CAROLINA FIRST CORP, 424B1, 1995-05-16

CAROLINA FIRST CORP
424B1, 1995-05-16
STATE COMMERCIAL BANKS

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424(b)(1)
33-58879
PROSPECTUS
$23,000,000
(CAROLINA FIRST CORPORATION LOGO APPEARS HERE)
9.00% SUBORDINATED NOTES DUE 2005
The 9.00% Subordinated Notes (the "Notes") offered hereby are unsecured
debt obligations of Carolina First Corporation (the "Company" or "CFC"). The
Notes are due on September 1, 2005. Interest on the Notes is payable quarterly
on the first day of March, June, September and December in each year, commencing
September 1, 1995.
The Company will redeem at any time, at 100% of the principal amount plus
accrued interest to the date of redemption, Notes tendered by the personal
representative or surviving joint tenant, tenant by the entirety or tenant in
common of a deceased holder, within 60 days of presentation of the necessary
documents, up to an annual maximum of $25,000 per holder and an annual maximum
for all holders of 2% of the original aggregate principal amount of the Notes.
The Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after September 1, 2000, at 100% of the principal amount plus
accrued interest to the date of redemption.
The Notes are unsecured and subordinated in right of payment to all present
and future senior indebtedness of the Company, including all general creditors
of the Company. There is no limitation on the Company's ability to issue
additional debt obligations in the future which are senior to, or which rank on
parity with, the Notes as to all matters. The Notes will be issued in integral
multiples of $1,000 and will be in fully registered form. The minimum principal
amount of Notes which may be purchased is $1,000. No sinking fund will be
established for the Notes.
Payment of principal of the Notes may be accelerated only in certain cases
involving the bankruptcy or insolvency of the Company. There is no right of
acceleration in the case of a default in the payment of the principal of or
interest on the Notes or in the performance of any covenant or agreement of the
Company. The indenture entered into by the Company in connection with the Notes
does not require the Company to maintain any financial ratios or specified
levels of net worth or liquidity. See "Description of Notes."
The Company has been advised by the Underwriters that each Underwriter
intends to make a market in the Notes; however, no assurance can be given that
an active trading market for the Notes will develop. The Company has no present
intention to have the Notes authorized for quotation on any automated quotation
system or listed on any securities exchange.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSIT ACCOUNTS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
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.
[CAPTION]
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Note............................................ 100% 3.75% 96.25%
Total (3)........................................... $23,000,000 $862,500 $22,137,500
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $300,000 payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
$3,450,000 aggregate principal amount of additional Notes on the same terms
and conditions set forth above, solely to cover over-allotments, if any. If
all such additional Notes are purchased, the total Price to Public,
Underwriting Discounts and Commissions, and Proceeds to Company will be
$26,450,000, $991,875 and $25,458,125, respectively. See "Underwriting."
The Notes are offered subject to receipt and acceptance by the several
Underwriters, to prior sale and to the Underwriters' right to reject orders in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that the Notes will be available for delivery on or about May 18,
1995.
J.C. Bradford &Co.
Interstate/Johnson Lane
Corporation
Morgan Keegan & Company, Inc.
May 11, 1995

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(A map of South Carolina appears here depicting the locations of Carolina
First as of March 31, 1995 and their pending acquisition.)

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 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, 13th Floor, New York, New York 10048; and Chicago Regional Office,
Citicorp Center, 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, at
prescribed rates.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, heretofore filed by the Company with the Commission
pursuant to the Exchange Act, are incorporated by reference, except as
superseded or modified herein:
1. Annual Report on Form 10-K for the year ended December 31, 1994; and
2. Current Reports on Form 8-K dated January 24, 1995, March 15, 1995
and April 10, 1995.
All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange
Act since December 31, 1994 shall be deemed to be incorporated by reference in
this Prospectus and shall be part hereof from the date of filing of such
document. All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of this
offering shall be deemed to be incorporated by reference into this prospectus.
Any statement contained herein or in a document incorporated herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently-filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document incorporated
by reference herein (other than exhibits to such a document unless such exhibit
is specifically incorporated by reference into such document). Requests for such
copies should be directed to: Carolina First Corporation, 102 South Main Street,
Greenville, South Carolina 29601, Attn: Chief Financial Officer, telephone (803)
255-7913.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. ALL
PER SHARE INFORMATION SET FORTH HEREIN HAS BEEN ADJUSTED TO REFLECT COMMON STOCK
DIVIDENDS PAID ON CFC'S COMMON STOCK. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION. EXCEPT WHERE EXPRESSLY STATED OTHERWISE, THE FINANCIAL
INFORMATION CONTAINED HEREIN ALSO REFLECTS THE COMPANY'S ACQUISITION OF AIKEN
COUNTY NATIONAL BANK WHICH WAS CONSUMMATED ON APRIL 10, 1995 AND ACCOUNTED FOR
AS A POOLING OF INTERESTS.
THE COMPANY
Carolina First Corporation is a bank holding company headquartered in
Greenville, South Carolina which operates through two subsidiaries: Carolina
First Bank and Carolina First Mortgage Company ("CF Mortgage"). The Company,
which commenced operations in December 1986, currently conducts business through
47 locations in South Carolina. At March 31, 1995, the Company had $1.1 billion
in assets, $877 million in loans, $943 million in deposits and $84 million in
stockholders' equity.
The Company was formed principally in response to perceived opportunities
resulting from the takeovers of several South Carolina-based banks by large
southeastern regional bank holding companies. A significant number of the
Company's executive officers and management personnel were previously employed
by certain of the larger South Carolina-based banks that were acquired by these
southeastern regional institutions. Consequently, these officers and management
personnel have significant customer relationships and commercial banking
experience that have contributed to the Company's loan and deposit growth.
The Company's objective is to become the leading South Carolina-based
banking institution. It believes that it can accomplish this goal by pursuing a
"super-community bank" strategy, offering the personalized service and local
decision-making authority that characterize community banks, as well as the
sophisticated banking products offered by regional and super-regional
institutions. The Company targets individuals and small to medium-sized
businesses in South Carolina that require a full range of quality banking
services.
The Company currently serves three principal market areas: the Greenville
metropolitan area and surrounding counties (located in the "Upstate" region of
South Carolina); the Columbia metropolitan area and surrounding counties
(located in the "Midlands" region of South Carolina); and Georgetown and Horry
counties (located in the "Coastal" region of South Carolina). In April 1994, the
Company entered the Charleston market with its acquisition of Citadel Federal
Savings & Loan Association from the Resolution Trust Corporation. The Company's
principal market areas, together with the Charleston market, represent the four
largest Metropolitan Statistical Areas in the state.
The Company began its operations with the de novo opening of Carolina First
Bank in Greenville and has pursued a strategy of growth through internal
expansion and through the acquisition of branch locations and financial
institutions in selected market areas. Its more significant acquisitions include
(i) the acquisition in August 1990 of First Federal Savings and Loan Association
of Georgetown (subsequently renamed Carolina First Savings Bank) which was
merged into Carolina First Bank in February 1995, (ii) the acquisitions in March
1993 and May 1994 of twelve branch locations and six branch locations,
respectively, of Republic National Bank, (iii) the acquisition of First Sun
Mortgage Corporation (subsequently renamed Carolina First Mortgage Company) in
September 1993, and (iv) the merger of Aiken County National Bank into Carolina
First Bank in April 1995. Approximately half of the Company's total deposits
have been generated through acquisitions.
CF Mortgage's principal activities include the origination and servicing of
one-to-four family residential mortgage loans through its seven offices in South
Carolina. At March 31, 1995, CF Mortgage was servicing 10,360 loans having an
aggregate principal balance of approximately $800 million. This servicing
includes approximately $435 million in servicing sold to an unrelated party as
of March 31, 1995. The Company is subservicing these loans until June 1995 and
is actively seeking to acquire additional servicing rights to replace the
servicing which was sold. See "Business -- CF Mortgage" and "Recent Matters."
Since 1990, Carolina First Bank acquired or originated credit card
receivables which had outstanding balances of approximately $104 million as of
December 31, 1994. In January 1995, Carolina First Bank contributed
approximately $97 million of its credit card receivables to a master trust (the
"Trust") in connection with a securitization of such credit card receivables
(the "Securitization"). In connection with the Securitization, certain interests
in the Trust were sold to an institutional investor, while Carolina First Bank
retained certain residual interests in the Trust assets and potential income. In
connection with the sale of such interests, Carolina First Bank received cash
proceeds of approximately $66 million.
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In the fourth quarter of 1994, the Company initiated a restructuring which
was designed to improve its long-term competitive position. This restructuring
had several unrelated components and involved (i) the merger of Carolina First
Bank and Carolina First Savings Bank, F.S.B. ("CF Savings Bank"), (ii) the
Securitization, and (iii) the write-off of certain intangible assets. In
connection with these transactions, the Company incurred in the fourth quarter
of 1994 an aggregate, one-time, after-tax charge of $9.4 million. The Company
believes that on a going-forward basis, the aggregate effect of the
restructuring will be to increase pre-tax income by approximately $2.8 million a
year. Absent the one-time charge associated with these transactions, the Company
would have had net income of $7.2 million during 1994.
In November 1994, the Company entered into an agreement to acquire Midlands
National Bank, a national bank headquartered in Prosperity, South Carolina. The
Company expects that this acquisition will be consummated in the second quarter
of 1995. At March 31, 1995, Midlands National Bank operated through three
locations and had approximately $42 million in assets, $37 million in deposits
and $27 million in loans. The Company expects to issue up to 784,242 shares of
the Company's $1 par value common stock ("Common Stock") in connection with this
acquisition, which is expected to be accounted for as a pooling of interests.
THE OFFERING
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Securities offered................................. $23,000,000 principal amount of 9.00% Subordinated Notes due 2005,
assuming no exercise of the Underwriters' over-allotment option to
purchase up to an additional $3,450,000 principal amount of Notes. The
Notes are unsecured, general obligations of the Company and are not
insured by the Federal Deposit Insurance Corporation (the "FDIC"). See
"Description of Notes."
Maturity........................................... September 1, 2005
Interest payment dates............................. Interest is payable quarterly on the first day of March, June, September
and December, commencing September 1, 1995. The first interest payment
will represent interest from the date of original issuance through
September 1, 1995.
Redemption option upon death of holder............. The Company will redeem, at 100% of the principal amount plus accrued
interest to the date of redemption, Notes tendered by the personal
representative or surviving joint tenant, tenant by the entirety or
tenant in common of a deceased holder, up to an annual maximum of
$25,000 per holder and an annual maximum for all holders of 2% of the
original aggregate principal amount of the Notes. See "Description of
Notes -- Redemption in the Event of Death of a Holder."
Redemption at Company's option..................... The Notes may be redeemed at the Company's option on or after September
1, 2000 at 100% of the principal amount plus accrued interest to the
date of redemption. See "Description of Notes -- Optional Redemption by
Company."
Subordination...................................... The Notes are unsecured and subordinated in right of payment to all
existing and future senior indebtedness of the Company, including
general creditors.
Sinking fund....................................... None
Use of proceeds.................................... The Company anticipates that approximately $15 million of the proceeds
of this offering will be contributed to Carolina First Bank to provide
additional capital to support internal growth and acquisitions. The
balance of the proceeds will be used for general corporate purposes.
Pending such use, the net proceeds will be invested in marketable
investment securities.
Trustee............................................ First American National Bank
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SUMMARY CONSOLIDATED FINANCIAL DATA
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THREE
MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1990 1991 1992 1993 1994 1994
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT
Net interest income................................. $ 11,467 $ 14,295 $ 19,368 $ 28,573 $ 43,471 $ 8,138
Provision for loan losses........................... 794 1,687 1,828 961 1,090 20
Net interest income after provision for loan
losses............................................ 10,674 12,608 17,540 27,612 42,381 8,118
Noninterest income, excluding gain on sale of
purchased mortgage servicing rights and securities
transactions...................................... 1,250 1,809 3,156 5,802 7,912 1,969
Gain on sale of purchased mortgage servicing
rights............................................ -- -- -- -- -- --
Securities transactions............................. (4) 664 535 662 75 73
Total noninterest income............................ 1,246 2,473 3,691 6,464 7,987 2,042
Noninterest expense, excluding credit card
restructuring charges............................. 10,058 12,889 17,688 26,855 40,378 8,190
Credit card restructuring charges................... -- -- -- -- 12,214 --
Total noninterest expense........................... 10,058 12,889 17,688 26,855 52,592 8,190
Net income (loss)................................... 1,288 1,738 2,383 5,048 (2,175) 1,487
Net income (loss) applicable to common
shareholders...................................... 1,288 1,738 1,758 3,118 (4,608) 1,177
PER SHARE DATA (1)(2)
Net income (loss) per common share:
Primary........................................... $ 0.35 $ 0.47 $ 0.47 $ 0.82 $ (0.93) $ 0.24
Fully diluted..................................... n/a n/a 0.47 0.82 (0.93) 0.24
Cash dividends declared............................. -- -- -- 0.05 0.21 0.05
Weighted average common shares outstanding:
Primary........................................... 3,686,446 3,719,100 3,743,504 3,784,599 4,974,087 4,951,558
Fully diluted..................................... n/a n/a 4,495,895 5,930,216 7,442,816 6,247,201
Common shares outstanding (period end).............. 3,712,241 3,737,406 3,758,820 4,946,523 5,034,060 4,962,175
Book value per common share (period end)............ $ 9.13 $ 9.52 $ 9.66 $ 10.08 $ 8.48 $ 10.21
Tangible book value per common share (period end)
(3)............................................... 9.11 8.80 8.92 7.12 4.46 7.27
FINANCIAL RATIOS
Return on average assets (annualized)............... 0.36% 0.41% 0.46% 0.68% (0.21)% 0.69%
Return on average equity (annualized)............... 3.89 4.98 5.44 8.16 (2.61) 8.90
Net interest margin (annualized).................... 3.47 3.63 4.03 4.29 4.89 4.28
Average loans as a percentage of average deposits... 96.17 94.14 92.09 87.09 95.63 87.46
ASSET QUALITY RATIOS (4)
Nonperforming assets as a percentage of loans and
other real estate owned........................... 0.73% 0.87% 1.18% 0.77% 0.46% 0.58%
Allowance for loan losses as a percentage of
loans............................................. 0.91 1.15 1.14 1.05 0.63 0.95
Allowance for loan losses as a percentage of
nonperforming loans............................... 184.03 238.06 195.36 299.00 228.40 283.29
Allowance for loan losses as a percentage of
nonperforming assets, including other real estate
owned............................................. 125.10 131.32 97.31 138.28 137.40 161.88
Net loan charge-offs as a percentage of average
loans (annualized)................................ 0.13 0.19 0.35 0.27 0.37 0.13
CAPITAL RATIOS (5)
Leverage ratio...................................... 8.87% 6.77% 7.95% 6.23% 5.54% 6.03%
Risk-based capital
Tier 1............................................ 10.25 9.04 10.44 8.52 7.53 8.33
Total............................................. 11.08 10.20 11.56 9.54 8.21 9.30
RATIO OF EARNINGS TO FIXED CHARGES (6)................ 1.08x 1.08x 1.16x 1.31x 0.93x 1.31x
BALANCE SHEET (PERIOD END)
Total assets........................................ $ 381,497 $ 493,430 $ 574,351 $ 860,373 $1,161,722 $ 889,457
Loans, net of unearned income....................... 300,932 372,231 427,172 594,519 895,605 643,447
Allowance for loan losses........................... 2,731 4,235 4,884 6,270 5,669 6,085
Total earning assets................................ 349,732 449,408 517,419 773,967 1,020,390 791,842
Total deposits...................................... 331,469 449,220 517,699 764,677 963,470 773,654
Stockholders' equity................................ 33,899 35,598 47,814 66,571 82,434 67,402
Nonperforming assets (4)............................ 2,183 3,225 5,019 4,531 4,126 3,759
OTHER DATA
Locations........................................... 11 17 18 39 48 39
Full-time equivalent employees...................... 151 226 252 453 527 470
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1995
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INCOME STATEMENT
Net interest income................................. $ 12,166
Provision for loan losses........................... 3,010
Net interest income after provision for loan
losses............................................ 9,155
Noninterest income, excluding gain on sale of
purchased mortgage servicing rights and securities
transactions...................................... 2,963
Gain on sale of purchased mortgage servicing
rights............................................ 2,026
Securities transactions............................. 97
Total noninterest income............................ 5,086
Noninterest expense, excluding credit card
restructuring charges............................. 10,590
Credit card restructuring charges................... --
Total noninterest expense........................... 10,590
Net income (loss)................................... 2,414
Net income (loss) applicable to common
shareholders...................................... 1,687
PER SHARE DATA (1)(2)
Net income (loss) per common share:
Primary........................................... $ 0.33
Fully diluted..................................... 0.30
Cash dividends declared............................. 0.06
Weighted average common shares outstanding:
Primary........................................... 5,056,582
Fully diluted..................................... 7,989,638
Common shares outstanding (period end).............. 5,088,979
Book value per common share (period end)............ $ 8.87

Tangible book value per common
share (period end) (3)............................ 5.05
FINANCIAL RATIOS
Return on average assets (annualized)............... 0.85%
Return on average equity (annualized)............... 11.62
Net interest margin (annualized).................... 4.94
Average loans as a percentage of average deposits... 91.72
ASSET QUALITY RATIOS (4)
Nonperforming assets as a percentage of loans and
other real estate owned........................... 0.34%
Allowance for loan losses as a percentage of
loans............................................. 0.91
Allowance for loan losses as a percentage of
nonperforming loans............................... 615.70
Allowance for loan losses as a percentage of
nonperforming assets, including other real estate
owned............................................. 262.74
Net loan charge-offs as a percentage of average
loans (annualized)................................ 0.33
CAPITAL RATIOS (5)
Leverage ratio...................................... 5.86%
Risk-based capital
Tier 1............................................ 7.47
Total............................................. 8.38
RATIO OF EARNINGS TO FIXED CHARGES (6)................ 1.36x
BALANCE SHEET (PERIOD END)
Total assets........................................ $1,135,961
Loans, net of unearned income....................... 877,122
Allowance for loan losses........................... 7,961
Total earning assets................................ 1,006,037
Total deposits...................................... 943,108
Stockholders' equity................................ 84,366
Nonperforming assets (4)............................ 3,030
OTHER DATA
Locations........................................... 47
Full-time equivalent employees...................... 524
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(1) Restated for 5% Common Stock dividends issued on the Common Stock each year
from 1989 through 1994.
(2) The Company redeemed its Series 1992 Preferred Stock on December 31, 1993.
Prior to that date, substantially all of the holders of the Series 1992
Preferred Stock elected to convert their shares into Common Stock resulting
in the issuance of 1,089,674 shares of Common Stock at an exchange value of
$9.97 per share.
(3) For purposes of computing tangible book value per common share, intangible
assets include goodwill and core deposit premiums.
(4) Nonperforming assets and nonperforming loans exclude loans which are 90 days
or more past due and still accruing interest.
(5) Computed in accordance with prevailing regulatory capital guidelines at the
period end. See "Business -- Supervision and Regulation -- Capital
Adequacy."
(6) For the purpose of computing the ratio of earnings to fixed charges,
earnings represent net income plus income taxes and fixed charges. Fixed
charges consist of interest on deposits, long-term debt and short-term
borrowings and one-third of rental expense (which is deemed representative
of the interest factor).
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THE COMPANY
Carolina First Corporation is a bank holding company headquartered in
Greenville, South Carolina which operates through two subsidiaries: Carolina
First Bank and CF Mortgage. The Company, which commenced operations in December
1986, currently conducts business through 47 locations in South Carolina. At
March 31, 1995, the Company had $1.1 billion in assets, $877 million in loans,
$943 million in deposits and $84 million in stockholders' equity.
The Company was formed principally in response to perceived opportunities
resulting from the takeovers of several South Carolina-based banks by large
southeastern regional bank holding companies. A significant number of the
Company's executive officers and management personnel were previously employed
by certain of the larger South Carolina-based banks that were acquired by these
southeastern regional institutions. Consequently, these officers and management
personnel have significant customer relationships and commercial banking
experience that have contributed to the Company's loan and deposit growth.
The Company's objective is to become the leading South Carolina-based
banking institution. It believes that it can accomplish this goal by pursuing a
"super-community bank" strategy, offering the personalized service and local
decision-making authority that characterize community banks, as well as the
sophisticated banking products offered by regional and super-regional
institutions. The Company targets individuals and small to medium-sized
businesses in South Carolina that require a full range of quality banking
services.
The Company's principal executive offices are located at 102 South Main
Street, Greenville, South Carolina 29601, and its telephone number is (803)
255-7900.
RECENT MATTERS
On April 10, 1995, the Company consummated its acquisition of Aiken County
National Bank, a national bank headquartered in Aiken, South Carolina ("ACNB").
At March 31, 1995, ACNB had two locations and approximately $39 million in
assets, $35 million in deposits and $30 million in loans. In connection with
this acquisition, ACNB was merged into Carolina First Bank and the Company
issued 452,813 shares of Common Stock to the ACNB shareholders. The transaction
was accounted for as a pooling of interests, and all financial information of
the Company contained in this Prospectus includes the results of ACNB for all
periods presented, unless expressly stated otherwise, even though ACNB was not
affiliated with the Company until April 10, 1995.
In November 1994, the Company entered into an agreement to acquire Midlands
National Bank, a national bank headquartered in Prosperity, South Carolina
("MNB"). The Company expects that this acquisition will be consummated in the
second quarter of 1995. At March 31, 1995, MNB operated through three locations
and had approximately $42 million in assets, $37 million in deposits and $27
million in loans. The Company expects to issue up to 784,242 shares of Common
Stock in connection with this acquisition, which is expected to be accounted for
as a pooling of interests. The transaction will be structured as a merger of MNB
into Carolina First Bank, and the former MNB banking locations will be operated
as branch locations of Carolina First Bank after the merger.
On May 4, 1995, Carolina First Bank and HomeBanc Mortgage Corporation
("HomeBanc") executed a letter setting forth certain terms of a proposed
purchase by Carolina First Bank from HomeBanc of servicing rights associated
with approximately $1 billion in mortgage loans. The purchase price for the
servicing is expected to be approximately $13 million. The sale is expected to
be consummated on or before June 1, 1995. Consummation of the transaction is
subject to, among other things, the completion of a satisfactory due diligence
investigation by Carolina First Bank, the receipt of all necessary regulatory
and other approvals, the execution of a mutually satisfactory purchase and sale
agreement, and the sale of HomeBanc's capital stock to a designated individual.
In connection with the transaction, Carolina First Bank will receive a letter of
credit equal to 5% of the purchase price, which can be drawn upon by Carolina
First Bank in certain instances, including for breaches of warranties by
HomeBanc.
6

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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the Notes offered hereby.
SOURCES OF PAYMENTS TO HOLDERS OF NOTES
The Company generates cash to pay interest on the Notes primarily through
dividends paid to it by Carolina First Bank and CF Mortgage and secondarily from
existing cash reserves, sales of marketable investment securities and interest
income on its investment assets. Carolina First Bank's ability to pay dividends
to the Company is subject to and limited by certain legal and regulatory
restrictions. At March 31, 1995, there was approximately $16 million in funds
available for dividend payments to the Company from Carolina First Bank.
However, the payment of any such dividends from Carolina First Bank is subject
to receipt of appropriate regulatory approvals. See "Business -- Supervision and
Regulation."
GROWTH THROUGH ACQUISITIONS
The Company has experienced significant growth in assets as a result of
acquisitions. Moreover, the Company anticipates engaging in selected
acquisitions of financial institutions and branch locations in the future. There
are certain risks associated with the Company's acquisition strategy that could
adversely impact net income. Such risks include, among others, incorrectly
assessing the asset quality of a particular institution being acquired,
encountering greater than anticipated costs of incorporating an acquired
business into the Company and being unable to profitably deploy funds acquired
in an acquisition.
The Company may require significant amounts of additional capital in
connection with its future growth. Acquisitions may lower the capital ratios of
the entities involved. Consequently, in the event that the Company engages in
significant acquisitions in the future, the Company may be required to raise
additional capital in order to maintain capital levels required by the bank
regulatory authorities or to have sufficient resources to pay interest on the
Notes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition -- Capital Resources," "Business --
Growth Strategy and Acquisitions" and "Business -- Supervision and
Regulation -- Capital Adequacy."
DEPENDENCE ON SENIOR MANAGEMENT
The Company is dependent upon the services of certain of the senior
executive officers of the Company and its subsidiaries. The loss of the services
of one or more of such individuals could have an adverse effect on the Company.
No assurance can be given that replacements for any of these officers could be
employed if these officers' services were no longer available. The Company
maintains key employee insurance on Mack I. Whittle, Jr., the Company's Chief
Executive Officer. See "Business" and "Management."
COMMERCIAL LENDING ACTIVITIES
Over the past several years, the Company has experienced significant growth
in commercial and commercial mortgage loans. These loans are generally more
risky than one-to-four family or consumer loans because they are unique in
character, generally larger in amount and dependent upon the borrower's ability
to generate cash to service the loan. 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 uncertainties as to the future value of
collateral, risks resulting from changes in economic and industry conditions and
risks inherent in dealing with individual borrowers.
The Company had loans to 39 borrowers having principal amounts ranging from
$2 million to $5 million, which loans accounted for $112.5 million, or 13%, of
the Company's loan portfolio in the first quarter of 1995. The Company had loans
to ten borrowers having principal amounts in excess of $5 million, which loans
accounted for $65.8 million, or 7%, of the Company's loan portfolio in the first
quarter of 1995. Any material deterioration in the quality of any of these
larger loans could have a significant impact on the Company's earnings and its
ability to make payments on the Notes.
While the Company's nonperforming loans as a percentage of total loans is
below its peer group average, there is a risk that the quality of the Company's
loan portfolio could decline, particularly in connection with the rapid growth
in loans the Company has experienced over the past several years.
7

<PAGE>
MARKET FOR THE NOTES
The Company has no present intention to have the Notes authorized for
quotation on any automated quotation system or listed on any securities
exchange. Although the Underwriters have advised the Company that each
Underwriter presently intends to make a market in the Notes, the Underwriters
may discontinue making a market in the Notes at any time for any reason.
Therefore, no assurance can be given that an active trading market for the Notes
will develop, or if it develops, that the trading market will continue for any
period of time thereafter.
CERTAIN TERMS OF THE NOTES
The Notes are unsecured and subordinated in right of payment to all present
and future senior indebtedness of the Company, including all general creditors
of the Company. There is no limitation on the Company's ability to issue
additional debt obligations in the future which are senior to, or rank on parity
with, the Notes as to all matters. Payment of principal of the Notes may not be
accelerated except in certain cases involving the bankruptcy or insolvency of
the Company. There is no right of acceleration in the case of a default in the
payment of the principal of, or any premium or interest on, the Notes or in the
performance of any covenant or agreement of the Company. The indenture entered
into by the Company in connection with the Notes does not require the Company to
maintain any financial ratios or specified levels of net worth or liquidity. See
"Description of Notes."
INDUSTRY DEVELOPMENTS
Certain recently-enacted or proposed legislation could have an effect on
both the costs of doing business and the competitive factors facing the
financial institutions industry. The Company is unable at this time to assess
the impact, if any, of this legislation on its financial condition or
operations. See "Business -- Supervision and Regulation."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby
are estimated to be approximately $21.8 million ($25.2 million if the
Underwriters' over-allotment option is exercised in full), after deducting the
underwriting discount and estimated offering expenses payable by the Company.
The Company anticipates that approximately $15 million of the proceeds of this
offering will be contributed to Carolina First Bank to provide additional
capital to support internal growth and acquisitions. The balance of the proceeds
will be used for general corporate purposes. Pending such use, the net proceeds
will be invested in marketable investment securities.
The Company has no understandings at this time regarding any future
acquisitions other than the acquisition of MNB, which is expected to be
accounted for as a pooling of interests. See "Business -- Growth Strategy and
Acquisitions" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- General."
8

<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company at March 31, 1995, (ii) such capitalization at that date as adjusted to
give effect to the sale by the Company of $23,000,000 in principal amount of the
Notes and after deducting the underwriting discounts and estimated offering
expenses, and (iii) such capitalization, at that date, as adjusted to give
effect to the sale by the Company of $23,000,000 of Notes as described in (ii)
above and assuming the consummation of the acquisition of MNB.
<TABLE>
<CAPTION>
MARCH 31, 1995
AS ADJUSTED
WITHOUT MNB WITH MNB
ACTUAL ACQUISITION ACQUISITION
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Long-term debt:
ESOP loan payable in annual installments of $50,000, plus interest
at 90% of prime, through 1997..................................................... $ 76 $ 76 $ 76
9.00% Subordinated Notes due 2005............................................... -- 21,838 21,838
Mortgage debt and capital leases..................................................... 1,086 1,086 1,122
Total long-term debt.............................................................. 1,162 23,000 23,036
Stockholders' equity:
Common Stock -- par value $1 per share; authorized 20,000,000 shares;
issued and outstanding 5,088,979 shares........................................... 5,089 5,089 5,674
Preferred Stock -- authorized 10,000,000 shares; issued and outstanding
917,200 shares (Series 1994), 608,000 shares (Series 1993) and
54,067 shares (Series 1993B)...................................................... 36,633 36,633 36,633
Surplus.............................................................................. 43,198 43,198 46,159
Retained earnings.................................................................... 1,004 1,004 1,583
Nonvested restricted stock........................................................... (998) (998) (998)
Guarantee of ESOP debt............................................................... (126) (126) (126)
Unrealized loss on securities available for sale..................................... (434) (434) (459)
Total stockholders' equity........................................................ 84,366 84,366 88,466
Total capitalization.............................................................. $85,528 $ 107,366 $ 111,502
</TABLE>

CAPITAL RATIOS
The following table sets forth (i) certain capital ratios for the Company
and Carolina First Bank at March 31, 1995, (ii) those ratios at that date as
adjusted to give effect to the sale by the Company of $23,000,000 principal
amount of the Notes and after deducting the underwriting discount and estimated
offering expenses, and (iii) those ratios at that date, as adjusted to give
effect to the sale by the Company of $23,000,000 principal amount of the Notes
as described in (ii) above and assuming the consummation of the acquisition of
MNB.
<TABLE>
<CAPTION>
MARCH 31, 1995
CAPITAL REQUIREMENTS AS ADJUSTED(3)
WELL ADEQUATELY WITHOUT MNB WITH MNB
CAPITALIZED CAPITALIZED ACTUAL ACQUISITION ACQUISITION
<S> <C> <C> <C> <C> <C>
THE COMPANY:
Leverage (1)................................................... 5.00% 4.00% 5.86 % 5.74% 5.89%
Risk-based capital: (2)
Tier 1....................................................... 6.00 4.00 7.47 7.33 7.53
Total........................................................ 10.00 8.00 8.38 10.66 10.79
CAROLINA FIRST BANK:
Leverage (1)................................................... 5.00 4.00 5.77 7.02 7.12
Risk-based capital: (2)
Tier 1....................................................... 6.00 4.00 7.37 8.97 9.11
Total........................................................ 10.00 8.00 8.28 9.87 10.01
</TABLE>

(1) Leverage ratio is defined as Tier 1 capital (using current risk-based
capital guidelines) as a percent of adjusted total assets. See
"Business -- Supervision and Regulation -- Capital Adequacy."
(2) The "as adjusted" risk-based capital ratios have been computed assuming the
net proceeds of this offering are invested in assets carrying a risk-weight
that is equivalent to the Company's and Carolina First Bank's average
risk-weight at March 31, 1995. See "Business -- Supervision and
Regulation -- Capital Adequacy."
(3) The "as adjusted" capital ratios of Carolina First Bank have been computed
assuming a capital contribution of $15,000,000 to it from the Company.
9

<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data for the
Company for each of the five years ended December 31, 1990, 1991, 1992, 1993 and
1994 and for the three months ended March 31, 1994 and 1995. The selected
consolidated financial data reflects the Company's acquisition of Carolina First
Savings Bank, F.S.B. ("CF Savings Bank") in August 1990 and ACNB in April 1995,
both of which were accounted for by as a pooling of interests. Therefore, the
Company's operating results contained herein include the results of CF Savings
Bank and ACNB for all periods presented, even though CF Savings Bank and ACNB
were not affiliated with the Company until August 1990 and April 1995,
respectively. See "Business -- Growth Strategy and Acquisitions" for additional
information regarding acquisitions by the Company of branch offices and other
financial assets, which acquisitions are reflected in the financial information
set forth in this table.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1990 1991 1992 1993 1994 1994
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT
Net interest income.............................. $ 11,467 $ 14,295 $ 19,368 $ 28,573 $ 43,471 $ 8,138
Provision for loan losses........................ 794 1,687 1,828 961 1,090 20
Net interest income after provision for loan
losses......................................... 10,674 12,608 17,540 27,612 42,381 8,118
Noninterest income, excluding gain on sale of
purchased mortgage servicing rights and
securities transactions........................ 1,250 1,809 3,156 5,802 7,912 1,969
Gain on sale of purchased mortgage servicing
rights......................................... -- -- -- -- -- --
Securities transactions.......................... (4) 664 535 662 75 73
Total noninterest income......................... 1,246 2,473 3,691 6,464 7,987 2,042
Noninterest expense, excluding credit card
restructuring charges.......................... 10,058 12,889 17,688 26,855 40,378 8,190
Credit card restructuring charges................ -- -- -- -- 12,214 --
Total noninterest expense........................ 10,058 12,889 17,688 26,855 52,592 8,190
Net income (loss)................................ 1,288 1,738 2,383 5,048 (2,175) 1,487
Net income (loss) applicable to common
shareholders................................... 1,288 1,738 1,758 3,118 (4,608) 1,177
PER SHARE DATA (1)(2)
Net income (loss) per common share:
Primary........................................ $ 0.35 $ 0.47 $ 0.47 $ 0.82 $ (0.93) $ 0.24
Fully diluted.................................. n/a n/a 0.47 0.82 (0.93) 0.24
Cash dividends declared.......................... -- -- -- 0.05 0.21 0.05
Weighted average common shares outstanding:
Primary........................................ 3,686,446 3,719,100 3,743,504 3,784,599 4,974,087 4,951,558
Fully diluted.................................. n/a n/a 4,495,895 5,930,216 7,442,816 6,247,201
Common shares outstanding (period end)........... 3,712,241 3,737,406 3,758,820 4,946,523 5,034,060 4,962,175
Book value per common share (period end)......... $ 9.13 $ 9.52 $ 9.66 $ 10.08 $ 8.48 $ 10.21
Tangible book value per common share (period end)
(3)............................................ 9.11 8.80 8.92 7.12 4.46 7.27
FINANCIAL RATIOS
Return on average assets (annualized)............ 0.36% 0.41% 0.46% 0.68% (0.21)% 0.69%
Return on average equity (annualized)............ 3.89 4.98 5.44 8.16 (2.61) 8.90
Net interest margin (annualized)................. 3.47 3.63 4.03 4.29 4.89 4.28
Average loans as a percentage of average
deposits....................................... 96.17 94.14 92.09 87.09 95.63 87.46
ASSET QUALITY RATIOS (4)
Nonperforming assets as a percentage of loans and
other real estate owned........................ 0.73% 0.87% 1.18% 0.77% 0.46% 0.58%
Allowance for loan losses as a percentage of
loans.......................................... 0.91 1.15 1.14 1.05 0.63 0.95
Allowance for loan losses as a percentage of
nonperforming loans............................ 184.03 238.06 195.36 299.00 228.40 283.29
Allowance for loan losses as a percentage of
nonperforming assets, including other real
estate owned................................... 125.10 131.32 97.31 138.28 137.40 161.88
Net loan charge-offs as a percentage of average
loans (annualized)............................. 0.13 0.19 0.35 0.27 0.37 0.13
CAPITAL RATIOS (5)
Leverage ratio................................... 8.87% 6.77% 7.95% 6.23% 5.54% 6.03%
Risk-based capital
Tier 1......................................... 10.25 9.04 10.44 8.52 7.53 8.33
Total.......................................... 11.08 10.20 11.56 9.54 8.21 9.30
RATIO OF EARNINGS TO FIXED CHARGES (6)............. 1.08x 1.08x 1.16x 1.31x 0.93x 1.31x
BALANCE SHEET (PERIOD END)
Total assets..................................... $ 381,497 $ 493,430 $ 574,351 $ 860,373 $1,161,722 $ 889,457
Loans, net of unearned income.................... 300,932 372,231 427,172 594,519 895,605 643,447
Allowance for loan losses........................ 2,731 4,235 4,884 6,270 5,669 6,085
Total earning assets............................. 349,732 449,408 517,419 773,967 1,020,390 791,842
Total deposits................................... 331,469 449,220 517,699 764,677 963,470 773,654
Stockholders' equity............................. 33,899 35,598 47,814 66,571 82,434 67,402
Nonperforming assets (4)......................... 2,183 3,225 5,019 4,531 4,126 3,759
OTHER DATA
Locations........................................ 11 17 18 39 48 39
Full-time equivalent employees................... 151 226 252 453 527 470
<CAPTION>

1995
<S> <C>

INCOME STATEMENT
Net interest income.............................. $ 12,166
Provision for loan losses........................ 3,010
Net interest income after provision for loan
losses......................................... 9,155
Noninterest income, excluding gain on sale of
purchased mortgage servicing rights and
securities transactions........................ 2,963
Gain on sale of purchased mortgage servicing
rights......................................... 2,026
Securities transactions.......................... 97
Total noninterest income......................... 5,086
Noninterest expense, excluding credit card
restructuring charges.......................... 10,590
Credit card restructuring charges................ --
Total noninterest expense........................ 10,590
Net income (loss)................................ 2,414
Net income (loss) applicable to common
shareholders................................... 1,687
PER SHARE DATA (1)(2)
Net income (loss) per common share:
Primary........................................ $ 0.33
Fully diluted.................................. 0.30
Cash dividends declared.......................... 0.06
Weighted average common shares outstanding:
Primary........................................ 5,056,582
Fully diluted.................................. 7,989,638
Common shares outstanding (period end)........... 5,088,979
Book value per common share (period end)......... $ 8.87
Tangible book value per common share (period end)
(3)............................................ 5.05
FINANCIAL RATIOS
Return on average assets (annualized)............ 0.85%
Return on average equity (annualized)............ 11.62
Net interest margin (annualized)................. 4.94
Average loans as a percentage of average
deposits....................................... 91.72
ASSET QUALITY RATIOS (4)
Nonperforming assets as a percentage of loans and
other real estate owned........................ 0.34%
Allowance for loan losses as a percentage of
loans.......................................... 0.91
Allowance for loan losses as a percentage of
nonperforming loans............................ 615.70
Allowance for loan losses as a percentage of
nonperforming assets, including other real
estate owned................................... 262.74
Net loan charge-offs as a percentage of average
loans (annualized)............................. 0.33
CAPITAL RATIOS (5)
Leverage ratio................................... 5.86%
Risk-based capital
Tier 1......................................... 7.47
Total.......................................... 8.38
RATIO OF EARNINGS TO FIXED CHARGES (6)............. 1.36x
BALANCE SHEET (PERIOD END)
Total assets..................................... $1,135,961
Loans, net of unearned income.................... 877,122
Allowance for loan losses........................ 7,961
Total earning assets............................. 1,006,037
Total deposits................................... 943,108
Stockholders' equity............................. 84,366
Nonperforming assets (4)......................... 3,030
OTHER DATA
Locations........................................ 47
Full-time equivalent employees................... 524
</TABLE>

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Since its inception in 1986, the Company has pursued a strategy of growth
through internal expansion and through the acquisition of branch locations and
financial institutions in selected market areas. At March 31, 1995, the Company
had grown to $1.1 billion in total assets and operated through 47 locations.
The Company's net income is comprised principally of Carolina First Bank's
net interest income. Net interest income is the difference between interest
earned on assets and interest paid for liabilities used to support such assets.
Variations in the volume and mix of assets and liabilities and their relative
sensitivity to interest rate movements determine changes in net interest income.
Net income is also affected by the level of the provision for loan losses,
noninterest income and noninterest expense. Noninterest income consists
primarily of service charges on deposit accounts, income from mortgage banking
operations, fees for trust services, net gains on the sale of securities and
sundry noninterest income. Noninterest expense consists primarily of salaries
and employee benefits, amortization of intangibles, credit card processing fees,
occupancy expense, furniture and equipment expense, federal deposit insurance
premiums and sundry noninterest expense.
Loans are the largest single component of the Company's earning assets and
generally have a more favorable return than other categories of earning assets.
The Company's loans increased 36% from $643.4 million at March 31, 1994 to
$877.1 million at March 31, 1995. This increase resulted principally from
internal growth and the acquisition of $37.5 million in loans in connection with
Carolina First Bank's acquisition of 6 branch locations of Republic National
Bank in May 1994 (the "6 Republic Branches"), and is net of mortgage loans sold
of approximately $51.0 million and the Securitization.
The Company has experienced significant growth in commercial and commercial
mortgage loans over the past several years. These loans constitute approximately
53% of the Company's total loans. There are certain risks inherent in making all
loans, including risks resulting from uncertainties as to the future value of
collateral, risks resulting from changes in economic and industry conditions and
risks inherent in dealing with individual borrowers. However, commercial and
commercial mortgage loans are generally more risky than one-to-four family or
consumer loans because they are unique in character, are generally larger in
amount and are dependent upon the borrower's ability to generate cash to service
the loan.
Deposits in Carolina First Bank are the largest source of liabilities used
to support earning assets. The Company's deposits increased 22% from $773.7
million at March 31, 1994 to $943.1 million at March 31, 1995. Approximately
$135.4 million of the increase resulted from the acquisition of the 6 Republic
Branches. In 1994, the Company modified its funding strategy to rely more on
advances from the Federal Home Loan Bank (the "FHLB") because management
determined that, due to increased competition for deposits, the marginal cost of
borrowing from the FHLB is lower than the marginal cost of raising deposits. At
March 31, 1994, FHLB advances totaled $18.0 million, compared to $68.2 million
at March 31, 1995.
In September 1993, the Company acquired CF Mortgage through a transaction
that was accounted for as a purchase. Due to accounting rules associated with
the purchase method of accounting, the financial information contained herein
does not include the results of CF Mortgage except for periods after the
acquisition.
In the fourth quarter of 1994, the Company initiated a restructuring which
was designed to improve the long-term competitive position of the Company. This
restructuring had several, unrelated components, and involved (i) the merger of
Carolina First Bank and CF Savings Bank, (ii) the Securitization, and (iii) the
write-off of certain intangible assets. In connection with these transactions,
the Company incurred in the fourth quarter of 1994 an aggregate one-time charge
of $12.2 million pre-tax ($9.4 million after-tax). The Company believes that on
a going-forward basis, the aggregate effect of the restructuring will be to
increase pre-tax income by approximately $2.8 million a year. Absent the
one-time charge associated with these transactions, the Company would have had
net income of $7.2 million during 1994.
In February 1995, the Company received a letter from the FDIC which
indicated that, based on its analysis of Carolina First Bank's Report of
Condition as of December 31, 1994, Carolina First Bank was undercapitalized
because its total risk-based capital ratio had fallen below 8% to 6.70%
(excluding ACNB), principally as a result of the inclusion of certain off-
balance sheet items as risk-weighted assets. As a result of the capital
deficiency, Carolina First Bank committed to (1) merge CF Savings Bank and
Carolina First Bank, (2) consummate the Securitization, (3) have the Company
contribute capital of $3.5 million to Carolina First Bank, and (4) sell certain
purchased mortgage servicing rights. All of these steps were taken by March 31,
1995. Although these steps were the subject of an agreement between Carolina
First Bank and the FDIC, the Company had determined to effect all of these
actions, except the $3.5 million capital contribution, prior to and independent
of the capital deficiency matter. As a result of its total risk-based capital
ratio declining below 8%, the Company, Carolina
11

<PAGE>
First Bank and the FDIC entered into a Capital Maintenance Commitment and
Guaranty Agreement pursuant to which the Company guaranteed that Carolina First
Bank will comply with the capital restoration plan described above until
Carolina First Bank has been adequately capitalized on average during each of
four consecutive quarters. At the end of February, Carolina First Bank's total
risk-based capital ratio was 8.10% (excluding ACNB). Carolina First Bank has
received a letter from the FDIC confirming that it is adequately capitalized.
See " -- Capital Resources."
In April 1995, the Company acquired ACNB through a transaction that was
accounted for as a pooling of interests. The Company's financial information has
been restated for the periods before the transaction. Unless expressly stated
otherwise, the Company's financial information contained herein includes the
results of ACNB for all periods presented, even though ACNB was not affiliated
with the Company until April 1995.
In November 1994, the Company entered into an agreement to acquire MNB. The
Company expects to consummate this acquisition in the second quarter of 1995. At
March 31, 1995, MNB operated through three locations and had approximately $42
million in assets, $37 million in deposits and $27 million in loans. Pro forma
condensed financial information reflecting the Company's acquisition of MNB is
set forth below in "Unaudited Pro Forma Condensed Financial Information."
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1995
The Company's net income increased 62% from $1.5 million, or $0.24 per
common share and $0.24 per fully diluted share, in the first quarter of 1994 to
$2.4 million, or $0.33 per common share and $0.30 per fully diluted share, in
the first quarter of 1995. Increases in average earning assets, net interest
income and noninterest income were the principal reasons for this earnings
growth.
Fully tax equivalent net interest income increased 49% from $8.3 million in
the first quarter of 1994 to $12.3 million in the first quarter of 1995. The
increase resulted from an improvement in the net interest margin and a higher
level of average earning assets. The improvement in net interest margin, which
increased from 4.28% in the first quarter of 1994 to 4.94% in the first quarter
of 1995, primarily resulted from loans repricing more rapidly than deposits in a
rising interest rate environment and a higher level of noninterest-bearing
deposits. The growth in average earning assets, which increased $224.5 million
from $771.9 million in the first quarter of 1994 to $996.4 million in the first
quarter of 1995, resulted from internal loan growth, which more than offset a
decrease in investment securities. Loans averaged $256.7 million higher in the
first quarter of 1995 than in the same period in 1994.
The provision for loan losses was $20,000 and $3.0 million in the first
quarter of 1994 and 1995, respectively. The $3.0 million provision for loan
losses in the first quarter of 1995 was made for several reasons. As a general
matter, management believed that such provision was appropriate in view of a
potential slowdown in the economy (which became evident in the first quarter)
and an increase in the prime interest rate in February 1995, both of which could
make it more difficult for certain borrowers to repay loans. Furthermore,
management believed that such provision was prudent because the Company was
expanding in new markets and was expecting to experience continued strong growth
in loans. Also, the mix of its loan portfolio was changing such that a number of
small loans were being replaced by larger credits, particularly in connection
with the Securitization, which occurred in January 1995. In the first quarter of
1995 the Company had loans to 39 borrowers having principal amounts ranging from
$2 million to $5 million, which loans accounted for $112.5 million, or 13%, of
the Company's loan portfolio. In the first quarter of 1995 the Company had loans
to ten borrowers having principal amounts in excess of $5 million, which loans
accounted for $65.8 million, or 7%, of the Company's loan portfolio. Finally,
management determined that such provision was warranted because of the increase
in chargeoffs in the first quarter to $782,000. At March 31, 1995, the Company's
allowance for loan losses as a percentage of nonperforming assets and other real
estate owned was 262.7%, compared to 161.9% a year earlier. The allowance for
loan losses as a percentage of total loans was 0.95% and 0.91% at March 31, 1994
and 1995, respectively.
Noninterest income, excluding gain on sale of purchased mortgage servicing
rights and securities transactions, increased 50% from $2.0 million in the first
quarter of 1994 to $3.0 million in the first quarter of 1995. On March 31, 1995,
the Company sold purchased mortgage servicing rights associated with $435
million in loans, which resulted in a gain of approximately $2 million. See
"Business -- CF Mortgage." Service charges on deposit accounts increased 45%
from $866,000 in the first quarter of 1994 to $1.3 million in the first quarter
of 1995. The increase in service charges was attributable to the acquisition of
branches and new deposit accounts, increased fee charges and improved collection
results. During the first quarter of 1995, the Company received income of
$377,000 from its interests in the Trust (created in the Securitization).
Mortgage banking income decreased 50% from $501,000 in the first quarter of 1994
to $252,000 in the first quarter of 1995.
12

<PAGE>
The decline in mortgage banking income is attributable to lower origination fees
due to a significant decrease in mortgage loan refinancings as a result of
rising interest rates and a decline in servicing fees net of related
amortization of purchased mortgage servicing rights. Fees for trust services
increased 22% from $245,000 in the first quarter of 1994, to $300,000 in the
first quarter of 1995 from the generation of new trust department business.
Realized gains on securities transactions increased from $73,000 in the first
quarter of 1994 to $97,000 in the first quarter of 1995.
Noninterest expense increased $2.4 million, or 29%, from $8.2 million in
the first quarter of 1994 to $10.6 million in the first quarter of 1995.
Salaries and employee benefits, which increased $1.1 million in the first
quarter of 1995, were the principal reason for this increase. The staffing cost
increases were principally attributable to acquisitions (primarily the
acquisition of the 6 Republic Branches), the opening of de novo branches
(including the Lexington and Myrtle Beach main offices), and additional
personnel hired to support the internal growth in loans and deposits. Sundry
noninterest expense increased $800,000 from $2.8 million in the first quarter of
1994 to $3.6 million in the first quarter of 1995. Of this increase, $442,000
represented the amortization of intangibles and $177,000 represented higher
federal deposit insurance premiums associated with higher deposit levels. The
remaining increase in noninterest expense was primarily attributable to the
overhead and operating expenses associated with higher lending and deposit
activity.
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
The Company had a net loss for 1994 of $2.2 million, or $0.93 per common
share. The net loss for 1994 includes one-time restructuring charges of $9.4
million (after-tax) and losses of $306,000 associated with ACNB. The
restructuring in the fourth quarter of 1994 had several unrelated components
which involved (i) the merger of CF Savings Bank into Carolina First Bank, (ii)
the Securitization, and (iii) the write-off of certain intangible assets.
Although the charges associated with the restructuring offset all Company
earnings in 1994, the Company believes that on a going-forward basis, the
aggregate effect of the restructuring will be to increase pre-tax income by
approximately $2.8 million a year. Absent the one-time restructuring charges and
losses associated with ACNB, the Company would have had net income of $7.5
million during 1994. Net income for 1993 was $5.0 million, or $0.82 per common
share. Increased net interest income and growth in noninterest income were the
primary reasons for the growth in earnings excluding restructuring charges and
ACNB.
Fully tax-equivalent net interest income increased $15.2 million, or 53%,
from $28.8 million in 1993 to $44.0 million in 1994. The increase resulted from
an improvement in the net interest margin and a higher level of average earning
assets. The improvement in net interest margin, which increased from 4.29% in
1993 to 4.89% in 1994, primarily resulted from lower rates paid on deposits and
a higher level of noninterest-bearing deposits. The growth in average earning
assets, which increased from $671.7 million in 1993 to $901.0 million in 1994,
primarily resulted from internal loan growth and branch acquisitions.
The provision for loan losses increased from $1.0 million in 1993 to $1.1
million in 1994. The allowance for loan losses as a percentage of total loans
decreased from 1.0% at December 31, 1993 to 0.6% at December 31, 1994. Continued
reductions in nonperforming asset levels enabled the Company to reduce the
allowance for loan losses compared with the prior year's level. Nonperforming
assets as a percentage of loans and other real estate owned were 0.77% and 0.46%
at December 31, 1993 and 1994, respectively. At December 31, 1994, the Company's
allowance for loan losses as a percentage of nonperforming assets and other real
estate owned was 137.4%, compared to 138.3% at December 31, 1993.
Noninterest income, excluding securities transactions, increased from $5.8
million in 1993 to $7.9 million in 1994. Service charges on deposit accounts,
the largest contributor to noninterest income, increased 45% from $2.7 million
in 1993 to $3.9 million in 1994. The increase in service charges was
attributable to the acquisition of branches and new deposit accounts, increased
fee charges and improved collection results. The expansion of mortgage banking
activities and the generation of new trust department business also contributed
to the increase in noninterest income. Mortgage banking income includes
origination fees, gains from the sale of loans and servicing fees. In 1994,
origination fees, gains from the sale of loans and servicing fees contributed
$954,000, $112,000 and $572,000, respectively, to noninterest income. Realized
gains on securities transactions decreased from $662,000 in 1993 to $75,000 in
1994.
Noninterest expense increased 96% from $26.9 million in 1993 to $52.6
million in 1994. The 1994 noninterest expense includes one-time restructuring
charges of $12.2 million (pre-tax). Also contributing to the increase in
noninterest expense was the acquisition of the 6 Republic Branches and the
opening of four branches de novo, a higher level of loan and deposit activity,
an increase in the amortization of intangibles and higher credit card processing
fees. Salaries and employee benefits, which increased $6.2 million in 1994, also
contributed to this increase. Sundry noninterest expense increased $5.2 million
from $10.4 million in 1993 to $15.6 million in 1994. Approximately half of this
increase was comprised of increases of $1.6 million in the amortization of
intangibles, $597,000 in the cost of servicing credit card receivables, $520,000
in advertising
13

<PAGE>
and public relations expense, and $509,000 in federal deposit insurance premiums
associated with higher deposit levels. The remaining increase in noninterest
expense is primarily attributable to higher lending and deposit activity.
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1993
The Company's net income increased 112% from $2.4 million, or $0.47 per
common share, in 1992 to $5.0 million, or $0.82 per common share, in 1993.
Increases in average earning assets, net interest income and noninterest income
were the principal reasons for this earnings growth.
Fully tax-equivalent net interest income increased $9.3 million, or 48%,
from $19.5 million in 1992 to $28.8 million in 1993. The increase resulted from
an improvement in the net interest margin and a higher level of average earning
assets. The improvement in net interest margin, which increased from 4.03% in
1992 to 4.29% in 1993, primarily resulted from lower deposit interest rates and
a higher level of noninterest-bearing deposits. The growth in average earning
assets, which increased from $483.6 million in 1992 to $671.7 million in 1993,
primarily resulted from internal loan growth and branch acquisitions. The
majority of this increase was in loans, which averaged $113.4 million higher in
1993 than in 1992.
The provision for loan losses decreased from $1.8 million in 1992 to $1.0
million in 1993. The allowance for loan losses as a percentage of total loans
decreased from 1.1% at December 31, 1992 to 1.0% at December 31, 1993. Continued
reductions in nonperforming asset levels enabled the Company to reduce the
allowance for loan losses compared with the prior year's level. Nonperforming
assets as a percentage of loans and other real estate owned were 1.18% and 0.77%
at December 31, 1992 and 1993, respectively. At December 31, 1993, the Company's
allowance for loan losses as a percentage of nonperforming assets and other real
estate owned was 138.3% compared to 97.3% at December 31, 1992.
Noninterest income, excluding securities transactions, increased 84% from
$3.2 million in 1992 to $5.8 million in 1993. Service charges on deposit
accounts, the largest contributor to noninterest income, increased 66% from $1.6
million in 1992 to $2.7 million in 1993. The increase in service charges was
attributable to the acquisition of branches and new deposit accounts, increased
fee charges and improved collection results. The expansion of mortgage banking
activities and the generation of new trust department business also contributed
to the increase in noninterest income. Mortgage banking income includes
origination fees, gains from the sale of loans (starting in 1992) and servicing
fees (starting in 1993). In 1993, origination fees, gains from the sale of loans
and servicing fees contributed $1.1 million, $509,000 and $228,000,
respectively, to noninterest income. Realized gains on securities transactions
increased to $662,000 in 1993 from $535,000 in 1992.
Noninterest expense increased $9.2 million, or 52%, from $17.7 million in
1992 to $26.9 million in 1993. Salaries and employee benefits, which increased
$4.5 million in 1993, were the principal reason for this increase. The staffing
cost increases were principally attributable to (i) acquisitions (primarily the
acquisitions of the Piedmont branch of Republic National Bank (the
"Republic-Piedmont Branch"), twelve branches of Republic National Bank (the "12
Republic Branches") and CF Mortgage), (ii) the opening of three de novo branches
(including the Columbia main office), and (iii) additional personnel hired to
support internal growth in loans and deposits. Sundry noninterest expense
increased $3.4 million from $7.0 million in 1992 to $10.4 million in 1993. Of
this increase, $306,000 represented the cost of servicing the purchased credit
card receivables, $440,000 represented the amortization of intangibles, and
$492,000 represented higher federal deposit insurance premiums from higher
levels of deposits. The remaining increase in noninterest expense is primarily
attributable to higher lending and deposit activity.
NET INTEREST INCOME
The largest component of the Company's net income is Carolina First Bank's
net interest income. Net interest income is the difference between the interest
earned on assets and the interest paid for the liabilities used to support such
assets. Variations in the volume and mix of assets and liabilities and their
relative sensitivity to interest rate movements determine changes in net
interest income.
14

<PAGE>
The following table sets forth, on a tax-equivalent basis, for the periods
indicated, certain information relating to the Company's average balances and
its average yields on assets and average costs of liabilities. Such yields and
costs are derived by dividing income or expense by the average balance of assets
or liabilities. Average balances are derived from daily balances.
COMPARATIVE AVERAGE BALANCES -- YIELDS AND COSTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1992 1993 1994
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Earning assets
Loans, net of unearned
income (1).................... $406,288 $37,339 9.19 % $519,710 $44,617 8.58 % $ 753,482 $67,911
Investment securities,
taxable....................... 57,505 3,462 6.02 124,407 6,076 4.88 116,745 5,224
Investment securities,
nontaxable (2)................ 3,741 456 12.18 8,252 731 8.86 17,188 1,540
Federal funds sold.............. 15,680 538 3.43 19,035 577 3.03 13,066 492
Interest bearing deposits with
other banks................... 340 16 4.62 250 15 5.89 476 20
Total earning assets........ 483,554 41,811 8.65 % 671,654 52,016 7.74 % 900,957 75,187
Non-earning assets.............. 39,723 67,953 112,603
Total assets................ $523,277 $739,607 $1,013,560
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking............. $ 31,558 $ 962 3.05 % $ 64,393 $ 1,465 2.28 % $ 98,073 $ 2,108
Savings....................... 21,821 892 4.09 58,613 1,788 3.05 85,691 2,564
Money market.................. 120,766 4,727 3.91 133,255 3,900 2.93 152,833 4,743
Certificates of deposit....... 236,296 13,548 5.73 307,155 13,779 4.49 408,239 17,895
Other......................... 30,734 1,968 6.40 33,358 1,707 5.12 43,077 2,083
Total interest-bearing
deposits................. 441,175 22,097 5.01 596,774 22,639 3.79 787,913 29,393
Short-term borrowings......... 2,290 128 5.57 14,023 427 3.05 41,362 1,638
Long-term borrowings.......... 1,374 110 8.00 1,318 120 9.10 1,264 120
Total interest-bearing
liabilities.............. 444,839 22,335 5.02 612,115 23,186 3.79 830,539 31,151
Noninterest-bearing liabilities
Noninterest-bearing
deposits.................... 30,871 59,591 98,638
Other noninterest
liabilities................. 3,793 6,042 1,006
Total liabilities........... 479,503 677,748 930,183
Stockholders' equity.............. 43,774 61,859 83,377
Total liabilities and
stockholders' equity..... $523,277 $739,607 $1,013,560
Net interest margin............... $19,476 4.03 % $28,830 4.29 % $44,036
<CAPTION>
YIELD/
RATE
<S> <C>
ASSETS
Earning assets
Loans, net of unearned
income (1).................... 9.01 %
Investment securities,
taxable....................... 4.47
Investment securities,
nontaxable (2)................ 8.96
Federal funds sold.............. 3.76
Interest bearing deposits with
other banks................... 4.25
Total earning assets........ 8.35 %
Non-earning assets..............
Total assets................
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking............. 2.15 %
Savings....................... 2.99
Money market.................. 3.10
Certificates of deposit....... 4.38
Other......................... 4.84
Total interest-bearing
deposits................. 3.73
Short-term borrowings......... 3.96
Long-term borrowings.......... 9.50
Total interest-bearing
liabilities.............. 3.75
Noninterest-bearing liabilities
Noninterest-bearing
deposits....................
Other noninterest
liabilities.................
Total liabilities...........
Stockholders' equity..............
Total liabilities and
stockholders' equity.....
Net interest margin............... 4.89 %
</TABLE>

(1) Includes nonaccruing loans.
(2) Fully tax-equivalent basis at a 35% tax rate.
15

<PAGE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following table sets forth the effect which the varying levels of
earning assets and interest-bearing liabilities and the applicable rates have
had on the changes in net interest income from 1992 to 1993 and from 1993 to
1994. For purposes of this table, changes which are not solely attributable to
volume or rate have been allocated to volume and rate on a pro-rata basis.
RATE/VOLUME VARIANCE ANALYSIS
<TABLE>
<CAPTION>
1992 COMPARED TO 1993 1993 COMPARED TO 1994
AMOUNT AMOUNT AMOUNT AMOUNT
CAUSED CAUSED CAUSED CAUSED
BY BY BY BY
CHANGE CHANGE CHANGE CHANGE
TOTAL IN IN TOTAL IN IN
CHANGE VOLUME RATE CHANGE VOLUME RATE
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
EARNING ASSETS
Loans, net of unearned income............................. $ 7,278 $ 9,871 $(2,593) $23,294 $21,002 $ 2,292
Securities, taxable....................................... 2,614 3,331 (717) (852) (367) (485)
Securities, nontaxable.................................... 275 435 (160) 810 793 17
Federal funds sold........................................ 39 115 (76) (86) (256) 170
Interest-bearing deposits with other banks................ (1) (5) 4 5 8 (3)
Total interest income................................ 10,205 13,747 (3,542) 23,171 21,180 1,991
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
Interest checking...................................... 503 767 (264) 643 733 (90)
Savings................................................ 896 1,165 (269) 776 812 (36)
Money market........................................... (827) 457 (1,284) 843 600 243
Certificates of deposit................................ 231 3,503 (3,272) 4,116 4,430 (314)
Other.................................................. (261) 163 (424) 376 469 (93)
Total interest-bearing deposits...................... 542 6,055 (5,513) 6,754 7,044 (290)
Short-term borrowings..................................... 299 381 (82) 1,211 1,049 162
Long-term borrowings...................................... 10 (4) 14 -- (5) 5
Total interest expense............................... 851 6,432 (5,581) 7,965 8,088 (123)
Net interest income............................... $ 9,354 $ 7,315 $ 2,039 $15,206 $13,092 $ 2,114
</TABLE>

PROVISION FOR LOAN LOSSES
During 1992, 1993, 1994 and the first quarter of 1995, the Company expensed
$1.8 million, $1.0 million, $1.1 million and $3.0 million, respectively, through
its provision for loan losses. The $3.0 million provision for loan losses in the
first quarter of 1995 was made for several reasons. As a general matter,
management believed that such provision was appropriate in view of a potential
slowdown in the economy (which became evident in the first quarter) and an
increase in the prime interest rate in February 1995, both of which could make
it more difficult for certain borrowers to repay loans. Furthermore, management
believed that such provision was prudent because the Company was expanding in
new markets and was expecting to experience continued strong growth in loans.
Also, the mix of its loan portfolio was changing such that a number of small
loans were being replaced by larger credits, particularly in connection with the
Securitization, which occurred in January 1995. Finally, management determined
that such provision was warranted because of the increase in chargeoffs in the
first quarter to $782,000.
At March 31, 1995, the Company's allowance for loan losses as a percentage
of nonperforming assets and other real estate owned was 262.7%, compared to
161.9% a year earlier. The allowance for loan losses as a percentage of total
loans was 0.95% and 0.91% at March 31, 1994 and 1995, respectively. Net
charge-offs as a percentage of average loans were 0.35% in 1992, 0.27% in 1993,
0.37% in 1994 and 0.33% (annualized) in the first quarter of 1995.
At March 31, 1995, the Company was closely monitoring loans totaling
approximately $8.5 million to three borrowers which were experiencing financial
difficulty. None of these loans was included in nonperforming assets or loans 90
days or more past due and still accruing interest at March 31, 1995.
16

<PAGE>
NONINTEREST INCOME
The following table sets forth, for the periods indicated, the principal
components of noninterest income.
NONINTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Service charges on deposits.............................. $ 538 $ 983 $1,632 $2,717 $3,930 $ 866 $1,260
Mortgage banking income:
Origination fees....................................... 309 461 778 1,051 954 231 189
Gain on sale of mortgage loans......................... -- -- 496 509 112 32 56
Servicing and other.................................... -- -- -- 228 572 238 7
Fees for trust services.................................. 141 197 305 542 919 245 300
Credit card trust income................................. -- -- -- -- -- -- 377
Sundry................................................... 262 168 (55) 755 1,425 357 774
Noninterest income, excluding gain on sale of purchased
mortgage servicing rights and securities
transactions........................................... 1,250 1,809 3,156 5,802 7,912 1,969 2,963
Gain on sale of purchased mortgage servicing rights...... -- -- -- -- -- -- 2,026
Gain on sale of securities............................... (4) 664 535 662 75 73 97
Total noninterest income............................... $1,246 $2,473 $3,691 $6,464 $7,987 $2,042 $5,086
</TABLE>

On March 31, 1995, the Company sold purchased mortgage servicing rights
associated with $435 million in mortgage loans to an unrelated party. In
connection with this transaction, the Company realized a gain of approximately
$2 million. The Company entered into this transaction because of its favorable
terms and is actively seeking to purchase additional servicing rights to replace
the servicing which was sold. See "Business -- CF Mortgage" and "Recent
Matters."
Service charges on deposit accounts, generally the largest contributor to
noninterest income, rose 45% from $866,000 in the first quarter of 1994 to $1.3
million in the first quarter of 1995. Service charges on deposit accounts rose
45% to $3.9 million in 1994, which followed increases of 66% in both 1993 and
1992. Each of these increases in service charges is attributable to acquiring
branches and new deposit accounts, increasing fee charges and improving
collection results.
Mortgage banking income includes origination fees, gains from the sale of
loans and servicing fees. Mortgage banking income in the first quarter of 1995
decreased 50% to $252,000, as compared to the first quarter of 1994. This
decrease is attributable to lower origination fees resulting from a slowdown in
mortgage loan refinancings and a decline in servicing fees net of the related
amortization of purchased mortgage servicing rights. Mortgage banking income for
1994 decreased 8% to $1.6 million. This followed increases of 40% in 1993 and
176% in 1992. The decrease in 1994 resulted from declines in gains from the sale
of loans from $509,000 in 1993 to $112,000 in 1994. Origination fees totaled
$778,000 in 1992, $1.1 million in 1993, $954,000 in 1994, and $189,000 in the
first quarter of 1995. Until the third quarter of 1992, mortgage loans were
originated primarily for the account of correspondent financial institutions,
with Carolina First Bank retaining an origination fee. Beginning in the third
quarter of 1992, the Company expanded the activities of its mortgage loan
operations and began self-funding the loans prior to sale in the secondary
market. Mortgage loans totaling approximately $80 million, $55 million and $7
million were sold in 1993 and 1994 and in the first quarter of 1995,
respectively.
Fees for trust services increased 22% from $245,000 in the first quarter of
1994 to $300,000 in the first quarter of 1995. Fees for trust services in 1994
increased 70% from the previous year to $919,000 from the previous year. This
followed increases of 78% in 1993 and 55% in 1992. All of these increases in
fees for trust services resulted from the generation of new trust business and
additional assets under management. Assets under management of the trust
department increased to approximately $214 million at December 31, 1994 from
approximately $129 million at December 31, 1993 and approximately $55 million at
December 31, 1992. Assets under management of the trust department increased to
approximately $264 million at March 31, 1995.
The Company recognized gains on the sale of securities of $535,000 in 1992,
$662,000 in 1993, $75,000 in 1994, and $97,000 in the first quarter of 1995.
Sundry income was $670,000 higher in 1994 as compared to 1993, primarily because
of
17

<PAGE>
higher customer service fees, insurance commissions and appraisal fee income
which were related to increased lending and deposit activities.
NONINTEREST EXPENSE
Noninterest expense increased 29% from $8.2 million in the first quarter of
1994 to $10.6 million in the first quarter of 1995. Noninterest expense was
$17.7 million in 1992, $26.9 million in 1993 and $52.6 million in 1994. Included
in 1994 noninterest expense was a $12.2 million one-time restructuring charge
associated with the Securitization and the write-down of certain intangible
assets. Excluding the restructuring charges, 1994 noninterest expense increased
50% over 1993, while 1993 was 52% higher than 1992. The increased expenditures
primarily reflect the costs of additional personnel to support the Company's
current and anticipated growth.
The following table sets forth, for the periods indicated, the principal
components of noninterest expense.
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Salaries and wages................................ $ 3,392 $ 4,484 $ 6,495 $10,165 $14,470 $2,956 $ 4,125
Benefits.......................................... 1,041 1,440 1,428 2,301 4,239 1,126 1,075
Occupancy......................................... 910 1,009 1,421 2,215 3,638 817 1,065
Furniture and equipment........................... 805 1,035 1,346 1,747 2,443 487 737
Federal deposit insurance premiums................ 472 780 1,025 1,517 2,026 441 618
Credit card processing charges.................... -- 458 603 909 1,506 311 201
Intangibles amortization.......................... 25 214 462 902 2,485 333 775
Credit card restructuring......................... -- -- -- -- 12,214 -- --
Sundry............................................ 3,413 3,469 4,908 7,099 9,571 1,719 1,994
Total noninterest expense....................... $10,058 $12,889 $17,688 $26,855 $52,592 $8,190 $10,590
</TABLE>

Salaries and wages and benefits increased 27% from $4.1 million in the
first quarter of 1994 to $5.2 million in the first quarter of 1995. Full-time
equivalent employees rose to 524 at March 31, 1995, compared to 470 at March 31,
1994. Staff increases were attributable to the addition of 11 new branches,
higher loan and deposit activity resulting from internal growth and
acquisitions, and the expansion of the mortgage banking operations. Salaries and
wages and benefits increased 50% to $18.7 million in 1994 from $12.5 million in
1993. This followed increases of 57% in 1993 and 34% in 1992. Full-time
equivalent employees rose to 527 at the end of 1994 from 453 and 252 at the end
of 1993 and 1992, respectively. Staff increases were again attributable to the
addition of new branches, higher loan and deposit activity resulting from
internal growth and acquisitions, and the expansion of the mortgage banking
operations.
Occupancy and furniture and equipment expenses increased $498,000, or 38%,
in the first quarter of 1995 compared to the first quarter of 1994. Occupancy
and furniture and equipment expenses increased $2.1 million, or 53%, in 1994.
These increases resulted principally from the addition of new banking offices
including new Myrtle Beach and Lexington main offices, the establishment of CF
Mortgage and the expansion of administrative offices in Greenville to a second
location. Occupancy and furniture and equipment expenses increased $1.2 million,
or 43%, in 1993 due to the addition of 18 branches and the opening of a regional
headquarters office in Columbia for the Midlands region of South Carolina. In
addition, the Company relocated its operations center from Greenville, South
Carolina to Columbia, South Carolina, a location more central to its branches.
Occupancy and furniture and equipment expenses increased 35% during 1992.
Federal deposit insurance premiums increased 40% to $618,000 in the first
quarter of 1995 as compared to the first quarter of 1994. Federal deposit
insurance premiums increased 34% in 1994 to $2.0 million, which followed
increases of 31% in 1992 and 48% in 1993. These increases were primarily due to
higher levels of deposits.
18

<PAGE>
Service charges for processing credit cards decreased $110,000 in the first
quarter of 1995 as compared to the same period in 1994, as a result of the
consummation in January 1995 of the Securitization. Service charges for
processing credit cards increased $597,000 in 1994, principally as a result of
the origination of approximately $60 million in credit card receivables during
the year. This increase in 1994 followed increases of $306,000 in 1993 and
$145,000 in 1992.
Intangibles amortization increased $442,000, or 133%, during the first
quarter of 1995 as compared to the first quarter of 1994, principally as a
result of the acquisition of 6 Republic Branches in May 1994 and the
reclassification of loan premiums as intangible assets. Intangibles amortization
increased $1.6 million in 1994 to $2.5 million principally as a result of
intangibles relating to the acquisition of branches, credit card receivables and
CF Mortgage. This increase in 1994 followed increases of $440,000 in 1993 and
$248,000 in 1992 . The increase in sundry noninterest expense was primarily
attributable to the overhead and operating expenses associated with higher
lending and deposit activities. The largest items of sundry noninterest expense
were stationery, supplies and printing, telephone, postage and advertising.
SELECTED FINANCIAL RATIOS
The following table includes, for the periods indicated, selected financial
ratios of the Company.
SELECTED FINANCIAL RATIOS
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets (annualized)................... 0.36 % 0.41 % 0.46 % 0.68 % (0.21) % 0.69 % 0.85 %
Return on average equity (annualized)................... 3.89 4.98 5.44 8.16 (2.61) 8.90 11.62
Return on average common equity (annualized)............ 3.89 4.98 4.75 7.93 (8.77) 9.21 14.61
Average equity as a percentage of average assets........ 9.30 8.17 8.37 8.36 8.23 7.76 7.34
Dividend payout ratio................................... 0.00 0.00 0.00 0.00 n/m 20.83 20.00
</TABLE>

<PAGE>
FINANCIAL CONDITION
LOAN PORTFOLIO
The Company's loan portfolio consists of commercial mortgage loans,
commercial loans, consumer loans and one-to-four family residential mortgage
loans. A substantial portion of these borrowers are located in South Carolina
and are concentrated in the Company's market areas. The Company has no foreign
loans or loans for highly leveraged transactions. The loan portfolio does not
contain any industry concentrations of credit risk exceeding 10% of the
portfolio. At March 31, 1995, the Company had total loans outstanding of $877.1
million which equaled approximately 93% of the Company's total deposits and
approximately 77% of the Company's total assets.
The Company's loans increased 36% from $643.4 million at March 31, 1994 to
$877.1 million at March 31, 1995. Of this increase, $37.5 million resulted from
loan acquisitions. This increase was net of $51.0 million of mortgage loans
sold, which were predominantly current production fixed rate mortgage loans. The
Company's loans increased 51% in 1994 and 39% in 1993. These increases were net
of mortgage loans sold, which were predominantly current production fixed rate
mortgage loans.
The Company has experienced significant growth in its commercial and
commercial mortgage loans over the past several years. Furthermore, these loans
constitute approximately 53% of the Company's total loans. There are certain
risks inherent in making all loans, including risks resulting from uncertainties
as to the future value of collateral, risks resulting from changes in economic
and industry conditions and risks inherent in dealing with individual borrowers.
However, commercial and commercial mortgage loans are generally more risky than
one-to-four family or consumer loans because they are unique in character, are
generally larger in amount and are dependent upon the borrower's ability to
generate cash to service the loan. For additional information regarding the
Company's procedures in dealing with credit risks, see "Business -- Credit
Review and Philosophy."
The Company had loans to 39 borrowers having principal amounts ranging from
$2 million to $5 million, which loans accounted for $112.5 million, or 13%, of
the Company's loan portfolio in the first quarter of 1995. The Company had loans
to ten borrowers having principal amounts in excess of $5 million, which loans
accounted for $65.8 million, or 7%, of the Company's loan portfolio in the first
quarter of 1995. Any material deterioration in the quality of any of these
larger loans could have a significant impact on the Company's earnings and its
ability to make payments on the Notes.
The table below sets forth the composition of the Company's loan portfolio
at the dates indicated.
LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial, financial and agricultural......... $ 64,534 $ 91,041 $106,858 $132,530 $175,221 $135,331 $189,389
Real Estate
Construction................................. 17,808 20,791 17,191 21,242 23,103 25,466 30,397
Mortgage
Residential............................... 118,219 118,591 115,813 148,888 198,590 101,313 239,156
Commercial and multifamily (1)............ 56,475 63,469 87,566 150,764 268,628 242,703 278,454
Consumer....................................... 46,486 82,104 96,886 135,616 159,241 140,372 139,311
Loans held for sale............................ -- -- 6,801 7,700 71,695 -- 1,100
Total gross loans....................... 303,522 375,996 431,115 596,740 896,478 645,185 877,807
Unearned income................................ (2,590) (3,765) (3,943) (2,221) (873) (1,738) (685)
Total loans net of unearned income...... 300,932 372,231 427,172 594,519 895,605 643,447 877,122
Allowance for loan losses...................... (2,731) (4,235) (4,884) (6,270) (5,669) (6,085) (7,961)
Total net loans......................... $298,201 $367,996 $422,288 $588,249 $889,936 $637,362 $869,161
</TABLE>

(1) The majority of these loans were made to operating businesses where real
property has been taken as additional collateral.
20

<PAGE>
LOAN PORTFOLIO COMPOSITION BY PERCENTAGES
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial, financial and agricultural......... 21.26% 24.21% 24.79% 22.21% 19.55% 20.98% 21.58%
Real Estate
Construction................................. 5.87 5.53 3.99 3.56 2.58 3.95 3.46
Mortgage
Residential............................... 38.94 31.54 26.86 24.95 22.15 15.70 27.24
Commercial and multifamily (1)............ 18.61 16.88 20.31 25.26 29.96 37.62 31.72
Consumer....................................... 15.32 21.84 22.47 22.73 17.76 21.75 15.87
Loans held for sale............................ -- -- 1.58 1.29 8.00 -- 0.13
Total gross loans....................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Total gross loans (dollars)............. $303,522 $375,996 $431,115 $596,740 $896,478 $645,185 $877,807
</TABLE>

(1) The majority of these loans were made to operating businesses where real
property has been taken as additional collateral.
Management expects that less than one third of the principal balance of the
loans scheduled to mature in the next twelve months will be paid out completely.
The remainder of the loans will be renewed in the normal course of business.
The following table shows the maturity distribution and interest
sensitivity of a portion of the Company's loan portfolio at March 31, 1995.
LOAN MATURITY AND INTEREST SENSITIVITY
<TABLE>
<CAPTION>
OVER ONE
BUT OVER
ONE YEAR LESS THAN FIVE
OR LESS FIVE YEARS YEARS TOTAL
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial, financial, agricultural and commercial real estate................ $360,813 $ 76,235 $30,796 $467,844
Real estate -- construction................................................... 25,664 4,733 -- 30,397
Total of loans with:
Predetermined interest rates................................................ 49,337 21,003 30,796 101,136
Floating interest rates..................................................... 337,140 59,965 -- 397,105
</TABLE>

ALLOWANCE FOR LOAN LOSSES
Management maintains an allowance for loan losses which it believes is
adequate to cover possible losses in the 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 valid. Thus, there can
be no assurance that charge-offs in future periods will not exceed the allowance
for loan losses or that additional increases in the allowance for loan losses
will not be required.
The allowance for loan losses is established through charges in the form of
a provision for loan losses and purchased loan adjustments. Loan losses and
recoveries are charged or credited directly to the allowance. The amount charged
to the provision for loan losses by the Company is based on management's
judgment as to the amount required to maintain an allowance adequate to provide
for potential losses in the Company's loan portfolio. The level of this
allowance is dependent upon the total amount of past due loans, general economic
conditions and management's assessment of potential losses.
During 1991, management reviewed the allowance for loan losses in light of
deterioration in the national and South Carolina economies, as well as increased
originations of commercial and consumer loans at CF Savings Bank. In order to
achieve an allowance that reflected this review, the Company increased its
provision for loan losses by approximately 113%. During 1993, 1994 and the first
quarter of 1995, the allowance for loan losses was comparable, as a percentage
of loans, to the levels set in 1991 and 1992. Provisions for loan losses of $1.0
million, $1.1 million and $3.0 million were made in 1993, 1994 and the first
quarter of 1995, respectively.
In addition, various regulatory agencies, as a part of their examination
process, periodically review Carolina First Bank's allowance for loan losses and
real estate owned. Such agencies may require Carolina First Bank to recognize
changes to the allowance based on their judgments about information available to
them at the time of their examination.
21

<PAGE>
The provision for loan losses was $20,000 and $3.0 million in the first
quarters of 1994 and 1995, respectively. The $3.0 million provision for loan
losses in the first quarter of 1995 was made for several reasons. As a general
matter, management believed that such provision was appropriate in view of a
potential slowdown in the economy (which became evident in the first quarter)
and an increase in the prime interest rate in February 1995, both of which could
make it more difficult for certain borrowers to repay loans. Furthermore,
management believed that such provision was prudent because the Company was
expanding in new markets and was expecting to experience continued strong growth
in loans. Also, the mix of its loan portfolio was changing such that a number of
small loans were being replaced by larger credits, particularly in connection
with the Securitization, which occurred in January 1995. Finally, management
determined that such provision was warranted because of the increase in
chargeoffs in the first quarter to $782,000. At March 31, 1995, the Company's
allowance for loan losses as a percentage of nonperforming assets and other real
estate owned was 262.7%, compared to 161.9% a year earlier. The allowance for
loan losses as a percentage of total loans was 0.95% and 0.91% at March 31, 1994
and 1995, respectively.
The table below presents an allocation of the allowance for loan losses by
the different loan categories at December 31 for each of the last five years and
at March 31, 1995. The breakdown is based on a number of qualitative factors and
the amounts presented are not necessarily indicative of actual amounts which
will be charged to any particular category.
COMPOSITION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31
1990 1991 1992 1993 1994
PERCENT PERCENT PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
ALLOWANCE IN ALLOWANCE IN ALLOWANCE IN ALLOWANCE IN ALLOWANCE IN
BREAKDOWN CATEGORY BREAKDOWN CATEGORY BREAKDOWN CATEGORY BREAKDOWN CATEGORY BREAKDOWN CATEGORY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial, financial
and agricultural...... $ 823 21.26 % $ 1,130 24.21 % $ 1,666 24.79 % $ 1,744 22.21 % $ 1,638 19.55%
Real estate:
Construction......... 183 5.87 255 5.53 338 3.99 128 3.56 115 2.58
Mortgage:
Residential........ 60 38.94 100 31.54 250 26.86 100 24.95 100 22.15
Commercial and
multifamily...... 880 18.61 1,414 16.88 1,135 20.31 542 25.26 506 29.96
Consumer and loans held
for sale.............. 512 15.32 912 21.84 1,007 24.05 3,130 24.02 2,745 25.76
Unallocated............ 273 -- 424 -- 488 -- 626 -- 565 --
Total.............. $ 2,731 100.00 % $ 4,235 100.00 % $ 4,884 100.00 % $ 6,270 100.00 % $ 5,669 100.00%
<CAPTION>
MARCH 31
1995
PERCENT
OF LOANS
ALLOWANCE IN
BREAKDOWN CATEGORY
<S> <C> <C>
Commercial, financial
and agricultural...... $ 2,021 21.58 %
Real estate:
Construction......... 250 3.46
Mortgage:
Residential........ 197 27.37
Commercial and
multifamily...... 1,283 31.72

Consumer and loans held
for sale.............. 3,414 15.87
Unallocated............ 796 --
Total.............. $ 7,961 100.00 %
</TABLE>

<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The table below summarizes certain information with respect to the
Company's allowance for loan losses and the composition of charge-offs and
recoveries for each of the last five years and for the first quarter of 1995.
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Loan loss reserve at beginning of period....... $ 2,290 $ 2,731 $ 4,235 $ 4,884 $ 6,270 $ 6,270 $ 5,669
Valuation allowance for loans acquired......... -- 450 255 1,811 1,078 -- --
Charge-offs:
Commercial, financial and agricultural....... 298 311 1,177 332 394 68 207
Real estate -- construction.................. -- 31 30 -- 85 -- --
Real estate -- mortgage...................... 12 88 115 234 233 37 --
Consumer..................................... 176 230 195 381 542 110 174
Credit cards................................. -- -- -- 488 1,641 6 401
Total loans charged-off................... 486 660 1,517 1,435 2,895 221 782
Recoveries:
Commercial, financial and agricultural....... 103 -- 42 12 59 -- 49
Real estate -- construction.................. -- -- 1 -- -- -- --
Real estate -- mortgage...................... -- -- 18 23 9 -- 3
Consumer..................................... 30 27 22 14 58 15 11
Credit cards................................. -- -- -- -- -- 1 1
Total loans recovered..................... 133 27 83 49 126 16 64
Net charge-offs................................ 353 633 1,434 1,386 2,769 205 718
Provision charged to expense................. 794 1,687 1,828 961 1,090 20 3,010
Loan loss reserve at end of period............. $ 2,731 $ 4,235 $ 4,884 $ 6,270 $ 5,669 $ 6,085 $ 7,961
Average loans.................................. $276,228 $335,509 $406,288 $519,710 $753,482 $608,327 $864,977
Total loans, net of unearned income
(period end)................................. 300,932 372,231 427,172 594,519 895,605 643,447 877,122
Net charge-offs as a percentage of average
loans........................................ 0.13% 0.19% 0.35% 0.27% 0.37% 0.13% 0.33%
Allowance for loan losses as a percentage
of loans..................................... 0.91 1.15 1.14 1.05 0.63 0.95 0.91
</TABLE>

In January 1995, the Company transferred $97 million of receivables
associated with its credit card portfolio to the Trust in connection with the
Securitization. Of the increase in consumer loan charge-offs experienced during
1994, $1.6 million resulted from charge-offs associated with credit card
receivables. Charge-offs in 1993 included $488,000 from charge-offs associated
with credit card receivables during a three month period during which the
Company had no escrow balance against which to offset losses. Except for 1994
and a three month period in 1993, the Company had escrow balances established by
the seller of the credit card accounts against which substantially all of the
credit card losses were offset.
23

<PAGE>
The following table sets forth information regarding the Company's
nonperforming assets for the dates indicated. Management does not believe that,
as of March 31, 1995 other than as set forth in the table below, the Company has
any loans where known information concerning credit problems causes senior
management to have serious doubts as to the ability of such borrowers to comply
with present loan repayment terms. At March 31, 1995, the Company was closely
monitoring loans totaling approximately $8.5 million to three borrowers, which
were experiencing financial difficulty. None of these loans was included in
nonperforming assets or loans 90 days or more past due and still accruing
interest at March 31, 1995. The table includes nonperforming assets for ACNB,
which were significantly higher, as a percentage of total loans, than those of
Carolina First Bank. The nonperforming assets ratios in the table below are
shown both including and excluding ACNB.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Nonaccrual loans................................................ $1,484 $1,779 $2,147 $2,097 $1,807 $2,148 $ 618
Restructured loans.............................................. -- -- 353 -- 675 -- 675
Total nonperforming loans.................................. 1,484 1,779 2,500 2,097 2,482 2,148 1,293
Other real estate owned......................................... 699 1,446 2,519 2,434 1,644 1,611 1,737
Total nonperforming assets................................. $2,183 $3,225 $5,019 $4,531 $4,126 $3,759 $3,030
Loans 90 days or more past due and still accruing interest...... $ 605 $1,784 $2,127 $2,060 $1,285 $1,148 $2,347
Total nonperforming assets as a percentage of loans and other
real estate owned (including ACNB)............................ 0.73% 0.87% 1.18% 0.77% 0.46% 0.58% 0.34%
Total nonperforming assets as a percentage of loans and other
real estate owned (excluding ACNB)............................ 0.69 0.46 0.49 0.28 0.25 0.20 0.17
Allowance for loan losses as a percentage of nonperforming loans
(including ACNB).............................................. 184.03 238.06 195.36 299.00 228.40 283.29 615.70
</TABLE>

Carolina First Bank ceases to recognize interest income on a loan when, in
the judgment of management, the interest is not collectible in the normal course
of business. Foregone interest income that would have been recorded if the loans
had been current in accordance with their original terms and had been
outstanding throughout the period or since origination was approximately
$407,000 in 1992, $507,000 in 1993, $178,000 in 1994, and $63,000 in the first
quarter of 1995. Interest income from these loans included in net income was
$54,000 in 1992, $43,000 in 1993, $28,000 in 1994, and $3,000 in the first
quarter of 1995.
INVESTMENT PORTFOLIO
Debt securities held as assets are classified as investment securities,
securities available for sale or trading securities. Effective January 1, 1994,
the Company adopted Statement of Financial Accounting Standards 115, "Accounting
for Certain Investments in Debt and Equity Securities." Securities classified as
investments are carried at cost, adjusted for the amortization of premiums and
the accretion of discounts. In order to qualify as an investment asset, the
Company must have the ability and a positive intention to hold them to maturity.
Securities available for sale are carried at market value with unrealized gains
or losses reported in stockholders' equity (net of tax effect). These securities
may be disposed of if management believes that the sale would provide the
Company and its subsidiaries with increased liquidity or, based upon prevailing
or projected economic conditions, that such sales would be a safe and sound
banking practice and in the best interest of the stockholders. Trading
securities are carried at market value with adjustments for unrealized gains or
losses reported in noninterest income. The Company's policy is to acquire
trading securities only to facilitate their sale to customers.
The Company's subsidiaries are generally limited to investments in (i)
United States Treasury securities or United States Government guaranteed
securities, (ii) securities of United States Government agencies, (iii)
mortgage-backed securities, (iv) general obligation municipal bonds and revenue
bonds which are investment grade rated and meet certain other standards, and (v)
money market instruments which are investment grade rated and meet certain other
standards.
24

<PAGE>
The following table sets forth the carrying value of the securities of the
Company at the end of each of the last three years and at March 31, 1995.
SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1992 1993 1994 1995
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
U.S. Treasury securities...................................................... $30,574 $ 16,316 $ 27,705 $ 28,008
Obligations of U.S. Government agencies and corporations...................... 38,311 88,993 69,815 77,291
Obligations of states and political subdivisions.............................. 3,316 11,907 20,628 20,137
Other securities.............................................................. 6,099 4,262 2,002 216
$78,300 $121,478 $120,150 $ 125,652
</TABLE>

The following tables indicate the carrying value of each investment
category due in one year or less, after one year through five years, after five
years through ten years, and after ten years. The weighted average yield for
each range of maturities at March 31, 1995 is also shown.
TYPES AND MATURITY GROUPINGS OF INVESTMENTS
HELD FOR INVESTMENT
<TABLE>
<CAPTION>
WITHIN AFTER ONE BUT AFTER FIVE BUT
ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
U.S. Treasury............... $ 200 8.50% $ 5,990 5.18% $-- -- % $ -- -- % $ 6,190
U.S. Government agencies and
corporations.............. -- -- 34,531 5.70 -- -- 8,768 6.25 43,299
States and political
subdivisions (1).......... 500 6.60 6,170 4.23 8,913 4.67 4,554 5.06 20,137
Other securities............ -- -- -- -- 53 -- -- -- 53
Total (1)................. $ 700 7.14% $46,691 5.44% $8,966 4.67% $13,322 5.84% $69,679
<CAPTION>
WEIGHTED AVERAGE
AVERAGE MATURITY
YIELD IN YEARS
<S> <C> <C>
U.S. Treasury............... 5.29% 3.51
U.S. Government agencies and
corporations.............. 5.81 3.23
States and political
subdivisions (1).......... 4.67 5.81
Other securities............ -- --
Total (1)................. 5.43% 3.82
</TABLE>

AVAILABLE FOR SALE
<TABLE>
<CAPTION>
WITHIN AFTER ONE BUT AFTER FIVE BUT
ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
U.S. Treasury............... $16,296 4.26% $ 5,522 5.85% $ -- -- % $ -- -- % $21,818
U.S. Government agencies and
corporations.............. 26,256 5.34 7,736 4.72 -- -- -- -- 33,992
States and political
subdivisions (1).......... -- -- -- -- -- -- -- -- --
Other securities............ 163 -- -- -- -- -- -- -- 163
Total (1)................. $42,715 4.90% $13,258 5.19% $ -- -- % $ -- -- % $55,973
<CAPTION>
WEIGHTED AVERAGE
AVERAGE MATURITY
YIELD IN YEARS
<S> <C> <C>
U.S. Treasury............... 4.66% 0.91
U.S. Government agencies and
corporations.............. 5.20 0.72
States and political
subdivisions (1).......... -- --
Other securities............ -- --
Total (1)................. 4.97% 0.74
</TABLE>

(1) Fully tax-equivalent basis at a 35% tax rate.
DEPOSITS
Carolina First Bank's primary source of funds for loans and investments is
its deposits which are gathered through Carolina First Bank's branch network.
Competition for deposit accounts is primarily based on the interest rates paid
thereon and the convenience of and the services offered by the branch locations.
The Company's pricing policy with respect to deposits takes into account the
liquidity needs of the Company, the direction and level of interest rates, and
local market conditions. Certificates of deposit in amounts in excess of
$100,000 are held primarily by customers in the Company's market areas. It is
the Company's policy not to use deposit brokers. Approximately $229 million, or
24%, of the Company's
25

<PAGE>
deposits were insured through the Savings Association Insurance Fund at December
31, 1994. See "Business -- Supervision and Regulation -- Insurance."
The following table sets forth the distribution of the Company's deposit
accounts at the dates indicated on each category of deposits:
DEPOSITS
<TABLE>
<CAPTION>
DECEMBER 31
1990 1991 1992 1993 1994
PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF OF OF OF
AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Demand deposit
accounts...... $ 25,638 7.73 % $ 27,765 6.18 % $ 43,069 8.32 % $ 71,094 9.30 % $124,530 12.93%
NOW accounts... 15,160 4.57 27,660 6.16 39,299 7.59 82,891 10.84 114,030 11.83
Savings
accounts...... 12,504 3.77 16,468 3.67 24,317 4.70 68,731 8.99 92,776 9.63
Money market
accounts...... 85,411 25.78 116,707 25.98 129,042 24.93 151,019 19.75 151,392 15.71
Time
deposits...... 143,861 43.40 199,906 44.49 205,713 39.73 277,868 36.34 351,846 36.52
Time deposits
of $100,000 or
over.......... 48,895 14.75 60,714 13.52 76,259 14.73 113,074 14.78 128,896 13.38
Total
deposits.... $331,469 100.00 % $449,220 100.00 % $517,699 100.00 % $764,677 100.00 % $963,470 100.00%
<CAPTION>
MARCH 31
1995
PERCENT
OF
AMOUNT DEPOSITS
<S> <C> <C>
Demand deposit
accounts...... $119,376 12.66 %
NOW accounts... 109,178 11.58
Savings
accounts...... 72,429 7.68
Money market
accounts...... 142,605 15.12
Time
deposits...... 371,691 39.41
Time deposits
of $100,000 or
over.......... 127,829 13.55
Total
deposits.... $943,108 100.00 %
</TABLE>

The Company uses its deposit base as its primary source of funds. Deposits
grew 26% from $764.7 million at December 31, 1993 to $963.5 million at December
31, 1994. Of the $198.8 million increase in deposits, approximately $141.2
million resulted from the acquisition of the 6 Republic Branches and Citadel
Federal Savings and Loan Association. Of the $247.0 million increase in deposits
in 1993, approximately $243.3 million resulted from the acquisitions of the
Republic-Piedmont Branch, the 12 Republic Branches and the three Columbia, South
Carolina branches of Bay Savings Bank, FSB (the "Bay Savings Bank Branches"). No
deposits were acquired in 1992.
The following table sets forth information with respect to the maturity of
the Company's certificates of deposit greater than $100,000 at March 31, 1995.
CERTIFICATES OF DEPOSIT GREATER THAN $100,000
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Maturing in three months or less...................................................................... $ 61,084
Maturing in over three through six months............................................................. 31,797
Maturing in over six through twelve months............................................................ 21,204
Maturing in over twelve months........................................................................ 13,744
Total............................................................................................ $127,829
</TABLE>

Generally, certificates of deposits greater than $100,000 have a higher
degree of interest rate sensitivity than other certificates of deposit. The
percentage of Company deposits represented by certificates of deposit greater
than $100,000 is higher than the percentage of such deposits held by the
Company's peers. However, the Company does not believe that its relatively high
percentage of certificates of deposits greater than $100,000 will have a
material adverse effect on the Company because such certificates are principally
held by long-term customers located in Carolina First Bank's market areas.
LIQUIDITY AND 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
purposes of asset/liability management are to ensure adequate liquidity and to
maintain an appropriate balance between interest sensitive assets and
liabilities. Liquidity management involves meeting the cash flow requirements of
the Company. These cash flow requirements primarily involve withdrawals of
deposits, extensions of credit, payment of operating expenses and repayment of
purchased funds. The Company's principal sources of funds for liquidity purposes
are customer deposits, principal and interest payments on loans, maturities and
sales of debt securities, temporary
26

<PAGE>
investments and earnings. Temporary investments averaged 3.31% of earning assets
in 1992, 2.87% in 1993, 1.50% in 1994 and 0.64% in the first quarter of 1995.
Management believes that the Company maintains an adequate level of liquidity by
retaining liquid assets and other assets that can easily be converted into cash,
and by maintaining access to alternate sources of funds, including federal funds
purchased from correspondent banks and borrowings from the FHLB.
The liquidity ratio is an indication of a company's ability to meet its
short-term funding obligations. FDIC examiners suggest that a commercial bank
maintain a liquidity ratio of between 20% and 25%. At March 31, 1995, excluding
ACNB, Carolina First Bank's liquidity ratio was approximately 15.21%. Excluding
ACNB, the liquidity ratio averaged 15.91% in 1994 and 15.23% in the first
quarter of 1995. At March 31, 1995, Carolina First Bank had unused short-term
lines of credit totaling approximately $33.7 million. All of the lenders have
reserved the right to withdraw these lines of credit at their option. In
addition, Carolina First Bank has access to borrowing from the FHLB. At March
31, 1995, unused borrowing capacity from the FHLB totaled $91.8 million.
Management believes that these sources are adequate to meet its liquidity needs.
The Company's core deposit base consists of consumer time deposits, savings
and NOW accounts, money market accounts and checking accounts. Although core
deposits are becoming increasingly interest sensitive for both the Company and
the industry as a whole, core deposits continue to provide the Company with a
large and stable source of funds. Core deposits averaged 75.1% of assets in
1992, 73.2% in 1993, 73.2% in 1994 and 73.1% in the first quarter of 1995. The
Company closely monitors its reliance on certificates of deposit greater than
$100,000, which are generally considered less stable than core deposits. The
Company's certificates of deposit in excess of $100,000 are held primarily by
customers in the Company's market areas. In 1994, the Company modified its
funding strategy to rely more on advances from the FHLB because management
determined that, due to increased competition for deposits, the marginal cost of
borrowing from the FHLB is lower than the marginal cost of raising deposits. At
March 31, 1995, FHLB advances totaled $68.2 million, compared to $18.0 million
at March 31, 1994.
The Company has certain cash needs, including general operating expenses
and the payment of dividends and interest on borrowings. The Company generates
cash to meet these needs primarily through management fees and dividends paid to
it by its subsidiaries and secondarily from existing cash reserves, sales of
marketable investment securities, interest income on its investment assets and
certain other vehicles. See "Business -- Supervision and Regulation."
The interest sensitivity gap is the difference between total interest
sensitive assets and liabilities in a given time period. The objective of
interest sensitivity management is to maintain reasonably stable growth in net
interest income despite changes in market interest rates by maintaining the
proper mix of interest sensitive assets and liabilities. Over the past several
years, the environment in which financial institutions operate has been
characterized by volatile interest rates and greater reliance on
market-sensitive deposits, increasing both the importance and the difficulty of
interest sensitivity management. Management seeks to maintain a general
equilibrium between interest sensitive assets and liabilities in order to
insulate net interest income from significant adverse changes in market rates.
The Company uses a variety of tools to analyze the Company's interest
sensitivity. The table below is a "static gap" presentation which reflects the
difference between total interest sensitive assets and liabilities within
certain time periods. At December 31, 1994 on a cumulative basis through twelve
months, rate-sensitive liabilities exceeded rate-sensitive assets, resulting in
a liability sensitive position at the end of 1994 of $222.1 million. Management
expects that its net interest margin and net income would increase, in the short
term, in a rising interest rate environment as the interest rates charged on
approximately 70% of the commercial loan portfolio is tied to the prime rate and
would reprice immediately in the event of a corresponding increase in the prime
rate. In a falling rate environment, the Company's net interest margin and net
income would decrease for the short term. Management believes that the Company's
savings and interest-bearing transaction accounts are not interest rate
sensitive and, accordingly, would not be repriced upward as quickly or to the
same degree as the Company's earning assets.
27

<PAGE>
The following table illustrates the Company's interest rate sensitivity at
December 31, 1994 as well as the cumulative gap position at December 31, 1994
and March 31, 1995.
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
TOTAL OVER ONE
0-3 4-6 7-12 WITHIN YEAR OR
MONTHS MONTHS MONTHS ONE YEAR NON-SENSITIVE TOTAL
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Earning assets
Loans, net of unearned income............... $505,802 $ 29,707 $ 48,732 $ 584,241 $ 311,364 $ 895,605
Investment securities, taxable.............. 19,025 2,796 23,916 45,737 55,537 101,274
Investment securities, nontaxable........... 1,346 -- 50 1,396 18,635 20,031
Federal funds sold.......................... 2,980 -- -- 2,980 -- 2,980
Interest bearing deposits with other
banks.................................... 500 -- -- 500 -- 500
Total earning assets................... 529,653 32,503 72,698 634,854 385,536 1,020,390
Non-earning assets, net....................... -- -- -- -- 141,332 141,332
Total assets........................... $529,653 $ 32,503 $ 72,698 $ 634,854 $ 526,868 $1,161,722
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking...................... $105,966 $ -- $ -- $ 105,966 $ -- $ 105,966
Savings................................ 92,745 -- -- 92,745 -- 92,745
Money market........................... 151,312 -- -- 151,312 -- 151,312
Certificates of deposit................ 139,647 110,034 109,332 359,013 79,881 438,894
Other.................................. 20,834 10,826 10,209 41,869 12,734 54,603
Total interest-bearing deposits........ 510,504 120,860 119,541 750,905 92,615 843,520
Short-term borrowings.................... 105,986 -- 52 106,038 -- 106,038
Long-term borrowings..................... -- -- -- -- 1,162 1,162
Total interest-bearing liabilities..... 616,490 120,860 119,593 856,943 93,777 950,720
Noninterest bearing liabilities
Noninterest bearing deposits........... -- -- -- -- 119,950 119,950
Other noninterest bearing liabilities,
net................................. -- -- -- -- 8,618 8,618
Total liabilities...................... 616,490 120,860 119,593 856,943 222,345 1,079,288
Stockholders' equity.......................... -- -- -- -- 82,434 82,434
Total liabilities and stockholders'
equity.............................. $616,490 $ 120,860 $ 119,593 $ 856,943 $ 304,779 $1,161,722
Interest sensitive gap........................ $(86,837) $ (88,357) $ (46,895) $(222,089) $ 222,089 $ --
Cumulative interest sensitive gap at December
31, 1994.................................... $(86,837) $(175,194) $(222,089) $(222,089)
Cumulative interest sensitive gap at
March 31, 1995.............................. $(98,647) $(208,610) $(235,731) $(235,731)
</TABLE>

While the static gap is a widely used measure of interest sensitivity,
management believes it is not a precise indicator of the Company's interest
sensitivity position. The table above presents a static view of the timing of
maturities and repricing opportunities, without taking into consideration that
changes in interest rates do not affect all assets and liabilities equally. For
example, rates paid on a substantial portion of savings and core time deposits
may contractually change within a relatively short time frame, but those rates
are significantly less interest sensitive than market based rates such as those
paid on non-core deposits. Accordingly, a liability sensitive static gap
position is not as indicative of the Company's true interest sensitivity as
would be the case for an organization which depends to a greater extent on
purchased funds to support earning
28

<PAGE>
assets. Net interest income may be impacted by other significant factors in a
given interest rate environment, including the spread between the prime rate and
the incremental borrowing cost and the volume and mix of earning asset growth.
Accordingly, the Company uses an asset/liability simulation model which
quantifies balance sheet and earnings variations under different interest rate
environments as its primary tool to measure and manage interest rate risk.
CAPITAL RESOURCES
The Company's capital needs have been met principally through public
offerings of common and preferred stock and through the retention of earnings.
In addition, the Company issued common and preferred stock in connection with
the acquisitions of CF Savings Bank, CF Mortgage and ACNB.
The Company's initial public offering in 1986 raised $15.3 million in
common equity and, to date, represents the largest amount of initial equity
raised in connection with the startup of a financial institution in South
Carolina. Other public offerings of capital stock include the offering of the
Series 1992 Preferred Stock in May 1992, which raised $10.3 million, the
offering of the Series 1993 Preferred Stock in March 1993, which raised $14.5
million, and the offering of the Series 1994 Preferred Stock in April 1994,
which raised $21.4 million. In December 1993, the Company redeemed the Series
1992 Preferred Stock. In connection with such redemption, substantially all of
the outstanding shares of Series 1992 Preferred Stock were converted into
1,089,674 shares of Common Stock.
The Company anticipates that approximately $15 million of the proceeds of
this offering will be contributed to Carolina First Bank to provide additional
capital to support internal growth and acquisitions. The balance of the proceeds
will be used for general corporate purposes. Pending such use, the net proceeds
will be invested in marketable investment securities.
Risk-based capital guidelines for financial institutions adopted by the
regulatory authorities went into effect after December 31, 1991. The risk-based
capital rules are designed to make regulatory capital requirements more
sensitive to differences in asset risk profile among financial institutions, to
account for off-balance sheet exposure and to minimize disincentives for holding
liquid assets. Risk-based capital guidelines have not had a material effect on
the Company's operations or on the operations of its subsidiaries. However, the
guidelines require that intangible assets be deducted when computing risk-based
capital ratios. Acquisitions accounted for using the purchase method of
accounting generally create intangible assets. Consequently, the Company's
ability to make cash acquisitions in the future using the purchase method of
accounting may be adversely affected. Intangible assets created as a result of
the purchase method of accounting also reduce the Company's tangible book value.
The ability of the Company to make acquisitions using the pooling of interests
method of accounting will not be affected by the guidelines. Acquisitions using
the pooling of interests methods of accounting involve the issuance of equity
securities in exchange for the securities of the acquired company.
Book value per share at December 31, 1993 and 1994 and March 31, 1995 was
$10.08, $8.48 and $8.87, respectively. The decline in book value at December 31,
1994 was attributable to the one-time restructuring charges. Tangible book value
per share at December 31, 1993 and 1994 and March 31, 1995 was $7.12, $4.46 and
$5.05, respectively. Tangible book value was significantly below book value as a
result of the purchase premiums associated with branch acquisitions and the
purchase of CF Mortgage. Tangible book value declined during 1994 as a result of
the addition of intangible assets related to the branch acquisitions and
reclassifications of loan premiums as intangible assets.
Under the capital guidelines of the Board of Governors of the Federal
Reserve (the "Federal Reserve Board") and the FDIC, the Company and Carolina
First Bank are currently required to maintain a minimum risk-based total capital
ratio of 8%, with at least 4% being Tier 1 capital. Tier 1 capital consists of
common stockholders' equity, qualifying perpetual preferred stock and minority
interests in equity accounts of consolidated subsidiaries, less goodwill. Banks
and bank holding companies must maintain a minimum Tier 1 leverage ratio (Tier 1
capital to total assets) of at least 3%, but this minimum ratio is increased by
100 to 200 basis points for other than the highest-rated institutions.
At December 31, 1994, the Company and CF Savings Bank were in compliance
with each of the applicable regulatory capital requirements and exceeded the
"adequately capitalized" regulatory guidelines. Carolina First Bank exceeded the
"adequately capitalized" regulatory guidelines for the Tier 1 risk-based capital
and leverage ratios, but was "undercapitalized" for the total risk-based capital
ratio. In February 1995, the Company received a letter from the FDIC which
indicated that, based on its analysis of Carolina First Bank's Report of
Condition as of December 31, 1994, Carolina First Bank was undercapitalized
because its total risk-based capital ratio had fallen below 8% to 6.70%
(excluding ACNB), principally as a result of the inclusion of certain
off-balance sheet items as risk-weighted assets. As a result of the capital
deficiency, Carolina First Bank committed to (1) merge CF Savings Bank and
Carolina First Bank, (2) consummate the Securitization, (3) have the Company
29

<PAGE>
contribute capital of $3.5 million to Carolina First Bank, and (4) sell certain
purchased mortgage servicing rights. All of these steps were taken by March 31,
1995. Although these steps were the subject of an agreement between the Carolina
First Bank and the FDIC, the Company had determined to effect all of these
actions, except the $3.5 million capital contribution, prior to and independent
of the capital deficiency matter.
At the end of February, Carolina First Bank's total risk-based capital
ratio was 8.10% (excluding ACNB). Carolina First Bank has received a letter from
the FDIC confirming that it is adequately capitalized. Carolina First Bank
expects that its total risk-based capital ratio will continue to increase as a
result of monthly operating results, the consummation of the acquisition of MNB
(which Carolina First Bank expects to consummate in the second quarter of 1995)
and the contribution of approximately $15 million to Carolina First Bank in
connection with this offering.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") and as a result of its total risk-based capital ratio declining
below 8%, the Company, Carolina First Bank and the FDIC entered into a Capital
Maintenance Commitment and Guaranty Agreement (the "Guaranty Agreement")
pursuant to which the Company guaranteed that Carolina First Bank will comply
with the capital restoration plan described above until Carolina First Bank has
been adequately capitalized on average during each of four consecutive quarters.
The Guaranty Agreement provides that in the event Carolina First Bank fails to
comply with the applicable capital requirements, the Company will pay to
Carolina First Bank or its successors or assigns an amount equal to the lesser
of (a) 5% of Carolina First Bank's total assets at the time Carolina First Bank
was notified or deemed to have notice that Carolina First Bank was
undercapitalized, or (b) the amount which is necessary to bring Carolina First
Bank into compliance with all capital standards applicable to Carolina First
Bank at the time Carolina First Bank failed to so comply. In the event that the
Company failed to make any such payments, the Company would be subject to
certain remedial provisions under FDICIA. Management does not believe that it
will be required to make payments under the Guaranty Agreement or that Carolina
First Bank will not be at least adequately capitalized in the foreseeable
future. See "Business -- Supervision and Regulation -- General."
The following tables set forth certain capital ratios and the amount of
capital of the Company and Carolina First Bank at December 31, 1993 and 1994 and
March 31, 1995, giving full effect to the exclusion of intangible assets.
CAPITAL RATIOS
<TABLE>
<CAPTION>
TOTAL RISKED-BASED TIER 1 RISK-BASED
CAPITAL RATIO CAPITAL RATIO LEVERAGE RATIO
12/31/93 12/31/94 3/31/95 12/31/93 12/31/94 3/31/95 12/31/93 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Company.............................. 9.54% 8.21% 8.38% 8.52% 7.53% 7.47% 6.23% 5.54%
Carolina First Bank.................. 9.06 6.97 8.28 8.05 6.37 7.37 6.01 5.26
<CAPTION>

3/31/95
<S> <C>
Company.............................. 5.86%
Carolina First Bank.................. 5.77
</TABLE>

CAPITAL REQUIREMENTS
<TABLE>
<CAPTION>
MARCH 31, 1995
ACTUAL AMOUNTS REQUIRED TO BE EXCESS
AMOUNTS ADEQUATELY CAPITALIZED AMOUNTS
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
COMPANY
Leverage............................................................. $65,374 $ 44,662 $20,712
Risk-based capital
Tier 1............................................................. 65,374 34,986 30,388
Total.............................................................. 73,336 69,972 3,364
CAROLINA FIRST BANK
Leverage............................................................. 64,339 44,590 19,749
Risk-based capital
Tier 1............................................................. 64,339 34,915 29,424
Total.............................................................. 72,301 69,830 2,471
</TABLE>

IMPACT OF INFLATION
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Company's subsidiaries 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 "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Interest Rate
Sensitivity."
INDUSTRY DEVELOPMENTS
Certain recently-enacted and proposed legislation could have an effect on
both the costs of doing business and the competitive factors facing the
financial institutions industry. The Company is unable at this time to assess
the impact of this legislation on its financial condition or operations. See
"Business -- Supervision and Regulation."
30

<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
In November 1994, the Company entered into an agreement to acquire MNB. The
Company expects that this acquisition will be consummated in the second quarter
of 1995. The Unaudited Pro Forma Combined Condensed Balance Sheet is based on
combining the historical consolidated balance sheet for the Company at March 31,
1995 and December 31, 1994 with the balance sheet of MNB at the same dates, and
adjusting for the issuance of additional shares expected to be issued in the
merger.
The Unaudited Pro Forma Combined Condensed Summary of Earnings combines the
consolidated statements of income of the Company for the years ended December
31, 1992, 1993 and 1994 and for the three months ended March 31, 1994 and 1995
with the statements of income of MNB for the same periods.
The merger is expected to be accounted for under the pooling of interest
method of accounting and pro forma data is derived in accordance with such
method.
Information set forth below should be read in conjunction with such
historical and pro forma financial statements and the notes thereto. The
unaudited pro forma information is provided for informational purposes only and
is not necessarily indicative of actual results that would have been achieved
had the merger been consummated at the beginning of the period presented, nor is
it necessarily indicative of future results.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRO FORMA
COMPANY MNB COMBINED
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Assets:
Cash and due from banks.............................................................. $ 57,250 $ 2,500 $ 59,750
Federal funds sold................................................................... 2,980 1,440 4,420
Investment securities................................................................ 121,305 9,192 130,497
Loans................................................................................ 896,478 27,463 923,941
Less unearned income.............................................................. (873) -- (873)
Less allowance for loan losses.................................................... (5,669) (333) (6,002)
Net loans.................................................................... 889,936 27,130 917,066
Premises and equipment............................................................... 38,504 1,319 39,823
Other assets......................................................................... 51,747 1,047 52,794
$1,161,722 $42,628 $1,204,350
Liabilities and shareholders' equity:
Liabilities:
Deposits:
Noninterest-bearing............................................................. $ 124,530 $ 2,444 $ 126,974
Interest bearing................................................................ 838,940 35,834 874,774
Total deposits............................................................... 963,470 38,278 1,001,748
Borrowed funds.................................................................. 107,200 36 107,236
Other liabilities............................................................... 8,618 266 8,884
Total liabilities............................................................ 1,079,288 38,580 1,117,868
Total shareholders' equity................................................... 82,434 4,048 86,482
$1,161,722 $42,628 $1,204,350
</TABLE>

<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
COMPANY MNB COMBINED
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Assets:
Cash and due from banks.............................................................. $ 49,468 $ 1,497 $ 50,965
Federal funds sold................................................................... 780 1,960 2,740
Investment securities................................................................ 127,135 8,881 136,016
Loans................................................................................ 877,807 27,225 905,032
Less unearned income.............................................................. (685) -- (685)
Less allowance for loan losses.................................................... (7,961) (334) (8,295)
Net loans......................................................................... 869,161 26,891 896,052
Premises and equipment............................................................... 38,250 1,298 39,548
Other assets......................................................................... 51,167 973 52,140
$1,135,961 $41,500 $1,177,461
Liabilities and shareholders' equity:
Liabilities:
Deposits:
Noninterest-bearing............................................................. $ 119,376 $ 2,606 $ 122,182
Interest bearing................................................................ 823,732 34,358 858,090
Total deposits............................................................... 943,108 37,164 980,272
Borrowed funds.................................................................. 97,269 36 97,305
Other liabilities............................................................... 11,218 200 11,418
Total liabilities............................................................ 1,051,595 37,400 1,088,995
Total shareholders' equity................................................... 84,366 4,100 88,466
$1,135,961 $41,500 $1,177,461
</TABLE>

<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income
Interest and fees on loans........................... $ 39,788 $ 47,313 $ 70,679 $ 13,376 $ 21,227
Interest on securities............................... 4,277 6,999 6,671 1,634 1,771
Other interest income................................ 694 654 623 194 148
Total interest income............................. 44,759 54,966 77,973 15,204 23,146
Interest expense
Interest on deposits................................. 23,760 24,055 30,750 6,389 9,084
Interest on borrowings............................... 249 552 1,759 211 1,391
Total interest expense............................ 24,009 24,607 32,509 6,600 10,475
Net interest income.................................. 20,750 30,359 45,464 8,604 12,671
Provision for loan losses.............................. 2,319 1,106 1,196 38 3,100
Net interest income after provision for
loan losses....................................... 18,431 29,253 44,268 8,566 9,571
Noninterest income
Services charges on deposit accounts................. 1,791 2,916 4,108 900 1,295
Mortgage banking income.............................. 1,274 1,788 1,638 501 252
Gain on sale of purchased mortgage servicing
rights............................................ -- -- -- -- 2,026
Gain on sale of securities........................... 634 710 75 73 97
Sundry............................................... 418 1,350 2,404 623 1,465
Total noninterest income.......................... 4,117 6,764 8,225 2,097 5,135
Noninterest expense
Salaries, wages and benefits......................... 8,466 13,140 19,397 4,246 5,358
Occupancy and furniture and equipment................ 3,032 4,234 6,306 1,357 1,830
Sundry............................................... 7,400 10,920 16,127 2,943 3,811
Credit card restructuring charges.................... -- -- 12,214 -- --
Total noninterest expense......................... 18,898 28,294 54,044 8,546 10,999
Income before income taxes........................... 3,650 7,723 (1,551) 2,117 3,707
Income taxes........................................... 1,184 2,305 190 540 1,270
Net income........................................... 2,466 5,418 (1,741) 1,577 2,437
Dividends on preferred stock........................... 625 1,930 2,433 310 727
Net income applicable to common shareholders......... $ 1,841 $ 3,488 $ (4,174) $ 1,267 $ 1,710
Net income per common share:
Primary.............................................. $ 0.43 $ 0.80 $ (0.75) $ 0.23 $ 0.30
Fully diluted........................................ 0.43 0.79 (0.75) 0.23 0.28
Average shares outstanding:
Primary.............................................. 4,295,043 4,339,760 5,540,814 5,536,526 5,641,550
Fully diluted........................................ 5,358,191 6,848,706 7,994,354 6,832,169 8,574,606
</TABLE>

<PAGE>
BUSINESS
GENERAL
The Company is a bank holding company headquartered in Greenville, South
Carolina which operates through two subsidiaries: Carolina First Bank and CF
Mortgage. The Company was formed in 1986 principally in response to perceived
opportunities resulting from the takeovers of several South Carolina-based banks
by large southeastern regional bank holding companies. A significant number of
the Company's executive officers and management personnel were previously
employed by certain of the larger South Carolina-based banks that were acquired
by these southeastern regional institutions. Consequently, these officers and
management personnel have significant customer relationships and commercial
banking experience that have contributed to the Company's loan and deposit
growth. The Company targets individuals and small to medium-sized businesses in
South Carolina that require a full range of quality banking services typically
provided by larger regional banking concerns, but that prefer the personalized
service afforded by a South Carolina-based institution. At March 31, 1995, the
Company had $1.1 billion in assets and operated through 47 locations in South
Carolina.
The Company's objective is to become the leading South Carolina-based
banking institution. It believes that it can accomplish this goal by pursuing a
"super-community bank" strategy, offering the personalized service and local
decision-making authority that characterize community banks, as well as the
sophisticated banking products offered by regional and super-regional
institutions. The Company is currently the fourth largest South Carolina-based
banking institution (and the largest South Carolina-based commercial bank) in
terms of total assets.
Management believes that a substantial number of individuals and small to
medium-sized businesses have become dissatisfied with the banking services that
they have received since their local "community" banks were acquired by large
regional concerns. Consequently, as a super-community bank, Carolina First
Bank's principal strategy is to take advantage of this dissatisfaction and
provide both the level of personal service and sophisticated products that these
customers require.
GROWTH STRATEGY AND ACQUISITIONS
Since its inception in 1986, the Company has pursued a strategy of growth
through internal expansion and through the acquisition of branch locations and
financial institutions in selected market areas.
INTERNAL GROWTH
The Company has emphasized internal growth through the acquisition of
market share from the large southeastern regional bank holding companies. It
attempts to acquire such market share by providing quality banking services and
personal service to business customers and individuals. The Company believes
that certain recent or pending acquisitions of other banks in the Company's
market areas, including the acquisitions of South Carolina National Bank by
Wachovia Corporation, The First Savings Bank, F.S.B. by Southern National
Corporation, Southern National Corporation by BB&T of South Carolina, Lexington
State Bank by BB&T of South Carolina, and National Bank of South Carolina by
Synovus Financial Corporation, present opportunities for internal growth which
are similar to those that existed at the time of the Company's formation in
1986. Since its opening in December 1986, the Company has grown to $1.1 billion
in assets as of March 31, 1995.
ACQUISITION STRATEGY
Management believes that past acquisitions have had a favorable impact on
the Company, enabling it to expand more rapidly than would otherwise have been
possible and attain the assets, market penetration and economies of scale
necessary to become a "super-community" institution. Management also believes
that selective acquisitions in the future could improve the Company's market
share and enhance the Company's ability to compete with other financial
institutions by expanding and improving the Company's branch network and the
range of services it offers. The Company's principal acquisition focus is on
acquiring South Carolina deposits and lending franchises that are located in
market areas characterized by economic growth. In particular, the Company seeks
acquisitions in its current market areas or in market areas with which Company
management is familiar or in which management has business ties.
PENDING ACQUISITIONS
On November 13, 1994, the Company, Carolina First Bank and MNB entered into
an agreement which provided that MNB would be merged into Carolina First Bank.
In connection with such transaction, up to 784,242 shares of the Company's
common stock will be issued to the shareholders of MNB. Regulatory approvals
have been received and the Company
34

<PAGE>
expects to consummate such acquisition in the second quarter of 1995. At March
31, 1995, MNB had approximately $42 million in assets, $37 million in deposits
and $27 million in loans.
The Company may consider other acquisitions if attractive opportunities
develop. However, other than the acquisition of MNB, the Company currently has
no other understandings, arrangements or agreements with any other party
regarding future acquisitions.
PAST ACQUISITIONS
The Company's past acquisitions include the following:
(Bullet) In August 1990, the Company acquired CF Savings Bank in a merger
transaction which resulted in the acquisition of approximately
$118 million in assets, $102 million in loans and $100 million in
deposits. This transaction was accounted for as a
pooling-of-interests. With this acquisition, the Company became
the largest financial institution in Georgetown County in terms of
total deposits.
(Bullet) In April 1991, Carolina First Bank acquired two Anderson, South
Carolina branches of American Federal Bank, F.S.B., which resulted
in the assumption of approximately $20 million in deposits, on
which a premium of $1.2 million was paid, and the acquisition of
$3.8 million in loans and approximately $800,000 in fixed assets.
(Bullet) In December 1991, CF Savings Bank acquired four Myrtle Beach,
South Carolina branches of The First Savings Bank, F.S.B., which
resulted in the assumption of approximately $36 million in
deposits, on which a premium of $1.3 million was paid, and the
acquisition of approximately $10 million in loans.
(Bullet) In January 1993, Carolina First Bank acquired the
Republic-Piedmont Branch, which resulted in the assumption of
approximately $15 million in deposits, on which a premium of
$600,000 was paid, and the acquisition of $3 million in loans and
approximately $500,000 in fixed assets. See "Management -- Certain
Transactions."
(Bullet) In March 1993, Carolina First Bank acquired the 12 Republic
Branches, which resulted in the assumption of approximately $190
million in deposits, on which a premium of $6.3 million was paid,
and the acquisition of approximately $28 million in loans and $6
million in fixed assets. See "Management -- Certain Transactions."
(Bullet) In five transactions during the period of time from December 1991
through November 1993, Carolina First Bank purchased an aggregate
of approximately $35 million in credit card receivables and
related accounts from Republic National Bank. These transactions
resulted in a credit card premium of approximately $7.6 million.
(Bullet) In September 1993, the Company acquired CF Mortgage, which
resulted in the acquisition of servicing rights to a portfolio of
approximately $250 million in mortgages and two origination
offices. The cost of the acquisition in excess of the fair value
of net assets acquired aggregated approximately $3.1 million. See
"Management -- Certain Transactions."
(Bullet) In December 1993, Carolina First Bank acquired the Bay Savings
Bank Branches, which resulted in the assumption of approximately
$40 million in deposits, on which a premium of $1.1 million was
paid, and the acquisition of approximately $100,000 in loans and
approximately $87,000 in fixed assets.
(Bullet) In April 1994, Carolina First Bank acquired the sole branch of
Citadel Federal Savings and Loan Association, from the Resolution
Trust Corporation, which resulted in the assumption of
approximately $5.8 million in deposits, on which a premium of
$533,000 was paid.
(Bullet) In May 1994, Carolina First Bank acquired the 6 Republic Branches,
which resulted in the assumption of approximately $135 million in
deposits, on which a premium of $5.4 million was paid, and the
acquisition of approximately $37.5 million in loans and $1.6
million in fixed assets. See "Management -- Certain Transactions."
(Bullet) In April 1995, the Company acquired ACNB in a merger transaction
which resulted in the acquisition of approximately $39 million in
assets, $30 million in loans and $35 million in deposits. This
transaction was accounted for as a pooling of interests.
CAROLINA FIRST BANK
Carolina First Bank is a South Carolina-chartered bank headquartered in
Greenville, South Carolina. It currently operates through 45 branches located
principally in the Upstate, Midlands and Coastal regions of South Carolina. Its
primary focus is on commercial and consumer lending to customers in its market
areas, with mortgage lending being of secondary
35

<PAGE>
emphasis. It also provides demand transaction accounts to businesses and
individuals. Since the acquisition of CF Mortgage in 1993, all of Carolina First
Bank's mortgage origination activities have been performed by CF Mortgage.
Carolina First Bank provides a full range of commercial and consumer
banking services, including short and medium-term loans, mortgage loans,
revolving credit arrangements, inventory and accounts receivable financing,
equipment financing, real estate lending, safety deposit services, savings
accounts, interest- and noninterest-bearing checking accounts and installment
and other personal loans. Carolina First Bank also provides trust services and
various cash management programs. At March 31, 1995, Carolina First Bank
exceeded all applicable regulatory capital requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources."
A significant number of Carolina First Bank's management and lending
personnel were previously employed by larger South Carolina-based banks.
Consequently, Carolina First Bank's management personnel have significant
customer relationships and commercial banking experience that have contributed
to the loan and deposit growth. In addition, the Board of Directors of the
Company and Carolina First Bank and Carolina First Bank's local advisory boards
include local business and community leaders whose contacts and relationships
have also contributed to Carolina First Bank's growth.
CF MORTGAGE
On September 30, 1993, the Company acquired First Sun Mortgage Corporation
(subsequently renamed CF Mortgage). CF Mortgage is headquartered in Columbia,
South Carolina and is engaged primarily in originating, underwriting and
servicing mortgage loans. In connection with its acquisition of CF Mortgage, the
Company issued 60,000 shares of its Series 1993B Preferred Stock which has a
liquidation value of $20.00 per share. As a result of this acquisition the
Company recorded approximately $3.1 million in goodwill.
CF Mortgage's mortgage loan origination operation is conducted principally
through seven offices, including its headquarters in Columbia and loan
origination offices located in Litchfield Beach, Greenville, Charleston,
Columbia, Anderson and Orangeburg. Mortgage loan applications are forwarded to
CF Mortgage's headquarters in Columbia for processing in accordance with GNMA,
FNMA and other applicable guidelines. With the acquisition of CF Mortgage on
September 30, 1993, substantially all of Carolina First Bank's mortgage loan
origination activity was transferred to CF Mortgage. During 1994, CF Mortgage
and Carolina First Bank originated $108 million of mortgage loans, which
generated $1.0 million in origination fee income. See "Management -- Certain
Transactions" and "Description of Capital Stock -- Series 1993B Preferred
Stock." The Company's present intention is to sell all conforming fixed rate
mortgage loans into the secondary market.
CF Mortgage's mortgage servicing operations consist of servicing mortgage
loans that are owned by Carolina First Bank and subservicing loans, to which the
right to service is owned by Carolina First Bank and other non-affiliated
financial institutions. This servicing operation is conducted at its
headquarters location in Columbia, South Carolina. At March 31, 1995, CF
Mortgage was servicing or subservicing 10,360 loans having an aggregate
principal balance of approximately $800 million. These amounts include 5,237
loans having a principal balance of approximately $435 million which were sold
to an unrelated third party effective March 31, 1995 but which CF Mortgage will
continue to service through June 1995. This sale resulted in a gain for the
Company of approximately $2 million and was effected because the Company
believed that the terms were favorable. CF Mortgage expects to purchase loan
servicing in the future in order to increase its servicing portfolio and replace
the servicing rights sold. As it has done in the past, the Company will
emphasize the purchase of current loan servicing production to reduce prepayment
risks. See "Recent Matters."
The Company views its mortgage banking operation as a means of increasing
noninterest income without increasing assets. The Company purchased the rights
to service the loan portfolios to take advantage of excess capacity thereby
creating a revenue stream to more rapidly cover the fixed costs associated with
its mortgage banking operations. The Company's long-term strategy is to have a
servicing portfolio principally comprised of loans originated by the Company but
which have been sold into the secondary market.
LENDING ACTIVITIES
Carolina First Bank's primary focus has been on commercial and installment
lending to individuals and small- to medium-sized businesses in its market
areas. Such loans totaled approximately $600 million and constituted
approximately 70% of Carolina First Bank's loan portfolio at March 31, 1995.
Since September 1993, mortgage loan origination activities that were
previously performed by Carolina First Bank and CF Savings Bank have been
performed by CF Mortgage. CF Mortgage performs all mortgage origination
activities and all mortgage loans originated and not sold in the secondary
market are placed in Carolina First Bank's loan portfolio.
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For information regarding the composition of the Company's loan portfolio,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Loan Portfolio."
There are inherent interest rate risks in making loans. For example, if
loans have long maturities and fixed rates of interest, the Company could be
adversely affected by a rise in the general level of interest rates. Except for
conforming residential mortgage loans, the Company generally attempts to
originate variable rate loans or short term fixed rate loans to deal with these
interest rate risks. The Company also mitigates interest rate risk by selling on
the secondary market substantially all of the conforming fixed rate mortgage
loans currently originated by the Company. At March 31, 1995, approximately 60%
of the Company's loan portfolio either had interest rates that adjust with the
prime rate or had maturity dates within 90 days.
The Company's residential mortgage loans typically are structured with
30-year maturities and adjustable interest rates. Commercial and multifamily
mortgage loans are made with a variety of maturity and interest structures,
primarily (i) three-to five-year maturities with 20-year amortization schedules
and adjustable rates of interest, and (ii) one-year maturities with single
principal payments at maturity and predetermined rates of interest.
Approximately $15.6 million in mortgage loans were originated in the first
quarter of 1995.
The Company's consumer loans (excluding credit card loans) generally have
initial maturities of four years or less and carry fixed rates of interest.
The Company's commercial, financial and agricultural loans are typically
structured with maturities of less than five years. At March 31, 1995,
approximately 65% of these loans have adjustable rates that average 91 basis
points above the prime rate. The Company's construction loans typically have
maturities of one year or less and may have fixed or adjustable interest rates.
The interest rates charged on loans vary with the degree of risk, maturity
and amount of the loan, and are further subject to competitive pressures, money
market rates, the availability of funds and government regulations.
The amount of collateral required depends upon the quality of the borrower,
the type of loan, the purpose of the loan and type of collateral being offered.
For commercial mortgage loans, the loan to value ratio generally ranges from 50%
to 80%. For one-to-four family residential mortgage loans, the loan to value
ratio is typically 80%. For commercial and consumer loans not secured by real
estate, the general policy of the Company is to obtain collateral, the value of
which is dependent on the type of loan, the quality of the borrower and the
quality of the collateral. The Company's general policy is to require appraisals
on all real estate given as collateral in connection with loans. Updates on
appraisals are typically not obtained unless there has been a deterioration in
either the loan or the collateral.
CREDIT REVIEW AND PHILOSOPHY
GENERAL. Certain credit risks are inherent in making loans, particularly
commercial, real estate and consumer loans. These include risks with respect to
the period of time over which loans may be repaid, risks resulting from
uncertainties as to the future value of collateral, risks resulting from changes
in economic and industry conditions and risks inherent in dealing with
individual borrowers. In particular, longer maturities increase the risks that
economic conditions will change and adversely affect collectibility.
The Company attempts to minimize loan losses through various means. In
particular, it attempts to rely primarily on the cash flow of a debtor as the
source of repayment and secondarily on the value of the underlying collateral.
The Company also attempts to utilize shorter loan terms in order to reduce the
risk of a decline in the value of such collateral.
The Company addresses repayment risks by adhering to internal credit
policies and procedures. These policies and procedures include a multi-layered
loan approval process, officer and customer lending limits, periodic
documentation examination, and follow-up procedures for any exceptions to credit
policies.
LOAN APPROVAL PROCESS. The point in the Company's loan approval process at
which a loan is approved depends on the size of the borrower's credit
relationship with the Company. Smaller loans may be approved by an individual
loan officer; however, such loans are later reviewed by an internal loan
committee. This internal loan committee must approve loans in advance when the
credit relationship exceeds the lending officer's lending limits. Certain larger
loans are reviewed and approved by the Directors' loan committee or are reviewed
by the Directors' loan committee and approved by the entire Board of Directors.
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ASSESSMENT OF LOANS. A grade is assigned to every commercial loan based on
management's assessment of the credit risk of each loan. These grades range from
1 (the highest grade loan, with little credit risk), to 8 (the lowest grade
loan, considered a loss), and are used to help management assess the adequacy of
the allowance for loan losses. Each grade bears a different weight factor. By
multiplying the grade weight factor times the dollar amount of loans in that
grade, management is given an indication of an appropriate allowance level.
Grades on loans change as circumstances change. Therefore, the required level of
the allowance is subject to change based on management's assessment of the
individual credit risk of the commercial loan portfolio. This review is
performed monthly.
The amounts of the allowance for loan losses associated with consumer and
mortgage loans are based on the Company's historical loss experiences for these
types of loans, coupled with an assessment of local economic conditions. The
assessment of consumer and mortgage loans is performed quarterly. See
"Business -- Growth Strategy and Acquisitions."
The Company has no foreign loans or loans for highly leveraged
transactions.
PLACEMENT ON NONACCRUAL STATUS. For commercial and consumer loans, Carolina
First Bank ceases to recognize interest income on a loan when, in the judgment
of management, the interest is not collectible in the normal course of business.
This generally occurs when a loan is greater than 90 days past due; however,
management may cease to recognize income at an earlier or later point, depending
on the particular circumstances involved. With respect to one-to-four family
residential mortgage loans, Carolina First Bank continues to accrue interest on
loans greater than 90 days past due unless a specific analysis of a particular
loan indicates that interest accrual should be discontinued. Carolina First Bank
has historically experienced minimal losses on one-to-four family residential
mortgage loans which become greater than 90 days past due. Because of this
experience and because Carolina First Bank's collection efforts are initiated
promptly after loans become 30 days past due, management believes that its
policy is justified.
MARKET AREAS
The Company operates principally in three general market areas, (1)
Greenville County and the contiguous counties of Spartanburg, Anderson and
Pickens counties, (2) the Columbia metropolitan statistical area ("MSA"), which
includes most of Richland and Lexington counties, and (3) the "Grand Strand"
coastal area, which includes Horry and Georgetown counties.
GREENVILLE COUNTY. The Company's largest market area is Greenville County
and its contiguous counties of Spartanburg, Anderson and Pickens. The Company
has nine locations in this market, and approximately 30% of Company's deposits
are located there. Carolina First Bank is the largest locally-based independent
commercial Bank in Greenville County. The City of Greenville is the economic
center of this Upstate market.
Greenville County had a population of approximately 328,000 in 1992 and is
the most populous county in South Carolina. It also leads the state in average
monthly employment, retail sales, and number of manufacturing units. Greenville
County has the third highest per capita income in the state. Unemployment in
Greenville County has been below national and state averages over the past
several years and averaged 4.1% in 1994. Greenville County is in the
Greenville/Spartanburg MSA, which is the largest MSA in South Carolina with a
population of approximately 659,000 in 1992.
Greenville County, and the Upstate market in general, is located in what is
known as the I-85 Business Corridor, which runs along Interstate 85 from
Atlanta, Georgia to Charlotte, North Carolina. The I-85 Business Corridor has
seen significant economic growth over the past decade and management expects
this growth to continue at above-average levels. The Upstate market is
characterized by a diverse base of industrial and service firms and is
considered to be one of the Southeast's leading areas for engineering and
manufacturing.
Although historically the Upstate market has been known for its
textile-related products, Upstate companies produce, among other products,
turbines, automobile tires, household cleaners, pharmaceutical products and
polyester plastic packaging. Examples of companies headquartered in the Upstate
market include Michelin North America, Hitachi USA, Delta Woodside Industries,
Inc., Multimedia, Inc., Bowater Incorporated, JPS Textile Group and Fluor Daniel
Corporation. In 1992, BMW North America announced that it would invest
approximately $645 million in a manufacturing facility located approximately 15
miles from Greenville. This plant is the only BMW manufacturing facility outside
Germany. This facility has been substantially completed and is currently
producing automobiles. It has and is expected to continue to have a significant
economic impact on the Upstate market. The Upstate's economy is also expected to
benefit from the Olympics Games, which will be held in Atlanta, Georgia in 1996.
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COLUMBIA MSA. The Company entered the Columbia MSA market in 1993 through
the acquisition of five former Republic National Bank branches and currently has
9 locations there. Approximately 25% of the Company's deposits are located in
this market.
The Columbia MSA is comprised of Richland and Lexington counties. In 1992,
Richland and Lexington counties had populations of approximately 294,000 and
178,000, respectively and had the third and fifth highest per capita income in
the state, respectively. Unemployment in Richland and Lexington counties has
been below national and state averages over the past several years and averaged
4.6% and 4.0% in 1994, respectively. The Columbia MSA had a population of
approximately 472,000 in 1992 and is the third largest MSA in South Carolina.
The Columbia market is characterized by a mixture of business and
government-related activity. Columbia is the state capital and the home of the
main campus of the University of South Carolina. Fort Jackson is a major
military installation which is located near Columbia and is designated for
expansion as a result of other base closings. Business activity in the Columbia
market is diverse. Companies in the Columbia market produce, among other things,
nylon, tractors, soft drinks, chemicals, and plastics. The Columbia market is
home to divisions of 27 Fortune 500 companies. Major companies having a
significant presence in Columbia include NCR Corporation, Martin Marietta
Corporation, Knight-Ridder, Inc. and Allied-Signal, Inc.
GRAND STRAND COASTAL AREA. The third principal market area of the Company
is the "Grand Strand" coastal area, which includes Georgetown and Horry counties
and contiguous portions of Williamsburg and Charleston counties. Carolina First
Bank is currently the largest financial institution in Georgetown County in
terms of deposit market share.
In 1992, Horry and Georgetown counties had populations of approximately
152,000 and 49,000, respectively. From 1982 to 1992, Horry County's population
increased 39%, which was the largest increase in South Carolina.
The Grand Strand market is characterized by tourism and resort development
and manufacturing. The beaches and resort areas in this market include Myrtle
Beach, Surfside Beach, Murrells Inlet, Litchfield Beach, Pawleys Island and
Debordieu. Visitors to the Grand Strand spent an estimated $1.7 billion in 1991,
and state authorities project that tourism, as well as the general population,
will continue to increase in the Grand Strand market. The manufacturing activity
of the area is principally based on steel, paper products, and lumber products.
Major companies located in this market area include International Paper Company,
AUX Corporation, Oneida Industries and Georgetown Steel Corporation.
Unemployment in Horry and Georgetown counties was approximately 7.1% and 10.4%,
respectively, in 1994.
Several of the Company's management personnel, Directors and customers in
the Greenville market have personal and business ties to the Grand Strand area.
In particular, the Chief Executive Officer of the Company, Mack I. Whittle, Jr.,
served as Regional Executive for Bankers Trust of South Carolina in Myrtle Beach
from 1978 to 1982. These ties with the Grand Strand led the Company to expand
into this market.
OTHER MARKET AREAS. The Company also operates branches in 13 small cities
with populations of less than 10,000. Deposits in these branch locations
comprise, in the aggregate, 16% of the Company's total deposits.
In April 1994, the Company entered the Charleston market with its
acquisition of Citadel Federal Savings & Loan Association. Although Carolina
First Bank currently has only one branch in Charleston, the Company's plan is to
increase its market presence in that area. The Company is engaged in preliminary
negotiations regarding the establishment of a Charleston main office in the
downtown business district.
In April, 1995, the Company entered the Aiken market with the acquisition
of ACNB. Aiken County has a population of 128,000 and the second highest per
capita income in South Carolina. Carolina First Bank's two branches in Aiken
have approximately 6% of the deposit market share in Aiken.
COMPETITION
Each of the Company's markets is a highly competitive banking market in
which all of the largest banks in the state are represented. The competition
among the various financial institutions is based upon interest rates offered on
deposit accounts, interest rates charged on loans, credit and service charges,
the quality of services rendered, the convenience of banking facilities and, in
the case of loans to large commercial borrowers, relative lending limits. In
addition to banks and savings associations, the Company competes with other
financial institutions including securities firms, insurance companies, credit
unions, leasing companies and finance companies. For information regarding
legislation which may have an impact on competition, see
"Business -- Supervision and Regulation -- Interstate Banking."
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EMPLOYEES
At March 31, 1995, the Company employed a total of 524 full-time equivalent
employees. The Company believes that its relations with its employees are good.
LITIGATION
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 material adverse effect
on the business or financial position of the Company or any of its subsidiaries.
On October 31, 1994, JW Charles Clearing Corp. filed a lawsuit against
Carolina First Bank in the Court of Common Pleas in Lexington County, South
Carolina. Such action, in general, claims that Carolina First Bank improperly
paid approximately $600,000 in checks to Harold McCarley and/or McCarley and
Associates, Inc. The complaint seeks actual and punitive damages in an amount to
be determined by a jury, plus interest on the damages and other costs. Carolina
First Bank has answered the complaint and is vigorously defending such
complaint. Carolina First Bank believes that there are valid defenses available
to it. In connection with the litigation, Carolina First Bank also expects to
make a claim under insurance policies for any losses it may suffer which, if
determined to cover the loss, could pay for substantially all of the actual
damages, if any, determined to be appropriate by a jury. However, no assurance
can be given at this time regarding whether it will be determined that any
losses suffered in this litigation will be covered by the insurance policy.
Furthermore, the Company is not in a position at this time to assess the likely
outcome of the litigation or any damages for which it may become liable.
MONETARY POLICY
The earnings of bank holding companies are affected by the policies of
regulatory authorities, including the Federal Reserve Board, in connection with
its regulation of the money supply. Various methods employed by the Federal
Reserve Board include open market operations in U.S. Government securities,
changes in the discount rate on member bank borrowings and changes in reserve
requirements against member bank deposits. These methods are used in varying
combinations to influence overall growth and distribution of bank loans,
investments and deposits, and their use may also affect interest rates charged
on loans or paid on deposits. The monetary policies of the Federal Reserve Board
have had a significant effect on the operating results of commercial banks in
the past and are expected to continue to do so in the future.
SUPERVISION AND REGULATION
GENERAL
The Company and its subsidiaries are extensively regulated under federal
and state law. To the extent that the following information describes statutory
or regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions. Any change in applicable laws
may have a material effect on the business and prospects of the Company. The
operations of the Company may be affected by possible legislative and regulatory
changes and by the monetary policies of the United States.
THE COMPANY. As a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), the Company is subject to
regulation and supervision by the Federal Reserve Board. Under the BHCA, the
Company's activities and those of its subsidiaries are limited to banking,
managing or controlling banks, furnishing services to or performing services for
its subsidiaries or engaging in any other activity that the Federal Reserve
Board determines to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. The BHCA prohibits the Company from
acquiring direct or indirect control of more than 5% of any class of outstanding
voting stock, or substantially all of the assets of any bank, or merging or
consolidating with another bank holding company without prior approval of the
Federal Reserve Board. The BHCA also prohibits the Company from acquiring
control of any bank operating outside the state of South Carolina unless such
action is specifically authorized by the statutes of the state where the bank to
be acquired is located. See " -- Certain Regulatory Matters -- Interstate
Banking."
Additionally, the BHCA prohibits the Company from engaging in or from
acquiring ownership or control of more than 5% of the outstanding voting stock
of any company engaged in a nonbanking business unless such business is
determined by the Federal Reserve Board to be so closely related to banking or
managing or controlling banks as to be properly incident thereto. The BHCA
generally does not place territorial restrictions on the activities of such
nonbanking-related entities.
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Further, the Federal Deposit Insurance Act, as amended ("FDIA"), authorizes
the merger or consolidation of any Bank Insurance Fund ("BIF") member with any
Savings Association Insurance Fund ("SAIF") member, the assumption of any
liability by any BIF member to pay any deposits of any SAIF member or vice
versa, or the transfer of any assets of any BIF member to any SAIF member in
consideration for the assumption of liabilities of such BIF member or vice
versa, provided that certain conditions are met and, in the case of any
acquiring, assuming or resulting depository institution which is a BIF member,
such institution continues to make payment of SAIF assessments on the portion of
liabilities attributable to any acquired, assumed or merged SAIF-insured
institution (or, in the case of any acquiring, assuming or resulting depository
institution which is a SAIF member, such institution continues to make payment
of BIF assessments on the portion of liabilities attributable to any acquired,
assumed or merged BIF-insured institution).
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss exposure to the depositors
of such depository institutions and to the FDIC insurance funds in the event the
depository institution becomes in danger of defaulting or in default under its
obligations to repay deposits. For example, under current federal law, to reduce
the likelihood of receivership of an insured depository institution subsidiary,
a bank holding company is required to guarantee the compliance of any insured
depository institution subsidiary that may become "undercapitalized" with the
terms of any capital restoration plan filed by such subsidiary with its
appropriate federal banking agency up to the lesser of (i) an amount equal to 5%
of the institution's total assets at the time the institution became
undercapitalized, or (ii) the amount that is necessary (or would have been
necessary) to bring the institution into compliance with all applicable capital
standards as of the time the institution fails to comply with such capital
restoration plan. Under a policy of the Federal Reserve Board with respect to
bank holding company operations, a bank holding company is required to serve as
a source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so absent such policy. The Federal Reserve Board also has the authority
under the BHCA to require a bank holding company to terminate any activity or
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a
bank) upon the Federal Reserve Board's determination that such activity or
control constitutes a serious risk to the financial soundness or stability of
any subsidiary depository institution of the bank holding company. Further,
federal law grants federal bank regulatory authorities additional discretion to
require a bank holding company to divest itself of any bank or nonbank
subsidiary if the agency determines that divestiture may aid the depository
institution's financial condition.
In addition, the "cross-guarantee" provisions of the FDIA require insured
depository institutions under common control to reimburse the FDIC for any loss
suffered by either the SAIF or the BIF of the FDIC as a result of the default of
a commonly controlled insured depository institution or for any assistance
provided by the FDIC to a commonly controlled insured depository institution in
danger of default. The FDIC may decline to enforce the cross-guarantee
provisions if it determines that a waiver is in the best interest of the SAIF or
the BIF, or both. The FDIC's claim for damages is superior to claims of
stockholders of the insured depository institution or its holding company but is
subordinate to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institutions.
The Company is subject to the obligations and restrictions described above,
and Carolina First Bank and is subject to the cross-guarantee provisions of the
FDIA. However, management of the Company currently does not expect that any of
these provisions will have any material impact on its operations.
As a bank holding company registered under the South Carolina Bank Holding
Company Act, the Company also is subject to regulation by the South Carolina
State Board of Financial Institutions (the "State Board"). Consequently, the
Company must receive the approval of the State Board prior to engaging in the
acquisitions of banking or nonbanking institutions or assets. The Company must
also file with the State Board periodic reports with respect to its financial
condition and operations, management, and intercompany relationships between the
Company and its subsidiaries.
CAROLINA FIRST BANK. Carolina First Bank is an FDIC-insured, South
Carolina-chartered banking corporation and is subject to various statutory
requirements and rules and regulations promulgated and enforced primarily by the
State Board and the FDIC. These statutes, rules and regulations relate to
insurance of deposits, required reserves, allowable investments, loans, mergers,
consolidations, issuance of securities, payment of dividends, establishment of
branches and other aspects of the business of Carolina First Bank. The FDIC has
broad authority to prohibit Carolina First Bank from engaging in what it
determines to be unsafe or unsound banking practices. In addition, federal law
imposes a number of restrictions on state-chartered, FDIC-insured banks and
their subsidiaries. These restrictions range from prohibitions against engaging
as a principal in certain activities to the requirement of prior notification of
branch closings. Carolina First Bank also is subject to
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various other state and federal laws and regulations, including state usury
laws, laws relating to fiduciaries, consumer credit and equal credit and fair
credit reporting laws. Carolina First Bank is not a member of the Federal
Reserve System.
DIVIDENDS. The holders of Common Stock are entitled to receive dividends
when and if declared by the Board of Directors out of funds legally available
therefor. The holders of the Series 1994 Preferred Stock, Series 1993 Preferred
Stock and Series 1993B Preferred Stock are entitled to receive dividends when,
as and if declared by the Board of Directors in their discretion out of funds
legally available therefor and as set forth in the Company's Articles of
Incorporation. For a description of the dividends to which holders of the Series
1994 Preferred Stock, Series 1993 Preferred Stock and the Series 1993B Preferred
Stock are entitled, see "Description of Capital Stock." The Company is a legal
entity separate and distinct from its subsidiaries and depends for its revenues
on the payment of dividends from its subsidiaries. Current federal law would
prohibit, except under certain circumstances and with prior regulatory approval,
an insured depository institution, such as Carolina First Bank, from paying
dividends or making any other capital distribution if, after making the payment
or distribution, the institution would be considered "undercapitalized," as that
term is defined in applicable regulations. In addition, as a South
Carolina-chartered bank, Carolina First Bank is subject to legal limitations on
the amount of dividends it is permitted to pay. In particular, Carolina First
Bank must receive the approval of the South Carolina Commissioner of Banking
prior to paying dividends to the Company.
CAPITAL ADEQUACY
THE COMPANY. The Federal Reserve Board has adopted risk-based capital
guidelines for bank holding companies. Under these guidelines, the minimum ratio
of total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least half of the total
capital is required to be "Tier 1 capital," principally consisting of common
stockholders' equity, noncumulative preferred stock, a limited amount of
cumulative perpetual preferred stock, and minority interests in the equity
accounts of consolidated subsidiaries, less certain goodwill items. The
remainder (Tier 2 capital) may consist of a limited amount of subordinated debt
and intermediate-term preferred stock, certain hybrid capital instruments and
other debt securities, perpetual preferred stock, and a limited amount of the
general loan loss allowance. In addition to the risk-based capital guidelines,
the Federal Reserve Board has adopted a minimum Tier 1 (leverage) capital ratio
under which a bank holding company must maintain a minimum level of Tier 1
capital (as determined under applicable rules) to average total consolidated
assets of at least 3% in the case of bank holding companies which have the
highest regulatory examination ratios and are not contemplating significant
growth or expansion. All other bank holding companies are required to maintain a
ratio of at least 100 to 200 basis points above the stated minimum. At March 31,
1995, the Company was in compliance with both the risk-based capital guidelines
and the minimum leverage capital ratio, with consolidated Tier 1 capital of
7.47% of risk-weighted assets, total capital of 8.38% of risk-weighted assets
and a leverage capital ratio of 5.66%.
CAROLINA FIRST BANK. As a state-chartered, FDIC-insured institution which
is not a member of the Federal Reserve System, Carolina First Bank is subject to
capital requirements imposed by the FDIC. The FDIC requires state-chartered
nonmember banks to comply with risk-based capital standards substantially
similar to those required by the Federal Reserve Board, as described above. The
FDIC also requires state-chartered nonmember banks to maintain a minimum
leverage ratio similar to that adopted by the Federal Reserve Board. Under the
FDIC's leverage capital requirement, state nonmember banks that (a) receive the
highest rating during the examination process and (b) are not anticipating or
experiencing any significant growth are required to maintain a minimum leverage
ratio of 3% of Tier 1 capital to total assets; all other banks (such as Carolina
First Bank) are required to maintain a minimum ratio of 100 to 200 basis points
above the stated minimum, with an absolute minimum leverage ratio of not less
than 4%. At March 31, 1995, Carolina First Bank had Tier 1 capital of 7.37% of
risk-weighted assets, total capital of 8.28% of risk-weighted assets, and a
leverage capital ratio of 5.77%.
At December 31, 1994, Carolina First Bank was not adequately capitalized
with respect to its total risk-based capital ratio. As a result of the capital
deficiency, Carolina First Bank committed to (1) merge CF Savings Bank and
Carolina First Bank; (2) consummate the Securitization; (3) have the Company
contribute capital of $3.5 million to Carolina First Bank; and (4) sell certain
purchased mortgage servicing rights. All of these steps were taken by March 31,
1995 and on such date, Carolina First Bank was adequately capitalized. Carolina
First Bank expects that its total risk-based capital ratio will continue to
increase as a result of monthly operating results and the consummation of the
acquisitions of MNB (which Carolina First Bank expects to consummate in the
second quarter of 1995). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Capital Resources."
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
FDICIA required each federal banking agency to revise its risk-based
capital standards to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk and the risk of nontraditional
activities, as well as
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reflect the actual performance and expected risk of loss on multifamily
mortgages. The Federal Reserve Board, the FDIC and the OCC have issued a joint
advance notice of proposed rulemaking, and have issued a revised proposal,
soliciting comments on a proposed framework for implementing these revisions.
Under the proposal, an institution's assets, liabilities, and off-balance sheet
positions would be weighted by risk factors that approximate the instruments'
price sensitivity to a 100 basis point change in interest rates. Institutions
with interest rate risk exposure in excess of a threshold level would be
required to hold additional capital proportional to that risk. The notice also
asked for comments on how the risk-based capital guidelines of each agency may
be revised to take account of concentration and credit risk and the risk of
nontraditional activities. The Company cannot assess at this point the impact
the proposal would have on the capital requirements of the Company or Carolina
First Bank.
INSURANCE
As an FDIC-insured institution, Carolina First Bank is subject to insurance
assessments imposed by the FDIC. Under current law, the insurance assessment to
be paid by FDIC-insured institutions shall be as specified in a schedule
required to be issued by the FDIC that specifies, at semiannual intervals,
target reserve ratios designed to increase the FDIC insurance fund's reserve
ratio to 1.25% of estimated insured deposits (or such higher ratio as the FDIC
may determine in accordance with the statute) in 15 years. Further, the FDIC is
authorized to impose one or more special assessments in any amount deemed
necessary to enable repayment of amounts borrowed by the FDIC from the United
States Department of the Treasury (the "Treasury Department").
Effective January 1, 1993, the FDIC implemented a risk-based assessment
schedule, having assessments ranging from 0.23% to 0.31% of an institution's
average assessment base. The actual assessment to be paid by each FDIC-insured
institution is based on the institution's assessment risk classification, which
is determined based on whether the institution is considered "well capitalized,"
"adequately capitalized" or "undercapitalized," as such terms have been defined
in applicable federal regulations adopted to implement the prompt corrective
action provisions of FDICIA (see " -- Certain Regulatory Matters -- Other Safety
and Soundness Regulations"), and whether such institution is considered by its
supervisory agency to be financially sound or to have supervisory concerns. As a
result of the current provisions of federal law, the assessment rates on
deposits could increase over the next 15 years over present levels. Based on the
current financial condition and capital levels of Carolina First Bank, the
Company does not expect that the current FDIC risk-based assessment schedule
will have a material adverse effect on Carolina First Bank's earnings. Carolina
First Bank's risk-based insurance assessment currently is set at 0.26% of its
average assessment base.
In connection with the merger of CF Savings Bank into Carolina First Bank
and Carolina First Bank's assumption of other SAIF-insured deposits in
connection with various acquisitions, approximately 28% of Carolina First Bank's
total deposits are subject to SAIF insurance assessments imposed by the FDIC.
Under current law, the insurance assessment to be paid by SAIF-insured
institutions must be the greater of 0.15% of the institution's average
assessment base (as defined) or such rate as the FDIC, in its sole discretion,
determines to be appropriate to be able to increase (or maintain) the SAIF
reserve ratio to 1.25% of estimated insured deposits (or such higher ratio as
the FDIC may determine in accordance with the statute) within a reasonable
period of time. From January 1, 1994 through December 31, 1997, the assessment
rate must not be less than 0.18% of the institution's average base assessment.
In each case, the assessment rate may be higher if the FDIC, in its sole
discretion, determines a higher rate to be appropriate. In addition, the FDIC
has adopted for SAIF assessments the risked based assessment schedule described
above. Carolina First Bank's risk-based insurance assessment on its SAIF-insured
deposits has been set at 0.23% of its average assessment base.
OTHER SAFETY AND SOUNDNESS REGULATIONS
PROMPT CORRECTIVE ACTION. Current law provides the federal banking agencies
with broad powers to take prompt corrective action to resolve problems of
insured depository institutions. The extent of these powers depends upon whether
the institutions in question are "well capitalized", "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Under uniform regulations defining such capital levels issued
by each of the federal banking agencies, a bank is considered "well capitalized"
if it has (i) a total risk-based capital ratio of 10% or greater, (ii) a Tier 1
risk-based capital ratio of 6% or greater, (iii) a leverage ratio of 5% or
greater, and (iv) is not subject to any order or written directive to meet and
maintain a specific capital level for any capital measure. An "adequately
capitalized" bank is defined as one that has (i) a total risk-based capital
ratio of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or greater,
and (iii) a leverage ratio of 4% or greater (or 3% or greater in the case of a
bank with a composite CAMEL rating of 1). A bank is considered (A)
"undercapitalized" if it has (i) a total risk-based capital ratio of less than
8%, (ii) a Tier 1 risk-based capital ratio of less than 4%, or (iii) a leverage
ratio of less than 4% (or 3% in the case of a bank with a composite CAMEL rating
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of 1); (B) "significantly undercapitalized" if the bank has (i) a total
risk-based capital ratio of less than 6%, or (ii) a Tier 1 risk-based capital
ratio of less than 3%, or (iii) a leverage ratio of less than 3%; and (C)
"critically undercapitalized" if the bank has a ratio of tangible equity to
total assets equal to or less than 2%. The Company and Carolina First Bank each
currently meet the definition of adequately capitalized.
COMMUNITY REINVESTMENT ACT
Carolina First Bank is subject to the requirements of the CRA. The CRA
requires that financial institutions have an affirmative and ongoing obligation
to meet the credit needs of their local communities, including low- and
moderate-income neighborhoods, consistent with the safe and sound operation of
those institutions. Each financial institution's efforts in meeting community
credit needs are evaluated as part of the examination process pursuant to twelve
assessment factors. These factors also are considered in evaluating mergers,
acquisitions and applications to open a branch or facility. Carolina First Bank
received an outstanding rating in its most recent evaluation. As a result of a
Presidential initiative, each of the federal banking agencies has issued a
notice of proposed rulemaking that would replace the current CRA assessment
system with a new evaluation system that would rate institutions based on their
actual performance (rather than efforts) in meeting community credit needs. The
Company currently is studying the proposal and determining whether the
regulation, if adopted, would require changes to Carolina First Bank's CRA
action plans.
TRANSACTIONS BETWEEN THE COMPANY, ITS SUBSIDIARIES AND AFFILIATES
The Company's subsidiaries are subject to certain restrictions on
extensions of credit to executive officers, directors, principal stockholders or
any related interest of such persons. Extensions of credit (i) must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unaffiliated persons;
and (ii) must not involve more than the normal risk of repayment or present
other unfavorable features. Aggregate limitations on extensions of credit also
may apply. The Company's subsidiaries also are subject to certain lending limits
and restrictions on overdrafts to such persons.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on extensions of credit to the
bank holding company or its nonbank subsidiary, on investments in their
securities and on the use of their securities as collateral for loans to any
borrower. Such restrictions may limit the Company's ability to obtain funds from
its bank subsidiary for its cash needs, including funds for acquisitions,
interest and operating expenses.
In addition, under the BHCA and certain regulations of the Federal Reserve
Board, a bank holding company and its subsidiaries are prohibited from engaging
in certain tie-in arrangements in connection with any extension of credit, lease
or sale of property or furnishing of services. For example, a subsidiary may not
generally require a customer to obtain other services from any other subsidiary
or the Company, and may not require the customer to promise not to obtain other
services from a competitor, as a condition to an extension of credit to the
customer.
INTERSTATE BANKING
In 1986, South Carolina adopted legislation which permitted banks and bank
holding companies in certain southern states to acquire banks in South Carolina
to the extent that such other states had reciprocal legislation which was
applicable to South Carolina banks and bank holding companies. The legislation
resulted in a number of South Carolina banks being acquired by large
out-of-state bank holding companies. Size gives the larger banks certain
advantages in competing for business from large corporations. These advantages
include higher lending limits and the ability to offer services in other areas
of South Carolina and the region. As a result, the Company does not generally
attempt to compete for the banking relationships of large corporations, but
concentrates its efforts on small to medium-sized businesses and on individuals.
In July 1994, South Carolina enacted legislation which effectively provides
that, after June 30, 1996, out-of-state bank holding companies (including bank
holding companies in the Southern Region, as defined under the statute) may
acquire other banks or bank holding companies having offices in South Carolina
upon the approval of the State Board and assuming compliance with certain other
conditions, including that the effect of the transaction not lessen competition
and that the laws of the state in which the out-of-state bank holding company
filing the applications has its principal place of business permit South
Carolina bank holding companies to acquire banks and bank holding companies in
that state. Although such legislation may increase takeover activity in South
Carolina, the Company does not believe that such legislation will have a
material impact on its competitive position.
Congress recently enacted the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994, which will increase the ability of bank holding
companies and banks to operate across state lines. Under the Riegle-Neal
Interstate
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Banking and Branching Efficiency Act of 1994, the existing restrictions on
interstate acquisitions of banks by bank holding companies will be repealed one
year following enactment, such that the Company and any other bank holding
company located in South Carolina would be able to acquire a bank located in any
other state, and a bank holding company located outside South Carolina could
acquire any South Carolina-based bank, in either case subject to certain deposit
percentage and other restrictions. The legislation also provides that, unless an
individual state elects beforehand either (i) to accelerate the effective date
or (ii) to prohibit out-of-state banks from operating interstate branches within
its territory, on or after June 1, 1997, adequately capitalized and managed bank
holding companies will be able to consolidate their multistate bank operations
into a single bank subsidiary and to branch interstate through acquisitions. De
novo branching by an out-of-state bank would be permitted only if it is
expressly permitted by the laws of the host state. The authority of a bank to
establish and operate branches within a state will continue to be subject to
applicable state branching laws. The Company believes that this legislation may
result in increased takeover activity of South Carolina financial institutions
by out-of-state financial institutions. However, the Company does not presently
anticipate that such legislation will have a material impact on its operations
or future plans.
CHANGE IN BANK CONTROL
The BHCA and the Change in Bank Control Act, together with regulations
promulgated by the Federal Reserve Board, require that, depending on the
particular circumstances, either Federal Reserve Board approval must be obtained
or notice must be furnished to the Federal Reserve Board and not disapproved
prior to any person or company acquiring control of a bank holding company, such
as the Company, subject to certain exemptions for certain transactions. Control
is conclusively presumed to exist if an individual or company acquires 25% or
more of any class of voting securities of the bank holding company. Control is
rebuttably presumed to exist if a person acquires 10% or more but less than 25%
of any class of voting securities and either the company has registered
securities under Section 12 of the Exchange Act (which the Company has done with
respect to the Common Stock) or no other person will own a greater percentage of
that class of voting securities immediately after the transaction. The
regulations provide a procedure for challenge of the rebuttable control
presumption.
OTHER REGULATIONS
Interest and certain other charges collected or contracted for by Carolina
First Bank are subject to state usury laws and certain federal laws concerning
interest rates. The Company's loan operations are also subject to certain
federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act governing disclosures of certain terms to consumer
borrowers, including investing their assets in loans to low- and moderate-income
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution is fulfilling its obligations to help
meet the housing needs of the community it serves, the Equal Credit Opportunity
Act prohibiting discrimination on the basis of race, creed or other prohibited
factors in extending credit, the Fair Credit Reporting Act of 1978 governing the
use and provision of information to credit reporting agencies, the Fair Debt
Collection Act governing the manner in which consumer debts may be collected by
collection agencies, and the rules and regulations of the various federal
agencies charged with the responsibility of implementing such federal laws. The
deposit operations of the Company also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records, and the Electronic Funds Transfer Act and
Regulations E issues by the Federal Reserve Board to implement that act, which
govern automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
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MANAGEMENT
SENIOR OFFICERS
The following persons serve as executive and senior officers of the Company
or its subsidiaries.
<TABLE>
<CAPTION>
COMPANY
OFFICER
NAME AGE OFFICES CURRENTLY HELD SINCE
<S> <C> <C> <C>
Mack I. Whittle, Jr.................. 46 President and Chief Executive Officer of the Company 1986
and Chairman of Carolina First Bank
William S. Hummers III............... 49 Executive Vice President, Chief Financial Officer and 1988
Secretary/Treasurer of the Company and Carolina
First Bank
James W. Terry, Jr................... 46 President of Carolina First Bank 1991
David L. Morrow...................... 43 Executive Vice President of Carolina First Bank 1992
Joseph C. Reynolds................... 49 President of CF Mortgage 1993
Charles D. Chamberlain............... 46 Executive Vice President and Senior Commercial 1989
Lending Officer of Carolina First Bank
H. Bryce Solomon..................... 41 Senior Vice President and Senior Consumer Lending 1989
Officer of Carolina First Bank
Andrew M. Crane...................... 48 Executive Vice President, Investment Management and 1994
Trust of Carolina First Bank
</TABLE>

Officers are appointed annually and serve at the pleasure of the Board of
Directors.
BUSINESS EXPERIENCE OF OFFICERS
Mack I. Whittle, Jr. is President and CEO of the Company and Chairman of
Carolina First Bank. Mr. Whittle has held these positions since the formation of
the Company in 1986. From 1986 until 1991, Mr. Whittle also served as President
of Carolina First Bank. Mr. Whittle served as Senior Vice President and Regional
Officer for Bankers Trust of South Carolina (currently NationsBank of South
Carolina, N.A.) from 1982 until May 1986 when he resigned his position in order
to organize and form the Company. As a Regional Officer, Mr. Whittle was
responsible for all operations of Bankers Trust of South Carolina in the Upstate
region of South Carolina.
William S. Hummers III is the Executive Vice President and Chief Financial
Officer of the Company and Carolina First Bank. He joined both the Company and
Carolina First Bank in those capacities in 1988. From 1982 to 1986, Mr. Hummers
was Senior Vice President and Controller with Southern Bank and Trust,
Greenville, South Carolina, which was acquired by First Union National Bank of
South Carolina in 1986. From 1986 to 1988, Mr. Hummers was Vice
President -- Management Reporting with First Union Corporation in Charlotte,
North Carolina. As Vice President -- Management Reporting, Mr. Hummers was
responsible for the preparation and presentation of financial information to
senior management and the board of directors.
James W. Terry, Jr. has served as the President of Carolina First Bank
since 1991. From 1986 to 1991, Mr. Terry was Senior Vice President and Regional
Executive for First Union National Bank of South Carolina in Greenville, South
Carolina. As Regional Executive, Mr. Terry was responsible for all operations of
First Union National Bank of South Carolina in the Upstate region of South
Carolina. In addition, Mr. Terry was responsible for all commercial real estate
lending throughout the state.
David L. Morrow has served as Executive Vice President of Carolina First
Bank since its merger with CF Savings Bank. From 1992 until such merger, he
served as President of CF Savings Bank. From 1988 to 1992, Mr. Morrow was Vice
President/City Executive for First Union National Bank of South Carolina in
Hilton Head, South Carolina. As City Executive, Mr. Morrow was responsible for
commercial lending and branch operations in Hilton Head.
Joseph C. Reynolds has served as the President of CF Mortgage since 1993.
From 1984 until 1993, Mr. Reynolds was Senior Vice President and Chief Mortgage
Banking Officer at South Carolina Federal Savings Bank, F.S.B. in Columbia,
South Carolina. As Chief Mortgage Banking Officer, Mr. Reynolds was in charge of
a mortgage banking operation which had a loan servicing portfolio of over $1
billion.
Charles D. Chamberlain has served as Executive Vice President and Senior
Lending Officer of Carolina First Bank since 1993. Mr. Chamberlain joined
Carolina First Bank in 1989 as Senior Commercial Lending Officer in Greenville
for Carolina
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First Bank and served in such capacity until 1993. Prior to 1988, Mr.
Chamberlain served as manager of a loan production office in Greenville, South
Carolina for First American National Bank, Nashville, Tennessee.
H. Bryce Solomon, Jr. has served as Senior Vice President of Carolina First
Bank in charge of consumer lending since 1989. From 1986 until 1989, Mr. Solomon
served as Vice President-Manager of Sales Finance for South Carolina for First
Union National Bank of South Carolina. Mr. Solomon served as Vice President and
Consumer Loan Manager of Southern Bank from 1984 until 1986, when it was
acquired by First Union National Bank of South Carolina. From 1980 to 1984, Mr.
Solomon was a Regional Sales Finance Manager for Bankers Trust of South
Carolina.
Andrew M. Crane has served as Executive Vice President of Carolina First
Bank in charge of Investment Management and Trust Services since 1994. From 1991
to 1994, Mr. Crane was Executive Vice President for NationsBank in Nashville,
Tennessee responsible for private banking in Tennessee and Kentucky. From 1987
to 1991, Mr. Crane was Executive Vice President and Group CEO for C&S National
Bank of South Carolina (currently NationsBank of South Carolina, N.A.)
responsible for commercial and retail banking in a six-county area of South
Carolina.
DIRECTORS
The following table sets forth the current directors of the Company.
<TABLE>
<CAPTION>
NAME AGE DIRECTORSHIPS WITH COMPANY AND ITS SUBSIDIARIES
<S> <C> <C>
William R. Timmons, Jr................................ 70 Chairman of the Company's Board of Directors and
Director of Carolina First Bank
Mack I. Whittle, Jr................................... 46 Director of the Company and Carolina First Bank
William S. Hummers III................................ 49 Director of the Company and Carolina First Bank
Judd B. Farr.......................................... 67 Director of the Company and Carolina First Bank
C. Claymon Grimes, Jr................................. 71 Director of the Company and Carolina First Bank
M. Dexter Hagy........................................ 49 Director of the Company and Carolina First Bank
Robert E. Hamby, Jr................................... 47 Director of the Company and Carolina First Bank
R. Glenn Hilliard..................................... 51 Director of the Company
Richard E. Ingram..................................... 52 Director of the Company and Carolina First Bank
Charles B. Schooler................................... 65 Director of the Company and Carolina First Bank
Elizabeth P. Stall.................................... 62 Director of the Company and Carolina First Bank
William M. Webster III................................ 60 Director of the Company and Carolina First Bank
</TABLE>

Mack I. Whittle, Jr. is President and CEO of the Company and Chairman of
Carolina First Bank. Mr. Whittle has held these positions since the formation of
the Company in 1986. From 1986 until 1991, Mr. Whittle also served as President
of Carolina First Bank. Mr. Whittle served as Senior Vice President and Regional
Officer for Bankers Trust of South Carolina (currently NationsBank of South
Carolina, N.A.) from 1982 until May 1986 when he resigned his position in order
to organize and form the Company.
William R. Timmons, Jr. is currently Chairman of the Board of the Company.
He has been a Director since its formation in 1986. Mr. Timmons is First Vice
President and Secretary of Canal Insurance Company, an insurer of commercial
motor vehicles. He has held this position since 1947.
William S. Hummers III is Executive Vice President and Chief Financial
Officer of the Company and Carolina First Bank. He joined the Company and
Carolina First Bank in those capacities in 1988. From 1982 to 1986, Mr. Hummers
was Senior Vice President and Controller with Southern Bank and Trust,
Greenville, South Carolina, which was acquired by First Union National Bank of
South Carolina in 1986. From 1986 to 1988, Mr. Hummers was Vice
President-Management Reporting with First Union Corporation in Charlotte, North
Carolina. Mr. Hummers became a Director of the Company in 1990.
Judd B. Farr is the owner and President of Greenco Beverage, Inc., a
distributorship headquartered in Greenville, South Carolina. Mr. Farr has served
as President since the opening of Greenco Beverage, Inc. in 1965.
C. Claymon Grimes, Jr. is an attorney in private practice in Georgetown,
South Carolina. He served as Director of CF Savings Bank from 1965 until its
merger with Carolina First Bank and came on the Board of the Company in 1990
after the acquisition of CF Savings Bank by the Company.
Robert E. Hamby, Jr. is Senior Vice President-Finance and Administration
and Chief Financial Officer of Multimedia, Inc., a diversified media company
headquartered in Greenville, South Carolina that owns and operates newspapers,
television
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and radio stations, cable television systems and media productions. Mr. Hamby
became Multimedia, Inc.'s Chief Financial Officer in 1987 and Senior Vice
President in 1993. Prior to 1985, when Mr. Hamby first became affiliated with
Multimedia, Inc., Mr. Hamby was a partner in the accounting firm of KPMG Peat
Marwick. Mr. Hamby became a Company Director in December 1993.
M. Dexter Hagy is President of Vaxa Corporation, an investment holding
company located in Greenville, South Carolina. From 1984 until 1987, Mr. Hagy
served as a senior executive officer of James River Corporation with
responsibility for its nonwoven fiber business. In 1987, Mr. Hagy resigned this
position to form Vaxa Corporation. From 1991 through 1993, Mr. Hagy (through
Vaxa Corporation) owned and operated Siteguard Security Holding Company, a
security alarm business which was sold in 1993. Mr. Hagy became a Company
Director in December 1993.
R. Glenn Hilliard has been a Director of the Company since its formation in
1986. Since 1989, he has served as President and CEO of ING Life Companies in
U.S. Prior to 1989, he was Chairman and CEO of Liberty Life Insurance Company in
Greenville, South Carolina.
Richard E. Ingram has been a Director of the Company since its formation in
1986. Mr. Ingram is currently Chairman of Builder Marts of America, Inc., a
company engaged in the wholesale distribution of building materials. From 1988
until 1993, Mr. Ingram served as Chairman and Chief Executive Officer of Builder
Marts of America, Inc. Mr. Ingram is also Chief Executive Officer of Snyder's
Auto Sales, Inc., a company which operates a car dealership in Greenville, South
Carolina. He has held such position since 1993. Mr. Ingram is also a director of
Synalloy Corporation.
Charles B. Schooler is a Doctor of Optometry in Georgetown, South Carolina.
He served as Director of CF Savings Bank from 1965 until its merger with
Carolina First Bank and became a Director of the Company in 1990 upon the
acquisition of CF Savings Bank by the Company.
Elizabeth P. Stall has been a Director of the Company since its formation
in 1986. She is a private investor in Greenville, South Carolina. Ms. Stall is
also a director of Multimedia, Inc. of Greenville, South Carolina. Multimedia,
Inc. is a diversified media company headquartered in Greenville, South Carolina
which owns and operates newspapers, television and radio stations, cable
television systems, security systems and media productions.
William M. Webster III has been a Director of the Company since its
formation in 1986. He is currently a partner in Carabo Capital, a company which
invests in commercial property.
DESCRIPTION OF NOTES
The Notes will be limited to $26,450,000 aggregate principal amount and
will mature on September 1, 2005. Interest on the Notes will be payable at the
rate per annum shown on the cover page of this Prospectus from the date of
delivery of the Notes, or from the most recent Interest Payment Date to which
interest has been paid or provided for, quarterly on the first day of March,
June, September and December in each year, commencing on September 1, 1995, to
the persons in whose names the Notes are registered at the close of business on
the 15th day of February, May, August and November, as the case may be,
immediately preceding such Interest Payment Date. The Notes are redeemable, in
whole or in part, at the option of the Company, at any time on or after
September 1, 2000, at 100% of the principal amount, plus accrued interest.
GENERAL
The following sets forth certain general terms and provisions of the Notes
offered hereby. The Notes are to be issued under an Indenture dated as of April
1, 1995 (the "Indenture"), between the Company and First American National Bank,
as trustee (the "Trustee"). A copy of the Indenture is an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the Notes and the Indenture do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture, including the definitions therein of
certain terms. Wherever particular Sections, Articles or defined terms of the
Indenture are referred to, it is intended that such Sections, Articles or
defined terms shall be incorporated herein by reference. Article and Section
references used herein are references to the Indenture. Capitalized terms not
otherwise defined in this Prospectus shall have the meanings given to them in
the Indenture. As used herein, the term "Securities" includes all securities
which may be issued pursuant to the Indenture, and includes the Notes.
The Notes will be unsecured and will be subordinated and junior to all
Senior Indebtedness (as defined below under "Subordination of Notes") and, in
certain circumstances relating to the dissolution, winding-up, liquidation or
reorganization of the Company, to all Additional Senior Obligations (as defined
below under "Subordination of Notes"). The Indenture does
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<PAGE>
not contain covenants prohibiting the Company from disposing of voting stock of
its subsidiaries, including the stock of any of its banking subsidiaries. Events
of default as to which payment of the principal of the Notes may be accelerated
are limited to events relating to the bankruptcy of the Company. See
"Subordination of Notes" and "Events of Default; Limited Rights of
Acceleration."
The Indenture does not limit the amount of securities that may be issued
thereunder and provides that securities may be issued thereunder from time to
time in one or more series. (Section 301) As noted above, the Notes will be
unsecured, subordinated obligations of the Company. Neither the Indenture nor
the Notes will limit or otherwise restrict the amount of other indebtedness
which may be incurred or the other securities which may be issued by the Company
or any of its subsidiaries. In addition, the Indenture and the Notes will not
contain any provision that would provide protection to the Holders of the Notes
against a sudden and dramatic decline in credit quality resulting from a
takeover, recapitalization or similar restructuring of the Company or other
event involving the Company that may adversely affect the credit quality of the
Company.
Because the Company is a holding company, its rights and the rights of its
creditors, including the holders of the Notes, to participate in the assets of
any subsidiary upon the liquidation or reorganization of such a subsidiary will
be subject to the prior claims of such subsidiaries' creditors (including, in
the case of a subsidiary bank, its depositors) except to the extent that the
Company may itself be a creditor with recognized claims against the subsidiary.
Claims on subsidiaries of the Company by creditors other than the Company
include claims with respect to long-term debt and substantial obligations with
respect to deposit liabilities, federal funds purchased, securities sold under
repurchase agreements and other short-term borrowings.
Principal of and interest on the Notes will be payable at the office or
agency of Carolina First Bank as Paying Agent maintained for such purpose in
Greenville, South Carolina and at any other office or agency maintained by the
Company for such purpose, except that, at the option of the Company, interest
may be paid by mailing a check to the address of the person entitled thereto as
it appears on the Security Register. The transfer of Notes (other than
Book-Entry Securities) will be registrable at the corporate trust office of
Carolina First Bank as Registrar in Greenville, South Carolina. (Sections 301,
305 and 1002) Interest on the Notes will be payable to the person in whose name
the Notes are registered at the close of business on the Regular Record Date
(the 15th day of February, May, August and November) designated for an Interest
Payment Date. (Section 307) The Notes will be issued only in fully registered
form without coupons and in denominations of $1,000 or integral multiples
thereof. (Section 302) No service charge will be required for any registration
of transfer or exchange of the Notes, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith other than certain exchanges not involving any transfer.
(Section 305)
BOOK-ENTRY SECURITIES
The Notes will be issued in the form of one or more book-entry securities
(the "Book-Entry Securities") deposited with The Depository Trust Company
("DTC") and registered in the name of a nominee of DTC (Section 301). The term
"Depositary" refers to DTC or any successor depositary. In such a case, one or
more Book-Entry Securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal amount of Notes
represented by such Book-Entry Securities. Except as set forth below, the Notes
will be available for purchase in denominations of $1,000 and integral multiples
thereof in book-entry form only. Unless and until it is exchanged in whole or in
part for Notes in definitive registered form, a Book-Entry Security may not be
transferred except as a whole by the Depositary for such Book-Entry Security to
a nominee of such Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such nominee to
a successor of the Depositary or a nominee of such successor. (Section 305).
DTC has advised the Company that it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC was
created to hold securities of persons who have accounts with DTC
("participants") and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. DTC's participants include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations and certain other organizations, some of which
(and/or their representatives) own DTC. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
Upon the issuance of a Book-Entry Security, the Depositary for such
Book-Entry Security or its nominee will credit, on its book-entry registration
and transfer system, the respective principal amounts of the Notes represented
by such Book-Entry
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Security to the accounts of persons that have accounts with such Depositary
("participants"). Such accounts shall be designated by the Underwriters or
agents with respect to such Notes or by the Company if such Notes are offered
and sold directly by the Company. Participants include securities brokers and
dealers, banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants"). Persons who are not participants may
beneficially own Book-Entry Securities held by the Depositary only through
participants or indirect participants.
Ownership of beneficial interests in any Book-Entry Security will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by the Depositary or its nominee (with respect to interests of
participants) for such Book-Entry Security and on the records of participants
(with respect to interests of indirect participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws, as well as the limits on participation
in the Depositary's book-entry system, may impair the ability to transfer
beneficial interests in a Book-Entry Security.
So long as the Depositary or its nominee is the registered owner of a
Book-Entry Security, such Depositary or such nominee will be considered the sole
owner or holder of the Notes represented by such Book-Entry Security for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in Notes represented by Book-Entry Securities will not be entitled to
have Notes represented by such Book-Entry Security registered in their names,
will not receive or be entitled to receive physical delivery of such Notes in
definitive form, and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of and interest on Notes registered in the name of
the Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner of the Book-Entry Security representing
such Notes. The Company expects that the Depositary or its nominee, upon receipt
of any payment of principal or interest, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Book-Entry Security for such Notes, as
shown on the records of such Depositary or its nominee. The Company also expects
that payments by participants and indirect participants to owners of beneficial
interests in such Book-Entry Security held through such persons will be governed
by standing instructions and customary practices, as is now the case with
securities registered in "street name," and will be the responsibility of such
participants and indirect participants. Neither the Company, the Trustee, any
Authenticating Agent, any Paying Agent nor the Security Registrar for the Notes
will have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership interests in the
Book-Entry Security for the Notes or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. (Section 311)
If the Depositary for the Notes notifies the Company that it is unwilling
or unable to continue as Depositary or if at any time the Depositary ceases to
be a clearing agency registered under the Exchange Act, the Company has agreed
to appoint a successor depositary. If such a successor is not appointed by the
Company with 90 days, the Company will issue the Notes in definitive registered
form in exchange for the Book-Entry Security representing such Notes. In
addition, the Company may at any time and in its sole discretion determine that
the Notes issued in the form of one or more Book-Entry Securities shall no
longer be represented by such Book-Entry Security or Securities and, in such
event, will issue the Notes in definitive registered form in exchange for such
Book-Entry Security or Securities representing such Notes. Further, if the
Company so specifies with respect to the Notes, or if an Event of Default, or an
event which with notice, lapse of time or both would be an Event of Default with
respect to the Notes has occurred and is continuing, an owner of a beneficial
interest in a Book-Entry Security representing Notes may receive Notes in
definitive registered form. In any such instance, an owner of a beneficial
interest in a Book-Entry Security will be entitled to physical delivery in
definitive registered form of Notes represented by such Book-Entry Security
equal in principal amount to such beneficial interest and to have such Notes
registered in its name. (Section 305) Notes so issued in definitive form will be
issued in denominations of $1,000 and integral multiples thereof and will be
issued in registered form only, without coupons.
SUBORDINATION OF NOTES
The Notes will be direct, unsecured obligations of the Company and will be
subordinate to all Senior Indebtedness of the Company and, under certain
circumstances relating to the dissolution, winding-up, liquidation or
reorganization of the Company, to all Additional Senior Obligations of the
Company, as described below (Article Thirteen). The Indenture does not limit or
prohibit the incurrence of Senior Indebtedness or Additional Senior Obligations.
As of March 31, 1995, the Company had outstanding approximately $1.2 million of
Senior Indebtedness and no Additional Senior Obligations.
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"Senior Indebtedness" is defined in the Indenture to mean (a) all
indebtedness of the Company, including indebtedness to general creditors,
whether now outstanding or subsequently created, assumed or incurred, other than
(i) the Securities, (ii) any obligation Ranking on a Parity with the Securities,
or (iii) any obligation Ranking Junior to the Securities and (b) any deferrals,
renewals or extensions of any such Senior Indebtedness. The term "indebtedness
of the Company for money borrowed" shall mean any obligation of, or any
obligation guaranteed by, the Company for repayment of money borrowed, whether
or not evidenced by bonds, debentures, notes or other written instruments, and
any deferred obligations for payment of the purchase price of property or assets
acquired other than in the ordinary course of business. "Additional Senior
Obligations" is defined in the Indenture to mean all indebtedness of the
Company, whether now outstanding or subsequently created, assumed or incurred,
for claims in respect of derivative products such as interest and foreign
exchange rate contracts, commodity contracts and similar arrangements; provided,
however, that Additional Senior Obligations do not include (a) any claims in
respect of Senior Indebtedness, or (b) any obligations (i) Ranking Junior to the
Securities, or (ii) Ranking on a Parity with the Securities. For purposes of
this definition, "claims" shall have the meaning assigned thereto in Section
101(4) of the United States Bankruptcy Code of 1978. Section 101 of the
Indenture does not limit or prohibit the incurrence of Senior Indebtedness or
Additional Senior Obligations.
The term "Ranking Junior to the Securities" is defined in the Indenture to
mean any obligation of the Company which (a) ranks junior to and not equally
with or prior to the Securities in right of payment upon the happening of any
insolvency, receivership, conservatorship, reorganization, readjustment of debt,
marshaling of assets and liabilities or similar proceedings or any liquidation
or winding-up of or relating to the Company as a whole, whether voluntary or
involuntary, and (b) is specifically designated as ranking junior to the
Securities by express provisions in the instrument creating or evidencing such
obligation.
The term "Ranking on a Parity with the Securities" is defined in the
Indenture to mean any obligation of the Company which (a) ranks equally with and
not prior to the Securities in right of payment upon the happening of any
insolvency, receivership, conservatorship, reorganization, readjustment of debt,
marshalling of assets and liabilities or similar proceedings or any liquidation
or winding-up of or relating to the Company as a whole, whether voluntary or
involuntary, and (b) is specifically designated as ranking on a parity with the
Securities by express provision in the instrument creating or evidencing such
obligation. (Section 101)
The Securities (including the Notes) will be subordinate in right of
payment to all Senior Indebtedness, as provided in the Indenture. No payment on
account of the principal of and premium, if any, or interest in respect of the
Securities may be made if there shall have occurred and be continuing a default
in payment with respect to Senior Indebtedness or an event of default with
respect to any Senior Indebtedness resulting in the acceleration of the maturity
thereof. Upon any payment or distribution of assets to creditors upon any
insolvency, receivership, conservatorship, reorganization, readjustment of debt,
marshalling of assets and liabilities or similar proceedings or any liquidation
or winding-up of or relating to the Company as a whole, whether voluntary or
involuntary, (a) the holders of all Senior Indebtedness will first be entitled
to receive payment in full before the Holders of the Securities will be entitled
to receive any payment in respect of the principal of and premium, if any, or
interest on the Securities, and (b) if after giving effect to the operation of
clause (a) above, (i) any amount of cash, property or securities remains
available for payment or distribution in respect of the Securities ("Excess
Proceeds"), and (ii) creditors in respect of Additional Senior Obligations have
not received payment in full of amounts due or to become due thereon or payment
of such amounts has not been duly provided for, then such Excess Proceeds shall
first be applied to pay or provide for the payment in full of all such
Additional Senior Obligations before any payment may be made on the Securities.
If the Holders of Securities receive payment and are aware at the time of
receiving payment that all Senior Indebtedness and Additional Senior Obligations
have not been paid in full, then such payment shall be held in trust for the
benefit of the holders of Senior Indebtedness and/or Additional Senior
Obligations, as the case may be. (Section 1301) By reason of such subordination,
in the event of insolvency, Holders of the Securities may recover less, ratably,
than holders of Senior Indebtedness and holders of Additional Senior
Obligations.
EVENTS OF DEFAULT; LIMITED RIGHTS OF ACCELERATION
The Indenture (with respect to the any Security issued thereunder,
including the Notes) defines an "Event of Default" as any one of the following
events (whatever the reason and whether it be occasioned by the subordination
provisions or be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body): (a) failure to pay any
interest on any Security when due and payable, continued for 30 days, whether or
not such payment is prohibited by the subordination provisions of the Indenture;
(b) failure to pay principal of or any premium on any Security when due; (c)
failure to deposit any sinking fund payment, when due, in respect of any
Security, whether or not such payment is prohibited by the subordination
provisions of
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the Indenture; (d) failure to perform any other covenants or warranties of the
Company in the Indenture or in any instrument evidencing indebtedness for
borrowed money in an aggregate principal amount exceeding $1 million of the
Company continued for 30 days after written notice as provided in the Indenture;
(e) the entry of a decree or order for relief in respect of the Company by a
court having jurisdiction in the premises in an involuntary case under Federal
or state bankruptcy laws and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; (f) the commencement
by the Company of a voluntary case under Federal or state bankruptcy laws or the
consent by the Company to the entry of a decree or order for relief in an
involuntary case under any such law; (g) the consent by the Company to the
appointment of a receiver of the Company or of a Principal Subsidiary Bank; (h)
the admission by the Company or by a Principal Subsidiary Bank of its insolvency
or inability to pay its debts generally as they become due; (i) the acceleration
of any indebtedness for borrowed money in an aggregate principal amount
exceeding $1 million of the Company or of a Principal Subsidiary Bank in certain
circumstances including the giving of notice; and (j) any other Event of Default
provided with respect to a specific series of Securities. (Section 501)
The payment of the principal of the Notes may be accelerated only upon the
occurrence of an Event of Default described in clause (e) or clause (f) of the
preceding paragraph (a "Bankruptcy Event of Default") and there is no right of
acceleration of the payment of principal of the Notes upon a default in the
payment of principal or interest, if any, or in the performance of any covenant
or agreement in the Notes or Indenture or other default. In the event of a
default in the payment of principal or interest, if any, or the performance of
any covenant or agreement in the Notes or Indenture, or other default described
in the preceding paragraph, the Trustee, subject to certain limitations and
conditions, may institute judicial proceedings to enforce payment of such
principal or interest, if any, or to obtain the performance of such covenant or
agreement or any other proper remedy, including, in certain circumstances, the
appointment of a non-voting observer who may attend meetings of the Company's
Board of Directors. Furthermore, upon an Event of Default, the Company shall be
precluded from paying dividends on all outstanding equity securities of the
Company until such Event of Default is remedied. (Section 503) Under certain
circumstances, the Trustee may withhold notice to the Holders of the Notes in a
default if the Trustee in good faith determines that the withholding of such
notice is in the best interest of such Holders, and the Trustee shall withhold
such notice for certain defaults for a period of 30 days. (Section 602)
If a Bankruptcy Event of Default with respect to the Notes occurs and is
continuing, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes may declare the principal amount of all the Notes
to be due and payable immediately. At any time after a declaration of
acceleration with respect to the Notes has been made, but before a judgment or
decree based on acceleration has been obtained, the Holders of a majority in
aggregate principal amount of the Notes may, under certain circumstances,
rescind and annul such acceleration. (Section 502)
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity. (Section 603) Subject
to such provisions for the indemnification of the Trustee and to certain other
conditions, the Holders of a majority in aggregate principal amount of the Notes
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, with respect to the Notes. (Section 512)
No Holder of the Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or trustee or for
any remedy thereunder, unless such Holder shall have previously given to the
Trustee under the Indenture written notice of a continuing Event of Default and
unless the Holders of at least 25% in aggregate principal amount of the Notes
shall have made written request, and offered reasonable indemnity, to such
Trustee to institute such proceeding as trustee, and such Trustee shall not have
received from the Holders of a majority in aggregate principal amount of the
Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. (Section 507) However, such
limitations do not apply to a suit instituted by a Holder of a Note for
enforcement of payment of the principal of and interest on such Note on or after
the respective due dates expressed in the Note. (Section 508)
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 1006)
REDEMPTION IN THE EVENT OF DEATH OF A HOLDER
Unless the Notes have been declared due and payable prior to their maturity
by reason of a Bankruptcy Event of Default, the Company will, at any time upon
the death of any Holder, redeem Notes within sixty days following receipt by the
Trustee of a written request therefor from such Holder's personal
representative, or surviving joint tenant(s), tenant by the entirety or
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tenant(s) in common, subject to the limitations that the Company will not be
obligated to redeem, during an initial period beginning with the original
issuance of the Notes and ending May 1, 1996, or during any twelve (12) month
period ending May 1 thereafter, (A) the portion of a Note or Notes presented by
a Holder exceeding an aggregate principal amount of $25,000 per Holder or (B)
Notes in an aggregate principal amount exceeding $460,000 (plus, to the extent
that the Underwriters exercise their over-allotment option, 2% of the principal
amount of the Notes purchased upon exercise of the over-allotment option;
provided that, in no event, shall the maximum aggregate principal amount of
Notes which the Company may be obligated to redeem in any such twelve month
period exceed $529,000); further references herein to the $460,000 aggregate
principal amount limitations shall be deemed to include such higher figure, not
exceeding $529,000, to the extent the Underwriters exercise their over-allotment
option.
Notes will be redeemed in order of their receipt by the Trustee. Notes may
be presented for redemption by delivering to the Trustee: (A) a written request
for redemption, in form satisfactory to the Trustee, signed by the registered
Holder's duly authorized representative, (B) the Note to be redeemed, free and
clear of any liens or encumbrances of any kind, and (C) appropriate evidence of
death of a Holder and appropriate evidence of authority of his representative to
make such request. The price to be paid by the Company for all Notes or portions
thereof presented to it pursuant to these provisions is 100% of the principal
amount thereof or portion thereof plus accrued but unpaid interest to the date
of payment. Any acquisition of Notes by the Company other than by redemption
upon the death of a Holder shall not be included in the computation of either
the $25,000 or $460,000 limitation for any period.
A Note held in tenancy by the entirety, joint tenancy or tenancy in common
will be deemed to be held by a single Holder and the death of a tenant by the
entirety, joint tenant or tenant in common will be deemed the death of a Holder.
The death of a person, who, during his lifetime, was entitled to substantially
all of the beneficial interests of ownership of a Note will be deemed the death
of the Holder, regardless of the registered Holder, if such beneficial interest
can be established to the satisfaction of the Trustee. For purposes of a
Holder's request for redemption and a request for redemption on behalf of a
deceased holder, such beneficial interest shall be deemed to exist in cases of
street name or nominee ownership, ownership under the Uniform Gifts to Minors
Act, community property or other joint ownership arrangements between a husband
and wife (including individual retirement accounts or Keogh [H.R. 10] plans
maintained solely by or for the Holder or decedent or by or for the Holder or
decedent and his spouse), and trusts and certain other arrangements where a
person has substantially all of the beneficial ownership interests in the Notes
during his lifetime. Beneficial interests shall include the power to sell,
transfer or otherwise dispose of a Note and the right to receive the proceeds
therefrom, as well as interest and principal payable with respect thereto.
In the case of Notes registered as Book-Entry Securities in the name of DTC
or its nominee or Notes registered in the names of banks, trust companies or
broker-dealers who are members of a national securities exchange or the National
Association of Securities Dealers, Inc. ("Qualified Institutions"), the $25,000
limitation shall apply to each beneficial owner of Notes held by a Qualified
Institution and the death of such beneficial owner shall entitle a Qualified
Institution to seek redemption of such Notes as if the deceased beneficial owner
were the record Holder. Such Qualified Institution, in its request for
redemption on behalf of such beneficial owners, must submit evidence,
satisfactory to the Trustee, that it directly or indirectly hold Notes on behalf
of such beneficial owner and must certify that the aggregate amount of requests
for redemption tendered by such Qualified Institution on behalf of such
beneficial owner in the initial period ending May 1, 1996 or in any subsequent
twelve month period does not exceed $25,000.
In the case of any Notes which are presented for redemption in part only,
upon such redemption the Company shall execute and the Trustee shall
authenticate and deliver to or on the order of the Holder of such Notes, without
service charge, a new Note(s), of any authorized denomination or denominations
as requested by such Holder, in aggregate principal amount equal to the
unredeemed portion of the principal of the Notes so presented.
Any Notes presented for redemption at the option of the Holder upon death
may be withdrawn by the person(s) presenting the same upon delivery of a written
request for such withdrawal to the Trustee. The Company may not use any Notes
purchased in the open market as a credit against its redemption obligations
hereunder.
The Trustee shall maintain at its main office a register (the "Redemption
Register") in which it shall record, in order of receipt, all requests for
redemption received by the Trustee upon the death of a Holder. Unless withdrawn,
all such requests shall remain in effect during the period in which they are
received and thereafter from period to period, until the Notes which are the
subject of such request have been redeemed. The Company's obligation to prepay
Notes tendered for prepayment is not cumulative.
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MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be made by the Company and
the Trustee under the Indenture with the consent of the Holders of not less than
a 66 2/3% in aggregate principal amount of the Outstanding Securities of each
series issued under the Indenture (including the Notes) and affected by the
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holders of each Outstanding Security
of the series (including the Notes) affected thereby (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest on,
any Security of such series (including the Notes); (b) reduce the principal
amount of or premium, if any, or interest on, any Security of any series
(including the Notes and including in the case of an Original Issue Discount
Security the amount payable upon acceleration of the maturity thereof); (c)
change the place or currency of payment of principal of or the premium, if any,
or interest on any Security of such series (including the Notes); (d) impair the
right to institute suit for the enforcement of any payment on any Security of
such series (including the Notes) on or after the Stated Maturity thereof (or,
in the case of redemption, on or after the Redemption Date); (e) modify the
subordination provision in a manner adverse to the Holders of the Notes of such
series (including the Notes); or (f) reduce the percentage in principal amount
of Outstanding Securities of any series (including the Notes), the consent of
whose Holders is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults. (Section 902)
The Holders of at least a 66 2/3% in aggregate principal amount of the
Outstanding Securities of any series (including the Notes) may, on behalf of all
Holders of that series of Securities, waive compliance by the Company with
certain restrictive provisions of the Indenture. (Section 1007) The Holders of a
majority in aggregate principal amount of the Outstanding Securities of any
series may, on behalf of all Holders of that series of Securities, waive any
past default under the Indenture, except a default in the payment of principal,
premium, if any, or interest and in respect of certain covenants. (Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into any other corporation or
transfer or sell, convey, exchange, transfer or lease its properties and assets
substantially as an entirety to any Person, unless (a) any successor or
purchaser is a corporation organized under the laws of any domestic
jurisdiction; (b) any such successor or purchaser expressly assumes the
Company's obligations on such Securities and under the Indenture; (c)
immediately after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing; and (d) certain other conditions
are met. (Section 801)
ASSUMPTION BY SUBSIDIARY
A Subsidiary may assume the Company's obligations under the Indenture
(including the Company's obligation to pay principal of and premium, if any, and
interest on the Securities (including the Notes), but excluding the Company's
obligation to comply with certain covenants provided that (a) such Subsidiary
expressly assumes the Company's obligations under the Indenture; (b) the Company
guarantees such Subsidiary's obligations; (c) such Subsidiary agrees to
indemnify each Holder against certain taxes and expenses relating to, or
incurred directly in connection with, such assumption; (d) immediately after
giving effect to the assumption, no Event of Default, and no event which, after
notice or lapse of time, or both, would become an Event of Default, shall have
occurred and be continuing; (e) certain Opinions of Counsel and Officers'
Certificates are delivered to the Trustee; and (f) certain other obligations are
met. (Section 803)
THE TRUSTEE
First American National Bank is the Trustee under the Indenture. The
Trustee or its affiliates from time to time conducts banking transactions with
the Company and its subsidiaries in the ordinary course of business. The
Indenture provides for the indemnification of the Trustee by the Company under
certain circumstances.
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UNDERWRITING
Pursuant to the Underwriting Agreement and subject to the terms and
conditions thereof, the Underwriters named below have agreed, severally, to
purchase from the Company the principal amount of Notes set forth opposite their
respective names.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF UNDERWRITER OF NOTES
<S> <C>
J.C. Bradford & Co. ........................................................................................ $ 7,666,667
Interstate/Johnson Lane Corporation......................................................................... 7,666,667
Morgan Keegan and Company, Inc. ............................................................................ 7,666,666
Total..................................................................................................... $ 23,000,000
</TABLE>

The Company may offer and sell Notes directly to a limited number of other
purchasers.
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions contained therein, to purchase all the Notes offered hereby
if any such Notes are purchased.
The Company has been advised that the Underwriters propose initially to
offer the Notes to the public at the interest rate set forth on the cover page
of this Prospectus and to certain dealers at such price less a concession not in
excess of 2.25% of the principal amount. The Underwriters may allow and such
dealers may reallow a concession not in excess of 0.25% of the principal amount
to certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed.
The offering of the Notes 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 the Notes.
The Company has granted to the Underwriters an option, exercisable not
later than 30 days from the date of this Prospectus, to purchase up to an
additional $3,450,000 principal amount of Notes to cover over-allotments. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the percentage thereof which
the principal amount of Notes to be purchased by it shown in the table above
bears to $23,000,000 and the Company will be obligated, pursuant to the option,
to sell such Notes to the Underwriters. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of Notes
offered hereby. If purchased, the Underwriters will sell such additional Notes
on the same terms as those on which the $23,000,000 of Notes are being offered.
The Company has entered into a consulting agreement with J.C. Bradford &
Co. as of March 1, 1995 for a period ending on or after September 30, 1995
pursuant to which J.C. Bradford & Co. will perform certain consulting services
for a fee of $50,000.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters and controlling persons, if any, against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments which the Underwriters or any such controlling persons may be required
to make in respect thereof.
EXPERTS
The consolidated financial statements and the supplemental consolidated
financial statements of the Company incorporated by reference herein as of
December 31, 1994 and 1993 and for each of the years in the three-year period
ended December 31, 1994 have been so incorporated by reference in reliance on
the reports of Elliott, Davis & Company, L.L.P., independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
Certain legal matters, including, among other things, the validity of the
Notes offered hereby, have been passed upon by Wyche, Burgess, Freeman & Parham,
P.A., counsel to the Company.
Counsel for the Underwriters is Nelson Mullins Riley & Scarborough, L.L.P.
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ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement,") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Notes offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and in the exhibits thereto. Certain items were omitted in accordance
with the rules and regulations of the Commission. Any interested party may
inspect the Registration Statement without charge at the public reference
facilities of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and
may obtain copies of all or any part of it from the Commission upon payment of
the fees prescribed by the Commission. Statements contained herein which refer
to a document filed as an exhibit to the Registration Statement are qualified in
their entirety by reference to the copy of such document filed with the
Commission.
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NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES, OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT
BE LEGALLY MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................................ 2
Incorporation of Certain Information by
Reference.......................................... 2
Prospectus Summary................................... 3
The Company.......................................... 6
Recent Matters....................................... 6
Risk Factors......................................... 7
Use of Proceeds...................................... 8
Capitalization....................................... 9
Selected Consolidated Financial Data................. 10
Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................................... 11
Unaudited Pro Forma Combined Condensed Financial
Information........................................ 31
Business............................................. 34
Management........................................... 46
Description of Notes................................. 48
Underwriting......................................... 55
Experts.............................................. 55
Legal Matters........................................ 55
Additional Information............................... 56
</TABLE>

$23,000,000
(CAROLINA FIRST CORPORATION LOGO APPEARS HERE)
9.00% SUBORDINATED NOTES
DUE 2005
PROSPECTUS
J.C. Bradford &Co.
Interstate/Johnson Lane
Corporation
Morgan Keegan & Company, Inc.
MAY 11, 1995