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, 1995
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)
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<CAPTION>
<S> <C>
South Carolina 57-0824914
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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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
(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, 1996 was $192,343,000.
The number of shares outstanding of the Registrant's common stock, $1.00 Par
Value was 9,213,683 at March 25, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
Portions of 1995 Annual Report to Shareholders Part II; IV
Portions of Proxy Statement dated March 12, 1996 Part III
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PART I
ITEM 1 - BUSINESS
THE COMPANY
Carolina First Corporation (the "Company"), organized in 1986,
is a bank holding company headquartered in Greenville, South Carolina. At
December 31, 1995, it operated through three subsidiaries: Carolina First Bank,
a state-chartered bank headquartered in Greenville, South Carolina; Carolina
First Mortgage Company, a South Carolina corporation headquartered in Columbia,
South Carolina ("CF Mortgage"); and Blue Ridge Finance Company, an automobile
finance company headquartered in Greenville, South Carolina ("Blue Ridge"). On
February 3, 1995, the Company completed the merger of Carolina First Savings
Bank, its savings bank subsidiary, into Carolina First 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 55 locations in
South Carolina. At December 31, 1995, the Company had approximately $1.415
billion in assets, $1.062 billion in loans, $1.095 billion in deposits and $95.0
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 four 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); Georgetown and
Horry counties (located in the northern Coastal region of South Carolina); and
the Charleston metropolitan area (located in the central Coastal region of South
Carolina). The Company's principal market areas represent the four largest
Metropolitan Statistical Areas in the state. The Company also has branch
locations in other counties in South Carolina.
The Company began its operations with the de novo opening of
Carolina First Bank in Greenville and has pursued a strategy of growth through
internal expansion and through the acquisition of branch locations and financial
institutions in selected market areas. Its more significant acquisitions include
(i) the acquisition in August 1990 of First Federal Savings and Loan Association
of Georgetown (subsequently renamed Carolina First Savings Bank) which was
merged into Carolina First Bank in February 1995, (ii) the acquisitions in March
1993 and May 1994 of twelve branch locations and six branch locations,
respectively, of Republic National Bank, (iii) the acquisition of First Sun
Mortgage Corporation (subsequently renamed Carolina First Mortgage Company) in
September 1993, (iv) the merger of Aiken County National Bank into Carolina
First Bank in April 1995, and (v) the merger of Midlands National Bank into
Carolina First Bank in June 1995. Approximately half of the Company's total
deposits have been generated through acquisitions.
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CAROLINA FIRST BANK
Carolina First Bank engages in a general banking business
through 52 branches in 34 communities in 15 South Carolina counties. Carolina
First 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 and time deposit accounts to businesses and
individuals. Since the acquisition of CF Mortgage in 1993, Carolina First Bank's
mortgage origination and servicing activities have been performed by CF
Mortgage.
Carolina First Bank provides a full range of commercial and
consumer banking services, including short and medium-term loans, mortgage
loans, revolving credit arrangements, inventory and accounts receivable
financing, equipment financing, real estate lending, safe deposit services,
savings accounts, interest- and noninterest-bearing checking accounts and
installment and other personal loans. Carolina First Bank also provides trust
services, investment products and various cash management programs.
CF MORTGAGE
On September 30, 1993, the Company acquired First Sun Mortgage
Corporation (subsequently renamed Carolina First Mortgage Company). CF Mortgage
is engaged primarily in originating, underwriting and servicing one-to-four
family residential mortgage loans. CF Mortgage also buys or sells purchased
mortgage servicing rights to keep its servicing balances at economically
desirable levels or to recognize gains from favorable terms.
CF Mortgage's mortgage loan origination operation is
conducted principally through eight offices in South Carolina. Mortgage loan
applications are forwarded to CF Mortgage's headquarters in Columbia for
processing in accordance with GNMA, FNMA and other applicable guidelines. During
1995, 1,162 mortgage loans totaling $110 million were originated. The Company
generally sells all conforming fixed rate mortgage loans into the secondary
market.
CF Mortgage's mortgage servicing operations consist of
servicing loans that are owned by Carolina First Bank and subservicing loans, to
which the right to service is owned by Carolina First Bank and other
non-affiliated financial institutions. This servicing operation is conducted at
its headquarters location in Columbia, South Carolina. At December 31, 1995, CF
Mortgage was servicing or subservicing approximately 14,979 loans having an
aggregate principal balance of approximately $1.279 billion. These servicing
balances included $300 million in mortgage loans for which the mortgage
servicing rights were sold at year end and CF Mortgage is subservicing until
June 1996.
BLUE RIDGE
On December 29, 1995, the Company completed its acquisition of
Blue Ridge, an automobile finance company headquartered in Greenville, South
Carolina. Blue Ridge operates from one location and, at December 31, 1995, had
approximately $4 million in total assets. Blue Ridge is engaged primarily in
indirect automobile lending.
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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 when
suitable opportunities develop. 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 list
summarizes the Company's acquisition activity during the past three years.
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Method of
Acquisition Date Acquired Accounting
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13 Branch Locations March 1993 $205 million Purchase
Republic National Bank (Deposits)
South Carolina
First Sun Mortgage Corporation September 1993 $250 million Purchase
Columbia, South Carolina (Mortgage Servicing Rights)
3 Branch Locations December 1993 $38 million Purchase
Bay Savings Bank, F.S.B (Deposits)
Columbia, South Carolina
1 Branch Location April 1994 $6 million Purchase
Citadel Federal Savings and (Deposits)
Loan Association
Charleston, South Carolina
6 Branch Locations May 1994 $135 million Purchase
Republic National Bank (Deposits)
South Carolina
Aiken National Bank April 1995 $39 million Pooling
Aiken, South Carolina (Assets)
Midlands National Bank June 1995 $44 million Pooling
Prosperity, South Carolina (Assets)
Blue Ridge Finance Company December 1995 $4 million Pooling
Greenville, South Carolina (Assets)
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DIVIDENDS
The Company and its subsidiaries are subject to certain
regulatory restrictions on the amount of dividends they are permitted to pay.
In each year from 1989 through 1995, the Company issued 5%
common stock dividends to common stockholders. At its June 1995 meeting, the
Board of Directors of the Company declared the issuance of a 5% common stock
dividend on August 15, 1995 to common shareholders of record as of August 1,
1995. The Company has paid all scheduled cash dividends on the Series 1993
Preferred Stock, Series 1993B Preferred Stock, Series 1994 Preferred Stock and
Notes since their respective issuances.
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 and to $0.07 beginning in the first quarter of 1996. 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.
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.
EMPLOYEES
At December 31, 1995, the Company employed a total of 589
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
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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.
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.
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.
In August 1995, the FDIC approved a reduction in the
insurance assessments for Bank Insurance Fund ("BIF") deposits. This reduction
decreased Carolina First Bank's insurance assessment for BIF deposits from 0.26%
to 0.04% of the average assessment base. Effective January 1, 1996, the
insurance assessment for Carolina First Bank's BIF deposits was set at zero
(although banks pay a $2,000 annual fee). The FDIC insurance assessment
reduction applies only to BIF-insured deposits and does not include deposits
insured by the Savings Association Insurance Fund ("SAIF"). In connection with
the merger of Carolina First Savings Bank into Carolina First Bank and Carolina
First Bank's assumption of other SAIF-insured deposits in connection with
various acquisitions, approximately $223 million of Carolina First Bank's total
deposits (as of March 31, 1995, the proposed assessment date) are subject to
SAIF insurance assessments imposed by the FDIC. The SAIF is underfunded and
various proposals, including a one-time charge assessed on all SAIF- insured
deposits, are being considered by regulators and lawmakers to recapitalize the
SAIF. The proposed amount of the special assessment has been as high as $0.85
per $100 of SAIF deposits. Assuming that the special assessment were applied at
the $0.85 rate, the Company would incur additional deposit insurance premium
expense of approximately $1.9 million which would be charged against current
period income. The timing and amount of such an assessment cannot be accurately
predicted at this time. Carolina First Bank's SAIF-insured deposits are
currently assessed at 0.23% of the average assessment base.
ACCOUNTING ISSUES
In October 1995, the FASB issued SFAS 123, "Accounting for
Stock-Based Compensation." SFAS 123 establishes a new method of accounting for
stock-based arrangements by measuring the value of a stock compensation award by
the fair value method versus the intrinsic method as currently is used under the
provisions of Opinion 25. If entities do not adopt SFAS 123, they will be
required to disclose in the footnotes net income and earnings per share
information as if the fair value based method had been adopted. The
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disclosure requirements of SFAS are effective for financial statements with
fiscal years beginning after December 15, 1995. SFAS 123 will have minimal
impact on the Company.
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 prohibited the Company from acquiring control of
any bank operating outside the State of South Carolina until September 29, 1995
unless such action was specifically authorized by the statutes of the state
where the bank to be acquired was 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 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
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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.
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.
Carolina First Bank. Carolina First Bank is an FDIC-insured,
South Carolina-chartered banking corporation and is subject to various statutory
requirements and rules and regulations promulgated and enforced primarily by the
State Board and the FDIC. These statutes, rules and regulations relate to
insurance of deposits, required reserves, allowable investments, loans, mergers,
consolidations, issuance of securities, payment of dividends, establishment of
branches and other aspects of the business of Carolina First Bank. The FDIC has
broad authority to prohibit Carolina First Bank from engaging in what it
determines to be unsafe or unsound banking practices. In addition, federal law
imposes a number of restrictions on state-chartered, FDIC-insured banks and
their subsidiaries. These restrictions range from prohibitions against engaging
as a principal in certain activities to the requirement of prior notification of
branch closings. Carolina First Bank also is subject to various other state and
federal laws and regulations, including state usury laws, laws relating to
fiduciaries, consumer credit and equal credit and fair credit reporting laws.
Carolina First Bank is not a member of the Federal Reserve System.
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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 Carolina
First Bank, from paying dividends or making any other capital distribution if,
after making the payment or distribution, the institution would be considered
"undercapitalized," as that term is defined in applicable regulations. In
addition, as a South Carolina-chartered bank, Carolina First Bank is subject to
legal limitations on the amount of dividends it is permitted to pay. In
particular, Carolina First Bank must receive the approval of the South Carolina
Commissioner of Banking prior to paying dividends to the Company.
CAPITAL ADEQUACY
The Company. The Federal Reserve 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, 1995, the Company was in compliance with both the risk-based capital
guidelines and the minimum leverage capital ratio.
Carolina First Bank. As a state-chartered, FDIC-insured
institution which is not a member of the Federal Reserve System, Carolina First
Bank is subject to capital requirements imposed by the FDIC. The FDIC requires
state-chartered nonmember banks to comply with risk-based capital standards
substantially similar to those required by the Federal Reserve, 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,
1995, the Company and Carolina First Bank were both in compliance with each of
the applicable regulatory capital requirements.
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FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
The Federal Deposit Insurance Corporation Improvement Act of
1994 ("FDICIA") required each federal banking agency to revise its risk-based
capital standards to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk and the risk of nontraditional
activities, as well as reflect the actual performance and expected risk of loss
on multifamily mortgages. The Federal Reserve, the FDIC and the OCC have issued
a joint advance notice of proposed rulemaking, and have issued a revised
proposal, soliciting comments on a proposed framework for implementing these
revisions. Under the proposal, an institution's assets, liabilities, and
off-balance sheet positions would be weighted by risk factors that approximate
the instrument's price sensitivity to a 100 basis point change in interest
rates. Institutions with interest rate risk exposure in excess of a threshold
level would be required to hold additional capital proportional to that risk.
The notice also asked for comments on how the risk-based capital guidelines of
each agency may be revised to take account of concentration and credit risk and
the risk of nontraditional activities. Carolina First Corporation cannot assess
at this point the impact the proposal would have on the capital requirements of
Carolina First Corporation or its subsidiary depository institutions.
As an FDIC-insured institution, Carolina First Bank is subject
to insurance assessments imposed by the FDIC. Under current law, the insurance
assessment to be paid by insured institutions shall be as specified in a
schedule required to be issued by the FDIC that specifies, at semiannual
intervals, target reserve ratios designed to increase the FDIC insurance fund's
reserve ratio to 1.25% of estimated insured deposits (or such higher ratio as
the FDIC may determine in accordance with the statute) in 15 years. Further, the
FDIC is authorized to impose one or more special assessments in any amount
deemed necessary to enable repayment of amounts borrowed by the FDIC from the
United States Department of the Treasury (the "Treasury Department").
Effective January 1, 1993, the FDIC implemented a risk-based
assessment schedule, having assessments ranging from 0.23% to 0.31% of an
institution's average assessment base. The actual assessment to be paid by each
FDIC-insured institution is based on the institution's assessment risk
classification, which is determined based on whether the institution is
considered "well capitalized," "adequately capitalized" or "undercapitalized,"
as such terms have been defined in applicable federal regulations adopted to
implement the prompt corrective action provisions of FDICIA (see "--Certain
Regulatory Matters--Other Safety and Soundness Regulations"), and whether such
institution is considered by its supervisory agency to be financially sound or
to have supervisory concerns. In August 1995, the FDIC approved a reduction in
the insurance assessments for Bank Insurance Fund ("BIF") deposits. This
reduction decreased Carolina First Bank's insurance assessment for BIF deposits
from 0.26% to 0.04% of the average assessment base. Effective January 1, 1996,
the insurance assessment for Carolina First Bank's BIF deposits was set at zero
(although banks pay a $2,000 annual fee). The FDIC insurance assessment
reduction applies only to BIF-insured deposits and does not include deposits
insured by the Savings Association Insurance Fund ("SAIF").
In connection with the merger of Carolina First Savings Bank
into Carolina First Bank and Carolina First Bank's assumption of other
SAIF-insured deposits in connection with various acquisitions, approximately
$223 million of Carolina First Bank's total deposits (as of March 31, 1995, the
proposed assessment date) are subject to SAIF insurance assessments imposed by
the FDIC. The SAIF is underfunded and various proposals, including a one-time
charge assessed on all SAIF-insured deposits, are being considered by regulators
and lawmakers to recapitalize the SAIF. The proposed amount of the special
assessment has been as high as $0.85 per $100 of SAIF deposits. Assuming that
the special assessment were applied at the $0.85 rate, the Company would incur
additional deposit insurance premium expense of approximately $1.9 million which
would be charged against current period income. The timing and amount of such an
assessment cannot be accurately predicted at this time. Carolina First Bank's
SAIF-insured deposits are currently assessed at 0.23% of the average assessment
base.
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OTHER SAFETY AND SOUNDNESS REGULATIONS
Prompt Corrective Action. Current law provides the federal
banking agencies with broad powers to take prompt corrective action to resolve
problems of insured depository institutions. The extent of these powers depends
upon whether the institutions in question are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" or
"critically undercapitalized." Under uniform regulations defining such capital
levels issued by each of the federal banking agencies, a bank is considered
"well capitalized" if it has (i) a total risk-based capital ratio of 10% or
greater, (ii) a Tier 1 risk-based capital ratio of 6% or greater, (iii) a
leverage ratio of 5% or greater, and (iv) is not subject to any order or written
directive to meet and maintain a specific capital level for any capital measure.
An "adequately capitalized" bank is defined as one that has (i) a total
risk-based capital ratio of 8% or greater, (ii) a Tier 1 risk-based capital
ratio of 4% or greater, and (iii) a leverage ratio of 4% or greater (or 3% or
greater in the case of a bank with a composite CAMEL rating of 1). A bank is
considered (A) "undercapitalized" if it has (i) a total risk-based capital ratio
of less than 8%, (ii) a Tier 1 risk-based capital ratio of less than 4% or (iii)
a leverage ratio of less than 4% ( or 3% in the case of a bank with a composite
CAMEL rating of 1); (B) "significantly undercapitalized" if the bank has (i) a
total risk-based capital ratio of less than 6%, or (ii) a Tier 1 risk-based
capital ratio of less than 3%, or (iii) a leverage ratio of less than 3%; and
(C) "critically undercapitalized" if the bank has a ratio of tangible equity to
total assets equal to or less than 2%. Carolina First Corporation and Carolina
First Bank each currently meet the definition of well capitalized.
Brokered Deposits. Current federal law also regulates the
acceptance of brokered deposits by insured depository institutions to permit
only a "well capitalized" depository institution to accept brokered deposits
without prior regulatory approval. Under FDIC regulations, "well capitalized"
insured depository institutions may accept brokered deposits without
restriction, "adequately capitalized" insured depository institutions may accept
brokered deposits with a waiver from the FDIC (subject to certain restrictions
on payments of interest rates) while "undercapitalized" insured depository
institutions may not accept brokered deposits. The regulations provide that the
definitions of "well capitalized," "adequately capitalized" and
"undercapitalized" are the same as the definitions adopted by the agencies to
implement the prompt corrective action provisions of FDICIA (as described in the
previous paragraph). Carolina First Corporation does not believe that these
regulations will have a material adverse effect on its current operations.
Other FDICIA Regulations. To facilitate the early
identification of problems, FDICIA required the federal banking agencies to
review and, under certain circumstances, prescribe more stringent accounting and
reporting requirements than those required by generally accepted accounting
principles. The FDIC has issued final regulations implementing those provisions.
The rule, among other things, requires that management report on the
institution's responsibility for preparing financial reporting and compliance
with designated laws and regulations concerning safety and soundness, and that
independent auditors attest to and report separately on assertions in
management's reports concerning compliance with such laws and regulations, using
FDIC approved audit procedures.
FDICIA required each of the federal banking agencies to
develop regulations addressing certain safety and soundness standards for
insured depository institutions (such as Carolina First Bank) and depository
institution holding companies (such as Carolina First Corporation), including
operational and managerial standards, asset quality, earnings and stock
valuation standards, as well as compensation standards (but not dollar levels of
compensation). Each of the federal banking agencies has issued a joint notice of
proposed rulemaking, which requested comment on the implementation of these
standards. The proposed rule sets forth general operational and managerial
standards in the areas of internal controls, information systems and internal
audit systems, loan documentation, credit underwriting, interest rate exposure,
asset growth and compensation fees and benefits. The proposed rule also
establishes a maximum ratio of classified assets to capital, and
11
<PAGE>
requires institutions to meet minimum capital standards as a measure of whether
such institutions have minimum earning sufficient to absorb losses without
impairing capital. Finally, the proposed rule would define compensation as
excessive if it is unreasonable or disproportionate to the services actually
performed. Bank holding companies would not be subject to the standards on
compensation. The proposal contemplates that each federal agency would determine
compliance with these standards through the examination process, and if
necessary to correct weaknesses, require an institution to file a written safety
and soundness compliance plan. Carolina First Corporation has not yet determined
the effect the proposed rule would have on its operations and the operations of
its depository institution subsidiary if it is adopted substantially as
proposed.
COMMUNITY REINVESTMENT ACT
Carolina First 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. Carolina First Bank received an "outstanding" rating in
its most recent evaluation.
As a result of a Presidential initiative, each of the federal
banking agencies has issued a notice of proposed rulemaking that would replace
the current CRA assessment system with a new evaluation system that would rate
institutions based on their actual performance (rather than efforts) in meeting
community credit needs. 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 Carolina First Bank's CRA
action plans.
TRANSACTIONS BETWEEN THE COMPANY, ITS SUBSIDIARIES AND AFFILIATES
The Company's subsidiaries are subject to certain restrictions
on extensions of credit to executive officers, directors, principal stockholders
or any related interest of such persons. Extensions of credit (i) must be made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
persons; and (ii) must not involve more than the normal risk of
12
<PAGE>
repayment or present other unfavorable features. Aggregate limitations on
extensions of credit also may apply. The Company's subsidiaries also are subject
to certain lending limits and restrictions on overdrafts to such persons.
Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the Federal Reserve Act on extensions of credit
to the bank holding company or its nonbank subsidiary, on investments in their
securities and on the use of their securities as collateral for loans to any
borrower. Such restrictions may limit the Company's ability to obtain funds from
its bank subsidiary for its cash needs, including funds for acquisitions,
interest and operating expenses. 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 ("Riegle-Neal Act"), which will increase
the ability of bank holding companies and banks to operate across state lines.
Under the Riegle-Neal Act, 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
13
<PAGE>
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.
There is legislation pending before the General Assembly of
the State of South Carolina which is designed to implement the Riegle-Neal Act.
OTHER REGULATIONS
Interest and certain other charges collected or contracted for
by Carolina First Bank and CF Mortgage Company are subject to state usury laws
and certain federal laws concerning interest rates. Carolina First Bank's and CF
Mortgage Company's loan operations are also subject to certain federal laws
applicable to credit transactions, such as the federal Truth-In-Lending Act
governing disclosures of credit terms to consumer borrowers, CRA requiring
financial institutions to meet their obligations to provide for the total credit
needs of the communities they serve, including investing their assets in loans
to low- and moderate-income borrowers, the Home Mortgage Disclosure Act of 1975
requiring financial institutions to provide information to enable the public and
public officials to determine whether a financial institution is fulfilling its
obligation to help meet the housing needs of the community it serves, the Equal
Opportunity Act prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit, the Fair Credit Reporting Act of 1978
governing the use and provision of information to credit reporting agencies, the
Fair Debt Collection Act governing the manner in which consumer debts may be
collected by collection agencies, and the rules and regulations of the various
federal agencies charged with the responsibility of implementing such federal
laws. The deposit operations of Carolina First Bank also are subject to the
Right to Financial Privacy Act, which imposes a duty to maintain confidentiality
of consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds Transfer
Act and Regulation E issued by the Federal Reserve to implement that act, which
govern automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic services.
14
<PAGE>
ITEM 1 - STATISTICAL DISCLOSURE
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Comparative Average Balances -- Yields and Costs.................................................16
Rate/Volume Variance Analysis....................................................................17
Securities Held for Investment Composition.......................................................18
Securities Available for Sale Composition........................................................18
Trading Account Composition......................................................................18
Securities Held for Investment and Securities Available for Sale Maturity Schedule...............19
Loan Portfolio Composition.......................................................................20
Loan Maturity and Interest Sensitivity...........................................................20
Nonperforming Assets.............................................................................21
Summary of Loan Loss Experience..................................................................21
Composition of Allowance for Loan Losses.........................................................22
Types of Deposits................................................................................23
Certificates of Deposit Greater than $100,000....................................................23
Return on Equity and Assets......................................................................24
Short-Term Borrowings............................................................................25
Interest Rate Sensitivity........................................................................26
Noninterest Income...............................................................................27
Noninterest Expense..............................................................................27
</TABLE>
15
<PAGE>
Comparative Average Balances -- Yields and Costs
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
Average/ Income/ Yield/ Average/ Income/ Yield/ Average/ Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance xpense Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets
Loans (net of unearned income)(1)............$ 965,632 $92,731 9.60 % $ 781,503 $68,474 8.76 % $ 548,619 $ 46,312 8.44 %
Investment securities (taxable).............. 134,894 7,500 5.56 125,053 5,623 4.50 131,829 6,483 4.92
Investment securities (nontaxable)........... 22,930 1,674(2) 7.30 17,609 1,567(2) 8.90 8,252 731(2)8.86
Federal funds sold and resale agreements..... 5,870 360 6.13 15,810 603 3.81 21,154 638 3.02
Interest bearing deposits with other banks... 919 71 7.73 1,180 49 4.17 1,284 57 4.42
Total earning assets..................... 1,130,245 102,336 9.05 % 941,155 76,316 8.11 % 711,138 54,221 7.62 %
Non-earning assets........................... 139,512 115,799 71,413
Total assets.............................$1,269,757 $1,056,954 $ 782,551
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking..........................$ 114,897 $ 2,332 2.03 % $ 101,558 $ 2,193 2.16 % $ 66,891 $ 1,523 2.28 %
Savings.................................... 75,407 2,235 2.96 87,919 2,619 2.98 60,854 1,848 3.04
Money market............................... 158,742 6,473 4.08 157,460 4,856 3.08 137,807 4,007 2.91
Certificates of deposit.................... 497,358 27,544 5.54 433,123 18,945 4.37 333,338 14,911 4.47
Other...................................... 45,850 2,595 5.66 44,347 2,137 4.82 34,733 1,766 5.09
Total interest-bearing deposits.......... 892,254 41,179 4.62 % 824,407 30,750 3.73 % 633,623 24,055 3.80 %
Short-term borrowings....................... 136,799 8,196 6.00 41,362 1,638 3.96 14,023 427 3.05
Long-term borrowings........................ 16,875 1,603 9.50 1,309 121 9.25 1,444 125 8.66
Total interest-bearing liabilities......... 1,045,928 50,978 4.87 % 867,078 32,509 3.75 % 649,090 24,607 3.79 %
Non-interest bearing liabilities
Non-interest bearing deposits.............. 130,775 101,209 61,550
Other non-interest liabilities............. 2,812 1,290 6,393
Total liabilities.......................... 1,179,515 969,577 717,033
Shareholders' equity........................... 90,242 87,377 65,518
Total liabilities and shareholders' equity...$1,269,757 $1,056,954 $ 782,551
Net interest margin........................... $51,358 4.54 % $43,807 4.65 % $ 29,614 4.16 %
</TABLE>
- ---------------------------------
(1)Includes nonaccruing loans.
(2)Fully tax-equivalent basis at a 35% tax rate.
Note: Average balances are derived from daily balances.
16
<PAGE>
Rate/Volume Variance Analysis
(dollars in thousands)
<TABLE>
<CAPTION>
1995 Compared to 1994 1994 Compared to 1993
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........$ 24,257 $ 17,682 $ 6,575 $ 22,162 $ 20,405 $ 1,757
Securities, taxable.................. 1,877 547 1,330 (860) (310) (550)
Securities, nontaxable............... 107 388 (281) 836 820 16
Federal funds sold................... (243) (609) 366 (35) (234) 199
Interest-bearing deposits with
other banks....................... 22 (11) 33 (8) (6) (2)
Total interest income...... 26,020 17,997 8,023 22,095 20,675 1,420
Interest-bearing liabilities
Interest-bearing deposits
Interest checking................. 139 271 (132) 670 757 (87)
Savings........................... (384) (370) (14) 771 812 (41)
Money market...................... 1,617 52 1,565 849 602 247
Certificates of deposit........... 8,599 3,557 5,042 4,034 4,374 (340)
Other............................. 458 85 373 371 465 (94)
Total interest-bearing deposit 10,429 3,595 6,834 6,695 7,010 (315)
Short-term borrowings................... 6,558 5,718 840 1,211 1,049 162
Long-term borrowings.................... 1,482 1,479 3 (4) (9) 5
Total interest expense..... 18,469 10,792 7,677 7,902 8,050 (148)
Net interest income.....$ 7,551 $ 7,205 $ 346 $ 14,193 $ 12,625 $ 1,568
</TABLE>
Note: Changes which are not solely attributable to volume or rate have been
allocated to volume and rate on a pro-rata basis.
17
<PAGE>
Securities Held for Investment Composition
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, (at amortized cost)
1995 1994 1993
<S> <C> <C> <C>
U.S. Treasury securities....................................$ 0 $ 6,189 $ 8,906
Obligations of U.S. Government agencies and corporations.... 0 42,936 37,636
Obligations of states and political subdivisions............ 25,937 21,086 11,907
Other securities............................................ 352 53 6,043
$ 26,289 $ 70,264 $ 64,492
</TABLE>
Securities Available for Sale Composition
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, (at carrying value)
1995 1994 1993
<S> <C> <C> <C>
U.S. Treasury securities....................................$ 97,140 $ 26,534 $ 11,523
Obligations of U.S. Government agencies and corporations.... 36,706 26,879 51,357
Other securities............................................ 12,426 7,135 1,991
$ 146,272 $ 60,548 $ 64,871
</TABLE>
Trading Account Composition
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, (at carrying value)
1995 1994 1993
<S> <C> <C> <C>
U.S. Treasury and Government agencies.......................$ 4,954 $ 178 $ 0
State and political subdivisions............................ 851 977 250
$ 5,805 $ 1,155 $ 250
</TABLE>
18
<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 $ 0 $ 0 $ 0 $ 0
U.S. Government agencies
and corporations.................................... 0 0 0 0 0
States and political subdivisions.................... 2,668 9,831 10,253 3,185 25,937
Other securities....................................... 0 0 0 352 352
$ 2,668 $ 9,831 $ 10,253 $ 3,537 $ 26,289
Weighted average yield
U.S Treasury........................................... 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
U.S. Government agencies
and corporations.................................... 0.00 0.00 0.00 0.00 0.00
States and political subdivisions...................... 4.01 4.29 4.76 5.29 4.57
Other securities....................................... 0.00 0.00 0.00 2.74 2.74
4.01 % 4.29 % 4.76 % 5.04 % 4.55 %
</TABLE>
<TABLE>
<CAPTION>
Available for Sale -- 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...........................................$ 97,118 $ 0 $ 0 $ 0 $ 97,118
U.S. Government agencies
and corporations.................................... 1,400 35,341 0 0 36,741
States and political subdivisions...................... 0 0 0 0 0
Other securities....................................... 12,322 0 0 0 12,322
$ 110,840 $ 35,341 $ 0 $ 0 $ 146,181
Weighted average yield
U.S Treasury........................................... 5.40 % 0.00 % 0.00 % 0.00 % 5.40 %
U.S. Government agencies
and corporations.................................... 5.33 6.18 0.00 0.00 6.15
States and political subdivisions...................... 0.00 0.00 0.00 0.00 0.00
Other securities....................................... 5.13 0.00 0.00 0.00 5.13
5.37 % 6.18 % 0.00 % 0.00 % 5.57 %
</TABLE>
19
<PAGE>
Loan Portfolio Composition
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural..$ 188,255 $ 179,876 $ 137,340 $ 112,241 $ 96,061
Real Estate
Construction......................... 31,552 24,039 22,752 18,269 21,682
Mortgage
Residential.......................... 217,899 206,980 157,460 123,636 124,162
Commercial and multifamily (1)....... 234,153 275,083 157,528 94,084 69,492
Consumer................................ 149,216 129,106 89,788 73,883 64,570
Credit cards............................ 86,901 36,954 53,305 30,702 23,034
Lease financing receivables............. 36,740 208 ------ 7 18
Loans held for sale..................... 125,000 71,695 7,700 6,801 ------
Total gross loans.................$ 1,069,716 $ 923,941 $ 625,873 $ 459,623 $ 399,019
Unearned income......................... (7,056) (873) (2,227) (3,973) (3,883)
Total loans net of unearned income 1,062,660 923,068 623,646 455,650 395,136
Allowance for loan losses............... (8,661) (6,002) (6,679) (5,276) (4,520)
Total net loans...................$ 1,053,999 $ 917,066 $ 616,967 $ 450,374 $ 390,616
</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.............................$ 308,358 $ 88,706 $ 25,344 $ 422,408
Real estate -- construction........................... 26,819 4,733 0 31,552
Total of loans with:
Predetermined interest rates....................... 82,049 37,874 25,344 145,267
Floating interest rates............................ 253,128 55,565 0 308,693
</TABLE>
20
<PAGE>
Nonperforming Assets
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Nonaccrual loans..................................$ 1,275 $ 2,051 $ 2,487 $ 2,474 $ 1,879
Restructured loans................................ 1,085 675 0 0 0
Total nonperforming loans............... 2,360 2,726 2,487 2,474 1,879
Other real estate owned........................... 2,508 1,996 2,879 2,804 1,471
Total nonperforming assets..............$ 4,868 $ 4,722 $ 5,366 $ 5,278 $ 3,350
Loans past due 90 days still accruing interest....$ 2,748 $ 1,285 $ 2,060 $ 2,127 $ 1,784
Total nonperforming assets as a percentage
of loans and other real estate owned.......... 0.46 % 0.51 % 0.86 % 1.23 % 0.84%
Allowance for loan losses as a percentage
of nonperforming loans......................... 366.99 % 220.18 % 268.59 % 186.63 % 240.55%
</TABLE>
<TABLE>
<CAPTION>
Summary of Loan Loss Experience
(dollars in thousands)
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Loan loss reserve at beginning of period..........$ 6,002 $ 6,679 $ 5,276 $ 4,520 $ 2,960
Blue Ridge merger................................. 128 0 0 0 0
Valuation allowance for loans acquired............ 633 1,077 1,811 255 450
Charge-offs:
Commercial, financial and agricultural........ 1,201 519 401 1,450 418
Real estate - construction................... 0 85 0 30 31
Real estate - mortgage....................... 85 263 267 195 108
Consumer..................................... 1,437 583 423 235 257
Credit cards................................. 2,536 1,641 488 0 0
Total loans charged-off.............. 5,259 3,091 1,579 1,910 814
Recoveries:
Commercial, financial and agricultural....... 180 69 23 48 0
Real estate - construction.................. 0 0 0 1 0
Real estate - mortgage...................... 14 9 23 18 0
Consumer.................................... 114 62 19 26 34
Credit cards................................ 3 0 0 0 0
Total loans recovered............... 311 140 65 93 34
Net charge-offs................................... 4,948 2,951 1,514 1,817 780
Provision charged to expense................ 6,846 1,197 1,106 2,318 1,890
Loan loss reserve at end of period................$ 8,661 $ 6,002 $ 6,679 $ 5,276 $ 4,520
Average loans.....................................$ 965,632 $ 781,503 $ 548,619 $ 432,282 $ 355,944
Total loans, net of unearned income (period end).. 1,062,660 923,068 623,646 455,650 395,136
Net charge-offs as a percentage of average loans.. 0.51 % 0.38 % 0.28 % 0.42 % 0.22%
Allowance for loan losses as a percentage of loans 0.82 0.65 1.07 1.16 1.14
</TABLE>
21
<PAGE>
Composition of Allowance for Loan Losses
(dollars in thousands)
<TABLE>
<CAPTION>
Allowance Breakdown
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural.......................$ 2,287 $ 1,730 $ 1,866 $ 1,783 $ 1,220
Real Estate
Construction....................... 151 130 148 356 273
Mortgage:
Residential...................... 233 135 145 288 126
Commercial and
multifamily................... 946 581 627 1,223 1,485
Consumer................................ 1,535 1,071 1,965 845 765
Credit cards............................ 2,643 1,757 1,262 254 199
Unallocated............................. 866 598 666 527 452
Total........................$ 8,661 $ 6,002 $ 6,679 $ 5,276 $ 4,520
</TABLE>
<TABLE>
<CAPTION>
Percentage of Loans in Category
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural....................... 17.60 % 19.47 % 21.94 % 24.44 % 24.07 %
Real Estate
Construction....................... 2.95 2.60 3.64 3.97 5.43
Mortgage:
Residential...................... 20.37 22.64 26.39 28.38 31.13
Commercial and
multifamily................... 33.58 29.77 25.16 20.46 17.42
Consumer................................ 13.95 13.97 14.35 16.07 16.18
Credit cards............................ 8.12 11.53 8.52 6.68 5.77
Lease financing receivables............. 3.43 0.02 0.00 0.00 0.00
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.
22
<PAGE>
Types of Deposits
(dollars in thousands)
<TABLE>
<CAPTION>
Balance as of December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Demand deposit accounts.................$ 160,393 $ 126,974 $ 72,950 $ 44,553 $ 29,238
NOW accounts............................ 132,063 117,271 85,910 40,779 28,740
Savings accounts........................ 66,552 94,774 70,897 26,758 18,119
Money market accounts................... 178,662 155,695 156,519 133,904 121,263
Time deposits........................... 403,914 371,169 297,499 224,279 216,222
Time deposits of $100,000 or
over................................. 153,907 135,865 120,774 85,351 66,476
Total deposits.....................$ 1,095,491 $ 1,001,748 $ 804,549 $ 555,624 $ 480,058
</TABLE>
<TABLE>
<CAPTION>
Percent of Deposits as of December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Demand deposit accounts................. 14.64 % 12.68 % 9.07 % 8.02 % 6.09 %
NOW accounts............................ 12.06 11.71 10.68 7.34 5.99
Savings accounts........................ 6.07 9.46 8.81 4.82 3.77
Money market accounts................... 16.31 15.54 19.45 24.10 25.26
Time deposits........................... 36.87 37.05 36.98 40.36 45.04
Time deposits of $100,000 or
over................................. 14.05 13.56 15.01 15.36 13.85
Total deposits..................... 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %
</TABLE>
Certificates of Deposit Greater than $100,000
(dollars in thousands)
Maturing in three months or less...............................$ 53,844
Maturing in over three through six months...................... 45,513
Maturing in over six through twelve months..................... 31,516
Maturing in over twelve months................................. 23,034
Total................................................$ 153,907
23
<PAGE>
Return on Equity and Assets
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Return on average assets................ 0.74 % (0.16)% 0.69 % 0.44 % 0.41 %
Return on average equity................ 10.43 (1.99) 8.27 5.22 4.89
Return on average common equity......... 17.07 (3.08) 12.60 6.10 4.89
Average equity as a percentage of
average assets....................... 7.11 8.27 8.37 8.39 8.32
Dividend payout ratio................... 24.51 n/m 0.00 0.00 0.00
</TABLE>
24
<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
1995
<S> <C> <C> <C> <C> <C>
Federal funds purchased............$ 40,750 $ 12,727 6.95 % $ 31,000 6.01 %
Securities sold under
repurchase agreements........... 66,967 50,884 5.36 60,532 5.30
Advances from the FHLB............. 90,000 70,526 6.11 90,000 5.75
Commercial paper................... 2,405 37 6.76 2,405 6.76
Other.............................. 2,852 2,625 9.00 2,852 9.00
$ 202,974 $ 136,799 6.00 % $ 186,789 5.71 %
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 19,933 3.94 72,000 6.03
Other.............................. 88 85 9.00 88 9.00
$ 106,074 $ 41,362 3.96 % $ 106,074 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 0 0.00
Other.............................. 54 54 5.74 54 5.74
$ 38,882 $ 14,077 3.06 % $ 16,779 2.76 %
</TABLE>
25
<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
Assets
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans, net of unearned income.............$ 547,879 $ 36,161 $ 70,239 $ 654,279 $ 408,381 $ 1,062,660
Investment securities, taxable............ 20,379 19,576 75,959 115,914 35,664 151,578
Investment securities, nontaxable......... 100 2,455 114 2,669 24,119 26,788
Federal funds sold........................ 0 0 0 0 0 0
Interest bearing deposits with
other banks............................. 750 250 0 1,000 0 1,000
Total earning assets.......... 569,108 58,442 146,312 773,862 468,164 1,242,026
Non-earning assets, net...................... 0 0 0 0 172,896 172,896
Total assets..................$ 569,108 $ 58,442 $ 146,312 $ 773,862 $ 641,060 $ 1,414,922
Liabilities and Stockholders' Equity
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest Checking..................$ 132,063 $ 0 $ 0 $ 132,063 $ 0 $ 132,063
Savings............................ 66,552 0 0 66,552 0 66,552
Money Market....................... 178,662 0 0 178,662 0 178,662
Certificates of Deposit............ 158,158 151,217 119,801 429,176 81,230 510,406
Other.............................. 14,691 14,048 11,129 39,868 7,546 47,414
Total interest-bearing deposits.. 550,126 165,265 130,930 846,321 88,776 935,097
Short-term borrowings.................. 186,789 0 0 186,789 0 186,789
Long-term borrowings................... 0 0 0 0 26,347 26,347
Total interest-bearing liabilitie 736,915 165,265 130,930 1,033,110 115,123 1,148,233
Noninterest bearing liabilities
Noninterest bearing deposits........... 0 0 0 0 160,394 160,394
Other noninterest bearing liabilities, 0 0 0 0 11,328 11,328
Total liabilities................ 736,915 165,265 130,930 1,033,110 286,845 1,319,955
Stockholders'equity.......................... 0 0 0 0 94,967 94,967
Total liabilities and stockholder
equity........................$ 736,915 $ 165,265 $ 130,930 $ 1,033,110 $ 381,812 $ 1,414,922
Interest sensitive gap.......................$ (167,807)$ (106,823)$ 15,382 $ (259,248)$ 259,248 $ ------
Cumulative interest sensitive gap............$ (167,807)$ (274,630)$ (259,248)$ 259,248 ------ ------
</TABLE>
26
<PAGE>
Noninterest Income
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Service charges on deposits..................$ 5,524 $ 4,089 $ 2,916 $ 1,791 $ 1,116
Credit card trust income..................... 2,775 0 0 0 0
Mortgage banking income:
Origination fees.......................... 1,086 954 1,051 778 461
Gain on sale of mortgage loans............ 699 112 509 496 0
Servicing and other....................... 377 572 228 0 0
Fees for trust services...................... 1,042 919 542 305 197
Gain on sale of securities................... 769 75 680 633 733
Gain on sale of mortgage servicing rights.... 2,943 0 0 0 0
Sundry....................................... 2,111 1,505 839 113 236
Total noninterest income...........$ 17,326 $ 8,226 $ 6,765 $ 4,116 $ 2,743
</TABLE>
Noninterest Expense
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Salaries and wages...........................$ 17,524 $ 15,023 $ 10,630 $ 6,870 $ 4,788
Benefits..................................... 4,584 4,375 2,510 1,596 1,576
Occupancy.................................... 4,209 3,728 2,301 1,496 1,075
Furniture and equipment...................... 3,182 2,577 1,933 1,536 1,187
Federal deposit insurance premiums........... 1,983 2,114 1,605 1,097 838
Credit card solicitation charges............. 1,910 0 0 0 0
Intangibles amortization..................... 1,774 2,410 875 462 214
Credit card restructuring charges............ 0 12,214 0 0 0
Sundry....................................... 11,716 9,398 7,440 5,840 4,197
Total noninterest expense..........$ 46,882 $ 51,839 $ 27,294 $ 18,897 $ 13,875
</TABLE>
27
<PAGE>
ITEM 2 - PROPERTIES
At December 31, 1995, the Company conducted business through
55 locations in South Carolina. At December 31, 1995, the total net tangible
book value of the premises and equipment and leasehold improvements owned by the
Company was $40,320,000. 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 Carolina First Bank's trust department, a CF Mortgage
mortgage origination office and various administrative functions. Blue Ridge
headquarters are located in an office park in Greenville and occupy
approximately 3,000 square feet.
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. CF Mortgage's headquarters are
located in this building. 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 55 locations, which
include the buildings described above. The Company or a subsidiary of the
Company owns 24 locations and leases 31 locations. The rental payments due under
the leases approximate the market rates. Leases generally have options for
extensions under substantially the same terms as in the original lease period
with certain rate escalations. The leases generally 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 is vigorously defending such complaint. The Bank
believes that there are valid defenses available to it. In connection with the
litigation, the Bank also
28
<PAGE>
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.
On September 26, 1995, David W. Bowers and E. Monte Bowers
filed a lawsuit against the Company and Carolina First Bank in the Court of
Common Pleas in Newberry County, South Carolina. The complaint alleges breach of
contract, breach of contract accompanied by a fraudulent act and fraud in the
inducement. The allegations arise from Carolina First Bank's alleged breach of
written employment agreements with David Bowers and Monte Bowers. The Bowers
demand judgment against Carolina First Bank in the amount of $912,000 plus
punitive damages, attorneys' fees and costs. It is the Company's position that
it has not breached the relevant employment contracts and it is vigorously
defending this lawsuit. The Company has asked the Court for permission to file
a counterclaim which alleges, among other things, securities law violations.
However, the Company is not in a position at this time to assess the
likelihood the Bowers will prevail on their claim, amount of liability, if any,
or the probability of the Company's success on its counterclaim.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders by
solicitation of proxies or otherwise during the fourth quarter of 1995.
29
<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 dividend of $0.05 per share payable on the common stock. 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 was paid each quarter of
1995. In December 1995, the Board approved an increase in the quarterly cash
dividend to $0.07 per share. On February 1, 1996, this dividend was paid. 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.
The Company generates cash to pay dividends primarily through
dividends paid to it by its subsidiaries. South Carolina's banking regulations
restrict the amount of dividends that may be paid from Carolina First Bank. All
dividends paid from Carolina First Bank are subject to prior approval by the
S.C. Commissioner of Banking and are payable only from the undivided profits of
Carolina First Bank. At December 31, 1995, Carolina First Bank's retained
earnings were $24.1 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 August 15, 1995, to common stockholders of record as of August 1,
1995. This dividend resulted in the issuance of 291,603 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 seventh consecutive year that the Company has
issued a 5% common stock dividend.
The remaining information required by Item 5 is set forth on
page 44 of the Company's 1995 Annual Report to Shareholders and is incorporated
by reference herein. In February 1996, the Company redeemed its 7.50%
Noncumulative Convertible Preferred Stock Series 1993 ("Series 1993 Preferred
Stock") and its 7.32% Noncumulative Convertible Preferred Stock Series 1994
("Series 1994 Preferred Stock"). In connection with the redemptions,
substantially all of the outstanding Series 1993 Preferred Stock and Series 1994
Preferred Stock was converted into the Company's $1.00 par value common stock
("Common Stock"). As of March 25, 1996, there were 3,103 common shareholders of
record, which includes the preferred shareholders who elected to convert their
shares into Common Stock as described above.
30
<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 seven years. All prior year information
has been restated to reflect acquisitions consummated during 1995 accounted for
under the pooling-of-interests method of accounting.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement:
Net interest income ............... $ 50,772 $ 43,260 $ 29,358 $ 20,749 $ 15,351
Provision for loan losses ......... 6,846 1,197 1,106 2,318 1,890
Noninterest income, excluding
securities transactions and sale
of mortgage servicing rights ... 13,614 8,151 6,085 3,483 2,010
Securities transactions ........... 769 75 680 633 733
Gain on sale of mortgage servicing
rights ......................... 2,943 -- -- -- --
Noninterest expenses .............. 46,882 51,839 27,294 18,897 13,875
Net income (loss) ................. 9,414 (1,740)1 5,418 2,466 1,871
Per Common Share Data:
Net income(loss) .................. $ 1.04 $ (0.71) $ 0.76 $ 0.41 $ 0.41
Cash dividends declared ........... 0.25 0.20 0.05 -- --
Balance Sheet (Period End):
Total assets ...................... $ 1,414,922 $ 1,204,350 $ 904,474 $ 616,288 $ 528,472
Loans-net of unearned income ...... 1,062,660 923,068 623,646 455,650 395,136
Nonperforming assets .............. 4,868 4,722 5,366 5,631 3,350
Total earning assets .............. 1,242,026 1,059,455 814,579 555,871 482,130
Total deposits .................... 1,095,491 1,001,748 804,549 555,624 480,058
Short-term borrowings ............. 186,789 106,074 16,779 2,591 2,755
Long-term debt .................... 26,347 1,162 1,274 1,492 1,753
Shareholders' equity .............. 94,967 86,482 70,415 51,288 38,989
Balance Sheet (Averages):
Total assets ...................... $ 1,269,757 $ 1,056,954 $ 782,551 $ 562,369 $ 459,900
Shareholders' equity .............. 90,242 87,377 65,518 47,206 38,279
</TABLE>
1 After fourth quarter 1994 restructuring charges of $9,415
(after tax).
31
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth on pages 10
through 19 in the Company's 1995 Annual Report to Shareholders, which
information is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth on pages 20
through 41 in the Company's 1995 Annual Report to Shareholders, which
information is incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
From inception through the 1994 fiscal year, the Company had
engaged Elliott, Davis & Company, LLP ("ED&C") as its independent public
accountants. In March 1995, the Board of Directors determined to dismiss ED&C
and engage KPMG Peat Marwick LLP ("KPMG"). 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. During the past two
years and subsequent interim periods, there were no "reportable events" within
the meaning of Item 304 of Regulation S-K promulgated by the SEC.
During 1994, KPMG provided accounting research to assist in
evaluating certain policies and procedures related to: (1) intangibles -
capitalization, cost allocation and amortization (premium for credit card
purchases, branch acquisitions, mortgage banking acquisitions and acquisition
related conversion costs and other deferred costs), (2) FAS 109 calculations and
disclosure and (3) a possible sale or securitization of Carolina First Bank's
credit card portfolio. (A securitization of the credit card portfolio was
consummated January 24, 1995.) The presentation consisted primarily of a summary
of current accounting practices prescribed by the FASB, EITF, SEC or other
relevant sources. This accounting research was presented jointly to the
Company's management, the Audit Committee and ED&C. There was no disagreement by
ED&C with the research by KPMG.
32
<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 and page 13 of the Company's Proxy Statement for the 1996 Annual
Meeting of Shareholders and is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item may be found on pages 4
through 10 of the Company's Proxy Statement for the 1996 Annual Meeting of
Shareholders 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 11
and 12 of the Company's Proxy Statement for the 1996 Annual Meeting of the
Shareholders and is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth on page 12
of the Company's Proxy Statement for the 1996 Annual Meeting of the Shareholders
and is incorporated herein by reference.
33
<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 20
through 41 in the Company's 1995 Annual Report to
Shareholders, which information is incorporated herein by
reference. The Report of Independent Auditors, dated January
26, 1996 of KPMG Peat Marwick LLP is included on page 20 of
the Company's 1995 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 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.
4.3-- Articles of Incorporation: Included as Exhibit 3.1.
4.4-- Bylaws: Included as Exhibit 3.2.
4.5-- 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.
4.6-- 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.
4.7-- Form of Indenture between Carolina First Corporation and First
American Trust Company, N.A., as Trustee: Incorporated by reference
to Exhibit 4.11 of the Company's Registration Statement on Form S-3,
Commission File No. 22-58879.
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
34
<PAGE>
Carolina First Corporation's Registration Statement on Form S-8,
Commission File No. 33-25424.
10.5 -- Amended and Restated Noncompetition and Severance Agreement dated
February 21, 1996, between Carolina First Corporation and Mack I.
Whittle, Jr.
10.6 -- Amended and Restated Noncompetition and Severance Agreement dated
February 21, 1996, between Carolina First Corporation and William S.
Hummers III.
10.7 -- Amended and Restated Noncompetition and Severance Agreement dated
February 21, 1996, between Carolina First Corporation and James W.
Terry, Jr.
10.8 -- Noncompetition and Severance Agreement dated February 21, 1996,
between Carolina First Corporation and David L. Morrow.
10.9 -- 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.
10.10 -- Carolina First Corporation Long-Term Management Performance Plan.
10.11 -- 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.
10.12 -- 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.
10.13 -- 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.
10.14 -- 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.
10.15 -- Servicing Rights Purchase Agreement between Bank of America, F.S.B.
and Carolina First Bank dated as of March 31, 1995: Incorporated by
reference to Exhibit 10.17 of Amendment No. 1 to Carolina First
Corporation's Annual Report on Form 10-K for the year ended, December
31, 1994, Commission File No. 0-15083.
10.16 -- Warrant to Purchase Common Stock of Affinity Financial Group, Inc.
and Amendment No. 1 with respect to Warrant to Purchase Common Stock
of Affinity Financial Group, Inc.
11.1 -- Computation of Per Share Earnings.
12.1 -- Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends.
13.1 -- 1995 Annual Report to Shareholders of the Company
13.2 -- Independent Report of Elliott, Davis & Company, L.L.P.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank, Carolina
First Mortgage Company and Blue Ridge Finance Company.
23.1 -- Consent of KPMG Peat Marwick LLP.
27.1 -- Financial Data Schedules.
(b) None.
(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.
35
<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 20, 1996
- ------------------------------- Executive Officer and Director
Mack I. Whittle, Jr.
/s/ William S. Hummers Executive Vice President and March 20, 1996
- --------------------------- Secretary
William S. Hummers, III (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 20, 1996
- ---------------------------
William R. Timmons, Jr.
/s/ Mack I. Whittle, Jr. Director March 20, 1996
- --------------------------------
Mack I. Whittle, Jr.
/s/ William S. Hummers Director March 20, 1996
- ----------------------------
William S. Hummers III
/s/ Judd B. Farr Director March 20, 1996
- -----------------------------------
Judd B. Farr
/s/ C. Claymon Grimes, Jr. Director March 20, 1996
- -----------------------------
C. Claymon Grimes, Jr.
/s/ M. Dexter Hagy Director March 20, 1996
- --------------------------------
M. Dexter Hagy
/s/ Robert E. Hamby, Jr. Director March 20, 1996
- -------------------------------
Robert E. Hamby, Jr.
Director March , 1996
R. Glenn Hilliard
/s/ Richard E. Ingram Director March 20, 1996
- ---------------------------------
Richard E. Ingram
36
<PAGE>
/s/ Charles B. Schooler Director March 20, 1996
- ---------------------------------
Charles B. Schooler
Director March , 1996
Edward J. Sebastian
/s/ Elizabeth P. Stall Director March 20, 1996
- ------------------------------------
Elizabeth P. Stall
37
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
10.5 Amended and Restated Noncompetition and Severance
Agreement dated February 21, 1996, between Carolina First
Corporation and Mack I. Whittle, Jr.
10.6 Amended and Restated Noncompetition and Severance
Agreement dated February 21, 1996, between Carolina
First Corporation and William S. Hummers III.
10.7 Amended and Restated Noncompetition and Severance
Agreement dated February 21, 1996, between Carolina First
Corporation and James W. Terry, Jr.
10.8 Noncompetition and Severance Agreement dated February
21, 1996, between Carolina First Corporation and David
L. Morrow.
10.16 Warrant to Purchase Common Stock of Affinity Financial
Group, Inc. and Amendment No. 1 with respect to Warrant
to Purchase Common Stock of Affinity Financial Group,
Inc.
11.1 Computation of Per Share Earnings.
12.1 Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Fixed Charges and Preferred Stock Dividends.
13.1 1995 Annual Report to Shareholders of the Company.
13.2 Independent Auditor Report of Elliott, Davis & Company,
L.L.P.
23.1 Consent of KPMG Peat Marwick LLP.
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NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT
THIS NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT (this "Agreement")
is made and entered into as of this 21st day of February, 1996, by and between
Mack I. Whittle, Jr., an individual (the "Executive"), and Carolina First
Corporation, a South Carolina corporation and financial institution holding
company headquartered in Greenville, South Carolina (the "Company"). As used
herein, the term "Company" shall include the Company and any and all of its
subsidiaries where the context so applies.
W I T N E S S E T H
WHEREAS the Board of Directors of the Company believes that the Executive
has been instrumental in the success of the Company since its inception in 1986;
WHEREAS the Company desires to continue to employ the Executive as Chief
Executive Officer of the Company and in such other capacities as the Executive
is currently employed as of the date hereof;
WHEREAS the Company has considered and will adopt a Longterm Incentive
Compensation Plan (the "Incentive Compensation Plan") which provides for
incentive compensation payments to be made to the executive officers of the
Company (including the Executive);
WHEREAS the terms hereof are consistent with the objectives of the
Incentive Compensation Plan;
WHEREAS the Executive is willing to accept the employment contemplated
herein under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions hereof, the Company
hereby employs the Executive and Executive hereby accepts such employment as the
Chief Executive Officer of the Company having such duties and responsibilities
as are set forth in Section 3 below.
2. Definitions. For purposes of this Agreement, the following terms
shall have the meanings specified below.
"Change in Control" shall mean the occurrence during the Term of any of
the following events:
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(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or
more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining whether a
Change in Control has occurred, Voting Securities which are acquired in
a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (i) an employee
benefit plan (or a trust forming a part thereof) maintained by (x) the
Company or (y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Subsidiary"), (ii) the
Company or any Subsidiary, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined); or
(b) The individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; provided, however, that if
the election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the 1934 Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest") including
by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization
involving the Company, unless
i) the stockholders of the Company,
immediately before such merger,
consolidation or reorganization,
own, directly or indirectly,
immediately following such merger,
consolidation or
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reorganization, at least two-thirds
of the combined voting power of the
outstanding voting securities of the
corporation resulting from such
merger or consolidation or
reorganization (the "Surviving
Corporation") in substantially the
same proportion as their ownership
of the Voting Securities immediately
before such merger, consolidation or
reorganization, and
ii) the individuals who were members of
the Incumbent Board immediately
prior to the execution of the
agreement providing for such merger,
consolidation or reorganization
constitute at least two-thirds of
the members of the board of
directors of the Surviving
Corporation.
(A transaction described in clauses (i) and
(ii) shall herein by referred to as a
"NonControl Transaction").
(2) A complete liquidation or dissolution of the
Company; or
(3) An agreement for the sale or other
disposition of all or substantially all of
the assets of the Company to any Person
(other than a transfer to a Subsidiary).
(d) Notwithstanding anything contained in this Agreement to
the contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that such
termination (1) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change in
Control and who effectuates a Change in Control (a "Third Party") or
(2) otherwise occurred in connection with, or in anticipation of, a
Change in Control which actually occurs, then for all purposes or this
Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the date of such
termination of the Executive's employment.
"Cause" shall mean (a) any act that (i) constitutes, on the part of the
Executive, fraud, dishonesty, gross malfeasance of duty, or conduct grossly
inappropriate to the Executive's office, and (ii) is demonstrably likely to lead
to material injury to the Company or resulted or was intended to result in
direct or indirect gain to or personal enrichment of the Executive; or
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(b) the conviction (from which no appeal may be or is timely
taken) of the Executive of a felony; or
(c) the suspension or removal of the Executive by federal or
state banking regulatory authorities acting under lawful authority
pursuant to provisions of federal or state law or regulation which may
be in effect from time to time;
provided, however, that in the case of clause (a) above, such conduct shall not
constitute Cause:
(x) unless (i) there shall have been delivered to the
Executive a written notice setting forth with specificity the reasons
that the Board believes the Executive's conduct constitutes the
criteria set forth in clause (a), (ii) the Executive shall have been
provided the opportunity to be heard in person by the Board (with the
assistance of the Executive's counsel if the Executive so desires), and
(iii) after such hearing, the termination is evidenced by a resolution
adopted in good faith by two-thirds of the members of the Board (other
than the Executive); or
(y) if such conduct (i) was believed by the Executive in good
faith to have been in or not opposed to the interests of the Company,
and (ii) was not intended to and did not result in the direct or
indirect gain to or personal enrichment of the Executive.
Additionally, after a Change in Control, the Company may not terminate
Executive for "Cause" as a result of any event about which the Company, any
member of a prior or existing Board of Directors, or any executive senior to the
Executive has known for more than twelve (12) months.
"Confidential Information" shall mean all business and other information
relating to the business of the Company, including without limitation, technical
or nontechnical data, programs, methods, techniques, processes, financial data,
financial plans, product plans, and lists of actual or potential customers,
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other Persons,
and (ii) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy or confidentiality. Such information and compilations of
information shall be contractually subject to protection under this Agreement
whether or not such information constitutes a trade secret and is separately
protectable at law or in equity as a trade secret. Confidential Information does
not include confidential business information which does not constitute a
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trade secret under applicable law two years after any expiration or termination
of this Agreement.
"Disability" or "Disabled" shall mean the Executive's inability as a
result of physical or mental incapacity to substantially perform his duties for
the Company on a full-time basis for a period of six (6) months as determined by
an independent physician selected with the approval of both the Executive and
the Company.
"Involuntary Termination" shall mean the termination of Executive's
employment by the Executive following a Change in Control which, in the sole
judgment of the Executive, is due to (i) a change of the Executive's
responsibilities, position (including status as Chief Executive Officer of the
Company, its successor or ultimate parent entity, office, title, reporting
relationships or working conditions), authority or duties (including changes
resulting from the assignment to the Executive of any duties inconsistent with
his positions, duties or responsibilities as in effect immediately prior to the
Change in Control); or (ii) a change in the terms or status (including the
rolling three year termination date) of this Agreement; or (iii) a reduction in
the Executive's compensation or benefits; or (iv) a forced relocation of the
Executive outside the Greenville metropolitan area; or (v) a significant
increase in the Executive's travel requirements; or (vi) any attempted
termination for Cause that does not comply with the substantive and procedural
provisions set forth in the definition of Cause; or (vii) the Company's
insolvency; or (viii) the Company's breach of this Agreement. An "Involuntary
Termination" shall be considered to have occurred only after Executive gives the
Company written notice of such termination setting forth the specific grounds
constituting the termination and ten (10) days to cure such termination and the
Company fails to cure such termination.
"Person" shall mean any individual, corporation, bank, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
"Voluntary Termination" shall mean the termination by Executive of
Executive's employment following a Change in Control which is not the result of
any of clauses (i) through (viii) set forth in the definition of Involuntary
Termination above.
3. Duties. During the Term hereof, the Executive shall have such duties and
authority as are typical of the chief executive officer of a company such as the
Company, including, without limitation, those specified in the Company's Bylaws.
Executive agrees that during the Term hereof, he will devote his full time,
attention and energies to the diligent performance of his duties. Executive
shall not, without the prior written
5
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consent of the Company, at any time during the Term hereof (i) accept employment
with, or render services of a business, professional or commercial nature to,
any Person other than the Company, (ii) engage in any venture or activity which
the Company may in good faith consider to be competitive with or adverse to the
business of the Company or of any affiliate of the Company, whether alone, as a
partner, or as an officer, director, employee or shareholder or otherwise,
except that the ownership of not more than 5% of the stock or other equity
interest of any publicly traded corporation or other entity shall not be deemed
a violation of this Section, or (iii) engage in any venture or activity which
the Board of Directors of the Company may in good faith consider to interfere
with Executive's performance of his duties hereunder.
4. Term. Unless earlier terminated as provided herein, the Executive's
employment hereunder shall be for a rolling term of three years (the "Term")
commencing on the date hereof, with compensation to be effective as of January
1, 1996. This Agreement shall be deemed to extend each day for an additional day
automatically and without any action on behalf of either party hereto; provided,
however, that either party may, by notice to the other, cause this Agreement to
cease to extend automatically and, upon such notice, the "Term" of this
Agreement shall be the three years following the date of such notice, and this
Agreement shall terminate upon the expiration of such Term. If no such notice is
given and this Agreement is terminated pursuant to Section 5 hereof, for the
purposes of calculating any amounts payable to the Executive as a result of such
termination, the remaining Term of this Agreement shall be deemed to be three
years from the date of such termination.
5. Termination. This Agreement may be terminated as follows:
5.1 The Company. The Company shall have the right to terminate
Executive's employment hereunder at any time during the Term hereof (i) for
Cause, (ii) if the Executive becomes Disabled, or (iii) upon the Executive's
death.
5.1.1 If the Company terminates Executive's
employment under this Agreement pursuant to clauses (i) through (iii) of Section
5.1, the Company's obligations hereunder shall cease as of the date of
termination; provided, however, if Executive is terminated for Cause after a
Change in Control, then such termination shall be treated as a Voluntary
Termination as contemplated in Section 5.2 below.
5.1.2 If the Company terminates Executive other
than pursuant to clauses (i) through (iii) of Section 5.1 and there has been a
Change in Control, Executive shall be entitled to receive immediately as
severance upon such termination, the
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compensation and benefits provided in Section 6 hereof that would otherwise be
payable over the three years subsequent to such termination. For purposes of
determining compensation which is not fixed (such as a bonus), the annual amount
of such unfixed compensation shall be deemed to be the equal to the average of
such compensation over the three year period immediately prior to the
termination.
5.1.3 If the Company terminates Executive other
than pursuant to clauses (i) through (iii) of Section 5.1 and in the absence of
a Change in Control, Executive shall be entitled to receive immediately as
severance upon such termination, the compensation and benefits provided in
Section 6 hereof for the remaining Term of this Agreement.
5.1.4 In the event of such termination other than
pursuant to clauses (i) through (iii) of Section 5.1, (A) all rights of
Executive pursuant to awards of share grants or options granted by the Company
shall be deemed to have vested and shall be released from all conditions and
restrictions, except for restrictions on transfer pursuant to the Securities Act
of 1933, as amended, and (B) the Executive shall be deemed to be credited with
service with the Company for such remaining Term for the purposes of the
Company's benefit plans, including, without limitation, any restricted stock
agreements now or hereafter entered into with Executive.
5.2 By Executive. Executive shall have the right to terminate
his employment hereunder if (i) the Company materially breaches this Agreement
and such breach is not cured within 30 days after written notice of such breach
is given by Executive to the Company; (ii) there is a Voluntary Termination; or
(iii) there is an Involuntary Termination.
5.2.1 If Executive terminates his employment
other than pursuant to clauses (i) through (iii) of Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of such termination
and Executive shall be subject to the noncompetition provisions set forth in
Section 10 hereof.
5.2.2 If Executive terminates his employment
hereunder pursuant to any of clauses (i) or (iii) of Section 5.2, Executive
shall be entitled to receive immediately as severance the compensation and
benefits provided in Section 6 hereof that would otherwise be payable over the
three years subsequent to such termination. For purposes of determining
compensation which is not fixed (such as a bonus), the annual amount of such
unfixed compensation shall be deemed to be the equal to the average of such
compensation over the three year period immediately prior to the termination.
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<PAGE>
5.2.3 If Executive terminates his employment
pursuant to clause (ii) of Section 5.2, Executive shall be entitled to receive
immediately as severance the compensation and benefits provided in Sections 6
hereof for one year following the date of his Voluntary Termination. For
purposes of determining compensation which is not fixed (such as a bonus), the
annual amount of such unfixed compensation shall be deemed to be the equal to
the average of such compensation over the three year period immediately prior to
the termination.
5.2.4 In addition, in the event of such
termination pursuant to any of clauses (i) through (iii) of this Section 5.2,
(A) all rights of Executive pursuant to awards of share grants or options
granted by the Company shall be deemed to have vested and shall be released from
all conditions and restrictions, except for restrictions on transfer pursuant to
the Securities Act of 1933, as amended, and (B) the Executive shall be deemed to
be credited with service with the Company for such remaining Term for the
purposes of the Company's benefit plans.
5.3 Limitation on Availability of Severance Benefits. All
severance benefits to Executive conditioned on a Change of Control shall have
been obtained by Executive within three (3) years following a Change of Control
or be null, void, and deemed to have been waived by Executive.
6. Compensation. In consideration of Executive's services and covenants
hereunder, Company shall pay to Executive the compensation and benefits
described below (which compensation shall be paid in accordance with the normal
compensation practices of the Company and shall be subject to such deductions
and withholdings as are required by law or policies of the Company in effect
from time to time, provided that his salary pursuant to Section 6.1 shall be
payable not less frequently than monthly):
6.1 Annual Salary. During the Term hereof, the Company shall
pay to Executive a salary at the rate of $250,000 per annum. Executive's salary
will be reviewed by the Board of Directors of the Company at the beginning of
each of its fiscal years and, in the sole discretion of the Board of Directors,
may be increased for such year.
6.2 Annual Incentive Bonus. During the Term hereof, the Board
of Directors may pay to Executive an annual incentive cash bonus in accordance
with the terms of the Short Term Incentive Compensation Plan.
6.3 Stock Options and Restricted Stock. During the Term
hereof, the Board of Directors shall grant Executive options to purchase Company
Common Stock and restricted stock in accordance with the terms of the Company's
Long Term Incentive
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Compensation Plan. The Company agrees to use its best efforts to cause the
Company's Long Term Incentive Compensation Plan to be presented to the
shareholders of the Company for approval at the next annual meeting of the
shareholders for the purpose of meeting any NASD shareholder approval
requirements and qualifying such Options under Section 16 of the Securities
Exchange Act of 1934, as amended ("Section 16"). In the event that such
shareholder approval is not secured for Section 16 purposes, the options
referenced herein shall remain the legal and valid obligation of the Corporation
enforceable in accordance with their terms. In the event that shareholder
approval is not secured and the NASD does not confirm that an exemption is
available with respect to the grant of the options and restricted stock, stock
appreciation or similar rights with terms and conditions substantially
equivalent to the options and restricted stock shall be granted to Executive.
6.4 Other Benefits. Executive shall be entitled to share in
any other employee benefits generally provided by the Company to its most highly
ranking executives for so long as the Company provides such benefits. The
Company also agrees to provide Executive with a Company-paid automobile,
reasonable club dues for one country club and two business club(s), personal tax
advisory services, and a $1,000,000 life insurance policy. Executive shall also
be entitled to participate in all other benefits accorded general Company
employees.
6.5 Executive's Right to Benefits Absolute. The right
of the Executive to receive the benefits set forth in this
Agreement shall be absolute and not subject to any right of set-
off or counterclaim the Company may have against Executive.
7. Accelerated Vesting of Executive's Stock Options and Restricted
Stock. Anything set forth herein to the contrary notwithstanding, Executive's
stock options and restricted stock shall vest immediately upon the occurrence of
a Change in Control or upon the triggering of the provisions of the Company's
Shareholder Rights Agreement, even if Executive remains employed with the
Company after a Change in Control. Additionally, to the extent that this
Agreement is inconsistent with Company's existing Restricted Stock Plan (the
"RSP"), the terms of the RSP shall control. Moreover, anything set forth herein
to the contrary notwithstanding, Executive shall have a minimum of one (1) year
from the date of vesting to exercise such stock option and restricted stock
rights.
8. Excess Parachute Payments. It is the intention of the parties hereto
that the severance payments and other compensation provided for herein are
reasonable compensation for Executive's services to the Company and shall not
constitute "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and any regulations
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thereunder. In the event that the Company's independent accountants acting as
auditors for the Company on the date of a Change of Control determine that the
payments provided for herein constitute "excess parachute payments," then the
compensation payable hereunder shall be increased, on a tax gross-up basis, so
as to reimburse the Executive for the tax payable by the Executive, pursuant to
Section 4999 of the Internal Revenue Code, on such "excess parachute payments,"
taking into account all taxes payable by Executive with respect to such tax
gross-up payments hereunder, so that Executive shall be, after payment of all
taxes, in the same financial position as if no taxes under Section 4999 had been
imposed upon him.
9. Confidentiality. Executive acknowledges that, prior to and during
the term of this Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by Executive on behalf of
a competitor of the Company to the Company's substantial detriment. In view of
the foregoing, Executive acknowledges and agrees that the restrictive covenants
contained in this Agreement are reasonably necessary to protect the Company's
legitimate business interests and goodwill. Executive agrees that he shall
protect the Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties performed in
accordance with this Agreement, any Confidential Information; provided, however,
that Executive may make disclosures required by a valid order or subpoena issued
by a court or administrative agency of competent jurisdiction, in which event
Executive will promptly notify the Company of such order or subpoena to provide
the Company an opportunity to protect its interests. Upon the termination or
expiration of his employment hereunder, the Executive agrees to deliver promptly
to the Company all Company files, customer lists, management reports, memoranda,
research, Company forms, financial data and reports and other documents supplied
to or created by him in connection with his employment hereunder (including all
copies of the foregoing) in his possession or control and all of the Company's
equipment and other materials in his possession or control.
10. Noncompetition. In the event that Executive's employment with the
Company is terminated before a Change in Control voluntarily by the Executive or
by the Board of Directors pursuant to clause (i) of Section 5.1, then Executive
shall not, for a period of one (1) year following such termination of
employment:
(i) become employed by any insured depository institution
that has customers or does business as follows:
(a) has an office situated in or an agent or agents
regularly working in any city in which Company has
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an office or in which an agent or agents of
Company regularly work, or
(b) has a significant number of offices situated in or a
significant number of agents regularly working in any
city in which Company has a significant number of
offices or in which a significant number of agents of
Company regularly work, or
(c) has customers located in any county of South
Carolina where the Company has a significant
number of customers, or
(d) shares a significant number of customers with
Company.
(ii) interfere or attempt to interfere with any business
relationship of the Company, including, without limitation,
employee and customer relationships, whether by lawful
competition or otherwise; or
(iii) engage, directly or indirectly, in any business or
activity which requires Executive, or any person or
party employed by him or whom he represents, to provide
Confidential Information or other data obtained by
Executive as a result of his employment with Company to
any other person or party who is then engaged in pro
viding similar services of the Company for use in
competing with the Company; or
(iv) solicit from any customer of the Company any business
that such customer has customarily done or contemplates
doing with the Company; or
(v) solicit any business from any customer of the Company
with whom the Executive had contact while employed by
the Company; or
(vi) otherwise compete against the Company, directly or indirectly,
either as principal, agent, employee, owner (if the percentage
of ownership exceeds 10% of the entity).
The parties hereto intend the geographic areas and all other
restrictions set forth herein to be completely severable and independent; if any
of the restrictions set forth above are determined to be unenforceable in any of
the geographic areas set forth above, the parties intend that the restrictions
set forth above shall continue to apply to the remaining geographic areas set
forth above.
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In the event that Executive's employment is terminated for any reason
following a Change in Control (whether by the Company or Executive), it is
expressly acknowledged that there shall be no limitation on any activity of
Executive, including direct competition with the Company or its successor, and
Company shall not be entitled to injunctive relief with respect to any such
activities of Executive.
11. Trust. The Company shall establish an irrevocable trust to fund the
obligations hereunder (which may be a "rabbi trust" if so requested by
Executive), which trust (i) shall have as trustee an individual acceptable to
Executive, (ii) shall be funded upon the earlier of a Change in Control or the
approval of any regulatory application filed by a potential acquiror of the
Company seeking to acquire control of the Company, and (iii) shall contain such
other terms and conditions as are reasonably necessary in Executive's
determination to ensure the Company's compliance with its obligations hereunder.
12. Assignment. The parties acknowledge that this Agreement has been
entered into due to, among other things, the special skills of Executive, and
agree that this Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of Company.
13. Notices. All notices, requests, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or seven days after mailing if mailed, first class,
certified mail postage prepaid:
To the Company: Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Attn: Chairman of the Board
To Executive: Mack I. Whittle, Jr.
102 South Main Street
Greenville, South Carolina 29601
Any party may change the address to which notices, requests, demands, and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
14. Provisions Severable. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
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15. Remedies. The Executive acknowledges that if he breaches or
threatens to breach his covenants and agreements in this Agreement, such actions
may cause irreparable harm and damage to the Company which could not be
compensated by monetary damages alone. Accordingly, if Executive breaches or
threatens to breach this Agreement, the Company shall be entitled to injunctive
relief, in addition to any other rights or remedies of the Company. In the event
that Executive is reasonably required to engage legal counsel to enforce his
rights hereunder against the Company, Executive shall be entitled to receive
from the Company his reasonable attorneys' fees and costs; provided that
Executive shall not be entitled to receive those fees and costs related to
matters, if any, which were the subject of litigation and with respect to which
a judgment is rendered against Executive.
16. Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
17. Amendments and Modifications. This Agreement may be amended or
modified only by a writing signed by other parties hereto.
18. Governing Law. The validity and effect of this agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of South Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WITNESSES: EXECUTIVE
/s/ /s/ Mack I. Whittle, Jr.
Mack I. Whittle, Jr.
/s/
CAROLINA FIRST CORPORATION
/s/ /s/ William R. Timmons, Jr.
By: William R. Timmons, Jr.
/s/ Chairman of the Board
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NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT
THIS NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT (this "Agreement")
is made and entered into as of this 21st day of February, 1996, by and between
William S. Hummers, III, an individual (the "Executive"), and Carolina First
Corporation, a South Carolina corporation and financial institution holding
company headquartered in Greenville, South Carolina (the "Company"). As used
herein, the term "Company" shall include the Company and any and all of its
subsidiaries where the context so applies.
W I T N E S S E T H
WHEREAS the Board of Directors of the Company believes that the
Executive has been instrumental in the success of the Company since his
employment in 1988;
WHEREAS the Company desires to continue to employ the Executive as
Executive Vice President/Chief Financial Officer of the Company and in such
other capacities as the Executive is
currently employed as of the date hereof;
WHEREAS the Company has considered and will adopt a Longterm Incentive
Compensation Plan (the "Incentive Compensation Plan") which provides for
incentive compensation payments to be made to the executive officers of the
Company (including the Executive);
WHEREAS the terms hereof are consistent with the objectives of the
Incentive Compensation Plan;
WHEREAS the Executive is willing to accept the employment contemplated
herein under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions hereof, the Company
hereby employs the Executive and Executive hereby accepts such employment as the
Executive Vice President/Chief Financial Officer of the Company having such
duties and responsibilities as are set forth in Section 3 below.
2. Definitions. For purposes of this Agreement, the following terms shall
have the meanings specified below.
"Change in Control" shall mean the occurrence during the Term of any of the
following events:
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(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or
more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining whether a
Change in Control has occurred, Voting Securities which are acquired in
a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (i) an employee
benefit plan (or a trust forming a part thereof) maintained by (x) the
Company or (y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Subsidiary"), (ii) the
Company or any Subsidiary, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined); or
(b) The individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; provided, however, that if
the election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the 1934 Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest") including
by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization
involving the Company, unless
i) the stockholders of the Company,
immediately before such merger,
consolidation or reorganization,
own, directly or indirectly,
immediately following such merger,
consolidation or
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reorganization, at least two-thirds
of the combined voting power of the
outstanding voting securities of the
corporation resulting from such
merger or consolidation or
reorganization (the "Surviving
Corporation") in substantially the
same proportion as their ownership
of the Voting Securities immediately
before such merger, consolidation or
reorganization, and
ii) the individuals who were members of
the Incumbent Board immediately
prior to the execution of the
agreement providing for such merger,
consolidation or reorganization
constitute at least two-thirds of
the members of the board of
directors of the Surviving
Corporation.
(A transaction described in clauses (i) and
(ii) shall herein by referred to as a
"NonControl Transaction").
(2) A complete liquidation or dissolution of the
Company; or
(3) An agreement for the sale or other
disposition of all or substantially all of
the assets of the Company to any Person
(other than a transfer to a Subsidiary).
(d) Notwithstanding anything contained in this Agreement to
the contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that such
termination (1) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change in
Control and who effectuates a Change in Control (a "Third Party") or
(2) otherwise occurred in connection with, or in anticipation of, a
Change in Control which actually occurs, then for all purposes or this
Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the date of such
termination of the Executive's employment.
"Cause" shall mean (a) any act that (i) constitutes, on the part of the
Executive, fraud, dishonesty, gross malfeasance of duty, or conduct grossly
inappropriate to the Executive's office, and (ii) is demonstrably likely to lead
to material injury to the Company or resulted or was intended to result in
direct or indirect gain to or personal enrichment of the Executive; or
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(b) the conviction (from which no appeal may be
or is timely taken) of the Executive of a felony; or
(c) the suspension or removal of the Executive by federal or
state banking regulatory authorities acting under lawful authority
pursuant to provisions of federal or state law or regulation which may
be in effect from time to time;
provided, however, that in the case of clause (a) above, such conduct shall not
constitute Cause:
(x) unless (i) there shall have been delivered to the
Executive a written notice setting forth with specificity the reasons
that the Board believes the Executive's conduct constitutes the
criteria set forth in clause (a), (ii) the Executive shall have been
provided the opportunity to be heard in person by the Board (with the
assistance of the Executive's counsel if the Executive so desires), and
(iii) after such hearing, the termination is evidenced by a resolution
adopted in good faith by two-thirds of the members of the Board (other
than the Executive); or
(y) if such conduct (i) was believed by the Executive in good
faith to have been in or not opposed to the interests of the Company,
and (ii) was not intended to and did not result in the direct or
indirect gain to or personal enrichment of the Executive.
Additionally, after a Change in Control, the Company may not terminate
Executive for "Cause" as a result of any event about which the Company, any
member of a prior or existing Board of Directors, or any executive senior to the
Executive has known for more than twelve (12) months.
"Confidential Information" shall mean all business and other information
relating to the business of the Company, including without limitation, technical
or nontechnical data, programs, methods, techniques, processes, financial data,
financial plans, product plans, and lists of actual or potential customers,
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other Persons,
and (ii) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy or confidentiality. Such information and compilations of
information shall be contractually subject to protection under this Agreement
whether or not such information constitutes a trade secret and is separately
protectable at law or in equity as a trade secret. Confidential Information does
not include confidential business information which does not constitute a
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trade secret under applicable law two years after any expiration or termination
of this Agreement.
"Disability" or "Disabled" shall mean the Executive's inability as a
result of physical or mental incapacity to substantially perform his duties for
the Company on a full-time basis for a period of six (6) months as determined by
an independent physician selected with the approval of both the Executive and
the Company.
"Involuntary Termination" shall mean the termination of Executive's
employment by the Executive following a Change in Control which, in the sole
judgment of the Executive, is due to (i) a change of the Executive's
responsibilities, position (including status as Executive Vice President/Chief
Financial Officer of the Company, its successor or ultimate parent entity),
office, title, reporting relationships or working conditions, authority or
duties (including changes resulting from the assignment to the Executive of any
duties inconsistent with his positions, duties or responsibilities as in effect
immediately prior to the Change in Control); or (ii) a change in the terms or
status (including the rolling three year termination date) of this Agreement; or
(iii) a reduction in the Executive's compensation or benefits; or (iv) a forced
relocation of the Executive outside the Greenville metropolitan area; or (v) a
significant increase in the Executive's travel requirements; or (vi) any
attempted termination for Cause that does not comply with the substantive and
procedural provisions set forth in the definition of Cause; or (vii) the
Company's insolvency; or (viii) the Company's breach of this Agreement. An
"Involuntary Termination" shall be considered to have occurred only after
Executive gives the Company written notice of such termination setting forth the
specific grounds constituting the termination and ten (10) days to cure such
termination and the Company fails to cure such termination.
"Person" shall mean any individual, corporation, bank, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
"Voluntary Termination" shall mean the termination by Executive of
Executive's employment following a Change in Control which is not the result of
any of clauses (i) through (viii) set forth in the definition of Involuntary
Termination above.
3. Duties. During the Term hereof, the Executive shall have such duties and
authority as are typical of an executive vice president and chief financial
officer of a company such as the Company, including, without limitation, those
specified in the Company's Bylaws. Executive agrees that during the Term hereof,
he will devote his full time, attention and energies to the diligent performance
of his duties. Executive shall not, without the prior written
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consent of the Company, at any time during the Term hereof (i) accept employment
with, or render services of a business, professional or commercial nature to,
any Person other than the Company, (ii) engage in any venture or activity which
the Company may in good faith consider to be competitive with or adverse to the
business of the Company or of any affiliate of the Company, whether alone, as a
partner, or as an officer, director, employee or shareholder or otherwise,
except that the ownership of not more than 5% of the stock or other equity
interest of any publicly traded corporation or other entity shall not be deemed
a violation of this Section, or (iii) engage in any venture or activity which
the Board of Directors of the Company may in good faith consider to interfere
with Executive's performance of his duties hereunder.
4. Term. Unless earlier terminated as provided herein, the Executive's
employment hereunder shall be for a rolling term of three years (the "Term")
commencing on the date hereof, with compensation to be effective as of January
1, 1996. This Agreement shall be deemed to extend each day for an additional day
automatically and without any action on behalf of either party hereto; provided,
however, that either party may, by notice to the other, cause this Agreement to
cease to extend automatically and, upon such notice, the "Term" of this
Agreement shall be the three years following the date of such notice, and this
Agreement shall terminate upon the expiration of such Term. If no such notice is
given and this Agreement is terminated pursuant to Section 5 hereof, for the
purposes of calculating any amounts payable to the Executive as a result of such
termination, the remaining Term of this Agreement shall be deemed to be three
years from the date of such termination.
5. Termination. This Agreement may be terminated as
follows:
5.1 The Company. The Company shall have the right to terminate
Executive's employment hereunder at any time during the Term hereof (i) for
Cause, (ii) if the Executive becomes Disabled, or (iii) upon the Executive's
death.
5.1.1 If the Company terminates Executive's
employment under this Agreement pursuant to clauses (i) through (iii) of Section
5.1, the Company's obligations hereunder shall cease as of the date of
termination; provided, however, if Executive is terminated for Cause after a
Change in Control, then such termination shall be treated as a Voluntary
Termination as contemplated in Section 5.2 below.
5.1.2 If the Company terminates Executive other
than pursuant to clauses (i) through (iii) of Section 5.1 and there has been a
Change in Control, Executive shall be entitled to receive immediately as
severance upon such termination, the
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<PAGE>
compensation and benefits provided in Section 6 hereof that would otherwise be
payable over the three years subsequent to such termination. For purposes of
determining compensation which is not fixed (such as a bonus), the annual amount
of such unfixed compensation shall be deemed to be the equal to the average of
such compensation over the three year period immediately prior to the
termination.
5.1.3 If the Company terminates Executive other
than pursuant to clauses (i) through (iii) of Section 5.1 and in the absence of
a Change in Control, Executive shall be entitled to receive immediately as
severance upon such termination, the compensation and benefits provided in
Section 6 hereof for the remaining Term of this Agreement.
5.1.4 In the event of such termination other than
pursuant to clauses (i) through (iii) of Section 5.1, (A) all rights of
Executive pursuant to awards of share grants or options granted by the Company
shall be deemed to have vested and shall be released from all conditions and
restrictions, except for restrictions on transfer pursuant to the Securities Act
of 1933, as amended, and (B) the Executive shall be deemed to be credited with
service with the Company for such remaining Term for the purposes of the
Company's benefit plans, including, without limitation, any restricted stock
agreements now or hereafter entered into with Executive.
5.2 By Executive. Executive shall have the right to terminate
his employment hereunder if (i) the Company materially breaches this Agreement
and such breach is not cured within 30 days after written notice of such breach
is given by Executive to the Company; (ii) there is a Voluntary Termination; or
(iii) there is an Involuntary Termination.
5.2.1 If Executive terminates his employment
other than pursuant to clauses (i) through (iii) of Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of such termination
and Executive shall be subject to the noncompetition provisions set forth in
Section 10 hereof.
5.2.2 If Executive terminates his employment
hereunder pursuant to any of clauses (i) or (iii) of Section 5.2, Executive
shall be entitled to receive immediately as severance the compensation and
benefits provided in Section 6 hereof that would otherwise be payable over the
three years subsequent to such termination. For purposes of determining
compensation which is not fixed (such as a bonus), the annual amount of such
unfixed compensation shall be deemed to be the equal to the average of such
compensation over the three year period immediately prior to the termination.
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<PAGE>
5.2.3 If Executive terminates his employment pursuant
to clause (ii) of Section 5.2, Executive shall be entitled to receive
immediately as severance the compensation and benefits provided in Sections 6
hereof for one year following the date of his Voluntary Termination. For
purposes of determining compensation which is not fixed (such as a bonus), the
annual amount of such unfixed compensation shall be deemed to be the equal to
the average of such compensation over the three year period immediately prior to
the termination.
5.2.4 In addition, in the event of such termination
pursuant to any of clauses (i) through (iii) of this Section 5.2, (A) all rights
of Executive pursuant to awards of share grants or options granted by the
Company shall be deemed to have vested and shall be released from all conditions
and restrictions, except for restrictions on transfer pursuant to the Securities
Act of 1933, as amended, and (B) the Executive shall be deemed to be credited
with service with the Company for such remaining Term for the purposes of the
Company's benefit plans.
5.3 Limitation on Availability of Severance Benefits. All
severance benefits to Executive conditioned on a Change of Control shall have
been obtained by Executive within three (3) years following a Change of Control
or be null, void, and deemed to have been waived by Executive.
6. Compensation. In consideration of Executive's services and covenants
hereunder, Company shall pay to Executive the compensation and benefits
described below (which compensation shall be paid in accordance with the normal
compensation practices of the Company and shall be subject to such deductions
and withholdings as are required by law or policies of the Company in effect
from time to time, provided that his salary pursuant to Section 6.1 shall be
payable not less frequently than monthly):
6.1 Annual Salary. During the Term hereof, the Company shall
pay to Executive a salary at the rate of $150,000 per annum. Executive's salary
will be reviewed by the Board of Directors of the Company at the beginning of
each of its fiscal years and, in the sole discretion of the Board of Directors,
may be increased for such year.
6.2 Annual Incentive Bonus. During the Term hereof, the Board
of Directors may pay to Executive an annual incentive cash bonus in accordance
with the terms of the Short Term Incentive Compensation Plan.
6.3 Stock Options and Restricted Stock. During the Term
hereof, the Board of Directors shall grant Executive options to purchase Company
Common Stock and restricted stock in accordance with the terms of the Company's
Long Term Incentive
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Compensation Plan. The Company agrees to use its best efforts to cause the
Company's Long Term Incentive Compensation Plan to be presented to the
shareholders of the Company for approval at the next annual meeting of the
shareholders for the purpose of meeting any NASD shareholder approval
requirements and qualifying such Options under Section 16 of the Securities
Exchange Act of 1934, as amended ("Section 16"). In the event that such
shareholder approval is not secured for Section 16 purposes, the options
referenced herein shall remain the legal and valid obligation of the Corporation
enforceable in accordance with their terms. In the event that shareholder
approval is not secured and the NASD does not confirm that an exemption is
available with respect to the grant of the options and restricted stock, stock
appreciation or similar rights with terms and conditions substantially
equivalent to the options and restricted stock shall be granted to Executive.
6.4 Other Benefits. Executive shall be entitled to share in
any other employee benefits generally provided by the Company to its most highly
ranking executives for so long as the Company provides such benefits. The
Company also agrees to provide Executive with a Company-paid automobile,
reasonable club dues for one country club and two business club(s), personal tax
advisory services, and a $1,000,000 life insurance policy. Executive shall also
be entitled to participate in all other benefits accorded general Company
employees.
6.5 Executive's Right to Benefits Absolute. The right of the
Executive to receive the benefits set forth in this Agreement shall be absolute
and not subject to any right of set- off or counterclaim the Company may have
against Executive.
7. Accelerated Vesting of Executive's Stock Options and Restricted
Stock. Anything set forth herein to the contrary notwithstanding, Executive's
stock options and restricted stock shall vest immediately upon the occurrence of
a Change in Control or upon the triggering of the provisions of the Company's
Shareholder Rights Agreement, even if Executive remains employed with the
Company after a Change in Control. Additionally, to the extent that this
Agreement is inconsistent with Company's existing Restricted Stock Plan (the
"RSP"), the terms of the RSP shall control. Moreover, anything set forth herein
to the contrary notwithstanding, Executive shall have a minimum of one (1) year
from the date of vesting to exercise such stock option and restricted stock
rights.
8. Excess Parachute Payments. It is the intention of the parties hereto
that the severance payments and other compensation provided for herein are
reasonable compensation for Executive's services to the Company and shall not
constitute "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and any regulations
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thereunder. In the event that the Company's independent accountants acting as
auditors for the Company on the date of a Change of Control determine that the
payments provided for herein constitute "excess parachute payments," then the
compensation payable hereunder shall be increased, on a tax gross-up basis, so
as to reimburse the Executive for the tax payable by the Executive, pursuant to
Section 4999 of the Internal Revenue Code, on such "excess parachute payments,"
taking into account all taxes payable by Executive with respect to such tax
gross-up payments hereunder, so that Executive shall be, after payment of all
taxes, in the same financial position as if no taxes under Section 4999 had been
imposed upon him.
9. Confidentiality. Executive acknowledges that, prior to and during
the term of this Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by Executive on behalf of
a competitor of the Company to the Company's substantial detriment. In view of
the foregoing, Executive acknowledges and agrees that the restrictive covenants
contained in this Agreement are reasonably necessary to protect the Company's
legitimate business interests and goodwill. Executive agrees that he shall
protect the Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties performed in
accordance with this Agreement, any Confidential Information; provided, however,
that Executive may make disclosures required by a valid order or subpoena issued
by a court or administrative agency of competent jurisdiction, in which event
Executive will promptly notify the Company of such order or subpoena to provide
the Company an opportunity to protect its interests. Upon the termination or
expiration of his employment hereunder, the Executive agrees to deliver promptly
to the Company all Company files, customer lists, management reports, memoranda,
research, Company forms, financial data and reports and other documents supplied
to or created by him in connection with his employment hereunder (including all
copies of the foregoing) in his possession or control and all of the Company's
equipment and other materials in his possession or control.
10. Noncompetition. In the event that Executive's employment with the
Company is terminated before a Change in Control voluntarily by the Executive or
by the Board of Directors pursuant to clause (i) of Section 5.1, then Executive
shall not, for a period of one (1) year following such termination of
employment:
(i) become employed by any insured depository institution
that has customers or does business as follows:
(a) has an office situated in or an agent or agents
regularly working in any city in which Company has
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an office or in which an agent or agents of
Company regularly work, or
(b) has a significant number of offices situated in or a
significant number of agents regularly working in any
city in which Company has a significant number of
offices or in which a significant number of agents of
Company regularly work, or
(c) has customers located in any county of South
Carolina where the Company has a significant
number of customers, or
(d) shares a significant number of customers with
Company.
(ii) interfere or attempt to interfere with any business
relationship of the Company, including, without limitation,
employee and customer relationships, whether by lawful
competition or otherwise; or
(iii) engage, directly or indirectly, in any business or
activity which requires Executive, or any person or
party employed by him or whom he represents, to provide
Confidential Information or other data obtained by
Executive as a result of his employment with Company to
any other person or party who is then engaged in pro
viding similar services of the Company for use in
competing with the Company; or
(iv) solicit from any customer of the Company any business
that such customer has customarily done or contemplates
doing with the Company; or
(v) solicit any business from any customer of the Company
with whom the Executive had contact while employed by
the Company; or
(vi) otherwise compete against the Company, directly or indirectly,
either as principal, agent, employee, owner (if the percentage
of ownership exceeds 10% of the entity).
The parties hereto intend the geographic areas and all other
restrictions set forth herein to be completely severable and independent; if any
of the restrictions set forth above are determined to be unenforceable in any of
the geographic areas set forth above, the parties intend that the restrictions
set forth above shall continue to apply to the remaining geographic areas set
forth above.
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In the event that Executive's employment is terminated for any reason
following a Change in Control (whether by the Company or Executive), it is
expressly acknowledged that there shall be no limitation on any activity of
Executive, including direct competition with the Company or its successor, and
Company shall not be entitled to injunctive relief with respect to any such
activities of Executive.
11. Trust. The Company shall establish an irrevocable trust to fund the
obligations hereunder (which may be a "rabbi trust" if so requested by
Executive), which trust (i) shall have as trustee an individual acceptable to
Executive, (ii) shall be funded upon the earlier of a Change in Control or the
approval of any regulatory application filed by a potential acquiror of the
Company seeking to acquire control of the Company, and (iii) shall contain such
other terms and conditions as are reasonably necessary in Executive's
determination to ensure the Company's compliance with its obligations hereunder.
12. Assignment. The parties acknowledge that this Agreement has been
entered into due to, among other things, the special skills of Executive, and
agree that this Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of Company.
13. Notices. All notices, requests, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or seven days after mailing if mailed, first class,
certified mail postage prepaid:
To the Company: Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Attn: Chairman of the Board
To Executive: William S. Hummers, III
12 Windy Court
Greenville, South Carolina 29615
Any party may change the address to which notices, requests, demands, and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
14. Provisions Severable. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
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15. Remedies. The Executive acknowledges that if he breaches or
threatens to breach his covenants and agreements in this Agreement, such actions
may cause irreparable harm and damage to the Company which could not be
compensated by monetary damages alone. Accordingly, if Executive breaches or
threatens to breach this Agreement, the Company shall be entitled to injunctive
relief, in addition to any other rights or remedies of the Company. In the event
that Executive is reasonably required to engage legal counsel to enforce his
rights hereunder against the Company, Executive shall be entitled to receive
from the Company his reasonable attorneys' fees and costs; provided that
Executive shall not be entitled to receive those fees and costs related to
matters, if any, which were the subject of litigation and with respect to which
a judgment is rendered against Executive.
16. Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
17. Amendments and Modifications. This Agreement may be amended or
modified only by a writing signed by other parties hereto.
18. Governing Law. The validity and effect of this agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of South Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WITNESSES: EXECUTIVE
/s/ /s/ William S. Hummers III
William S. Hummers III
/s/
CAROLINA FIRST CORPORATION
/s/
/s/ William R. Timmons, Jr.
/s/ By: William R. Timmons, Jr.
Chairman of the Board
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NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT
THIS NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT (this "Agreement")
is made and entered into as of this 21st day of February, 1996, by and between
James W. Terry, Jr., an individual (the "Executive"), Carolina First
Corporation, a South Carolina corporation and financial institution holding
company headquartered in Greenville, South Carolina, and Carolina First Bank, a
South Carolina banking corporation and wholly-owned subsidiary of the Company.
Carolina First Corporation and Carolina First Bank are hereinafter referred to
as the "Company", except where the context otherwise requires, in which case
"Company" shall refer only to Carolina First Corporation.
W I T N E S S E T H
WHEREAS the Board of Directors of the Company (the "Board") believes that
the Executive has been instrumental in the past success of the Company;
WHEREAS the Company desires to continue to employ the Executive as
President of Carolina First Bank and in such other capacities as the Executive
is currently employed as of the date hereof;
WHEREAS the Company has considered and will adopt a Longterm Incentive
Compensation Plan (the "Incentive Compensation Plan") which provides for
incentive compensation payments to be made to the executive officers of the
Company (including the Executive);
WHEREAS the terms hereof are consistent with the objectives of the
Incentive Compensation Plan;
WHEREAS the Executive is willing to accept the employment contemplated
herein under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions hereof, the Company
hereby employs the Executive and Executive hereby accepts such employment as
President of Carolina First Bank having such duties and responsibilities as are
set forth in Section 3 below.
2. Definitions. For purposes of this Agreement, the following terms
shall have the meanings specified below.
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"Change in Control" shall mean the occurrence during the Term of any of
the following events:
(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or
more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining whether a
Change in Control has occurred, Voting Securities which are acquired in
a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (i) an employee
benefit plan (or a trust forming a part thereof) maintained by (x) the
Company or (y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Subsidiary"), (ii) the
Company or any Subsidiary, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined); or
(b) The individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; provided, however, that if
the election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the 1934 Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest") including
by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization
involving the Company, unless
i) the stockholders of the Company,
immediately before such merger,
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consolidation or reorganization,
own, directly or indirectly,
immediately following such merger,
consolidation or reorganization, at
least two-thirds of the combined
voting power of the outstanding
voting securities of the corporation
resulting from such merger or
consolidation or reorganization (the
"Surviving Corporation") in
substantially the same proportion as
their ownership of the Voting
Securities immediately before such
merger, consolidation or
reorganization, and
ii) the individuals who were members of
the Incumbent Board immediately
prior to the execution of the
agreement providing for such merger,
consolidation or reorganization
constitute at least two-thirds of
the members of the board of
directors of the Surviving
Corporation.
(A transaction described in clauses (i) and
(ii) shall herein by referred to as a
"NonControl Transaction").
(2) A complete liquidation or dissolution of the
Company; or
(3) An agreement for the sale or other
disposition of all or substantially all of
the assets of the Company to any Person
(other than a transfer to a Subsidiary).
(d) Notwithstanding anything contained in this Agreement to
the contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that such
termination (1) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change in
Control and who effectuates a Change in Control (a "Third Party") or
(2) otherwise occurred in connection with, or in anticipation of, a
Change in Control which actually occurs, then for all purposes or this
Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the date of such
termination of the Executive's employment.
"Cause" shall mean (a) any act that (i) constitutes, on the part of the
Executive, fraud, dishonesty, gross malfeasance of duty, or conduct grossly
inappropriate to the Executive's office, and (ii) is demonstrably likely to lead
to material injury to the
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Company or resulted or was intended to result in direct or indirect gain to or
personal enrichment of the Executive; or
(b) the conviction (from which no appeal may be
or is timely taken) of the Executive of a felony; or
(c) the suspension or removal of the Executive by federal or
state banking regulatory authorities acting under lawful authority
pursuant to provisions of federal or state law or regulation which may
be in effect from time to time;
provided, however, that in the case of clause (a) above, such conduct shall not
constitute Cause:
(x) unless (i) there shall have been delivered to the
Executive a written notice setting forth with specificity the reasons
that the Board believes the Executive's conduct constitutes the
criteria set forth in clause (a), (ii) the Executive shall have been
provided the opportunity to be heard in person by the Board (with the
assistance of the Executive's counsel if the Executive so desires), and
(iii) after such hearing, the termination is evidenced by a resolution
adopted in good faith by two-thirds of the members of the Board (other
than the Executive); or
(y) if such conduct (i) was believed by the Executive in good
faith to have been in or not opposed to the interests of the Company,
and (ii) was not intended to and did not result in the direct or
indirect gain to or personal enrichment of the Executive.
Additionally, after a Change in Control, the Company may not terminate
Executive for "Cause" as a result of any event about which the Company, any
member of a prior or existing Board of Directors, or any executive senior to the
Executive has known for more than twelve (12) months.
"Confidential Information" shall mean all business and other information
relating to the business of the Company, including without limitation, technical
or nontechnical data, programs, methods, techniques, processes, financial data,
financial plans, product plans, and lists of actual or potential customers,
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other Persons,
and (ii) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy or confidentiality. Such information and compilations of
information shall be contractually subject to protection under this Agreement
whether or not such information constitutes a
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trade secret and is separately protectable at law or in equity as a trade
secret. Confidential Information does not include confidential business
information which does not constitute a trade secret under applicable law two
years after any expiration or termination of this Agreement.
"Disability" or "Disabled" shall mean the Executive's inability as a
result of physical or mental incapacity to substantially perform his duties for
the Company on a full-time basis for a period of six (6) months as determined by
an independent physician selected with the approval of both the Executive and
the Company.
"Involuntary Termination" shall mean the termination of Executive's
employment by the Executive following a Change in Control which, in the sole
judgment of the Executive, is due to (i) a change of the Executive's
responsibilities, position (including status as President of Carolina First
Bank, its successor or ultimate parent entity), office, title, reporting
relationships or working conditions, authority or duties (including changes
resulting from the assignment to the Executive of any duties inconsistent with
his positions, duties or responsibilities as in effect immediately prior to the
Change in Control); or (ii) a change in the terms or status (including the
rolling three year termination date) of this Agreement; or (iii) a reduction in
the Executive's compensation or benefits; or (iv) a forced relocation of the
Executive outside the Greenville metropolitan area; or (v) a significant
increase in the Executive's travel requirements; or (vi) any attempted
termination for Cause that does not comply with the substantive and procedural
provisions set forth in the definition of Cause; or (vii) the Company's
insolvency; or (viii) the Company's breach of this Agreement. An "Involuntary
Termination" shall be considered to have occurred only after Executive gives the
Company written notice of such termination setting forth the specific grounds
constituting the termination and ten (10) days to cure such termination and the
Company fails to cure such termination.
"Person" shall mean any individual, corporation, bank, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
"Voluntary Termination" shall mean the termination by Executive of
Executive's employment following a Change in Control which is not the result of
any of clauses (i) through (viii) set forth in the definition of Involuntary
Termination above.
3. Duties. During the Term hereof, the Executive shall have such duties
and authority as are typical of a president of a bank such as Carolina First
Bank, including, without limitation, those specified in Carolina First Bank's
Bylaws. Executive
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agrees that during the Term hereof, he will devote his full time, attention and
energies to the diligent performance of his duties. Executive shall not, without
the prior written consent of the Company, at any time during the Term hereof (i)
accept employment with, or render services of a business, professional or
commercial nature to, any Person other than the Company, (ii) engage in any
venture or activity which the Company may in good faith consider to be
competitive with or adverse to the business of the Company or of any affiliate
of the Company, whether alone, as a partner, or as an officer, director,
employee or shareholder or otherwise, except that the ownership of not more than
5% of the stock or other equity interest of any publicly traded corporation or
other entity shall not be deemed a violation of this Section, or (iii) engage in
any venture or activity which the Board of Directors of the Company may in good
faith consider to interfere with Executive's performance of his duties
hereunder.
4. Term. Unless earlier terminated as provided herein, the Executive's
employment hereunder shall be for a rolling term of three years (the "Term")
commencing on the date hereof, with compensation to be effective as of January
1, 1996. This Agreement shall be deemed to extend each day for an additional day
automatically and without any action on behalf of either party hereto; provided,
however, that either party may, by notice to the other, cause this Agreement to
cease to extend automatically and, upon such notice, the "Term" of this
Agreement shall be the three years following the date of such notice, and this
Agreement shall terminate upon the expiration of such Term. If no such notice is
given and this Agreement is terminated pursuant to Section 5 hereof, for the
purposes of calculating any amounts payable to the Executive as a result of such
termination, the remaining Term of this Agreement shall be deemed to be three
years from the date of such termination.
5. Termination. This Agreement may be terminated as follows:
5.1 The Company. The Company shall have the right to terminate
Executive's employment hereunder at any time during the Term hereof (i) for
Cause, (ii) if the Executive becomes Disabled, or (iii) upon the Executive's
death.
5.1.1 If the Company terminates Executive's
employment under this Agreement pursuant to clauses (i) through (iii) of Section
5.1, the Company's obligations hereunder shall cease as of the date of
termination; provided, however, if Executive is terminated for Cause after a
Change in Control, then such termination shall be treated as a Voluntary
Termination as contemplated in Section 5.2 below.
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5.1.2 If the Company terminates Executive other
than pursuant to clauses (i) through (iii) of Section 5.1 and there has been a
Change in Control, Executive shall be entitled to receive immediately as
severance upon such termination, the compensation and benefits provided in
Section 6 hereof that would otherwise be payable over the three years subsequent
to such termination. For purposes of determining compensation which is not fixed
(such as a bonus), the annual amount of such unfixed compensation shall be
deemed to be the equal to the average of such compensation over the three year
period immediately prior to the termination.
5.1.3 If the Company terminates Executive other
than pursuant to clauses (i) through (iii) of Section 5.1 and in the absence of
a Change in Control, Executive shall be entitled to receive immediately as
severance upon such termination, the compensation and benefits provided in
Section 6 hereof for the remaining Term of this Agreement.
5.1.4 In the event of such termination other than
pursuant to clauses (i) through (iii) of Section 5.1, (A) all rights of
Executive pursuant to awards of share grants or options granted by the Company
shall be deemed to have vested and shall be released from all conditions and
restrictions, except for restrictions on transfer pursuant to the Securities Act
of 1933, as amended, and (B) the Executive shall be deemed to be credited with
service with the Company for such remaining Term for the purposes of the
Company's benefit plans, including, without limitation, any restricted stock
agreements now or hereafter entered into with Executive.
5.2 By Executive. Executive shall have the right to terminate
his employment hereunder if (i) the Company materially breaches this Agreement
and such breach is not cured within 30 days after written notice of such breach
is given by Executive to the Company; (ii) there is a Voluntary Termination; or
(iii) there is an Involuntary Termination.
5.2.1 If Executive terminates his employment
other than pursuant to clauses (i) through (iii) of Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of such termination
and Executive shall be subject to the noncompetition provisions set forth in
Section 10 hereof.
5.2.2 If Executive terminates his employment
hereunder pursuant to any of clauses (i) or (iii) of Section 5.2, Executive
shall be entitled to receive immediately as severance the compensation and
benefits provided in Section 6 hereof that would otherwise be payable over the
three years subsequent to such termination. For purposes of determining
compensation which is not fixed (such as a bonus), the annual amount of such
unfixed compensation shall be deemed to be the equal to the average of
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such compensation over the three year period immediately prior to the
termination.
5.2.3 If Executive terminates his employment
pursuant to clause (ii) of Section 5.2, Executive shall be entitled to receive
immediately as severance the compensation and benefits provided in Sections 6
hereof for one year following the date of his Voluntary Termination. For
purposes of determining compensation which is not fixed (such as a bonus), the
annual amount of such unfixed compensation shall be deemed to be the equal to
the average of such compensation over the three year period immediately prior to
the termination.
5.2.4 In addition, in the event of such
termination pursuant to any of clauses (i) through (iii) of this Section 5.2,
(A) all rights of Executive pursuant to awards of share grants or options
granted by the Company shall be deemed to have vested and shall be released from
all conditions and restrictions, except for restrictions on transfer pursuant to
the Securities Act of 1933, as amended, and (B) the Executive shall be deemed to
be credited with service with the Company for such remaining Term for the
purposes of the Company's benefit plans.
5.3 Limitation on Availability of Severance Benefits. All
severance benefits to Executive conditioned on a Change of Control shall have
been obtained by Executive within three (3) years following a Change of Control
or be null, void, and deemed to have been waived by Executive.
6. Compensation. In consideration of Executive's services and covenants
hereunder, Company shall pay to Executive the compensation and benefits
described below (which compensation shall be paid in accordance with the normal
compensation practices of the Company and shall be subject to such deductions
and withholdings as are required by law or policies of the Company in effect
from time to time, provided that his salary pursuant to Section 6.1 shall be
payable not less frequently than monthly):
6.1 Annual Salary. During the Term hereof, the Company shall
pay to Executive a salary at the rate of $155,000 per annum. Executive's salary
will be reviewed by the Board of Directors of the Company at the beginning of
each of its fiscal years and, in the sole discretion of the Board of Directors,
may be increased for such year.
6.2 Annual Incentive Bonus. During the Term hereof, the Board
of Directors may pay to Executive an annual incentive cash bonus in accordance
with the terms of the Short Term Incentive Compensation Plan.
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6.3 Stock Options and Restricted Stock. During the Term
hereof, the Board of Directors shall grant Executive options to purchase Company
Common Stock and restricted stock in accordance with the terms of the Company's
Long Term Incentive Compensation Plan. The Company agrees to use its best
efforts to cause the Company's Long Term Incentive Compensation Plan to be
presented to the shareholders of the Company for approval at the next annual
meeting of the shareholders for the purpose of meeting any NASD shareholder
approval requirements and qualifying such Options under Section 16 of the
Securities Exchange Act of 1934, as amended ("Section 16"). In the event that
such shareholder approval is not secured for Section 16 purposes, the options
referenced herein shall remain the legal and valid obligation of the Corporation
enforceable in accordance with their terms. In the event that shareholder
approval is not secured and the NASD does not confirm that an exemption is
available with respect to the grant of the options and restricted stock, stock
appreciation or similar rights with terms and conditions substantially
equivalent to the options and restricted stock shall be granted to Executive.
6.4 Other Benefits. Executive shall be entitled to share in
any other employee benefits generally provided by the Company to its most highly
ranking executives for so long as the Company provides such benefits. The
Company also agrees to provide Executive with a Company-paid automobile,
reasonable club dues for one country club and two business club(s), personal tax
advisory services, and a $1,000,000 life insurance policy. Executive shall also
be entitled to participate in all other benefits accorded general Company
employees.
6.5 Executive's Right to Benefits Absolute. The right
of the Executive to receive the benefits set forth in this
Agreement shall be absolute and not subject to any right of set-
off or counterclaim the Company may have against Executive.
7. Accelerated Vesting of Executive's Stock Options and Restricted
Stock. Anything set forth herein to the contrary notwithstanding, Executive's
stock options and restricted stock shall vest immediately upon the occurrence of
a Change in Control or upon the triggering of the provisions of the Company's
Shareholder Rights Agreement, even if Executive remains employed with the
Company after a Change in Control. Additionally, to the extent that this
Agreement is inconsistent with Company's existing Restricted Stock Plan (the
"RSP"), the terms of the RSP shall control. Moreover, anything set forth herein
to the contrary notwithstanding, Executive shall have a minimum of one (1) year
from the date of vesting to exercise such stock option and restricted stock
rights.
8. Excess Parachute Payments. It is the intention of the parties hereto
that the severance payments and other compensation
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provided for herein are reasonable compensation for Executive's services to the
Company and shall not constitute "excess parachute payments" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended, and any
regulations thereunder. In the event that the Company's independent accountants
acting as auditors for the Company on the date of a Change of Control determine
that the payments provided for herein constitute "excess parachute payments,"
then the compensation payable hereunder shall be increased, on a tax gross-up
basis, so as to reimburse the Executive for the tax payable by the Executive,
pursuant to Section 4999 of the Internal Revenue Code, on such "excess parachute
payments," taking into account all taxes payable by Executive with respect to
such tax gross-up payments hereunder, so that Executive shall be, after payment
of all taxes, in the same financial position as if no taxes under Section 4999
had been imposed upon him.
9. Confidentiality. Executive acknowledges that, prior to and during
the term of this Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by Executive on behalf of
a competitor of the Company to the Company's substantial detriment. In view of
the foregoing, Executive acknowledges and agrees that the restrictive covenants
contained in this Agreement are reasonably necessary to protect the Company's
legitimate business interests and goodwill. Executive agrees that he shall
protect the Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties performed in
accordance with this Agreement, any Confidential Information; provided, however,
that Executive may make disclosures required by a valid order or subpoena issued
by a court or administrative agency of competent jurisdiction, in which event
Executive will promptly notify the Company of such order or subpoena to provide
the Company an opportunity to protect its interests. Upon the termination or
expiration of his employment hereunder, the Executive agrees to deliver promptly
to the Company all Company files, customer lists, management reports, memoranda,
research, Company forms, financial data and reports and other documents supplied
to or created by him in connection with his employment hereunder (including all
copies of the foregoing) in his possession or control and all of the Company's
equipment and other materials in his possession or control.
10. Noncompetition. In the event that Executive's employment with the
Company is terminated before a Change in Control voluntarily by the Executive or
by the Board of Directors pursuant to clause (i) of Section 5.1, then Executive
shall not, for a period of one (1) year following such termination of
employment:
(i) become employed by any insured depository institution
that has customers or does business as follows:
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(a) has an office situated in or an agent or agents
regularly working in any city in which Company has
an office or in which an agent or agents of
Company regularly work, or
(b) has a significant number of offices situated in or a
significant number of agents regularly working in any
city in which Company has a significant number of
offices or in which a significant number of agents of
Company regularly work, or
(c) has customers located in any county of South
Carolina where the Company has a significant
number of customers, or
(d) shares a significant number of customers with
Company.
(ii) interfere or attempt to interfere with any business
relationship of the Company, including, without limitation,
employee and customer relationships, whether by lawful
competition or otherwise; or
(iii) engage, directly or indirectly, in any business or
activity which requires Executive, or any person or
party employed by him or whom he represents, to provide
Confidential Information or other data obtained by
Executive as a result of his employment with Company to
any other person or party who is then engaged in pro
viding similar services of the Company for use in
competing with the Company; or
(iv) solicit from any customer of the Company any business
that such customer has customarily done or contemplates
doing with the Company; or
(v) solicit any business from any customer of the Company
with whom the Executive had contact while employed by
the Company; or
(vi) otherwise compete against the Company, directly or indirectly,
either as principal, agent, employee, owner (if the percentage
of ownership exceeds 10% of the entity).
The parties hereto intend the geographic areas and all other
restrictions set forth herein to be completely severable and independent; if any
of the restrictions set forth above are determined to be unenforceable in any of
the geographic areas set forth above, the parties intend that the restrictions
set forth above shall continue to apply to the remaining geographic areas set
forth above.
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In the event that Executive's employment is terminated for any reason following
a Change in Control (whether by the Company or Executive), it is expressly
acknowledged that there shall be no limitation on any activity of Executive,
including direct competition with the Company or its successor, and Company
shall not be entitled to injunctive relief with respect to any such activities
of Executive.
11. Trust. The Company shall establish an irrevocable trust to fund the
obligations hereunder (which may be a "rabbi trust" if so requested by
Executive), which trust (i) shall have as trustee an individual acceptable to
Executive, (ii) shall be funded upon the earlier of a Change in Control or the
approval of any regulatory application filed by a potential acquiror of the
Company seeking to acquire control of the Company, and (iii) shall contain such
other terms and conditions as are reasonably necessary in Executive's
determination to ensure the Company's compliance with its obligations hereunder.
12. Assignment. The parties acknowledge that this Agreement has been
entered into due to, among other things, the special skills of Executive, and
agree that this Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of Company.
13. Notices. All notices, requests, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or seven days after mailing if mailed, first class,
certified mail postage prepaid:
To the Company: Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Attn: Chairman of the Board
To Executive: James W. Terry, Jr.
236 Riverside Drive
Greenville, South Carolina 29601
Any party may change the address to which notices, requests, demands, and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
14. Provisions Severable. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
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15. Remedies. The Executive acknowledges that if he breaches or
threatens to breach his covenants and agreements in this Agreement, such actions
may cause irreparable harm and damage to the Company which could not be
compensated by monetary damages alone. Accordingly, if Executive breaches or
threatens to breach this Agreement, the Company shall be entitled to injunctive
relief, in addition to any other rights or remedies of the Company. In the event
that Executive is reasonably required to engage legal counsel to enforce his
rights hereunder against the Company, Executive shall be entitled to receive
from the Company his reasonable attorneys' fees and costs; provided that
Executive shall not be entitled to receive those fees and costs related to
matters, if any, which were the subject of litigation and with respect to which
a judgment is rendered against Executive.
16. Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
17. Amendments and Modifications. This Agreement may be
amended or modified only by a writing signed by other parties
hereto.
18. Governing Law. The validity and effect of this agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of South Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WITNESSES: EXECUTIVE
/s/ /s/ James W. Terry, Jr.
/s/ James W. Terry, Jr.
CAROLINA FIRST CORPORATION
/s/ /s/ William R. Timmons, Jr.
/s/ By: William R. Timmons, Jr.
Chairman of the Board
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CAROLINA FIRST BANK
/s/ /s/ Mack I. Whittle, Jr.
/s/ By: Mack I. Whittle, Jr.
Chairman of the Board
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NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT
THIS NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT (this "Agreement")
is made and entered into as of this 21st day of February, 1996, by and between
David L. Morrow, an individual (the "Executive"), and Carolina First
Corporation, a South Carolina corporation and financial institution holding
company headquartered in Greenville, South Carolina, and Carolina First Bank, a
South Carolina banking corporation and wholly-owned subsidiary of the Company.
Carolina First Corporation and Carolina First Bank are hereinafter referred to
as the "Company", except where the context otherwise requires, in which case
"Company" shall refer only to Carolina First Corporation.
W I T N E S S E T H
WHEREAS the Board of Directors of the Company believes that the
Executive has been instrumental in the success of the Company since his
employment;
WHEREAS the Company desires to continue to employ the Executive as
Executive Vice President/Regional Executive of Carolina First Bank and in such
other capacities as the Executive is currently employed as of the date hereof;
WHEREAS the Company has considered and will adopt a Longterm Incentive
Compensation Plan (the "Incentive Compensation Plan") which provides for
incentive compensation payments to be made to the executive officers of the
Company (including the Executive);
WHEREAS the terms hereof are consistent with the objectives of the
Incentive Compensation Plan;
WHEREAS the Executive is willing to accept the employment contemplated
herein under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions hereof, the Company
hereby employs the Executive and Executive hereby accepts such employment as
Executive Vice President/Regional Executive of Carolina First Bank having such
duties and responsibilities as are set forth in Section 3 below.
2. Definitions. For purposes of this Agreement, the following terms shall
have the meanings specified below.
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"Change in Control" shall mean the occurrence during the
Term of any of the following events:
(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or
more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining whether a
Change in Control has occurred, Voting Securities which are acquired in
a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (i) an employee
benefit plan (or a trust forming a part thereof) maintained by (x) the
Company or (y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Subsidiary"), (ii) the
Company or any Subsidiary, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined); or
(b) The individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; provided, however, that if
the election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the 1934 Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest") including
by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization
involving the Company, unless
i) the stockholders of the Company,
immediately before such merger,
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consolidation or reorganization,
own, directly or indirectly,
immediately following such merger,
consolidation or reorganization, at
least two-thirds of the combined
voting power of the outstanding
voting securities of the corporation
resulting from such merger or
consolidation or reorganization (the
"Surviving Corporation") in
substantially the same proportion as
their ownership of the Voting
Securities immediately before such
merger, consolidation or
reorganization, and
ii) the individuals who were members of
the Incumbent Board immediately
prior to the execution of the
agreement providing for such merger,
consolidation or reorganization
constitute at least two-thirds of
the members of the board of
directors of the Surviving
Corporation.
(A transaction described in clauses (i) and
(ii) shall herein by referred to as a
"NonControl Transaction").
(2) A complete liquidation or dissolution of the
Company; or
(3) An agreement for the sale or other
disposition of all or substantially all of
the assets of the Company to any Person
(other than a transfer to a Subsidiary).
(d) Notwithstanding anything contained in this Agreement to
the contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that such
termination (1) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change in
Control and who effectuates a Change in Control (a "Third Party") or
(2) otherwise occurred in connection with, or in anticipation of, a
Change in Control which actually occurs, then for all purposes or this
Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the date of such
termination of the Executive's employment.
"Cause" shall mean (a) any act that (i) constitutes, on the part of the
Executive, fraud, dishonesty, gross malfeasance of duty, or conduct grossly
inappropriate to the Executive's office, and (ii) is demonstrably likely to lead
to material injury to the
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Company or resulted or was intended to result in direct or indirect gain to or
personal enrichment of the Executive; or
(b) the conviction (from which no appeal may be
or is timely taken) of the Executive of a felony; or
(c) the suspension or removal of the Executive by federal or
state banking regulatory authorities acting under lawful authority
pursuant to provisions of federal or state law or regulation which may
be in effect from time to time;
provided, however, that in the case of clause (a) above, such conduct shall not
constitute Cause:
(x) unless (i) there shall have been delivered to the
Executive a written notice setting forth with specificity the reasons
that the Board believes the Executive's conduct constitutes the
criteria set forth in clause (a), (ii) the Executive shall have been
provided the opportunity to be heard in person by the Board (with the
assistance of the Executive's counsel if the Executive so desires), and
(iii) after such hearing, the termination is evidenced by a resolution
adopted in good faith by two-thirds of the members of the Board (other
than the Executive); or
(y) if such conduct (i) was believed by the Executive in good
faith to have been in or not opposed to the interests of the Company,
and (ii) was not intended to and did not result in the direct or
indirect gain to or personal enrichment of the Executive.
Additionally, after a Change in Control, the Company may not terminate
Executive for "Cause" as a result of any event about which the Company, any
member of a prior or existing Board of Directors, or any executive senior to the
Executive has known for more than twelve (12) months.
"Confidential Information" shall mean all business and other information
relating to the business of the Company, including without limitation, technical
or nontechnical data, programs, methods, techniques, processes, financial data,
financial plans, product plans, and lists of actual or potential customers,
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other Persons,
and (ii) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy or confidentiality. Such information and compilations of
information shall be contractually subject to protection under this Agreement
whether or not such information constitutes a
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trade secret and is separately protectable at law or in equity as a trade
secret. Confidential Information does not include confidential business
information which does not constitute a trade secret under applicable law two
years after any expiration or termination of this Agreement.
"Disability" or "Disabled" shall mean the Executive's inability as a
result of physical or mental incapacity to substantially perform his duties for
the Company on a full-time basis for a period of six (6) months as determined by
an independent physician selected with the approval of both the Executive and
the Company.
"Involuntary Termination" shall mean the termination of Executive's
employment by the Executive following a Change in Control which, in the sole
judgment of the Executive, is due to (i) a change of the Executive's
responsibilities, position (including status as Executive Vice
President/Regional Executive of Carolina First Bank, its successor or ultimate
parent entity), office, title, reporting relationships or working conditions,
authority or duties (including changes resulting from the assignment to the
Executive of any duties inconsistent with his positions, duties or
responsibilities as in effect immediately prior to the Change in Control); or
(ii) a change in the terms or status (including the rolling three year
termination date) of this Agreement; or (iii) a reduction in the Executive's
compensation or benefits; or (iv) a forced relocation of the Executive outside
the Greenville metropolitan area; or (v) a significant increase in the
Executive's travel requirements; or (vi) any attempted termination for Cause
that does not comply with the substantive and procedural provisions set forth in
the definition of Cause; or (vii) the Company's insolvency; or (viii) the
Company's breach of this Agreement. An "Involuntary Termination" shall be
considered to have occurred only after Executive gives the Company written
notice of such termination setting forth the specific grounds constituting the
termination and ten (10) days to cure such termination and the Company fails to
cure such termination.
"Person" shall mean any individual, corporation, bank, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
"Voluntary Termination" shall mean the termination by Executive of
Executive's employment following a Change in Control which is not the result of
any of clauses (i) through (viii) set forth in the definition of Involuntary
Termination above.
3. Duties. During the Term hereof, the Executive shall have such duties and
authority as are typical of an executive vice president and Regional Executive
of a company such as the Company, including, without limitation, those specified
in the
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Company's Bylaws. Executive agrees that during the Term hereof, he will devote
his full time, attention and energies to the diligent performance of his duties.
Executive shall not, without the prior written consent of the Company, at any
time during the Term hereof (i) accept employment with, or render services of a
business, professional or commercial nature to, any Person other than the
Company, (ii) engage in any venture or activity which the Company may in good
faith consider to be competitive with or adverse to the business of the Company
or of any affiliate of the Company, whether alone, as a partner, or as an
officer, director, employee or shareholder or otherwise, except that the
ownership of not more than 5% of the stock or other equity interest of any
publicly traded corporation or other entity shall not be deemed a violation of
this Section, or (iii) engage in any venture or activity which the Board of
Directors of the Company may in good faith consider to interfere with
Executive's performance of his duties hereunder.
4. Term. Unless earlier terminated as provided herein, the Executive's
employment hereunder shall be for a rolling term of three years (the "Term")
commencing on the date hereof, with compensation to be effective as of January
1, 1996. This Agreement shall be deemed to extend each day for an additional day
automatically and without any action on behalf of either party hereto; provided,
however, that either party may, by notice to the other, cause this Agreement to
cease to extend automatically and, upon such notice, the "Term" of this
Agreement shall be the three years following the date of such notice, and this
Agreement shall terminate upon the expiration of such Term. If no such notice is
given and this Agreement is terminated pursuant to Section 5 hereof, for the
purposes of calculating any amounts payable to the Executive as a result of such
termination, the remaining Term of this Agreement shall be deemed to be three
years from the date of such termination.
5. Termination. This Agreement may be terminated as follows:
5.1 The Company. The Company shall have the right to terminate
Executive's employment hereunder at any time during the Term hereof (i) for
Cause, (ii) if the Executive becomes Disabled, or (iii) upon the Executive's
death.
5.1.1 If the Company terminates Executive's
employment under this Agreement pursuant to clauses (i) through (iii) of Section
5.1, the Company's obligations hereunder shall cease as of the date of
termination; provided, however, if Executive is terminated for Cause after a
Change in Control, then such termination shall be treated as a Voluntary
Termination as contemplated in Section 5.2 below.
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5.1.2 If the Company terminates Executive other
than pursuant to clauses (i) through (iii) of Section 5.1 and there has been a
Change in Control, Executive shall be entitled to receive immediately as
severance upon such termination, the compensation and benefits provided in
Section 6 hereof that would otherwise be payable over the three years subsequent
to such termination. For purposes of determining compensation which is not fixed
(such as a bonus), the annual amount of such unfixed compensation shall be
deemed to be the equal to the average of such compensation over the three year
period immediately prior to the termination.
5.1.3 If the Company terminates Executive other
than pursuant to clauses (i) through (iii) of Section 5.1 and in the absence of
a Change in Control, Executive shall be entitled to receive immediately as
severance upon such termination, the compensation and benefits provided in
Section 6 hereof for the remaining Term of this Agreement.
5.1.4 In the event of such termination other than
pursuant to clauses (i) through (iii) of Section 5.1, (A) all rights of
Executive pursuant to awards of share grants or options granted by the Company
shall be deemed to have vested and shall be released from all conditions and
restrictions, except for restrictions on transfer pursuant to the Securities Act
of 1933, as amended, and (B) the Executive shall be deemed to be credited with
service with the Company for such remaining Term for the purposes of the
Company's benefit plans, including, without limitation, any restricted stock
agreements now or hereafter entered into with Executive.
5.2 By Executive. Executive shall have the right to terminate
his employment hereunder if (i) the Company materially breaches this Agreement
and such breach is not cured within 30 days after written notice of such breach
is given by Executive to the Company; (ii) there is a Voluntary Termination; or
(iii) there is an Involuntary Termination.
5.2.1 If Executive terminates his employment
other than pursuant to clauses (i) through (iii) of Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of such termination
and Executive shall be subject to the noncompetition provisions set forth in
Section 10 hereof.
5.2.2 If Executive terminates his employment
hereunder pursuant to any of clauses (i) or (iii) of Section 5.2, Executive
shall be entitled to receive immediately as severance the compensation and
benefits provided in Section 6 hereof that would otherwise be payable over the
three years subsequent to such termination. For purposes of determining
compensation which is not fixed (such as a bonus), the annual amount of such
unfixed compensation shall be deemed to be the equal to the average of
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such compensation over the three year period immediately prior to the
termination.
5.2.3 If Executive terminates his employment
pursuant to clause (ii) of Section 5.2, Executive shall be entitled to receive
immediately as severance the compensation and benefits provided in Sections 6
hereof for one year following the date of his Voluntary Termination. For
purposes of determining compensation which is not fixed (such as a bonus), the
annual amount of such unfixed compensation shall be deemed to be the equal to
the average of such compensation over the three year period immediately prior to
the termination.
5.2.4 In addition, in the event of such
termination pursuant to any of clauses (i) through (iii) of this Section 5.2,
(A) all rights of Executive pursuant to awards of share grants or options
granted by the Company shall be deemed to have vested and shall be released from
all conditions and restrictions, except for restrictions on transfer pursuant to
the Securities Act of 1933, as amended, and (B) the Executive shall be deemed to
be credited with service with the Company for such remaining Term for the
purposes of the Company's benefit plans.
5.3 Limitation on Availability of Severance Benefits. All
severance benefits to Executive conditioned on a Change of Control shall have
been obtained by Executive within three (3) years following a Change of Control
or be null, void, and deemed to have been waived by Executive.
6. Compensation. In consideration of Executive's services and covenants
hereunder, Company shall pay to Executive the compensation and benefits
described below (which compensation shall be paid in accordance with the normal
compensation practices of the Company and shall be subject to such deductions
and withholdings as are required by law or policies of the Company in effect
from time to time, provided that his salary pursuant to Section 6.1 shall be
payable not less frequently than monthly):
6.1 Annual Salary. During the Term hereof, the Company shall
pay to Executive a salary at the rate of $124,000 per annum. Executive's salary
will be reviewed by the Board of Directors of the Company at the beginning of
each of its fiscal years and, in the sole discretion of the Board of Directors,
may be increased for such year.
6.2 Annual Incentive Bonus. During the Term hereof, the Board
of Directors may pay to Executive an annual incentive cash bonus in accordance
with the terms of the Short Term Incentive Compensation Plan.
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6.3 Stock Options and Restricted Stock. During the Term
hereof, the Board of Directors shall grant Executive options to purchase Company
Common Stock and restricted stock in accordance with the terms of the Company's
Long Term Incentive Compensation Plan. The Company agrees to use its best
efforts to cause the Company's Long Term Incentive Compensation Plan to be
presented to the shareholders of the Company for approval at the next annual
meeting of the shareholders for the purpose of meeting any NASD shareholder
approval requirements and qualifying such Options under Section 16 of the
Securities Exchange Act of 1934, as amended ("Section 16"). In the event that
such shareholder approval is not secured for Section 16 purposes, the options
referenced herein shall remain the legal and valid obligation of the Corporation
enforceable in accordance with their terms. In the event that shareholder
approval is not secured and the NASD does not confirm that an exemption is
available with respect to the grant of the options and restricted stock, stock
appreciation or similar rights with terms and conditions substantially
equivalent to the options and restricted stock shall be granted to Executive.
6.4 Other Benefits. Executive shall be entitled to share in
any other employee benefits generally provided by the Company to its most highly
ranking executives for so long as the Company provides such benefits. The
Company also agrees to provide Executive with a Company-paid automobile,
reasonable club dues for one country club and two business club(s), personal tax
advisory services, and a $1,000,000 life insurance policy. Executive shall also
be entitled to participate in all other benefits accorded general Company
employees.
6.5 Executive's Right to Benefits Absolute. The right
of the Executive to receive the benefits set forth in this
Agreement shall be absolute and not subject to any right of set-
off or counterclaim the Company may have against Executive.
7. Accelerated Vesting of Executive's Stock Options and Restricted
Stock. Anything set forth herein to the contrary notwithstanding, Executive's
stock options and restricted stock shall vest immediately upon the occurrence of
a Change in Control or upon the triggering of the provisions of the Company's
Shareholder Rights Agreement, even if Executive remains employed with the
Company after a Change in Control. Additionally, to the extent that this
Agreement is inconsistent with Company's existing Restricted Stock Plan (the
"RSP"), the terms of the RSP shall control. Moreover, anything set forth herein
to the contrary notwithstanding, Executive shall have a minimum of one (1) year
from the date of vesting to exercise such stock option and restricted stock
rights.
8. Excess Parachute Payments. It is the intention of the parties hereto
that the severance payments and other compensation
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provided for herein are reasonable compensation for Executive's services to the
Company and shall not constitute "excess parachute payments" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended, and any
regulations thereunder. In the event that the Company's independent accountants
acting as auditors for the Company on the date of a Change of Control determine
that the payments provided for herein constitute "excess parachute payments,"
then the compensation payable hereunder shall be increased, on a tax gross-up
basis, so as to reimburse the Executive for the tax payable by the Executive,
pursuant to Section 4999 of the Internal Revenue Code, on such "excess parachute
payments," taking into account all taxes payable by Executive with respect to
such tax gross-up payments hereunder, so that Executive shall be, after payment
of all taxes, in the same financial position as if no taxes under Section 4999
had been imposed upon him.
9. Confidentiality. Executive acknowledges that, prior to and during
the term of this Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by Executive on behalf of
a competitor of the Company to the Company's substantial detriment. In view of
the foregoing, Executive acknowledges and agrees that the restrictive covenants
contained in this Agreement are reasonably necessary to protect the Company's
legitimate business interests and goodwill. Executive agrees that he shall
protect the Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties performed in
accordance with this Agreement, any Confidential Information; provided, however,
that Executive may make disclosures required by a valid order or subpoena issued
by a court or administrative agency of competent jurisdiction, in which event
Executive will promptly notify the Company of such order or subpoena to provide
the Company an opportunity to protect its interests. Upon the termination or
expiration of his employment hereunder, the Executive agrees to deliver promptly
to the Company all Company files, customer lists, management reports, memoranda,
research, Company forms, financial data and reports and other documents supplied
to or created by him in connection with his employment hereunder (including all
copies of the foregoing) in his possession or control and all of the Company's
equipment and other materials in his possession or control.
10. Noncompetition. In the event that Executive's employment with the
Company is terminated before a Change in Control voluntarily by the Executive or
by the Board of Directors pursuant to clause (i) of Section 5.1, then Executive
shall not, for a period of one (1) year following such termination of
employment:
(i) become employed by any insured depository institution
that has customers or does business as follows:
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(a) has an office situated in or an agent or agents
regularly working in any city in which Company has
an office or in which an agent or agents of
Company regularly work, or
(b) has a significant number of offices situated in or a
significant number of agents regularly working in any
city in which Company has a significant number of
offices or in which a significant number of agents of
Company regularly work, or
(c) has customers located in any county of South
Carolina where the Company has a significant
number of customers, or
(d) shares a significant number of customers with
Company.
(ii) interfere or attempt to interfere with any business
relationship of the Company, including, without limitation,
employee and customer relationships, whether by lawful
competition or otherwise; or
(iii) engage, directly or indirectly, in any business or
activity which requires Executive, or any person or
party employed by him or whom he represents, to provide
Confidential Information or other data obtained by
Executive as a result of his employment with Company to
any other person or party who is then engaged in pro
viding similar services of the Company for use in
competing with the Company; or
(iv) solicit from any customer of the Company any business
that such customer has customarily done or contemplates
doing with the Company; or
(v) solicit any business from any customer of the Company
with whom the Executive had contact while employed by
the Company; or
(vi) otherwise compete against the Company, directly or indirectly,
either as principal, agent, employee, owner (if the percentage
of ownership exceeds 10% of the entity).
The parties hereto intend the geographic areas and all other
restrictions set forth herein to be completely severable and independent; if any
of the restrictions set forth above are determined to be unenforceable in any of
the geographic areas set forth above, the parties intend that the restrictions
set forth above shall continue to apply to the remaining geographic areas set
forth above.
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In the event that Executive's employment is terminated for any reason
following a Change in Control (whether by the Company or Executive), it is
expressly acknowledged that there shall be no limitation on any activity of
Executive, including direct competition with the Company or its successor, and
Company shall not be entitled to injunctive relief with respect to any such
activities of Executive.
11. Trust. The Company shall establish an irrevocable trust to fund the
obligations hereunder (which may be a "rabbi trust" if so requested by
Executive), which trust (i) shall have as trustee an individual acceptable to
Executive, (ii) shall be funded upon the earlier of a Change in Control or the
approval of any regulatory application filed by a potential acquiror of the
Company seeking to acquire control of the Company, and (iii) shall contain such
other terms and conditions as are reasonably necessary in Executive's
determination to ensure the Company's compliance with its obligations hereunder.
12. Assignment. The parties acknowledge that this Agreement has been
entered into due to, among other things, the special skills of Executive, and
agree that this Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of Company.
13. Notices. All notices, requests, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or seven days after mailing if mailed, first class,
certified mail postage prepaid:
To the Company: Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Attn: Chairman of the Board
To Executive: David L. Morrow
303 Wildwood Dunes
Myrtle Beach, SC 29572
Any party may change the address to which notices, requests, demands, and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
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14. Provisions Severable. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
15. Remedies. The Executive acknowledges that if he breaches or
threatens to breach his covenants and agreements in this Agreement, such actions
may cause irreparable harm and damage to the Company which could not be
compensated by monetary damages alone. Accordingly, if Executive breaches or
threatens to breach this Agreement, the Company shall be entitled to injunctive
relief, in addition to any other rights or remedies of the Company. In the event
that Executive is reasonably required to engage legal counsel to enforce his
rights hereunder against the Company, Executive shall be entitled to receive
from the Company his reasonable attorneys' fees and costs; provided that
Executive shall not be entitled to receive those fees and costs related to
matters, if any, which were the subject of litigation and with respect to which
a judgment is rendered against Executive.
16. Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
17. Amendments and Modifications. This Agreement may be
amended or modified only by a writing signed by other parties
hereto.
18. Governing Law. The validity and effect of this agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of South Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WITNESSES: EXECUTIVE
/s/ David L. Morrow
/s/ David L. Morrow
/s/
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CAROLINA FIRST CORPORATION
/s/ William R. Timmons, Jr.
/s/ By: William R. Timmons, Jr.
/s/ Chairman of the Board
CAROLINA FIRST BANK
/s/ /s/ Mack Whittle, Jr.
/s/ By: Mack I. Whittle, Jr.
Chairman of the Board
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THIS WARRANT AND THE SHARES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT") OR ANY
APPLICABLE STATE SECURITIES LAW. THIS WARRANT AND THE UNDERLYING SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR RESALE IN CONNECTION
WITH THE DISTRIBUTION THEREOF. NO DISPOSITION OF THE WARRANT OR THE UNDERLYING
SHARES MAY BE MADE IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAW OR (II) AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH DISPOSITION WITHOUT
REGISTRATION IS IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAW.
WARRANT
TO PURCHASE COMMON STOCK OF AFFINITY FINANCIAL GROUP, INC.
FOR GOOD AND VALUABLE CONSIDERATION RECEIVED, Carolina First
Corporation, a South Carolina corporation ("Warrant Holder" or, with its
successors and assigns, "holder"), is hereby entitled to purchase from Affinity
Financial Group, Inc., a Delaware corporation (the "Company"), at any time and
from time to time (subject to Section 2.5 hereof), at a purchase price of $.01
per share, 62,890 shares of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (as defined below), subject to adjustment
as provided in Article IV.
ARTICLE I
CERTAIN DEFINITIONS
For all purposes of this Warrant, unless the context otherwise
requires, the following terms shall have the following respective meanings:
"Act": the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations of the Commission promulgated thereunder,
all as the same shall be in effect at the time.
"Beneficially Own": the term Beneficially Own shall have the meaning
ascribed to such term in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, or any successor rule.
"Commission": the Securities and Exchange Commission, or any other
federal agency then administering the Act.
"Common Stock": the Company's authorized Common Stock, no par value per
share, as such class existed on the date of issuance of this Warrant and any
other securities as to which this Warrant becomes
exercisable pursuant to Article IV.
"Company": Affinity Financial Group, Inc., a Delaware corporation, and
any other corporation assuming or required to assume the Warrant pursuant to
Section 4.3.
"Federal Reserve Board": the Board of Governors of the Federal Reserve
System.
"Person": any individual, corporation, partnership, trust,
unincorporated organization, government, or any political subdivision,
instrumentality or agency of any government.
"Warrant Office": see Section 3.1.
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"Warrant Shares": the shares of Common Stock purchasable from time to
time or purchased by the holder of the Warrant upon the exercise thereof
pursuant to Article II.
"Warrant": this warrant and all warrants issued in substitution,
combination or subdivision therefor.
ARTICLE II
EXERCISE OF WARRANT
2.1 Method of Exercise. To exercise this Warrant in whole or in part,
the holder hereof shall deliver to the Company, at the Warrant Office designated
pursuant to Section 3.1: (a) a written notice, in substantially the form of the
subscription notice attached hereto as Exhibit A, modified as appropriate to
reflect any conditional exercise or change in the terms of exercise hereinbelow
described, of such holder's election to exercise this warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (b) this
Warrant and (c) a check payable to the order of the Company in an amount equal
to the aggregate Warrant price for the number of shares of Common Stock being
purchased. Such election may be conditional if the holder so desires, as in the
case of an election to exercise this Warrant contingent upon the occurrence of a
change of control or other event and, in such case, the holder may require such
exercise to be effected immediately before, simultaneous with, or immediately
after such event or at any other time, as requested by the holder, and the
holder may further change its instructions and withdraw or modify its election
to exercise the Warrant at any time prior to the requested date upon which such
exercise would otherwise be effected. The Company shall, as promptly as
practicable, and in any event within 14 days thereafter, execute and deliver or
cause to be executed and delivered, in accordance with said notice, a
certificate or certificates representing the aggregate number of shares of
Common Stock specified in said notice. The stock certificate or certificates so
delivered shall be in such denominations as may be specified in said notice and
shall be registered in the name of such holder or such other name or names as
shall be designated in said notice; provided, however, the Company shall have no
obligation to issue such shares in any manner which would result in a violation
of the registration requirements of the Act or any applicable Blue Sky Laws.
Such certificate or certificates shall be deemed to have been issued and such
holder or any other person so designated to be named therein shall be deemed for
all purposes to have become a holder of record of such shares as of the date the
notice and payment is received by the Company as aforesaid. If this Warrant
shall have been exercised only in part, the Company shall, at the time of
delivery of the certificate or certificates, deliver to the holder a new Warrant
evidencing the rights to purchase the remaining shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of the holder, appropriate notation may be
made on this Warrant which shall then be returned to the holder. The Company
shall pay all expenses, transfer (but not income) taxes and other charges
payable in connection with the preparation, issuance and delivery of stock
certificates and new Warrants, except that, in case stock certificates or new
Warrants shall be registered in a name or names other than the name of the
holder of this Warrant, funds sufficient to pay all transfer taxes which shall
be payable upon the issuance of stock certificates or new Warrants shall be paid
by the holder hereof promptly upon receipt of a written request of the Company
for payment.
2.2 Warrant Shares to be Fully Paid and Nonassessable. All shares of
Common Stock issued upon the exercise of this Warrant shall be duly authorized,
validly issued, fully paid and nonassessable and, if the Common Stock is then
listed on one or more national securities exchanges or quoted on any automated
quotation system, shall be duly listed or quoted thereon.
2.3 Legend on Warrant Shares. The certificates or other instruments
which evidence any shares of Common Stock issued upon exercise hereof shall,
unless no longer required in the judgment of the Company or as set forth in an
opinion of counsel reasonably acceptable to the Company, bear a legend
substantially to the following effect in conspicuous print:
These Shares were issued pursuant to that certain Warrant dated
November 8, 1995 granted to Carolina First Corporation by Affinity
Financial Group, Inc. (the "Warrant") and are subject to the
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terms thereof, including the provision that, notwithstanding anything
to the contrary therein, Warrant Holder (as defined therein) may not
transfer any shares of Common Stock to a third party if, after such
transfer, such third party transferee will beneficially own 5% or more
of the affinity financial group, inc. Common Stock. A copy of the
Warrant will be provided upon request made to the principal executive
offices of affinity financial group, inc., a Delaware corporation.
2.4 Acknowledgment of Continuing Obligation. The Company will, at the
time of any exercise of this Warrant in whole or in part, upon request of the
holder hereof, acknowledge in writing its continuing obligation to such holder
in respect of any rights to which the holder shall continue to be entitled after
exercise in accordance with this Warrant; provided, however, that the failure of
the holder to make any such request shall not affect the continuing obligation
of the Company to the holder in respect of such rights.
2.5 Limitations on Exercise. Notwithstanding anything to the contrary
herein, unless prior written approval of the Federal Reserve Board is received,
this Warrant may not be exercised in whole or in part if, after such exercise,
Warrant holder will beneficially own 5% or more of the Common Stock then
outstanding.
2.6 Limitations on Transfer of Common Stock. Notwithstanding anything
to the contrary herein, unless prior written approval of the Federal Reserve
Board is received, Warrant Holder may not transfer any shares of Common Stock to
any person (or persons in a series of transactions) if, after such transfer,
such persons will beneficially own 5% or more of the Common Stock.
ARTICLE III
WARRANT OFFICE; TRANSFER OF WARRANT
3.1 Warrant Office. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's office at 1333 main street, suite 101, Columbia, South Carolina
29201 and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock as to which written notice has previously
been given to the holder.
3.2 Transfer of Warrant. This Warrant may not be transferred, in whole
or in part, to any person unless the Warrant Holder has received the approval of
the Federal Reserve Board. If such transfer is approved, the Warrant may be
transferred to any person by presentation to the Company of the Warrant and a
written assignment, in a form reasonably acceptable to the Company, duly
executed by the holder hereof along with written instructions for such transfer;
provided, however, the holder of this Warrant, by acceptance hereof, agrees not
to transfer the Warrant or the related Warrant shares in any manner which would
result in a violation of the registration provisions of the Act or any
applicable Blue Sky Laws, and the Company shall not be required to take any
action hereunder which would result in a violation of such provisions. Upon
presentation for transfer in compliance with the terms hereof, the Company shall
promptly execute and deliver a new Warrant or Warrants identical to this Warrant
in the name or names of the transferee or transferees and in the denominations
specified in such instructions. The Company shall pay all expenses, taxes (other
than income taxes) and other charges payable in connection with the preparation,
issuance and delivery of Warrants under this Section 3.2, except that funds
sufficient to pay all transfer taxes pertaining to the transfer which shall be
payable upon the issuance of such new Warrants shall be paid by the holder
hereof promptly upon receipt of written request of the Company for payment.
ARTICLE IV
ANTI-DILUTION PROVISIONS
4.1 Number of Shares Subject to Adjustment. The number of shares of
Common Stock purchasable at any time hereunder (and/or other securities and
property which may become issuable hereunder) shall be subject to adjustment
from time to time as provided in this article iv.
3
<PAGE>
4.2 Effect of "Split-ups", "Split-downs" and Stock Dividends. In case
at any time or from time to time while the Warrant remains outstanding the
Company shall subdivide as a whole, by reclassification, by the issuance of a
stock dividend on the Common Stock payable in Common Stock, or otherwise, the
number of shares of Common Stock then outstanding into a greater number of
shares of Common Stock, with or without par value, the number of shares of
Common Stock which may be purchased hereunder shall be increased
proportionately. In case at any time or from time to time while the Warrant
remains outstanding the Company shall consolidate as a whole, by
reclassification or otherwise, the number of shares of Common Stock then
outstanding into a lesser number of shares of Common Stock, with or without par
value, the number of shares of Common Stock which may be purchased hereunder
shall be reduced proportionately.
4.3 Effect of Merger or Consolidation. In case the Company shall, while
this Warrant remains outstanding, enter into any consolidation with or merge
into any other corporation wherein the Company is not the surviving corporation,
or wherein securities of a corporation other than the Company are distributable
to holders of Common Stock, or sell or convey 50% or more of its assets, and in
connection with such consolidation, merger, sale or conveyance, shares of stock
or other securities shall be issuable or deliverable in exchange for the Common
Stock, then, as a condition of such consolidation, merger, sale or conveyance,
lawful and adequate provision shall be made whereby the holder of this Warrant
shall thereafter be entitled to purchase pursuant to this Warrant (in lieu of
the number of shares of Common Stock which such holder would have been entitled
to purchase immediately prior to such consolidation, merger, sale or conveyance)
the shares of stock or other securities to which such number of shares of Common
Stock would have been entitled at the time of such consolidation, merger, sale
or conveyance, at an aggregate purchase price equal to that which would have
been payable if such number of shares of Common Stock had been purchased by
exercise of this Warrant immediately prior thereto. In case of any such
consolidation, merger, sale or conveyance, appropriate provision shall be made
with respect to the rights and interests thereafter of the holder of this
Warrant, to the end that all the provisions of this Warrant (including the
provisions of this article iv) shall thereafter be applicable, as nearly as
practicable, to such stock or other securities thereafter deliverable upon the
exercise of this Warrant. The Company shall not effect any such consolidation,
merger, sale or conveyance unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or purchasing or acquiring such
assets shall assume by written instrument, executed and mailed or delivered to
the holder of this Warrant, the obligation to deliver to such holder such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive, which instrument shall contain the
express assumption by such successor corporation of the due and punctual
performance and observance of every provision of this Warrant to be performed
and observed by the Company and of all liabilities and obligations of the
Company hereunder.
4.4 Reorganization or Reclassification. In case of any capital
reorganization or any reclassification of the capital stock of the Company
(except as provided in Section 4.2) while this Warrant remains outstanding, then
as a condition of such capital reorganization or reclassification, lawful and
adequate provision shall be made whereby the holder of this Warrant shall
thereafter be entitled to purchase pursuant to this Warrant (in lieu of the
number of shares of Common Stock specified in the first paragraph of this
Warrant which such holder would have been entitled to purchase immediately prior
to such reorganization or reclassification) the shares of stock of any class or
other securities or property to which such number of shares of Common Stock
would have been entitled at the time of such reorganization or reclassification,
at an aggregate purchase price equal to that which would have been payable if
such number of shares of Common Stock specified in the first paragraph of this
Warrant had been purchased immediately prior to such reorganization or
reclassification. In case of any such capital reorganization or
reclassification, appropriate provision shall be made with respect to the rights
and interests thereafter of the holder of this Warrant, to the end that all the
provisions of this Warrant (including the provisions of this article iv) shall
thereafter be applicable, as nearly as practicable, to such stock or other
securities or property thereafter deliverable upon the exercise of this Warrant.
4
<PAGE>
4.5 Statement of Adjustment: Accountants' Opinion. Upon each adjustment
of the number of shares of Common Stock, and in the event of any change in the
rights of the holder of this Warrant by reason of other events herein set forth,
then and in each case, the Company will promptly (a) prepare a schedule setting
forth the adjusted number of shares entitled to be purchased hereunder, or
specifying the other shares of stock, securities or assets and the amount
thereof receivable as a result of such change in rights, and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based, and (b) if requested by a holder of the Warrant, obtain an
opinion of a firm of independent certified public accountants of recognized
national or regional standing selected by the Company's board of directors (who
may be the regular auditors of the Company) that, based upon the Warrant and a
review of the aforementioned schedules prepared by the Company, such
computations were made in accordance with the provisions of the Warrant. The
Company will promptly mail a copy of such schedule and of such accountants'
opinion to the registered holder of this Warrant.
4.6 Determinations by the Company. All determinations by the Company
under the provisions of this Warrant shall be made in good faith with due regard
to the interests of the holder of this Warrant and in accordance with good
financial practice.
4.7 Notification by the Company. If the Company proposes:
(a) to declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the
holders of its Common Stock;
(b) to make an offer for subscription pro rata to the
holders of its Common Stock of any additional shares of stock
of any class or other rights;
(c) to effect any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale or
transfer of all or substantially all its assets to, another
corporation; or
(d) to effect a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the holder at the address of such holder as
shown on the books of the Company, (a) at least ten (10) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, or (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
ten (10) days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. In each case ten (10) days' prior written notice
shall mean notice received by the holders at least ten (10) days before the
applicable event or circumstance.
ARTICLE V
CERTAIN COVENANTS OF THE COMPANY
The Company covenants and agrees that:
5
<PAGE>
(a) it will authorize, reserve and set apart and have at all times,
free from preemptive rights, a number of shares of authorized but unissued
Common Stock or other securities or property deliverable upon the exercise of
this Warrant sufficient to enable it at any time to fulfill all its obligations
hereunder;
(b) this Warrant shall be binding upon any corporation succeeding to
the Company by merger or consolidation;
(c) the Company will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is at all
times equal to or less than the per share exercise price provided hereunder;
(d) if any shares of Common Stock to be reserved for the purpose of
exercise of this Warrant require registration or listing with, or approval of,
any governmental authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise (except that no registration
under the securities Act of 1933 shall be required) in order for such shares to
be validly issued and delivered upon exercise of this Warrant, the Company will
in good faith and as expeditiously as possible endeavor to secure such
registration, listing or approval, as the case may be; and
(e) it will not repurchase outstanding shares or otherwise take any
action which would cause Warrant holders to beneficially own 5% or more of the
Common Stock then outstanding; and
(f) the capitalization of the Company on october 27, 1994 and on
november 1, 1995 was and is as set forth in exhibit b attached hereto.
ARTICLE VI
MISCELLANEOUS
6.1 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the state of Delaware.
6.2 Waiver and Amendment. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder and the Company, except that any waiver of any term
or condition, or any amendment or supplementation, of this Warrant must be in
writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way affect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with any
term or condition of this Warrant.
6.3 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
6.4 Filing of Warrant. A copy of this Warrant shall be filed in the
records of the Company.
6.5 Notice. Any notice or other document required or permitted to be
given or delivered to the holder shall be delivered personally, or sent by
certified or registered mail, to such holder at the last address shown on the
books of the Company maintained at the Warrant office for the registration of,
and the registration of transfer of, the Warrant or at any more recent address
of which the holder shall have notified the Company in writing. Any notice or
other document required or permitted to be given or delivered to the Company,
other than such notice or documents required to be delivered to the Warrant
office, shall be delivered at, or sent by certified or registered mail to, the
office of the Company described above or such other
6
<PAGE>
address within the united states of america as shall have been furnished by the
Company to the holder in accordance herewith.
6.6 Loss, Destruction, Etc. of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of the
Warrant, and in the case of any such loss, theft or destruction, upon delivery
of a bond of indemnity in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation, upon surrender
and cancellation of the Warrant, the Company will make and deliver a new
Warrant, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Warrant. Any Warrant issued under the provisions of this Section 6.6 in lieu of
any Warrant alleged to be lost, destroyed or stolen, or in lieu of any mutilated
Warrant, shall constitute an original contractual obligation on the part of the
Company.
6.7 Limitation of Liability; Not Stockholders. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notice, other than as herein
expressly provided, in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the purchase price of any Warrant shares or as a stockholder of
the Company, whether such liability is asserted by the Company or by creditors
of the Company.
6.8 Termination of Warrant. This Warrant will terminate (to the extent
not exercised) on december 31, 2015.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its President and its corporate seal to be impressed hereon and
attested by its Secretary.
AFFINITY FINANCIAL GROUP, INC.
November 8, 1995 By:
Jeff A. Norris, Chief Executive Officer
[CORPORATE SEAL]
Attest:
Secretary
7
<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION NOTICE
Affinity Financial Group, Inc.
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented by said Warrant for, and to purchase
thereunder, shares of the Common Stock covered by said Warrant and herewith
makes payment in full therefor of $ by check payable to the order of the
Company, and requests (a) that certificates for such shares (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to whose address is and whose taxpayer identification number is and
(b) if such shares shall not include all of the shares issuable as provided in
said Warrant, that a new Warrant of like tenor and date for the balance of the
shares issuable thereunder be delivered to the undersigned.
Warrant Holder
By:
, President
Dated:
8
<PAGE>
EXHIBIT B
Capitalization at October 27, 1994 and Capitalization at November 1, 1995
9
<PAGE>
AMENDMENT NO. 1
with respect to
WARRANT
TO PURCHASE COMMON STOCK OF AFFINITY FINANCIAL GROUP, INC.
This Amendment No. 1 is executed with respect to that certain Warrant
to Purchase Common Stock of Affinity Financial Group, Inc. (now known as
Affinity Technology Group, Inc.) (the "Warrant") held by Carolina First
Corporation, a South Carolina corporation ("Warrant Holder" or, with its
successors and assigns, "Holder"), which Warrant entitled Warrant Holder
to purchase 62,890 shares of Common Stock of Affinity Technology Group, Inc.,
a Delaware corporation (the "Company") in accordance with the terms thereof.
WHEREAS, Warrant Holder has exercised its rights to receive 7,500
shares of the total 62,890 shares issuable pursuant to the Warrant;
WHEREAS the Company has issued to Warrant Holder such 7,500 shares;
WHEREAS the Company and Warrant Holder desire to amend the Warrant as
reflect that it currently represents the right to receive 55,390 shares of
Company Common Stock;
NOW, THEREFORE, the Warrant Holder hereby amends the Warrant as
follows:
As a result of the partial exercise of the Warrant with respect to
7,500 shares, the Warrant is hereby amended to state that the shares of
Company Common Stock issuable thereunder is changed from 62,890 shares
to 55,390 shares. The Warrant is otherwise unchanged and remains in full
force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to
be signed in its name by its President and its corporate seal to be impressed
hereon and attested by it Secretary.
AFFINITY TECHNOLOGY GROUP, INC.
December 28, 1995 By:
Jeff A. Norris, Chief Executive Officer
[CORPORATE SEAL]
Attest:
Secretary
CONSENT AND AGREE:
Carolina First Corporation
William S. Hummers III
Computation of Earnings Per Share Exhibit 11.1
Carolina First Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the year ended
December 31, 1995
=========================
<S> <C>
A. Net income................................................................. $9,414,000
Less: Dividends on preferred stock........................................ 2,752,000
=========================
B. Net income applicable to common shareholders............................... $6,662,000
=========================
Primary Earnings Per Share
Average shares outstanding................................................. 6,263,850
Dilutive average shares outstanding under options.......................... 247,127
Exercise prices............................................................ $5.77 to $14.17
Assumed proceeds on exercise............................................... $1,635,297
Average market value per share............................................. 14.42
Less: Treasury stock purchased with the assumed
proceeds from exercise of options....................................... 114,139
-------------------------
C. Adjusted average shares -- Primary......................................... 6,396,838
-------------------------
Primary Earnings Per Share (B/C)........................................... $1.04
=========================
Fully Diluted Earnings Per Share
Average shares outstanding................................................. 6,263,850
Dilutive average shares outstanding under options.......................... 247,127
Exercise prices............................................................ $5.77 to $14.17
Assumed proceeds on exercise............................................... $1,635,297
Market value per share..................................................... 15.41
Less: Treasury stock purchased with the assumed
proceeds from exercise of options....................................... 106,114
-------------------------
Adjusted averaged shares.................................................. 6,404,863
-------------------------
Common shares from the assumed conversion of
convertible preferred stock............................................. 2,869,823
-------------------------
D. Adjusted average shares -- Fully diluted................................... 9,274,686
-------------------------
Fully Diluted Earnings Per Share (A/D)..................................... $1.02
=========================
</TABLE>
Computation of Ratio of Earnings to Fixed Charges
Exhibit 12.1
Carolina First Corporation and Subsidiaries
<TABLE>
<CAPTION>
($ in thousands)
Years Ended December 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS:
Income from continuing operations
before income taxes....................... $ 14,370 $ (1,550) $ 7,723 $ 3,650 $ 2,272
ADD:
(a) Fixed charges............................. 51,573 32,902 24,845 24,145 26,708
DEDUCT:
(a) Interest capitalized during year........... ----- ----- ----- ----- (122)
-------------------------------------------------------------------
Earnings, for computation purposes............... $ 65,943 $ 31,352 $ 32,568 $ 27,795 $ 28,858
===================================================================
FIXED CHARGES:
Interest on indebtedness, expenses or cap...... $ 50,978 $ 32,509 $ 24,607 $ 24,010 $ 26,612
Portion of rents representative of the
interest factor....................... 520 393 238 135 96
Amortization of debt expense.................... 75
-------------------------------------------------------------------
Fixed charges, for computation purposes.......... $ 51,573 $ 32,902 $ 24,845 $ 24,145 $ 26,708
===================================================================
Ratio of earnings to fixed charges................... 1.28 x 0.95 x 1.31 x 1.15 x 1.08 x
</TABLE>
<PAGE>
Corporate Profile
Carolina First Corporation (Nasdaq/NM - CAFC), headquartered in
Greenville, South Carolina, is the largest independent bank holding Company
in South Carolina with assets of $1.4 billion and 55 banking offices
throughout the state. Since its inception in 1986, Carolina First has
experienced exceptional growth coupled with outstanding credit quality.
Carolina First is a high growth franchise based on the "Super Community Bank"
strategy serving individuals and small-to medium-sized businesses. We intend
to be South Carolina's bank.
Carolina First Corporation's three subsidiaries are Carolina First
Bank (CFB), a state-chartered commercial bank, Carolina First Mortgage
Company (CFMC), a mortgage banking operation, and Blue Ridge Finance Company,
an automobile finance Company. CFB is the largest South Carolina-based
commercial bank, and CFMC is the fourth largest mortgage loan servicer in
South Carolina. Through its subsidiaries, Carolina First provides a full
range of banking services, including mortgage, trust and investment services,
designed to meet substantially all of the financial needs of its customers.
Table of Contents
Financial Highlights......................... 1
Letter to Shareholders....................... 2
Business Strategy............................ 6
1995 Business Highlights..................... 8
Five-Year Financial Summary.................. 9
Management's Discussion and Analysis......... 10
Report of Independent Auditors............... 20
Report of Management......................... 20
Consolidated Financial Statements............ 21
Notes to Consolidated Financial Statements... 25
Directory.................................... 42
Shareholder Information...................... 44
<PAGE>
FINANCIAL HIGHLIGHTS
Net Income
($ in millions)
(A bar graph appears here with the following plot points:)
1991 1992 1993 1994 1995
1.9 $2.5 $5.4 $7.7* $9.4
Five-Year Compound Growth Rate 4.51%
*Excludes fourth quarter 1994 restructuring charges of $9.415 (after-tax).
Year End Assets
($ in millions)
(A bar graph appears here with the following plot points:)
1991 1992 1993 1994 1995
$528 $616 $904 $1,204 $1,415
5-Year Compound Growth Rate 28.0%
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands, except share data)
1995 1994 % Change
INCOME STATEMENT DATA
Net income (loss) (1)..... $9,414 $ (1,740) n/m
Net income (loss) per
common share:(2)
Primary................... $1.04 $ (0.71) n/m
Fully diluted............. 1.02 (0.71) n/m
Cash dividends declared per
common share (2).......... 0.25 0.20 19.0%
BALANCE SHEET DATA (YEAR END)
Total assets.............. $1,414,922 $ 1,204,350 17.5%
Loans - net of unearned
income.................... 1,062,660 923,068 15.1
Deposits.................. 1,095,491 1,001,748 9.4
Shareholders' equity...... 94,967 86,482 9.8
Book value per share(2)... $9.14 $ 7.93 15.3%
FINANCIAL RATIOS
Return on average assets.. 0.74% (0.16)% n/m
Return on average equity.. 10.43 (1.99) n/m
ASSET QUALITY RATIOS
Nonperforming assets as a
% of loans and foreclosed
property.................. 0.46% 0.51% (9.8)%
Net loan charge-offs as a % of
average loans............. 0.51 0.38 34.2
Allowance for loan losses times
nonperforming loans....... 3.67X 2.20x 66.7
OPERATIONS DATA
Banking offices........... 55 51 7.8%
Full-time equivalent
employees................. 589 551 6.9
STOCK PRICE INFORMATION
(YEAR END)
Closing market price(2)... $17.50 $ 13.33 31.3%
Annual shares traded...... 3,781,700 1,693,900 123.3
Price/book ratio.......... 1.91X 1.68x 13.9
Market capitalization
(includes preferred stock) $160,227 $ 121,168 32.2
n/m Not meaningful.
(1) After fourth quarter 1994 restructuring charges of $9,415 (after-tax).
(2) Per share data have been restated to reflect 5% stock dividends.
1
<PAGE>
TO OUR SHAREHOLDERS
As Carolina First approaches its 10-year anniversary, we look back
with pride on how much we have accomplished and the leadership position we
have attained in South Carolina. Looking backward, however, is not the way
that Carolina First arrived where it is today. The 21st century is ahead, and
our vision is firmly fixed on the opportunities and challenges that we will
face during our second decade and beyond.
RECORD PERFORMANCE
We move into the future on firm financial footing. In 1995, we
reported record earnings, continuing our trend of increasing profitability.
Net income of $9.4 million, or $1.02 per fully diluted share, increased 23%
over 1994 earnings excluding restructuring charges. Earnings per share have
grown at compounded rates of 36% and 25% for the latest three- and five- year
periods, respectively. This earnings performance is particularly encouraging
as Carolina First continues to be one of the fastest-growing banks in the
Southeast.
Our commitment to South Carolina communities continues to be strong
with net loans increasing 15% during 1995 to $1.1 billion at year end. This
loan growth is net of approximately $84 million of credit card receivables
which we securitized, or packaged and sold, off-balance-sheet. Securitization
is part of our overall funding strategy, because it efficiently funds our
loan growth by moving loan balances off-balance-sheet while keeping the
related income stream and continuing to service our customers. We expect to
complete a securitization of approximately $100 million of commercial real
estate loans in the first quarter of 1996.
Our loan growth has not come at the expense of loan quality. As of
December 31, 1995, our credit quality remained outstanding with nonperforming
assets making up only 0.46% of loans and foreclosed property. Maintaining
outstanding credit quality is, and has always been, the cornerstone of
Carolina First's success.
(Photo of Mack I. Whittle, Jr. appears here with the following caption.)
"We consider Carolina First to be an innovator for better, more flexible
ways of delivering finnacial products and services."
MACK I. WHITTLE, JR.
President and Chief Executive Officer
2
<PAGE>
". . . A $1,000 INVESTMENT AT OUR FOUNDING IN 1986 WAS WORTH $2,521 AT
YEAR END."
We also are pleased with the advances made by our mortgage Company.
In July 1995, our servicing portfolio reached a new high of 15,000 loans,
totaling over $1.3 billion in loan balances being serviced. During the year,
we bought and sold mortgage servicing rights at attractive rates. These
transactions enabled us to build a solid servicing portfolio and recognize
gains from the value of our servicing rights sold.
SHAREHOLDER VALUE
Our strong performance resulted in real value to our shareholders.
We have increased our cash dividends every year since the initiation of cash
dividends, and have distributed a 5% common stock dividend for the seventh
consecutive year. Our quarterly cash dividend to common shareholders
increased 17% to $0.07 per share, or an indicated annual rate of $0.28 per
share. The market price of Carolina First's common stock rose 31% during
1995, and our market capitalization now tops $160 million. This increase in
our common stock price, which continued in January 1996, enabled us to redeem
our Series 1993 and Series 1994 Preferred Stock. Substantially all of our
preferred shareholders converted their shares into common stock. This
redemption will benefit shareholders by saving approximately $1.9 million in
annual dividend payments, improving book value per share, and increasing the
number of common shares outstanding.
We are pleased to report that 1995 was not the first year our
shareholders have been rewarded. If you had invested $1,000 at our founding
in 1986, your investment would have grown in value to $2,521 at December 31,
1995, after taking into account our seven 5% stock dividends and quarterly
cash dividends.
VALUE OF INVESTMENT
IF YOU HAD INVESTED $1,000 IN CAROLINA FIRST COMMON STOCK
<TABLE>
<CAPTION>
COMPOUND
TOTAL VALUE % CHANGE ANNUAL
12/31/95 IN VALUE GROWTH RATE
<S> <C> <C> <C>
Three Years Ago $1,549 55% 16%
Five Years Ago $2,472 147% 20%
At Our Founding in 1986 $2,521 152% 11%
</TABLE>
ASSUMES REINVESTMENT OF CASH DIVIDENDS AND 5% STOCK DIVIDENDS.
3
<PAGE>
BUILDING FOR THE 21ST CENTURY
To make Carolina First the best bank, we will continue to build on our
core strengths -- outstanding credit quality, "personal touch" community
banking, aggressive growth, a spirit of innovation and recognition of the
importance of technology. Customers confirm that our super community bank
strategy works. Quite simply, our definition of super community banking is
combining big bank services with a small town touch. We never will forget that
we are a people business. New customers continue to tell us that the reason they
switched to Carolina First is because they enjoy the "personal touch Carolina
First gives." At the same time, we frequently hear from customers a pleasantly
surprised "I thought only big banks could do that" when they learn of the
banking products and services we provide.
This strategy will become more central to our success in the coming
years. Customers' needs will continue to evolve, becoming more sophisticated
and diverse as new technologies arrive on the scene. At the same time,
customers will continue to seek prompt service, good value and the hometown
touch that can only come from a banker who knows you. We believe that the
challenge for the super community bank will be--at a time when many banks
are using technology to distance themselves from customers--to find ways to
harness the technologies of the future in order to serve these time-honored
goals.
We are already proving our ability to meet the changing needs of
our customers. We are introducing innovative new products and services, and
new ways to deliver those products and services, that maintain our focus on
the individual customer. In 1995, we focused on customer convenience and
choice by opening, or acquiring, six traditional branch offices, three
branches within grocery stores, four automated teller machines and seven
automated loan machines. We are providing our customers with the products they
want, when they want them.
". . . COMBINING BIG BANK SERVICES WITH A SMALL TOWN TOUCH . . . "
4
<PAGE>
We will continue that focus in 1996, by ensuring that each branch
in our network is reaching its potential, both in terms of profitability and
customer service. And we will work to ensure that our existing customers are
aware of all of our products and services, thus strengthening and extending
our relationships with our customers. Carolina First is also guaranteeing no
fee increases in 1996 for our customers; our campaign "We've put the freeze
on fees!" has been enthusiastically received.
We also are broadening our vision by introducing services that will
use technology the way it should be used--to serve our customers. We are
introducing a home banking product, joining forces with other banks on an
Internet banking project, and concentrating on developing alternate delivery
systems. We consider Carolina First to be an innovator for better, more
flexible ways of delivering financial products and services. Carolina First
will meet the challenges of the next century by using, and offering, some of
the most innovative products on the market, but never letting the technology
become more important than our customers.
With gratitude for the commitment and support of our shareholders,
customers, employees and directors, we look forward to 1996 and the
years beyond.
(Signature of Mack I. Whittle, Jr. appears here)
Mack I. Whittle, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
"WE ARE PROVIDING OUR CUSTOMERS WITH THE PRODUCTS THEY WANT, WHEN THEY WANT
THEM."
5
<PAGE>
THE CAROLINA FIRST BUSINESS STRATEGY
STRATEGIC FOCUS WORKS. FROM OUR 1986 INCEPTION ONWARD, CAROLINA
FIRST HAS KEPT ITS FOCUS ON BECOMING SOUTH CAROLINA'S PREMIER BANK.
WE STRIVE TOWARD CLEAR GOALS: PROVIDING THE BEST CUSTOMER SERVICE,
EMPLOYEE SATISFACTION AND SHAREHOLDER RETURN. WE SERVE A WELL-DEFINED MARKET:
INDIVIDUALS AND SMALL- TO MEDIUM-SIZED BUSINESSES WITHIN THE STATE. AND WE
PURSUE A TIMELY STRATEGY OF COMBINING THE MOST ATTRACTIVE FEATURES OF SMALL
COMMUNITY BANKS WITH THOSE OF LARGE REGIONAL BANKS.
OUR "SUPER COMMUNITY BANK" STRATEGY OF DELIVERING BIG BANK SERVICES
WITH A SMALL TOWN TOUCH WORKS. LIKE SMALL COMMUNITY BANKS, CAROLINA FIRST
OFFERS PERSONALIZED SERVICE, LOCAL MARKET KNOWLEDGE AND DECENTRALIZED
DECISION-MAKING. AT THE SAME TIME, WE FEATURE PRODUCT BREADTH AND BACK-OFFICE
EFFICIENCIES TO RIVAL LARGER REGIONAL BANKS. THIS STRATEGY LETS US REALLY
KNOW OUR CUSTOMERS AND PROVIDE CUSTOMIZED FINANCIAL SERVICES TO QUICKLY MEET
THEIR NEEDS.
IT'S A WINNING STRATEGY FOR THE BANK, OUR CUSTOMERS AND OUR
SHAREHOLDERS. IN JUST NINE YEARS, WE HAVE GROWN TO $1.4 BILLION IN ASSETS,
BECOMING SOUTH CAROLINA'S LARGEST INDEPENDENT COMMERCIAL BANK. AND WHILE
CUSTOMER SERVICE AND EMPLOYEE SATISFACTION ARE NOT AS NEATLY MEASURABLE AS
OUR FINANCIAL PERFORMANCE, OURS ARE EASILY APPRECIATED BY SIMPLY VISITING ANY
OF OUR BRANCHES.
CAROLINA FIRST'S "SUPER COMMUNITY BANK" STRATEGY FEATURES FOUR KEY
COMPONENTS:
[ ] CUSTOMER RELATIONSHIP FOCUS.
[ ] COMPREHENSIVE BANKING PRODUCTS AND SERVICES.
[ ] MULTICHANNEL DELIVERY SYSTEM.
[ ] ATTRACTIVE BANKING MARKETS.
CUSTOMER RELATIONSHIPS
[ ] Carolina First's brand of banking -- personable, flexible
and responsive -- is distinctive and attractive to the
businesses and individuals we serve.
[ ] Our bankers are committed to knowing our customers
unusually well. So well that we don't just react to
customer needs -- we anticipate them.
[ ] Founded in and focused on South Carolina, Carolina First
offers an advantage over larger banks with out-of-state
headquarters. We stress local decision-making and prompt,
appropriate answers. Our policy is not to be hamstrung by
policy.
COMPREHENSIVE PRODUCTS
[ ] Carolina First provides a full range of banking services
designed to meet substantially all the financial needs
of our customers.
[ ] Our service groups include: commercial banking, retail
banking, mortgage services, investments and trust
management, financial services and consumer finance. Our
products include commercial loans, consumer loans,
credit cards, deposits, indirect automobile financing,
investments, mortgages and trust services.
[ ] We smoothly overlap and blend products, people and
processes to build customer relationships. We are
committed to bringing together the full resources of
Carolina First to meet the needs of our customers.
6
<PAGE>
[ ] Carolina First uses technology the way it should be used--
to serve our customers. After all, service is the
most important product we offer.
MULTICHANNEL DELIVERY SYSTEM
[ ] Carolina First's delivery system emphasizes customer
choice and convenience. We strive to provide our
customers with the products they want, when they want
them. Equally important, we ensure that banking with us
is customer-friendly and easy.
[ ] Delivery channels include traditional branch offices,
branches within grocery stores, automated teller
machines (ATMs), automated loan machines (ALMs), and a
24-hour customer voice response system. The following
chart illustrates the expansion of our cus tomers'
service options.
1995 1994 1993
Number of:
Traditional branches 46 40 32
Grocery store branches 6 3 3
ATMs 18 14 12
ALMs 7 - -
[ ] In 1996, we will further increase our accessibility by
enabling customers to bank from the convenience of their
homes and offices, 24 hours a day, by personal computer
or by telephone.
ATTRACTIVE MARKETS
[ ] Carolina First now serves 34 communities in 15 South
Carolina counties. These communities include the four
largest Metropolitan Statistical Areas in the state.
(Map of South Carolina depicting the counties currently served by
Carolina First appears here.)
[ ] South Carolina is a great place to do business. Our
strengths include 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.
[ ] South Carolina is not just our home; it's an
attractive banking environment. With over 75% of South
Carolina's banking assets controlled by out-of-state
financial institutions, the state presents a
remarkable opportunity for an independent bank like
Caro lina First. We have seized this opportunity to
become South Carolina's premier independent commercial
bank.
7
<PAGE>
1995 BUSINESS HIGHLIGHTS
CAROLINA FIRST
EXPANDED INTO NEW
SOUTH CAROLINA MARKETS . . .
[ ] Completed acquisitions of Aiken County National Bank
of Aiken with $39 million in assets and Midlands
National Bank of Prosperity with $44 million in
assets.
[ ] Opened our main office in Charleston, at 1 Broad St.,
a highly visible and historic location, and new
offices in two Charleston grocery stores. Carolina
First now operates four branches in Charleston, with a
fifth branch opening in 1996.
[ ] Initiated plans for our first branch in Hilton Head,
opening in the second half of 1996.
INTRODUCED INNOVATIVE
NEW PRODUCTS . . .
[ ] Developed a home banking product so customers can bank
from the convenience of their homes or offices, 24
hours a day, by personal computer or telephone.
[ ] Installed seven automated loan machines, adding
efficient and cost-effective lending vehicles to our
retail branch network.
[ ] Launched a life-cycle investment product, "Carolina
Compass Portfolios", for our personal and
institutional trust customers.
[ ] Enhanced indirect automobile lending through our new
subsidiary, Blue Ridge Finance Company, which was
acquired in December.
FUNDED OUR GROWTH . . .
[ ] Initiated a profitable program of credit card
securitization providing over $84 million in
off-balance-sheet financing. In 1995, credit card
trust income topped $2.7 million, exceeding our
forecasts.
[ ] Raised $26.5 million in new capital through the public
offering of our subordinated notes.
[ ] Invested in Affinity Technology Group, Inc., a
developer of a new generation of automated loan
machines.
ALL OF WHICH REWARDED
OUR SHAREHOLDERS.
[ ] Increased quarterly cash dividend 17% to $0.07 per share, or
$0.28 per share on an annualized basis, our third
consecutive increase.
[ ] Distributed 5% common stock dividends for the seventh
consecutive year.
[ ] Common stock price advanced 31% during the year to
$17.50.
[ ] More than doubled the common stock trading volume to
3.8 million shares, dramatically improving the stock's
marketability.
8
<PAGE>
FIVE-YEAR FINANCIAL SUMMARY
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands, except share data)
<TABLE>
<CAPTION>
Years Ended December 31,
FIVE-YEAR
COMPOUND
1995 1994 1993 1992 1991 GROWTH RATE
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 50,772 $ 43,260 $ 29,358 $ 20,749 $ 15,351 32.5%
Provision for loan losses 6,846 1,197 1,106 2,318 1,890 49.2
Noninterest income, excluding
securities transactions 16,557 8,151 6,085 3,483 2,010 61.5
Securities transactions 769 75 680 633 733 N/M
Noninterest expenses 46,882 51,839 27,294 18,897 13,875 33.8
Net income (loss) (1) 9,414 (1,740) 5,418 2,466 1,871 45.1
PER COMMON SHARE DATA (2)
Net income (loss) per common share:
Primary $ 1.04 $ (0.71) $ 0.76 $ 0.41 $ 0.41 25.8%
Fully diluted 1.02 (0.71) 0.76 0.41 0.41 25.3
Book value (December 31) 9.14 7.93 9.24 8.72 8.59 2.1
Closing market price (December 31) 17.50 13.33 11.79 11.01 6.99 19.3
Cash dividends declared 0.25 0.20 0.05 -- -- --
BALANCE SHEET DATA (YEAR END)
Total assets $ 1,414,922 $ 1,204,350 $ 904,474 $ 616,288 $ 528,472 28.0%
Loans - net of unearned income 1,062,660 923,068 623,646 455,650 395,136 27.2
Allowance for loan losses 8,661 6,002 6,679 5,276 4,519 23.9
Nonperforming assets 4,868 4,722 5,366 5,631 3,350 17.4
Total earning assets 1,242,026 1,059,455 814,579 555,871 482,130 26.9
Deposits 1,095,491 1,001,748 804,549 555,624 480,058 25.1
Shareholders' equity 94,967 86,482 70,415 51,288 38,989 20.6
BALANCE SHEET DATA (AVERAGES)
Total assets $ 1,269,757 $ 1,056,954 $ 782,551 $ 562,369 $ 459,900 27.1%
Loans - net of unearned income 965,632 781,503 548,619 432,282 355,944 27.0
Total earning assets 1,130,245 941,155 711,138 520,125 426,518 25.8
Deposits 1,023,029 925,615 635,582 476,291 384,791 26.9
Shareholders' equity 90,242 87,377 65,518 47,206 38,279 20.0
FINANCIAL RATIOS
Return on average assets 0.74% (0.16)% 0.69% 0.44% 0.41%
Return on average equity 10.43 (1.99) 8.27 5.22 4.89
Net interest margin 4.54 4.65 4.16 4.01 3.62
ASSET QUALITY RATIOS
Nonperforming assets as a % of
loans and foreclosed property 0.46% 0.51% 0.86% 1.23% 0.84%
Net loan charge-offs as a % of
average loans 0.51 0.38 0.28 0.42 0.22
Allowance for loan losses times
nonperforming loans 3.67X 2.20x 2.69x 1.87x 2.40x
OPERATIONS DATA
Banking offices 55 51 42 21 20
Full-time equivalent employees 589 551 477 275 250
</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.
9
<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 (THE "COMPANY") AND ITS SUBSIDIARIES,
CAROLINA FIRST BANK, CAROLINA FIRST MORTGAGE COMPANY ("CF MORTGAGE") AND
BLUE RIDGE FINANCE COMPANY ("BLUE RIDGE"). THIS DISCUSSION SHOULD BE
READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES PRESENTED ELSEWHERE IN THIS REPORT.
OVERVIEW
The Company, which commenced banking operations in December
1986, currently conducts business through 55 locations in South
Carolina. 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. At December 31, 1995, the Company had approximately $1.415
billion in assets, $1.063 billion in loans, $1.095 billion in deposits
and $95.0 million in shareholders' equity.
In January 1995, Carolina First Bank contributed
approximately $97 million of its credit card receivables to a master
trust (the "Trust") in connection with a securitization of such credit
card receivables (the "Securitization"). In connection with the
Securitization, certain interests in the Trust were sold to an
institutional investor, while Carolina First Bank retained certain
interests in the Trust assets and potential income. In connection with
the sale of such interests, Carolina First Bank received cash proceeds
of approximately $66 million. Additional credit card receivables,
totaling approximately $14 million, have been added to the Trust during
1995.
In February 1995, the Company completed the merger of Carolina
First Savings Bank, its savings bank subsidiary, into Carolina First Bank.
The Company has experienced 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.
On May 18, 1995, the Company completed a $26.5 million public
offering of its 9.0% Subordinated Notes due 2005 (the "Notes"). A substantial
portion of the proceeds was contributed to Carolina First Bank to provide
additional capital to support internal growth and acquisitions and for
working capital purposes.
At its June 1995 meeting, the Board of Directors of the Company
declared the issuance of a 5% common stock dividend on August 15, 1995 to
common shareholders of record as of August 1, 1995. This dividend resulted in
the issuance of 291,603 shares of the Company's $1.00 par value common stock
("Common Stock"). This is the seventh consecutive year that the Company has
issued a 5% common stock dividend. Per share data of prior periods have been
restated to reflect these dividends. At its December 1995 meeting, the Board
of Directors increased the quarterly cash dividend to $0.07 per share from
$0.06 per share. This is the third consecutive year that the Company has
increased its quarterly cash dividend.
During 1995, the Company sold and purchased mortgage servicing
rights. On March 31, 1995, the Company sold mortgage servicing rights for
approximately $435 million in mortgage loans which resulted in a gain of
approximately $2 million. On August 31, 1995, the Company completed the
purchase of mortgage servicing rights for loans with an aggregate principal
balance of approximately $933 million. On December 29, 1995, a sale of
mortgage servicing rights for approximately $324 million in mortgage loans
was completed which resulted in a gain of approximately $790,000. At December
31, 1995, CF Mortgage was servicing or subservicing 14,979 loans having an
aggregate principal balance of approximately $1.279 billion.
Increasing Returns
(in percentages)
(Line graph appears here with the following plot points.)
1991 1992 1993 1994 1995
Return on average equity 4.89% 5.22% 8.27% 8.78%* 10.43%
Return on average assets 0.41% 0.44% 0.69% 0.73%* 0.74
*Excluding restructuring charges
10
<PAGE>
These servicing balances included the $324 million in mortgage
servicing rights sold at year end which CF Mortgage is subservicing until
June 1996.
At December 31, 1995, the Company owned 7,500 shares of common
stock of Affinity Technology Group, Inc. ("Affinity") and Warrants to
purchase 55,390 shares of Affinity's common stock at a purchase price of
$0.01 per share. As of December 31, 1995, there was no market for this
investment which was recorded at its book value of $75. On January 24, 1996,
the Board awarded 6,289 shares of Affinity stock
to certain officers of the Company deemed most
responsible for the Company's investment.
In February 1996, the Company redeemed its 7.50% Noncumulative
Convertible Preferred Stock Series 1993 ("Series 1993 Preferred Stock") and its
7.32% Noncumulative Convertible Preferred Stock Series 1994 ("Series 1994
Preferred Stock"). In connection with the redemptions, the Company expects that
substantially all of the outstanding preferred stock will be converted into
Common Stock.
In February 1996, the Atlanta Internet Bank, F.S.B. (the "Atlanta
Internet Bank"), a de novo banking operation scheduled to open in the Atlanta
marketplace in 1996, announced the participation of Carolina First Bank as a
lead investor. The Atlanta Internet Bank plans to provide banking services to
customers on the Internet.
RECENT ACQUISITIONS
On April 10, 1995, the Company completed its acquisition of Aiken
County National Bank ("ACNB"), a national bank headquartered in Aiken, South
Carolina. ACNB operated through two locations and had approximately $39
million in assets. The Company issued 475,291 shares of its Common Stock for
all the issued and outstanding shares of ACNB.
On June 30, 1995, the Company completed its acquisition of Midlands
National Bank ("MNB"), a national bank headquartered in Prosperity, South
Carolina. MNB operated through three locations and had approximately $44
million in assets. The Company issued 614,216 shares of its Common Stock for
all the issued and outstanding shares of MNB.
Each of these acquisitions has been accounted for using the
pooling-of-interests method of accounting. Accordingly, financial statements
for all periods have been restated to reflect the results of operations of
the combined companies from the earliest period presented, except for
dividends per share.
On December 29, 1995, the Company completed its acquisition of Blue
Ridge, an automobile finance Company headquartered in Greenville, South
Carolina. Blue Ridge operates from one location and, at December 31, 1995,
had approximately $4 million in total assets. The Company issued 154,141
shares of Common Stock for all the issued and outstanding shares of Blue
Ridge. This acquisition was accounted for as a pooling-of-interests, except
financial statements for periods prior to the acquisition were not restated
since the effect was not material.
INCOME STATEMENT REVIEW
The Company reported record earnings in 1995. Net income for 1995
increased 23% to $9.414 million, compared with 1994 net operating earnings
before restructuring charges of $7.675 million and 1993 net income of $5.418
million. Net income per fully diluted share was $1.02 in 1995, up 12% over
1994 net income per share before restructuring charges of $0.91 and 1993 net
income per share of $0.76. In the fourth quarter of 1994, the Company
incurred one-time restructuring charges of $9.415 million (net of tax),
related to the initiation of a program of credit card securitization and the
merger of two subsidiaries. Including these restructuring charges, the net
loss for 1994 was $1.740 million, or $0.71 per common share.
The largest component of the Company's net income is Carolina First
Bank's net interest income. Net interest income is the difference between the
interest earned on assets and the interest paid for the liabilities to
support such assets. The Company has experienced an upward trend in net
interest income, which increased 17% in 1995 compared with 1994 and 47% in
1994 compared with 1993. The increases in net interest income were primarily
attributable to loan growth. Average loans increased 24% in 1995 and 42% in
1994.
The net interest margin, defined as net interest income divided by
average earning assets, decreased slightly to 4.54% in 1995 from 4.65% in
1994. The 1993 net interest margin was 4.16%. The decline in the 1995 net
interest margin was primarily due to a reduction in the prime interest rate
and an especially competitive deposit rate environment. In July, the prime
interest rate was reduced from 9% to 8.75%. Approximately 65% of the loan
portfolio has variable rates, indexed to the prime interest rate, and were
immediately repriced downward resulting in lower interest income. While
deposit rates were lowered somewhat, the full impact of the reduction in the
general level of interest rates was not realized in interest expense savings.
During 1995, many financial institutions continued to offer deposit
promotions above the market rates, creating upward pressure on the Company's
cost
11
<PAGE>
INCOME STATEMENT REVIEW -- SUMMARY OF CHANGES
($ in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
CHANGE 1995 VS. 1994 Change 1994 vs. 1993
1995 $ % 1994 $ % 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 50,772 $ 7,512 17.4% $ 43,260 $ 13,902 47.4% $ 29,358
Provision for loan losses 6,846 5,649 471.9 1,197 91 8.2 1,106
Net interest income after
provision for loan losses 43,926 1,863 4.4 42,063 13,811 48.9 28,252
Noninterest income, excluding
securities transactions and
sale of mortgage servicing
rights 13,614 5,463 67.0 8,151 2,066 34.0 6,085
Gain on sale of securities 769 694 N/M 75 (605) n/m 680
Gain on sale of mortgage
servicing rights 2,943 2,943 N/M -- -- n/m --
Noninterest expenses 46,882 7,257 18.3 39,625 12,331 45.2 27,294
Credit card restructuring
charges -- (12,214) N/M 12,214 12,214 n/m --
Income (loss) before
income taxes 14,370 15,920 N/M (1,550) (9,273) n/m 7,723
Income taxes 4,956 4,766 N/M 190 (2,115) n/m 2,305
Net income (loss) $ 9,414 $ 11,154 N/M $ (1,740) $ (7,158) n/m $ 5,418
</TABLE>
of funds. During the first half of 1995, the Company offered a
5-month certificate of deposit promotion at a rate above the prevailing
market rate. The Company also offered money market promotions in new markets,
such as Charleston, to develop new customer relationships. The Company has
instituted deposit promotions and kept its deposit rates competitive in an
effort to increase its liquidity levels, as recommended by the Federal
Deposit Insurance Corporation ("FDIC"). The Company expects the competitive
deposit rate environment to continue.
The provision for loan losses was $6.846 million in 1995, up
significantly from $1.197 million in 1994 and $1.106 million in 1993. The
1995 provision for loan losses was increased principally as a result of the
growth in commercial and commercial real estate loans. Also, management
believed that the provision was appropriate in view of the composition of the
commercial loan portfolio. Commercial and commercial real estate loans
constitute approximately 51% of the Company's total loans, including loans hel
d for sale. The Company had loans to 62 borrowers having principal amounts
ranging from $2 million to $5 million, which accounted for $185.7 million, or
17% of the Company's loan portfolio in the fourth quarter of 1995. The
Company had loans to five borrowers having principal amounts in excess of $5
million, which accounted for $31.1 million, or 3%, of the Company's loan
portfolio in the fourth quarter of 1995.
Another consideration for increasing the Company's 1995 provision
for loan losses was the Company's credit card activities. The Company
continued to solicit new credit card receivables during 1995 and ended the
year with credit card receivables of $86.9 million, or 8% of the Company's
loan portfolio. In prior years, the Company had escrow balances established
by the seller of credit card accounts against which to offset credit card
losses. These escrow balances have fully expired, resulting in an increase in
credit card charge-offs to $2.536 million in 1995 from $1.641 million in 1994
and $488,000 in 1993. Management also felt that an increased provision was
Warranted because of overall economic signals and reports that consumer
credit quality is deteriorating. While the Company has not recognized such
signs of deteriorating credit quality in its portfolio, management decided
that such a provision was appropriate in view of a potential deterioration.
Management currently anticipates that loan growth will continue in
1996. New market areas are expected to contribute
12
<PAGE>
to 1996 portfolio growth. Certain forecasts for 1996 indicate a
potential slowing of the economy. Management intends to closely monitor
economic trends and the potential effect on Carolina First Bank's loan
portfolio. These factors could result in an increase in the 1996
provision for loan losses.
Noninterest income, excluding the gain on sale of mortgage
servicing rights and securities transactions, increased $5.463 million, or
67%, to $13.614 million in 1995, up from $8.151 million in 1994 and $6.085
million in 1993. This increase resulted principally from service charges on
deposit accounts, credit card trust income and mortgage banking income. The
Company had $2.943 million in gains on sale of mortgage servicing rights in
1995 and no gains in 1994 or 1993. The Company recognized gains on the sale
of securities of $769,000, $75,000 and $680,000 in 1995, 1994 and 1993,
respectively.
Service charges on deposit accounts, the largest contributor to
noninterest income, rose $1.435 million, or 35%, to $5.524 million in 1995,
an increase from $4.089 million in 1994 and $2.916 million in 1993. Average
deposits increased 11% in 1995 and 46% in 1994. The increase in service
charges was attributable to attracting new transaction accounts, increased
fee charges and improved collection results. In addition, effective March 1,
1995, Carolina First Bank implemented new service charges, including a charge
for foreign automated teller machine transactions.
Mortgage banking income includes origination fees, gains from the
sale of loans and servicing fees (which are net of the related amortization
for the mortgage servicing rights and subservicing payments). Mortgage
banking income in 1995 was $2.162 million, compared with $1.638 million in
1994 and $1.788 million in 1993. The increase is primarily attributable to
gains on the sale of mortgage loans and the adoption of Statement of
Financial Accounting Standards ("SFAS") 122, "Accounting for Mortgage Servicing
Rights". Income from originations and sales of mortgage loans totaled
$1.785 million in 1995, compared with $1.066 million in 1994 and $1.560
million in 1993. Mortgage loans totaling approximately $116 million, $55
million and $80 million were sold in 1995, 1994 and 1993, respectively. CF
Mortgage's mortgage servicing operations consist of servicing loans that are
owned by Carolina First Bank and subservicing loans, to which the right to
service is owned by Carolina First Bank and other non-affiliated financial
institutions. At December 31, 1995, CF Mortgage was servicing or subservicing
14,979 loans having an aggregate principal balance of approximately $1.279
billion.
During 1995, the Company adopted SFAS 122, which was applied
retroactively to the beginning of 1995, and recorded an asset to reflect the
value of the servicing for its originated mortgage loans. In connection with
the Company's adoption of SFAS 122, the Company recognized a gain of $281,000
which is included in mortgage banking income.
Fees for trust services in 1995 increased to $1.042 million, up 13%
from the $919,000 earned in 1994. Fees for trust services in 1993 were
$542,000. At December 31, 1995, Carolina First Bank's trust department had
assets under management of approximately $343 million. Trust department
assets under management were $214 million at year end 1994 and $129 million
at year end 1993. Fees for trust services increased as a result of the
generation of new trust business and
<TABLE>
<CAPTION>
AVERAGE YIELDS AND RATES
(on a fully tax-equivalent basis)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans........................................ 9.60% 8.76% 8.44% 9.20% 10.36%
Securities................................... 5.83 5.04 5.15 6.41 7.95
Short-term investments...................... 6.35 3.84 3.10 3.82 5.53
Total earning assets......................... 9.05% 8.11% 7.62% 8.64% 9.90%
INTEREST-BEARING LIABILITIES
Interest-bearing deposits.................... 4.62% 3.73% 3.80% 5.00% 6.79%
Short-term borrowings........................ 6.00 3.96 3.05 5.57 5.82
Long-term debt............................... 9.50 9.25 8.66 7.54 6.93
Total interest-bearing liabilities........... 4.87% 3.75% 3.79% 5.02% 6.77%
NET INTEREST MARGIN.............................. 4.54% 4.65% 4.16% 4.01% 3.62%
PRIME INTEREST RATE.............................. 8.83% 7.14% 6.00% 6.26% 8.48%
</TABLE>
13
<PAGE>
additional assets under management, but were less than expected
because of delays in the introduction of new products and the recognition of
income from new business booked.
Sundry income was $606,000 higher in 1995 than in 1994, primarily
because of higher customer service fees, insurance commissions and appraisal
fee income. These increases are primarily related to increased lending and
deposit activities.
Noninterest expenses were $46.882 million in 1995, $51.839 million
in 1994 and $27.294 million in 1993. Included in 1994 noninterest expenses
was a $12.214 million one-time restructuring charge associated with the
credit card securitization and the write-down of other intangible assets.
Excluding the 1994 restructuring charges, 1995 noninterest expenses increased
18% over 1994, while 1994 was 45% higher than 1993.
Salaries and wages and benefits increased 14% to $22.108 million in
1995 from $19.398 million in 1994. This increase follows an increase of 48%
from $13.140 million in 1993. Full-time equivalent employees rose to 589 at
the end of 1995 from 551 and 477 at the end of 1994 and 1993, respectively.
Staff increases were attributable to the addition of 4 banking offices, entry
into the Charleston market and higher loan and deposit activity resulting
from internal growth and acquisitions.
The 1995 occupancy and furniture and equipment expenses increased
17% to $7.391 million in 1995 from $6.305 million in 1994 and $4.234 million
in 1993. This increase resulted principally from the addition of new banking
offices. Thirteen new offices, including the Lexington, Myrtle Beach and
Charleston main offices, have been added since the beginning of 1994.
Sundry expense items increased $4.097 million, or 36%, to $15.609
million in 1995 from $11.512 million in 1994 and $9.045 million in 1993. The
largest items of sundry noninterest expense were telephone, postage,
supplies, loan servicing expense and professional fees. The amortization of
solicitation fees associated with direct mail credit card originations
increased approximately $1.910 million. Advertising expenses increased
approximately $468,000 over the prior year due to new advertising campaigns
to raise deposit balances and promotions in new markets. The remaining
increase in sundry noninterest expense was principally attributable to the
overhead and operating expenses associated with higher lending and deposit
activities.
In August 1995, the FDIC approved a reduction in the insurance
assessments for Bank Insurance Fund ("BIF") deposits. This reduction
decreased Carolina First Bank's insurance assessment for BIF deposits from
0.26% to 0.04% of the average assessment base. This decrease was retroactive
to June 1, 1995. FDIC insurance premiums for 1995 were $1.983 million,
approximately $131,000 lower than 1994's charges. Effective January 1, 1996,
the insurance assessment for Carolina First Bank's BIF deposits was set at zer
o (although banks pay a $2,000 annual fee). The FDIC insurance assessment
reduction applies only to BIF-insured deposits and does not include deposits
insured by the Savings Association Insurance Fund ("SAIF"). In connection
with the merger of Carolina First Savings Bank into Carolina First Bank and
Carolina First Bank's assumption of other SAIF-insured deposits in connection
with various acquisitions, approximately $223 million of Carolina First
Bank's total deposits (as of March 31, 1995, the proposed assessment date)
are subject to SAIF insurance assessments imposed by the FDIC. The SAIF is
underfunded and various proposals, including a one-time charge assessed on
all SAIF-insured deposits, are being considered by regulators and lawmakers
to recapitalize the SAIF. The proposed amount of the special assessment has
been as high as $0.85 per $100 of SAIF deposits. Assuming that the special
assessment were applied at the $0.85 rate, the Company would incur additional
deposit insurance premium expense of approximately $1.9 million which would
be charged against current period income. The timing and amount of such an
assessment cannot be accurately predicted at this time. Carolina First Bank's
SAIF-insured deposits are currently assessed at 0.23% of the average
assessment base.
The provision for income taxes in 1995 was $4.956 million, $190,000
in 1994 and $2.305 million in 1993. Income taxes for 1994 include a one-time
reduction of $2.799 million from restructuring charges, partially offset by
$1.005 million of income tax expense in connection with the merger of
Carolina First Savings Bank into Carolina First Bank.
BALANCE SHEET REVIEW
Total assets at December 31, 1995 were $1.415 billion, an increase
of $210.6 million, or 17%, from $1.204 billion at the end of 1994. Loans
increased $139.6 million, or 15%, to $1.063 billion at December 31, 1995
compared with $923.1 million at December 31, 1994. Deposits at year end 1995
were $1.095 billion, up 9% from $1.002 billion at year end 1994. Total
shareholders' equity increased 10% to $95.0 million at December 31, 1995 from
$86.5 million at the end of 1994. Significant components of balance sheet
growth include increases from internal loan growth, new branch openings and
the proceeds from the public offering of the Notes.
Average total assets in 1995 were $1.270 billion, a 20% increase
over the 1994 average of $1.057 billion. Average
14
<PAGE>
earning assets were $1.130 billion in 1995, a 20% increase over
the 1994 level of $941.2 million. For 1993, average total assets and average
earning assets were $782.6 million and $711.1 million, respectively.
The Company's loan portfolio consists of commercial mortgage loans,
commercial loans, consumer loans and one-to-four family residential mortgage
loans. A substantial portion of these borrowers are located in South Carolina
and are concentrated in the Company's market areas. The Company has no
foreign loans or loans for highly leveraged transactions. The loan portfolio
does not contain any industry concentrations of credit risk exceeding 10% of
the portfolio. At December 31, 1995, the Company had total loans outstanding
of $1.063 billion which equaled approximately 97% of the Company's total
deposits and approximately 75% of the Company's total assets. The composition
of the Company's loan portfolio, including loans held for sale, at December
31, 1995 was as follows: commercial and commercial real estate 51%,
residential mortgage 20%, consumer 14%, credit card 8%, lease financing
receivables 4% and construction 3%.
The Company's loans increased $139.6 million, or 15%, to
approximately $1.063 billion at December 31, 1995 from $923.1 million at
December 31, 1994. This increase resulted primarily from internal growth.
This increase was net of approximately $116.1 million of mortgage loans sold
and $84 million of credit card receivables sold. In August 1995, the Company
purchased approximately $32.9 million, net of related unearned income, in
lease receivables from an unrelated third party.
Year End Loans
($ in millions)
(A bar graph appears here with the following plot points.)
1991 1992 1993 1994 1995
$395 $456 $624 $923 $1,063
5-Year Compound Growth Rate 27.2%
For 1995, the Company's loans averaged $965.6 million with a yield
of 9.60%, compared with $781.5 million and a yield of 8.76% for the same
period of 1994. 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 was offset by the upward repricing
of interest-bearing deposits.
In June 1995, Carolina First Bank received an "outstanding" rating,
the highest level attainable, for its Community Reinvestment Act ("CRA")
performance from the FDIC. The CRA examination was conducted in December
1994.
Securitization and packaging and selling loans are part of the
Company's funding strategy. The Company engages in these transactions because
they fund loan growth by moving loans off-balance-sheet while allowing the
Company to retain the related income stream and servicing relationships.
During 1995, approximately $97 million in credit card receivables were
transferred to the Trust. Loans held for sale at December 31, 1995 were
approximately $125 million and primarily consisted of commercial and industrial
loans secured by real estate. The Company expects to complete a
securitization of approximately $100 million of commercial real estate loans
in the first quarter of 1996.
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. 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
15
<PAGE>
loans, general economic conditions and management's assessment of
potential losses.
At December 31, 1995, the Company had $1.275 million in
non-accruing loans, $1.085 million in restructured loans and $2.748 million
in loans greater than ninety days past due on which interest was still being
accrued. This compares with $2.051 million in non-accruing loans, $675,000 in
restructured loans and $1.285 million in loans greater than ninety days past
due on which interest was still being accrued at December 31, 1994.
Nonperforming assets as a percentage of loans and other real estate owned were
0.46% and 0.51% at December 31, 1995 and 1994, respectively. Charge-offs as
a percentage of average loans, excluding credit cards, during 1995 were
0.24%, compared with 0.17% in 1994. The allowance for loan losses as a
percentage of nonperforming loans was 367% and 220% as of December 31, 1995
and 1994, respectively.
At December 31, 1995, the total investment portfolio had a book
value of $172.5 million and a fair value of $172.9 million for an unrealized
gain of $472,000. The investment portfolio had a weighted average maturity of
approximately 2 years. Securities (i.e., investment securities, securities
available for sale and trading securities) averaged $157.8 million in 1995,
11% above the 1994 average of $142.5 million. The average portfolio yield
increased to 5.83% in 1995 from 5.04% in 1994. The portfolio yield increased
due to upward repricing during the first half of the year when interest rates
were rising. At December 31, 1995, securities totaled $178.4 million, up
$46.4 million from the $132.0 million invested at the end of 1994.
At December 31, 1995, other assets included other real estate owned
of $2.508 million and intangible assets of $18.382 million. The intangible
assets balance is attributable to goodwill of $8.168 million, core deposit
balance premiums of $9.938 million and purchased credit card premiums of
$276,000.
During 1995, interest-bearing liabilities averaged $1.046 billion,
compared with $867.1 million for 1994. The average interest rates were 4.87%
and 3.75% for 1995 and 1994, respectively. At December 31, 1995,
interest-bearing deposits comprised approximately 85% of total deposits and
81% of interest-bearing liabilities. Starting in 1994, the Company modified
its funding strategy to rely more on advances from the Federal Home Loan Bank
("FHLB") because management determined that, due to increased competition for
deposits, the marginal cost of borrowing from the FHLB is lower that the
marginal cost of raising deposits. At December 31, 1995, FHLB advances
totaled $90.0 million, compared with $72.0 million at December 31, 1994.
Carolina First Bank's primary source of funds for loans and
investments is deposits which are gathered through Carolina First Bank's
branch network. Deposits grew 9.4% to $1.095 billion at December 31, 1995
from $1.002 billion at December 31, 1994. Internal growth generated the $93.0
million in new deposits. During 1995, total interest-bearing deposits
averaged $892.3 million with a rate of 4.62%, compared with $824.4 million
with a rate of 3.73% in 1994. As the level of interest rates continued to
rise in 1994, the Company repriced deposits more slowly than the increase in
the yields on earning assets. During 1995, however, deposit pricing was very
competitive in Carolina First Bank's market areas, resulting in upward
pressure on deposit interest rates. The Company does not believe that it has
any brokered deposits.
Average noninterest-bearing deposits, which increased 29% during
the year, increased to 12.8% of average total deposits in 1995 from 10.9% in
1994. This increase was attributable to new accounts from commercial loan
customers and escrow balances related to mortgage servicing operations.
The Company's core deposit base consists of consumer time deposits,
savings, NOW accounts, money market accounts and checking accounts. Although
such core deposits are becoming increasingly interest sensitive for both the
Company and the
Year End Deposits
($ in millions)
(A bar graph appears here with the following plot points.)
1991 1992 1993 1994 1995
$480 $556 $804 $1,002 $1,095
5-Year Compound Growth Rate 25.1%
16
<PAGE>
Shareholders' Equity vs. Market Capitalization
($ in millions)
(A bar grap appears here with the following plot points.)
1991 1992 1993 1994 1995
Shareholders' Equity $39 $51 $70 $ 86 $ 95
Market Capitalization $34 $65 $89 $121 $160
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 1995. 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.
Total shareholders' equity amounted to $95.0 million, or 6.71% of
total assets, at December 31, 1995, compared with $86.5 million, or 7.18% of
total assets, at December 31, 1994. The $8.5 million increase in total
shareholders' equity resulted principally from retention of earnings less
cash dividends paid. In addition, the year end 1995 shareholders' equity was
increased by the $1.152 million change from an unrealized loss to an
unrealized gain on securities available for sale.
The Company's capital needs have been met principally through
public offerings of common stock, preferred stock and subordinated notes and
through the retention of earnings. In addition, the Company issued capital
stock in connection with the acquisitions of Carolina First Savings Bank, CF
Mortgage, ACNB, MNB and Blue Ridge.
On May 18, 1995, the Company completed a $26.5 million public
offering of its Notes. The Notes, which are due on September 1, 2005, pay
interest quarterly at an annual rate of 9.00%. The Notes qualify as Tier 2
capital.
In February 1996, the Company redeemed its Series 1993 Preferred Stock
and its Series 1994 Preferred Stock. In connection with the redemption of the
Series 1993 Preferred Stock, substantially all of the outstanding shares were
converted into 871,021 shares of Common Stock. The redemption date for the
Series 1994 Preferred Stock is February 29, 1996. Holders may elect to convert
their shares into Common Stock (at a rate of 1.8828 shares for each share of
Series 1994 Preferred Stock) or redeem their shares for $26.50. The Company
expects that substantially all of the shares of Series 1994 Preferred Stock will
be converted into Common Stock.
Book value per share at December 31, 1995 and 1994 was $9.14 and
$7.93, respectively. Tangible book value per share at December 31, 1995 and
1994 was $6.36 and $4.49, respectively. Tangible book value was significantly
below book value as a result of the purchase premiums associated with branch
acquisitions and the purchase of CF Mortgage. The conversions of the Series
1993 Preferred Stock and Series 1994 Preferred Stock described above are
expected to increase the Company's book value per share and tangible book
value per share.
At December 31, 1995, the Company and Carolina First Bank were in
compliance with each of the applicable regulatory capital requirements and
exceeded the "well capitalized" regulatory guidelines. The following table
sets forth various capital ratios for the Company and Carolina First Bank.
AS OF Well Capitalized
CAPITAL RATIOS 12/31/95 Requirement
THE COMPANY
Total risk-based
capital............ 10.22% 10.0%
Tier 1 risk-based
capital............ 7.09 6.0
Leverage ratio..... 5.40 5.0
CAROLINA FIRST BANK
Total risk-based
capital............ 10.15 10.0
Tier 1 risk-based
capital............ 9.35 6.0
Leverage ratio..... 7.23 5.0
17
<PAGE>
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 0.52% and 1.68% of earning assets in 1995
and 1994, 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 FHLB. The Company is pursuing
the securitization of approximately $100 million in commercial real
estate loans, which would move these loans off the balance sheet and
significantly improve liquidity. The Company expects to complete the
commercial loan securitization in the first quarter of 1996.
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, 1995,
Carolina First Bank's liquidity ratio was approximately 10%. At December 31,
1995, Carolina First Bank had unused short-term lines of credit totaling
approximately $12.8 million (which are withdrawable at the lender's option).
In addition, Carolina First Bank has access to borrowing from the FHLB. At
December 31, 1995, unused borrowing capacity from the FHLB totaled
approximately $45 million. Management believes that these sources are
adequate to meet its liquidity needs. Following its third quarter of 1995
examination, the FDIC recommended that Carolina First Bank increase its
liquidity ratio. Carolina First Bank has adopted a plan which is designed to
improve its liquidity ratio.
In 1994, the Company modified its funding strategy to rely more on
advances from the FHLB because management determined that, due to increased
competition for deposits, the marginal cost of borrowing from the FHLB is
lower than the marginal cost of raising deposits. At December 31, 1995, FHLB
advances totaled $90.0 million, compared with $72.0 million at December 31,
1994.
The Company has certain cash needs, including general operating
expenses and the payment of dividends and interest on borrowings. The Company
generates cash to meet these needs primarily through management fees and
dividends paid to it by its subsidiaries and secondarily from existing cash
reserves, sales of securities available for sale, interest income on its
investment assets and certain other vehicles.
The interest sensitivity gap is the difference between total
interest sensitive assets and liabilities in a given time period. The
objective of interest sensitivity management is to maintain reasonably stable
growth in net interest income despite changes in market interest rates by
maintaining the proper mix of interest sensitive assets and liabilities. Over
the past several years, the environment in which financial institutions
operate has been characterized by volatile interest rates and greater
NonPerforming Assets as a % of
Loans and Foreclosed Property
(in percentages)
(A bar graph appears here with the following plot points.)
1991 1992 1993 1994 1995
Carolina First 0.84% 1.23% 0.86% 0.51% 0.46%
Federal Reserve Bank Holding
Company Peer Group** 3.32% 2.78% 2.20% 1.25% 1.13%*
*As of September 30, 1995
**Source: Federal Reserve Bank Holding Company Performance Report
18
<PAGE>
reliance on market-sensitive deposits, increasing both the importance
and the difficulty of interest sensitivity management. Management seeks
to maintain a general equilibrium between interest sensitive assets and
liabilities in order to insulate net interest income from significant
adverse changes in market rates.
The Company's 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 analytical measures of asset
quality, management believes the Company has effectively managed its credit
risk. Net loan charge-offs, including credit card receivables, totaled $4.948
million in 1995 and $2.951 million in 1994, or 0.51% and 0.38%, respectively,
as a percentage of average loans. Nonperforming assets as a percentage of
loans and other real estate owned were 0.46% and 0.51% as of December 31,
1995 and 1994, respectively.
<TABLE>
<CAPTION>
ASSET QUALITY
($ in thousands)
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Nonaccural loans $1,275 $2,051 $2,487 $2,474 $1,879
Restructured loans 1,085 675 -- -- --
Total nonperforming loans 2,360 2,726 2,487 2,474 1,879
Other real estate 2,508 1,996 2,879 2,804 1,471
Total nonperforming assets $4,868 $4,722 $5,366 $5,278 $3,350
Nonperforming assets as a % of loans and
foreclosed property 0.46% 0.51% 0.86% 1.23% 0.84%
Accruing loans past due 90 days $2,748 $1,285 $2,060 $2,127 $1,784
Allowance for loan losses times nonperforming loans 3.67X 2.20x 2.69x 1.87x 2.40x
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS OF CAROLINA FIRST CORPORATION
We have audited the acCompanying consolidated balance sheet of
Carolina First Corporation and subsidiaries as of December 31, 1995, and the
related consolidated statements of income, changes in shareholders' equity,
and cash flows for the year then ended. 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 audit. The acCompanying consolidated financial
statements of Carolina First Corporation and subsidiaries as of December 31,
1994, and for each of the years in the two-year period ended December 31,
1994, were audited by other auditors whose report thereon dated February 3,
1995, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 1995 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, 1995, and the
results of their operations and cash flows for the year then ended in
conformity with generally accepted accounting principles.
(Signature of KPMG Peat Marwick LLP)
KPMG PEAT MARWICK LLP
Greenville, SC
January 26, 1996
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 KPMG Peat Marwick
LLP, independent auditors, in accordance with generally accepted auditing
standards. KPMG Peat Marwick LLP 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 KPMG Peat Marwick LLP
(separately and jointly) to determine that each is fulfilling its responsibili
ties and to consider recommendations for enhancing internal controls. The
financial statements have not been reviewed, or confirmed for accuracy or
relevance, by the Federal Deposit Insurance Corporation.
(Signature of Mack I. Whittle, Jr.) (Signature of William S. Hummers, III)
Mack I. Whittle, Jr. William S. Hummers, III
President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
20
<PAGE>
CONSOLIDATED BALANCE SHEETS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands, except share data)
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
1995 1994
<CAPTION>
<S> <C> <C>
ASSETS
Cash and due from banks.................................... $ 84,433 $ 59,750
Federal funds sold and resale agreements................... - 4,420
Securities
Trading.................................................. 5,805 1,155
Available for sale....................................... 146,272 60,548
Held for investment (market value $26,670 in 1995 and
$66,820 in 1994)....................................... 26,289 70,264
<CAPTION>
<S> <C> <C>
Total securities....................................... 178,366 131,967
<CAPTION>
<S> <C> <C>
Loans held for sale........................................ 125,000 71,695
Loans...................................................... 944,716 852,246
Less unearned income..................................... 7,056 873
Less allowance for loan losses........................... 8,661 6,002
<CAPTION>
<S> <C> <C>
Net loans.............................................. 1,053,999 917,066
<CAPTION>
<S> <C> <C>
Premises and equipment..................................... 40,320 39,823
Accrued interest receivable................................ 10,829 7,674
Other assets............................................... 46,975 43,650
<CAPTION>
<S> <C> <C>
$ 1,414,922 $ 1,204,350
<CAPTION>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing.................................... $ 160,394 $ 126,974
Interest-bearing....................................... 935,097 874,774
<CAPTION>
<S> <C> <C>
Total deposits......................................... 1,095,491 1,001,748
Federal funds purchased and repurchase agreements........ 91,532 33,986
Other short-term borrowings.............................. 95,257 72,088
Long-term debt........................................... 26,347 1,162
Accrued interest payable................................. 6,737 4,141
Other liabilities........................................ 4,591 4,743
<CAPTION>
<S> <C> <C>
Total liabilities...................................... 1,319,955 1,117,868
<CAPTION>
<S> <C> <C>
Commitments and Contingent Liabilities
Shareholders' Equity
Preferred stock - no par value; authorized 10,000,000
shares; issued and outstanding 917,200 shares (Series
1994), 456,521 shares (Series 1993) and 53,575 shares
(Series 1993B) in 1995 and 920,000 shares (Series
1994), 621,000 shares (Series 1993) and 60,000 shares
(Series 1993B) in 1994; liquidation preference $25 per
share (Series 1994 and 1993) and $20 per share (Series
1993B)................................................. 32,909 37,014
Common stock - par value $1 per share; authorized
20,000,000 shares; issued and outstanding 6,517,366
shares in 1995 and 5,618,941 shares in 1994............ 6,517 5,619
Surplus.................................................. 54,432 45,543
Retained earnings........................................ 1,778 515
Nonvested restricted stock............................... (745) (1,083)
Guarantee of ESOP debt................................... (76) (126)
Unrealized gain (loss) on securities available for sale,
net of tax............................................. 152 (1,000)
<CAPTION>
<S> <C> <C>
Total shareholders' equity............................. 94,967 86,482
<CAPTION>
<S> <C> <C>
$ 1,414,922 $ 1,204,350
<CAPTION>
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
21
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands, except share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For The Years Ended December 31,
1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................. $ 92,731 $ 68,474 $ 46,312
Interest on securities
Taxable.................................................. 7,500 5,623 6,483
Exempt from Federal income taxes......................... 1,088 1,020 475
<CAPTION>
<S> <C> <C> <C>
Total interest on securities........................... 8,588 6,643 6,958
Interest on federal funds sold and resale agreements....... 431 652 695
<CAPTION>
<S> <C> <C> <C>
Total interest income.................................. 101,750 75,769 53,965
<CAPTION>
<S> <C> <C> <C>
INTEREST EXPENSE
Interest on deposits....................................... 41,179 30,750 24,055
Interest on short-term borrowings.......................... 8,196 1,638 427
Interest on long-term debt................................. 1,603 121 125
<CAPTION>
<S> <C> <C> <C>
Total interest expense................................. 50,978 32,509 24,607
<CAPTION>
<S> <C> <C> <C>
Net interest income.................................... 50,772 43,260 29,358
PROVISION FOR LOAN LOSSES.................................... 6,846 1,197 1,106
<CAPTION>
<S> <C> <C> <C>
Net interest income after provision for loan losses.... 43,926 42,063 28,252
<CAPTION>
<S> <C> <C> <C>
NONINTEREST INCOME
Service charges on deposit accounts........................ 5,524 4,089 2,916
Credit card trust income................................... 2,775 - -
Mortgage banking income.................................... 2,162 1,638 1,788
Fees for trust services.................................... 1,042 919 542
Gain on sale of securities................................. 769 75 680
Gain on sale of mortgage servicing rights.................. 2,943 - -
Sundry..................................................... 2,111 1,505 839
<CAPTION>
<S> <C> <C> <C>
Total noninterest income............................... 17,326 8,226 6,765
<CAPTION>
<S> <C> <C> <C>
NONINTEREST EXPENSES
Salaries and wages......................................... 17,524 15,023 10,630
Employee benefits.......................................... 4,584 4,375 2,510
Occupancy.................................................. 4,209 3,728 2,301
Furniture and equipment.................................... 3,182 2,577 1,933
Amortization of intangibles................................ 1,774 2,410 875
Sundry..................................................... 15,609 11,512 9,045
Credit card restructuring charges.......................... - 12,214 -
<CAPTION>
<S> <C> <C> <C>
Total noninterest expenses............................. 46,882 51,839 27,294
<CAPTION>
<S> <C> <C> <C>
Income (loss) before income taxes...................... 14,370 (1,550) 7,723
Income taxes............................................... 4,956 190 2,305
<CAPTION>
<S> <C> <C> <C>
Net income (loss)...................................... 9,414 (1,740) 5,418
Dividends on preferred stock............................... 2,752 2,433 1,930
<CAPTION>
<S> <C> <C> <C>
Net income (loss) applicable to common shareholders.... $ 6,662 $ (4,173) $ 3,488
<CAPTION>
<S> <C> <C> <C>
NET INCOME (LOSS) PER COMMON SHARE:*
Primary................................................ $ 1.04 $ (0.71) $ 0.76
Fully diluted.......................................... 1.02 (0.71) 0.76
AVERAGE COMMON SHARES OUTSTANDING:*
Primary................................................ 6,396,838 5,836,845 4,587,884
Fully diluted.......................................... 9,274,686 8,429,010 6,840,779
CASH DIVIDENDS DECLARED PER COMMON SHARE*.................... $ 0.25 $ 0.20 $ 0.05
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
* Share data have been restated to reflect 5% stock dividends.
22
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands)
<TABLE>
<CAPTION>
Shares of Retained
Common Preferred Common Earnings
Stock Stock Stock Surplus and Other*
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992................................... 4,036,273 $ 10,319 $ 4,036 $ 30,476 $ 6,457
Net income................................................. - - - - 5,418
Issuance of Series 1993 preferred stock.................... - 14,462 - - -
Issuance of Series 1993B preferred stock................... - 1,200 - - -
Conversion and redemption of Series 1992 preferred stock... 1,089,674 (10,319) 1,090 9,137 -
Common stock issued pursuant to:
Stock dividend........................................... 147,458 - 147 1,770 (1,926)
Restricted stock plan.................................... 35,500 - 36 409 (445)
Dividend reinvestment plan............................... 4,104 - 4 45 -
Exercise of stock options................................ 4,341 - 4 26 -
Cash dividends paid/accrued by Carolina First:
Preferred stock.......................................... - - - - (1,930)
Common stock............................................. - - - - (214)
Vesting recognized as salary expense....................... - - - - 163
Payment on ESOP debt....................................... - - - - 50
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993................................... 5,317,350 15,662 5,317 41,863 7,573
Net loss................................................... - - - - (1,740)
Transfer of undivided profits to surplus................... - - - 56 (56)
Issuance of Series 1994 preferred stock.................... - 21,444 - - -
Common stock issued pursuant to:
Stock dividend........................................... 214,380 - 214 2,466 (2,689)
Restricted stock plan.................................... 40,768 - 41 570 (611)
Dividend reinvestment plan............................... 44,055 - 44 559 -
Employee stock purchase plan............................. 2,247 - 3 28 -
Exercise of stock options................................ 141 - - 1 -
Cash dividends paid/accrued by Carolina First:
Preferred stock.......................................... - - - - (2,433)
Common stock............................................. - - - - (1,024)
Treasury shares purchased.................................. - (92) - - -
Vesting recognized as salary expense....................... - - - - 236
Payment on ESOP debt....................................... - - - - 50
Unrealized loss on securities available for sale, net of
tax...................................................... - - - - (1,000)
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994................................... 5,618,941 37,014 5,619 45,543 (1,694)
<CAPTION>
<CAPTION>
Total
<S> <C>
BALANCE, DECEMBER 31, 1992................................... $ 51,288
Net income................................................. 5,418
Issuance of Series 1993 preferred stock.................... 14,462
Issuance of Series 1993B preferred stock................... 1,200
Conversion and redemption of Series 1992 preferred stock... (92)
Common stock issued pursuant to:
Stock dividend........................................... (9)
Restricted stock plan.................................... -
Dividend reinvestment plan............................... 49
Exercise of stock options................................ 30
Cash dividends paid/accrued by Carolina First:
Preferred stock.......................................... (1,930)
Common stock............................................. (214)
Vesting recognized as salary expense....................... 163
Payment on ESOP debt....................................... 50
<S> <C>
BALANCE, DECEMBER 31, 1993................................... 70,415
Net loss................................................... (1,740)
Transfer of undivided profits to surplus................... -
Issuance of Series 1994 preferred stock.................... 21,444
Common stock issued pursuant to:
Stock dividend........................................... (9)
Restricted stock plan.................................... -
Dividend reinvestment plan............................... 603
Employee stock purchase plan............................. 31
Exercise of stock options................................ 1
Cash dividends paid/accrued by Carolina First:
Preferred stock.......................................... (2,433)
Common stock............................................. (1,024)
Treasury shares purchased.................................. (92)
Vesting recognized as salary expense....................... 236
Payment on ESOP debt....................................... 50
Unrealized loss on securities available for sale, net of
tax...................................................... (1,000)
<S> <C>
BALANCE, DECEMBER 31, 1994................................... 86,482
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Net income................................................. - - - - 9,414
Common stock issued pursuant to:
Stock dividend........................................... 291,603 - 292 4,082 (4,393)
Blue Ridge merger........................................ 154,141 - 154 (22) 672
Exercise of stock warrants............................... 12,598 - 13 60 -
Dividend reinvestment plan............................... 43,322 - 43 555 -
Employee stock purchase plan............................. 6,595 - 6 82 -
Exercise of stock options................................ 51,250 - 51 274 -
Conversion of preferred stock............................ 338,916 (4,197) 339 3,858 (113)
Cash dividends paid/accrued by Carolina First:
Preferred stock.......................................... - - - - (2,752)
Common stock............................................. - - - - (1,565)
Treasury shares sold....................................... - 92 - - -
Vesting recognized as salary expense....................... - - - - 338
Payment on ESOP debt....................................... - - - - 50
Unrealized gain on securities available for sale, net of
tax...................................................... - - - - 1,152
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995................................... 6,517,366 $ 32,909 $ 6,517 $ 54,432 $ 1,109
<CAPTION>
<CAPTION>
Net income................................................. 9,414
<S> <C>
Common stock issued pursuant to:
Stock dividend........................................... (19)
Blue Ridge merger........................................ 804
Exercise of stock warrants............................... 73
Dividend reinvestment plan............................... 598
Employee stock purchase plan............................. 88
Exercise of stock options................................ 325
Conversion of preferred stock............................ (113)
Cash dividends paid/accrued by Carolina First:
Preferred stock.......................................... (2,752)
Common stock............................................. (1,565)
Treasury shares sold....................................... 92
Vesting recognized as salary expense....................... 338
Payment on ESOP debt....................................... 50
Unrealized gain on securities available for sale, net of
tax...................................................... 1,152
<S> <C>
BALANCE, DECEMBER 31, 1995................................... $ 94,967
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
*Other includes unrealized gain (loss) on securities available for sale,
nonvested restricted stock and guarantee of ESOP debt.
23
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For The Years Ended December 31,
1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................................... $ 9,414 $ (1,740) $ 5,418
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operations
Depreciation............................................. 3,284 2,756 1,965
Amortization of intangibles.............................. 1,774 2,410 875
Provision for loan losses................................ 6,846 1,197 1,106
Deferred income tax expense (benefit).................... (967) 1,017 450
Gain on sale of securities............................... (769) (75) (680)
Gain on sale of mortgage servicing rights................ (2,943) - -
Unrealized gain on securities............................ (51) - (199)
Originations of mortgage loans held for sale............. (110,190) (49,562) (81,076)
Sale of mortgage loans held for sale..................... 116,109 55,099 80,177
Proceeds from sale of trading securities................. 452,666 420,378 1,075
Proceeds from maturity of trading securities............. 23,493 31,176 -
Purchase of trading securities........................... (480,758) (452,459) (1,325)
Increase in accrued interest receivable.................. (3,155) (2,299) (751)
Increase in accrued interest payable..................... 2,596 775 281
Increase in other assets................................. (4,339) (17,410) (5)
Premiums paid on acquired credit cards................... - - (1,023)
Increase (decrease) in other liabilities................. (668) (3,439) 5,458
Federal Home Loan Bank stock dividend.................... - (150) (68)
<CAPTION>
<S> <C> <C> <C>
Net cash provided by (used for) operating activities... 12,342 (12,326) 11,678
<CAPTION>
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in federal funds sold and
resale agreements........................................ 4,420 55,450 (51,934)
Proceeds from sale of securities available for sale........ 77,570 26,429 67,285
Proceeds from maturity of securities available for sale.... 72,160 162,709 219,720
Proceeds from maturity of securities held for investment... 10,135 8,110 5,570
Purchase of securities available for sale.................. (160,232) (173,712) (276,940)
Purchase of securities held for investment................. (39,041) (24,777) (52,708)
Purchase of loans.......................................... (32,911) - (16,265)
Net increase in loans...................................... (118,663) (264,738) (119,208)
Proceeds from sale of mortgage servicing rights............ 5,026 - -
Proceeds from sale of premises and equipment............... 30 424 474
Capital expenditures....................................... (3,811) (11,209) (12,060)
Blue Ridge merger.......................................... 804 - -
<CAPTION>
<S> <C> <C> <C>
Net cash used for investing activities................... (184,513) (221,314) (236,066)
<CAPTION>
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Acquired deposits (net).................................... - 97,735 196,840
Net increase in deposits................................... 93,743 56,024 5,674
Net increase in federal funds purchased and
repurchase agreements.................................... 57,546 17,261 14,188
Increase in short-term borrowings.......................... 23,169 71,976 (108)
Issuance of long-term debt................................. 25,237 - -
Payments of long-term debt................................. (52) (78) (163)
Issuance of preferred stock................................ - 21,352 14,462
Redemption of preferred stock.............................. - - (92)
Cash dividends paid........................................ (4,221) (3,025) (1,777)
Other common stock activity................................ 1,432 629 30
<CAPTION>
<S> <C> <C> <C>
Net cash provided by financing activities................ 196,854 261,874 229,054
<CAPTION>
<S> <C> <C> <C>
Net increase in cash and due from banks...................... 24,683 28,234 4,666
Cash and due from banks at beginning of year................. 59,750 31,516 26,850
<CAPTION>
<S> <C> <C> <C>
Cash and due from banks at end of year....................... $ 84,433 $ 59,750 $ 31,516
<CAPTION>
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
24
<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, Blue Ridge Finance Company ("Blue Ridge") and
Carolina First Mortgage Company ("CF Mortgage"). All significant interCompany
accounts and transactions have been eliminated.
The accounting principles followed by the Company and its subsidiaries and
the methods of applying these principles conform with generally accepted
accounting principles and with general practices within the banking industry.
Certain principles which significantly affect the determination of financial
position, results of operations and cash flows are summarized below.
Prior years' financial statements have been restated to reflect acquisitions
consummated during 1995 accounted for using the pooling-of-interests method of
accounting. Acquisitions during the past three years that were accounted for as
purchases are reflected in the financial position and results of operations of
the Company since the date of their acquisition. Certain prior year amounts have
been reclassified to conform with 1995 presentations.
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 fair 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 fair value. Such securities are
used to execute asset/liability management strategy and to manage liquidity.
Adjustments for unrealized gains or losses, net of the income tax effect, 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 -- Loans receivable are stated at unpaid principal balances adjusted
for unamortized premiums and unearned discounts. Carolina First Bank recognizes
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. Loans are considered to be impaired when, in management's
judgment, the collection of principal or interest is not collectible in
accordance with the terms of the obligation. An impaired loan is put on
non-accrual status and future cash receipts are applied to principal only. The
accrual of interest resumes only when the loan returns to performing status.
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 commercial loans secured
by real estate, mortgage loans and credit card loans and are carried at the
lower of aggregate cost or market value.
LOAN SALES -- 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 mortgage 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. The resulting excess
servicing rights, included in other assets, are amortized to operations over the
remaining life of the loans. Management periodically reviews and adjusts, as
necessary, its estimates of remaining loan lives.
MORTGAGE SERVICING RIGHTS -- Effective January 1, 1995, the Company adopted
Statement of Financial Accounting Standards ("SFAS") 122, "Accounting for
Mortgage Servicing Rights," which amends SFAS 65, "Accounting for Certain
Mortgage Banking Activities." The statement provides guidance for recognition of
mortgage servicing rights as an asset when a mortgage loan is sold or
securitized and servicing rights retained. Since the adoption of SFAS 122, the
Company capitalizes the allocated cost of originated mortgage servicing rights,
and records a corresponding increase in mortgage banking income. Prior to the
25
<PAGE>
adoption of the statement, the allocated costs of originated mortgage servicing
rights were not capitalized.
The rights to service mortgage loans for others ("mortgage servicing rights"
or "MSRs") are included in other assets. Purchased mortgage servicing rights are
recorded at lower of cost or market. Originated mortgage servicing rights are
capitalized based on the allocated cost which is determined when the underlying
loans are sold or securitized. MSRs are amortized in proportion to and over the
period of estimated net servicing income using a method that is designed to
approximate a level-yield method, taking into consideration the estimated
prepayment of the underlying loans. For purposes of measuring impairment, MSRs
are periodically reviewed for impairment 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 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. In addition, various regulatory agencies periodically review
the Company's allowance for loan losses as part of their examination process and
could require the Company to adjust its allowance for loan losses.
CONCENTRATIONS OF CREDIT RISK -- The Company makes loans to individuals and
small businesses for various personal and commercial purposes primarily
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.
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, included in other 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.
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 noninterest expenses. Gains and losses realized
from the sale of other real estate owned are included in noninterest income.
LOAN ORIGINATION FEES -- 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
26
<PAGE>
adjustment. If the commitment expires unexercised, the net deferred amount is
recognized.
INCOME TAXES -- The Company computes its income taxes in accordance with the
provisions of SFAS 109, "Accounting for Income Taxes." Under SFAS 109, deferred
tax liabilities are recognized on all taxable temporary differences (reversing
differences where tax deductions initially exceed financial statement expense,
or income is reported for financial statement purposes prior to being reported
for tax purposes). In addition, deferred tax assets are recognized on all
deductible temporary differences (reversing differences where financial
statement expense initially exceeds tax deductions, or income is reported for
tax purposes prior to being reported for financial statement purposes) and
operating loss and tax credit carryforwards. Valuation allowances are
established to reduce deferred tax assets if it is determined to be "more likely
than not" that all or some portion of the potential deferred tax assets will not
be realized. Under SFAS 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.
PER SHARE DATA -- Primary earnings per share are computed by dividing net
income (loss) applicable to common shareholders by the weighted average number
of shares of common stock and common stock equivalents outstanding during the
period. Fully diluted earnings per share are computed by dividing net income
(loss) by the weighted average number of shares of common stock and common stock
equivalents outstanding during the period, with common stock equivalents
calculated based on the ending market price, if higher than the average market
price. Common stock equivalents consist of convertible preferred stock, stock
warrants and options and are computed using the treasury stock method. The
weighted average number of shares outstanding during the period for primary and
fully diluted earnings per share was adjusted retroactively for the pooling-of-
interests acquisitions by merger of Aiken County National Bank ("ACNB") and
Midlands National Bank ("MNB").
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In October 1995, the Financial
Accounting Standards Board ("FASB") issued SFAS 123, "Accounting for Stock-Based
Compensation." SFAS 123 establishes a new method of accounting for stock-based
arrangements by measuring the value of a stock compensation award by the fair
value method versus the intrinsic method as currently is used under the
provisions of Opinion 25. If entities do not adopt SFAS 123, they will be
required to disclose in the footnotes pro forma net income and earnings per
share information as if the fair value based method had been adopted. The
disclosure requirements of SFAS 123 are effective for financial statements with
fiscal years beginning after December 15, 1995. SFAS 123 will have minimal
impact on the Company.
2. STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash includes currency and coin, cash
items in process of collection, interest bearing time deposits with other banks
and due from banks.
The following summarizes supplemental cash flow data for the years ended
December 31:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994 1993
<S> <C> <C> <C>
Interest paid.............. $ 53,574 $ 31,734 $ 24,326
Income taxes paid.......... 6,194 2,868 2,059
Significant non-cash
transactions are
summarized as follows:
Transfer of securities from
available for sale to
held for investment in
relation to
pooling-of-interests
merger................... 2,618 - -
One time reclass of
securities from held for
investment to available
for sale................. 75,499 - -
Loans transferred to other
real estate owned........ 1,876 647 2,355
Change in unrealized gain
(loss) on securities
available for sale, net
of tax................... 1,152 (1,000) -
Blue Ridge merger.......... 804 - -
Transfer from undivided
profits to capital
surplus.................. - 56 -
</TABLE>
3. SUBSEQUENT EVENTS
On January 4, 1996, the Company announced the redemption of the 7.50%
Noncumulative Convertible Preferred Stock Series 1993 ("Series 1993 Preferred
Stock"). The redemption date was February 5, 1996. Of the 435,121 shares of
Series 1993 Preferred Stock outstanding on January 4, 1996, holders of 432,655
shares elected to convert into common stock. Consequently, the Company issued
871,021 shares of $1.00 par value common stock.
On January 25, 1996, the Company announced the redemption of the 7.32%
Noncumulative Convertible Preferred Stock Series 1994 ("Series 1994 Preferred
Stock"). The redemption date is February 29, 1996.
27
<PAGE>
4. BUSINESS COMBINATIONS
On February 3, 1995, Carolina First Savings Bank was merged into Carolina
First Bank.
On April 10, 1995, Aiken County National Bank ("ACNB"), a national bank
headquartered in Aiken, South Carolina, was merged into Carolina First Bank.
Carolina First Bank acquired all the outstanding common shares of ACNB in
exchange for 475,291 shares (adjusted for 5% stock dividend) of the Company's
common stock. At the merger date, ACNB had approximately $39 million in total
assets, year-to-date net interest income of approximately $569,000 and
year-to-date net income of approximately $117,000.
On June 30, 1995, Midlands National Bank ("MNB"), a national bank
headquartered in Prosperity, South Carolina, was merged into Carolina First
Bank. Carolina First Bank acquired all the outstanding common shares of MNB in
exchange for 614,216 shares (adjusted for 5% stock dividend) of the Company's
common stock. At the merger date, MNB had approximately $44 million in total
assets, year-to-date net interest income of approximately $926,000 and
year-to-date net income of approximately $12,000.
The consolidated financial statements of the Company give effect to these
two mergers, each of which has been accounted for as a pooling-of-interests.
Accordingly, financial statements for all periods have been restated to reflect
the results of operations of the companies on a combined basis from the earliest
period presented, except for dividends per share.
The Company's consolidated financial data for the years ended December 31,
1994 and 1993 have been restated as follows:
<TABLE>
<CAPTION>
As
Previously Currently
($ in thousands) Reported ACNB MNB Reported
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Net interest income.......... $ 39,423 $ 1,844 $ 1,993 $ 43,260
Provision for loan losses.... 950 140 107 1,197
Net income (loss)............ (1,869) (306) 435 (1,740)
YEAR ENDED DECEMBER 31, 1993
Net interest income.......... $ 25,942 $ 1,630 $ 1,786 $ 29,358
Provision for loan losses.... 909 52 145 1,106
Net income................... 4,935 113 370 5,418
</TABLE>
On December 29, 1995, the Company acquired all the outstanding shares of
Blue Ridge Finance Company, an automobile finance Company based in Greenville,
South Carolina, in exchange for 154,141 shares of the Company's common stock. At
the merger date, Blue Ridge had approximately $4 million in total assets. The
transaction was accounted for as a pooling-of-interests; however, due to the
immateriality of the transaction in relation to the Company's consolidated
financial position and operating results, prior period financial statements have
not been restated. Prior to the merger, Blue Ridge's fiscal year ended August
31. In recording the pooling-of-interests combination, Blue Ridge's financial
statements for the twelve months ended December 31, 1995 were combined with
the Company's financial statements for the same period.
On April 29, 1994, Carolina First 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 $5.8 million, on which a premium of approximately
$533,000 was paid.
On May 2, 1994, Carolina First Bank and Carolina First 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,
Carolina First Bank acquired only the deposits and select loans from Republic
National Bank's main office branch in Columbia. With this transaction, Carolina
First Bank and Carolina First Savings Bank acquired loans of approximately
$37.5 million and deposits of about $135.3 million on which a premium of
approximately $5.4 million was paid.
In March 1993, Carolina First Bank acquired certain assets and assumed
certain liabilities of 13 South Carolina branches of Republic National Bank.
Carolina First Bank acquired $31.2 million in loans, $6.4 million in premises
and equipment, and $204.9 million in deposit liabilities. The total premium paid
for the acquisitions was approximately $6.9 million.
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 $1.2 million. Total cost of the acquisition in excess of the
fair value of net assets acquired aggregated approximately $3.7 million.
28
<PAGE>
On December 31, 1993, Carolina First 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.). Carolina First Bank
assumed deposit liabilities of $38.5 million and acquired $143,000 in loans. The
total premium paid for the acquisition was approximately $1.1 million.
The acquisitions in 1994 and 1993 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.
5. RESTRICTIONS ON CASH AND DUE FROM BANKS
Carolina First 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 the years ended December 31, 1995 and
1994, were approximately $16,067,000 and $6,927,000, respectively.
6. SECURITIES
Effective January 1, 1994, the Company adopted 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 fair 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. Held for investment securities are
reported at amortized cost.
In November 1995, the FASB issued a Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities," which allowed entities a one-time reclassification of
their investment securities without tainting their investment portfolio. This
was to be done before December 31, 1995. In accordance with this Special Report,
the Company reclassed $75,499,000 of its held for investment portfolio to its
available for sale portfolio.
The aggregate book and fair values of securities at December 31 were as
follows:
<TABLE>
<CAPTION>
1995
BOOK GROSS UNREALIZED FAIR
($ in thousands) VALUE GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE
FOR SALE
U.S. treasury
securities......... $ 97,118 $ 71 $ 49 $ 97,140
Obligations of U.S.
government agencies
and corporations... 36,741 63 98 36,706
Other securities..... 12,322 115 11 12,426
$ 146,181 $ 249 $ 158 $ 146,272
SECURITIES HELD FOR
INVESTMENT
Obligations of states
and political
subdivisions....... $ 25,937 $ 381 $ - $ 26,318
Other securities..... 352 - - 352
$ 26,289 $ 381 $ - $ 26,670
</TABLE>
<TABLE>
<CAPTION>
1994
Gross Unrealized Fair
($ in thousands) Book Value Gains Losses Value
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE
FOR SALE
U.S. treasury
securities......... $ 27,213 $ - $ 679 $ 26,534
Obligations of U.S.
government agencies
and corporations... 27,512 - 633 26,879
Other securities..... 7,303 - 168 7,135
$ 62,028 $ - $ 1,480 $ 60,548
SECURITIES HELD FOR
INVESTMENT
U.S. treasury
securities......... $ 6,189 $ - $ 537 $ 5,652
Obligations of U.S.
government agencies
and corporations... 42,936 - 1,852 41,084
Obligations of states
and political
subdivisions....... 21,086 19 1,074 20,031
Other securities..... 53 - - 53
$ 70,264 $ 19 $ 3,463 $ 66,820
</TABLE>
29
<PAGE>
The book value and estimated fair value of debt securities at December 31,
1995, 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. Fair value of
securities was determined using quoted market prices.
<TABLE>
<CAPTION>
1995
BOOK FAIR
($ in thousands) VALUE VALUE
<S> <C> <C>
SECURITIES AVAILABLE
FOR SALE
Due in one year or less.... $ 97,118 $ 98,536
Due after one year through
five years............... 35,341 35,310
No contractual maturity.... 13,722 12,426
$ 146,181 $ 146,272
SECURITIES HELD FOR
INVESTMENT
Due in one year or less.... $ 2,668 $ 2,675
Due after one year through
five years............... 9,831 9,950
Due after five years
through ten years........ 10,253 10,456
Due after ten years........ 3,537 3,589
$ 26,289 $ 26,670
</TABLE>
Gross realized gains and losses on sales of securities for the years ended
December 31 were:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994 1993
<S> <C> <C> <C>
Gross realized gains....... $ 1,156 $ 252 $ 973
Gross realized losses...... (387) (177) (293)
Net gain on sale of
securities............... $ 769 $ 75 $ 680
</TABLE>
The change from a net unrealized loss to a net unrealized gain on securities
available for sale, as recorded in shareholders' equity, for the year ended
December 31, 1995 was $1,152,000. Securities with an approximate book value of
$120,851,000 and $92,427,000 at December 31, 1995 and 1994, respectively, were
pledged to secure public deposits and for other purposes. Estimated market
values of securities pledged were $121,213,000 and $88,438,000 at December 31,
1995 and 1994, respectively.
At December 31, 1995, the Company owned 7,500 shares of common stock of
Affinity Technology Group, Inc. ("Affinity"). This investment, included in
securities available for sale, was recorded at its book value of $75. As of
December 31, 1995, there was no market for this investment so the fair value
could not be determined. At December 31, 1995, the Company owned warrants to
purchase 55,390 shares of Affinity's common stock at a purchase price of $0.01
per share.
7. LOANS AND ALLOWANCE FOR LOAN LOSSES
The following is a summary of loans outstanding by category at December 31:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994
<S> <C> <C>
Real estate - mortgage..... $ 217,899 $ 206,980
Real estate -
construction............. 31,552 24,039
Commercial and
industrial............... 188,255 179,876
Commercial and industrial
secured by real estate... 234,153 275,083
Consumer................... 149,216 129,106
Credit cards............... 86,901 36,954
Lease financing
receivables.............. 36,740 208
Loans held for sale........ 125,000 71,695
Gross loans................ 1,069,716 923,941
Less unearned income....... 7,056 873
Less allowance for loan
losses................... 8,661 6,002
Net loans.................. $ 1,053,999 $ 917,066
</TABLE>
On January 1, 1995, the Company adopted SFAS 114, "Accounting by Creditors
for Impairment of a Loan." SFAS 114 requires that impaired loans and certain
restructured loans be measured at the present value of expected future cash
flows, discounted at the loan's effective interest rate, at the loan's
observable market price, or at the fair value of the collateral if the loan is
collateral dependent. A specific reserve is set up for each impaired loan.
Also on January 1, 1995, the Company adopted 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.
At December 31, 1995, the recorded investment in loans that were considered
to be impaired under SFAS 114 was $1,275,000. The average recorded investment in
impaired loans in 1995 was $1,261,000. The related allowance for these impaired
loans was $669,000. At December 31, 1994, there were $2,051,000 of loans which
were not accruing interest. Foregone interest income was approximately $269,000
in 1995, $220,000 in 1994 and $561,000 in 1993. Interest income recognized on
these loans during 1995, 1994 and 1993 was approximately $373,000, $49,000 and
$46,000, respectively.
Foreclosure loans included in other real estate owned amounted to $2,348,000
and $869,000 at December 31, 1995 and 1994, respectively. At December 31, 1995
and 1994, loans included $1,085,000 and $675,000 in restructured loans.
30
<PAGE>
Changes in the allowance for loan losses were:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
Balance at beginning
of year.................. $ 6,002 $ 6,679 $ 5,276
Blue Ridge merger.......... 128 - -
Valuation allowance for
loans purchased.......... 633 1,077 1,811
Provision for loan
losses................... 6,846 1,197 1,106
Recoveries on loans
previously charged off... 311 140 65
Loans charged off.......... (5,259) (3,091) (1,579)
Balance at end of year..... $ 8,661 $ 6,002 $ 6,679
</TABLE>
On January 24, 1995, Carolina First Bank securitized approximately
$97,000,000 of credit card receivables. This transaction was recorded as a sale
in accordance with SFAS 77, "Reporting by Transferor of Receivables with
Recourse." During 1995, credit card receivables totaling approximately $14
million were securitized. 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 subservicing fee.
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
$13,405,000 and $17,295,000 at December 31, 1995 and 1994, respectively. During
1995, new loans of approximately $6,923,000 were made, and payments totaled
approximately $10,813,000.
8. PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994
<CAPTION>
<S> <C> <C>
Land....................... $ 6,948 $ 5,699
Buildings.................. 20,176 20,599
Furniture, fixtures and
equipment................ 17,784 16,910
Leasehold improvements..... 7,479 6,469
Construction in progress... 74 420
52,461 50,097
Less accumulated
depreciation and
amortization............. 12,141 10,274
$ 40,320 $ 39,823
</TABLE>
Depreciation and amortization charged to operations totaled $3,284,000,
$2,756,000 and $1,965,000 in 1995, 1994 and 1993, respectively.
At December 31, 1995, approximately $2,074,000 of land and buildings was
pledged as collateral for long-term debt obligations (Note 15).
9. INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization, at December 31 are
included in other assets and summarized as follows:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994
<CAPTION>
<S> <C> <C>
Goodwill................... $ 8,168 $ 9,123
Core deposit premium....... 9,938 11,125
Credit card premium........ 276 345
$ 18,382 $ 20,593
</TABLE>
10. MORTGAGE OPERATIONS
Effective January 1, 1995, the Company adopted SFAS 122, "Accounting for
Mortgage Servicing Rights," which amends SFAS 65, "Accounting for Certain
Mortgage Banking Activities." The statement provides guidance for recognition of
mortgage servicing rights as an asset when a mortgage loan is sold or
securitized and servicing rights retained. Since the adoption of SFAS 122, the
Company capitalized $281,000, representing the allocated cost of originated
mortgage servicing rights, and recorded a corresponding increase in mortgage
banking income. Prior to the adoption of the statement, the allocated costs of
originated mortgage servicing rights were not capitalized.
Mortgage servicing rights which are included in other assets at December 31
are summarized as follows:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994
<S> <C> <C>
Servicing rights........... $ 9,932 $ 8,655
Excess servicing rights.... 27 34
</TABLE>
The Company paid $13,401,000 for mortgage servicing rights to approximately
$1,009,227,000 of loans in 1995. The amortization of servicing rights and excess
servicing rights included in loan servicing fees amounted to $1,447,000,
$908,000, and $636,000 in 1995, 1994 and 1993, respectively. Mortgage servicing
rights in 1995 were reduced by approximately $10,965,000 related to the sales of
mortgage servicing rights.
The fair value of mortgage servicing rights at December 31, 1995 was
approximately $10,511,000. No valuation allowance for capitalized servicing
rights or excess servicing rights was required during the year ended December
31, 1995.
31
<PAGE>
Mortgage banking income includes income from originations and sales of
mortgages loans of $1,785,000, $1,066,000 and $1,560,000 in 1995, 1994 and 1993,
respectively.
11. DEPOSITS
Certificates of deposit in excess of $100,000 totaled $153,907,000 and
$135,865,000 at December 31, 1995 and 1994, respectively.
12. INCOME TAXES
Income tax expense for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994 1993
<S> <C> <C> <C>
CURRENTLY PAYABLE
(REFUNDABLE)
Federal.................. $ 5,664 $ (827) $ 1,555
State.................... 259 - 300
5,923 (827) 1,855
DEFERRED
Federal.................. (999) 804 436
State.................... 32 213 14
(967) 1,017 450
Total income taxes....... $ 4,956 $ 190 $ 2,305
</TABLE>
Income taxes are different than tax expense computed by applying the
statutory federal income tax rate of 35% for 1995, and 34% for 1994 and 1993, to
income before income taxes. The reason for these differences are as follows:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994 1993
<S> <C> <C> <C>
Tax expense (benefit) at
statutory rate........... $ 5,030 $ (527) $ 2,626
Differences resulting from:
Rehabilitation tax
credit................. (30) (150) (60)
Effect of Carolina First
Savings Bank merger.... - 1,005 -
Change in valuation
allowance for deferred
tax assets............. 85 36 10
State tax net of federal
benefit................ 189 141 207
Nontaxable interest...... (329) (227) (176)
Other, net............... 11 (88) (302)
$ 4,956 $ 190 $ 2,305
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at December 31 are
presented below:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994
<S> <C> <C>
DEFERRED TAX ASSETS
Loan loss allowance
deferred for tax
purposes............... $ 2,385 $ 714
Excess basis of
intangible assets for
financial reporting
purposes over tax
basis.................. 1,540 1,062
Unrealized loss on
securities available
for sale............... - 483
Net operating loss
carryforwards.......... 354 386
Compensation expense
deferred for tax
reporting purposes..... 289 166
Other.................... 114 311
4,682 3,122
Less valuation
allowance............ 217 132
4,465 2,990
DEFERRED TAX LIABILITIES
Accretion and FHLB
dividends.............. - 118
Net loan fees deferred
for tax purposes....... 390 378
Tax depreciation in
excess of book
depreciation........... 1,205 917
Unrealized gain on
securities available
for sale............... 47 -
Tax bad debt reserve
recapture adjustment... 1,695 991
Other.................... 119 14
3,456 2,418
Net deferred tax
assets............... $ 1,009 $ 572
</TABLE>
A portion of the change in net deferred tax assets relates to unrealized
gains and losses on securities available for sale. The related current period
deferred taxes of $530,000 have been recorded directly to shareholders' equity.
The balance of the change in net deferred tax assets results from the current
period deferred tax benefit of $967,000. The net deferred tax asset is included
in other assets in the acCompanying consolidated balance sheets.
32
<PAGE>
The valuation allowance against the potential total deferred tax assets as
of December 31, 1995 and 1994 relates to deductible temporary differences for
state tax purposes. It is management's conclusion that the realization of the
net deferred tax asset recorded is more likely than not. This conclusion is
based upon taxable income in carryback years and conservative projections of
taxable income in future years.
The Company's income tax returns for 1992 and subsequent years are subject
to review by the taxing authorities. There are no significant pending
assessments from taxing authorities regarding taxation issues at the Company or
its subsidiaries.
13. BORROWED FUNDS
Short-term borrowings and their related weighted average interest rates at
December 31 were:
<TABLE>
<CAPTION>
1995 1994
($ in thousands) AMOUNT RATE Amount Rate
<S> <C> <C> <C> <C>
Federal funds purchased.... $ 31,000 6.01% $ 16,000 5.58%
Repurchase agreements...... 60,532 5.30 17,986 5.23
FHLB advances.............. 90,000 5.75 72,000 6.03
Commercial paper........... 2,405 6.76 - -
Other...................... 2,852 9.00 88 9.00
$ 186,789 5.71% $ 106,074 5.84%
</TABLE>
Total loans pledged to the Federal Home Loan Bank ("FHLB") for advances at
December 31, 1995 were $126,754,000.
Federal funds purchased represent unsecured overnight borrowings from other
financial institutions by Carolina First Bank. Repurchase agreements represent
short-term borrowings by Carolina First Bank with maturities ranging from 1 to
182 days collateralized by securities of the United States government or its
agencies. FHLB advances represent borrowings from the FHLB of Atlanta by
Carolina First Bank pursuant to lines of credit collateralized by a blanket lien
on qualifying loans secured by first mortgages on 1-4 family residences. These
advances have an initial maturity of one year or less with interest payable
monthly. Commercial paper is issued by the Company with maturities less than 270
days. Other short-term borrowings represents primarily debt acquired through the
Blue Ridge merger.
The maximum short-term borrowings outstanding at any month end were:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994
<S> <C> <C>
Federal funds purchased
and repurchase
agreements............... $ 107,717 $ 33,986
Advances from
the FHLB................. 90,000 72,000
Commercial paper and
other short-term
borrowings............... 5,205 88
Aggregate short-term
borrowings............... 202,922 106,074
</TABLE>
Average short-term borrowings during 1995 and 1994 were $136,799,000 and
$41,362,000, respectively. The average interest rate on short-term borrowings
during 1995 and 1994 were 6.00% and 3.96%, respectively.
14. UNUSED LINES OF CREDIT
At December 31, 1995, Carolina First Bank had unused short-term lines of
credit to purchase federal funds from unrelated banks totaling $12,750,000.
These lines of credit are available on a one-to-ten day basis for general
corporate purposes of Carolina First Bank. All of the lenders have reserved the
right to withdraw these lines at their option. At December 31, 1995, Carolina
First Bank had an unused line of credit with the FHLB of Atlanta totaling
$45,000,000.
15. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994
<S> <C> <C>
9.00% Subordinated Notes;
due September 1, 2005;
interest payable
quarterly................ $ 25,237 $ -
Mortgage note payable;
interest at 11% due
December 31, 2012, with
current annual payments
of approximately
$125,000................. 1,084 1,086
Employee Stock Ownership
Plan (ESOP) note payable
to Wachovia Bank; due
December 14, 1997;
interest at 90% of the
prime rate, payable
annually................. 26 76
$ 26,347 $ 1,162
</TABLE>
33
<PAGE>
On May 18, 1995, the Company completed its public offering of the 9.00%
Subordinated Notes. The Subordinated Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after September 1, 2000, at 100%
of the principal amount plus accrued interest to the date of redemption.
The principal maturities of long-term debt for the next five years
subsequent to December 31, 1995 are $52,000 in 1996, $29,000 in 1997, $24,000 in
1998, $27,000 in 1999 and $17,000 in 2000.
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 Corporation filed a lawsuit against
Carolina First Bank in the Court of Common Pleas in Lexington County, South
Carolina. Such action, in general, claims that Carolina First Bank improperly
paid approximately $600,000 in checks to Harold McCarley and/or McCarley and
Associates, Inc. The complaint seeks actual and punitive damages in an amount to
be determined by a jury, plus interest on the damages and other costs. Carolina
First Bank has answered the complaint and plans to vigorously defend such
complaint. Carolina First Bank believes that there are valid defenses available
to it. In connection with the litigation, Carolina First Bank also expects to
make a claim under insurance policies for any losses it may suffer which, if
determined to cover the loss, could pay for substantially all of the actual
damages, if any, determined to be appropriate by a jury. However, no assurance
can be given at this time regarding whether it will be determined that any
losses suffered in this litigation will be covered by the insurance policy.
Furthermore, the Company is not in a position at this time to assess the
likely outcome of the litigation or any damages for which it may become liable.
On September 26, 1995, David W. Bowers and E. Monte Bowers filed a lawsuit
against the Company and Carolina First Bank in the Court of Common Pleas in
Newberry County, South Carolina. The complaint alleges breach of contract,
breach of contract accompanied by a fraudulent act and fraud in the inducement.
The allegations arise from Carolina First Bank's alleged breach of written
employment agreements with David Bowers and Monte Bowers. The Bowers demand
judgment against Carolina First Bank in the amount of $912,000 plus punitive
damages, attorneys' fees and costs. It is the Company's position that it has not
breached the relevant employment contracts and is vigorously defending this
lawsuit. However, the Company is not in a position to assess the likelihood or
amount of liability.
During 1995, Congress considered various proposals for a one-time special
assessment to be charged on all Savings Association Insurance Fund ("SAIF")
deposits to fully capitalize the SAIF immediately. The proposed amount of the
special assessment has been as high as $0.85 per $100 of SAIF deposits. Assuming
that the special assessment were applied at the $0.85 rate, the Company would
incur additional deposit insurance premium expense of approximately $1.9 million
which would be charged against current period income. The timing and amount of
such an assessment cannot be accurately predicted at this time.
17. LEASE COMMITMENTS
Approximate minimum rental payments under noncancelable operating leases at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
($ in thousands)
1996....................... $ 1,744
1997....................... 1,670
1998....................... 1,545
1999....................... 1,507
2000....................... 1,297
Thereafter................. 8,580
$ 16,343
</TABLE>
Leases on premises and equipment 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 $1,484,000, $1,138,000
and $714,000 in 1995, 1994 and 1993, respectively. The leases typically provide
that the lessee pay property taxes, insurance and maintenance cost.
18. PREFERRED STOCK
On January 4, 1996, the Company announced the redemption of the Series 1993
Preferred Stock. The redemption date was February 5, 1996. Of the 435,121 shares
of Series 1993 Preferred Stock outstanding, holders of 432,655 shares elected to
convert into common stock. Consequently, the Company issued 871,021 shares of
$1.00 par value common stock. Dividends paid or declared on the Series 1993
Preferred Stock during 1995 were $1,006,000.
34
<PAGE>
On January 25, 1996, the Company announced the redemption of the Series 1994
Preferred Stock. The redemption date is February 29, 1996. Holders may elect to
convert their shares into common stock or redeem their shares for $26.50. Each
share of Series 1994 Preferred Stock is convertible into 1.8828 shares of common
stock. Dividends paid or declared on the Series 1994 Preferred Stock during 1995
were $1,679,000.
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 CF Mortgage,
formerly First Sun Mortgage Corporation. Each share of Series 1993B Preferred
Stock is convertible into 1.8375 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 during 1995 were $67,000.
19. PER SHARE INFORMATION
The Company's Board of Directors declared a five percent common stock
dividend issued on August 15, 1995, to common shareholders of record on August
1, 1995. Per share data have been restated to reflect this dividend.
The following is a summary of the earnings per share calculation for the
years ended December 31:
<TABLE>
<CAPTION>
($ in thousands, except
share data) 1995 1994 1993
<S> <C> <C> <C>
PRIMARY
Average common shares
outstanding........... 6,263,850 5,836,845 4,587,884
Dilutive common stock
options and
warrants.............. 132,988 - -
Average primary shares
outstanding........... 6,396,838 5,836,845 4,587,884
Net income (loss)....... $9,414 $(1,740 ) $5,418
Less dividends on
preferred stock....... 2,752 2,433 1,930
Net income (loss)
applicable to common
shareholders.......... $6,662 $(4,173 ) $3,488
Per share amount........ $ 1.04 $ (0.71 ) $ 0.76
FULLY DILUTED
Average common shares
outstanding........... 6,263,850 5,836,845 4,587,884
Convertible preferred
stock assumed
converted............. 2,869,823 2,592,165 2,252,895
Dilutive common stock
options and
warrants.............. 141,013 - -
Average fully diluted
shares outstanding.... 9,274,686 8,429,010 6,840,779
Net income (loss)....... $9,414 $(1,740 ) $5,418
Per share amount, if
lower than primary per
share amount.......... $ 1.02 n/a n/a
</TABLE>
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 its subsidiaries.
South Carolina's banking regulations restrict the amount of dividends that
Carolina First Bank can pay. All dividends paid from Carolina First Bank are
subject to the prior approval of the Commissioner of Banking and payable only
from the retained earnings of Carolina First Bank. At December 31, 1995,
Carolina First Bank's retained earnings were $24,102,000.
35
<PAGE>
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 551,250. 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 1995 and 1994. The information has been adjusted
for the 5% stock dividends.
<TABLE>
<CAPTION>
1995 1994
OPTION Option
PRICE Price
SHARES PER SHARE Shares Per Share
<S> <C> <C> <C> <C>
Outstanding,
January 1.......... 137,700 $ 5.77/14.77 109,550 $5.77/10.91
Granted.............. 57,775 12.74/15.25 28,298 14.17
Cancelled............ (4,022) 8.43/15.25 - -
Exercised............ (49,691) 5.77/14.17 (148) 8.96/11.46
Outstanding, December
31................. 141,762 $ 5.77/15.25 137,700 $5.77/14.17
Exercisable, December
31................. 49,548 $ 5.77/14.17 41,645 $5.77/11.46
Available for grant,
December 31........ 299,285 353,038
</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, 1995, there were 72,746 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 $338,000 charged to expense in 1995, $236,000 in 1994 and
$163,000 in 1993.
In connection with the Directors' Stock Option Plan, established at the 1994
Annual Meeting, grants were issued for 19,950 shares at an option price of
$12.86 per share on May 1, 1995 and 16,800 shares at an option price of $11.79
per share on May 2, 1994.
Each of MNB's organizers received one nontransferable warrant to purchase
one share of MNB's common stock for each share they had committed to purchase in
the 1988 initial offering. The exercise price of the warrants is $5.77 per
share, and the warrants are exercisable at any time until their expiration on
December 7, 1998. The total number of shares that can be purchased with these
warrants was 160,256 at the end of 1994. At December 31, 1995 there were 147,658
warrants outstanding; 12,598 were exercised in 1995.
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, 1995, the Company had executed simultaneous
repurchase/reverse repurchase transactions with customers with total principal
amounts of approximately $345,054,000 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, 1995, was $1,196,425,000.
36
<PAGE>
23. RELATED PARTY TRANSACTIONS
The Company has entered into a series of transactions with entities whose
Chief Executive Officer is now a director of the Company. These transactions
include the purchase of branches from Republic National Bank, the purchase of
the credit card receivables from Republic National Bank, the purchase of
mortgage servicing rights from Resource Bancshares Mortgage Group, Inc. and the
purchase of lease financing receivables from Republic Leasing Company, Inc.
Carolina First Bank has also entered into servicing and solicitation agreements
with Republic National Bank pursuant to its credit card accounts.
During the years ended December 31, 1995, 1994 and 1993, lease payments
aggregating approximately $167,000, $163,000 and $163,000, respectively, were
made to affiliates of directors or companies in which certain directors have an
interest.
These transactions, agreements and lease payments were made in the ordinary
course of business and were on terms comparable to those which would have been
obtained between unrelated parties.
24. EMPLOYEE BENEFIT PLANS
The Company maintains the Carolina First Salary Reduction Plan and Trust
("the Plan") for all eligible employees of Carolina First Bank, CF Mortgage and
Blue Ridge. 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. Effective January 1, 1996, the Company's matching
percentage was increased to five percent. Contributions of $496,000, $458,000
and $301,000 were charged to operations in 1995, 1994 and 1993, 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, 1995, 1994 and 1993, contributions of $901,000,
$813,000 and $401,000, respectively, were charged to operations.
The ESOP has a loan used to acquire shares of stock of the Company. Such
stock is pledged as collateral for the loan. In accordance with the requirements
of the American Institute of Certified Public Accountants Statements of Position
76-3 and 93-6, the Company presents the outstanding loan amount as other
borrowed money and as a reduction of shareholders' equity in the acCompanying
consolidated balance sheets (Note 15). Company contributions to the ESOP are the
primary source of funds used to service the debt.
25. NONINTEREST EXPENSES
The significant components of sundry noninterest expenses for the years
ended December 31 are presented below:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994 1993
<S> <C> <C> <C>
Federal deposit insurance
premiums................. $ 1,983 $ 2,114 $ 1,605
Credit card solicitation
charges.................. 1,910 - -
Advertising................ 1,427 959 434
Postage.................... 1,127 861 564
Telephone.................. 1,066 940 586
Stationery, supplies and
printing................. 1,037 1,223 904
Other...................... 7,059 5,415 4,952
$ 15,609 $ 11,512 $ 9,045
</TABLE>
26. 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 wholly-owned subsidiary, Carolina First Savings
Bank, into Carolina First 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 Carolina First Savings Bank into Carolina First Bank, the
Company incurred income taxes of $1,005,000 due to the different tax treatment
accorded the allowance for loan losses at Carolina First Savings Bank.
37
<PAGE>
27. PARENT COMPANY FINANCIAL INFORMATION
The following is condensed financial information of Carolina First
Corporation (Parent Company only):
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
December 31,
($ in thousands) 1995 1994
<S> <C> <C>
ASSETS
Cash......................................................... $ 1,733 $ 298
Investment in subsidiaries:
Bank subsidiary............................................ 116,158 78,083
Nonbank subsidiaries....................................... 897 1,640
Total investment in subsidiaries............................. 117,055 79,723
Receivable from subsidiaries................................. - 76
Premises and equipment....................................... 137 363
Other investments............................................ 2,014 1,470
Other assets................................................. 2,937 5,279
$ 123,876 $ 87,209
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued expenses and other liabilities....................... $ 1,191 $ 601
Borrowed funds............................................... 27,718 126
Shareholders' equity......................................... 94,967 86,482
$ 123,876 $ 87,209
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
For the Years Ended December 31,
($ in thousands) 1995 1994 1993
<S> <C> <C> <C>
INCOME
Dividend income.............................................. $ 13 $ 500 $ 1,400
Interest income from subsidiaries............................ 71 98 73
Sundry....................................................... 894 181 217
978 779 1,690
EXPENSE
Interest on borrowed funds................................... 1,503 10 -
Deferred compensation........................................ 338 236 163
Shareholder communications................................... 255 287 203
Sundry....................................................... 1,850 1,020 417
3,946 1,553 783
Income (loss) before taxes and equity in undistributed net
income (loss) of subsidiaries.............................. (2,968) (774) 907
Income tax benefits.......................................... 1,110 680 173
Equity in undistributed net income (loss) of subsidiaries.... 11,272 (1,646) 4,338
Net income (loss)............................................ $ 9,414 $ (1,740) $ 5,418
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOW
For the Years Ended December 31,
($ in thousands) 1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................................ $ 9,414 $ (1,740) $ 5,418
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operations
Equity in undistributed net income (loss) of subsidiaries.... (11,272) 1,646 (4,338)
Depreciation................................................. 16 18 15
Increase (decrease) in other liabilities..................... 583 143 (190)
Decrease (increase) in other assets.......................... 2,342 (4,919) (45)
Net cash provided by (used for) operating activities......... 1,083 (4,852) 860
INVESTING ACTIVITIES
Investment in bank subsidiary................................ (25,100) (14,000) (15,000)
Investment in nonbank subsidiaries........................... - - (350)
Net decrease (increase) in loans to subsidiaries............. 76 - (212)
Increase in other
investments................................................ (441) (480) (348)
Decrease (increase) in fixed assets, net..................... 210 (381) 230
Blue Ridge merger............................................ 804 - -
Net cash used for investing activities....................... (24,451) (14,861) (15,680)
FINANCING ACTIVITIES
Increase in borrowings, net.................................. 2,355 - -
Exercise of stock options.................................... - - 30
Issuance of Subordinated Notes............................... 25,237 - -
Net proceeds from sale of preferred stock.................... - 21,444 14,462
Redemption of preferred stock................................ - - (92)
Cash dividends paid.......................................... (4,221) (3,025) (1,777)
Other........................................................ 1,432 764 -
Net cash provided by financing activities.................... 24,803 19,183 12,623
Net change in cash and due from banks........................ 1,435 (530) (2,197)
Cash at beginning of year.................................... 298 828 3,025
Cash at end of year.......................................... $ 1,733 $ 298 $ 828
</TABLE>
39
<PAGE>
28. QUARTERLY OPERATING RESULTS (UNAUDITED)
The following is a summary of the unaudited consolidated quarterly results
of the Company and its subsidiaries for the years ended December 31:
<TABLE>
<CAPTION>
Fourth
($ in thousands, except First Quarter Second Quarter Third Quarter Quarter
share data) 1995 1994 1995 1994 1995 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income........ $22,913 $14,308 $24,001 $18,131 $26,351 $20,337 $28,485
Interest expense....... 10,506 6,630 12,143 7,394 13,746 8,820 14,583
Net interest income.... 12,407 7,678 11,858 10,737 12,605 11,517 13,902
Provision for loan
losses............... 3,400 38 990 204 1,000 275 1,456
Net interest income
after provision for
loan losses.......... 9,007 7,640 10,868 10,533 11,605 11,242 12,446
Noninterest income..... 5,153 2,096 3,643 2,109 3,893 2,399 4,637
Noninterest expenses... 10,825 7,620 11,119 9,831 11,824 10,417 13,114
Income before taxes.... 3,335 2,116 3,392 2,811 3,674 3,224 3,969
Income taxes........... 1,134 540 1,163 880 1,203 1,020 1,456
Net income (loss)...... 2,201 1,576 2,229 1,931 2,471 2,204 2,513
Dividends on preferred
stock................ 727 310 685 661 687 731 653
Net income (loss)
applicable to common
shareholders......... $ 1,474 $ 1,266 $ 1,544 $ 1,270 $ 1,784 $ 1,473 $ 1,860
Net income (loss) per
common share:*
Primary.............. $ 0.24 $ 0.22 $ 0.24 $ 0.22 $ 0.28 $ 0.25 $ 0.28
Fully diluted........ 0.24 0.22 0.24 0.22 0.27 0.25 0.27
Average common shares
outstanding:*
Primary.............. 6,211,368 5,813,352 6,385,478 5,829,209 6,436,619 5,834,968 6,555,895
Fully diluted........ 9,291,330 7,173,615 9,315,021 8,652,326 9,340,304 8,927,528 9,356,861
</TABLE>
<TABLE>
<CAPTION>
FOURTH
($ in thousands, except QUARTER
share data) 1994
<S> <C>
Interest income........ $22,993
Interest expense....... 9,665
Net interest income.... 13,328
Provision for loan
losses............... 680
Net interest income
after provision for
loan losses.......... 12,648
Noninterest income..... 1,622
Noninterest expenses... 23,971
Income before taxes.... (9,701)
Income taxes........... (2,250)
Net income (loss)...... (7,451)
Dividends on preferred
stock................ 731
Net income (loss)
applicable to common
shareholders......... $ (8,182)
Net income (loss) per
common share:*
Primary.............. $ (1.40)
Fully diluted........ (1.40)
Average common shares
outstanding:*
Primary.............. 5,869,591
Fully diluted........ 8,625,154
</TABLE>
*Per share data have been restated to reflect the 5% stock dividends.
40
<PAGE>
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, accrued interest receivable and payable and other assets
and liabilities.
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 resale agreements, federal funds purchased and repurchase
agreements and other short-term borrowings.
Fair value for variable rate loans that reprice frequently 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 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.
At December 31, 1995 and 1994, Carolina First Bank had outstanding standby
letters of credit, documentary letters of credit and commitments to extend
credit. These off-balance sheet financial instruments are based on fees
currently charged for similar instruments or on the estimated cost to terminate
them or otherwise settle the obligations with the counterparties at the
reporting date. At December 31, 1995 and 1994 the carrying amounts and fair
values of these off-balance sheet financial instruments were immaterial.
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>
1995 1994
FAIR
($ in thousands) CARRYING AMOUNT VALUE Carrying Amount
<S> <C> <C> <C>
FINANCIAL ASSETS
Cash and due from banks...................................... $ 84,433 $ 84,433 $ 59,750
Federal funds sold and resale agreements..................... - - 4,420
Trading securities........................................... 5,805 5,805 1,155
Securities available for sale................................ 146,272 146,272 60,548
Securities held to maturity.................................. 26,289 26,670 70,264
Loans receivable............................................. 1,062,660 1,064,354 923,068
FINANCIAL LIABILITIES
Deposit liabilities.......................................... 1,095,491 1,096,892 1,001,748
Federal funds purchased and repurchase agreements............ 91,532 91,532 33,986
Short-term borrowings........................................ 95,257 95,257 72,088
Long-term debt............................................... 26,347 27,314 1,162
</TABLE>
<TABLE>
<CAPTION>
1994
Fair
($ in thousands) Value
<S> <C>
FINANCIAL ASSETS
Cash and due from banks...................................... $ 59,750
Federal funds sold and resale agreements..................... 4,420
Trading securities........................................... 1,155
Securities available for sale................................ 60,548
Securities held to maturity.................................. 66,820
Loans receivable............................................. 901,060
FINANCIAL LIABILITIES
Deposit liabilities.......................................... 1,000,973
Federal funds purchased and repurchase agreements............ 33,986
Short-term borrowings........................................ 72,088
Long-term debt............................................... 1,315
</TABLE>
41
DIRECTORY
BOARDS OF DIRECTORS
DAVID BAKER (Bullet)
Real Estate Developer
R. COBB BELL (Bullet)
Certified Public Accountant
CLAUDE M. EPPS, JR. (Bullet)
President
Bellamy, Rutenberg, Copeland,
Epps, Gravely & Bowers, P.A.
JUDD B. FARR +(Bullet)
President
Greenco Beverage Co., Inc.
C. CLAYMON GRIMES, JR. (Bullet)
Attorney
M. DEXTER HAGY +(Bullet)
President
Vaxa Corporation
ROBERT E. HAMBY, JR. +(Bullet)
Certified Public Accountant
R. GLENN HILLIARD+
Chairman, President and Chief Executive Officer
ING North America
Insurance Corporation
KEITH C. HINSON (Bullet)
President
Waccamaw Land and Timber
MICHAEL R. HOGAN +(Bullet)
President
Puckett, Scheetz & Hogan
WILLIAM S. HUMMERS, III +(Bullet)
Executive Vice President
and Chief Financial Officer
Carolina First Corporation
Executive Vice President
Carolina First Bank
RICHARD E. INGRAM +(Bullet)
Chairman of the Board
Builder Marts of America, Inc. (BMA)
JAMES J. JOHNSON (Bullet)
President and Treasurer
Dargan Construction Company, Inc.
DAVID L. MORROW (Bullet)
Executive Vice President
Carolina First Bank
WALTER J. ROBERTS, JR., M.D. (Bullet)
Internist
Medical Director SCMA-PCN
H. EARLE RUSSELL, JR., M.D. (Bullet)
Surgeon
Greenville Surgical Associates
JASPER SALMOND (Bullet)
Senior Marketing Coordinator
Wilbur Smith Associates
CHARLES B. SCHOOLER, O.D. +(Bullet)
Optometrist
EDWARD J. SEBASTIAN+
Chairman and Chief Executive Officer
Resource Bancshares Corporation
Chairman and Chief Executive Officer
Resource Bancshares Mortgage
Group, Inc.
ELIZABETH P. STALL +(Bullet)
Investments
JAMES W. TERRY, JR. (Bullet)
President
Carolina First Bank
WILLIAM R. TIMMONS, JR. +(Bullet)
Chairman
Carolina First Corporation
Chairman
Canal Insurance Company
WILLIAM M. WEBSTER, III +(Bullet)
Partner
Carabo Capital
MACK I. WHITTLE, JR. +(Bullet)
President and Chief Executive Officer
Carolina First Corporation
Chairman and Chief Executive Officer
Carolina First Bank
THOMAS C. "NAP" VANDIVER (Bullet)
Chairman Emeritus
Carolina First Bank
ADVISORY BOARD MEMBERS
ANDERSON
Richard C. Ballenger
James W. Braswell, Jr.
A. Reese Fant
Daniel J. Fleming, M.D.
William W. Jones
John F. Rainey, M.D.
D. Gray Suggs
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.
GEORGETOWN COUNTY
Alan S. Altman
T. M. Andrews
James H. Call
William F. Fairey, M.D.
Douglas G. Mahon, III
Robert B. Plowden, Jr.
Julian A. Reynolds, Jr.
R. Frank Swinnie, Jr.
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 A. Lassiter
Gertrude Harvey Leonard
HORRY COUNTY
W. Scott Brandon
H. Eugene Butler, III, DMD
Donald M. Carriker
Edward C. Cribb, Jr.
Roger E. Grigg
Luther O. McCutchen, III
Daniel W. R. Moore, Sr.
Edward L. Proctor, Jr., M.D.
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
MIDLANDS
Earl H. Bergen, Jr.
Rodney S. Griffin
Dan H. Hamm, Jr.
Terry L. Koon
Heyward D. Shealy
C. Gurnie Stuck
PIEDMONT
Max W. Kennedy
Al McAbee, Jr.
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 W. Craig
A. D. Gantt, M.D.
Lonnie McAlister
Leonard Mills
Russell Nix
Tom P. Scott
Legend
+Carolina First Corporation (Bullet)Carolina First Bank
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
42
BANKING OFFICES
AIKEN
Main Office
142 Chesterfield Street, S.E.
803-649-9991
2286 Whiskey Road
803-642-0300
ANDERSON
Main Office
1722 North Main Street
864-231-5960
110 West Shockley Ferry Road
864-231-5971
ANDREWS
201 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
CHAPIN
260 Columbia Avenue
803-345-1066
CHARLESTON
Main Office
1 Broad Street
803-769-2929
556 E. Bay Street (Drive up)
(Opening in 1996)
Bi-Lo at Mt. Pleasant
923 Houston Northcutt Boulevard
803-769-2965
852 Orleans Road
803-763-0072
Bi-Lo at Savannah Highway
1621 Savannah Highway
803-769-2942
COLUMBIA
Main Office
1225 Lady Street
803-540-2700
1940 Blossom Street
803-771-8919
Columbia Mall
7171 Two Notch Road
803-253-7873
Kroger at Decker Boulevard
2500 Decker Boulevard
803-929-5397
1420 Lady Street
803-929-5372
380 St. Andrews Road
803-929-5376
7389 Sumter Highway
803-253-8894
Trenholm Plaza
4840 Forest Drive
803-253-8890
10000 Two Notch Road
803-253-8888
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
864-255-7900
101 Cleveland Street
864-255-7904
200 East Camperdown Way
864-255-4763
917 Haywood Road
864-255-7917
1295 South Pleasantburg Drive
864-239-6432
1450 Wade Hampton Boulevard
864-255-4900
1216 Woodruff Road
864-239-4650
Blue Ridge Finance Company
355 Woodruff Road, Suite 210
864-458-7134
HARDEEVILLE
114 North Coastal Highway
803-784-2216
IRMO
1265 Lake Murray Boulevard
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
864-234-3180
MCCOLL
114 Main Street
803-523-5381
MYRTLE BEACH
Main Office
2003 Oak Street
803-448-9458
Kroger at Galleria
9608 Highway 17 North
803-449-6544
NEWBERRY
2633 Winnsboro Road
803-321-0433
NORTH MYRTLE BEACH
Kroger at North Myrtle Beach
781 Main Street
803-249-3781
PAWLEYS ISLAND
Highway 17 South
803-237-4294
PIEDMONT
15 Main Street
864-845-7563
PROSPERITY
305 Main Street
803-364-7300
RIDGELAND
114 North Green Street
803-726-5518
SALLEY
125 Railroad Avenue North
803-258-3201
SPRINGFIELD
7222 Festival Trail Road
803-258-3211
SURFSIDE
Kroger at Surfside
5900 Highway 17 South
803-238-0301
SWANSEA
200 South Brecon Avenue
803-568-2133
TAYLORS
3406 Wade Hampton Boulevard
864-239-4680
WILLISTON
11 West Main Street
803-266-7474
43
<PAGE>
SHAREHOLDER INFORMATION
STOCK LISTING
The common stock of Carolina First Corporation is traded on The
Nasdaq Stock Market's National Market under the symbol, CAFC. At December 31,
1995, there were 2,926 common shareholders of record, 157 Series 1994
preferred shareholders of record (formerly traded under the symbol, CAFCN),
and 181 Series 1993 preferred shareholders of record (formerly traded under
the symbol, CAFCO).
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.
DIVIDEND CALENDAR
Dividends, if approved by the Board of Directors, are customarily
paid to shareholders of record as follows.
Record Dates:
January 15, April 15, July 15 and October 15
Dividend Dates:
February 1, May 1, August 1 and November 1
REGISTRAR AND TRANSFER AGENT
Carolina First Bank, Trust Division
P. O. Box 1029, Greenville, SC 29602
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 (864) 255-4919.
ANNUAL MEETING
The Annual Meeting of Shareholders of Carolina First Corporation
will be held at 10:30 a.m., April 18, 1996, at the 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
(864) 255-7913
QUARTERLY COMMON STOCK SUMMARY
<TABLE>
<CAPTION>
1995 1994
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK PRICE RANGES:
High $19.38 $16.75 $14.52 $14.52 $13.33 $15.00 $14.29 $12.25
Low 13.50 14.05 12.14 12.86 12.62 13.33 10.89 10.89
Close 17.50 16.25 14.29 13.45 13.33 14.52 14.29 10.89
DIVIDEND 0.07 0.06 0.06 0.06 0.05 0.05 0.05 0.05
VOLUME TRADED 1,792,590 778,306 742,581 468,246 595,643 481,530 377,904 238,843
SHARES OUTSTANDING 6,517,366 6,131,722 5,831,724 5,673,860 5,618,941 5,561,987 5,553,538 5,332,324
</TABLE>
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.
(Mailing Code NO POSTAGE
appears here) 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
(Bar Code appears here)
(Mailing Code NO POSTAGE
appears here) 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
(Bar Code appears here)
<PAGE>
Duplicate Mailing/Change of Address Notification
If you would like to eliminate duplicate mailings, or change the address at
which you receive shareholders 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
<PAGE>
EXHIBIT 13.2
(Logo of Elliott, Davis & Company appears here)
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.
REPORT OF INDEPENDENT CERTIFIED 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 the related consolidated statements of income, changes in shareholders'
equity and cash flows for each of the two 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 statements. 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
the results of their operations and their cash flows for each of the two
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
(Signature of Elliott, Davis & Company, L.L.P
appears here)
Elliott, Davis & Company, L.L.P.
Greenville, South Carolina
February 3, 1995
Internationally - Moore Stephens Elliott Davis, L.L.C.
<TABLE>
<S> <C> <C>
870 S. PLEASANTBURG DRIVE POST OFFICE BOX 6286 GREENVILLE, SOUTH CAROLINA 29606-6286
</TABLE>
TELEPHONE (803) 242-3370 TELEFAX (803) 232-7161
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Carolina First Corporation
We consent to incorporation by reference in the registration statements (Nos.
33-82670, 33-25424, 33-82668, 33-80822, and 33-79668) on Form S-8 and
registration statement (No. 33-73280) on Form S-3 of Carolina First
Corporation of our report dated January 26, 1996, relating to the consolidated
balance sheet of Carolina First Corporation and subsidiaries as of December
31, 1995 and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the year then ended, which report
appears in the December 31, 1995, annual report on Form 10-K of Carolina
First Corporation.
/s/ KPMG Peat Marwick LLP
Greenville, South Carolina
March 29, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US $
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 83,433
<INT-BEARING-DEPOSITS> 1,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 5,805
<INVESTMENTS-HELD-FOR-SALE> 146,272
<INVESTMENTS-CARRYING> 26,289
<INVESTMENTS-MARKET> 26,670
<LOANS> 1,062,660
<ALLOWANCE> 8,661
<TOTAL-ASSETS> 1,414,922
<DEPOSITS> 1,095,491
<SHORT-TERM> 186,789
<LIABILITIES-OTHER> 11,328
<LONG-TERM> 26,347
0
32,909
<COMMON> 6,517
<OTHER-SE> 55,541
<TOTAL-LIABILITIES-AND-EQUITY> 1,414,922
<INTEREST-LOAN> 92,731
<INTEREST-INVEST> 8,588
<INTEREST-OTHER> 431
<INTEREST-TOTAL> 101,750
<INTEREST-DEPOSIT> 41,179
<INTEREST-EXPENSE> 50,978
<INTEREST-INCOME-NET> 50,772
<LOAN-LOSSES> 6,846
<SECURITIES-GAINS> 769
<EXPENSE-OTHER> 46,882
<INCOME-PRETAX> 14,370
<INCOME-PRE-EXTRAORDINARY> 9,414
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,414
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.02
<YIELD-ACTUAL> 9.60
<LOANS-NON> 1,275
<LOANS-PAST> 2,748
<LOANS-TROUBLED> 1,085
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,002
<CHARGE-OFFS> 5,259
<RECOVERIES> 311
<ALLOWANCE-CLOSE> 8,661
<ALLOWANCE-DOMESTIC> 8,661
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
