) the sum of the Charge Off Adjustment Percent plus the
Delinquency/Repossession Adjustment Percent.

1.60 Charge Off Adjustment Percent means the excess,
calculated as of the first day of each month, of the Actual Charge Off
Percent over three percent (3%).

1.61 Delinquency/Repossession Adjustment Percent means, as
of any date of calculation, (a) one percent 91%) when the average
Delinquency/Repossession Percent for the two months immediately
preceding such date is greater than six percent (6%), but less than
seven percent (7%), and (b) two percent (2%) when the average
Delinquency/Repossession Percent for the two months immediately
preceding such date is equal to or greater than seven percent (7%).

1.62 Delinquency/Repossession Percent means the percent
(rounded to the nearest whole percent), calculated as of the first day
of each month, by dividing (a) the aggregate amount of the Net
Contract Payments owing under all of Borrower's Contracts with respect
to which any payment due thereunder is more than sixty (60) days past
due, as determined on a contractual basis, as of the last day of each
of the three (3) months immediately preceding the date of calculation,
plus the Repossession Value of all Vehicles which Borrower has
repossessed but has not sold as of the date of calculation, by (b) the
average monthly amount of Borrower's Net Contracts Payments
outstanding as of the last day of each of those three (3) months.

1.63 Repossession Value means, as of any date of
determination, the lesser of (a) the Net Contract Payments then owing
under a Vehicle Contract with respect to which the subject Vehicle has
been repossessed by Borrower, or (b) the value of such Vehicle, as
determined by the then most recently published edition of the Guide
and Black Book, as appropriate.

-3-
<PAGE> 5

1.64 Vehicle Contract means a Contract which is a motor
vehicle retail installment Contract and a Contract arising from a loan
made by Borrower to a Contract Debtor and secured by a Lien on a
Vehicle.

1.65 Guide and Black Book means, respectively, the
National Automobile Dealers Association Official Used Car Guide and
the National Auto Research Black Book. In the event that either of
those publications shall, at any time, cease to be published, then
Lender shall, in its sold discretion, select a comparable publication.

1.66 Repossession Inventory Adjustment means, as of any
date of calculation, the Repossession Value of all Vehicles with
respect to which more than ninety (90) days have elapsed since the
date such Vehicles were repossessed by Borrower without having been
sold during such ninety (90)- day period."

1.6 Amendment of Section 3.1. Section 3.1 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:

"3.1 Interest Rate. The Loan, until paid in full, shall
bear interest on the unpaid principal balance thereof from the initial
funding date of each Advance, at the Reference Rate plus
three-quarters of one percent (0.75%) per annum. The interest rate
shall be adjusted as, when, and effective as of the date any change in
the Reference Rate occurs. Changes in the Reference Rate shall occur
without notice or demand of any kind."

1.7 Amendment of Section 4.1. Section 4.1 of the Loan Agreement
is hereby amended and rested to read in its entirety as follows:

"4.1 Term of Agreement and Loan Repayment. This Agreement
shall have a term commencing on April 10, 1995, and terminating on
December 31, 1997 ('Maturity Date'). The Loan shall be due and
payable in full on the Maturity Date without notice or demand and
shall be repaid to Lender by a wire transfer of immediately available
funds. Borrower may terminate this Agreement prior to the Maturity
Date by: (a) giving Lender at least sixty (60) days prior notice of
intention to terminate this Agreement; (b) paying and performing, as
appropriate, all Obligations on or prior to the effective date of
termination; and (c) paying to Lender an early termination fee equal
to (i) one percent (1%) of the Total Credit Facility in the event the
effective date of termination is before December 20, 1996; and (ii)
one-half of one percent (.5%) of the Total Credit Facility in the
event the effective date of termination occurs on or after December
20, 1996, but before December 31, 1997. No early termination fee
shall apply thereafter. Notwithstanding the foregoing, upon the
occurrence of an Event of Default, Lender may immediately terminate
further performance under this Agreement without notice or demand."

-4-
<PAGE> 6

1.8 Amendment of Section 6.4. The phrase "seven and one-half
percent (7.5%)," appearing in Section 6.4 of the Loan Agreement, is hereby
amended to be "five (5.0%) percent."

1.9 Amendment of Section 8.7. Section 8.7 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:

"8.7 Total Debt Ratio. Borrower shall not permit the
ratio, calculated as of the last day of each month, of (a) the
aggregate amount of all Debt to (b) Adjusted Tangible Net Worth, to be
more than: (a) 15 to 1 prior to December 1, 1996, and (b) 10 to 1
thereafter."

1.10 Deletion of Section 8.8. Section 8.8 of the Loan Agreement is
hereby deleted from the Loan Agreement in its entirety and shall be of no
further force or effect.

1.11 Deletion of Section 8.9. Section 8.9 of the Loan Agreement is
hereby deleted from the Loan Agreement in its entirety and shall be of no
further force or effect.

1.12 Amendment of Section 8.16. Section 8.16 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:

"8.16 Intercompany Management Fees. Borrower shall not,
directly or indirectly pay in any form (including without limitation
salary, bonuses, commissions, fees, and incentive compensation) any
fees or other Debt due from Borrower to any Affiliate for services
rendered or facilities provided to Borrower by such Affiliate.
Notwithstanding the foregoing provisions of this Section 8.16,
Borrower may pay such administrative and overhead expenses (including
taxes) as are, from time to time, reasonably allocated to Borrower by
Emergent Group, Inc., provided: (a) the amount paid to Emergent Group,
Inc. as a management fee in any Fiscal Year does not exceed the
greater of thirty thousand dollars ($30,000) or thirty-four percent
(34%) of the Borrower's Adjusted Net Earnings from Operations for such
Fiscal Year, before provision for income taxes for such period (with
the provision for income taxes being calculated for Borrower without
reference to the taxable income of any other Person); and (b) no
Default or Event of Default exists at the time of such payment."

1.13 Amendment of Article Eight. Article Eight of the Loan
Agreement is hereby amended by the addition of a new section, numbered 8.24,
which shall read in its entirety as follows:

"8.24 Interest Coverage Ratio. Commencing with the quarter
ending March 31, 1996, Borrower will maintain an Interest Coverage
Ratio, calculated as of the last day of each quarter in each Fiscal
Year for the period commencing

-5-
<PAGE> 7

on the first day of such Fiscal Year to the date of calculation, of
not less than 1.15 to 1."

1.14 Amendment of Section 11.1. Section 11.1 of the Loan Agreement
is hereby amended by the addition of a new subsection "r," which shall read in
its entirely as follows:

"r. the Delinquency/Repossession Percent is at
any time greater than eight percent (8%)."

ARTICLE TWO - REPRESENTATIONS AND WARRANTIES

2.1 Borrower's Representations, Warranties, and Covenants.
Borrower hereby represents and warrants that (a) the execution and delivery of
this Amendment and compliance by Borrower with all of the provisions of this
Amendment (i) are within the powers and purposes of Borrower; (ii) have been
duly authorized or approved by Borrower; and (iii) when executed and delivered
by or on behalf of Borrower, will constitute valid and binding obligations of
Borrower, enforceable in accordance with its terms; (b) Borrower has no offsets
or counterclaims against Lender or defenses to the payments due under the Loan
Documents; (c) Lender has a first perfected security interest in the Collateral
for the Loan; and (d) the recitals in this Amendment are true. Borrower
reaffirms its obligation to pay all amounts due Lender under the Loan Documents
in accordance with the terms thereof, as modified hereby.

ARTICLE THREE - GENERAL PROVISIONS

3.1 Loan Documents Unmodified. Except as otherwise specifically
modified by this Amendment, all terms and provisions of the Loan Documents and
all liens and security interests created thereby shall remain unmodified and in
full force and effect. Nothing contained in this Amendment shall in any way
impair the validity or enforceability of the Loan Documents, as modified
hereby, or alter, waive, annul, vary, affect, or impair any provision,
condition, or covenant contained therein or any rights, power, or remedy
granted therein.

3.2 Construction of Amendment. Each party hereto has cooperated
in the drafting and preparation of this Amendment and, as a result, this
Amendment shall not be construed against any party. This Amendment may be
amended or modified only by a written agreement signed by the parties hereto.
This Amendment may be executed in counterparts.

3.3 Parties, Successors and Assigns. This Amendment shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.

3.4 Total Agreement. This Amendment, and all other agreements
referred to herein or delivered in connection herewith, shall constitute the
entire agreement between the parties relating to the subject matter hereof and
shall not be changed or terminated orally.

-6-
<PAGE> 8

3.5 Severability. To the extent any provision of this Amendment
is not enforceable under applicable law, such provision shall be deemed null
and void and shall have no effect on the remaining portions of the Amendment.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.

<TABLE>
<S> <C>
"BORROWER"

Premier Financial Services, Inc.,
a South Carolina corporation

Dated: January 16, 1996 By: /s/ Keith B. Giddens
------------------------------
Keith B. Giddens,
Chief Executive Officer

Dated: January 16, 1996 By: /s/ H. Kim Ballard
------------------------------
H. Kim Ballard, Secretary

"LENDER"

BankAmerica Business Credit, Inc.
a Delaware corporation

Dated: January 22, 1996 By: /s/ Joseph F. Pignotti
------------------------------
Joseph F. Pignotti,
Executive Vice President
</TABLE>

GUARANTY REAFFIRMATION

In consideration of the agreements and amendments made by the Lender
in this Amendment and to induce the Lender to take such action (acknowledging
that the Lender would not do so without this reaffirmation and consent), each
Guarantor hereby ratifies, reaffirms, and continues in full force and effect
the Guaranties. The Guaranties shall each continue for all purposes
notwithstanding the amendments, modifications, and other actions embodied in
this Amendment.

Each Guarantor represents, acknowledges, and agrees that each Guaranty
constitutes the valid, legally binding, joint and several obligations of the
each Guarantor, enforceable against him/her/it in accordance with its terms and
that the liability of Guarantors under the Guaranties shall not be affected in
any way by the execution and delivery of this Amendment or by the consummation
of the transactions contemplated thereby.

-7-
<PAGE> 9

<TABLE>
<S> <C>
"GUARANTORS"

Carolina Investors, Inc.,
a South Carolina corporation

Dated: January 16, 1996 By: /s/ Keith B. Giddens
-----------------------------
Keith B. Giddens,
Chief Executive Officer

Emergent Financial Corporation,
a South Carolina corporation

Dated: January 16, 1996 By: /s/ Keith B. Giddens
-----------------------------
Keith B. Giddens,
Chief Executive Officer
</TABLE>

-8-
<PAGE> 10

CERTIFICATE OF RESOLUTION RE
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT

I, Phil Cox, hereby certify on behalf of the corporation named below
that:

1. I am the duly qualified and acting secretary of Carolina
Investors, Inc., a South Carolina corporation and as such secretary I am a
keeper of the corporate records and the seal of the corporation.

2. The following is a true copy of resolutions of the board of
directors of the corporation, duly adopted pursuant to the unanimous written
consent, of its board of directors, given on January 16, 1996:

"RESOLVED that the terms of Amendment No. 1 to Loan and Security
Agreement between this corporation and Emergent Financial Corporation,
as guarantors, Premier Financial Services, Inc. and BankAmerica
Business Credit Inc., a Delaware corporation, be and hereby are
approved and ratified.

FURTHER RESOLVED, that any one officer of this corporation is hereby
authorized and directed, on behalf of this corporation, to make,
execute, and deliver to BankAmerica Business Credit, Inc. any and all
documents and to do any and all acts necessary or desirable to
effectuate the foregoing resolution."

3. The resolutions specified in paragraph 2 are in conformity
with the articles of incorporation and bylaws of the corporation, have never
been modified or repealed, and are now in full force and effect.

IN WITNESS WHEREOF, I have set my hand and the seal of the corporation
on January 16, 1996.

/s/ Phil Cox
--------------------------------------
Phil Cox
--------------------------------------
Secretary for Carolina Investors, Inc.

[Seal]
<PAGE> 11

CERTIFICATE OF RESOLUTION RE
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT

I, H. Kim Bullard, hereby certify on behalf of the corporation named
below that:

1. I am the duly qualified and acting secretary of Premier
Financial Services, Inc., a South Carolina corporation and as such secretary I
am a keeper of the corporate records and the seal of the corporation.

"RESOLVED that the terms of Amendment No. 1 to Loan and Security
Agreement between this corporation and BankAmerica Business Credit
Inc., a Delaware corporation, be and hereby are approved and ratified.

IN WITNESS WHEREOF, I have set my hand and the seal of the corporation
on January 16, 1996.

/s/ H. Kim Bullard
--------------------------------
H. Kim Bullard, Secretary for
Premier Financial Services, Inc.

[Seal]
<PAGE> 12

December 20, 1995

Premier Financial Services, Inc.
415 A Farrs Bridge Road
Greenville, South Carolina 29610

Gentlemen:

Reference is made to the Loan and Security Agreement dated as of April
10, 1995 ("Loan Agreement") by and between BankAmerica Business Credit, Inc.
("BABC") and Premier Financial Services, Inc. ("Premier").

This is to confirm the understanding between BABC and Premier to the
effect that the Loan Agreement is to be amended, subject to the execution of
documentation satisfactory to BABC and Premier, in January 1996 to provide for
the following:

1. The interest rate is to be reduced to a rate equal to the
Reference Rate plus .75%.

2. The maximum credit facility will be increased to $6,000,000.

3. The maturity of the credit facility will be extended to
December 31, 1997.

4. The prepayment fee will be one percent (1%) of the credit
facility if the loan is prepaid prior to December 20, 1996 and one-half percent
(1/2%) of the credit facility if the loan is prepaid after December 20, 1996
but prior to December 31, 1997.

5. The debt to tangible net worth ratio covenant shall be changed
to 15 to 1 prior to December 31, 1996, and 10 to 1 thereafter.

6. A minimum EBIT ratio of 1.15 to 1 covenant shall be added to
the Loan Agreement to be tested quarterly on a cumulative basis beginning March
31, 1996.

7. The advance rate shall be subject to a reduction of one
percent (1%) for each one percent (1%) increase in net charge-offs over three
percent (3%) on a twelve-month rolling average.
<PAGE> 13

Premier Financial Services, Inc.
December 20, 1995
Page 2

8. The advance rate shall be subject to a reduction when
delinquent contracts plus repossession inventory exceeds six percent (6%) of
gross contract balances plus repossession inventory for two consecutive months
using a three-month rolling average as follows:

(i) One percent (1%) reduction when 60+ day contract
delinquency plus repossession inventory exceed six
percent (6%) but are less than seven percent (7%) of
gross contract balances plus repossession inventory;

(ii) Two percent (2%) reduction when 60+ day contract
delinquency plus repossession inventory is greater
than or equal to seven percent (7%) but less than
eight percent (8%) of gross contract balances plus
repossession inventory;

9. A default under the Loan Agreement shall occur if 60+ day
contract delinquent plus repossession inventory is greater than eight percent
(8%) of gross contract balances plus repossession inventory.

10. The Aggregate value of all 90 day+ repossession inventory
shall be deducted from tangible net worth each month.

11. Management fees shall be limited to the greater of (i) $30,000
per year or (ii) thirty-four percent (34%) of pretax profits.

12. Minimum Adjusted TNW covenant to be deleted.

13. Minimum Borrowing Base ratio to be deleted.

14. The following underwriting conditions will no longer be
eligibility criteria: Used Car Loans - Maximum of 100,000
miles at contract close. Maximum allowable terms:
New and Current Used - 60 Months
1 & 2 Years Old - 48 Months
3 & 4 Years Old - 42 Months
5 & 6 Years Old - 30 Months
7 & 8 Years Old - 18 Months

All other terms and conditions of the Loan Agreement will remain
unmodified.

Please acknowledge your agreement with the foregoing by signing below
and returning a copy to my attention.

<PAGE> 14

Premier Financial Services, Inc.
December 20, 1995
Page 3

Very truly yours,

BANKAMERICA BUSINESS CREDIT, INC.

By: /s/ Joseph F. Pignotti
----------------------------
Its: Executive Vice President
----------------------------

Agreed this 20th day of
December, 1995:

PREMIER FINANCIAL SERVICES, INC.

By: Kevin J. Mast
---------------------------
Its: Treasurer
---------------------------

<PAGE> 1

EXHIBIT 10.17

The Company hereby undertakes to provide to the Commission upon request, copies
of any schedules and exhibits to this Loan and Security Agreement dated as of
December 29, 1993 between NationsBank of Georgia, N.A., and Emergent Business
Capital, Inc., $32,000,000.

<PAGE> 2

AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT

This Amendment is entered into as of April 26th, 1995, between
Emergent Business Capital, Inc. ("Borrower") and NationsBank of Georgia, N.A.
("NationsBank").

Borrower and NationsBank are party to a December 29, 1993 Loan and
Security Agreement (the "Agreement").

Borrower and NationsBank agree as follows:

1. Definitions. Terms defined in the Agreement have the same
meanings as in the Agreement when used in this Amendment.

2. Amendments. The Agreement is hereby amended as follows:

(a) In Section 2.1(a), clause (ii), change "65%" to "80%".

(b) Change the first sentence in Section 2.2 to read as follows in
its entirety:

The Loans shall bear interest on the average daily net balance
thereof, calculated monthly, at a fluctuating rate of interest equal
to the Prime Rate.

(c) At the end of the third paragraph of Section 2.2, immediately
before the period, add "(such fee not to exceed $25,000 per year)".

(d) Change the first two sentences of Section 2.7 to read as
follows:

This Agreement shall be effective on the date set forth in the first
paragraph of this Agreement, and shall continue in full force and
effect until December 29, 1998 and from year to year thereafter unless
terminated on December 29, 1998 or any subsequent anniversary thereof
by either party's giving to the other not less than 60 days' prior
written notice. If the Borrower terminates this Agreement other than
on December 29, 1998 or any subsequent anniversary thereof, the
Borrower shall pay to the Lender an early termination fee equal to
$150,000 for any termination before December 29, 1998, $100,000 for
any termination after December 29, 1998 and before December 29, 1999,
and $50,000 for any termination thereafter not on a December 29.

(e) As previously provided in a June 30, 1994 letter, all
references in Sections 7.3(a) and 7.3(b) to "Carolina Investors, Inc." have
been changed to "Emergent Financial Corporation".

(f) Change the text of Section 7.13 to read as follows:

1
<PAGE> 3

The Borrower shall maintain at all times a Tangible Net Worth of not
less than $3,000,000 during 1995, $3,750,000 during 1996, $4,500,000
during 1997, and $5,250,000 during 1998, and continuing to increase by
$750,000 each fiscal year thereafter.

(g) Change Section 7.15 to read "[Intentionally deleted]".

3. Effective Date. The amendments to the Agreement set forth in
Section 2 hereof shall be effective on and as of the date of this Amendment
(the "Effective Date"), provided that all of the following conditions precedent
have been satisfied on such date in a manner satisfactory to NationsBank:

(a) NationsBank shall have received a fully-executed counterpart
of this Amendment.

(b) All legal matters incident to this Amendment shall be
satisfactory to counsel for NationsBank.

(c) No default under the Agreement shall exist, and no status or
condition shall exist which with the giving of notice or the passage
of time or both would constitute a default under the Agreement;
Borrower's representations in this Amendment shall be true; and no
lawsuit or proceeding shall be pending (or, to Borrower's knowledge,
threatened) against Borrower which may have a materially adverse
effect upon Borrower's financial condition or upon Borrower's ability
to carry out the transactions contemplated by this Amendment and the
Agreement as amended hereby.

(d) NationsBank shall have received such other documents as
NationsBank shall reasonably request.

4. Representations, etc. Borrower represents, covenants, and
warrants that no Default exists, and that the Obligations are owing without
defense, offset, recoupment right, or counterclaim.

5. Fees and Expenses.

Borrower shall reimburse NationsBank for NationsBank's expenses in
connection with this Amendment, including attorneys' fees, on demand. Borrower
authorizes NationsBank to charge Borrower's line of credit under the Agreement
to pay for such fees and expenses (regardless of the amount of collateral or
eligible collateral then existing).

6. Agreement.

2
<PAGE> 4

Agreement", "hereto", "hereof", and terms of similar import shall refer to the
Agreement as amended by this Amendment, and all references to the Agreement in
any document, instrument, certificate, note, or other agreement executed in
connection therewith shall be deemed to refer to the Agreement as so amended.

(b) Borrower waives, releases, and forever discharges NationsBank
and its directors, officers, agents, employees, successors, and assigns from
any and all claims and defenses with respect to the Agreement and any and all
documents, instruments, certificates, notes, and other agreements executed in
connection therewith, and covenants not to sue NationsBank based upon any such
claim or defense.

7. Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of Georgia.

8. Further Assurances. Borrower shall promptly and duly execute
and deliver such documents, and take such further action, as NationsBank
reasonably requests to effectuate the purpose and intent of this Amendment.

9. Headings. Section headings in this Amendment are for
convenience only, and are not a substantive part of this Amendment.

10. Counterparts. This Amendment may be executed separately in
counterparts.

IN WITNESS WHEREOF, Borrower and NationsBank have executed this
Amendment No. 1 to Loan and Security Agreement.

[Seal] EMERGENT BUSINESS CAPITAL, INC.

Attest:
By: /s/ Keith B. Giddens
----------------------------------
Title: Chief Executive Officer
/s/ Kevin J. Mast
- -----------------------------
Secretary

NATIONSBANK OF GEORGIA, N.A.

By: /s/ John Bohan
----------------------------------
Title: Vice President

3
<PAGE> 5

AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT

This Amendment is entered into as of May 30, 1995, between Emergent
Business Capital, Inc. ("Borrower") and Nationsbank of Georgia, N.A.
("NationsBank").

Borrower and NationsBank are party to a December 29, 1993 Loan and
Security Agreement (the "Agreement").

1. Amendments. The Agreement is hereby amended as follows:

2. The following language shall be added to the end of section
8.8"; provided however that the Borrower may sell, lease or otherwise transfer
all or any substantial part of its assets material to its operations if such
sale or transfer is being pursued in connection with the securitization of such
assets".

(a) NationsBank shall have received a fully-executed counterpart
of this Amendment.

(b) All legal matters incident to this Amendment shall be
satisfactory to counsel for NationsBank.

(d) NationsBank shall have received such other documents as
NationsBank shall reasonably request.

4. Representations, etc. Borrower represents, covenants, and
warrants that no Default exists, and that the Obligations are owing without
defense, offset, recoupment right, or counterclaim.

5. Fees and Expenses. Borrower shall reimburse NationsBank for
NationsBank's expenses in connection with this Amendment, including attorneys'
fees, on demand. Borrower authorizes NationsBank to charge Borrower's line of
credit under the Agreement to pay for such fees and expenses (regardless of the
amount of collateral or eligible collateral then existing).

-1-
<PAGE> 6

6. Agreement.

(a) Except as specifically amended hereby, the Agreement shall
remain unchanged and continue in full force and effect in accordance with its
terms. From and after the Effective Date, each reference in the Agreement
(including all Exhibits and Schedules thereto) to "this Agreement", "hereto",
"hereof", and terms of similar import shall refer to the Agreement as amended
by this Amendment, and all references to the Agreement in any document,
instrument, certificate, note, or other agreement executed in connection
therewith shall be deemed to refer to the Agreement as so amended.

7. Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of Georgia.

8. Further Assurances. Borrower shall promptly and duly execute
and deliver such documents, and take such further action, as NationsBank
requests to effectuate the purpose and intent of this Amendment.

9. Headings. Section headings in this Amendment are for
convenience only, and are not a substantive part of this Amendment.

10. Counterparts. This Amendment may be executed separately in
counterparts.

IN WITNESS WHEREOF, Borrower and NationsBank have executed this
Amendment No. 2 to Loan and Security Agreement.

[Seal] EMERGENT BUSINESS CAPITAL, INC.

Attest:
By: /s/ Keith B. Giddens
----------------------------------
Title: Chief Executive Officer
/s/ Kevin J. Mast
- -------------------------------
Secretary

NATIONSBANK OF GEORGIA, N.A.

By: /s/ John Bohan
----------------------------------
Title: Vice President

-2-
<PAGE> 7

AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT

This Amendment is entered into as of October 10th, 1995, between
Emergent Business Capital, Inc. ("Borrower") and NationsBank of Georgia, N.A.
("NationsBank").

Borrower and NationsBank are party to a December 29, 1993 Loan and
Security Agreement, as amended by Amendment No. 1 dated April 26, 1995 and
Amendment No. 2 dated May 22, 1995 (the "Agreement").

Borrower and NationsBank agree as follows:

1. Definitions. Terms defined in the Agreement have the same
meanings as in the Agreement when used in this Amendment.

2. Amendments. The Agreement is hereby amended as follows:

(a) In Section 1.1, in the definition of "Loans", change
"$32,000,000" to "$24,000,000".

(b) In Section 1.1, in the definition of "Tangible Net Worth",
change "the Borrower's total assets" to "the total assets of the Borrower and
its consolidated Subsidiaries", and change "the Borrower's stockholders" to
"stockholders".

(c) In Section 1.1, in the definition of "Total Liabilities",
change "the Borrower" to "the Borrower and its consolidated Subsidiaries".

(d) In the first proviso in Section 2.1(a), change "$24,000,000"
to "$16,000,000".

(e) In the third paragraph in Section 2.2, change the
parenthetical to read: "(i.e., $16,000,000 minus the average daily principal
amount of Stub Loans outstanding)".

(f) In Section 6.5, change the text to "The Borrower has no
Subsidiary except Emergent Commercial Mortgage, Inc. and Emergent Business
Capital Holdings Corp."

(g) Change Section 7.13 to read as follows:

7.13 TANGIBLE NET WORTH. The Borrower shall maintain at
all times a Tangible Net Worth of not less than $3,000,000 during
1995, $3,750,000 during 1996, $4,500,000 during 1997, and $5,250,000
during 1998, and continuing to increase by $750,000 each fiscal year
thereafter.

(b) Change Section 7.14 to read as follows:

-1-
<PAGE> 8

7.14 RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH.
The Borrower shall maintain at all times a ratio of Total Liabilities
to Tangible Net Worth of not more than 6 to 1.

3. Effective Date. The amendments to the Agreement set forth in
Section 2 hereof shall be effective on and as of the date of this Amendment
(the "Effective Date").

4. Representations, etc. Borrower represents, covenants, and
warrants that no Default exists, and that the Obligations are owing without
defense, offset, recoupment right, or counterclaim.

6. Agreement. Except as specifically amended hereby, the
Agreement shall remain unchanged and continue in full force and effect in
accordance with its terms. From and after the Effective Date, each reference
in the Agreement (including all Exhibits and Schedules thereto) to "this
Agreement", "hereto", "hereof", and terms of similar import shall refer to the
Agreement as amended by this Amendment, and all references to the Agreement in
any document, instrument, certificate, note, or other agreement executed in
connection therewith shall be deemed to refer to the Agreement as so amended.

7. Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of Georgia.

9. Headings. Section headings in this Amendment are for
convenience only, and are not a substantive part of this Amendment.

10. Counterparts. This Amendment may be executed separately in
counterparts.

-2-
<PAGE> 9

IN WITNESS WHEREOF, Borrower and NationsBank have executed this
Amendment No. 3 to Loan and Security Agreement.

[Seal] EMERGENT BUSINESS CAPITAL, INC.

Attest:
By: /s/ John A. Bickley
---------------------------
Title: President

/s/ Kevin J. Mast
- --------------------------------
Secretary

NATIONSBANK OF GEORGIA, N.A.

By: /s/ John Bohan
---------------------------
Title: Vice President

-3-
<PAGE> 10

June 8, 1995

Mr. Kevin J. Mast
Vice President and Chief Financial Officer
Emergent Business Capital, Inc.
P. O. Box 17526
Greenville, SC 29606

Re: December 29, 1993 Loan and Security Agreement ("L&SA") between
NationsBank of Georgia, N.A. ("NationsBank") and Emergent Business
Capital, Inc. ("Emergent")

Kevin:

Section 8.14 of the LS&A requires the Lender's written consent if Emergent's
Capital Expenditures during the fiscal year exceed $100,000. You have informed
us that Capital Expenditures will exceed that amount, primarily due to the
expense of a computer upgrade. This letter constitutes our written approval of
Capital Expenditures up to $300,000 for the current fiscal year.

NationsBank of Georgia, N.A.

By: /s/ John Bohan
-----------------------
John Bohan
Vice President

<PAGE> 1

EXHIBIT 10.18

The Company hereby undertakes to provide to the Commission upon request, copies
of any schedules and exhibits to this Mortgage Loan Warehouse Agreement dated
November 22, 1994 between Carolina Investors, Inc., and First Union National
Bank of North Carolina.

<PAGE> 2

FOURTH AMENDMENT TO
MORTGAGE LOAN WAREHOUSING AGREEMENT

FOURTH AMENDMENT TO MORTGAGE LOAN WAREHOUSING AGREEMENT (the
"Amendment"), dated as of November 22, 1994, among CAROLINA INVESTORS, INC.
("Borrower"), EMERGENT FINANCIAL CORPORATION, EMERGENT GROUP, INC. and EMERGENT
MORTGAGE CORP. (each, jointly and severally, a "Guarantor" and, collectively,
the "Guarantors"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("Lender").

W I T N E S S E T H:

WHEREAS, the Borrower and the Lender are parties to a Mortgage Loan
Warehousing Agreement dated as of November 22, 1994, as previously amended by
that certain letter agreement dated as of March 31, 1995, by that certain
Second Amendment to Mortgage Loan Warehousing Agreement dated as of April 30,
1995 and by that certain Third Amendment to Mortgage Loan Warehousing Agreement
dated as of October 20, 1995 (as so amended, the "Agreement"); and

WHEREAS, the parties hereto wish to amend the Agreement as set forth
below; and

WHEREAS, subject to and upon the terms and conditions herein set
forth, the Lender is willing to continue to make available to the Borrower the
credit facilities provided for in the Agreement; and

WHEREAS, a specific condition to the willingness of the Lender to
continue to make available to the Borrower the credit facilities provided for
in the Agreement, is the reaffirmation by each of the Guarantors of the
Guaranty to which such Guarantor is a party; and

WHEREAS, each of the Guarantors will derive a material benefit from
the continued availability to the Borrower of the credit facilities provided
for in the Agreement and therefore each of the Guarantors is willing to
reaffirm the Guaranty to which such guarantor is a party;

NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto hereby agree as follows:

1. All capitalized terms used herein and not otherwise defined
shall have the respective meanings provided to such terms in the Agreement, as
amended hereby.

2. Amendments to the Agreement.

a. Paragraph 7(g) of the Agreement is hereby deleted in its
entirety and replaced with the following:

"7(g) Investments; Advances; Guaranties. Make or commit to make any
advance, loan or extension of credit (other than Mortgage Loans made
in the

<PAGE> 3

ordinary course of the Company's business) or capital contribution to,
or purchase any stocks, bonds, notes, debenture or other securities
of, or make any other investment in, or guaranty the indebtedness or
obligations of any other Person, in excess of the level permitted in
Paragraph 7(o) below; provided, however, that (i) the Company shall be
permitted to guaranty the indebtedness or other obligations of the
following two (2) Affiliates of the Company: (A) Premier Financial
Services, Inc., and (B) The Loan Pro$, Inc., which may be incurred in
the normal course of such Affiliates' business, so long as Emergent
Financial Corporation remains the sole shareholder of Premier
Financial Services, Inc. and continues to own at least eighty percent
(80%) of the outstanding capital stock of The Loan Pro$, Inc., (ii)
the Company shall be permitted to guaranty any indebtedness of EMC to
the lenders party to the EMC Syndicated Facility thereunder pursuant
to the Syndicated Guaranty, and (iii) the Company shall be permitted
to make advances to EMC."

b. Paragraph 7(m) of the Agreement is hereby deleted in its
entirety and the following paragraph is substituted in lieu thereof:

"7(m) Minimum Book Net Worth. Permit its Book Net Worth as
of the last day of any month to be less than the sum of (a) $9,000,000
plus (b) 100% of all capital contributions made to the Company after
the date of the Mortgage Loan Warehousing Agreement which evidences
the EMC Syndicated Facility."

c. Paragraph 7(o) of the Agreement is hereby deleted in its
entirety and the following paragraph is substituted in lieu thereof:

"7(o) Maximum Affiliate Receivables. Permit the amount of
Affiliate Receivables from Affiliates other than EMC to exceed
$30,000,000 at any time."

d. Paragraph 7(p) which had been deleted in a previous amendment
and not replaced is hereby replaced with the following provision:

"7(p) Percentage of Book Net Worth to Total Assets. Permit
its Book Net Worth at any date to be less than six percent (6%) of its
total assets as determined in accordance with GAAP."

e. Paragraph 8(l) of the Agreement is hereby deleted and the
following paragraph is substituted in lieu thereof:

"8(l) The principal amount of the Investor Obligations shall
decline by more than twenty percent (20%) during any two (2)
consecutive calendar month period."

2
<PAGE> 4

f. Paragraph 8(m) of the Agreement is hereby deleted in its
entirety and the following paragraph is substituted in lieu thereof:

"8(m) An Event of Default shall occur under the EMC
Syndicated Facility; or"

g. The definitions of "Guaranty Obligations" and "Investor
Obligations" contained in Paragraph 10 of the Agreement are hereby deleted and
the following are substituted in lieu thereof:

"`Guaranty Obligations' shall mean any and all debts,
obligations and liabilities of EMC (whether now existing or hereafter
arising, voluntary or involuntary, whether or not jointly owed with
others, direct or indirect, absolute or contingent, liquidated or
unliquidated, and whether or not from time to time decreased or
extinguished, increased, created or incurred), arising out of or
related to the EMC Syndicated Facility or any of the agreements,
documents and instruments executed in connection therewith."

"`Investor Obligations' shall mean those obligations of the
Company to pay principal and interest to holders of the Company's
Subordinated Debentures (Series S, Series T, Series W, Series U,
Series V and Series A) and Floating Rate Senior Notes (Series 90,
Series 91, Series 92, Series 93, Series 94, Series 95 and Series 96)
each as listed on page 10 of that certain Prospectus of the Company
dated March 1, 1995 describing the Series A Subordinated Debentures
and the Series 96 Floating Rate Senior Notes, together with
obligations of the Company to pay principal and interest to holders of
any similar Subordinated Debentures or Floating Rate Senior Notes
issued by the Company subsequent to the above Series."

h. Paragraph 10 of the Agreement is hereby amended by deleting
the definition of "EMC Facility".

i. The following definitions are hereby added to Paragraph 10 of
the Agreement as new definitions:

"`EMC Syndicated Facility' shall mean that certain revolving
credit facility extended by certain lenders to EMC pursuant to the
terms of that certain Mortgage Loan Warehousing Agreement dated as of
______________________, 19__ among EMC, the Lender in its capacity as
administrative agent, the Lender in its capacity as collateral agent,
and the lenders party thereto, and any and all agreements, documents
and instruments executed in connection therewith, as any of such items
may be amended, extended or replaced from time to time."

3
<PAGE> 5

"`Syndicated Guaranty' shall mean that certain Guaranty of
even date herewith executed and delivered by the Company to the Lender
in its capacity as collateral agent for the lenders party to the EMC
Syndicated Facility, pursuant to which the Company shall guaranty the
payment and performance of the obligations thereunder."

3. This Amendment shall become effective as of the date hereof,
provided that the Agent shall have received the following items:

(A) A copy of this Amendment executed by the Borrower, by each of
the Guarantors and the Lender (whether such parties shall have
signed the same or different copies);

(B) A Reaffirmation of Guaranty (the "Reaffirmation") executed by
each of the Guarantors in favor of the Lender; and

(C) Resolutions of the Borrower and of each of the Guarantors
authorizing (i) the execution of this Amendment, and (ii) in
the case of the Guarantors, the Reaffirmation to which such
Guarantor is a party.

4. The Borrower hereby represents and warrants that as of the
effective date hereof, there exists no Default or Event of Default under the
Agreement and the Borrower has no claim or cause of action against the Lender
arising out of or relating in any way to the Agreement (as amended hereby) or
the other Credit Documents, and the Borrower hereby waives and releases any and
all claims or causes of action which the Borrower may have as of the effective
date hereof against the Lender arising out of or relating in any way to the
Agreement (as amended hereby) or the other Credit Documents.

5. This Amendment is limited and, except as set forth herein,
shall not constitute a modification, acceptance or waiver of any provision of
the Agreement, or any other document or instrument entered into in connection
therewith.

6. This Amendment may be executed in any number of counterparts
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument. A complete set of
counterparts shall be lodged with each of the Borrower and the Lender.

7. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the laws of the
State of North Carolina.

8. From and after the date hereof, all references in the
Agreement, and any other document or instrument entered into in connection
therewith, to the Agreement shall be deemed to be references to the Agreement
as amended hereby.

4
<PAGE> 6

9. The Guarantors join in the execution and delivery of this
Amendment to acknowledge and consent to the terms hereof and hereby reaffirm
their obligations under the Guaranties.

10. THE LENDER, THE GUARANTORS AND THE BORROWER EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT ANY OF THEM MAY HAVE TO A TRAIL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AMENDMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING HERETO OR THERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AMENDMENT.

[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

5
<PAGE> 7

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and sealed as of the day and year first above written.

<TABLE>
<S> <C>
CAROLINA INVESTORS, INC.,
[CORPORATE SEAL] a South Carolina corporation

ATTEST:
By /s/ J. P. Cox By /s/ Keith B. Giddens
---------------------------------- -------------------------------------
Name J. Phil Cox Name Keith B. Giddens
-------------------------------- -----------------------------------
Title Secretary Title Chief Executive Officer
------------------------------- ----------------------------------

FIRST UNION NATIONAL BANK OF NORTH
[CORPORATE SEAL] CAROLINA, a national banking association

ATTEST:
By By
---------------------------------- -------------------------------------
Name Name
-------------------------------- ------------------------------------
Title Title
------------------------------- ----------------------------------

EMERGENT FINANCIAL CORPORATION, a
[CORPORATE SEAL] South Carolina corporation, as a Guarantor

ATTEST:
By /s/ Kevin J. Mast By /s/ Keith B. Giddens
---------------------------------- -------------------------------------
Name Kevin J. Mast Name Keith B. Giddens
-------------------------------- -----------------------------------
Title Treasurer Title President
------------------------------- ----------------------------------

EMERGENT GROUP, INC., a South
[CORPORATE SEAL] Carolina corporation, as a Guarantor

ATTEST:
By /s/ Kevin J. Mast By /s/ Keith B. Giddens
---------------------------------- -------------------------------------
Name Kevin J. Mast Name Keith B. Giddens
-------------------------------- -----------------------------------
Title Treasurer Title Chief Executive Officer
------------------------------- ----------------------------------
</TABLE>

6
<PAGE> 8

<TABLE>
<S> <C>
EMERGENT MORTGAGE CORP, a
[CORPORATE SEAL] South Carolina corporation

</TABLE>

7
<PAGE> 9

REAFFIRMATION OF GUARANTY (CII Facility)

TO: First Union National Bank of North Carolina
One First Union Center
301 South College Street,
CORP-15, TW-19
Charlotte, North Carolina 28288

THIS REAFFIRMATION OF GUARANTY (this "Reaffirmation"), dated as of
____________________, 1996, is made by EMERGENT GROUP, INC., a South Carolina
corporation ("Guarantor"), in favor of the "Lender" (as defined below) and is
executed pursuant to the terms of that certain Fourth Amendment to Mortgage
Loan Warehousing Agreement of even date herewith (the "Amendment") among
Carolina Investors, Inc. ("Borrower") the Guarantor, Emergent Financial
Corporation , Emergent Mortgage Corp. and First Union National Bank of North
Carolina ("Lender") which Amendment amends that certain Mortgage Loan
Warehousing Agreement dated as of November 22, 1994 among the Borrower, the
Guarantors (other than Emergent Mortgage Corp.) and Lender, as previously
amended by that certain letter agreement dated as of March 31, 1995 among the
Borrower, the Guarantors (other than Emergent Mortgage Corp.) and the Lender,
by that certain Second Amendment to Mortgage Loan Warehousing Agreement dated
as of April 30, 1995 among the Borrower the Guarantors (other than Emergent
Mortgage Corp.) and the Lender and by that certain Third Amendment to Mortgage
Loan Warehousing Agreement dated as of October 20, 1995 among the Borrower, the
Guarantors and the Lender (as so amended, the "Warehousing Agreement").
Capitalized terms used in this Reaffirmation and not otherwise defined herein
shall have the meanings set forth in the Warehousing Agreement, as amended by
the Amendment.

Pursuant to the terms and conditions of the Warehousing Agreement,
Guarantor executed a Guaranty dated as of November 22, 1994 in favor of the
Lender, pursuant to which Guarantor agreed to guaranty the payment of the
Obligations of Borrower to Lender.

Lender has agreed to amend the Warehousing Agreement as set forth in
the Amendment.

A specific condition to the willingness of the Lender to enter into
the Amendment and to continue to make available to Borrower the credit
facilities provided for in the Warehousing Agreement, as so amended, is the
reaffirmation of the terms of the Guaranty. Guarantor owns directly or
indirectly 100% of the stock of the Borrower and thus will benefit from the
continued availability to Borrower of the credit facilities provided for in the
Warehousing Agreement.

To induce the Lender to modify the terms of the Warehousing Agreement
pursuant to the Amendment and to continue to make available to Borrower the
credit facilities provided for the Warehousing Agreement, as so amended, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Guarantor hereby reaffirms its obligations under the
Guaranty and agrees that the Guaranty shall remain in full force and effect
with respect to the Obligations.

8
<PAGE> 10

IN WITNESS WHEREOF, the undersigned has executed this Reaffirmation
under seal as of the date and year first written above.

GUARANTOR

EMERGENT GROUP, INC.,
[CORPORATE SEAL] a South Carolina corporation

ATTEST:
Kevin J. Mast By: /s/ Keith B. Giddens
- ------------------------ -------------------------
Treasurer COO and Exec V.P.

9
<PAGE> 11

REAFFIRMATION OF GUARANTY (CII Facility)

TO: First Union National Bank of North Carolina
One First Union Center
301 South College Street,
CORP-15, TW-19
Charlotte, North Carolina 28288

THIS REAFFIRMATION OF GUARANTY (this "Reaffirmation"), dated as of
________________________,1996, is made by EMERGENT FINANCIAL CORPORATION, a
South Carolina corporation ("Guarantor"), in favor of the "Lender" (as defined
below) and is executed pursuant to the terms of that certain Fourth Amendment
to Mortgage Loan Warehousing Agreement of even date herewith (the "Amendment")
among Carolina Investors, Inc. ("Borrower") the Guarantor, Emergent Group,
Inc., Emergent Mortgage Corp. and First Union National Bank of North Carolina
("Lender") which Amendment amends that certain Mortgage Loan Warehousing
Agreement dated as of November 22, 1994 among the Borrower, the Guarantors
(other than Emergent Mortgage Corp.) and Lender, as previously amended by that
certain letter agreement dated as of March 31, 1995 among the Borrower, the
Guarantors (other than Emergent Mortgage Corp.) and the Lender, by that certain
Second Amendment to Mortgage Loan Warehousing Agreement dated as of April 30,
1995 among the Borrower the Guarantors (other than Emergent Mortgage Corp.) and
the Lender and by that certain Third Amendment to Mortgage Loan Warehousing
Agreement dated as of October 20, 1995 among the Borrower, the Guarantors and
the Lender (as so amended, the "Warehousing Agreement"). Capitalized terms
used in this Reaffirmation and not otherwise defined herein shall have the
meanings set forth in the Warehousing Agreement, as amended by the Amendment.

Lender has agreed to amend the Warehousing Agreement as set forth in
the Amendment.

A specific condition to the willingness of the Lender to enter into
the Amendment and to continue to make available to Borrower the credit
facilities provided for in the Warehousing Agreement, as so amended, is the
reaffirmation of the terms of the Guaranty. Guarantor owns directly or
indirectly 100% of the stock of the Borrower and thus will benefit from the
continued availability to Borrower of the credit facilities provided for in the
Warehousing Agreement.

10
<PAGE> 12

IN WITNESS WHEREOF, the undersigned has executed this Reaffirmation
under seal as of the date and year first written above.

GUARANTOR

EMERGENT FINANCIAL CORPORATION,
[CORPORATE SEAL] a South Carolina corporation

ATTEST:
Kevin J. Mast By: /s/ Keith B. Giddens
- ----------------------- ---------------------------
Treasurer President

11
<PAGE> 13

REAFFIRMATION OF GUARANTY (CII Facility)

TO: First Union National Bank of North Carolina
One First Union Center
301 South College Street,
CORP-15, TW-19
Charlotte, North Carolina 28288

THIS REAFFIRMATION OF GUARANTY (this "Reaffirmation"), dated as of
_______________________________, 1996, is made by EMERGENT MORTGAGE CORP., a
South Carolina corporation ("Guarantor"), in favor of the "Lender" (as defined
below) and is executed pursuant to the terms of that certain Fourth Amendment
to Mortgage Loan Warehousing Agreement of even date herewith (the "Amendment")
among Carolina Investors, Inc. ("Borrower") the Guarantor, Emergent Financial
Corporation , Emergent Group, Inc. and First Union National Bank of North
Carolina ("Lender") which Amendment amends that certain Mortgage Loan
Warehousing Agreement dated as of November 22, 1994 among the Borrower, the
Guarantors (other than Guarantor) and Lender, as previously amended by that
certain letter agreement dated as of March 31, 1995 among the Borrower, the
Guarantors (other than Guarantor) and the Lender, by that certain Second
Amendment to Mortgage Loan Warehousing Agreement dated as of April 30, 1995
among the Borrower the Guarantors (other than Guarantor) and the Lender and by
that certain Third Amendment to Mortgage Loan Warehousing Agreement dated as of
October 20, 1995 among the Borrower, the Guarantors and the Lender (as so
amended, the "Warehousing Agreement"). Capitalized terms used in this
Reaffirmation and not otherwise defined herein shall have the meanings set
forth in the Warehousing Agreement, as amended by the Amendment.

Lender has agreed to amend the Warehousing Agreement as set forth in
the Amendment.

A specific condition to the willingness of the Lender to enter into
the Amendment and to continue to make available to Borrower the credit
facilities provided for in the Warehousing Agreement, as so amended, and for
Lender to continue to make available to the Guarantor the credit facilities
provided for in the EMC Warehousing Agreement (as defined in the Guaranty) is
the reaffirmation of the terms of the Guaranty. Both 100% of the stock of the
Guarantor and 100% of the stock of the Borrower are owned by Emergent Financial
Corporation, and thus Guarantor will benefit from the continued availability to
Borrower of the credit facilities provided for in the Warehousing Agreement and
the continued availability to Guarantor of the credit facilities provided for
in the EMC Warehousing Agreement.

To induce the Lender to modify the terms of the Warehousing Agreement
pursuant to the Amendment, to continue to make available to Borrower the credit
facilities provided for the Warehousing Agreement, as so amended, and to
continue to make available to Guarantor the credit facilities provided for in
the EMC Warehousing Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby
reaffirms its obligations under the Guaranty and agrees that the Guaranty shall
remain in full force and effect with respect to the Obligations.

12
<PAGE> 14

IN WITNESS WHEREOF, the undersigned has executed this Reaffirmation
under seal as of the date and year first written above.

GUARANTOR

EMERGENT MORTGAGE CORP.,
[CORPORATE SEAL] a South Carolina corporation

ATTEST:
/s/ J. P. Cox By: /s/ Dennis Kanupp
- -------------------------- -------------------------
Secretary President