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United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM to
Commission file number 0-15083
CAROLINA FIRST CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0824914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 South Main Street, Greenville, South Carolina 29601
(Address of principal executive offices) ( Zip Code)
Registrant's telephone number, including area code (803) 255-7900
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value; 7.50% Noncumulative Convertible
Preferred Stock Series 1993; 7.32% Noncumulative Convertible
Preferred Stock Series 1994
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates
(shareholders holding less than 5% of an outstanding class of stock,
excluding directors and executive officers), computed by reference to the
closing price of such stock, as of March 1, 1995 was $98,199,000.
The number of shares outstanding of the Registrant's common stock, $1.00 Par
Value was 4,616,705 at March 24, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
Portions of 1994 Annual Report to Shareholders Part II; IV
Portions of Proxy Statement dated March 8, 1995 Part III
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PART I
ITEM 1 - BUSINESS
The Company
Carolina First Corporation (the "Company") is a bank holding
company headquartered in Greenville, South Carolina. At December
31, 1994, it operated through three subsidiaries: Carolina First
Bank , a state-chartered bank headquartered in Greenville, South
Carolina (the"Bank"); Carolina First Savings Bank, F.S.B., a
federally-chartered savings bank headquartered in Georgetown,
South Carolina (the"Savings Bank"); and Carolina First Mortgage
Company, a South Carolina corporation headquartered in Columbia,
South Carolina (the "Mortgage Company"). On February 3, 1995,
the Company completed the merger of the Savings Bank into the
Bank. Through its subsidiaries, the Company provides a full
range of banking services, including mortgage, trust and
investment services, designed to meet substantially all of the
financial needs of its customers. The Company, which commenced
banking operations in December 1986, currently conducts business
through 46 locations in South Carolina. At December 31, 1994,
the Company had approximately $1.1 billion in assets, $865.9
million in loans, $925.4 million in deposits and $79.0 million in
shareholders' 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 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). The
Company's principal market areas represent three of the four
largest Metropolitan Statistical Areas in the state. In April
1994, the Company entered the Charleston market, the second
largest Metropolitan Statistical Area in the state, with the
purchase of the insured deposits of Citadel Federal Savings and
Loan Association ("Citadel Federal"). The Company also has
branch locations in other counties in South Carolina.
The Company began its operations with the de novo opening of
the 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 the acquisition in
August 1990 of First Federal Savings and Loan Association of
Georgetown (subsequently renamed Carolina First Savings Bank) and
the acquisition in March 1993 of 12 branch locations of Republic
National Bank. Approximately half of the Company's total
deposits have been generated through acquisitions.
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The Bank
The Bank engages in a general banking business through 43
branches in 30 communities in 14 South Carolina counties. On
February 3, 1995, the Savings Bank was merged into the Bank,
increasing the number of Bank branch locations from 30 to 43.
The Bank's primary focus is on commercial and consumer lending to
customers in its market areas, with mortgage lending being of
secondary emphasis. It also provides demand transaction accounts
to businesses and individuals. Since the acquisition of the
Mortgage Company in 1993, all of the Bank's mortgage origination
activities have been performed by the Mortgage Company.
The 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,
safe deposit services, savings accounts, interest- and
noninterest-bearing checking accounts and installment and other
personal loans. The Bank also provides trust services and
various cash management programs.
The Mortgage Company
On September 30, 1993, the Company acquired First Sun
Mortgage Corporation (subsequently renamed Carolina First
Mortgage Company). The Mortgage Company is engaged primarily in
originating, underwriting and servicing one-to-four family
residential mortgage loans.
The Mortgage Company's mortgage loan origination operation
is conducted principally through eight offices in South Carolina.
Mortgage loan applications are forwarded to the Mortgage
Company's headquarters in Columbia for processing in accordance
with GNMA, FNMA and other applicable guidelines. Beginning in
the third quarter of 1992, the Company expanded the activities
of its mortgage loan operations and began self-funding the loans
through the Savings Bank, now the Bank, prior to sale in the
secondary market. With the acquisition of the Mortgage Company,
substantially all of the Bank's mortgage loan origination
activity was transferred to the Mortgage Company. During 1994,
1,062 mortgage loans totaling $108 million were originated. The
Company's intention is to sell all conforming fixed rate mortgage
loans into the secondary market.
The Mortgage Company's mortgage servicing operations consist
of servicing loans that are owned by the Bank and subservicing
loans, to which the right to service is owned by the Bank and
other non-affiliated financial institutions. This servicing
operation is conducted at its headquarters location in Columbia,
South Carolina. At December 31, 1994, the Mortgage Company was
servicing or subservicing approximately 10,351 loans having an
aggregate principal balance of approximately $800 million. The
servicing portfolio includes purchased mortgage servicing rights
for approximately $675 million in mortgage loans; the related
intangible asset for excess and purchased mortgage servicing
rights totaled $8.7 million at December 31, 1994.
As of March 31, 1995, the Company entered into an agreement
with a non-affiliated company to sell the rights to service
approximately $450 million (face value) of mortgage loans. This
agreement is attached as an exhibit to this filing. This
transaction will result in a gain of approximately $2 million and
a reduction of the Company's purchased mortgage servicing rights
by approximately $7 million. The Company will continue to
subservice these loans until June 1995 and is actively pursuing a
strategy to replace this servicing volume.
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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. The Company has emphasized internal
growth through the acquisition of market share from the large
out-of-state bank holding companies. It attempts to acquire
market share by providing quality banking services and personal
service to individuals and business customers.
The Company has grown through acquisitions. The following
discussion highlights the Company's acquisition activity during
1994.
On April 29, 1994, the Bank purchased the insured deposits
of Citadel Federal from the Resolution Trust Corporation, as
receiver for Citadel Federal. This acquisition resulted in the
acquisition of one branch office in Charleston, South Carolina,
with deposits of approximately $5.8 million, on which a premium
of approximately $533,000 was paid.
On May 2, 1994, the Company acquired six branches from
Republic National Bank. The acquired branches are located in
Columbia, Edgefield, Johnston, Bennettsville, Lake City and
McColl. In addition, the Company acquired the deposits and
select loans from Republic National Bank's main office branch in
Columbia, which was not acquired. With this transaction, the
Company acquired loans of approximately $37.5 million and
deposits of approximately $135.3 million, on which a premium of
approximately $5.4 million was paid.
On October 13, 1994, the Bank entered into an agreement with
Aiken County National Bank ("Aiken County National") for the
merger of Aiken County National into the Bank. The Bank will
acquire all the outstanding common shares of Aiken County
National in exchange for approximately 453,000 shares of the
Company's common stock. At year-end 1994, Aiken County National
had assets of approximately $42 million, loans of $29 million and
deposits of $38 million. The agreement requires that the merger
be accounted for as a pooling of interests. Shareholder and
regulatory approval have been received. The Company expects
the acquisition to close in April 1995.
On November 14, 1994, the Bank entered into an agreement
with Midlands National Bank ("Midlands") for the merger of
Midlands into the Bank. The Bank will acquire all the
outstanding common shares of Midlands in exchange for
approximately 584,000 shares of the Company's common stock. At
year end 1994, Midlands had assets of $43 million, loans of $28
million and deposits of $39 million. The agreement requires that
the merger be accounted for as a pooling of interests. The
acquisition requires shareholder and regulatory approval and is
expected to close in the second quarter of 1995. Regulatory
approval has been received.
Equity Offering and Dividends
On April 15, 1994, the Company issued 920,000 shares of
7.32% Noncumulative Convertible Preferred Stock Series 1994
("Series 1994 Preferred Stock"), which raised approximately $21.4
million in equity.
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In the first quarter of 1994, the Company instituted a
quarterly cash dividend to common shareholders of $0.05 per
share. As of the first quarter of 1995, the Board of Directors
increased the quarterly cash dividend to $0.06 per share. On May
16, 1994, the Company issued a 5% common stock dividend to common
shareholders of record as of April 29, 1994. This is the sixth
consecutive year that Carolina First has issued a 5% common stock
dividend.
Restructuring Charges
During the fourth quarter of 1994, the Company announced a
restructuring that initiated a program of credit card
securitization, wrote down related intangible assets and merged
the Savings Bank into the Bank. One-time restructuring and
nonrecurring charges related to this plan amounted to $12.2
million pre-tax ($9.4 million after-tax). Management expects the
restructuring to increase future pre-tax income by approximately
$2.8 million a year, through increased operational efficiency,
lower amortization costs, and the reinvestment of the cash
currently invested in the credit card portfolio.
In connection with the program of credit card
securitization, the Company recorded charges of $12.2 million
pre-tax, primarily from the write down of intangible assets and
charges associated with the origination of credit card accounts.
On January 24, 1995, the Company completed the securitization of
approximately $100 million in credit card loans. The
securitization transferred the credit card receivables to a trust
in return for a payment equal to the principal balance of the
credit cards. The Company purchased a 30% interest in the trust,
and the remainder was sold to an institutional investor. Through
this securitization, the Company retains an interest in a portion
of the earnings from the securitized loans and at the same time
received initially approximately $70 million in additional funds
to make loans in its banking markets.
On February 3, 1995, the Company completed the merger of the
Savings Bank into the Bank. Management believes that there will
be significant economic and managerial benefits from this
combination including the elimination of duplicative
administration, the consolidation of regulators, the reduction of
regulatory burdens and increased management focus. As part of
the merger, the Company incurred income taxes of approximately
$1.0 million due to the different tax treatment accorded the
allowance for loan losses at the Savings Bank.
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. Size
gives 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. The Company believes
it has competed effectively in this market segment by offering
quality, personal service.
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Employees
At December 31, 1994, the Company employed a total of 499
full-time equivalent employees. The Company believes that its
relations with its employees are good.
Monetary Policy
The earnings of bank holding companies are affected by the
policies of regulatory authorities, including the Board of
Governors of the Federal Reserve System, 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. 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 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. The BHCA also prohibits the
Company from acquiring control of any bank operating outside the
State of South Carolina (until September 29, 1995) unless such
action is specifically authorized by the statutes of the state
where the bank to be acquired is located. See " -- Supervision
and Regulation -- 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 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
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on the
activities of such nonbanking-related entities.
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, that 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, that 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 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 also has the authority under
the BHCA to require a bank holding company to terminate any
activity or relinquish control of a nonbank subsidiary (other
than a nonbank subsidiary of a bank) upon the Federal Reserve's
determination that such activity or control constitutes a serious
risk to the financial soundness or stability of any subsidiary
depository institution of the bank holding company. Further,
federal law grants federal bank regulatory authorities additional
discretion to require a bank holding company to divest itself of
any bank or nonbank subsidiary if the agency determines that
divestiture may aid the depository institution's financial
condition.
In addition, the "cross-guarantee" provisions of the FDIA
require insured depository institutions under common control to
reimburse the FDIC for any loss suffered by either the SAIF or
the BIF as a result of the default of a commonly controlled
insured depository institution or for any assistance provided by
the FDIC to a commonly controlled insured depository institution
in danger of default. The FDIC may decline to enforce the cross-
guarantee provisions if it determines that a waiver is in the
best interest of the SAIF or the BIF, or both. The FDIC's claim
for damages is superior to claims of stockholders of the insured
depository institution or its holding company but is subordinate
to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly
controlled insured depository institutions.
The Company is subject to the obligations and restrictions
described above. However, management currently does not expect
that any of these provisions will have any material impact on its
operations.
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As a bank holding company registered under the South
Carolina Bank Holding Company Act, the Company also is subject to
regulation by 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.
The Bank. The 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 the Bank. The FDIC
has broad authority to prohibit the 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. The Bank also is subject to
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. The Bank is not
a member of the Federal Reserve System.
Dividends. The holders of the Company's 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 Company's outstanding series of preferred stock
are also 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. 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 the 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,
the Bank is subject to legal limitations on the amount of
dividends it is permitted to pay. In particular, the 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 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 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 December 31, 1994, the Company was in
compliance
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with both the risk-based capital guidelines and the
minimum leverage capital ratio.
The Bank. As a state-chartered, FDIC-insured institution
which is not a member of the Federal Reserve System, the 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, as described above. The FDIC
also requires state-chartered nonmember banks to maintain a
minimum leverage ratio similar to that adopted by the Federal
Reserve. Under the FDIC's leverage capital requirement, state
nonmember banks that (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 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%. As of December 31, 1994, the
Bank was in compliance with both the Tier 1 risk-based capital
guidelines and the minimum leverage capital ratio, but the total
risk-based capital ratio was 6.70%, which was below the minimum
level of 8.00%. In February 1995, after becoming aware of the
capital deficiency, the Bank took corrective actions and exceeded
the adequately capitalized standards as of the end of February.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Capital Resources."
Insurance
As an FDIC-insured institution, the Bank is subject to
insurance assessments imposed by the FDIC. Under current law,
the insurance assessment to be paid by 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 "--Supervision and Regulation--Other Safety and
S o u ndness Regulations"), and whether such institution is
considered by its supervisory agency to be financially sound or
to have supervisory concerns. The current risk-based assessment
schedule is being reviewed and may be revised downward during
1995, but no final decisions have be reached. The Bank's risk-
based insurance assessment currently is set at 0.26% of its
average assessment base.
In connection with the merger of the Savings Bank into the
Bank and the Bank's assumption of other SAIF-insured deposits in
connection with various acquisitions, approximately 28% of the
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,
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determines a higher rate to be appropriate. In
addition, the FDIC has adopted for SAIF assessments the risk-
based assessment schedule described above. The Bank's risk-based
insurance assessment on its SAIF-insured deposits has been set at
0.23% of its average assessment base.
Community Reinvestment Act
The Bank is subject to the requirements of the Community
Reinvestment Act ("CRA"). The CRA requires that financial
institutions have an affirmative and ongoing obligation to meet
the credit needs of their local communities, including low- and
moderate-income neighborhoods, consistent with the safe and sound
operation of those institutions. Each financial institution's
efforts in meeting community credit needs are evaluated as part
of the examination process pursuant to twelve assessment factors.
These factors also are considered in evaluating mergers,
acquisitions and applications to open a branch or facility. The
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. Under the proposal, each institution
would be evaluated based on the degree to which it is providing
loans (the lending test), branches and other services (the
service test) and investments to low- and moderate-income areas
(the investment test). Under the lending test, as proposed, an
institution would be evaluated on the basis of its market share
of reportable loans in low- and moderate-income areas in
comparison to other lenders subject to CRA in its service area,
and in comparison with the institution's market share of
reportable loans in other service areas. An institution would be
evaluated under the investment test based on the amount of
investments made that have had a demonstrable impact on low- and
moderate-income areas or persons as compared to its risk-based
capital. The service test would evaluate a retail institution
primarily based on the percentage of its branches located in, or
that are readily accessible to, low- and moderate-income areas.
Each depository institution would have to report to its federal
supervisory agency and make available to the public data on the
geographic distribution of its loan applications, denials,
originations and purchases. Small institutions could elect to be
evaluated under a streamlined method that would not require them
to report this data. All institutions, however, would receive
one of five ratings based on their performance: Outstanding,
High Satisfactory, Low Satisfactory, Needs to Improve or
Substantial Noncompliance. An institution that received a rating
of Substantial Noncompliance would be subject to enforcement
action. The Company currently is studying the proposal and
determining whether the regulation, if adopted, would require
changes to the 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
10
<PAGE>
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. Certain of these
restrictions are not applicable to transactions between a bank
and a savings association owned by the same bank holding company,
provided that every bank and savings association controlled by
such bank holding company complies with all applicable capital
requirements without relying on goodwill.
In addition, under the BHCA and certain regulations of the
Federal Reserve, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of
property or furnishing of services. 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.
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 South Carolina State Board of Financial
Institutions 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. However, no assurance of such fact may be given.
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 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.
11
<PAGE>
ITEM 1 - STATISTICAL DISCLOSURE
Comparative Average Balances -- Yields and Costs . . . . . . 13
Rate/Volume Variance Analysis . . . . . . . . . . . . . . . . 14
Securities Held for Investment Composition . . . . . . . . . 15
Securities Available for Sale Composition . . . . . . . . . . 15
Trading Account Composition . . . . . . . . . . . . . . . . . 15
Securities Held for Investment and Securities Available for Sale
Maturity Schedule . . . . . . . . . . . . . . . . . . . . . . 16
Loan Portfolio Composition . . . . . . . . . . . . . . . . . 17
Loan Maturity and Interest Sensitivity . . . . . . . . . . . 17
Nonperforming Assets . . . . . . . . . . . . . . . . . . . . 18
Summary of Loan Loss Experience . . . . . . . . . . . . . . . 18
Composition of Allowance for Loan Losses . . . . . . . . . . 19
Types of Deposits . . . . . . . . . . . . . . . . . . . . . . 20
Certificates of Deposit Greater than $100,000 . . . . . . . . 20
Return on Equity and Assets . . . . . . . . . . . . . . . . . 21
Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . 22
Interest Rate Sensitivity . . . . . . . . . . . . . . . . . . 23
Noninterest Income . . . . . . . . . . . . . . . . . . . . . 24
Noninterest Expense . . . . . . . . . . . . . . . . . . . . . 24
12
<PAGE>
Comparative Average Balances -- Yields and Costs
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
Average/ Income/ Yield/ Average/ Income/ Yield/ Average/ Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets
Loans (net of unearned
income)(1)........$ 723,477 $ 65,302 9.03 % $ 489,891 $ 42,091 8.59 % $ 372,737 $ 34,316 9.21%
Investment securities
(taxable)......... 111,335 4,936 4.43 118,140 5,677 4.81 52,467 3,096 5.90
Investment securities
(nontaxable)...... 16,639 1,507 (2) 9.06 8,252 731 (2) 8.86 3,741 456 (2) 12.18
Federal funds sold.. 9,701 353 3.63 14,316 434 3.03 13,342 455 3.41
Interest bearing
deposits with
others banks....... 476 20 4.25 250 15 5.89 250 11 4.28
Total earning
assets........ 861,628 72,118 8.37 % 630,849 48,948 7.76 % 442,537 38,334 8.66%
Non-earning
assets............ 108,401 64,289 35,787
Total assets....$ 970,029 $ 695,138 $ 478,324
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing
deposits
Interest checking.$ $90,280 $ 1,963 2.17 % $ 57,174 $ 1,272 2.22 % $ 25,432 $ 726 2.85%
Savings........... 81,831 2,454 3.00 55,114 1,674 3.04 18,857 770 4.08
Money market...... 147,049 4,584 3.12 125,903 3,667 2.91 115,993 4,525 3.90
Certificates of
deposit........ 392,832 17,238 4.39 290,823 13,020 4.48 216,377 12,366 5.72
Other............. 40,324 1,967 4.88 30,362 1,569 5.17 26,654 1,731 6.49
Total interest-
bearing deposits 752,315 28,206 3.75 % 559,376 21,202 3.79 % 403,313 20,117 4.99%
Short-term
borrowings....... 41,362 1,638 3.96 14,023 427 3.05 2,290 128 5.55
Long-term
borrowings....... 1,264 120 9.50 1,318 120 9.10 1,374 110 8.00
Total interest-
bearing liabilities 794,941 29,964 3.77 % 574,717 21,749 3.78 % 406,977 20,355 5.00%
Non-interest bearing
liabilities
Non-interest bearing
deposits........ 94,573 56,405 27,922
Other non-interest
liabilities..... 800 5,777 3,427
Total liabilities.. 890,314 636,899 438,325
Stockholders' equity.. 79,715 58,239 39,999
Total liabilities and
stockholders'
equity............$ 970,029 $ 695,138 $ 478,324
Net interest
margin.... $ 42,154 4.89 % $ 27,199 4.31 % $ 17,979 4.06 %
</TABLE>
(1)Includes nonaccruing loans.
(2)Fully tax-equivalent basis at a 35% tax rate.
Note: Average balances are derived from daily balances.
13
<PAGE>
Rate/Volume Variance Analysis
(dollars in thousands)
<TABLE>
<CAPTION>
1994 Compared to 1993 1993 Compared to 1992
Amount Amount Amount Amount
Caused Caused Caused Caused
by by by by
Total Change in Change in Total Change in Change in
Change Volume Rate Change Volume Rate
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans, net of unearned income........$ 23,211 $ 20,987 $ 2,224 $ 7,774 $ 10,193 $ (2,419)
Securities, taxable.................. (741) (316) (425) 2,581 3,247 (666)
Securities, nontaxable............... 777 760 17 275 435 (160)
Federal funds sold................... (82) (209) 127 (21) 32 (53)
Interest-bearing deposits with
other banks....................... 5 8 (3) 4 0 4
Total interest income...... 23,170 21,230 1,940 10,613 13,907 (3,294)
Interest-bearing liabilities
Interest-bearing deposits
Interest checking................. 691 719 (28) 546 735 (189)
Savings........................... 780 801 (21) 904 1,146 (242)
Money market...................... 917 646 271 (858) 361 (1,219)
Certificates of deposit........... 4,218 4,470 (252) 654 3,692 (3,038)
Other............................. 398 480 (82) (162) 221 (383)
Total interest-bearing deposit 7,004 7,116 (112) 1,084 6,155 (5,071)
Short-term borrowings................... 1,211 1,049 162 300 382 (82)
Long-term borrowings.................... 0 (5) 5 10 (4) 14
Total interest expense..... 8,215 8,160 55 1,394 6,533 (5,139)
Net interest income.....$ 14,955 $ 13,070 $ 1,885 $ 9,219 $ 7,374 $ 1,845
</TABLE>
Note: Changes which are not solely attributable to volume or rate have been
allocated to volume and rate on a pro-rata basis.
14
<PAGE>
Securities Held for Investment Composition
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1994 1993 1992
<S> <C> <S> <S>
U.S. Treasury securities..............................................$ 5,989 $ 3,995 $ ------
Obligations of U.S. Government agencies and corporations.............. 40,185 31,432 ------
Obligations of states and political subdivisions...................... 20,029 11,907 3,316
Other securities...................................................... 53 2,271 1,203
$ 66,256 $ 49,605 $ 4,519
Securities Available for Sale Composition
(dollars in thousands)
December 31,
1994 1993 1992
U.S. Treasury securities..............................................$ 20,920 $ 11,523 $ 30,574
Obligations of U.S. Government agencies and corporations.............. 26,779 51,357 38,311
Other securities...................................................... 1,949 1,991 4,896
$ 49,648 $ 64,871 $ 73,781
Trading Account Composition
(dollars in thousands)
December 31,
1994 1993 1992
U.S. Treasury and Government agencies.................................$ 178 $ ------ $ ------
State and political subdivisions...................................... 977 250 ------
$ 1,155 $ 250 $ ------
</TABLE>
15
<PAGE>
Securities Held for Investment and
Securities Available for Sale Maturity Schedule
(dollars in thousands)
<TABLE>
<CAPTION>
Held for Investment -- Book Value
After One After Five
But But
Within Within Within After
One Year Five Years Ten Years Ten Years Total
<S> <C> <C> <C> <C> <C>
U.S Treasury.............$ 0 $ 5,989 $ 0 $ 0 $ 5,989
U.S. Government
agencies and
corporations.......... 0 33,022 0 7,163 40,185
States and political
subdivisions.......... 1,396 5,709 9,498 3,426 20,029
Other securities......... 0 0 53 0 53
$ 1,396 $ 44,720 $ 9,551 $ 10,589 $ 66,256
Weighted average yield
U.S Treasury............. 0.00 % 5.18 % 0.00 % 0.00 % 5.18 %
U.S. Government
agencies and
corporations.......... 0.00 5.76 0.00 6.25 5.85
States and political
subdivisions.......... 4.69 4.19 4.68 5.14 4.62
Other securities......... 0.00 0.00 4.45 0.00 4.45
4.69 % 5.48 % 4.68 % 5.89 % 5.41 %
Available for Sale -- Book Value
After One After Five
But But
Within Within Within After
One Year Five Years Ten Years Ten Years Total
U.S Treasury.............$ 17,534 $ 3,959 $ 0 $ 0 $ 21,493
U.S. Government
agencies and
corporations.......... 24,411 3,001 0 0 27,412
States and political
subdivisions.......... 0 0 0 0 0
Other securities......... 1,999 0 0 0 1,999
$ 43,944 $ 6,960 $ 0 $ 0 $ 50,904
Weighted average yield
U.S Treasury............. 4.17 % 5.42 % 0.00 % 0.00 % 4.40 %
U.S. Government
agencies and
corporations.......... 4.30 4.71 0.00 0.00 4.34
States and political
subdivisions.......... 0.00 0.00 0.00 0.00 0.00
Other securities......... 3.89 0.00 0.00 0.00 3.89
4.23 % 5.11 % 0.00 % 0.00 % 4.35 %
</TABLE>
16
<PAGE>
Loan Portfolio Composition
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural............$ 164,190 $ 122,753 $ 97,748 $ 81,526 $ 58,287
Real Estate
Construction................................ 21,918 19,673 15,113 16,754 14,656
Mortgage
Residential............................... 198,590 148,888 115,813 118,591 118,219
Commercial and multifamily (1)............ 260,010 142,806 79,452 55,696 50,269
Consumer.................................... 150,339 125,559 85,573 69,900 36,475
Loans held for sale......................... 71,695 7,700 6,801 ------ ------
Total gross loans........................ 866,742 567,379 400,500 342,467 277,906
Unearned income............................. (873) (2,221) (3,943) (3,766) (2,591)
Total loans net of unearned income..... 865,869 565,158 396,557 338,701 275,315
Allowance for loan losses.................. (5,267) (5,688) (4,263) (3,727) (2,403)
Total net loans.........................$ 860,602 $ 559,470 $ 392,294 $ 334,974 $ 272,912
</TABLE>
(1) The majority of these loans are made to operating businesses where real
property has been taken as additional collateral.
Loan Maturity and Interest Sensitivity
(dollars in thousands)
<TABLE>
<CAPTION>
Over One
But Over
One Year Less than Five
or Less Five Years Years Total
<S> <C> <C> <C> <C>
Commercial, financial, agricultural and
commercial real estate.......................$ 325,753 $ 69,314 $ 29,133 $ 424,200
Real estate - construction........................ 18,505 3,413 ------ 21,918
Total of loans with:
Predetermined interest rates................. 27,624 20,344 28,525 76,493
Floating interest rates...................... 317,311 52,314 ------ 369,625
</TABLE>
17
<PAGE>
Nonperforming Assets
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Nonaccrual loans.................. $1,012 $ 558 $ 519 $ 843 $1,202
Restructured loans................ 675 -- 353 -- --
Total nonperforming loans...... 1,687 558 872 843 1,202
Other real estate owned........... 517 1,021 1,074 695 699
Total nonperforming assets..... $2,204 $1,579 $1,946 $1,538 $1,901
Loans past due 90 days still
accruing interest................ $1,285 $2,060 $2,121 $1,489 $ 424
Total nonperforming assets as a
percentage of loans and other real
estate owned..................... 0.25% 0.28% 0.49% 0.45% 0.69%
Allowance for loan losses as a
percentage of nonperforming loans.. 312% 1,019% 489% 442% 200%
</TABLE>
Summary of Loan Loss Experience
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Loan loss reserve at beginning of period..........$ 5,688 $ 4,263 $ 3,727 $ 2,402 $ 2,041
Valuation allowance for loans acquired............ 1,078 1,811 255 450 ------
Charge-offs:
Commercial, financial and agricultural........ 246 298 985 302 273
Real estate - construction................... ------ ------ ------ ------ ------
Real estate - mortgage....................... 168 179 59 57 12
Consumer..................................... 526 357 183 216 176
Credit cards................................. 1,622 487 ------ ------ ------
Total loans charged-off.............. 2,562 1,321 1,227 575 461
Recoveries:
Commercial, financial and agricultural....... 59 12 14 ------ 2
Real estate - construction.................. ------ ------ 1 ------ ------
Real estate - mortgage...................... ------ ------ 18 ------ ------
Consumer.................................... 54 14 22 27 30
Credit cards................................ ------ ------ ------ ------ ------
Total loans recovered............... 113 26 55 27 32
Net charge-offs................................... 2,449 1,295 1,172 548 429
Provision changed to expense................. 950 909 1,453 1,423 790
Loan loss reserve at end of period................$ 5,267 $ 5,688 $ 4,263 $ 3,727 $ 2,402
Average loans.....................................$ 723,477 $ 489,891 $ 372,737 $ 302,976 $ 251,961
Total loans, net of unearned income (period end).. 865,869 565,158 396,557 338,701 275,315
Net charge-offs as a percentage of average loans.. 0.34 % 0.26 % 0.31 % 0.18 % 0.17 %
Allowance for loan losses as a percentage of loans 0.61 1.01 1.08 1.10 0.87
</TABLE>
18
<PAGE>
Composition of Allowance for Loan Losses
(dollars in thousands)
<TABLE>
<CAPTION>
Allowance Breakdown
December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural..................$ 1,500 $ 1,570 $ 1,500 $ 1,000 $ 750
Real Estate
Construction................ 100 100 300 200 147
Mortgage:
Residential............... 100 100 250 100 60
Commercial and
Multifamily............ 450 400 987 1,309 809
Consumer................. 2,592 3,125 800 745 397
Unallocated........................ 525 393 426 373 240
Total...................$ 5,267 $ 5,688 $ 4,263 $ 3,727 $ 2,403
Percentage of Loans in Category
December 31,
1994 1993 1992 1991 1990
Commercial, financial and
agricultural................... 18.94 % 21.64 % 24.41 % 23.81 % 20.97 %
Real Estate
Construction................ 2.53 3.47 3.77 4.89 5.27
Mortgage:
Residential............... 31.18 27.60 30.62 34.63 42.54
Commercial and
Multifamily............ 30.00 25.17 19.84 16.26 18.09
Consumer................. 17.35 22.12 21.36 20.41 13.13
Total.................... 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %
</TABLE>
Note: 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.
19
<PAGE>
Types of Deposits
(dollars in thousands)
<TABLE>
<CAPTION>
Balance as of December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Demand deposit accounts.................$ 119,950 $ 67,776 $ 39,563 $ 25,113 $ 23,226
NOW accounts............................ 105,966 75,078 32,699 21,824 11,519
Savings accounts........................ 89,329 65,198 21,103 14,492 11,180
Money market accounts................... 146,213 144,547 122,837 113,083 81,989
Time deposits........................... 338,194 261,674 187,931 176,712 124,800
Time deposits of $100,000 or
over................................. 125,796 110,312 72,135 56,147 47,219
Total deposits.....................$ 925,448 $ 724,585 $ 476,268 $ 407,371 $ 299,933
Percent of Deposits as of December 31,
1994 1993 1992 1991 1990
Demand deposit accounts................. 12.96 % 9.35 % 8.31 % 6.16 % 7.74 %
NOW accounts............................ 11.45 10.36 6.87 5.36 3.84
Savings accounts........................ 9.65 9.00 4.43 3.56 3.73
Money market accounts................... 15.80 19.95 25.79 27.76 27.34
Time deposits........................... 36.54 36.11 39.45 43.38 41.61
Time deposits of $100,000 or
over................................. 13.60 15.23 15.15 13.78 15.74
Total deposits..................... 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %
</TABLE>
Certificates of Deposit Greater than $100,000
(dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Maturing in three months or less.......................................................................$ 49,724
Maturing in over three through six months.............................................................. 32,747
Maturing in over six through twelve months............................................................. 24,542
Maturing in over twelve months......................................................................... 18,783
Total........................................................................................$ 125,796
</TABLE>
20
<PAGE>
Return on Equity and Assets
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Return on average assets................ (0.19)% 0.71 % 0.53 % 0.43 % 0.32 %
Return on average equity................ (2.34) 8.50 6.29 5.39 3.54
Return on average common equity......... (3.82) 8.44 6.17 5.39 3.54
Average equity as a percentage of
average assets....................... 8.22 8.38 8.36 8.04 9.04
Dividend payout ratio................... n/m 0.00 0.00 0.00 0.00
</TABLE>
21
<PAGE>
Short Term Borrowings
(dollars in thousands)
<TABLE>
<CAPTION>
Maximum Average
Outstanding Average Interest
At Any Average Interest Ending Rate at
Year Ended December 31, Month End Balance Rate Balance Year End
<S> <C> <C> <C> <C> <C>
1994
Federal funds purchased.................$ 16,000 $ 5,474 4.50 % $ 16,000 5.58 %
Securities sold under
repurchase agreements................ 17,986 15,870 3.80 17,986 5.23
Advances from the FHLB............... 72,000 20,018 3.94 72,000 6.03
$ 105,986 $ 41,362 3.96 % $ 105,986 5.84 %
1993
Federal funds purchased.................$ 6,953 3,571 2.68 % $ 400 2.99 %
Securities sold under
repurchase agreements................ 16,325 5,827 2.49 16,325 2.74
Advances from the FHLB............... 15,550 4,625 4.04 ------ 3.44
$ 38,828 $ 14,023 3.05 % $ 16,725 2.75 %
1992
Federal funds purchased.................$ 6,695 $ 592 5.65 % $ 1,145 2.94 %
Securities sold under
repurchase agreements................ 1,825 756 5.72 1,392 2.69
Advances from the FHLB............... 12,000 942 5.35 ------ 3.39
$ 20,520 $ 2,290 5.55 % $ 2,537 2.80 %
</TABLE>
22
<PAGE>
Interest Rate Sensitivity
(dollars in thousands)
<TABLE>
<CAPTION>
Over One
Total Year or
0-3 4-6 7-12 Within Non-
Months Months Months One Year Sensitive Total
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Loans, net of unearned income.......... $ 489,064 $ 23,769 $ 48,732 $ 561,565 $ 304,304 $ 865,869
Investment securities, taxable............. 18,925 2,000 23,916 44,841 52,187 97,028
Investment securities, nontaxable...... 1,346 ------- 50 1,396 18,635 20,031
Federal funds sold............................... 500 ------- ------- 500 ------- 500
Interest bearing deposits with
other banks.................................... 500 ------- ------- 500 ------- 500
Total earning assets................. 510,335 25,769 72,698 608,802 375,126 983,928
Non-earning assets, net............................. ------- ------- ------- ------- 136,169 136,169
Total assets.........................$ 510,335 $ 25,769 $ 72,698 $ 608,802 $ 511,295 $ 1,120,097
Liabilities and Stockholders' Equity
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest Checking.........................$ 105,966 $ ------ $ ------ $ 105,966 $ ------ $ 105,966
Savings................................... 89,329 ------ ------ 89,329 ------ 89,329
Money Market.............................. 146,213 ------ ------ 146,213 ------ 146,213
Certificates of Deposit................... 132,248 109,207 102,985 344,440 77,702 422,142
Other..................................... 12,670 10,826 10,209 33,705 8,143 41,848
Total interest-bearing deposits......... 486,426 120,033 113,194 719,653 85,845 805,498
Short-term borrowings......................... 105,986 ------ 52 106,038 ------ 106,038
Long-term borrowings.......................... ------ ------ ------ ------ 1,162 1,162
Total interest-bearing liabilities...... 592,412 120,033 113,246 825,691 87,007 912,698
Noninterest bearing liabilities
Noninterest bearing deposits.................. ------ ------ ------ ------ 119,950 119,950
Other noninterest bearing liabilities, net ------ ------ ------ ------ 8,408 8,408
Total liabilities....................... 592,412 120,033 113,246 825,691 215,365 1,041,056
Stockholders'equity................................. ------ ------ ------ ------ 79,041 79,041
Total liabilities and stockholders'
equity...............................$ 592,412 $ 120,033 $ 113,246 $ 825,691 $ 294,406 $ 1,120,097
Interest sensitive gap..............................$ (82,077)$ (94,264)$ (40,548)$ (216,889)$ 216,889 $ -----
Cumulative interest sensitive gap...................$ (82,077)$ (176,341)$ (216,889)$ (216,889)
</TABLE>
23
<PAGE>
Noninterest Income
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Service charges on deposits.............$ 3,720 $ 2,536 $ 1,468 $ 835 $ 415
Mortgage banking income:
Origination fees..................... 954 1,051 778 461 309
Gain on sale of mortgage loans....... 112 509 496 ------ ------
Servicing and other.................. 572 228 ------ ------ ------
Fees for trust services................. 919 542 305 197 141
Gain on sale of securities.............. 234 662 517 664 (4)
Sundry.................................. 1,347 724 (108) 129 234
Total noninterest income......$ 7,858 $ 6,252 $ 3,456 $ 2,286 $ 1,095
</TABLE>
Noninterest Expense
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Salaries and wages......................$ 13,883 $ 9,607 $ 5,989 $ 4,040 $ 2,982
Benefits................................ 4,043 2,115 1,260 1,292 906
Occupancy............................... 3,547 2,129 1,339 937 838
Furniture and equipment................. 2,242 1,558 1,152 847 614
Federal deposit insurance premiums...... 1,899 1,392 910 694 435
Credit card processing charges.......... 1,506 909 603 458 ------
Intangibles amortization................ 2,485 902 462 214 25
Credit card restructuring charges....... 12,214 ------ ------ ------ ------
Sundry.................................. 8,634 6,566 4,430 3,125 3,127
Total noninterest expense.....$ 50,453 $ 25,178 $ 16,145 $ 11,607 $ 8,927
</TABLE>
24
<PAGE>
ITEM 2 - PROPERTIES
At December 31, 1994, the Company conducted business through
46 locations in South Carolina. At December 31, 1994, the total
net tangible book value of the premises and equipment and
leasehold improvements owned by the Company was $36,842,000. The
Company believes that its physical facilities are adequate for
its current operations.
The Company's headquarters are located on Main Street in
Greenville's downtown commercial area. The headquarters, which
were built in 1900, are owned by the Company and have been
substantially renovated to suit their present purposes. The
Company's headquarters also serve as the Bank's headquarters.
The headquarters contain approximately 160,000 square feet, of
which approximately 67,000 square feet is currently being
utilized by the Company. The balance of the building will be
renovated as necessary to accommodate future expansion of the
Company. In October 1993, the Bank purchased another office
building, with approximately 27,000 square feet, in downtown
Greenville, which houses the Bank's trust department, the
Mortgage Company's mortgage origination offices and various
administrative functions.
In February 1993, the Company entered into a lease on a
42,000 square foot building in Columbia, South Carolina. This
facility houses the Company's operations center, regional
administrative offices, investments division and a Columbia main
office branch, which opened in September 1993. In September
1993, the Company purchased an office building in Columbia, South
Carolina for its mortgage banking operations. In June 1994, the
Company completed the construction of a 16,000 square foot main
office branch in Myrtle Beach which serves as the regional
headquarters for the coastal offices.
The Company's subsidiaries operate through 46 locations,
which include the buildings described above. The Company or a
subsidiary of the Company owns 16 locations and leases 30
locations. The rental payments due under the leases approximate
the market rates. Leases have options for extensions under
substantially the same terms as in the original lease period with
certain rate escalations. The leases provide that the lessee pay
property taxes, insurance and maintenance costs.
All locations of the Company and its subsidiaries are
considered suitable and adequate for their intended purposes.
Individually, none of the above leases are considered material.
ITEM 3 - LEGAL PROCEEDINGS
The Company and its subsidiaries are from time to time
parties to various legal actions arising in the normal course of
business. Such items are not expected to have any 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 the Bank in the Court of Common Pleas in
Lexington County, South Carolina. Such action, in general,
claims that the 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. The Bank has answered the complaint and plans to
vigorously defend such complaint. The Bank believes that there
are valid defenses available to it. In connection with the
litigation, the 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
25
<PAGE>
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.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
26
<PAGE>
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
In November 1993, the Board of Directors announced an
initial quarterly cash divided of $0.05 per share payable on the
common stock, which dividend was paid on February 1, 1994. A
cash dividend of $0.05 per share was paid to common shareholders
each quarter in 1994. In November 1994, the Board of Directors
increased the quarterly cash dividend on the common stock to
$0.06 per share, which dividend was paid on February 1, 1995.
The Company presently intends to continue to pay this quarterly
cash dividend on the common stock and all series of preferred
stock; however, future dividends will depend upon the Company's
financial performance and capital requirements.
The Company generates cash to pay dividends primarily
through dividends paid to it by the Bank. South Carolina's
banking regulations restrict the amount of dividends that may be
paid from the Bank. All dividends paid from the Bank are subject
to prior approval by the S.C. Commissioner of Banking and are
payable only from the undivided profits of the Bank. At
December 31, 1994, the Bank's retained earnings were $5.1
million. After the merger of the Bank and the Savings Bank in
February 1995, the retained earnings of the Savings Bank are also
available to pay dividends to the Company. At December 31, 1994,
the Savings Bank's retained earnings were $8.4 million. However,
the payments of any such dividends would be subject to receipt of
appropriate regulatory approvals.
The Board of Directors approved a 5% common stock dividend,
issued on May 16, 1994, to common stockholders of record as of
April 29, 1994. This dividend resulted in the issuance of
214,380 shares of the Company's $1.00 par value common stock.
Per share data of prior periods have been restated to this
dividend. This is the sixth consecutive year that the Company
has issued a 5% common stock dividend.
The remaining information required by Item 5 is set forth on
page 47 of the Company's 1994 Annual Report to Stockholders and
is incorporated by reference herein. As of March 27, 1995, there
were 1,959 common shareholders of record, 154 Series 1994 preferred
shareholders of record and 199 Series 1993 preferred shareholders of
record.
27
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the
last five years. All per share data have been restated to
reflect 5% common stock dividends issued on the common stock in
the last six years.
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement:
Net interest income....................$ 41,627 $ 26,943 $ 17,819 $ 12,866 $ 10,241
Provision for loan losses.............. 950 909 1,453 1,423 790
Noninterest income..................... 7,858 6,252 3,456 2,286 1,095
Noninterest expenses................... 50,453 25,178 16,145 11,607 8,927
Net income (loss) ..................... (1,869) 4,935 2,517 1,680 1,045
Per Common Share Data:
Net income(loss)...................... $ (0.95) $ 0.90 $ 0.57 $ 0.51 $ 0.32
Cash dividends declared............... 0.21 0.05 - - -
Balance Sheet (Period End):
Total assets.........................$1,120,097 $816,421 $529,063 $447,314 $345,745
Loans-net of unearned income......... 865,869 565,158 396,557 338,701 275,315
Nonperforming assets................. 2,204 1,579 1,946 1,538 1,901
Total earning assets................. 983,928 734,346 477,323 407,708 317,501
Total deposits....................... 925,448 724,585 476,268 407,371 299,933
Short-term borrowings................ 106,038 16,779 2,591 2,755 12,260
Long-term debt....................... 1,162 1,214 1,268 1,322 276
Shareholders' equity................. 79,041 62,869 44,225 31,875 30,235
Balance Sheet (Averages):
Total Assets.........................$ 970,029 $ 695,138 $478,324 $387,265 $ 326,598
Shareholders' equity................... 79,715 58,239 39,999 31,143 29,540
</TABLE>
1 After fourth quarter 1994 restructuring charges of $9,415 (after tax).
28
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EARNINGS ANALYSIS
The one-time charge for the corporate restructuring
(discussed above in "Business - Restructuring Charges") resulted
in a net loss for 1994. The Company reported a net loss for 1994
of $1.9 million, or a loss of $0.95 per common share. The net
loss for 1994 includes one-time restructuring charges of $9.4
million (after-tax). Net income for 1993 was $4.9 million, or
$0.90 per common share, and 1992 net income was $2.5 million, or
$0.57 per common share. Increased net interest income, growth in
noninterest income and continued good credit quality were the
primary reasons for the growth in earnings excluding
restructuring charges.
Fully tax equivalent ("FTE") net interest income increased
$15.0 million, or 55%, due to a higher level of average earning
assets and an increased net interest margin. Increases in
average earning assets resulted primarily from the acquisition of
branches and internal growth. The net interest margin increased
to 4.89% from 4.31% in 1993 and 4.06% in 1992.
Noninterest income, excluding securities transactions
increased to $7.6 million, or 36%, from $5.6 million in 1993 and
$2.9 million in 1992. The increase in noninterest income was
attributable to higher service charges on deposit accounts, the
expansion of mortgage servicing and the generation of new trust
business.
Noninterest expenses increased to $50.5 million in 1994 from
$25.2 million in 1993 and $16.1 million in 1992. The 1994
noninterest expenses includes one-time restructuring charges of
$12.2 million. Also contributing to the increase in noninterest
expenses were the acquisition of seven branches and the opening
of four branches de novo, a higher level of loan and deposit
activity, amortization of intangibles and higher credit card
processing fees.
Net Interest Income
The largest component of Carolina First's operations is net
interest income, 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. As the
primary contributor to Carolina First's earnings, net interest
income constituted 84% of net revenues (net interest income plus
noninterest income) in 1994, compared with 81% in 1993 and 84% in
1992.
FTE net interest income adjusts the yield for assets earning
tax-exempt income to a comparable yield on a taxable basis. The
Company has experienced a markedly upward trend in FTE net
interest income, which increased 55% in 1994, 51% in 1993 and
38% in 1992. FTE net interest income was $42.2 million in 1994,
$27.2 million in 1993 and $18.0 million in 1992. The increase
resulted from a higher level of average earning assets and an
improvement in the net interest margin. The growth in average
earning assets, which increased to $861.6 million in 1994 from
$630.8 million in 1993 and $442.5 in 1992, resulted primarily
from internal loan growth and the acquisition of branches. The
majority of this increase was in loans, which averaged $233.6
million higher in 1994 than 1993 and $117.1 million higher in
1993 than 1992.
29
<PAGE>
The net interest margin, defined as net interest income
divided by average earning assets, increased to 4.89% in 1994
from 4.31% in 1993 and 4.06% in 1992. The increase resulted
primarily from lower deposit interest rates and a higher
proportion of noninterest-bearing deposits. In addition, the
yield on loans has risen due to increases in the prime interest
rate, increased consumer loan volume from the retail branch
network and increased credit card loan volume from mail
solicitations.
Provision and 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.
The Company attempts to deal with repayment risks through
the establishment of, and adherence to, internal credit policies.
These policies include officer and customer limits, periodic
documentation examination and follow-up procedures for any
exceptions to credit policies. A summary of the Bank's approach
to managing credit risk is provided below in the "Asset Quality"
section.
During 1994, 1993 and 1992, the Company expensed $950,000,
$909,000, and $1,453,000, respectively, through its provision for
loan losses. Net loan charge-offs, excluding credit card loans,
decreased to $779,000 in 1994, from $1.3 million in 1993 and $1.2
million in 1992. During 1994, net loan charge-offs as a
percentage of average loans have remained low at 0.34% including
credit card charge-offs, compared with 0.26% for 1993 and and
0.31% for 1992.
At December 31, 1994, the allowance for loan losses totaled
$5.3 million, or 0.7% of total loans excluding loans held for
sale, a decline from $5.7 million, or 1.0% of total loans, at the
end of 1993. Continued reductions in nonperforming asset levels
enabled the Company to reduce the allowance for loan losses
compared with the prior years' levels. Nonperforming assets as a
percentage of loans and foreclosed property were 0.25% and 0.28%
at December 31, 1994 and 1993, respectively. At December 31,
1994, the allowance for loan losses was 312% of nonperforming
loans. The Company's asset quality measures compare favorably to
its FDIC peer group.
The Bank was examined in December 1993 by the FDIC, and the
Savings Bank was examined in February 1994 by the OTS. No
significant increases in reserves resulted from these
examinations.
Noninterest Income
Noninterest income, excluding securities transactions,
increased $2.0 million, or 36%, to $7.6 million in 1994, up from
$5.6 million in 1993 and $2.9 million in 1992. This increase
resulted principally from
30
<PAGE>
service charges on deposit accounts, fees for trust services and
mortgage banking servicing income. The Company realized gains on the
sale of securities of $234,000, $662,000 and $517,000 in 1994, 1993
and 1992, respectively.
Service charges on deposit accounts, the largest contributor
to noninterest income, rose $1.2 million, or 47%, to $3.7 million
in 1994, an increase from $2.5 million in 1993 and $1.5 million
in 1992. The increase in service charges is attributable to
acquiring branches and new deposit accounts, increasing fee
charges and improving collection rates. In 1994, average
deposits increased 38%, and the number of deposit accounts rose
44%.
Mortgage banking income was $1.6 million in 1994, $1.8
million in 1993 and $1.3 million in 1992. Mortgage banking
income includes origination fees, profits from the sale of loans
and servicing fees (which started in 1993). Origination fees
totaled $1.0 million in 1994, compared with $1.1 million in 1993
and $778,000 in 1992. During 1994, 1,062 mortgage loans totaling
$108 million were originated, similar to originations of 1,063
loans for $103 million in 1993. The increase in the level of
interest rates during 1994 made the origination of mortgage loans
more competitive resulting in a slightly lower origination fee
per loan.
Until the third quarter of 1992, mortgage loans were
originated primarily for the account of correspondent financial
institutions, with the Company 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 through the Savings Bank prior to sale in the secondary
market. Mortgage loans totaling approximately $55 million, $80
million and $16 million were sold in 1994, 1993 and 1992,
respectively. Income from this activity totaled $112,000 in
1994, $509,000 in 1993 and $496,000 in 1992.
The Mortgage Company's mortgage servicing operations consist
of servicing loans that are owned by the Bank and subservicing
loans, to which the right to service is owned by the Bank and
other non-affiliated financial institutions. Mortgage loans
serviced are all one-to-four family residential mortgage loans.
At December 31, 1994, 10,351 loans with an aggregate principal
amount of $800 million were being serviced or subserviced by the
Mortgage Company. Servicing and other mortgage banking income
from non-affiliated companies, net of the related amortization,
was $572,000 in 1994 and $228,000 in 1993.
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. However, 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 with servicing retained.
Subsequent to year end, the Company entered into an
agreement with a non-affiliated company to sell the rights to
service approximately $450 million (face value) of mortgage
loans. This transaction will result in a gain of approximately
$2 million and a reduction of the Company's purchased mortgage
servicing rights by approximately $7 million. The Company will
continue to subservice these loans until June 1995 and is
actively pursuing a strategy to replace this servicing volume.
Fees for trust services in 1994 increased to $919,000, up
70% from the $542,000 earned in 1993. Fees for trust services in
1992 were $305,000. Fees for trust services increased as a
result of the generation of new trust business and additional
assets under management, particularly in investment management
and custody accounts. Assets under management of the trust
department increased to approximately $214 million at December
31, 1994, up significantly from $129 million at year end 1993 and
$55 million at year end 1992.
31
<PAGE>
Sundry income items were $623,000 higher in 1994, primarily
because of higher customer service fees, appraisal fee income and
insurance commissions. These increases are largely attributable
to increased lending and deposit activity. In addition, the
Company earned approximately $108,000 in 1994 real estate rental
income, the majority of which is not expected to continue. In
addition, earnings associated with the credit card securitization
are expected to be a new source of fee income in 1995.
On August 18, 1993, the Bank entered into an investor
services agreement with Edgar M. Norris & Co., Inc. ("Norris &
Co."), a broker-dealer registered with the National Association
of Securities Dealers, Inc., to offer certain brokerage services
to the Bank's customers. Under this affiliate arrangement, the
Bank offers certain brokerage services to its customers through
dual employees (a Bank employee who is also employed by Norris &
Co.). The commissions or mark up charges on transactions are
shared between the Bank and Norris & Co. as set forth in the
investor services agreement. Brokerage services activity for
1994 has been limited.
Noninterest Expense
Noninterest expenses were $50.5 million in 1994, $25.2
million in 1993 and $16.1 million in 1992. Included in 1994
noninterest expenses is a $12.2 million one-time restructuring
charge associated with the credit card securitization and the
write-down of other intangible assets. Excluding the
restructuring charges, 1994 noninterest expenses increased 52%
over 1993, while 1993 was 56% higher than 1992. The increased
expenditures primarily reflect the costs of additional personnel
to support the Company's current and anticipated growth.
Salaries and wages and benefits increased 53% to $17.9
million in 1994 from $11.7 million in 1993. This increase
follows an increase of 62% from $7.2 million in 1992. Full-time
equivalent employees rose to 499 at the end of 1994 from 430 and
228 at the end of 1993 and 1992, respectively. Staff increases
were attributable to the addition of 11 banking offices, higher
loan and deposit activity resulting from internal growth and
acquisitions, and the expansion of the mortgage banking
operations.
The 1994 occupancy and furniture and equipment expenses
increased $2.1 million, or 57%, due to the addition of 11 banking
offices, including a new Myrtle Beach main office, the opening of
a regional headquarters office in Columbia for the Midlands
region of South Carolina, the expansion of the Mortgage Company's
operations and the expansion of its administrative offices in
Greenville to a second location.
The 1994 restructuring charges include $12.2 million
primarily from the write down of intangible assets and charges
associated with the origination of credit card accounts.
Management expects the restructuring of its credit card
operations to increase future pre-tax income by approximately
$2.3 million a year, through increased lower amortization costs
and the reinvestment of the cash currently invested in the credit
card portfolio.
Sundry expense items increased $4.8 million, or 49%, to
$14.5 million in 1994 from $9.8 million in 1993 and $6.4 million
in 1992. Three expense items-- federal insurance premiums,
intangibles amortization and credit card processing fees --
accounted for approximately 46% of this increase. Federal
deposit insurance premiums increased $507,000, or 36%, in 1994 to
$1.9 million. This increase was primarily due to a higher levels
of deposits. Intangibles amortization increased $1.6 million, or
175%, in 1994 to $2.5 million, principally as a result of
intangibles relating to the acquisition of branches, credit card
receivables and the Mortgage Company. Credit card processing
fees increased $597,000, or 66%, to $1.5 million in 1994,
principally as a result of credit card solicitations by the
Company and the purchase of approximately $16.3
32
<PAGE>
million in credit card receivables in June 1993 and November 1993.
With the securitization of the majority of credit card loans during the
first quarter of 1995, management expects credit card processing
fees to decrease significantly in 1995.
Advertising and public relations expenses increased
$526,000, or 136%, to $912,000 in 1994, due to the Company's
statewide expansion, advertising campaigns in key markets and
special deposit promotions. The remaining increase in sundry
noninterest expenses was primarily attributable to the overhead
and operating expenses associated with higher lending and deposit
activities. The largest sundry noninterest expenses were
stationery, supplies and printing, telephone, postage, and fees.
Income Taxes
The provision for income taxes in 1994 was a credit of
$49,000. The provision for income taxes was $2.2 million in 1993
and $1.2 million in 1992. Income taxes for 1994 include a one-
time reduction of $2.8 million from restructuring charges,
partially offset by $1 million of income tax expense in
connection with the merger of the Savings Bank into the Bank.
The Company's effective tax rates were 30.1% (excluding the
restructuring charges), 30.6%, and 31.6% in 1994, 1993 and 1992,
respectively.
BALANCE SHEET ANALYSIS
Total assets at December 31, 1994 were $1.1 billion, an
increase of $303.7 million, or 37%, from $816.4 million at the
end of 1993. Loans increased $300.7 million, or 53%, to $865.9
million at December 31, 1994 compared with $565.2 million at
December 31, 1993. Deposits at year end 1994 were $925.4
million, up 28% from $724.6 million at year end 1993. Total
shareholders' equity increased 26% to $79.0 million at December
31, 1994 from $62.9 million at the end of 1993. Significant
components of balance sheet growth include increases from
internal loan growth, branch acquisitions and the proceeds from
the Series 1994 preferred stock offering.
Average total assets in 1994 were $970.0 million, a 40%
increase over the 1993 average of $695.1 million. Average
earning assets were $861.6 million in 1994, a 37% increase over
the 1993 level of $630.8 million. For 1992, average total assets
and average earning assets were $478.3 million and $442.5
million, respectively.
Loans
The Company's loan portfolio consists principally of
commercial mortgage loans, other 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 concentrations of credit risk
exceeding 10% of the portfolio. At December 31, 1994, the
Company had total loans outstanding of $865.9 million which
equaled approximately 94% of the Company's total deposits and
approximately 77% of the Company's total assets. The level of
total loans, relative to total deposits and total assets, has
increased from the prior year. The composition of the Company's
loan portfolio at December 31, 1994 was as follows: commercial
and commercial mortgage 47%, residential mortgage 26%, consumer
11%, credit card 12% and construction 4%.
33
<PAGE>
The Company's loans increased $300.7 million, or 53%, to
$865.9 million at December 31, 1994 from $565.2 million at
December 31, 1993. Of this increase, $37.5 million resulted from
loans acquired in branch acquisitions. The balance was internal
loan growth. This increase was net of $55.1 million of mortgage
loans sold, which were predominantly current production, fixed
rate mortgage loans. During 1994, the Bank began a mail campaign
to solicit new credit card customers. These solicitations
resulted in approximately $60 million in new credit card
balances, which nearly doubled the size of the Bank's credit card
portfolio.
As noted above, the Company has experienced significant
growth in its commercial and commercial mortgage loans over the
past several years. Furthermore, these loans constitute
approximately 47% of the Company's total loans at December 31,
1994. These loans generally range in size from $250,000 to
$500,000 and are typically made to small to medium-sized,
owner-operated companies.
For 1994, the Company's loans averaged $723.5 million with a
yield of 9.03%, compared with $489.9 million and a yield of 8.59%
for 1993. The interest rates charged on loans vary with the
degree of risk and the maturity and amount of the loan.
Competitive pressures, money market rates, availability of funds,
and government regulations also influence interest rates. The
increase in loan yield is largely attributable to the upward
repricing of variable rate loans, which constitute approximately
60% of the loan portfolio. During 1994, the average prime
interest rate rose approximately 114 basis points.
Loans held for sale at December 31, 1994 included $69.5
million in credit card loans and $2.2 million in mortgage loans.
On January 24, 1995, the Company completed the securitization of
the credit card loans held for sale at year end.
Securities
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. To date, the
Company does not use derivative products.
During the first quarter of 1993, the Bank received approval
to establish dealer bank operations to sell United States
Treasury, Federal agency and municipal bonds to individuals,
corporations and municipalities through its investments division.
Income from the Company's dealer activity is not material.
34
<PAGE>
At December 31, 1994, the total investment portfolio had a
book value of $118.3 million and a market value of $113.7 million
for an unrealized loss of $4.6 million. The investment portfolio
had a weighted average duration of approximately 2.15 years.
Securities (i.e., investment securities, securities available for
sale and trading securities) averaged $128.0 million in 1994, 1%
above the 1993 average of $126.4 million. The average portfolio
yield declined slightly from 5.07% in 1993 to 5.03% in 1994.
During the past two years, average securities have been a
lesser component of average earning assets, decreasing from 20.0%
in 1993 to 14.8% in 1994. The Company decreased the relative
level of its investment portfolio to fund loans in its banking
markets. At December 31, 1994, securities totaled $117.1
million, up $2.4 million from the $114.7 million invested at the
end of 1993.
Other Assets
At December 31, 1994, other assets included other real
estate owned of $517,000 and intangible assets of $29.8 million.
The intangible assets balance is attributable to goodwill of $9.1
million, core deposit balance premiums of $11.1 million, excess
and purchased mortgage servicing rights of $8.7 million and
purchased credit card premiums of $345,000.
Deposits
The primary source of funds for loans and investments is
deposits which are gathered through the 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 liquidity
needs, the direction and levels of interest rates and local
market conditions. The Company does not believe that any of its
deposits qualify as brokered deposits. It is the Company's
policy not to accept brokered deposits.
During 1994, interest-bearing liabilities averaged $794.9
million, compared with $574.7 million for 1993. This increase
resulted principally from branch acquisitions. The average
interest rates were 3.77% and 3.78% for 1994 and 1993,
respectively. At December 31, 1994, interest-bearing deposits
comprised approximately 87% of total deposits and 88% of
interest-bearing liabilities. During 1994, the Company increased
its use of short-term borrowings to fund loan growth. Short-term
borrowings averaged $41.4 million and $14.0 million in 1994 and
1993, respectively.
The Company uses its deposit base as its primary source of
funds. Deposits grew 28% to $925.4 million at December 31, 1994
from $724.6 million at December 31, 1993. Of the $200.8 million
increase in deposits, approximately $141.2 million resulted from
the acquisition of branches. Internal growth generated the
remaining new deposits. During 1994, total interest-bearing
deposits averaged $752.3 million with a rate of 3.75%, compared
with $559.4 million with a rate of 3.79% in 1993. As the level
of interest rates fell in 1993, the Company was able to reprice
deposits to more than recover declines in the yields on earning
assets. During the first half of 1994, which was a period of
rising interest rates, the Company generally kept deposit
interest rates unchanged which caused the average deposit rate to
continue to decline, primarily from the repricing of certificates
of deposit. Beginning with the third quarter of 1994, however,
the Company raised deposit interest rates, causing the Company's
interest rate paid on deposits to rise.
Average noninterest-bearing deposits, which increased 68%
during the year, increased to 11.2% of average total deposits in
1994 from 9.2% in 1993. This increase was attributable to new
accounts from commercial loan customers and escrow balances
related to mortgage servicing operations.
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<PAGE>
The Company's core deposit base consists of consumer time
deposits, savings, NOW accounts, money market accounts and
checking accounts. Although such core deposits are becoming
increasingly interest sensitive for both the Company and the
industry as a whole, such core deposits continue to provide the
Company with a large and stable source of funds. Core deposits
as a percentage of average total deposits averaged approximately
86% in 1994. The Company closely monitors its reliance on
certificates of deposit greater than $100,000, which are
generally considered less stable and less reliable than core
deposits.
Generally, certificates of deposits greater than $100,000
have a higher degree of interest rate sensitivity than other
certificates of deposit. The percentage of the Company's
deposits represented by certificates of deposit greater than
$100,000 is higher than the percentage of such deposits held by
its peers. However, the Company does not believe that this
higher-than-peer percentage of certificates of deposits greater
than $100,000 will have a material adverse effect because such
certificates are principally held by long-term customers located
in the Company's market areas.
Capital Resources and Dividends
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 both common and preferred stock in connection with the
acquisitions of the Savings Bank and the Mortgage Company.
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 8.32%
Cumulative Convertible Preferred Stock ("Series 1992 Preferred
Stock") in May 1992, which raised $10.3 million, the offering of
the 7.50% Noncumulative Convertible Preferred Stock Series
("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.
On September 30, 1993, the Company completed the acquisition
of all of the outstanding stock of First Sun Mortgage Corporation
in exchange for 60,000 shares of Series 1993B Preferred Stock
which added $1.2 million in equity. There is currently no market
for the Series 1993B Preferred Stock, and it is not expected that
any market for such stock will develop.
The Company completed the offering of its Series 1994
Preferred Stock on April 15, 1994. In connection with this
offering, the Company raised approximately $21.4 million after
deduction of the related expenses and issued 920,000 shares of
its Series 1994 Preferred Stock. Each share of Series 1994
Preferred Stock provides for cash dividends, when, as, and if
declared by the Board of Directors, at the annual rate of $1.83
per share. Dividends on the Series 1994 Preferred Stock are not
cumulative. A Series 1994 Preferred Stock share may be converted
at the option of the holder into 1.7931 shares of common stock.
The conversion ratio has been restated to reflect the 5% common
stock dividend issued in May 1994. In addition, and upon
compliance with certain conditions, the Company may redeem the
Series 1994 Preferred Stock at the redemption prices set forth in
the Company's Articles of Amendment related to the Series 1994
Preferred Stock.
Total stockholders' equity increased $16.1 million, or 26%,
to $79.0 million at December 31, 1994 from $62.9 million at
December 31, 1993. This change primarily reflects the capital
raised in connection with
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<PAGE>
the Series 1994 Preferred Stock offering discussed above,
which was issued on April 15, 1994, partially offset by the
payment of dividends and the net loss for 1994.
Book value per share was $8.58 and $10.27 at December 31,
1994 and 1993, respectively. The decline in book value is
attributable to the one-time restructuring charges. Tangible
book value per share at December 31, 1994 was $4.16, down from
$7.37 at December 31, 1993. Tangible book value is significantly
below book value as a result of the purchase premiums associated
with branch acquisitions and the purchase of the Mortgage
Company. Tangible book value declined during 1994 from the
addition of intangible assets related to the branch acquisitions
and reclassifications of loan premiums to intangible assets.
Risk-based capital guidelines for financial institutions
adopted by the regulatory authorities went into effect after
December 31, 1990. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), signed into law on December
19, 1991, provides authority for special assessments against
insured deposits and for development of a general risk-based
deposit insurance assessment system, which the Federal Deposit
Insurance Corporation ("FDIC") implemented on a transitional
basis effective January 1, 1993.
At December 31, 1994, the Company and the Savings Bank were
in compliance with each of the applicable regulatory capital
requirements and exceeded the "adequately capitalized" regulatory
guidelines. The 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 the Bank's Report of Condition and income as of December 31,
1994, that the Bank was undercapitalized with respect to its
total risk-based capital ratio. Specifically, the FDIC
determined that the Bank's total risk-based capital ratio was
6.70%, as compared to the minimum 8%.
As a result of the capital deficiency, the Bank committed to
(1) combine the Savings Bank and the Bank; (2) consummate the
credit card securitization; (3) have the Company contribute
capital of $3.5 million to the Bank; and (4) sell certain
purchase mortgage servicing rights. All of these steps were
taken except for the sale of the purchase mortgage servicing
rights, which is expected to be consummated by March 31, 1995.
At the end of February, and as a result of the January and
February operating results (and without the consummation of the
sale of the purchase mortgage servicing rights), the Bank's total
risk-based capital ratio was 8.10%. The 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 Aiken County National Bank and Midlands National
Bank (which the Bank expects to consummate in April and May of
1995).
As a result of its total risk-based capital ratio declining
below 8%, the Company, the Bank and the FDIC entered into a
Capital Maintenance Commitment and Guaranty Agreement (the
"Guaranty Agreement") pursuant to which the Company guaranteed
that the Bank will comply with the restoration plan described
above until the Bank has been adequately capitalized on average
during each of four consecutive quarters. The Guaranty Agreement
provides that in the event the Bank fails to comply with the
applicable capital requirements, the Company will pay to the Bank
or its successors or assigns an amount equal to the lesser of (a)
5% of the Bank's total assets at the time the Bank was notified
or deemed to have notice that the Bank was undercapitalized, or
(b) the amount which is necessary to bring the Bank into
compliance with all capital standards applicable to the Bank at
the time the Bank failed to so comply.
Management does not believe that it will be required to make
payments under the Guaranty Agreement or that the Bank will not
be at least adequately capitalized in the foreseeable future.
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The following table sets forth certain capital ratios and
the amount of capital of the Company and the Bank at December 31,
1994 and 1993, giving full effect to the exclusion of intangible
assets.
<TABLE>
<CAPTION>
Capital Ratios
Total Tier 1
Risk-based Risk-based
Capital Ratio Capital Ratio Leverage Ratio
12/31/94 12/31/93 12/31/94 12/31/93 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
The Company 8.35% 9.43% 7.65% 8.43% 5.44% 6.02%
The Bank 6.70 8.86 6.14 7.89 5.27 5.81
Adequately Capitalized
Minimum Requirement 8.00 8.00 4.00 4.00 4.00 4.00
</TABLE>
The Company and its subsidiaries are subject to certain
regulatory restrictions on the amount of dividends they are
permitted to pay. The Company has paid all scheduled cash
dividends on the Series 1993 Preferred Stock, the Series 1993B
Preferred Stock and the Series 1994 Preferred Stock since their
respective issuances. During each of the last six years, the
Company issued 5% common stock dividends to common stockholders.
In November 1993, the Board of Directors initiated a regular
quarterly cash dividend of $0.05 per share payable on the common
stock, the first of which was paid on February 1, 1994. Cash
dividends have been paid on a quarterly basis since the
initiation of the cash dividend. The Board of Directors
increased the quarterly cash dividend to $0.06 beginning in the
first quarter of 1995. The Company presently intends to continue
to pay this quarterly cash dividend on the common stock; however,
future dividends will depend upon the Company's financial
performance and capital requirements.
In the future, the Company may engage in offerings of equity
or debt to raise capital.
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 investments and earnings. Temporary investments
averaged 1.18% and 2.31% of earning assets in 1994 and 1993,
respectively. 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 borrowing from the Federal
Home Loan Bank.
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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 December 31, 1994, the Bank's liquidity
ratio was approximately 13%. At December 31, 1994, the Bank had
unused short-term lines of credit with correspondent banks of
$17.8 million. All of the lenders have reserved the right to
withdraw these lines of credit at their option. In addition, the
Company, through its subsidiaries, has access to borrowing from
the Federal Home Loan Bank. At December 31, 1994, unused
borrowing capacity from the Federal Home Loan Bank totaled $33
million. Management believes that these sources are adequate to
meet its liquidity needs. On January 24, 1995, the Company
completed the securitization of the majority of its credit card
loans. In connection with this securitization, the Company
received approximately $70 million which provided additional
liquidity.
As reported in the Consolidated Statements of Cash Flows,
changes in deposits, borrowed funds, investments and equity
provided cash in 1994 of $157.4 million, $89.2 million, $51.4
million and $21.9 million, respectively. The Company used this
cash to increase loans by $265.4 million, capital expenditures by
$10.4 million, cash balances by $27.7 million, operating
activities by $13.5 million and dividends by $2.9 million.
The Company plans to meet its future cash needs through the
proceeds of stock offerings, liquidation of temporary
investments, maturities or sales of loans and investment
securities and generation of deposits. By increasing the rates
paid on deposits, the Company would be able to raise deposits.
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. 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 Asset/Liability
Management Committee uses an asset/liability simulation model
which quantifies balance sheet and earnings variations under
different interest rate environments to measure and manage
interest rate risk.
ASSET QUALITY
Prudent risk management involves assessing risk and managing
it effectively. Certain credit risks are inherent in making
loans, particularly commercial, real estate and consumer loans.
The Company attempts to manage credit risks by adhering to
internal credit policies and procedures. These policies and
procedures include a multi-layered loan approval process, officer
and customer limits, periodic documentation examination and
follow-up procedures for any exceptions to credit policies.
Loans are assigned a grade and those that are determined to
involve more than normal credit risk are placed in a special
review status. Loans that are placed in special review status
are required to have a plan under which they will be either
repaid or restructured in a way that reduces credit risk. Loans
in this special review status are reviewed monthly by the loan
committee of the Board of Directors.
As demonstrated by the following key analytical measures of
asset quality, management believes the Company has effectively
managed its credit risk. Net loan charge-offs, excluding credit
card loans, decreased to $779,000 in 1994, from $1.3 million in
1993 and $1.2 million in 1992. During 1994, net loan charge-offs
as a percentage of average loans have remained low at 0.11%,
compared with 0.26% for 1993 and and 0.31% in 1992.
Nonperforming assets as a percentage of loans and foreclosed
property were 0.25% and 0.28% at December 31, 1994 and 1993,
respectively. At December 31, 1994, the allowance for loan
losses was 312%
39
<PAGE>
of nonperforming loans. At December 31, 1994,
the Company had $1.0 million in non-accruing loans, $675,000 in
restructured loans and $1.3 million in loans greater than ninety
days past due on which interest was still being accrued. These
asset quality measures compare favorably to the Company's bank
holding company peer group.
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 on the price of goods and services.
While the Company's noninterest income and expense and the
interest rates earned and paid are affected by the rate of
inflation, the Company believes that the effects of inflation are
generally manageable through asset/liability management. See "--
Liquidity and 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."
ACCOUNTING ISSUES
The Financial Accounting Standards Board ("FASB") has issued
Standards No. 114, "Accounting by Creditors for Impairment of a
Loan, " which proposes that all creditors value all loans for
which it is probable that the creditor will be unable to collect
all amounts due according to the terms of the loan agreement at
the present value of the expected future cash flows. This
discounting would be done at the loan's effective interest rate.
The periodic effect on net income has not been fully determined,
but is not expected to have a material impact on the Company's
financial position or results of operations. This proposed
standard would apply for fiscal years beginning after December
15, 1994. In October 1994, the FASB issued SFAS 118, "Accounting
by Creditors for Impairment of a Loan -- Income Recognition and
Disclosures." SFAS 118 amends SFAS 114 in the areas of
disclosure requirements and methods for recognizing interest
income on an impaired loan. The Statement is effective
concurrent with the effective date of SFAS 114.
The FASB has also issued an exposure draft, "Accounting for
the Impairment of Long Lived Assets," which proposes standards
for the identification of long-lived assets, identifiable
intangibles and goodwill that may need to be written down because
of an entity's inability to recover the assets' carrying values.
The periodic effect of the adoption of this standard on net
income has not been fully determined. This proposed standard
would apply for fiscal years beginning after December 15, 1994
with earlier application encouraged.
The FASB has issued an exposure draft, "Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables for Securitization
of Mortgage Loans," that proposes that an entity recognize, as
separate assets, rights to service mortgage loans for others
irrespective of how those servicing rights are acquired (i.e.,
whether purchased or originated). If adopted, this statement would
also require that gains on sales of loans be recorded as income
in the period of sale (i.e., such gain would not reduce capitalized
servicing rights). Under this proposed statement, impairment of
capitalized mortgage servicing rights would
40
<PAGE>
be measured by type of mortgage servicing right, based on fair
value using a reserve methodology. This proposed statement would
be applied prospectively in fiscal years beginning after December
15, 1995, to transactions in which an entity acquires mortgage
servicing rights and to impairment evaluations of all
capitalized mortgage servicing rights and capitalized excess
servicing receivables whenever acquired. Retroactive application
would be prohibited. The effect of this proposed statement on
the Company's results of operations has not yet been fully determined.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth on pages
24 through 42 in the Company's 1994 Annual Report to
Shareholders, which information is incorporated herein by
reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
At its Board meeting on March 15, 1995, the Company's Board
of Directors determined to dismiss Elliott Davis & Company, LLP
("ED&C") and to engage KPMG Peat Marwick LLP ("KPMG") as the
Company's auditors for the 1995 fiscal year. ED&C has served as
the Company's principal accountants since its inception in 1986.
The change in auditors resulted from the Board's decision that it
was in the Company's best interest to utilize a national
accounting firm, with its attendant size, experience and
expertise.
ED&C's report on the financial statements for the past two
years has not contained an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to uncertainty,
audit scope, or accounting principles.
The determination to change the Company's principal
accounting firm was recommended to the Board of Directors by the
Company's Audit Committee.
The Company has filed a current report on Form 8-K dated
March 15, 1995 regarding the change in the Company's auditors.
The information in such report is incorporated herein by
reference.
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<PAGE>
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth on pages
2 through 4, page 8, pages 19 and 20 of the Company's definitive
Proxy Statement for the 1995 Annual Meeting of Stockholders and is
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item may be found on pages
9 through 14 of the Company's definitive Proxy Statement for the
1995 Annual Meeting of Stockholders and is incorporated herein by
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is set forth on pages
15 through 18 of the Company's definitive Proxy Statement for the
1995 Annual Meeting of the Stockholders and is incorporated
herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth on pages
18 through 19 of the Company's definitive Proxy Statement for the
1995 Annual Meeting of the Stockholders and is incorporated
herein by reference.
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<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Certain documents filed as part of this Form 10-K:
1. Financial Statements
The information required by this item is set forth on pages
24 through 42 in the Company's 1994 Annual Report to
Shareholders, which information is incorporated herein by
reference. The Report of Independent Public Accountants,
dated February 3, 1995 of Elliott, Davis & Company, L.L.P.
is included on page 24 of the Company's 1994 Annual Report
to Shareholders, which information is incorporated herein by
reference.
2. Financial Statement Schedules
All other financial statements or schedules have been
omitted since the required information is included in the
consolidated financial statements or notes thereto, or is
not applicable or required.
3. Listing of Exhibits
3.1 -- Articles of Incorporation. Incorporated by reference to
Exhibit 3.1 of the Company's Registration Statement on
Form S-4, Commission File No.57389
3.2 -- Bylaws: Incorporated by reference to Exhibit 4.2 of
Carolina First Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993,
Commission File No. 0-15083.
4.1 -- Specimen CFC Common Stock certificate: Incorporated by
reference to Exhibit 4.1 of Carolina First
Corporation's Registration Statement on Form S-1,
Commission File No. 33-7470.
4.2 -- Specimen Noncumulative Convertible Preferred Stock
Series 1993 certificate: Incorporated by reference to
Exhibit 4.3 from Carolina First Corporation's
Registration Statement on Form S-2, Commission File No.
33-57110.
4.3 -- Specimen Convertible Preferred Stock Series 1993B
certificate: Incorporated by reference to Exhibit 4.3
from Carolina First Corporation's Registration
Statement on Form S-2, Commission File No. 33-75458.
4.4 -- Specimen Noncumulative Convertible Preferred Stock
Series 1994 certificate: Incorporated by reference to
Exhibit 4.12 from Carolina First Corporation's
Registration Statement on Form S-2, Commission File No.
33-75458.
4.5 -- Articles of Incorporation: Included as Exhibit 3.1.
4.6 -- Bylaws: Included as Exhibit 3.2.
4.7 -- Series 1993 Preferred Stock Dividend Reinvestment Plan:
Incorporated by reference to the Prospectus in Carolina
First Corporation's Registration Statement on Form S-3,
Commission File No. 33-72868.
4.8 -- Common Stock Dividend Reinvestment Plan: Incorporated
by reference to the Prospectus in Carolina First
Corporation's Registration Statement on Form S-3,
Commission File No. 33-73280.
4.9 -- Series 1994 Preferred Stock Dividend Reinvestment Plan:
Incorporated by reference to the Prospectus in Carolina
First Corporation's Registration Statement on Form S-3,
Commission File No. 33-79774.
4.10 -- Shareholders' Rights Agreement: Incorporated by
reference to Exhibit 2 of Carolina First Corporation's
Current Report on Form 8-K dated November 9, 1993,
Commission File No. 0-15083.
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<PAGE>
10.1 -- Carolina First Corporation Amended and Restated
Restricted Stock Plan: Incorporated by reference to
Exhibit 99.1 from the Company's Registration Statement
on Form S-8, Commission File No. 33-82668/82670.
10.2 -- Carolina First Corporation Employee Stock Ownership
Plan: Incorporated by reference to Exhibit 10.2 of
Carolina First Corporation's Annual Report on Form 10-K
for the year ended December 31, 1991, Commission File
No. 0-15083.
10.3 -- Carolina First Corporation Amended and Restated Stock
Option Plan: Incorporated by reference to Exhibit 99.1
from the Company's Registration Statement on Form S-8,
Commission File No. 33-80822.
10.4 -- Carolina First Corporation Salary Reduction Plan:
Incorporated by reference to Exhibit 28.1 of Carolina
First Corporation's Registration Statement on Form S-8,
Commission File No. 33-25424.
10.5 -- Noncompetition and Severance Agreement dated November
9, 1993, between Carolina First Corporation and Mack I.
Whittle, Jr.: Incorporated by reference to Exhibit 10.1
of Carolina First Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993,
Commission File No. 0-15083.
10.6 -- Noncompetition and Severance Agreement dated November
9, 1993, between Carolina First Corporation and William
S. Hummers III: Incorporated by reference to Exhibit
10.2 of Carolina First Corporation's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1993,
Commission File No. 0-15083.
10.7 -- Noncompetition and Severance Agreement dated November
9, 1993, between Carolina First Corporation and James
W. Terry, Jr.: Incorporated by reference to
Exhibit 10.3 of Carolina First Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1993, Commission File No. 0-15083.
10.8 -- Reorganization Agreement entered into as of October 13,
1994 by and among Carolina First Bank, Carolina First
Corporation and Aiken County National Bank.
Incorporated by referenced to Exhibit 2.1 of Carolina
First Corporation's Registration Statement on Form S-4,
Commission File No. 33-57389.
10.9 -- Reorganization Agreement dated as of November 14,1994
between and among Carolina First Corporation, Carolina
First Bank and Midlands National Bank: Incorporated by
reference to Exhibit 10.8 of Carolina First
Corporation's Registration Statement on Form S-4,
Commission File No. 33-57389.
10.10 -- Short-Term Performance Plan: Incorporated by
reference to Exhibit 10.3 of Carolina First
Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993, Commission
File No. 0-15083.
10.11 -- Carolina First Corporation Long-Term Management
Performance Plan.
10.12 -- Carolina First Corporation Employee Stock Purchase
Plan: Incorporated by reference to Exhibit 99.1 from
the Company's Registration Statement on Form S-8,
Commission File No. 33-79668.
10.13 -- Carolina First Corporation Directors Stock Option Plan:
Incorporated by reference to Exhibit 99.1 from the
Company's Registration Statement on Form S-8,
Commission File No. 33-82668/82670.
10.14 -- Pooling and Servicing Agreement dated as of December
31, 1994 between Carolina First Bank, as Seller and
Master Servicer, and The Chase Manhattan Bank, as
Trustee. Incorporated by reference to Exhibit 28.1 of
Carolina First Corporation's Current Report on Form 8-K
dated as of January 24, 1995.
10.15 -- 1994-A Supplement dated as of December 31, 1994 between
Carolina First Bank, as Seller and Master Servicer, and
The Chase Manhattan Bank, as Trustee. Incorporated by
reference to Exhibit 28.2 of Carolina First
Corporation's Current Report on Form 8-K dated as of
January 24, 1995.
10.16 -- Capital Maintenance Commitment and Guaranty between
Carolina First Corporation, Carolina First Bank and the
Federal Deposit Insurance Corporation.
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<PAGE>
10.17 -- Servicing Rights Purchase Agreement between Bank of
America, F.S.B. and Carolina First Bank dated as of
March 31, 1995: To be filed by amendment when
available.
11.1 -- Computation of Per Share Earnings.
13.1 -- 1994 Annual Report to Shareholders of the Company.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank and
Carolina First Mortgage Company.
23.1 -- Consent of Elliott, Davis & Company, L.L.P.
27.1 -- Financial Data Schedules.
(b) Certain reports on Form 8-K dated January 24, 1995, Commission
File No. 0-15083 and March 15, 1995, Commission File No. 0-
15083.
(c) Exhibits required to be filed with this Form 10-K by Item 601
of Regulation S-K are filed herewith or incorporated by
reference herein.
(d) Certain additional financial statements. Not applicable
45
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CAROLINA FIRST CORPORATION
Signature Title Date
/s/ Mack I. Whittle, Jr. President, Chief March 27, 1995
Mack I. Whittle, Jr. Executive Officer and Director
/s/ William S. Hummers III Executive Vice President and March 27, 1995
William S. Hummers, III Secretary
(Principal Accounting and
Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated:
Signature Title Date
/s/ William R. Timmons, Jr. Director March 27, 1995
William R. Timmons, Jr.
/s/ Mack I. Whittle, Jr. Director March 27, 1995
Mack I. Whittle, Jr.
/s/ William S. Hummers III Director March 27, 1995
William S. Hummers III
/s/ Judd B. Farr Director March 27, 1995
Judd B. Farr
Director March , 1995
C. Claymon Grimes, Jr.
/s/ Robert E. Hamby, Jr. Director March 27, 1995
Robert E. Hamby, Jr.
/s/ M. Dexter Hagy Director March 27, 1995
M. Dexter Hagy
Director March , 1995
R. Glenn Hilliard
/s/ Richard E. Ingram Director March 27, 1995
Richard E. Ingram
46
<PAGE>
Director March , 1995
Charles B. Schooler
/s/ Elizabeth P. Stall Director March 27, 1995
Elizabeth P. Stall
/s/ William M. Webster III Director March 27, 1995
William M. Webster III
47
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
10.11 Carolina First Corporation Long-Term Management
Performance Plan.
10.16 Capital Maintenance Commitment and Guaranty between
Carolina First Corporation, Carolina First Bank and the
Federal Deposit Insurance Corporation.
11.1 Computation of Per Share Earnings.
13.1 1994 Annual Report to Shareholders of the Company.
23.1 Consent of Elliott, Davis & Company, L.L.P.
48
<PAGE>
EXHIBIT 10.11
CAROLINA FIRST CORPORATION
LONG-TERM MANAGEMENT PERFORMANCE PLAN
I. PURPOSE
This Long-Term Management Performance Plan is designed to
aid the Compensation Committee of the Board of Directors of
Carolina First Corporation in determining appropriate levels of
bonus compensation for certain key employees of the Company based
on the long-term performance of the Company. The purpose of such
long-term incentive bonus compensation is to recognize and reward
those key employees of the Company who contribute substantially
to the achievement of long-term, strategic objectives of the
Company and to aid in attracting and retaining key management
talent.
II. DEFINITIONS
The following terms have the following meanings as used in
the Plan:
Award means incentive compensation award hereunder
authorized by the Committee for payment to a Participant.
Base Number shall have the meaning ascribed to such term in
Section VII hereof.
Base Salary shall mean the base cash compensation paid to a
Participant by the Company or a Subsidiary during a particular
fiscal year, which compensation shall be fixed and not contingent
upon anything but continued employment. Base Salary shall not
include matching amounts paid by the Company under any employee
benefit plan.
Beneficiary means the beneficiary or beneficiaries
designated to the Company in writing by a Participant to receive
any benefit payable hereunder after his death. If a Participant
shall not so designate a beneficiary, his estate shall be his
beneficiary.
Board means the Board of Directors of the Company.
CEO means the Chief Executive Officer of the Company.
Committee means all members of the Compensation Committee of
the Board who are "disinterested persons" (as defined in Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, or any applicable successor rule or regulation).
Company means Carolina First Corporation and, where the
context so requires, any Subsidiary, having an employee who has
1
<PAGE>
been designated as a Participant for any specific Performance
Cycle.
Group shall have the meaning ascribed to such term in
Section IV hereof.
Participant means an employee of the Company (or Subsidiary)
who has been designated by the Committee as eligible to receive
an Award for a specific Performance Cycle.
Performance Cycle means the three-year period of time within
which performance is measured for the purposes of determining
whether an Award has been earned.
Performance Goals means the performance goals as determined
by the Committee for a specific Performance Cycle and set forth
on an exhibit attached hereto, which Performance Goals may be
amended and reweighted in the discretion of the Committee at the
beginning of each Performance Cycle or as otherwise specifically
provided for herein.
Points means the "points" described in Section VI hereof.
Plan means this Long-Term Management Performance Plan.
Subsidiary means a corporation or enterprise at least 50% of
whose stock is owned by the Company at the time of election of
participation and payment of an award under this Plan.
III. ADMINISTRATION
Subject to express contrary provisions of law or the Plan,
the Plan will be administered by the Committee. The Committee
shall have full power and authority to (i) establish, revise and
approve the Performance Goals for the Company, (ii) interpret all
terms and provisions of the Plan, (iii) adopt, amend and rescind
general and special rules and regulations for the Plan's
administration and (iv) make all other determinations necessary
or advisable for the administration of this Plan. The Committee
shall act at any meeting by a majority of its members or by the
unanimous written consent of its members. Any document signed by
the chairman of the Committee in the name of the Committee shall
be presumed to have been authorized by the Committee.
All actions taken by the Committee under the Plan shall be
final, conclusive and binding upon the Company, the shareholders,
the employees of the Company, and any person having any interest
in the Plan.
No member of the Board or Committee shall be liable for any
act or omission in connection with the execution of his duties or
the exercise of his discretion under the Plan, except when such
2
<PAGE>
acts or omissions represent gross negligence or willful
misconduct. To the extent permitted by the Company's bylaws and
applicable law, the Company shall defend and hold harmless each
such person from any and all claims, losses, damages, expenses
(including counsel fees) and liabilities (including any amounts
paid in settlement with the approval of the Board of Directors)
arising from any act or omission with respect to the Plan, except
when such acts or omissions represent gross negligence or willful
misconduct.
IV. ELIGIBILITY
Eligibility to participate in the Plan shall be restricted
to those Company employees who, by reason of their positions and
performance, are expected to contribute substantially to the
long-term success of the Company during the Performance Cycle for
which they are selected. Company Directors who are not employees
of the Company are not eligible to receive Awards under the Plan.
Prior to commencement of each Performance Cycle, the CEO shall
submit to the Committee his recommendations as to which employees
shall be Participants. The Committee shall approve or disapprove
each such recommendation prior to the commencement of the
Performance Cycle. The CEO may recommend, and the Committee may
approve, as a Participant a person who is hired during a
Performance Cycle.
The Committee, in its discretion, shall place each
Participant in one of three Groups. In general, and subject to
the Committee's discretion, the Groups will be comprised as
follows:
Group 1: CEO and certain Executive Vice Presidents
Group 2: Certain Executive Vice Presidents, Senior Vice
Presidents, Subsidiary Presidents and Division
Heads
Group 3: Key Managers, Department Heads
V. PERFORMANCE CYCLES AND DETERMINATION OF PERFORMANCE GOALS
The Plan shall have four Performance Cycles, the first
beginning in fiscal 1993 and continuing through fiscal 1995, the
second beginning in fiscal 1995 and continuing through fiscal
1997, the third beginning in fiscal 1997 and continuing through
fiscal 1999, and the fourth beginning in fiscal 1999 and
continuing through fiscal 2001.
Within the first two months of each Performance Cycle, the
Committee shall determine all Performance Goals, the relevant
weightings of each such Performance Goal, and the applicability
of various Performance Goals to the various Groups. Such
Performance Goals shall be set forth in writing and attached
hereto as an exhibit. The Committee may establish different
Performance Goals
3
<PAGE>
(and different weightings) for each Performance
Cycle.
The Performance Goals applicable to a particular Participant
shall be communicated in writing to each Participant within such
first two months of the Performance Cycle.
In the event that during a Performance Cycle, the Committee
determines that an extraordinary and material change has occurred
in the business, operations, corporate or capital structure of
the Company, or the manner in which it conducts its business, and
determines that the established Performance Goals are no longer
suitable for such Performance Cycle, the Committee may modify
such Performance Goals, in whole or in part, as it deems
appropriate and equitable, subject to compliance with applicable
law.
VI. POINTS EARNED
Each Participant shall earn Points, which shall be used in
computing any Award. If a Participant meets all of his
Performance Goals exactly, he shall earn 100 Points. Points will
be earned by a Participant on a graduated basis, based upon the
percentage of a given Performance Goal that was met. The
percentage of a given Performance Goal that was met shall be
multiplied by the number of Points designated for such
Performance Goal. However, in order for a Participant to earn
any Points for a Performance Goal, 85% or more of such
Performance Goal must be met. The total number of Points for a
Participant shall be the sum of all such Performance Goal Points
which have been earned.
For example: If 90% of a Group 1 Participant's EPS
Performance Goal is met (under the weighted Performance Goals set
forth below), he would earn 54 Points (90% x 60 Points). If 110%
of a Group 1 Participant's EPS Performance Goal is met (under the
weighted Performance Goals set forth below), he would earn 66
Points (110% x 60 Points).
Performance Goal Points
EPS 60
Market Share 15
NPA/TL 15
NIE-NII/AA 10
Total 100
Notwithstanding the foregoing, for Participants who have an
EPS Performance Goal among their criteria, unless at least 85% of
the EPS Performance Goal is met, no Points shall be earned, and
no Award shall be made under this Plan to such Participants.
VII. AMOUNTS AND COMPOSITION OF AWARDS
A Participant's Award, if any, shall be computed, as
provided below, based upon (i) his number of Points and (ii) his
Base
4
Number.
A Group 1 Participant's Base Number shall be equal to 100%
of his Base Salary in year 3 of the relevant Performance Cycle.
A Group 2 Participant's Base Number shall be equal to 80% of his
Base Salary in year 3 of the relevant Performance Cycle. A Group
3 Participant's Base Number shall be equal to 70% of his Base
Salary in year 3 of the relevant Performance Cycle.
Participants shall receive Awards in accordance with the
following schedule:
Below 85 Points No Award
85 to 99 Points 25% of Base Number plus
5% of Base Number for each
Point in excess of 85
100 to 125 Points 100% of Base Number plus
1% of Base Number for each
Point in excess of 100
Above 125 Points 125% of Base Number plus
1.5% of Base Salary for each
Point in excess of 125
Once earned, an Award shall be paid in the form of
Nonqualified Stock Options, Restricted Stock and Cash in the
following percentages:
Nonqualified Restricted
Participant Stock Options Stock Cash
Group 1 50% 25% 25%
Group 2 50% 25% 25%
Group 3 25% 50% 25%
Nonqualified stock options shall be granted pursuant to and
in accordance with the Company's Amended and Restated Stock
Option Plan. It is contemplated that such options shall have a
duration of ten years from the date of grant, and that one-third
of such stock options shall be exercisable on each of the first
three anniversaries of the grant thereof. For purposes of this
Plan, the "value" of such stock options will be their aggregate
exercise price. (For example, if a Group 1 Participant is
entitled to receive an Award of $30,000 and the fair market value
of the Company's Common Stock is $15 per share, the Group 1
Participant shall be granted options to purchase 1,000 shares at
an exercise price of $15 in order to receive 50% of his Award in
stock options).
Restricted Stock shall be granted pursuant to and in
accordance with the Company's Amended and Restated Restricted
Stock
5
<PAGE>
Agreement Plan. It is contemplated that such restricted
stock shall be granted for nominal consideration and shall vest
one-third on each of the first three anniversaries of the grant
thereof.
VIII. DETERMINATION AND PAYMENT OF AWARDS
Promptly after the conclusion of each Performance Cycle, the
Committee shall review the performance of each Participant with
respect to his Performance Goals and shall make final
determinations as to the Awards, if any, which shall be payable
hereunder. Awards shall be prorated to reflect a Participant's
hire date in the case of a Participant was not employed during an
entire Performance Cycle.
All such determinations shall be final, conclusive and
binding upon the Company, the shareholders, the employees of the
Company, and any person having any interest in the Plan.
The Company shall pay all Awards that have been finally
approved as soon as possible following the date of which the
independent public accountants of the Company sign their report
on the financial statements of the Company for the relevant
Performance Cycle. No special or separate fund shall be
established, and no segregation of assets shall be made to assure
payment of any Award.
IX. WITHHOLDING
The Company shall have the right to deduct and withhold all
sums required to be withheld by federal, state, local or other
tax authorities with respect to the payment of any Award. There
is no obligation that any Participant be advised of the existence
of any such tax prior to the date of payment.
X. TERMINATION OF EMPLOYMENT
In the event of the death, disability or retirement of an
Participant during a Performance Cycle, the Committee may, in its
sole discretion, grant a pro rata Award at the end of such
Performance Cycle. Any such Award shall be paid to the
Participant or his/her Beneficiary, as appropriate. In the event
of termination of the employment of a Participant during a
Performance Cycle for any reason other than death, disability or
retirement, no Award shall be payable. In the event of the
death, disability or retirement of an Participant after the end
of a Performance Cycle, but prior to payment of an Award, such
shall be paid to the Participant or his/her Beneficiary, as
applicable.
XI. RIGHTS OF PARTICIPANTS AND BENEFICIARIES
Notwithstanding any other provision herein to the contrary,
6
<PAGE>
nothing in the Plan shall be deemed to give any Participant, or
his legal representative or assigns, or any other person or
entity claiming under or through an Participant, the right to
receive an Award under the Plan until such Award has granted in
writing to the Participant by the Committee.
Neither any Participant nor any other person shall have,
under any circumstances, any interest whatsoever, vested or
contingent, in any assets of the Company, or in any share or
shares of capital stock of the Company, by virtue of any Award of
any unpaid portion thereof.
GRANT OF AN AWARD TO A PARTICIPANT UNDER THIS PLAN SHALL NOT
BE CONSTRUED AS CONSTITUTING A COMMITMENT, GUARANTEE, AGREEMENT
OR UNDERSTANDING OF ANY KIND THAT THE COMPANY SHALL CONTINUE TO
EMPLOY SUCH EMPLOYEE DURING ANY PERFORMANCE CYCLE, OR THAT SUCH
EMPLOYEE WILL BE SELECTED AS AN PARTICIPANT FOR ANY SUBSEQUENT
PERFORMANCE CYCLE. SPECIFICALLY, THIS PLAN DOES NOT ALTER THE
AT-WILL STATUS OF ANY COMPANY EMPLOYEE.
The Company shall not be liable for the debts, contracts or
engagements of any Participant or any Beneficiary. Rights to
cash payments under this Plan may not be taken in execution by
levy, attachment or garnishment, or by any other legal or
equitable proceeding, while in the hands of the Company, nor
shall any Participant or any Beneficiary have any right to
assign, grant a security interest in, pledge or hypothecate any
Award or expectation of receiving an Award.
If the Company is to be consolidated or merged with another
corporation and the Company's directors do not constitute a
majority of the directors of the surviving company, each Award
hereunder, which at the time of such consolidation or merger is
not yet payable or is unpaid, shall be paid (either in full or on
a pro rata basis at the Committee's discretion) prior to the
effective date of such merger or consolidation.
XII. AMENDMENT AND TERMINATION OF PLAN
Subject to applicable law (including the regulations of
Section 16 of the Securities Exchange Act of 1934, as amended),
the Plan may be amended or terminated at any time by the Board of
Directors or the Committee, provided such amendment or
termination may not effect any Awards which have been granted.
XIII. EFFECTIVE DATE
The Plan shall become effective as to Performance Cycles
commencing on or after January 1, 1993 and shall remain in effect
until January 1, 2002, unless terminated earlier by the Board;
provided, however, that no action taken pursuant hereto which
involves the issuance of equity securities shall be effective
7
<PAGE>
unless and until any requisite shareholder approval shall have
been received.
8
<PAGE>
EXHIBIT A
Performance Goals and Weighted Criteria (1994)
This Exhibit A to the Long-Term Management Performance Plan (the
"Plan") sets forth the Performance Goals and their respective weights
for each of Groups 1, 2 and 3 for the Performance Cycle beginning
January 1, 1993 and ending December 31, 1995. Terms used herein, which
are defined in the Plan shall have the same meaning as in the Plan.
Section 1. Definitions. The following terms shall have the
following meanings.
EPS means primary earnings per common share.
Market Share means the Company's deposit market share stated as a
percentage of the total deposit market on a statewide basis.
NIE-NII/AA means the Company's non-interest expenses minus
noninterest income divided by average assets.
NPA/TL means Nonperforming Assets as a percentage of Total Loans.
Section 2. Performance Goals. The following are the Performance
Goals for the Company for the Performance Cycle beginning January 1,
1993.
EPS-- Achievement of a 25% compounded annual growth rate.
Market Share-- To represent 4% of statewide deposits on June 30, 1995.
NIE-NII/AA-- To . .
NPA/TL-- To reduce NPA/TL an average of 5% per year for each of
the fiscal years 1993, 1994 and 1995.
Section 3. Relevant Weightings of Performance Goals per Group.
The tables below set forth the relevant Performance Goals and the
weightings of each such Goal for each Group for the Performance Cycle
beginning January 1, 1993.
GROUP 1 GROUP 2 and GROUP 3
100% of Performance Goal Points 100% of Performance Goal Points
EPS 60 EPS 50
Market Share 15 Market Share 25
NPA/TL 15 NPA/TL 15
NIE-NII/AA 10 NIE-NII/AA 10
Total 100 Total 100
1
<PAGE>
EXHIBIT 10.16
CAPITAL MAINTENANCE COMMITMENT AND GUARANTY
On or about February 21, 1995, Carolina First Bank, Greenville,
South Carolina ("Bank"), submitted to the Federal Deposit Insurance
Corporation ("FDIC")a capital restoration plan dated February 16,
1995 ("Plan"), the terms of which are incorporated herein by
reference, which sets forth the Bank's proposal for becoming
adequately capitalized, as required under Section 38 of the Federal
Deposit Insurance Act ("Act"), 12 U.S.C. (section mark) 18310 ("Section 38").
In exchange for the mutual covenants contained herein (including,
without limitation, the covenants of the FDIC) and other valuable
consideration, the receipt and sufficiency of which is
acknowledged, the undersigned, Carolina First Corporation,
Greenville, South Carolina ("Guarantor") a company which owns all
of the outstanding capital stock of the Bank, hereby guarantees and
provides assurance in the form of a financial commitment, that the
Bank will comply with the aforementioned Plan until the Bank has
been adequately capitalized on average during each of four
consecutive quarters, and, in the event the Bank fails to so
comply, the Guarantor hereby agrees that it will pay to the Bank or
its successors or assigns, according to the terms approved by the
FDIC, an amount equal to the lesser of (a) 5 percent of the Bank's
total assets at the time the Bank was notified or deemed to have
notice that the Bank was undercapitalized, or (b) the amount which
is necessary to bring the Bank into compliance with all capital
standards applicable to the Bank at the time the Bank failed to so
comply. A copy of a duly certified resolution by the Board of
Directors of the Guarantor in favor of this Capital Maintenance
Commitment and Guaranty ("Commitment") is attached hereto and
incorporated herein by reference.
Each of the parties hereto acknowledge that it is in the best
interest of each of them that the Bank comply with its capital
restoration plan.
As consideration for the FDIC's covenants contained herein, the
Guarantor's covenants herein provide value to the Bank and the
Insurance Fund by committing, in support of the Bank's Plan, the
financial strength and resources of the Guarantor, its successors
and assigns, the adequacy and sufficiency of which is acknowledged.
In exchange, the FDIC agrees to (l) accept the Bank's Plan, (2)
forgo the right to treat the Bank in the same manner as if it were
significantly undercapitalized as provided in Section 38(f) of the
Act by its failure to submit and implement an acceptable plan and
(3) forgo any other such action against the Bank as would be
necessary under Section 38 absent the Commitment, thereby enhancing
the financial strength of the Guarantor and the value of its
shareholders by enhancing the financial strength of its asset, its
subsidiary Bank.
The parties specifically agree that this Commitment establishes a
<PAGE>
binding and enforceable contractual commitment for the benefit of
the Bank and the FDIC as insurer and administrator of the Insurance
Fund, and upon the Guarantor's failure to perform any of the
obligations contained herein, the FDIC, after notice to the
Guarantor, may commence legal action to enforce this Commitment
either in its corporate capacity as insurer, or in its receivership
capacity in the event of the failure of the Bank, as intended
beneficiary of this Commitment.
It is further specifically agreed, that the commitment contained
herein shall survive the failure of the Bank, and shall continue as
a binding contractual commitment of the Guarantor, its successors
and assigns.
The Guarantor waives any right to notice of and information from
the FDIC concerning the Bank's performance under the Plan prior to
the Bank's failure to comply.
This Commitment and the rights and obligation hereunder shall be
governed by and shall be construed in accord with the Federal law
of the United States, and, in the absence of controlling Federal
law, in accord with the laws of the State of South Carolina.
Nothing contained herein shall preclude the FDIC from taking any
other appropriate enforcement action against the Bank, including
appropriate action under Section 38 of the Act not related to the
absence of this Commitment, and no enforcement action brought
against the Bank by the FDIC shall excuse the Guarantor from the
obligations contained herein.
This Commitment reflects the complete and full agreement entered
among the parties and may not be modified, released, renewed or
extended in any manner except by a writing signed by all the
parties .
Executed and delivered as of this day of March, 1995.
Carolina First Bank
By:
Name and Title
Carolina First Corporation
By:
Name and Title
Federal Deposit Insurance Corporation
By:
Name and Title
2
<PAGE>
CERTIFICATE OF ADOPTION OF RESOLUTION
I, William S. Hummers III, do hereby certify that I am the
Secretary of Carolina First Corporation, Greenville, South Carolina
("Guarantor"), and that the Capital Maintenance Commitment and
Guaranty executed in conjunction with the capital restoration plan
dated February 16, 1995, submitted by the Carolina First Bank,
Greenville, South Carolina (Bank"), was executed pursuant to duly
authorized Resolution of the Board of Directors of the Guarantor
dated , 1995, a copy of which is attached, which
authorizes Mack I. Whittle, Jr. to execute such agreements on
behalf of the Bank, or which authorizes that person to execute this
particular Guarantee. Furthermore, I certify that the foregoing
Resolution has not been modified or rescinded, and is in full force
and effect as of the date of this CERTIFICATE.
Dated this day of March, 1995.
Secretary
Sworn to and subscribed before me this day of
1995.
Notary Public
My Commission Expires:
EXHIBIT 11.1
CAROLINA FIRST CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
($, Except Share Data, in Thousands)
Year Ended
December 31, 1994
Primary
Net income (loss) applicable to
common shareholders $ (4,302)
Shares:
Weighted average number of
outstanding common shares 4,521,274
Primary earnings per common share $ (0.95)
Fully Diluted
Net income applicable to
common shareholders $ (4,302)
Dividends on preferred stock 2,433
Net income $ (1,869)
Shares:
Weighted average number of
outstanding common shares 4,521,274
Weighted average common share
equivalents from preferred stock 2,468,729
Total common share equivalents 6,990,003
Fully diluted earnings per share $ (0.27)
CAROLINA FIRST CORPORATION
1994 ANNUAL REPORT
<PAGE>
CORPORATE PROFILE
Carolina First Corporation, headquartered in Greenville, South Carolina, is
one of the largest independent bank holding companies in South Carolina with
assets of over $1 billion and 46 banking offices throughout the state. Since its
inception in 1986, Carolina First has experienced exceptional growth coupled
with outstanding credit quality. Carolina First is a high growth franchise based
on the "super community bank" strategy serving individuals and small- to medium-
sized businesses. Carolina First intends to be South Carolina's bank.
Its two subsidiaries are Carolina First Bank (CFB), a state-chartered
commercial bank, and Carolina First Mortgage Company (CFMC), a mortgage banking
operation. CFB is the largest South Carolina-based commercial bank, and CFMC is
the fifth largest mortgage loan servicer in South Carolina. Through its
subsidiaries, Carolina First provides a full range of banking services,
including mortgage, trust and investment services, designed to meet
substantially all the financial needs of its customers.
CONTENTS
Financial Highlights............................................ 2
Letter to Shareholders.......................................... 3
Strategies and Markets ......................................... 7
Management's Discussion and Analysis............................ 8
Report of Management............................................24
Report of Independent Public Accountants........................24
Consolidated Financial Statements...............................25
Notes to Consolidated Financial Statements......................29
Directory.......................................................43
Shareholder Information.........................................47
<PAGE>
FINANCIAL HIGHLIGHTS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands, except share data)
<TABLE>
<CAPTION>
FIVE-YEAR
Years Ended December 31, COMPOUND
1994 1993 1992 1991 1990 GROWTH RATE
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net interest income................. $41,627 $26,943 $17,819 $12,866 $10,241 39.0%
Provision for loan losses........... 950 909 1,453 1,423 790 1.8
Noninterest income, excluding
securities transactions............ 7,624 5,590 2,939 1,622 1,099 51.1
Securities transactions............. 234 662 517 664 (4) 68.9
Noninterest expenses................ 50,453 25,178 16,145 11,607 8,927 49.5
Net income (loss) (1)............... (1,869) 4,935 2,517 1,680 1,045
PER COMMON SHARE DATA (2)
Net income (loss)................... $(0.95) $ 0.90 $ 0.57 $ 0.51 $0.32
Book value (December 31)............ 8.58 10.27 9.91 9.72 9.28
Market price (December 31).......... 14.00 12.38 11.56 7.34 7.61
Cash dividends paid................. 0.20 - - - -
FINANCIAL RATIOS
Return on average assets(3)......... (0.19)% 0.71% 0.53% 0.43% 0.32%
Return on average equity(3)......... (2.34) 8.50 6.29 5.39 3.54
Net interest margin................. 4.89 4.31 4.06 3.63 3.37
ASSET QUALITY RATIOS
Nonperforming assets as a percentage
of loans and foreclosed property... 0.25% 0.28% 0.49% 0.45% 0.69%
Net loan charge-offs as a percentage
of average loans................... 0.11 0.26 0.31 0.18 0.17
Allowance for loan losses to
nonperforming loans................ 312 1,019 489 442 200
</TABLE>
<TABLE>
<CAPTION>
FIVE-YEAR
December 31, COMPOUND
1994 1993 1992 1991 1990 GROWTH RATE
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
Total assets..................... 1,120,097 $816,421 $ 529,063 $447,314 $ 345,745 28.0%
Loans-net of unearned income..... 865,869 565,158 396,557 338,701 275,315 30.0
Allowance for loan losses........ 5,267 5,688 4,263 3,727 2,403 20.9
Nonperforming assets............. 2,204 1,579 1,946 1,538 1,901 (3.1)
Securities....................... 117,059 114,726 78,300 56,241 40,184 22.4
Total earning assets............. 983,928 734,346 477,323 407,708 317,501 26.2
Total deposits................... 925,448 724,585 476,268 407,371 299,933 26.3
Shareholders' equity............. 79,041 62,869 44,225 31,875 30,235 22.3
OPERATIONS DATA
Banking offices.................. 46 37 16 15 9
Full-time equivalent employees... 499 430 228 204 131
</TABLE>
(1) After fourth quarter 1994 restructuring charges of $9,415 (after-tax).
(2) Per share data have been restated to reflect 5% stock dividends.
(3) After fourth quarter 1994 restructuring charges. Excluding these charges,
the return on average assets was 0.78%, and the return on average equity was
9.47%.
2
<PAGE>
TO OUR SHAREHOLDERS
(Photo of Mack I. Whittle, Jr. appears here)
MACK I. WHITTLE, JR.
PRESIDENT & CHIEF EXECUTIVE OFFICER
When Carolina First opened its first branch, we set out to build the premier
bank in South Carolina. We planned on creating a bank that would one day top a
billion dollars in assets. Eight short years later, I am proud to report that
Carolina First has exceeded the billion dollar threshold.
At December 31, 1994, total assets were $1.1 billion, an increase of 37%
over 1993. Our five-year compound growth rate for total assets was 28%, one of
the highest growth rates of any financial institution in the Southeast. We
reported a net loss for 1994 of $1.9 million, or a loss of $0.95 per common
share. However, the net loss for 1994 resulted from one-time restructuring
charges of $9.4 million (after-tax). Without this restructuring charge, we met
our 1994 earnings goals which contributed to a five-year compound growth rate of
52%.
The year 1994 produced other important milestones for Carolina First. We
instituted a quarterly cash dividend of $0.05 per share to common shareholders
while maintaining our 5% common stock dividend. As of the first quarter of
1995, the Board of Directors has increased the quarterly cash dividend to $0.06
per share, reflecting our confidence in the future. The market price of
Carolina First's common stock rose 13% during 1994, and our market
capitalization now tops $100 million. We continued our expansion into new South
Carolina markets by opening four new offices, acquiring seven branches, and
announcing two mergers.
We recently announced a restructuring that merged Carolina First Savings
Bank into Carolina First Bank, securitized our credit card loans, and wrote
down related intangible assets. Fourth quarter net income included a one-time
charge for this restructuring of $9.4 million (after-tax), which offset all
operating earnings for 1994 and resulted in a net loss of $1.9 million. Despite
the one-time impact on income this year, we expect the restructuring to
increase future pre-tax income by approximately $2.8 million a year, through
increased operational efficiency, lower amortization costs, and the
reinvestment of the cash currently invested in our credit card portfolio.
Carolina First's accomplishments this year, and for the past eight years,
are attributable to our commitment to excellence in all aspects of our business.
I'd like to take this opportunity to discuss three of the most important areas:
leading South Carolina, focusing on fundamentals, and remaining poised to meet
the future.
EIGHT SHORT YEARS LATER,
I AM PROUD TO REPORT THAT
CAROLINA FIRST HAS EXCEEDED
THE BILLION DOLLAR THRESHOLD.
3
<PAGE>
LEADING SOUTH CAROLINA
To Carolina First, leadership is defined by our commitment to our customers,
our communities, our employees, and our shareholders. We are the leading South
Carolina-based commercial bank, serving 30 communities in 14 counties from 46
banking offices throughout the state. As the "local" bank, we understand the
unique needs of the individuals and businesses that we serve, yet we offer the
expertise, services, and products of the largest financial institution.
Our philosophy of community service is distinct from those out-of-state
banks doing business in South Carolina. A fundamental element of our strategy is
to reinvest local funds into South Carolina communities, thereby promoting local
economic growth. Carolina First Bank's "outstanding" rating under federal
community reinvestment regulations reflects our ability to meet the credit needs
of our local communities, including low and moderate income neighborhoods. By
investing in our communities, Carolina First makes South Carolina a better place
to live and do business.
We could not have achieved our leadership position without the skills and
contributions of our over 500 employees. We have always prided ourselves on
employing outstanding individuals who are also skilled bankers. We also have
capitalized on the opportunities presented by the acquisitions of South Carolina
banks by out-of-state banks in attracting experienced and respected bankers who
understand South Carolina markets. As we have grown and expanded our presence
throughout the state, we have created jobs in South Carolina, for South
Carolinians.
In achieving a leadership role, we also have looked to our communities for
guidance. We have assembled a truly statewide board of directors, which
reflects the diversity of perspectives and skills that make South Carolina such
a vibrant place. The business and community leaders on our corporate board,
bank board, and local advisory boards lead us in our continued pursuit to be
the premier bank in South Carolina.
FOCUSING ON FUNDAMENTALS
Carolina First's focus on the fundamentals of banking - asset quality,
capital strength, net interest income, fee income growth, operating efficiencies
- has given us the opportunity to report favorable results to our shareholders
year after year.
Carolina First continued this attention to the basics in 1994. First, we
maintained our tradition of high asset quality. At December 31, 1994,
nonperforming assets as a percentage of loans and foreclosed property were a low
0.25%. We
A FUNDAMENTAL ELEMENT OF OUR
STRATEGY IS TO REINVEST LOCAL FUNDS
INTO SOUTH CAROLINA COMMUNITIES,
THEREBY PROMOTING ECONOMIC GROWTH.
4
<PAGE>
complemented this soundness with a strong capital base. In April, we raised
$21 million in new equity through a successful public offering of 920,000 shares
of our Series 1994 preferred stock. And we carefully managed our lending and
deposit strategies to achieve a net interest margin of 4.89% for the year, our
best performance yet.
We also sought during 1994 to position ourselves to increase fee income in
the future. Our mortgage bank subsidiary, Carolina First Mortgage Company,
services a mortgage loan portfolio of $800 million, making it the fifth largest
mortgage loan servicer in South Carolina. Our mortgage servicing volume is now
large enough to realize the economies of scale available in the servicing
business. Our trust department has expanded, both in the markets we serve and
the products we offer. With 11 new branches in 1994, a 45% increase in
customers, and greater market penetration in the communities we serve, we
expect increased fee income from our service charges.
Another fundamental goal is maximizing operating efficiency. Our corporate
restructuring is designed to do that. Our projection is that the restructuring
will increase pre-tax earnings by approximately $2.8 million per year. Part of
this increase is expected to come from consolidation of our two banking
subsidiaries into one entity. The result will be substantial regulatory and
administrative cost savings. The restructuring also initiated a program of
credit card securitization that permits Carolina First to continue to receive
income while allowing us to invest the cash received in loans in our markets.
POISED TO MEET THE FUTURE
Our aggressive expansion over the last few years has made Carolina First the
largest South Carolina-based commercial bank. We have a significant presence in
three of the four largest banking markets in South Carolina and entered the
fourth in 1994 with the acquisition of our first Charleston branch at the
Citadel Mall. One of our principal goals in 1995 is to expand our presence in
the Charleston market, and thereby achieve a strong position in these four
markets. We continue to grow in other markets as well. Our acquisitions of Aiken
County National Bank, with two offices in Aiken, and Midlands National Bank,
with branches in Newberry, Prosperity, and Chapin, are expected to be completed
in the first half of 1995 and will bring Carolina First to these new South
Carolina communities. Customers in these markets, and others like them
throughout the state, appreciate and value the unique benefits of dealing with a
South Carolina-based financial institution.
Carolina First is also investing in technology that will help it become and
remain the premier bank in South Carolina. We are committed to offering our
customers the innovation and technological know-how of the big banks, but with
none of
OUR CORPORATE RESTRUCTURING
IS DESIGNED TO... MAXIMIZE
OPERATING EFFICIENCY.
5
<PAGE>
the bureaucracy and rigidity. For instance, we electronically process new
accounts and allow our customers to access their accounts 24 hours a day, seven
days a week. In 1995, we will launch an innovative new product - automated loan
machines. This product is extremely customer-friendly and is designed to make
our services more accessible and convenient. These future-oriented investments
are positioning us for our next stages of growth.
We are also pleased by the increased attention Carolina First has received
from the investment community. Currently, seven brokerage firms make a market
in our stock, and two firms have recently written favorable research reports.
Our trading volumes have also increased dramatically; during 1994, over 1.6
million shares were traded. This increased attention by investors is good news
for our shareholders and is reflected in our stock price. If you had invested
$100 when we opened in 1986, your investment would have grown to $190 at
December 31, 1994, after adjusting for our six 5% stock dividends and four
quarterly cash dividends.
Through our emphasis on leadership, fundamentals, and the future, Carolina
First is building its business for the long term. Our continued excellence in
these areas gives Carolina First excellent prospects for 1995 and the years to
come. The commitment and support of our shareholders, customers, employees, and
directors have brought us a long way from our first branch on Haywood Road, and
will take us much farther.
(Signature of Mack I. Whittle, Jr. appears here)
Mack I. Whittle, Jr.
President and Chief Executive Officer
WE ARE COMMITTED TO OFFERING
OUR CUSTOMERS THE INNOVATION
AND TECHNOLOGICAL KNOW-HOW OF
THE BIG BANKS, BUT WITH NONE OF
THE BUREAUCRACY AND RIGIDITY.
6
<PAGE>
STRATEGIES AND MARKETS
Strategic focus. It works. Since our inception in 1986, our focus has
remained unchanged - to be South Carolina's premier bank. Carolina First strives
to be the premier bank in customer service, in employee satisfaction, and in
enhancing shareholder value. We are uniquely in tune with South Carolinians, in
a way that the out-of-state banks do not match.
Our "super community bank" strategy offers the best of both worlds by
combining the best features of small community banks with those of large
regional banks. Like small community banks, Carolina First has personalized
customer service, local market knowledge, and decentralized decision-making.
Yet, we also have the broad product lines and back-office efficiencies equal to
those of larger regional banks. This winning strategy allows us to really know
our customers and provide customized financial services to quickly meet their
needs.
South Carolina is a great place to do business. Our strengths are low
unemployment, a strong manufacturing base, superior market access, a high level
of foreign investments, and the geographical advantages of the coastal areas and
the mountains. At Carolina First, we concentrate on meeting the banking needs
of individuals and small- to medium-sized businesses in South Carolina.
South Carolina is not only our home, it is also an attractive banking
environment. Over 70% of South Carolina banks' assets are controlled by out-of-
state financial institutions. Our markets present a remarkable opportunity for
an emerging independent bank like Carolina First. We have seized this
opportunity to become the largest independent commercial bank in South Carolina.
(A map of South Carolina appears here showing the 14 South Carolina
counties served by Carolina First.)
CAROLINA FIRST NOW SERVES 30 COMMUNITIES IN 14 SOUTH CAROLINA COUNTIES FROM 46
BANKING OFFICES. AS WE GROW, WE REMAIN TRUE TO OUR FOUNDING VISION.
WE'RE OUT TO BE SOUTH CAROLINA'S PREMIER BANK.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FOLLOWING DISCUSSION IS PRESENTED TO ASSIST IN UNDERSTANDING THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CAROLINA FIRST CORPORATION
("CAROLINA FIRST") AND ITS SUBSIDIARIES, CAROLINA FIRST BANK (THE "BANK"),
CAROLINA FIRST SAVINGS BANK (THE "SAVINGS BANK") AND CAROLINA FIRST MORTGAGE
COMPANY (THE "MORTGAGE COMPANY"). THROUGH ITS SUBSIDIARIES, CAROLINA FIRST
PROVIDES A FULL RANGE OF BANKING SERVICES, INCLUDING MORTGAGE, TRUST AND
INVESTMENT SERVICES, DESIGNED TO MEET SUBSTANTIALLY ALL OF THE FINANCIAL NEEDS
OF ITS CUSTOMERS.
OVERVIEW
Carolina First, which commenced banking operations in December 1986,
currently conducts business through 46 locations in South Carolina. At December
31, 1994, Carolina First had approximately $1.1 billion in assets, $865.9
million in loans, $925.4 million in deposits and $79.0 million in shareholders'
equity. At December 31, 1994, Carolina First's nonperforming assets (which
include nonaccruing loans and restructured loans) totaled 0.25% of total loans
and foreclosed property.
Carolina First was formed principally in response to perceived opportunities
resulting from the takeovers of several South Carolina-based banks by large
southeastern regional bank holding companies. A significant number of Carolina
First's executive officers and management personnel were previously employed by
certain of the larger South Carolina-based banks that were acquired by these
southeastern regional institutions. Consequently, these officers and management
personnel have significant customer relationships and commercial banking
experience that have contributed to Carolina First's loan and deposit growth.
Carolina First targets individuals and small- to medium-sized businesses in
South Carolina that require a full range of quality banking services.
Carolina First currently serves three principal market areas: the Greenville
metropolitan area and surrounding counties (located in the Upstate region of
South Carolina); the Columbia metropolitan area and surrounding counties
(located in the Midlands region of South Carolina); and Georgetown and Horry
counties (located in the Coastal region of South Carolina). Carolina First's
principal market
(A bar graph appears here. The plot points are listed below.)
Year End Assets
($ in millions)
1990 1991 1992 1993 1994
$346 $447 $529 $816 $1,120
5-Year Compound Growth Rate 28.0%
8
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areas represent three of the four largest Metropolitan Statistical Areas in
the state. In April 1994, Carolina First entered the Charleston market, the
second largest Metropolitan Statistical Area in the state, with the purchase of
the insured deposits of Citadel Federal Savings and Loan Association ("Citadel
Federal"). Carolina First also has branch locations in other counties in South
Carolina.
In 1993, Carolina First formed the Mortgage Company. The Mortgage Company's
principal activities include the origination and servicing of one-to-four family
residential mortgage loans through eight offices in South Carolina. At December
31, 1994, the Mortgage Company was servicing approximately 10,351 loans having
an aggregate principal balance of approximately $800 million.
GROWTH STRATEGY AND ACQUISITIONS
Since its inception in 1986, Carolina First has pursued a strategy of
growth through internal expansion and through the acquisition of branch
locations and financial institutions in selected market areas. Carolina First
has emphasized internal growth through the acquisition of market share from the
large out-of-state bank holding companies. It attempts to acquire market share
by providing quality banking services and personal service to individuals and
business customers. The following discussion highlights Carolina First's
acquisition activity during 1994.
On April 29, 1994, the Bank purchased the insured deposits of Citadel
Federal from the Resolution Trust Corporation, as receiver for Citadel Federal.
This acquisition resulted in the acquisition of one branch office in Charleston,
South Carolina, with deposits of approximately $5.8 million, on which a premium
of approximately $533,000 was paid.
On May 2, 1994, Carolina First acquired six branches from Republic National
Bank. The acquired branches are located in Columbia, Edgefield, Johnston,
Bennettsville, Lake City and McColl. In addition, Carolina First acquired the
deposits and select loans from Republic National Bank's main office branch in
Columbia, which was not acquired. With this transaction, Carolina First
acquired loans of approximately $37.5 million and deposits of approximately
$135.3 million, on which a premium of approximately $5.4 million was paid.
On October 13, 1994, the Bank entered into an agreement with Aiken County
National Bank ("Aiken County National") for the merger of Aiken County National
into the Bank. The Bank will acquire all the outstanding common shares of Aiken
County National in exchange for approximately 453,000 shares of Carolina First's
common stock. At year end 1994, Aiken County National had assets of
approximately $42 million, loans of $29 million and deposits of $38 million.
The agreement requires that the merger be accounted for as a pooling of
interests.
9
<PAGE>
On November 14, 1994, the Bank entered into an agreement with Midlands
National Bank ("Midlands") for the merger of Midlands into the Bank. The Bank
will acquire all the outstanding common shares of Midlands in exchange for
approximately 584,000 shares of Carolina First's common stock. At year end
1994, Midlands had assets of $43 million, loans of $28 million and deposits of
$39 million. The agreement requires that the merger be accounted for as a
pooling of interests.
EQUITY OFFERING AND DIVIDENDS
On April 15, 1994, Carolina First issued 920,000 shares of 7.32%
Noncumulative Convertible Preferred Stock Series 1994 ("Series 1994 Preferred
Stock"), which raised approximately $21.4 million in equity.
In the first quarter of 1994, Carolina First instituted a quarterly cash
dividend to common shareholders of $0.05 per share. As of the first quarter of
1995, the Board of Directors increased the quarterly cash dividend to $0.06 per
share. On May 16, 1994, Carolina First issued a 5% common stock dividend to
common shareholders of record as of April 29, 1994. This is the sixth
consecutive year that Carolina First has issued a 5% common stock dividend.
RESTRUCTURING CHARGES
During the fourth quarter of 1994, Carolina First announced a restructuring
that initiated a program of credit card securitization, wrote down related
intangible assets and merged the Savings Bank into the Bank. One-time
restructuring and nonrecurring charges related to this plan amounted to $12.2
million pre-tax ($9.4 million after-tax). Management expects the restructuring
to increase future pre-tax income by approximately $2.8 million a year, through
increased operational efficiency, lower amortization costs, and the reinvestment
of the cash currently invested in the credit card portfolio.
In connection with the program of credit card securitization, Carolina First
recorded charges of $12.2 million pre-tax, primarily from the write down of
intangible assets and charges associated with the origination of credit card
accounts. On January 24, 1995, Carolina First completed the securitization of
approximately $100 million in credit card loans. The securitization transferred
the credit card loans to a trust in return for a payment equal to the principal
balance of the credit cards. Carolina First purchased a 30% interest in the
trust, and the remainder was sold to an investor. Through this securitization,
Carolina First retains an interest in the earnings from the securitized loans
and at the same time has approximately $70 million in additional funds to make
loans in its banking markets.
On February 3, 1995, Carolina First completed the merger of the Savings Bank
into the Bank. Management
10
<PAGE>
believes that there may be significant economic and managerial benefits from
this combination including the elimination of duplicative administration, the
consolidation of regulators, reduced regulatory burdens and increased management
focus. As part of the merger, Carolina First incurred income taxes of $1.0
million due to the different tax treatment accorded the allowance for loan
losses at the Savings Bank.
EARNINGS ANALYSIS
The one-time charge for the corporate restructuring resulted in a net loss
for 1994. Carolina First reported a net loss for 1994 of $1.9 million, or a
loss of $0.95 per common share. The net loss for 1994 includes one-time
restructuring charges of $9.4 million (after-tax). Net income for 1993 was $4.9
million, or $0.90 per common share, and 1992 net income was $2.5 million, or
$0.57 per common share. Increased net interest income, growth in noninterest
income and continued good credit quality were the primary reasons for the growth
in earnings excluding the restructuring charges.
Fully tax equivalent (FTE) net interest income increased $15.0 million, or
55%, due to a higher level of average earning assets and an increased net
interest margin. Increases in average earning assets resulted primarily from
the acquisition of branches and internal growth. The net interest margin
increased to 4.89% from 4.31% in 1993 and 4.06% in 1992.
Noninterest income excluding securities transactions increased to $7.6
million, or 36%, from $5.6 million in 1993 and $2.9 million in 1992. The
increase in noninterest income was attributable to higher service charges on
deposit accounts, the expansion of mortgage servicing and the generation of new
trust business.
Noninterest expenses increased to $50.5 million in 1994 from $25.2 million
in 1993 and $16.1 million in 1992. The 1994 noninterest expenses include one-
time restructuring charges of $12.2 million. Also contributing to the increase
in noninterest expenses were the acquisition of seven branches and the opening
of four branches de novo, a higher level of loan and deposit activity,
amortization of intangibles and higher credit card processing fees.
NET INTEREST INCOME
The largest component of Carolina First's operations is net interest income,
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. As the primary contributor
to Carolina First's earnings, net interest income constituted 84% of net
revenues (net interest income plus noninterest income) in 1994, compared with
81% in 1993 and 84% in 1992.
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<PAGE>
FTE net interest income adjusts the yield for assets earning tax-exempt
income to a comparable yield on a taxable basis. Carolina First has experienced
a markedly upward trend in FTE net interest income, which increased 55% in 1994,
51% in 1993 and 38% in 1992. FTE net interest income was $42.2 million in 1994,
$27.2 million in 1993 and $18.0 million in 1992. The increase resulted from a
higher level of average earning assets and an improvement in the net interest
margin. The growth in average earning assets, which increased to $861.6 million
in 1994 from $630.8 million in 1993 and $442.5 in 1992, resulted primarily from
internal loan growth and the acquisition of branches. The majority of this
increase was in loans, which averaged $233.6 million higher in 1994 than 1993
and $117.1 million higher in 1993 than 1992.
The net interest margin, defined as net interest income divided by average
earning assets, increased to 4.89% in 1994 from 4.31% in 1993 and 4.06% in
1992. The increase resulted primarily from lower deposit interest rates and a
higher proportion of noninterest-bearing deposits. In addition, the yield on
loans has risen due to increases in the prime interest rate, increased consumer
loan volume from
(Graph appears here with the following plot points:)
Net Interest Margin
(in percentages)
1990 1991 1992 1993 1994
gross yield 10.37% 9.90% 8.66% 7.76% 8.37%
break-even yield* 7.00% 6.27% 4.60% 3.45% 3.48%
net interest margin 7.00-10.37 6.27-9.90 4.60-8.66 3.45-7.76 3.48-8.37
* Interest expense divided by average earning assets
AVERAGE YIELDS AND RATES
(on a fully tax-equivalent basis)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans................................. 9.03% 8.59% 9.21% 10.36% 10.84%
Securities............................ 5.03 5.07% 6.32% 7.95% 8.37
Short-term Investments................ 3.66 3.08% 3.43% 5.53% 7.76
Total Earning Assets................. 8.37% 7.76% 8.66% 9.90% 10.37%
INTEREST-BEARING LIABILITIES:
Interest-bearing Deposits............. 3.75% 3.79% 4.99% 6.79% 7.77%
Short-term Borrowings................. 3.96 3.05% 5.55% 5.82% 4.95
Long-term Debt........................ 9.50% 9.10% 8.00% 6.93% 9.18
Total Interest-bearing Liabilities... 3.77% 3.78% 5.00% 6.77% 7.72%
NET INTEREST MARGIN..................... 4.89% 4.31% 4.06% 3.63% 3.37%
PRIME INTEREST RATE..................... 7.14% 6.00% 6.26% 8.48% 10.01%
12
<PAGE>
the retail branch network and increased credit card loan volume from mail
solicitations.
PROVISION AND 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 Carolina First is based on
management's judgment as to the amount required to maintain an allowance
adequate to provide for potential losses in Carolina First'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 1994, 1993 and 1992, Carolina First expensed $950,000, $909,000 and
$1,453,000, respectively, through its provision for loan losses. Net loan
charge-offs, excluding credit card loans, decreased to $779,000 in 1994, from
$1.3 million in 1993 and $1.2 million in 1992. During 1994, net loan charge-
offs as a percentage of average loans remained low at 0.11%, compared with 0.26%
for 1993 and 0.31% for 1992.
At December 31, 1994, the allowance for loan losses totaled $5.3 million, or
0.7% of total loans excluding loans held for sale, a decline from $5.7 million,
or 1.0% of total loans, at the end of 1993. Continued reductions in
nonperforming asset levels enabled Carolina First to reduce the allowance for
loan losses compared with the prior years' levels. Nonperforming assets as a
percentage of loans and foreclosed property were 0.25% and 0.28% at December 31,
1994 and 1993, respectively. At December 31, 1994, the allowance for loan losses
was 312% of nonperforming loans. Carolina First's asset quality measures
compare favorably to its FDIC peer group.
NONINTEREST INCOME
Noninterest income, excluding securities transactions, increased $2.0
million, or 36%, to $7.6 million in 1994, up from $5.6 million in 1993 and $2.9
million in 1992. This increase resulted principally from service charges on
deposit accounts, fees for trust services and mortgage banking servicing income.
Carolina First realized gains on the sale of securities of $234,000, $662,000
and $517,000 in 1994, 1993 and 1992, respectively.
13
<PAGE>
Service charges on deposit accounts, the largest contributor to noninterest
income, rose $1.2 million, or 47%, to $3.7 million in 1994, an increase from
$2.5 million in 1993 and $1.5 million in 1992. The increase in service charges
is attributable to acquiring branches and new deposit accounts, increasing fee
charges and improving collection rates. In 1994, average deposits increased
38%, and the number of deposit accounts rose 44%.
Mortgage banking income was $1.6 million in 1994, $1.8 million in 1993 and
$1.3 million in 1992. Mortgage banking income includes origination fees,
profits from the sale of loans and servicing fees (which started in 1993).
Origination fees totaled $1.0 million in 1994, compared with $1.1 million in
1993 and $778,000 in 1992. During 1994, 1,062 mortgage loans totaling $108
million were originated, similar to originations of 1,063 loans for $103 million
in 1993. The increase in the level of interest rates during 1994 made the
origination of mortgage loans more competitive resulting in a slightly lower
origination fee per loan.
Until the third quarter of 1992, mortgage loans were originated primarily
for the account of correspondent financial institutions, with Carolina First
retaining an origination fee. Beginning in the third quarter of 1992, Carolina
First expanded the activities of its mortgage loan operations and began self-
funding the loans through the Savings Bank prior to sale in the secondary
market. Mortgage loans totaling approximately $55 million, $80 million and $16
million were sold in 1994, 1993 and 1992, respectively. Income from this
activity totaled $112,000 in 1994, $509,000 in 1993 and $496,000 in 1992.
The Mortgage Company's mortgage servicing operations consist of servicing
loans that are owned by the Bank and subservicing loans, to which the right to
service is owned by the Bank and other non-affiliated financial institutions.
Mortgage loans serviced are all one-to-four family residential mortgage loans.
At December 31, 1994, 10,351 loans with an aggregate principal amount of $800
million were being serviced or subserviced by the Mortgage Company. Servicing
income from non-affiliated companies, net of the related amortization, was
$578,000 in 1994 and $76,000 in 1993.
Fees for trust services in 1994 increased to $919,000, up 70% from the
$542,000 earned in 1993. Fees for trust services in 1992 were $305,000. Fees
for trust services increased as a result of the generation of new trust business
and additional assets under management, particularly in investment management
and custody accounts. Assets under management of the trust department increased
to approximately $214 million at December 31, 1994, up significantly from $129
million at year end 1993 and $55 million at year end 1992.
14
<PAGE>
Sundry income items were $623,000 higher in 1994, primarily because of
higher customer service fees, appraisal fee income and insurance commissions.
These increases are largely attributable to increased lending and deposit
activity. In addition, Carolina First earned approximately $108,000 in 1994 real
estate rental income, the majority of which is not expected to continue. With
the January 1995 completion of the credit card securitization, earnings from the
trust, after payment of interest, servicing fees and charge-offs, are expected
to provide a new source of fee income in 1995.
NONINTEREST EXPENSES
Noninterest expenses were $50.5 million in 1994, $25.2 million in 1993 and
$16.1 million in 1992. Included in 1994 noninterest expenses is a $12.2 million
one-time restructuring charge associated with the credit card securitization and
the write-down of other intangible assets. Excluding the restructuring charges,
1994 noninterest expenses increased 52% over 1993, while 1993 was 56% higher
than 1992. The increased expenditures primarily reflect the costs of additional
personnel to support Carolina First's current and anticipated growth.
Salaries and wages and benefits increased 53% to $17.9 million in 1994 from
$11.7 million in 1993. This increase follows an increase of 62% from $7.2
million in 1992. Full-time equivalent employees rose to 499 at the end of 1994
from 430 and 228 at the end of 1993 and 1992, respectively. Staff increases were
attributable to the addition of 11 banking offices, higher loan and deposit
activity resulting from internal growth and acquisitions, and the expansion of
mortgage banking operations.
The 1994 occupancy and furniture and equipment expenses increased $2.1
million, or 57%, due to the addition of 11 banking offices including a new
Myrtle Beach main office, the opening of a regional headquarters office in
Columbia for the Midlands region of South Carolina, the establishment of the
Mortgage Company and the expansion of administrative offices in Greenville to a
second location.
Sundry expense items increased $4.7 million, or 48%, to $14.5 million in
1994 from $9.8 million in 1993 and $6.4 million in 1992. Three expense items -
federal insurance premiums, intangibles amortization and credit card processing
fees - accounted for approximately 46% of this increase. Federal deposit
insurance premiums increased $507,000, or 36%, in 1994 to $1.9 million. This
increase was primarily due to higher levels of deposits. Intangibles
amortization increased $1.6 million, or 175%, in 1994 to $2.5 million,
principally as a result of intangibles relating to the acquisition of branches,
credit card receivables and the Mortgage Company. Credit card processing fees
increased
15
<PAGE>
$597,000, or 66%, to $1.5 million in 1994, principally as a result of credit
card solicitations by Carolina First and the purchase of approximately $16.3
million in credit card receivables in June 1993 and November 1993. With the
securitization of the majority of credit card loans during the first quarter of
1995, management expects credit card processing fees to decrease significantly
in 1995.
Advertising and public relations expenses increased $526,000, or 136%, to
$912,000 in 1994, due to Carolina First's statewide expansion, advertising
campaigns in key markets and special deposit promotions. The remaining increase
in sundry noninterest expenses was primarily attributable to the overhead and
operating expenses associated with higher lending and deposit activities. The
largest sundry noninterest expenses were stationery, supplies and printing,
telephone, postage, and fees.
INCOME TAXES
The provision for income taxes in 1994 was a credit of $49,000. The
provision for income taxes was $2.2 million in 1993 and $1.2 million in 1992.
Income taxes for 1994 include a one-time reduction of $2.8 million from
restructuring charges, partially offset by $1 million of income tax expense in
connection with the merger of the Savings Bank into the Bank.
BALANCE SHEET ANALYSIS
Total assets at December 31, 1994, were $1.1 billion, an increase of $303.7
million, or 37%, from $816.4 million at the end of 1993. Loans increased $300.7
million, or 53%, to $865.9 million at December 31, 1994, compared with $565.2
million at December 31, 1993. Deposits at year end 1994 were $925.4 million, up
28% from $724.6 million at year end 1993. Total shareholders' equity increased
26% to $79.0 million at December 31, 1994, from $62.9 million at the end of
1993. Significant components of balance sheet growth include increases from
internal loan growth, branch acquisitions and the proceeds from the Series 1994
preferred stock offering.
Average total assets in 1994 were $970.0 million, a 40% increase over the
1993 average of $695.1 million. Average earning assets were $861.6 million in
1994, a 37% increase over the 1993 level of $630.8 million. For 1992, average
total assets and average earning assets were $478.3 million and $442.5 million,
respectively.
LOANS
Carolina First's loan portfolio consists principally of one-to-four family
residential mortgage loans, commercial mortgage loans and other commercial and
consumer loans. A substantial portion of these borrowers are located in South
Carolina and are concentrated in the Carolina First's
16
<PAGE>
market areas. Carolina First has no foreign loans or loans for highly
leveraged transactions. The loan portfolio does not contain any concentrations
of credit risk exceeding 10% of the portfolio. At December 31, 1994, Carolina
First had total loans outstanding of $865.9 million which equaled approximately
94% of Carolina First's total deposits and approximately 77% of Carolina First's
total assets. The level of total loans, relative to total deposits and total
assets, has increased from the prior year. The composition of Carolina First's
loan portfolio at December 31, 1994, was as follows: commercial and commercial
mortgage 47%, residential mortgage 26%, consumer 11%, credit card 12% and
construction 4%.
Carolina First's loans increased $300.7 million, or 53%, to $865.9 million
at December 31, 1994 from $565.2 million at December 31, 1993. Of this
increase, $37.5 million resulted from loans acquired in branch acquisitions.
The balance was internal loan growth. This increase was net of $55.1 million of
mortgage loans sold, which were predominantly current production, fixed rate
mortgage loans. During 1994, the Bank began a mail campaign to solicit new
credit card customers. These solicitations resulted in approximately $60 million
in new credit card balances, which nearly doubled the size of the Bank's credit
card portfolio.
As noted above, Carolina First has experienced significant growth in its
commercial and commercial mortgage loans over the past several years.
Furthermore, these loans constitute approximately 47% of Carolina First's total
loans at December 31, 1994. These loans generally range in size from $250,000
to $500,000 and are typically made to small- to medium-sized, owner-operated
companies.
(A bar graph appears here. The plot points are listed below:)
Year End Loans
($ in millions)
1990 1991 1992 1993 1994
$275 $339 $397 $565 $866
5-Year Compound Growth Rate 30.0%
For 1994, Carolina First's loans averaged $723.5 million with a yield of
9.03%, compared with $489.9 and a yield of 8.59% for 1993. The interest rates
charged on loans vary with the degree of risk and the maturity and amount of the
loan. Competitive pressures, money market rates, availability of funds, and
government regulations also influence interest rates. The increase in loan
yield is largely
17
<PAGE>
attributable to the upward repricing of variable rate loans, which
constitute approximately 60% of the loan portfolio. During 1994, the average
prime interest rate rose approximately 114 basis points.
Loans held for sale at December 31, 1994, included $69.5 million in credit
card loans and $2.2 million in mortgage loans. On January 24, 1995, Carolina
First completed the securitization of the credit card loans held for sale at
year end.
SECURITIES
Carolina First'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. To date, Carolina First does not own any derivative products.
At December 31, 1994, the total investment portfolio had a book value of
$118.3 million and a market value of $113.7 million for an unrealized loss of
$4.6 million. The investment portfolio had a weighted average duration of
approximately 2.15 years. Securities (i.e., investment secu-rities, securities
available for sale and trading securities) averaged $128.0 million in 1994, 1%
above the 1993 average of $126.4 million. The average portfolio yield declined
slightly from 5.07% in 1993 to 5.03% in 1994.
During the past two years, average securities have been a lesser component
of average earning assets, decreasing from 20.0% in 1993 to 14.8% in 1994.
Carolina First decreased the relative level of its investment portfolio to fund
loans in its banking markets. At year end 1994, securities totaled $117.1
million, up $2.4 million from the $114.7 million invested at the end of 1993.
DEPOSITS
The primary source of funds for loans and investments is deposits which are
gathered through the 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. Carolina First's pricing policy
with respect to deposits takes into account liquidity needs, the direction and
levels of interest rates and local market conditions. Carolina First does not
believe that any of its deposits qualify as brokered deposits. It is Carolina
First's policy not to accept brokered deposits.
During 1994, interest-bearing liabilities averaged $794.9 million, compared
with $574.7 million for 1993. This increase resulted principally from branch
acquisitions. The
18
<PAGE>
average interest rates were 3.77% and 3.78% for 1994 and 1993, respectively.
At December 31, 1994, interest-bearing deposits comprised approximately 87% of
total deposits and 88% of interest-bearing liabilities. During 1994, Carolina
First increased its use of short-term borrowings to fund loan growth. Short-
term borrowings averaged $41.4 million and $14.0 million in 1994 and 1993,
respectively.
Carolina First uses its deposit base as its primary source of funds.
Deposits grew 28% to $925.4 million at December 31, 1994, from $724.6 million at
December 31, 1993. Of the $200.8 million increase in deposits, approximately
$141.2 million resulted from the acquisition of branches. Internal growth
generated the remaining new
(Bar graph appears here. The plot points are listed below:)
Year End Deposits
($ in millions)
1990 1991 1992 1993 1994
$300 $407 $476 $725 $925
5-Year Compound Growth Rate 26.3%
deposits. During 1994, total interest-bearing deposits averaged $752.2
million with a rate of 3.75%, compared with $559.4 million with a rate of 3.79%
in 1993. As the level of interest rates fell in 1993, Carolina First was able
to reprice deposits to more than recover declines in the yields on earning
assets. During the first half of 1994, which was a period of rising interest
rates, Carolina First generally kept deposit interest rates unchanged which
caused the average deposit rate to continue to decline, primarily from the
repricing of certificates of deposit. Beginning with the third quarter of 1994,
however, Carolina First raised deposit interest rates, causing the cost of
deposits to rise.
Average noninterest-bearing deposits, which increased 68% during the year,
increased to 11.2% of average total deposits in 1994 from 9.2% in 1993. This
increase was attributable to new accounts from commercial loan customers and
escrow balances related to mortgage servicing operations.
Carolina First's core deposit base consists of consumer time deposits,
savings, NOW accounts, money market accounts and checking accounts. Although
such core deposits are becoming increasingly interest sensitive for both
Carolina First and the industry as a whole, such core deposits continue to
provide Carolina First with a large and stable source of funds. Core deposits
as a percentage of average total deposits averaged approximately 86% in 1994.
Carolina First closely monitors its reliance on certificates of
19
<PAGE>
deposit greater than $100,000, which are generally considered less stable
and less reliable than core deposits.
CAPITAL RESOURCES AND DIVIDENDS
Carolina First's capital needs have been met principally through public
offerings of common and preferred stock and through the retention of earnings.
In addition, Carolina First issued both common and preferred stock in connection
with the acquisitions of the Savings Bank and the Mortgage Company.
Carolina First completed the offering of its Series 1994 Preferred Stock on
April 15, 1994. In connection with this offering, Carolina First raised
approximately $21.4 million after deduction of the related expenses and issued
920,000 shares of its Series 1994 Preferred Stock. Each share of Series 1994
Preferred Stock provides for cash dividends, when, as, and if declared by the
Board of Directors, at the annual rate of $1.83 per share. Dividends on the
Series 1994 Preferred Stock are not cumulative. A Series 1994 Preferred Stock
share may be converted at the option of the holder into 1.7931 shares of common
stock. The conversion ratio has been restated to reflect the 5% common stock
dividend. In addition, and upon compliance with certain conditions, Carolina
First may redeem the Series 1994 Preferred Stock at the redemption prices set
forth in the Company's Articles of Amendment related to the Series 1994
Preferred Stock.
Total shareholders' equity increased $16.1 million, or 26%, to $79.0 million
at December 31, 1994, from $62.9 million at December 31, 1993. This change
primarily reflects the capital raised in connection with the Series 1994
Preferred Stock offering discussed above, which was issued on April 15, 1994,
partially offset by the payment of dividends and the net loss for 1994.
Book value per share was $8.58 and $10.27 at December 31, 1994 and 1993,
respectively. The decline in book value is attributable to the one-time
restructuring charges. Tangible book value per share at December 31, 1994 was
$4.16, down from $7.37 at December 31, 1993. Tangible book value is
significantly below book value as a result of the purchase premiums associated
with branch acquisitions and the purchase of the Mortgage Company. Tangible
book value declined during 1994 from the addition of intangible assets related
to the branch acquisitions and reclassifications of loan premiums to intangible
assets.
At December 31, 1994, Carolina First and the Savings Bank were in compliance
with each of the applicable
</TABLE>
<TABLE>
<CAPTION>
AS OF WELL CAPITALIZED ADEQUATELY CAPITALIZED
CAPITAL RATIOS 12/31/94 REQUIREMENT REQUIREMENT
<S> <C> <C> <C>
CAROLINA FIRST CORPORATION:
Total Risk-based Capital.... 8.35% 10.0% 8.0%
Tier 1 Risk-based Capital... 7.65 6.0 4.0
Leverage Ratio.............. 5.44% 5.0 4.0
</TABLE>
20
<PAGE>
regulatory capital requirements and exceeded the "adequately capitalized"
regulatory guidelines. The 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. Following the
merger with the Savings Bank which was completed on February 3, 1995, the Bank's
total risk-based capital ratio increased to exceed the "adequately capitalized"
guidelines. The risk-based insurance assessments for the Bank has been set at
0.26% of the average assessment basis.
Carolina First and its subsidiaries are subject to certain regulatory
restrictions on the amount of dividends they are permitted to pay. Carolina
First has paid all scheduled cash dividends on the Series 1993 Preferred Stock,
the Series 1993B Preferred Stock and the Series 1994 Preferred Stock since their
respective issuances. During each of the last six years, Carolina First issued
5% common stock dividends to common shareholders.
In November 1993, the Board of Directors initiated a regular quarterly cash
dividend of $0.05 per share payable on the common stock, the first of which was
paid on February 1, 1994. Cash dividends of $0.05 have been paid on a quarterly
basis since the initiation of the cash dividend. The Board of Directors
increased the quarterly cash dividend to $0.06 beginning in the first quarter of
1995. Carolina First presently intends to continue to pay this quarterly cash
dividend on the common stock; however, future dividends will depend upon
Carolina First's financial performance and capital requirements.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Asset/liability management is the process by which Carolina First 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
Carolina First. These cash flow requirements primarily involve withdrawals of
deposits, extensions of credit, payment of operating expenses and repayment of
purchased funds. Carolina First's principal sources of funds for liquidity
purposes are customer deposits, principal and interest payments on loans,
maturities and sales of debt securities, temporary investments and earnings.
Temporary investments averaged 1.18% and 2.31% of earning assets in 1994 and
1993, respectively. Management believes that Carolina First 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 Federal Home Loan Bank.
21
<PAGE>
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 December 31, 1994, the
Bank's liquidity ratio was approximately 13%. At December 31, 1994, the Bank
had unused short-term lines of credit with correspondent banks of $17.8 million.
All of the lenders have reserved the right to withdraw these lines of credit at
their option. In addition, Carolina First, through its subsidiaries, has access
to borrowings from the Federal Home Loan Bank. At December 31, 1994, unused
borrowing capacity from the Federal Home Loan Bank totaled $33 million.
Management believes that these sources are adequate to meet its liquidity needs.
On January 24, 1995, Carolina First completed the securitization of the majority
of its credit card loans. In connection with this securitization, Carolina First
received approximately $70 million which provided additional liquidity.
Carolina First plans to meet its future cash needs through the proceeds of
stock offerings, liquidation of temporary investments, maturities or sales of
loans and investment securities and generation of deposits. By increasing the
rates paid on deposits, Carolina First would be able to raise deposits.
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. 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 Asset/Liability Management Committee uses an asset/liability
simulation model which quantifies balance sheet and earnings variations under
different interest rate environments to measure and manage interest rate risk.
ASSET QUALITY
Prudent risk management involves assessing risk and managing it
effectively. Certain credit risks are inherent in making loans, particularly
commercial, real estate and consumer loans. Carolina First attempts to manage
credit risks by adhering to internal credit policies and procedures. These
policies and procedures include a multi-layered loan approval process, officer
and customer limits, periodic documentation examination and follow-up procedures
for any exceptions to credit policies. Loans are assigned a grade and those
that are determined to involve more than normal credit risk are placed in a
special review status. Loans that are placed in special review status are
required to have a plan under which they will be either repaid or restructured
in a way that reduces credit risk. Loans in this special review status are
reviewed monthly by the loan committee of the Board of Directors.
22
<PAGE>
As demonstrated by the following key analytical measures of asset quality,
management believes Carolina First has effectively managed its credit risk. Net
loan charge-offs, excluding credit card loans, decreased to $779,000 in 1994,
from $1.3 million in 1993 and $1.2 million in 1992. During 1994, net loan
charge-offs as a percentage of average loans have remained low at 0.11%,
compared with 0.26% for 1993 and 0.31% in 1992. Nonperforming assets as a
percentage of loans and foreclosed property were 0.25% and 0.28% at December 31,
1994 and 1993, respectively. At December 31, 1994, the allowance for loan
losses was 312% of nonperforming loans. At December 31, 1994, Carolina First had
$1.0 million in nonaccruing loans, $675,000 in restructured loans and $1.3
million in loans greater than ninety days past due on which interest was still
being accrued. These asset quality measures compare favorably to Carolina
First's bank holding company peer group.
(A bar graph appears here. The plot points are listed below:)
Nonperforming Assets as a % of
Loans and Foreclosed Property
(in percentages)
1990 1991 1992 1993 1994
Federal Reserve Bank
Holding Company Peer Group** 2.90% 3.32% 2.79% 2.19% 1.48%*
Carolina First 0.69% 0.45% 0.49% 0.28% 0.25%
* As of September 30, 1994
**Source: Federal Reserve Bank Holding Company Performance Report
ASSET QUALITY
($ in thousands)
<TABLE>
<CAPTION>
December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Nonaccrual loans................................. $ 1,012 $ 558 $ 519 $ 843 $ 1,202
Restructured loans............................... 675 - 353 - -
Total nonperforming loans..................... 1,687 558 872 843 1,202
Other real estate................................ 517 1,021 1,074 695 699
Total nonperforming assets.................... $ 2,204 $ 1,579 $1,946 $1,538 $ 1,901
Nonperforming assets as a percentage of loans and
foreclosed property............................ 0.25% 0.28% 0.49% 0.45% 0.69%
Accruing loans past due 90 days.................. $ 1,285 $ 2,060 $2,121 $1,489 $ 424
Allowance for loan losses to
nonperforming loans............................ 312% 1,019% 489% 442% 200%
</TABLE>
23
<PAGE>
REPORT OF MANAGEMENT
Management of Carolina First Corporation ("the Company") is committed to
quality customer service, enhanced shareholder value, financial stability and
integrity in all dealings. Management has prepared the accompanying consolidated
financial statements in conformity with generally accepted accounting
principles. The statements include amounts that are based on management's best
estimates and judgments. Other financial information contained in this report is
presented on a basis consistent with the financial statements.
To ensure the integrity, objectivity and fairness of data in these
statements, management of the Company has established and maintains an internal
control structure that is supplemented by a program of internal audits. The
internal control structure is designed to provide reasonable assurance that
assets are safeguarded and transactions are executed, recorded and reported in
accordance with management's intentions and authorizations.
The financial statements have been audited by Elliott, Davis & Company,
L.L.P., independent auditors, in accordance with generally accepted auditing
standards. Elliott, Davis & Company reviews the results of its audit with both
management and the Audit Committee of the Board of Directors of the Company. The
Audit Committee, composed entirely of outside directors, meets periodically with
management, internal auditors and Elliott, Davis & Company (separately and
jointly) to determine that each is fulfilling its responsibilities and to
consider recommendations for enhancing internal controls.
(Signature of Mack I. Whittle, Jr.) (Signature of William S. Hummers, III)
Mack I. Whittle, Jr. William S. Hummers, III
President and Chief Executive Officer Executive Vice President and
Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Carolina First Corporation
Greenville, South Carolina
We have audited the accompanying consolidated balance sheets of Carolina
First Corporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Carolina
First Corporation and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
(Signature of Elliott, Davis & Company, L.L.P.)
Elliott, Davis & Company, L.L.P.
Greenville, South Carolina
February 3, 1995
24
<PAGE>
CONSOLIDATED BALANCE SHEETS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
ASSETS
Cash and due from banks................................... $ 55,047 $ 27,320
Federal funds sold and securities
purchased under resale agreements........................ 500 54,212
Securities
Trading.................................................. 1,155 250
Available for sale....................................... 49,648 64,871
Held for investment (market value $62,868 in 1994
and $50,024 in 1993)................................... 66,256 49,605
Total securities....................................... 117,059 114,726
Loans held for sale....................................... 71,695 7,700
Loans..................................................... 795,047 559,679
Less unearned income..................................... (873) (2,221)
Less allowance for loan losses........................... (5,267) (5,688)
Net loans.............................................. 860,602 559,470
Premises and equipment.................................... 36,842 28,990
Accrued interest receivable............................... 7,079 4,811
Other assets.............................................. 42,968 26,892
1,120,097 $ 816,421
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing.................................... 119,950 $ 67,776
Interest-bearing....................................... 805,498 656,809
Total deposits......................................... 925,448 724,585
Federal funds purchased and securities
sold under repurchase agreements....................... 33,986 16,725
Other short-term borrowings.............................. 72,052 54
Long-term debt........................................... 1,162 1,214
Accrued interest payable................................. 3,798 3,041
Other liabilities........................................ 4,610 7,933
Total liabilities...................................... 1,041,056 753,552
Commitments and Contingent Liabilities
Shareholders' Equity
Preferred stock - no par value; authorized
10,000,000 shares;
issued and outstanding 920,000 shares (Series
1994),
621,000 shares (Series 1993) and 60,000 shares
(Series 1993B) in 1994 and 621,000 shares
(Series 1993)
and 60,000 shares (Series 1993B) in 1993;
liquidation
preference $25 per share (Series 1994 and 1993)
and
$20 per share (Series 1993B)........................... 37,014 15,662
Common stock - par value $1 per share; authorized
20,000,000 shares; issued and outstanding
4,581,247
shares in 1994 and 4,279,724 shares in 1993............ 4,581 4,280
Surplus.................................................. 39,037 35,412
Retained earnings........................................ 472 8,400
Nonvested restricted stock............................... (1,083) (709)
Guarantee of ESOP debt................................... (126) (176)
Unrealized loss on securities available for sale......... (854) -
Total shareholders' equity............................. 79,041 62,869
1,120,097 $ 816,421
</TABLE>
See Notes to Consolidated Financial Statements which are an
integral part of these statements.
25
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands, except share data)
<TABLE>
<CAPTION>
For The Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................... 65,302 $ 42,091 $34,316
Interest on securities
Taxable................................................. 4,936 5,677 3,096
Exempt from Federal income taxes........................ 980 475 296
Total interest on securities.......................... 5,916 6,152 3,392
Interest on federal funds sold and securities
purchased
under resale agreements................................. 373 449 466
Total interest income................................. 71,591 48,692 38,174
INTEREST EXPENSE
Interest on deposits..................................... 28,206 21,202 20,117
Interest on short-term borrowings........................ 1,638 427 128
Interest on long-term debt............................... 120 120 110
Total interest expense................................ 29,964 21,749 20,355
Net interest income................................... 41,627 26,943 17,819
PROVISION FOR LOAN LOSSES.................................. 950 909 1,453
Net interest income after provision for loan
losses.............................................. 40,677 26,034 16,366
NONINTEREST INCOME
Service charges on deposit accounts...................... 3,720 2,536 1,468
Mortgage banking income.................................. 1,638 1,788 1,274
Fees for trust services.................................. 919 542 305
Gain on sale of securities............................... 234 662 517
Sundry................................................... 1,347 724 (108)
Total noninterest income.............................. 7,858 6,252 3,456
NONINTEREST EXPENSES
Salaries and wages....................................... 13,883 9,607 5,989
Employee benefits........................................ 4,043 2,115 1,260
Occupancy................................................ 3,547 2,129 1,339
Furniture and equipment.................................. 2,242 1,558 1,152
Sundry................................................... 14,524 9,769 6,405
Credit card restructuring charges........................ 12,214 - -
Total noninterest expenses............................ 50,453 25,178 16,145
Income (loss) before income taxes..................... (1,918) 7,108 3,677
Income taxes............................................... (49) 2,173 1,160
Net income (loss)..................................... (1,869) 4,935 2,517
Dividends on preferred stock............................... 2,433 1,930 625
Net income (loss) applicable to common
shareholders........................................ (4,302) $ 3,005 $1,892
PER COMMON SHARE DATA*
Net income (loss)..................................... $ (0.95) $ 0.90 $0.57
Cash dividends........................................ 0.21 $ 0.05 $ -
Average common shares................................. 4,521,274 3,331,787 3,290,691
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements. *Per share data have been restated to reflect 5% stock
dividends.
26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands)
<TABLE>
<CAPTION>
For The Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... (1,869) $ 4,935 $ 2,517
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operations
Depreciation............................................. 2,552 1,676 1,302
Amortization of intangibles.............................. 2,485 902 462
Provision for loan losses................................ 950 909 1,453
Provision for deferred taxes............................. 73 (267) (243)
Gain on sale of securities............................... (234) (662) (517)
Unrealized (gain) loss on securities..................... - (199) 199
Originations of mortgage loans held for sale............. (49,562) (81,076) (22,538)
Proceeds from sale of mortgage loans held for
sale................................................... 55,099 80,177 15,737
Proceeds from sale of trading securities................. 420,378 1,075 -
Proceeds from maturity of trading securities............. 31,176 - -
Purchase of trading securities........................... (452,459) (1,325) -
Mortgage loans sold in process of collection............. - - (6,830)
Increase in accrued interest receivable.................. (2,268) (788) (159)
Increase (decrease) in accrued interest payable.......... 757 385 (209)
(Increase) decrease in other assets...................... (17,093) 281 (1,760)
Premiums paid on acquired credit cards................... - (1,023) (1,377)
Increase (decrease) in other liabilities................. (3,356) 5,542 690
Federal Home Loan Bank stock dividend.................... (150) (68) (77)
Net cash provided by (used for) operating
activities........................................... (13,521) 10,474 (11,350)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of securities.......................... - - 34,929
Proceeds from sale of securities available for sale....... 24,131 67,285 -
Proceeds from maturity of securities...................... - - 27,451
Proceeds from maturity of securities available for
sale.................................................... 159,767 219,720 -
Proceeds from maturity of securities held for
investment.............................................. 7,210 171 -
Purchase of securities.................................... - - (84,044)
Purchase of securities available for sale................. (169,698) (276,940) -
Purchase of securities held for investment................ (23,711) (45,275) -
Net decrease (increase) in federal funds sold and
securities
purchased under resale agreements........................ 53,712 (51,996) 10,300
Purchase of loans......................................... - (16,265) (5,359)
Net increase in loans..................................... (265,434) (119,006) (46,613)
Proceeds from sale of premises and equipment.............. 387 379 871
Capital expenditures...................................... (10,791) (11,985) (1,443)
Net cash used for investing activities................. (224,427) (233,912) (63,908)
CASH FLOWS FROM FINANCING ACTIVITIES
Acquired deposits (net)................................... 97,735 196,840 -
Net increase in deposits.................................. 59,688 5,065 68,897
Net increase in federal funds purchased and
securities sold under repurchase agreements.............. 17,261 14,188 84
Issuance (payments) of borrowed funds..................... 71,946 (54) (302)
Issuance of preferred stock............................... 21,352 14,462 10,319
Redemption of preferred stock............................. - (92) -
Cash dividends paid....................................... (2,936) (1,777) (385)
Other common stock activity............................... 629 30 -
Net cash provided by financing activities.............. 265,675 228,662 78,613
Increase in cash and due from banks......................... 27,727 5,224 3,355
Cash and due from banks at beginning of year................ 27,320 22,096 18,741
Cash and due from banks at end of year...................... 55,047 $ 27,320 $ 22,096
</TABLE>
See Notes to Consolidated Financial Statements which are an
integral part of these statements.
27
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands)
<TABLE>
<CAPTION>
Retained
Shares of Earnings
Common Preferred Common and
Stock Stock Stock Surplus Other* Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991........................... 2,837,355 $ - $ 2,837 $ 22,644 $ 6,394 $ 31,875
Net income......................................... - - - - 2,517 2,517
Issuance of Series 1992 preferred stock............ - 10,319 - - - 10,319
Common stock issued pursuant to:
Stock dividend.................................... 139,505 - 140 1,186 (1,334) (8)
Restricted stock plan............................. 21,787 - 22 195 (217) -
Cash dividends paid/accrued by Carolina First:
Preferred stock................................... - - - - (625) (625)
Vesting recognized as salary expense............... - - - - 97 97
Payment on ESOP debt............................... - - - - 50 50
BALANCE, DECEMBER 31, 1992........................... 2,998,647 10,319 2,999 24,025 6,882 44,225
Net income......................................... - - - - 4,935 4,935
Issuance of Series 1993 preferred stock............ - 14,462 - - - 14,462
Issuance of Series 1993B preferred stock........... - 1,200 - - - 1,200
Conversion and redemption of Series 1992
preferred stock................................... 1,089,674 (10,319) 1,090 9,137 - (92)
Common stock issued pursuant to:
Stock dividend.................................... 147,458 - 147 1,770 (1,926) (9)
Restricted stock plan............................. 35,500 - 36 409 (445) -
Dividend reinvestment plan........................ 4,104 - 4 45 - 49
Exercise of stock options......................... 4,341 - 4 26 - 30
Cash dividends paid/accrued by Carolina First:
Preferred stock................................... - - - - (1,930) (1,930)
Common stock...................................... - - - - (214) (214)
Vesting recognized as salary expense............... - - - - 163 163
Payment on ESOP debt............................... - - - - 50 50
BALANCE, DECEMBER 31, 1993........................... 4,279,724 15,662 4,280 35,412 7,515 62,869
Net loss........................................... - - - - (1,869) (1,869)
Issuance of Series 1994 preferred stock............ - 21,444 - - - 21,444
Common stock issued pursuant to:
Stock dividend.................................... 214,380 - 214 2,466 (2,689) (9)
Restricted stock plan............................. 40,700 - 41 570 (611) -
Dividend reinvestment plan........................ 44,055 - 44 559 - 603
Employee stock purchase plan...................... 2,247 - 2 29 - 31
Exercise of stock options......................... 141 - - 1 - 1
Cash dividends paid/accrued by Carolina First:
Preferred stock................................... - - - - (2,433) (2,433)
Common stock...................................... - - - - (936) (936)
Treasury shares purchased.......................... - (92) - - - (92)
Vesting recognized as salary expense............... - - - - 236 236
Payment on ESOP debt............................... - - - - 50 50
Unrealized loss on securities available for sale... - - - - (854) (854)
BALANCE, DECEMBER 31, 1994........................... 4,581,247 $ 37,014 $ 4,581 $ 39,037 $ (1,591) $ 79,041
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part
of these statements.
* Other includes unrealized loss on securities available for sale,
nonvested restricted stock and guarantee of ESOP debt.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of Carolina First Corporation (the "Company") and its wholly-owned
subsidiaries, Carolina First Bank (the "Bank"), Carolina First Savings Bank,
F.S.B. (the "Savings Bank"), and Carolina First Mortgage Company (the "Mortgage
Company"). All significant intercompany accounts and transactions have been
eliminated.
Concentrations of Credit Risk - The Company makes loans to individuals and
small businesses for various personal and commercial purposes throughout South
Carolina. The Company has a diversified loan portfolio and the borrowers'
ability to repay their loans is not dependent upon any specific economic
segment.
Securities - Management determines the appropriate classification of
securities at the time of purchase. Securities, primarily debt securities, are
classified as trading securities, securities available for sale and securities
held for investment, defined as follows:
Trading securities are carried at market value. The Company's policy is to
acquire trading securities only to facilitate their sale to customers.
Adjustments for unrealized gains or losses are included in noninterest income.
Securities available for sale are carried at market value. Such securities
are used to execute asset/liability management strategy and to manage liquidity.
Adjustments for unrealized gains or losses are made through the equity account.
Securities held for investment are stated at cost, net of the amortization
of premiums and the accretion of discounts. The Company intends to and has the
ability to hold such securities until maturity.
Gains or losses on the sale of securities are recognized on a specific
identification, trade date basis.
Loans - The Bank and the Savings Bank recognize interest on loans using the
interest method. Income on certain installment loans is recognized using the
"Rule of 78's" method. The results from the use of the "Rule of 78's" method
are not materially different from those obtained by using the interest method.
The recognition of interest income is discontinued when, in management's
judgment, the interest is not collectible in the normal course of business.
The premium or discount on purchased loans is amortized over the expected
life of the loans and is included in interest and fees on loans.
Loans Held for Sale - Loans held for sale include mortgage loans and credit
card loans and are carried at the lower of aggregate cost or market value.
Loan Sales and Servicing Fees - Gains or losses on sales of loans are
recognized at the time of sale and are determined by the difference between net
sales proceeds and the carrying value of the loans sold. When loans are sold
with servicing rights retained, additional gains or losses are realized if the
actual servicing fees to be received differ from the normal servicing fees.
Normal service fees are recognized as income in the period earned.
Loan servicing rights purchased are recorded at lower of cost or market.
The Company amortizes the estimated future reduction in the value of purchased
and excess mortgage servicing rights based upon quarterly external valuations.
Such valuations are projected using a discounted cash flow method that includes
assumptions regarding prepayments, servicing costs and other factors. Impairment
is measured on a disaggregated basis for each pool of rights.
Allowance for Loan Losses - The allowance for loan losses is based on
management's ongoing evaluation of the loan portfolio and reflects an amount
that, in management's opinion, is adequate to absorb losses in the existing
portfolio. In evaluating the portfolio, management takes into consideration
numerous factors, including current economic conditions, prior loan loss
experience, the composition of the loan portfolio, and management's estimate of
anticipated credit losses. Loans are charged against the allowance at such time
as they are determined to be losses. Subsequent recoveries are credited to the
allowance. Management considers the year end allowance appropriate and adequate
to cover possible losses in the loan portfolio; however, management's judgment
is based upon a number of
29
<PAGE>
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.
Premises and Equipment - Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed over the estimated useful lives of the assets primarily using the
straight-line method. Leasehold improvements are amortized on a straight-line
basis over the lesser of the estimated useful life of the improvement or the
terms of the respective lease.
Additions to premises and equipment and major replacements or improvements
are capitalized at cost. Maintenance, repairs and minor replacements are
expensed when incurred.
Intangible Assets - Intangible assets consist primarily of goodwill and core
deposit premiums resulting from the Company's branch acquisitions. On an
ongoing basis, the Company evaluates the carrying value of these intangible
assets and charges to expense any difference between the carrying value and the
estimated fair market value.
Amortization for intangibles is generally provided by using the straight-
line method over the estimated economic lives of the various assets, ranging
from 9 to 25 years.
During 1994, the Company reevaluated the estimated economic lives and
amortization methods for its intangible assets. As a result of this
reevaluation, core deposit intangibles are being amortized over 10 years
(previously 15 years) using the sum-of-the-years' digits method (previously
straight-line method). Goodwill is being amortized over 25 years (previously 15
years) using the straight-line method. The effect of this change is not
significant.
Other Real Estate Owned - Other real estate owned, included in other assets,
is comprised of real estate properties acquired in partial or total satisfaction
of problem loans. The properties are recorded at the lower of cost or fair
market value at the date acquired. Losses arising at the time of acquisition of
such properties are charged against the allowance for loan losses. Subsequent
write-downs that may be required to the carrying value of these properties are
charged to other expenses. Gains and losses realized from the sale of other
real estate owned are included in noninterest income.
Loan Origination Fees - The Company accounts for loan origination and
commitment fees and related direct costs in accordance with Statement of
Financial Accounting Standards ("SFAS") 91, "Accounting for Non-refundable Fees
and Costs Associated with Originating or Acquiring Loans and Initial Direct
Costs of Leases." Origination fees received and direct costs incurred are
amortized to interest income over the contractual lives of the loans, adjusted
for repayments, using the level yield method. Loan commitment fees received to
originate or purchase loans are offset against the direct costs incurred to make
such commitments. The net amount is deferred and upon exercise is recognized
over the life of the related loan as a yield adjustment. If the commitment
expires unexercised, the net deferred amount is recognized.
Income Taxes- Effective January 1, 1992, the Company adopted the provisions
of SFAS 109, "Accounting for Income Taxes." The pronouncement requires an asset
and liability approach for financial accounting and reporting for income taxes.
The adoption of SFAS 109 had no effect on the financial statements and,
accordingly, is not presented as a change in an accounting principle.
Certain items of income and expense (principally provision for loan losses
and depreciation) are included in one reporting period for financial accounting
purposes and another for income tax purposes. Provisions for deferred income
taxes are made in recognition of such temporary differences. Rehabilitation
investment tax credits are accounted for by the use of the flow-through method.
Reclassifications - Certain amounts for prior years have been reclassified
to conform with statement presentations for 1994. These reclassifications have
no affect on previously reported net income.
Statements of Cash Flows - Cash includes currency and coin, cash items in
process of collection and due from banks. Interest paid on deposits and short-
term borrowings amounted to approximately $29,206,000, $21,364,000 and
$20,563,000 in 1994, 1993 and 1992, respectively. Income
30
<PAGE>
tax payments of $2,578,000 were made in 1994, $1,988,000 in 1993 and
$854,000 in 1992.
Recently Issued Accounting Pronouncements- In May 1993, the Financial
Accounting Standards Board ("FASB") issued SFAS 114, "Accounting by Creditors
for Impairment of a Loan." SFAS 114 provides for the use of present value
accounting to determine the reserve for possible credit losses on certain loans,
including loans that have been modified as part of a troubled debt
restructuring. The impact of the new statement, effective for fiscal years
beginning after December 15, 1994, has not yet been determined, but is not
expected to have a material impact on the Company's financial position or
results of operations.
In October 1994, the FASB issued SFAS 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures." SFAS 118 amends SFAS
114 in the areas of disclosure requirements and methods for recognizing interest
income on an impaired loan. The Statement is effective concurrent with the
effective date of SFAS 114.
In May 1993, the FASB issued SFAS 115, "Accounting for Certain Investments
in Debt and Equity Securities." SFAS 115 provides for the classification of
investment securities into three categories - trading, available for sale and
held for investment. Trading and available for sale securities are reported at
market value in the balance sheet with unrealized gains and losses to be
reported in income (for trading securities) or shareholders' equity (for
available for sale securities). The Company adopted SFAS 115 on January 1, 1994.
The FASB has also issued an exposure draft, "Accounting for the Impairment
of Long-Lived Assets," which proposes standards for the identification of long-
lived assets, identifiable intangibles and goodwill that may need to be written
down because of an entity's inability to recover the assets' carrying values.
The periodic effect of the adoption of this standard on net income has not been
fully determined. This proposed standard would apply for fiscal years beginning
after December 15, 1994 with earlier application encouraged.
In October 1994, the FASB issued SFAS 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments." SFAS 119
requires disclosures about Derivative Financial Instruments. The Company has no
such securities. SFAS 119 also amends SFAS 105, "Disclosure of Information
about Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk" and SFAS 107, "Disclosures about
Fair Value of Financial Instruments" for certain disclosure requirements which
have a minimal impact on the Company.
2. SUBSEQUENT EVENTS
On January 24, 1995, the Bank securitized approximately $100,000,000 of
credit card receivables. This transaction will be recorded as a sale in
accordance with SFAS 77 "Reporting by Transferor for Transfer of Receivables
with Recourse." Recourse obligations related to this transaction are not
material. Excess servicing fees related to the securitization are recorded
during the life of the transaction. The excess servicing fee is based upon the
difference between finance charges received from the cardholder less the yield
paid to investors, credit losses and a nominal servicing fee.
3. RESTRUCTURING CHARGES
During the fourth quarter of 1994, the Company announced a restructuring
that initiated a program of credit card securitization, wrote down related
intangible assets, and merged the Savings Bank into the Bank. Restructuring and
nonrecurring charges related to this plan amounted to $12,214,000 pre-tax
($9,415,000 after-tax).
The Company incurred credit card restructuring charges of $12,214,000 pre-
tax ($8,410,000 after-tax) primarily from the write-down of intangible assets
and charges associated with the origination of credit card accounts. As part of
the merger of the Savings Bank into the Bank, the Company incurred income taxes
of $1,005,000 due to the different tax treatment accorded the allowance for loan
losses at the Savings Bank.
4. BUSINESS COMBINATIONS
In March 1993, the Bank acquired certain assets and assumed certain
liabilities of 13 South Carolina branches of
31
<PAGE>
Republic National Bank. The Bank acquired $31,239,000 in loans, $6,400,000
in premises and equipment, and $204,863,000 in deposit liabilities. The total
premium paid for the acquisitions was approximately $6,929,000.
On September 30, 1993, the Company acquired, for 60,000 shares of
Convertible Preferred Stock Series 1993B ("Series 1993B Preferred Stock"), all
of the outstanding stock of First Sun Mortgage Corporation, a South Carolina
corporation which engaged in mortgage banking activities. The Company changed
the name of First Sun Mortgage Corporation to Carolina First Mortgage Company.
The value of the Series 1993B Preferred Stock on the date of acquisition was
determined to be $1,200,000. Total cost of the acquisition in excess of the
fair value of net assets acquired aggregated approximately $3,070,000.
On December 31, 1993, the Bank acquired certain assets and assumed certain
liabilities of three Columbia, South Carolina branches of Bay Savings Bank,
F.S.B. (formerly Omni Savings Bank, F.S.B.). The Bank assumed deposit
liabilities of $38,489,000 and acquired $143,000 in loans. The total premium
paid for the acquisition was approximately $1,068,000.
On April 29, 1994, the Bank purchased the insured deposits of Citadel
Federal Savings and Loan Association ("Citadel Federal") from the Resolution
Trust Corporation, as receiver for Citadel Federal. This acquisition resulted
in the acquisition of one branch office in Charleston, South Carolina, with
deposits of approximately $5,849,000, on which a premium of approximately
$533,000 was paid.
On May 2, 1994, the Bank and the Savings Bank acquired six branches from
Republic National Bank. The acquired branches are located in Columbia,
Edgefield, Johnston, Bennettsville, Lake City and McColl. In addition, the Bank
acquired only the deposits and select loans from Republic National Bank's main
office branch in Columbia. With this transaction, the Bank and the Savings Bank
acquired loans of approximately $37,511,000 and deposits of about $135,326,000,
on which a premium of approximately $5,400,000 was paid.
The above acquisitions were accounted for under the purchase method of
accounting. The results of operations of the above acquisitions have been
included in the consolidated financial statements since the acquisition date.
On October 13, 1994, the Bank entered into a definitive agreement with Aiken
County National Bank ("Aiken County National") for the merger of Aiken County
National into the Bank. The Bank will acquire all the outstanding common shares
of Aiken County National in exchange for approximately 453,000 shares of the
Company's common stock (assuming no dissenter's rights are exercised). Aiken
County National has assets of approximately $42 million, loans of $29 million
and deposits of $38 million. This transaction, which is subject to regulatory
and Aiken County National shareholder approval, is expected to be completed in
the first quarter of 1995.
On November 14, 1994, the Bank entered into a definitive agreement with
Midlands National Bank ("Midlands") for the merger of Midlands into the Bank.
The Bank will acquire all the outstanding common shares of Midlands in exchange
for approximately 584,000 shares of the Company's common stock (assuming no
dissenter's rights are exercised). Midlands has assets of approximately $43
million, loans of $28 million and deposits of $39 million. This transaction,
which is subject to regulatory and Midlands shareholder approval, is expected to
be completed in the second quarter of 1995.
Regulatory approval has been applied for both the Aiken County National and
Midlands mergers. The Aiken County National and Midlands mergers will be
accounted for as a pooling of interests.
The Company has applied for and received regulatory approval to merge the
Savings Bank into the Bank. This merger was completed February 3, 1995.
5. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank based upon a percentage of deposits. The average amounts of these
reserve balances for
32
<PAGE>
the years ended December 31, 1994 and 1993, were approximately $6,927,000
and $4,853,000, respectively.
6. SECURITIES
The aggregate book and market values of securities at December 31 were as
follows:
<TABLE>
<CAPTION>
1994
Book Gross Unrealized Market
($ in thousands) Value Gains Losses Value
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. treasury securities....... $21,493 $ - $ 573 $20,920
Obligations of U.S. government
agencies and corporations.... 27,412 - 633 26,779
Corporate bonds................ 1,999 - 50 1,949
Total securities available
for sale..................... $50,904 $ - $1,256 $49,648
SECURITIES HELD FOR INVESTMENT:
U.S. treasury securities....... $ 5,989 $ - $ 537 $ 5,452
Obligations of U.S. government
agencies and corporations.... 40,185 - 1,852 38,333
Obligations of states and
political subdivisions....... 20,029 19 1,018 19,030
Other bonds.................... 53 - - 53
Total securities held
for investment............... $66,256 $19 $3,407 $62,868
</TABLE>
<TABLE>
<CAPTION>
1993
Book Gross Unrealized Market
($ in thousands) Value Gains Losses Value
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. treasury securities....... $11,521 $ 12 $ 10 $11,523
Obligations of U.S. government
agencies and corporations.... 51,353 61 57 51,357
Corporate bonds................ 1,997 - 6 1,991
Total securities available
for sale..................... $64,871 $ 73 $ 73 $64,871
SECURITIES HELD FOR INVESTMENT:
U.S. treasury securities....... $ 3,995 $ - $ 7 $ 3,988
Obligations of U.S. government
agencies and corporations.... 31,432 232 31 31,633
Obligations of states and
political subdivisions....... 11,907 240 14 12,133
Corporate bonds................ 2,271 - 1 2,270
Total securities held
for investment............... $49,605 $472 $ 53 $50,024
</TABLE>
The book value and estimated market value of debt securities at December 31,
1994, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties. Market value
of securities is determined using quoted market prices.
<TABLE>
<CAPTION>
Book Market
($ in thousands) Value Value
<S> <C> <C>
Due in one year or less... $ 45,340 $ 44,296
Due after one year
through five years...... 51,680 48,955
Due after five years
through ten years....... 9,551 8,996
Due after ten years....... 10,589 10,269
Total securities.......... $117,160 $112,516
</TABLE>
Gross realized gains and losses on sales of securities
were:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993 1992
<S> <C> <C> <C>
Gross realized gains.... $252 $ 955 $605
Gross realized losses... (18) (293) (88)
Net gain on sale of
securities............ $234 $ 662 $517
</TABLE>
The change in the net unrealized loss on securities available for sale for
the year ended December 31, 1994 was $854,000, net of applicable income taxes of
$403,000. Securities with an approximate book value of $89,544,000 and
$85,233,000 at December 31, 1994 and 1993, respectively, were pledged to secure
public deposits and for other purposes. Estimated market values of securities
pledged were $85,595,000 and $85,926,000 at December 31, 1994 and 1993,
respectively.
7. LOANS AND ALLOWANCE FOR LOAN LOSSES
The following is a summary of loans outstanding by category at December 31:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993
<S> <C> <C>
Real estate-mortgage............. $198,590 $148,888
Real estate-construction......... 21,918 19,673
Commercial and industrial........ 164,190 122,753
Commercial and industrial
secured by real estate......... 260,010 142,806
Loans to individuals for
household, family and other
personal expenditures.......... 145,474 124,236
Loans held for sale.............. 71,695 7,700
All other loans, including
overdrafts..................... 4,865 1,323
Gross loans...................... 866,742 567,379
Less unearned income............. (873) (2,221)
Less allowance for loan losses... (5,267) (5,688)
Net loans........................ $860,602 $559,470
</TABLE>
33
<PAGE>
Directors, executive officers and associates of such persons were customers
of and had transactions with the Company in the ordinary course of business.
Included in such transactions are outstanding loans and commitments, all of
which were made under normal credit terms and did not involve more than normal
risk of collection. The aggregate dollar amount of these loans was
approximately $8,477,000 and $9,361,000 at December 31, 1994 and 1993,
respectively. During 1994, new loans of approximately $2,865,000 were made, and
payments totaled approximately $3,749,000.
At December 31, 1994 and 1993, loans included $1,012,000 and $558,000,
respectively, on which interest was not being accrued. At December 31, 1994,
loans included $675,000 in restructured loans. Foregone interest income was
approximately $53,000 in 1994, $218,000 in 1993 and $234,000 in 1992.
Foreclosure loans included in other real estate owned amounted to $517,000 and
$1,021,000 at December 31, 1994 and 1993, respectively.
Transactions in the allowance for loan losses were:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year... $ 5,688 $ 4,263 $ 3,727
Valuation allowance for
loans purchased.............. 1,078 1,811 255
Provision for loan losses...... 950 909 1,453
Recoveries on loans
previously charged off....... 113 26 55
Loans charged off.............. (2,562) (1,321) (1,227)
Balance at end of year......... $ 5,267 $ 5,688 $ 4,263
</TABLE>
8. PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993
<S> <C> <C>
Land......................... $ 4,951 $ 4,248
Buildings.................... 18,871 13,509
Furniture, fixtures and
equipment.................. 15,447 11,098
Leasehold improvements....... 6,469 5,872
Construction in progress..... 420 712
46,158 35,439
Less accumulated depreciation
and amortization........... (9,316) (6,449)
$36,842 $28,990
</TABLE>
Depreciation and amortization charged to operations totaled $2,552,000,
$1,676,000 and $1,302,000 in 1994, 1993 and 1992, respectively.
At December 31, 1994, approximately $2,145,000 of land and buildings is
pledged as collateral for long-term debt obligations (Note 15).
9. INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization, at December 31 are
included in other assets and summarized as follows:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993
<S> <C> <C>
Goodwill............... 9,123 $ 5,791
Core deposit premium... 11,125 8,820
Credit card premium.... 345 2,244
$20,593 $16,855
</TABLE>
Goodwill arising from acquisitions is being amortized on a straight-line
basis over 25 years. Core deposit premiums are being amortized using the sum-
of-the-years' digits method over 10 years. Credit card premiums are amortized
over their estimated useful economic lives primarily over nine years. Goodwill,
core deposit and credit card premium amortization charged to operations was
$2,485,000, $902,000 and $462,000 for the years ended December 31, 1994, 1993
and 1992, respectively.
10.MORTGAGE OPERATIONS
Purchased servicing rights and excess servicing rights derived from the sale
of loans which are included in other assets at December 31 are summarized as
follows:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993
<S> <C> <C>
Purchased servicing rights... 8,655 $3,334
Excess servicing rights...... 34 54
</TABLE>
The Company paid $6,665,000 for servicing rights to approximately
$222,697,000 of loans in 1994. The amortization of purchased and excess
servicing rights included in loan servicing fees amounted to $908,000, $636,000,
and $35,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
Mortgage banking income includes origination fees of $954,000, $1,051,000
and $778,000 in 1994, 1993 and 1992, respectively, and gains from the sale of
mortgage loans of $112,000, $509,000 and $496,000 in 1994, 1993 and 1992,
respectively.
34
<PAGE>
11. DEPOSITS
Certificates of deposit in excess of $100,000 totaled $125,796,000 and
$110,312,000 at December 31, 1994 and 1993, respectively.
12.INCOME TAXES
Income tax expense (benefit) for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993 1992
<S> <C> <C> <C>
Currently payable (refundable):
Federal...................... $ (285) $2,200 $1,326
State........................ 163 240 77
Total........................ (122) 2,440 1,403
Deferred....................... 73 (267) (243)
$ (49) $2,173 $1,160
</TABLE>
The sources of temporary differences and the resulting deferred taxes for
the years ended December 31 are as follows:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993 1992
<S> <C> <C> <C>
Provision for loan losses
in excess of amount
deductible for taxes.... $ (1,729) $ (277) $ (258)
Accretion and
FHLB dividends.......... (27) (23) (24)
Tax depreciation in excess
of book depreciation.... (195) 66 49
Restructuring charges..... 2,131 - -
Amortization.............. (65) - -
Other, net................ (42) (33) (10)
$ 73 $ (267) $ (243)
</TABLE>
Deferred taxes of $842,000 and $915,000 are included in other assets on the
balance sheets at December 31, 1994 and 1993, respectively. There is no
valuation allowance related to deferred tax assets.
Income taxes are different than tax expense computed by applying the
statutory federal income tax rate, 34%, to income before income taxes. The
reasons for these differences are as follows:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993 1992
<S> <C> <C> <C>
Tax expense (benefit)
at statutory rate.............$ (652) $2,417 $1,318
Differences resulting from:
Rehabilitation tax credit....... (150) (60) (68)
Effect of Savings Bank merger... 1,005 - -
Benefit of net operating
loss carryforward............. - (102) -
State tax net of federal
benefit....................... 56 162 56
Nontaxable interest............. (221) (176) (89)
Other, net...................... (87) (68) (57)
$ (49) $2,173 $1,160
</TABLE>
There are no significant pending assessments from taxing authorities
regarding taxation issues at the Company or its subsidiaries.
13.BORROWED FUNDS
Federal funds purchased mature overnight and carried a rate of 5.58%, 2.99%
and 2.94% at December 31, 1994, 1993 and 1992, respectively.
Securities sold under repurchase agreements mature overnight and carried a
rate of 5.23%, 2.74% and 2.69% at December 31, 1994, 1993 and 1992,
respectively.
Advances from the Federal Home Loan Bank ("FHLB") mature daily and carried a
rate of 6.03% at December 31, 1994. Total loans pledged to the FHLB for advances
at December 31, 1994 were $138,114,000.
Following is a summary of short-term borrowings at December 31:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993 1992
<S> <C> <C> <C>
Federal funds purchased... $ 16,000 $ 400 $ 1,145
Securities sold under
repurchase agreements... 17,986 16,325 1,392
Advances from the FHLB.... 72,000 - -
$105,986 $16,725 $ 2,537
Maximum amount outstanding
at any month end:
Federal funds purchased
and securities sold under
repurchase agreements.....$ 33,986 $23,278 $ 8,520
Advances from the FHLB..... 72,000 15,550 12,000
Aggregate short-term
borrowings................ 105,986 32,767 17,963
Average amount outstanding... 41,362 14,023 2,290
Interest rate at year end.... 5.84% 2.75% 2.80%
Average interest rate
during year................ 3.96% 3.05% 5.55%
</TABLE>
14. UNUSED LINES OF CREDIT
At December 31, 1994, the Bank had unused short-term lines of credit to
purchase federal funds from unrelated banks totaling $17,750,000. These lines of
credit are available on a one-to-ten day basis for general corporate purposes of
the Bank. All of the lenders have reserved the right to withdraw these lines at
their option.
At December 31, 1994, the Savings Bank had an unused line of credit with the
FHLB of Atlanta totaling $33,000,000.
35
<PAGE>
15. LONG TERM DEBT
At December 31, 1994 and 1993, long-term debt consisted of a mortgage note
payable of $1,088,000 and $1,092,000, respectively. The note bears interest at
11% per annum with current annual payments of approximately $125,000. Long-term
debt also consisted of a note payable totaling $125,920 and $175,920,
respectively, representing the Company's guarantee of borrowings from a bank by
the ESOP (see Note 25). The note bears interest, which is payable annually, at
a variable rate which approximates 90% of the prime interest rate. Annual
principal payments are $50,000 until the note is repaid. Future payments due on
long-term debt are as follows:
<TABLE>
<CAPTION>
($ in thousands)
<S> <C>
1995.......... $ 52
1996.......... 52
1997.......... 28
1998.......... 28
1999.......... 28
Thereafter.... 1,026
$1,214
</TABLE>
16. COMMITMENTS AND CONTINGENT LIABILITIES
The Company has, from time to time, various lawsuits and claims arising from
the conduct of its business. Such items are not expected to have any material
adverse effect on the financial position or results of operations of the
Company.
On October 31, 1994, JW Charles Clearing Corp. filed a lawsuit against the
Bank in the Court of Common Pleas in Lexington County, South Carolina. Such
action, in general, claims that the Bank improperly paid approximately $600,000
in checks to Harold McCarley and/or McCarley and Associates, Inc. The complaint
seeks actual and punitive damages in an amount to be determined by a jury, plus
interest on the damages and other costs. The Bank has answered the complaint and
plans to vigorously defend such complaint. The Bank believes that there are
valid defenses available to it. In connection with the litigation, the Bank
also expects to make a claim under insurance policies for any losses it may
suffer which, if determined to cover the loss, could pay for substantially all
of the actual damages, if any, determined to be appropriate by a jury. However,
no assurance can be given at this time regarding whether it will be determined
that any losses suffered in this litigation will be covered by the insurance
policy. Furthermore, the Company is not in a position at this time to assess
the likely outcome of the litigation or any damages for which it may become
liable.
17.LEASE COMMITMENTS
Approximate minimum rental payments under noncancelable operating leases
at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
($ in thousands)
<S> <C>
1995.......... $1,273
1996.......... 1,220
1997.......... 1,047
1998.......... 916
1999.......... 902
Thereafter.... 4,348
$9,706
</TABLE>
Leases on premises have options for extensions under substantially the same
terms as in the original lease period with certain rate escalations. Lease
payments charged to expense totaled $1,138,000, $714,000 and $405,000 in 1994,
1993 and 1992, respectively. The leases provide that the lessee pay property
taxes, insurance and maintenance cost.
18.PREFERRED STOCK
On April 15, 1994, the Company issued 920,000 shares of 7.32% Noncumulative
Convertible Preferred Stock Series 1994 ("Series 1994 Preferred Stock"), which
raised $21,444,000 in equity. Dividends on the Series 1994 Preferred Stock will
be payable quarterly, when, as, and if declared by the Board of Directors, at an
annual rate of $1.83 per share. Dividends on the Series 1994 Preferred Stock are
not cumulative. To date, all regular quarterly dividends have been paid. A
Series 1994 Preferred Stock share may be converted at the option of the holder
into 1.7931 shares of common stock or a conversion price of $13.94 per share of
common stock. The Company, at its option, may redeem the Series 1994 Preferred
Stock at any time after July 1, 1994. However, the Series 1994 Preferred Stock
may not be redeemed prior to July 1, 1997, unless the average of the last
reported sale price of the Company's common stock for 20 consecutive business
days ending within 5 business days of the date of the notice of redemption has
been at least 125% of the
36
<PAGE>
conversion price. Dividends paid or declared on the Series 1994 Preferred
Stock during 1994 were $1,194,000.
On March 5, 1993, the Company issued 621,000 shares of 7.50% Noncumulative
Convertible Preferred Stock Series 1993 ("Series 1993 Preferred Stock"), which
raised $14,462,000 in equity. Dividends on the Series 1993 Preferred Stock are
payable quarterly, if declared by the Board of Directors, at an annual rate of
$1.875 per share. Dividends on the Series 1993 Preferred Stock are not
cumulative. To date, all regular quarterly dividends have been paid. A Series
1993 Preferred Stock share may be converted at the option of the holder into
1.917 shares of common stock, or a conversion price of $13.04 per share of
common stock. The Company, at its option, may redeem the Series 1993 Preferred
Stock at any time after July 1, 1993. However, the Series 1993 Preferred Stock
may not be redeemed prior to July 1, 1996, unless the average of the last
reported sale price of the Company's common stock for 20 consecutive business
days ending within 5 business days of the date of the notice of redemption has
been at least 125% of the conversion price. Dividends paid or declared on the
Series 1993 Preferred Stock during 1994 were $1,164,000.
On November 1, 1993, the Company announced the redemption of the 8.32%
Cumulative Convertible Preferred Stock Series 1992 ("Series 1992 Preferred
Stock"). The redemption date was December 31, 1993. Of the 460,000 shares of
Series 1992 Preferred Stock outstanding, holders of 456,634 shares elected to
convert into common stock. Consequently, the Company issued 1,089,674 shares of
$1.00 par value common stock.
On September 30, 1993, the Company issued 60,000 shares of Series 1993B
Preferred Stock in exchange for all the outstanding common stock of the Mortgage
Company, formerly First Sun Mortgage Corporation. The value of the Series 1993B
Preferred Stock on the date of the acquisition was determined to be $1,200,000.
The Series 1993B Preferred Stock has a liquidation value of $20.00 per share and
provides for cumulative quarterly cash dividends of $0.3125 per share. Each
share of Series 1993B Preferred Stock is convertible into 1.75 shares of common
stock. There is currently no market for the Series 1993B Preferred Stock, and it
is not expected that any market for such class of stock will develop. Dividends
paid or declared on the Series 1993B Preferred Stock were $75,000.
19.PER SHARE INFORMATION
The Company's Board of Directors declared a five percent stock dividend
issuable on May 16, 1994, to stockholders of record on April 29, 1994. Per
share data have been restated to reflect this dividend.
20.RESTRICTION OF DIVIDENDS
The ability of the Company to pay cash dividends over the long term is
dependent upon receiving cash in the form of dividends from the Bank. South
Carolina's banking regulations restrict the amount of dividends that can be
paid. All dividends paid from the Bank are subject to the prior approval of the
Commissioner of Banking and payable only from the retained earnings of the Bank.
At December 31, 1994, the Bank's retained earnings were $5,126,000.
After the merger of the Bank and Savings Bank in February 1995, the retained
earnings of the Savings Bank will be available to pay dividends to the Company.
At December 31, 1994, the Savings Bank's retained earnings were $8,370,000.
21.STOCK OPTION AND RESTRICTED STOCK PLANS
The Company maintains an Incentive Stock Option Plan and a Restricted Stock
Awards Plan. Under these plans, shares of the Company's common stock are
granted to key employees.
At the 1994 Annual Meeting, the number of shares available for grants was
increased to 525,000. Under the terms of the plan, the option price must not be
less than the fair market value of the stock at the date of grant. Options are
exercisable ratably (on a cumulative basis), twenty percent twelve months after
the date of grant, and twenty percent at the end of each twelve month period
thereafter. All options granted under the plan must be exercised within a period
not to exceed ten years from the date of grant.
The following is a summary of the activity under the Company's Incentive
Stock Option Plan for the years 1994
37
<PAGE>
and 1993. The information has been adjusted for the 5% stock dividends.
<TABLE>
<CAPTION>
1994 1993
OPTION PRICE Option Price
SHARES PER SHARE Shares Per Share
<S> <C> <C> <C> <C>
Outstanding,
January 1......... 38,934 $8.85/11.46 28,893 $6.58/11.46
Granted............. 26,950 14.88 17,535 12.03
Cancelled........... - - 3,153 8.85/12.03
Exercised........... 141 9.41/12.03 4,341 6.58
Outstanding,
December 31....... 65,743 $8.85/14.88 38,934 $8.85/12.03
Exercisable,
December 31....... 17,012 $8.85/12.03 9,270 $8.85/11.46
Available for grant,
December 31....... 400,019 169,988
</TABLE>
All shares granted under the Restricted Stock Plan are subject to
restrictions as to continuous employment for a specified time period following
the date of grant. During this period the holder is entitled to full voting
rights and dividends. At December 31, 1994, there were 100,479 shares of
restricted stock outstanding. Deferred compensation representing the fair
market value of the stock at the date of grant is being amortized over a five-
year vesting period, with $236,000 charged to expense in 1994, $163,000 in 1993
and $97,000 in 1992.
At the 1994 Annual Meeting, a Directors' Stock Option Plan was established.
On May 2, 1994, grants for 16,000 shares at an option price of $12.38 per share
were issued.
22. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, to meet the financing needs of its
customers, the Company is a party to financial instruments with off-balance-
sheet risk. These financial instruments include commitments to extend credit,
standby letters of credit, repurchase agreements and documentary letters of
credit. Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the statements of
financial position.
The Company's exposure to credit loss in the event of non-performance by the
other party to the financial instrument is represented by the contractual amount
of those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
Commitments to extend credit are agreements to lend as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Company upon extension of credit, is based on management's credit
evaluation.
At December 31, 1994, the Company had executed simultaneous
repurchase/reverse repurchase transactions with customers with total principal
amounts of approximately $233,400,000 which are not reflected in the
accompanying statement of financial position.
The total portfolio of loans serviced or sub-serviced for non-affiliated
parties at December 31, 1994, was $704,869,000.
23.RELATED PARTY TRANSACTIONS
The Bank leases a Greenville office from a partnership; one of the partners
is a director of the Bank and the Company. Under the terms of this lease, which
extends to 2001, the Bank made payments totaling $82,000 in both 1994 and 1993.
The Bank leases land, on which it has constructed a branch, from a company of
which a director is an officer. Under the terms of the lease, which extends to
2009, the Bank made $56,000 in payments in 1994, 1993 and 1992, respectively.
The Savings Bank leases the land, on which an office is constructed, from the
wife of a director. Under the terms of this lease, which extends to 2018, the
Savings Bank made $25,000 in payments in 1994, 1993 and 1992. These leases were
made on terms comparable to those which would have been obtained between
unrelated parties.
38
<PAGE>
24. CORRECTION OF AN ERROR
The accompanying financial statements for 1992 have been restated to correct
an error. Unrealized losses on securities available for sale were charged to
shareholders' equity instead of being charged to income as stated in the
Company's policy of accounting for such securities at the lower of cost or
market. The effect of the restatement was to decrease net income for 1992 by
$199,000 ($.07 per common share).
25.EMPLOYEE BENEFIT PLANS
The Company maintains the Carolina First Salary Reduction Plan and Trust
("the Plan") for all eligible employees of the Bank, the Savings Bank and the
Mortgage Company. Upon ongoing approval of the Board of Directors, the Company
matches employee contributions equal to four percent of compensation subject to
certain adjustments and limitations. Contributions of $458,000, $301,000 and
$180,000 were charged to operations in 1994, 1993 and 1992, respectively.
The Company maintains the Carolina First Employee Stock Ownership Plan
("ESOP") for all eligible employees. Contributions are at the discretion of, and
determined annually by, the Board of Directors, and may not exceed the maximum
amount deductible under the applicable section of the Internal Revenue Code. For
the years ended December 31, 1994, 1993 and 1992, contributions of $813,000,
$401,000 and $275,000, respectively, were charged to operations.
The ESOP has a loan used to acquire shares of stock of the Company. Such
stock is pledged as collateral for the loan. In accordance with the requirements
of the AICPA Statement of Position 76-3 and 93-6, the Company presents the
outstanding loan amount as other borrowed money and as a reduction of
shareholders' equity in the accompanying consolidated balance sheets (Note 15).
Company contributions to the ESOP are the primary source of funds used to
service the debt.
26. NONINTEREST EXPENSES
The significant components of sundry noninterest expenses for the years
ended December 31 are presented below:
<TABLE>
<CAPTION>
($ in thousands) 1994 1993 1992
<S> <C> <C> <C>
Noninterest expenses - Sundry:
Federal deposit insurance
premiums.................... $ 1,899 $ 1,392 $ 910
Credit card processing fees... 1,506 909 603
Intangibles amortization...... 2,485 902 462
Stationery, supplies
and printing................ 1,095 772 521
Telephone..................... 883 537 268
Postage....................... 832 536 291
Advertising................... 912 386 506
Other......................... 4,912 4,335 2,844
$14,524 $ 9,769 $ 6,405
</TABLE>
27. PARENT COMPANY FINANCIAL INFORMATION
The following is condensed financial information of Carolina First
Corporation (Parent Company only):
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
($ in thousands) December 31,
1994 1993
ASSETS
<S> <C> <C>
Cash........................... 298 $ 828
Investment in Subsidiaries
Bank......................... 55,238 45,830
Savings Bank................. 15,404 13,700
Mortgage Company............. 1,640 1,877
Total investment in
subsidiaries................. 72,282 61,407
Receivable from subsidiaries... 76 7
Premises and equipment......... 363 -
Other investments.............. 1,439 959
Other assets................... 5,310 391
$79,768 $ 63,592
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accrued expenses
and other liabilities........$ 601 $ 547
Long-term debt................. 126 176
Shareholders' equity........... 79,041 62,869
$79,768 $ 63,592
</TABLE>
39
<PAGE>
CONDENSED STATEMENTS OF INCOME
($ in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INCOME
Dividends
Bank subsidiary.............. $ 200 $ 700 $ 350
Savings Bank subsidiary...... 300 700 300
Interest, Bank................. 98 73 97
Sundry......................... 181 217 227
779 1,690 974
EXPENSES
Interest on borrowed funds..... 10 - 5
Deferred compensation.......... 236 163 97
Shareholder communications..... 287 203 152
Sundry......................... 1,020 417 253
1,553 783 507
Income (loss) before taxes
and equity in undistributed
net income of subsidiaries... (774) 907 467
Income tax benefits............ 680 173 58
Equity in undistributed net
income of subsidiaries....... (1,775) 3,855 1,992
Net income (loss).............. $ (1,869) $4,935 $2,517
</TABLE>
CONDENSED STATEMENTS OF CASH FLOW
($ in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............... $ (1,869) $ 4,935 $ 2,517
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operations
Equity in undistributed
earnings of subsidiaries...... 1,775 (3,855) (1,992)
Depreciation.................... 18 15 14
Increase (decrease) in
other liabilities............. 54 (190) 204
Decrease (increase) in
other assets.................. (4,919) (45) 117
Net cash provided by (used for)
operating activities.......... (4,941) 860 860
INVESTING ACTIVITIES
Investment in Bank subsidiary... (13,000) (15,000) (7,000)
Investment in Savings Bank
subsidiary.................... (1,000) - -
Investment in Mortgage
Company....................... - (350) -
Loans to subsidiary............. - (212) -
Increase in other investments... (480) (348) (580)
Sale of fixed assets............ (381) 230 -
Net cash used for investing
activities.................... (14,861) (15,680) (7,580)
FINANCING ACTIVITIES
Decrease in notes payable....... - - (250)
Exercise of stock options....... - 30 -
Net proceeds from sale of
Preferred stock............... 21,444 14,462 10,319
Redemption of Preferred stock... - (92) -
Cash dividend on Preferred
stock......................... (2,936) (1,777) (385)
Other........................... 764 - -
Net cash provided by
financing activities.......... 19,272 12,623 9,684
Net change in cash and due
from banks.................... (530) (2,197) 2,964
Cash at beginning of year....... 828 3,025 61
Cash at end of year............. $ 298 $ 828 $ 3,025
</TABLE>
40
<PAGE>
28. QUARTERLY OPERATING RESULTS (UNAUDITED)
The following is a summary of the unaudited consoli-
dated quarterly results of the Company and its subsidiaries
for the years ended December 31:
<TABLE>
<CAPTION>
($ in thousands, except share data) First Quarter Second Quarter
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest income.................... $ 13,714 $ 9,958 $ 16,871 $ 12,364
Interest expense................... 5,973 4,686 6,739 5,643
Net interest income................ 7,741 5,272 10,132 6,721
Provision for loan losses.......... - 265 200 314
Net interest income after provision
for loan losses.................. 7,741 5,007 9,932 6,407
Noninterest income................. 1,971 1,086 1,973 1,540
Noninterest expenses............... 7,768 4,628 9,346 6,177
Income before taxes................ 1,944 1,465 2,559 1,770
Income taxes....................... 466 513 790 620
Net income......................... 1,478 952 1,769 1,150
Dividends on preferred stock....... 310 239 661 612
Net income applicable
to common shareholders...........$ 1,168 $ 713 1,108 $ 538
Earnings per common share*.........$ 0.26 $ 0.22 0.25 $ 0.16
Average number of outstanding
common shares*................... 4,498,745 3,308,118 4,514,002 3,310,225
Third Quarter Fourth Quarter
1994 1993 1994 1993
Interest income..................... $ 19,143 $ 13,043 $ 21,863 $ 13,327
Interest expense.................... 8,152 5,690 9,100 5,730
Net interest income................. 10,991 7,353 12,763 7,597
Provision for loan losses........... 250 330 500 -
Net interest income after provision
for loan losses................... 10,741 7,023 12,263 7,597
Noninterest income.................. 2,260 1,592 1,654 2,034
Noninterest expenses................ 10,072 6,843 23,267 7,530
Income (loss) before taxes.......... 2,929 1,772 (9,350) 2,101
Income taxes........................ 928 466 (2,233) 574
Net income (loss)................... 2,001 1,306 (7,117) 1,527
Dividends on preferred stock........ 731 530 731 549
Net income (loss) applicable
to common shareholders............$ 1,270 $ 776 (7,848) $ 978
Earnings (loss) per common share*...$ 0.28 $ 0.23 (1.72) $ 0.29
Average number of outstanding
common shares*.................... 4,519,486 3,325,608 4,552,461 3,386,308
</TABLE>
*Per share data have been restated to reflect the 5% stock dividend.
29. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, "Disclosures about Fair Value of Financial Instruments" requires
disclosure of fair value information, whether or not recognized in the statement
of financial position, when it is practicable to estimate the fair value. SFAS
107 defines a financial instrument as cash, evidence of an ownership interest in
an entity or contractual obligations which require the exchange of cash of other
financial instruments. Certain items are specifically excluded from the
disclosure requirements, including the Company's Common and Preferred stock,
premises and equipment and other assets and liabilities.
41
<PAGE>
Fair value approximates book value for the following financial instruments
due to the short-term nature of the instrument: cash and due from banks, federal
funds sold and securities purchased under resale agreements, federal funds
purchased and securities sold under repurchase agreements, and other short-term
borrowings.
Fair value for variable rate loans that reprice frequently and for loans
that mature in less than one year is based on the carrying value. Fair value for
mortgage loans, consumer loans and all other loans (primarily commercial and
industrial loans) is based on the discounted present value of the estimated
future cash flows. Discount rates used in these computations approximate the
rates currently offered for similar loans of comparable terms and credit
quality.
Fair value for demand deposit accounts and interest-bearing accounts with no
fixed maturity date is equal to the carrying value. Certificate of deposit
accounts maturing during 1995 are valued at their carrying value. Certificate
of deposit accounts maturing after 1995 are estimated by discounting cash flows
from expected maturities using current interest rates on similar instruments.
Fair value for long-term debt is based on discounted cash flows using the
Company's current incremental borrowing rate. Investment securities are valued
using quoted market prices. Fair value for the Company's off-balance-sheet
financial instruments is based on the discounted present value of the estimated
future cash flows. Discount rates used in these computations approximate rates
currently offered for similar loans of comparable terms and credit quality.
The Company has used management's best estimate of fair value based on the
above assumptions. Thus, the fair values presented may not be the amounts which
could be realized in an immediate sale or settlement of the instrument. In
addition, any income taxes or other expenses which would be incurred in an
actual sale or settlement are not taken into consideration in the fair values
presented.
The estimated fair values of the Company's financial instruments at December
31 were as follows:
<TABLE>
<CAPTION>
1994 1993
CARRYING FAIR Carrying Fair
($ in thousands) AMOUNT VALUE Amount Value
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and due from banks...............$ 55,047 $ 55,047 $ 27,320 $ 27,320
Federal funds sold and securities
purchased under resale agreements... 500 500 54,212 54,212
Trading securities.................... 1,155 1,155 250 250
Securities available for sale......... 49,648 49,648 64,871 64,871
Securities held to maturity........... 66,256 62,868 49,605 50,024
Loans receivable...................... 866,742 846,285 567,379 565,683
FINANCIAL LIABILITIES:
Deposit liabilities................... 925,448 924,703 724,585 705,134
Federal funds purchased and securities
sold under repurchase agreements.... 33,986 33,986 16,725 16,725
Short-term borrowings................. 72,052 72,052 54 54
Long-term debt........................ 1,162 1,315 1,214 1,401
FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK:
Commitments to extend credit.......... 68,974 65,526 44,574 45,050
Standby letters of credit............. 5,769 5,480 4,365 4,412
Documentary letters of credit......... 394 376 713 721
</TABLE>
42
<PAGE>
Directory
Boards of Directors
David Baker*
Real Estate Developer
R. Cobb Bell*
Certified Public Accountant
Claude M. Epps, Jr.*
Partner
The Bellamy Law Firm
Judd B. Farr+*
President
Greenco Beverage Co., Inc.
C. Claymon Grimes, Jr.+*
Attorney
M. Dexter Hagy+*
President
Vaxa Corporation
Robert E. Hamby, Jr.+*
Senior Vice President
Chief Financial Officer
Multimedia, Inc.
R. Glenn Hilliard+
President and Chief Executive Officer
ING North America
Insurance Corporation
Keith C. Hinson*
President
Waccamaw Land and Timber
Michael R. Hogan*
President
Puckett, Scheetz & Hogan
William S. Hummers, III+*
Executive Vice President
and Chief Financial Officer
Carolina First Corporation
Executive Vice President
Carolina First Bank
Richard E. Ingram+*
Chairman of the Board
Builder Marts of America, Inc. (BMA)
Chairman and Chief Executive Officer
Snyder's Auto Sales, Inc.
James J. Johnson*
Senior Vice President and Treasurer
Dargan Construction Company
David L. Morrow*
Executive Vice President
Carolina First Bank
Walter J. Roberts, Jr., M.D.*
Internist
H. Earle Russell, Jr., M.D.*
Surgeon
Greenville Surgical Associates
Jasper Salmond*
Senior Marketing Coordinator
Wilbur Smith Associates
Charles B. Schooler, O.D.+*
Optometrist
Elizabeth P. Stall+*
Investments
James W. Terry, Jr.*
President
Carolina First Bank
William R. Timmons, Jr. +*
Chairman
Carolina First Corporation
Chairman
Canal Insurance Company
William M. Webster, III+*
Partner
Carabo Capital
Mack I. Whittle, Jr. +*
President and Chief Executive Officer
Carolina First Corporation
Chairman and Chief Executive Officer
Carolina First Bank
Thomas C. "Nap" Vandiver*
Chairman Emeritus
Carolina First Bank
Legend
+ Carolina First Corporation
* Carolina First Bank
Advisory Board Members
Anderson
Richard C. Ballenger
A. Reese Fant
Daniel J. Fleming, M.D.
William W. Jones
John F. Rainey, M.D.
D. Gray Suggs
David S. Vandiver
Barnwell
H. Pat Chappell
Ken R. Cooke, Jr.
F. H. Dicks, III
Miles Loadholt
Blackville
J. David Bodiford, Jr.
Martin O. Laird
H. A. Moskow, M.D.
J. Terry Poole
Riley T. Shelton, Sr.
Coastal
James H. Call
Edward C. Cribb, Jr.
Roger E. Grigg
Luther O. McCutcheon, III
George E. Payton
Robert E. Plowden, Jr.
Edward L. Proctor, Jr., M.D.
Frank Swinnie
Greenville
Alfred N. Bell, Jr.
Steven R. Brandt
Nesbitt Q. Cline, Sr.
R. Jack Dill, Sr.
R. Montague Laffitte, Jr., M.D.
A. Foster McKissick, III
Mary Louise Mims
James B. Orders, III
E. Hays Reynolds, III
Porter B. Rose
James Tate
Morris E. Williams, M.D.
Hardeeville
Edith Brown
Richard Crosby
Ronald Harvey
J. Willock Horton
David Lassiter
Gertrude Harvey Leonard
Lake City
Marlene T. Askins
Joe F. Boswell
Matthew C. Brown
Daniel W. Guy, M.D.
Roger K. Kirby
Laura Landrum
James C. Lynch, Sr.
E. LeRoy Nettles, Jr.
L. L. Propst, Jr.
William J. Sebnick
Piedmont
M. Larry Ayers
Max W. Kennedy
Al McAbee
John McCoy
Ridgeland
G. Dwaine Malphrus, Jr.
F. A. Nimmer
R. Bailey Preacher
H. Klugh Purdy
Harold H. Wall
Swansea
Paul E. Argoe
J. E. Hendrix
Roy Lucas
Mary Lewis Smith
Lawrence Kit Spires
Williston
Ted Craig
A. D. Gantt, M.D.
Lonnie E. McAlister
Leonard Mills
Russell W. Nix
Tom P. Scott, Sr.
Principal Officers
Charles D. Chamberlain
Executive Vice President
Carolina First Bank
Andrew M. Crane
Executive Vice President
Carolina First bank
C. Daniel Dobson, Jr.
Executive Vice President
Carolina First Mortgage Company
William S. Hummers, III
Executive Vice President
and Chief Financial Officer
Carolina First Corporation
Executive Vice President
Carolina First Bank
David L. Morrow
Executive Vice President
Carolina First Bank
Joseph C. Reynolds
President
Carolina First Mortgage Company
James W. Terry, Jr.
President
Carolina First Bank
Mack I. Whittle, Jr.
President and Chief Executive Officer
Carolina First Corporation
Chairman and Chief Executive Officer
Carolina First Bank
43
<PAGE>
BANKING OFFICES
ANDERSON
Main Office
1722 North Main Street
(803)224-9520
110 West Shockley Ferry Road
(803) 231-5971
ANDREWS
210 South Morgan Avenue
(803)264-3571
BARNWELL
Dunbarton & Jackson Streets
(803)259-3536
BENNETTSVILLE
405 East Main Street
(803)479-1121
BLACKVILLE
227 Main Street
(803)284-2258
CHARLESTON
852 Orleans Road
(803)763-0072
COLUMBIA
Main Office
1225 Lady Street
(803)540-2700
1940 Blossom Street
(803)771-8919
Columbia Mall
7171 Two Notch Road
(803)253-7872
10000 Two Notch Road
(803)253-8888
380 St. Andrews Road
(803)929-5376
7389 Sumter Highway
(803)253-8894
Trenholm Plaza
4840 Forest Drive
(803)253-8890
1420 Lady Street
(803)929-5372
EDGEFIELD
309 Main Street
(803)637-3147
GEORGETOWN
Main Office
1031 Front Street
(803)546-4163
706 North Fraser Street
(803)546-6100
GREENVILLE
Main Office
102 South Main Street
(803)255-7900
101 Cleveland Street
(803)255-7904
917 Haywood Road
(803)255-7917
1295 South Pleasantburg Drive
(803)239-6430
1450 Wade Hampton Boulevard
(803)255-4900
1216 Woodruff Road
(803) 239-4650
200 East Camperdown Way
(803)255-4763
HARDEEVILLE
114 North Coastal Highway
(803)784-2216
IRMO
1265 Newberry Avenue
(803)748-7008
JOHNSTON
406 Lee Street
(803)275-4467
LAKE CITY
133 West Main Street
(803)394-8563
LEXINGTON
575 Columbia Avenue
(803)356-8500
LITCHFIELD
1 Wall Street
(803)237-9111
MAULDIN
305 Neely Ferry Road
(803)234-3180
MCCOLL
114 Main Street
(803)523-5381
MYRTLE BEACH
Main Office
2003 Oak Street
(803)448-9458
Galleria
9608 Highway 17 North
(803)449-6544
NORTH MYRTLE BEACH
781 Main Street
(803)249-3781
ORANGEBURG
230 Elliott Street
(803)531-1177
PAWLEYS ISLAND
Highway 17 South
(803)237-4294
PIEDMONT
15 Main Street
(803)845-7562
RIDGELAND
114 North Green Street
(803)726-5517
SALLEY
125 Railroad Avenue
(803)258-3201
SPRINGFIELD
7222 Festival Trail Road
(803)258-3211
SURFSIDE
5900 Highway 17 South
(803)238-0301
SWANSEA
200 South Brecon Avenue
(803)568-2131
TAYLORS
3406 Wade Hampton Boulevard
(803)239-4680
WILLISTON
11 West Main Street
(803)266-7474
44
<PAGE>
To help us
mail more efficiently,
and to help you
invest more efficiently,
please fill out and return
the attached cards.
Thank you.
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 57 GREENVILLE, SC
Postage will be paid by addressee
Carolina First Corporation
Shareholder Relations Department
Post Office Box 1029
Greenville, South Carolina 29602-9777
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 57 GREENVILLE, SC
Postage will be paid by addressee
Carolina First Bank
Trust Department
Post Office Box 1029
Greenville, South Carolina 29602-9777
45
<PAGE>
Duplicate Mailing/Change of Address Notification
If you would like to eliminate duplicate mailings or change the address at
which you receive shareholder mailings, please check the appropriate item
below and complete the following information.
[ ] Eliminate duplicate mailings
[ ] Address change
Name
Company Name
(If Applicable)
Address
City State Zip Code
Signature
(Please sign this card if you are changing your address)
Dividend Reinvestment Plan
You may elect to have all or a portion of your cash dividends automatically
reinvested in Carolina First Corporation common stock at a five percent
discount. In addition, you may also invest additional cash for purchase of
common stock at market value. Participants in the plan incur no brokerage
commissions, service charges or fees. Participation is completely voluntary,
and you may withdraw at any time.
This information is not an offer to sell or the solicitation of an offer to
buy. The offering is made only by means of the Prospectus, which will be mailed
upon receipt of this card.
Name
Company Name
(If Applicable)
Address
City State Zip Code
Type of stock owned:
[ ] Common [ ] Series 1994 Preferred [ ] Series 1993 Preferred
46
<PAGE>
SHAREHOLDER INFORMATION
Common Stock
The common stock of Carolina First Corporation is
traded in the NASDAQ National Market System under
the symbol, CAFC. At December 31, 1994, there were
1,849 common shareholders of record.
Series 1994 Preferred Stock
The Series 1994 preferred stock of Carolina First
Corporation is traded over-the-counter under the
symbol, CAFCN. At December 31, 1994, there were
145 Series 1994 preferred shareholders of record.
Series 1993 Preferred Stock
The Series 1993 preferred stock of Carolina First
Corporation is traded over-the-counter under the
symbol, CAFCO. At December 31, 1994, there were 199
Series 1993 preferred shareholders of record.
Dividend Reinvestment Service
Carolina First Corporation has a dividend reinvestment
plan which allows shareholders to purchase additional
shares of common stock at a five percent discount by
reinvesting their cash dividends. Participants in the
plan may also invest additional cash, up to a maximum
of $10,000 per quarter, for purchase of common stock
at market value. Participants in the plan incur no
brokerage commissions, service charges or fees.
For information concerning Carolina First Corporation's
Dividend Reinvestment Plan, please fill out the card
in the back of this report or call our investor relations
department at (803) 255-4919.
Registrar And Transfer Agent
Carolina First Bank
Trust Division
P.O. Box 1029
Greenville, SC 29602
Annual Meeting
The Annual Meeting of Shareholders of Carolina First
Corporation will be held at 10:30 a.m., April 20, 1995,
in the Roe Coach Factory, Peace Center for the Performing
Arts, Greenville, South Carolina.
Information Contact
For further information about Carolina First Corporation
or its subsidiaries, or to obtain a copy of the Carolina
First Corporation Annual Report to the Securities and
Exchange Commission on Form 10-K (available without charge
to shareholders), please contact:
William S. Hummers III
Executive Vice President
Carolina First Corporation
P.O. Box 1029
Greenville, SC 29602
(803) 255-7913
Market Makers
J.C. Bradford & Co.
Fox-Pitt, Kelton Inc.
Interstate/Johnson Lane
Morgan Keegan & Company, Inc.
The Robinson-Humphrey Company, Inc.
Sterne, Agee & Leach
Wheat First Securities, Inc.
Quarterly Common Stock Summary
<TABLE>
<CAPTION>
1994 1993
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stock price ranges:
High $14.00 $15.75 $15.00 $12.86 $14.05 $13.10 $12.38 $11.79
Low 13.25 14.00 12.50 11.43 11.67 11.43 10.48 10.43
Close 14.00 15.25 15.00 11.43 12.38 13.10 11.90 10.88
Dividend 0.05 0.05 0.05 0.05 - - - -
Volume Traded 595,643 481,530 377,904 238,843 410,768 332,516 155,615 194,334
Shares Outstanding 4,581,247 4,524,361 4,515,912 4,294,630 4,279,724 3,189,144 3,152,595 3,003,941
</TABLE>
47
EXHIBIT 23.1
ELLIOTT, DAVIS & COMPANY, L.L.P.
Certified Public Accountants
MEMBERS OF THE
AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS
GREENVILLE, S.C.
GREENWOOD, S.C.
ANDERSON, S.C.
AIKEN,S.C.
COLUMBIA, S.C.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Carolina First Corporation
Greenville, South Carolina
We hereby consent to the incorporation by reference in the Registration
Statements (Forms S-8 Numbers 33-25424; 33-36411; 33-36412) of our report
dated February 3, 1995, with respect to the consolidated financial statements
of Carolina First Corporation included in this Annual Report (Form 10-K)
for the year ended December 31, 1994.
(Signature of Elliott, Davis & Company LLP appears here)
Greenville, South Carolina
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<CASH> 54,547
<INT-BEARING-DEPOSITS> 500
<FED-FUNDS-SOLD> 500
<TRADING-ASSETS> 1,155
<INVESTMENTS-HELD-FOR-SALE> 49,648
<INVESTMENTS-CARRYING> 66,256
<INVESTMENTS-MARKET> 62,868
<LOANS> 865,869<F1>
<ALLOWANCE> 5,267
<TOTAL-ASSETS> 1,120,097
<DEPOSITS> 925,448
<SHORT-TERM> 106,038
<LIABILITIES-OTHER> 8,408
<LONG-TERM> 1,162
<COMMON> 4,581
0
37,014
<OTHER-SE> 37,446
<TOTAL-LIABILITIES-AND-EQUITY> 1,120,097
<INTEREST-LOAN> 65,302
<INTEREST-INVEST> 5,916
<INTEREST-OTHER> 373
<INTEREST-TOTAL> 71,591
<INTEREST-DEPOSIT> 28,206
<INTEREST-EXPENSE> 29,964
<INTEREST-INCOME-NET> 41,627
<LOAN-LOSSES> 950
<SECURITIES-GAINS> 234
<EXPENSE-OTHER> 50,453
<INCOME-PRETAX> (1,918)
<INCOME-PRE-EXTRAORDINARY> (1,918)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,869)
<EPS-PRIMARY> (.95)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.37
<LOANS-NON> 1,012
<LOANS-PAST> 1,285
<LOANS-TROUBLED> 675
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,688
<CHARGE-OFFS> 2,562
<RECOVERIES> 113
<ALLOWANCE-CLOSE> 5,267
<ALLOWANCE-DOMESTIC> 5,267
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Included held for sale.
</FN>
</TABLE>
