As filed with the Securities and Exchange Commission on July 30, 1998.
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CAROLINA FIRST CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
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<S> <C>
SOUTH CAROLINA 6711 57-0824914
------------------------------- -------------------------- -----------------
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number Identification No.)
</TABLE>
102 SOUTH MAIN STREET
GREENVILLE, SOUTH CAROLINA 29601
(864) 255-7900
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(Address, including ZIP code, and telephone number, including area
code, of registrant's principal executive offices)
WILLIAM S. HUMMERS III, EXECUTIVE VICE PRESIDENT
CAROLINA FIRST CORPORATION
102 SOUTH MAIN STREET
GREENVILLE, SOUTH CAROLINA 29601
(864) 255-7913
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(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
Copies to:
WILLIAM P. CRAWFORD, JR., ESQ.
WYCHE, BURGESS, FREEMAN & PARHAM, P.A.
POST OFFICE BOX 728
GREENVILLE, SOUTH CAROLINA 29602-0728
(864) 242-8200 (TELEPHONE)
(864) 235-8900 (FACSIMILE)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box.9
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount
Title of Each Class Amount to Offering Price Aggregate of Registration
of Securities to be Registered be Registered Per Unit (1) Offering Price (1) Fee (2)
- ------------------------------ ------------- ---------------- ------------------ ---------------
Common Stock 2,500,267 $6.54 $16,350,170 $4,823.25
(par value $1.00 per share)
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f). Pursuant to Rule 457(f)(2), the Proposed
Maximum Aggregate Offering Price has been determined based upon $16,344,000,
which is the book value of the First National Bank of Pickens County common
stock to be received by Carolina First Corporation in the Merger as of June
30, 1998 (the latest practicable date).
(2) Calculated pursuant to Rule 457(f).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
200 South Pendleton Street
Easley, South Carolina 29640
August 7, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
First National Bank of Pickens County ("Special Meeting") to be held at the main
office of First National Bank of Pickens County ("First National") located at
200 South Pendleton Street, Easley, South Carolina 29640, on Monday, September
7, 1998, at 10:00 a.m., local time.
At the Special Meeting you will be asked to consider and vote upon the
Reorganization Agreement ("Reorganization Agreement") dated as of June 22, 1998
by and among First National, Carolina First Corporation and Carolina First Bank.
If the Reorganization Agreement is approved by holders of at least two-thirds of
the outstanding shares of common stock of First National and certain other
conditions are met, First National will be merged (the "Merger") with and into
Carolina First Bank, a wholly-owned banking subsidiary of Carolina First
Corporation, which will be the surviving entity in the Merger. In connection
with the Merger, First National shareholders will receive shares of Carolina
First Corporation common stock having a fair market value (as defined in the
Reorganization Agreement) of $750.08 (subject to adjustment upward to $769.89 in
the event the consummation of the Merger occurs after September 30, 1998) for
each share of First National common stock held by them. On August _____, 1998,
the last reported sale price of Carolina First Corporation common stock on the
Nasdaq National Market was $_______ per share. The Reorganization Agreement is
described in detail in the accompanying Proxy Statement/Prospectus and is
attached as Annex A thereto.
Enclosed herewith are the Notice of Special Meeting of Shareholders, a
Proxy Statement/Prospectus and a Proxy for use in connection with the Special
Meeting. The Proxy Statement/Prospectus includes a description of the terms and
conditions of the Merger and related agreements, financial and other information
about Carolina First Corporation, Carolina First Bank and First National, and
other information. You are urged to consider carefully the entire Proxy
Statement/Prospectus, including the annexes thereto.
THE BOARD OF DIRECTORS OF FIRST NATIONAL BELIEVES THAT THE REORGANIZATION
AGREEMENT IS IN THE BEST INTERESTS OF FIRST NATIONAL AND ITS SHAREHOLDERS AND
RECOMMENDS A VOTE FOR THE APPROVAL OF THE REORGANIZATION AGREEMENT.
Because the affirmative vote of holders of at least two-thirds of the
issued and outstanding shares of First National common stock is required to
approve the Reorganization Agreement, it is important that your shares of First
National common stock be represented at the Special Meeting, whether or not you
are personally able to attend. A failure to vote, either by not returning the
enclosed Proxy or by checking the "Abstain" box thereon, will have the same
effect as a vote against the Reorganization Agreement. You are therefore urged
to complete, date and sign the enclosed Proxy, and return it promptly in the
enclosed return envelope, which does not require any postage if mailed in the
United States. If you attend the Special Meeting, you may vote shares of which
you are the record owner in person, even if you have already returned your
Proxy.
Sincerely,
James H. Grantham
Chairman
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
200 South Pendleton Street
Easley, South Carolina 29640
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 7, 1998
TO THE SHAREHOLDERS OF FIRST NATIONAL BANK OF PICKENS COUNTY:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of First
National Bank of Pickens County ("Special Meeting") to be held at the main
office of First National Bank of Pickens County ("First National") located at
200 South Pendleton Street, Easley, South Carolina 29640, on Monday, September
7, 1998, at 10:00 a.m., local time, for the following purposes:
1. CONSIDERATION OF THE REORGANIZATION AGREEMENT. To consider and vote
upon a proposal to adopt the Reorganization Agreement ("Reorganization
Agreement") dated as of June 22, 1998, between Carolina First Corporation,
Carolina First Bank and First National, pursuant to which First National will be
merged (the "Merger") into Carolina First Bank, a wholly-owned banking
subsidiary of Carolina First Corporation, and First National shareholders will
receive Carolina First Corporation common stock in exchange for their shares of
First National common stock, all on and subject to the terms and conditions
contained therein.
2. OTHER BUSINESS. To transact such other business as may properly come
before the Special Meeting or any adjournments thereof.
Only shareholders of record at the close of business on July 15, 1998, are
entitled to notice of and to vote at the Special Meeting or any adjournments
thereof. The affirmative vote of the holders of at least two-thirds of the
issued and outstanding shares of First National common stock is required to
approve the Reorganization Agreement. All shareholders, whether or not they
expect to attend the Special Meeting in person, are requested to complete, date,
sign and return the enclosed Proxy in the accompanying envelope. The Proxy may
be revoked by the record shareholder (i) by giving written notice to the
Secretary of First National at any time before it is voted, (ii) by submitting a
proxy having a later date, or (iii) by such person appearing at the Special
Meeting and giving notice of revocation to the corporate officers responsible
for maintaining the list of shareholders.
By Order of the Board of Directors,
August 7, 1998 James H. Grantham
Chairman
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
Proxy Statement/Prospectus
CAROLINA FIRST CORPORATION
Prospectus for 2,500,267 Shares of Common Stock $1.00 Par Value Per Share
FIRST NATIONAL BANK OF PICKENS COUNTY
Proxy Statement for Special Meeting of Shareholders
This Proxy Statement/Prospectus relates to the issuance by Carolina First
Corporation of up to 2,500,267 shares (the "Carolina First Corporation Shares")
of its $1.00 par value common stock ("Carolina First Corporation common stock")
in connection with the proposed merger (the "Merger") of First National Bank of
Pickens County ("First National") with and into Carolina First Bank, a
wholly-owned banking subsidiary of Carolina First Corporation. Upon consummation
of the Merger, each outstanding share of First National common stock will be
converted into shares of Carolina First Corporation common stock having a fair
market value (as defined in the Reorganization Agreement) of $750.08 (subject to
adjustment upward to $769.89 in the event the consummation of the Merger occurs
after September 30, 1998). The Carolina First Corporation Shares are offered to
the First National shareholders subject to the terms and conditions specified in
the Reorganization Agreement ("Reorganization Agreement") dated as of June 22,
1998 and entered into by and among Carolina First Corporation, Carolina First
Bank and First National. The Reorganization Agreement provides that as a result
of the transactions specified in the Reorganization Agreement, the First
National common stock will be canceled. Upon consummation of the transactions
specified in the Reorganization Agreement, the current operations of First
National will become part of the banking operations of Carolina First Bank. Cash
will be paid in lieu of fractional shares to which a First National shareholder
becomes entitled. See "THE PROPOSED TRANSACTION -- General Description of the
Terms of the Reorganization Agreement."
This Proxy Statement/Prospectus serves as the Proxy Statement of First
National in connection with the solicitation of proxies to be used at the
Special Meeting of Shareholders of First National (the "Special Meeting") to be
held on September 7, 1998 for the purposes described herein. This Proxy
Statement/Prospectus is first being sent to First National shareholders on or
about August 7, 1998.
Consummation of the transactions contemplated in the Reorganization
Agreement is subject to certain conditions, including, among others, approval by
the shareholders of First National at the Special Meeting and approval by
applicable regulatory authorities.
Any shareholder of First National who, at or prior to the Special Meeting,
gives written notice that he dissents from the Merger or who votes against the
Merger shall be entitled, upon strict compliance with certain statutory
procedures, to receive the value of the First National common stock owned by
such shareholder at the time and in the manner set forth herein. See "THE
PROPOSED TRANSACTION -- Rights of Dissenting Shareholders of First National."
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY SHAREHOLDERS OF FIRST NATIONAL.
FIRST NATIONAL'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO
APPROVE THE REORGANIZATION AGREEMENT.
The Carolina First Corporation common stock is traded on the Nasdaq
National Market under the Nasdaq market symbol "CAFC." On May 12, 1998 (the last
business day prior to the announcement of the Merger), the closing bid price of
the Carolina First Corporation common stock, as reported by Nasdaq, was $27.50
per share. The First National common stock is not traded on any established
market and has experienced very limited trading. First National management is
aware of only one transaction in 1998 which involved the sale of 200 shares of
First National common stock at $75.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE CAROLINA FIRST CORPORATION SHARES OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS AND LOAN
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement/Prospectus is August 7, 1998.
<PAGE>
<TABLE>
<S> <C>
TABLE OF CONTENTS
AVAILABLE INFORMATION................................................................3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE....................................3
OTHER INFORMATION....................................................................4
SUMMARY..............................................................................5
Introduction...................................................................5
Time, Place and Purposes of the Special Meeting................................5
Parties to the Reorganization Agreement........................................5
General Terms of the Proposed Transaction......................................6
Vote Required and Record Date..................................................6
Recommendation of Board of Directors...........................................6
Rights of Dissenting Shareholders..............................................6
Certain Differences in Shareholders' Rights....................................7
Conditions and Regulatory Approvals............................................7
Termination of the Reorganization Agreement....................................7
Effective Time of the Merger...................................................7
Opinion of Financial Adviser...................................................7
Certain Federal Income Tax Consequences........................................8
Interests of Certain Persons...................................................8
Restrictions on Resales by Affiliates..........................................8
Accounting Treatment...........................................................8
Market Prices and Dividends....................................................8
Selected Consolidated Financial Data..........................................10
Comparative Per Share Data....................................................13
RISK FACTORS........................................................................15
Dependence on Senior Management...............................................15
Growth Through Acquisitions...................................................15
Antitakeover Measures.........................................................15
INFORMATION CONCERNING THE SPECIAL MEETING..........................................16
Special Meeting...............................................................16
Purpose of the Special Meeting..........................................16
First National Record Date and Voting Rights............................16
Proxies.................................................................16
Recommendation..........................................................17
THE PROPOSED TRANSACTION............................................................18
General Description of the Terms of the Reorganization Agreement..............18
Background of and Reasons for the Reorganization Agreement....................19
First National Reasons..................................................19
Carolina First Corporation Reasons......................................21
Opinion of First National's Financial Adviser.................................21
Exchange of First National Stock Certificates.................................23
Conditions to Consummation of the Merger......................................24
Termination...................................................................25
Amendment.....................................................................25
Conduct of First National's and Carolina First Corporation's
Business Prior to the Effective Time....................................26
Required Regulatory Approvals.................................................26
Operations After the Merger...................................................27
Interests of Certain Persons in the Merger....................................27
Directors...............................................................27
1
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<CAPTION>
Indemnification; Advancement of Expenses; Directors' and Officers'
Insurance.........................................................27
Employment Agreements.........................................................28
Other Matters Related to Employees and Employee Benefit Plans.................28
Accounting Treatment..........................................................28
Certain Federal Income Tax Consequences.......................................29
Fractional Share Interests..............................................29
Restrictions on Resales by Affiliates.........................................30
Rights of Dissenting Shareholders of First National...........................31
Recommendation of the First National Board of Directors.......................31
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION..................................32
INFORMATION ABOUT CAROLINA FIRST CORPORATION........................................39
General.......................................................................39
Capital Adequacy..............................................................40
Recent Developments...........................................................43
INFORMATION ABOUT FIRST NATIONAL....................................................44
History and Business..........................................................44
Recent Developments...........................................................44
Correspondent Banking.........................................................56
Data Processing...............................................................56
Employees.....................................................................57
Monetary Policies.............................................................57
Supervision and Regulation....................................................57
Description of Property.......................................................60
Legal Proceedings.............................................................61
Market for Common Stock and Dividends.........................................61
Management and Principal Shareholders of First National.......................62
Certain Transactions..........................................................63
COMPARATIVE RIGHTS OF SHAREHOLDERS..................................................63
Comparison of Carolina First Corporation Common Stock and
First National Common Stock............................................63
CAROLINA FIRST CORPORATION CAPITAL STOCK............................................66
Common Stock..................................................................66
Preferred Stock...............................................................66
Certain Matters...............................................................67
Shareholders' Rights Agreement..........................................67
Management Contracts....................................................68
Board of Directors......................................................68
Voting..................................................................69
Control Share Acquisition/Business Combination Statutes.................70
Transfer Agent..........................................................70
Dividend Reinvestment Plan..............................................70
LEGAL MATTERS.......................................................................70
EXPERTS.............................................................................70
OTHER MATTERS.......................................................................71
INDEX TO FINANCIAL STATEMENTS......................................................F-1
Annexes
Reorganization Agreement.................................................Annex A
Opinion of Orr Management Company........................................Annex B
Dissenter's Rights Statute...............................................Annex C
Financial Statements of Carolina First Bank..............................Annex D
</TABLE>
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AVAILABLE INFORMATION
Carolina First Corporation is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission ("Commission"). Such reports, proxy
statements and other information filed with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following Regional Offices of the Commission: New York Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048 and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon the payment
of fees at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants (including Carolina First Corporation)
that file electronically with the Commission.
Carolina First Corporation has filed with the Commission a Registration
Statement (which shall include any amendments thereto) on Form S-4
("Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), with respect to the Carolina First Corporation Shares
offered hereby. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Registration Statement and the annexes and schedules thereto are available for
inspection and copying as set forth in the preceding paragraph. For further
information with respect to Carolina First Corporation, First National and the
Carolina First Corporation Shares offered hereby, reference is hereby made to
the Registration Statement, including the annexes and schedules thereto.
All information contained or incorporated by reference in this Proxy
Statement/Prospectus with respect to Carolina First Corporation has been
supplied by Carolina First Corporation, and all information contained or
incorporated by reference in this Proxy Statement/Prospectus with respect to
First National has been supplied by First National.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WITH
RESPECT TO CAROLINA FIRST CORPORATION WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH A
DOCUMENT UNLESS SUCH EXHIBIT IS SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED UPON ORAL OR WRITTEN REQUEST TO WILLIAM S.
HUMMERS III, EXECUTIVE VICE PRESIDENT, CAROLINA FIRST CORPORATION, 102 SOUTH
MAIN STREET, GREENVILLE, SC 29601, TELEPHONE NUMBER (864) 255-7900. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
AUGUST 31, 1998.
The following documents filed with the Commission by Carolina First
Corporation pursuant to Section 13(a) or 15(d) of the Exchange Act are
incorporated herein by reference:
(i) Carolina First Corporation's Annual Report on Form 10-K for the
year ended December 31, 1997;
(ii) Carolina First Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998;
(iii) Carolina First Corporation's Current Reports on Form 8-K dated
February 13, 1998; and
(iv) The description of the Carolina First Corporation common stock
which is contained in Carolina First Corporation's Form 8-A filed
with the Commission on or about October 20, 1986, including any
amendment or report filed for the purpose of updating such
description.
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All documents filed by Carolina First Corporation pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the Special Meeting shall be deemed to be incorporated by reference in this
Proxy Statement/Prospectus and to be a part hereof from the respective dates of
filing of such documents. Any statement contained herein or in a document
incorporated herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently-filed document which also is incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/Prospectus.
OTHER INFORMATION
This Proxy Statement/Prospectus does not cover any resales of the
Carolina First Corporation common stock offered hereby to be received by
shareholders deemed to be "affiliates" of Carolina First Corporation or First
National upon consummation of the Merger. No person is authorized to make use of
this Proxy Statement/Prospectus in connection with such resales, although such
securities may be traded without the use of this Proxy Statement/Prospectus by
those shareholders of Carolina First Corporation not deemed to be "affiliates"
of Carolina First Corporation or First National.
No person is authorized to give any information or to make any
representation not contained in or incorporated by reference in this Proxy
Statement/Prospectus, and, if given or made, such information or representation
must not be relied upon as having been authorized by Carolina First Corporation
or First National. This Proxy Statement/Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, any of the securities offered
hereby to any person or in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so, or to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any sale hereunder shall under any circumstances create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof or that there has been no change in the affairs of
Carolina First Corporation or First National since such date.
4
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT/PROSPECTUS. THIS SUMMARY IS NOT INTENDED TO BE A COMPLETE
STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS, THE
ACCOMPANYING ANNEXES, AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE AND
INCLUDED HEREWITH. A COPY OF THE REORGANIZATION AGREEMENT (EXCLUDING THE
SCHEDULES ATTACHED THERETO) IS ATTACHED HERETO AS ANNEX A AND IS INCORPORATED
HEREIN BY REFERENCE. AS USED HEREIN, THE TERMS "CAROLINA FIRST CORPORATION" AND
"FIRST NATIONAL" REFER TO CAROLINA FIRST CORPORATION AND FIRST NATIONAL BANK OF
PICKENS COUNTY, RESPECTIVELY, AND WITH RESPECT TO CAROLINA FIRST CORPORATION,
UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS CONSOLIDATED SUBSIDIARIES.
INTRODUCTION. This Proxy Statement/Prospectus is furnished in connection
with (i) the issuance by Carolina First Corporation of the Carolina First
Corporation Shares and (ii) the solicitation of proxies by the First National
Board of Directors with respect to the Special Meeting to be held on September
7, 1998 and at any adjournment thereof. The Special Meeting is being held for
the purpose of considering and voting upon the Reorganization Agreement. This
Proxy Statement/Prospectus is first being mailed to First National shareholders
on or about August 7, 1998.
TIME, PLACE AND PURPOSES OF THE SPECIAL MEETING. The Special Meeting will
be held on September 7, 1998 at 10:00 a.m., local time, at First National's main
office, 200 South Pendleton Street, Easley, South Carolina. At the Special
Meeting, shareholders of First National will consider and vote on the proposal
to approve the Reorganization Agreement, which provides for the Merger of First
National into Carolina First Bank and the exchange of First National common
stock for Carolina First Corporation common stock. See "INFORMATION CONCERNING
THE SPECIAL MEETING."
PARTIES TO THE REORGANIZATION AGREEMENT.
CAROLINA FIRST CORPORATION. Carolina First Corporation is a bank holding
company headquartered in Greenville, South Carolina which engages in a general
banking business through its four principal operating subsidiaries: (1) Carolina
First Bank, a South Carolina-chartered commercial bank headquartered in
Greenville, South Carolina, (2) Carolina First Mortgage Company, a mortgage loan
origination and servicing company headquartered in Columbia, South Carolina, (3)
Blue Ridge Finance Company, Inc., an automobile finance company headquartered in
Greenville, South Carolina, and (4) Resource Processing Group, Inc., a credit
card origination and servicing company headquartered in Columbia, South
Carolina. Carolina First Corporation is a South Carolina corporation which was
organized in 1986. At March 31, 1998, it had total consolidated assets of
approximately $2.3 billion. Its principal executive offices are located at 102
South Main Street, Greenville, South Carolina 29601, and its telephone number is
(864) 255-7900. See "INFORMATION ABOUT CAROLINA FIRST CORPORATION."
CAROLINA FIRST BANK. Carolina First Bank is a South Carolina-chartered
bank, which is a wholly-owned subsidiary of Carolina First Corporation. It
engages in a general banking business through 58 locations which are located
throughout South Carolina. It began its operations in December 1986 and at March
31, 1998 had total assets of approximately $2.2 billion, total loans net of
unearned income of approximately $1.5 billion and total deposits of
approximately $1.9 billion. Carolina First Bank's deposits are insured by the
Federal Deposit Insurance Corporation (the "FDIC"). See "INFORMATION ABOUT
CAROLINA FIRST CORPORATION."
FIRST NATIONAL. First National is a national banking association
headquartered in Easley, South Carolina which conducts a general banking
business principally in Pickens County, South Carolina. At
5
<PAGE>
March 31, 1998, First National had total assets of approximately $117.5 million.
Its principal executive offices are located at 200 South Pendleton Street,
Easley, South Carolina 29640, and its telephone number is (864) 859-6301. See
"INFORMATION ABOUT FIRST NATIONAL" and the documents that accompany this Proxy
Statement/Prospectus.
GENERAL TERM OF THE PROPOSED TRANSACTION. Pursuant to the terms of the
Reorganization Agreement, upon consummation of the Merger, holders of First
National's common stock will be entitled to receive shares of Carolina First
Corporation common stock having a fair market value (as defined in the
Reorganization Agreement) of $750.08 (subject to adjustment upward to $769.89 in
the event the consummation of the Merger occurs after September 30, 1998) for
each outstanding share of First National common stock held by them (the
"Conversion Ratio"). The "fair market value" is defined in the Reorganization
Agreement as the average of the closing prices as quoted on the Nasdaq National
Market for Carolina First Corporation common stock for the twenty days in which
Carolina First Corporation common stock was traded immediately prior to the
closing date of the Merger (the "Closing Date"), except that if prior to the
effective time of the Merger, any other person or entity shall have publicly
announced an intention to acquire control of Carolina First Corporation by
merger or otherwise or Carolina First Corporation shall have publicly
acknowledged that it is seeking to be acquired by another person or entity or is
discussing being acquired by another person or entity, then the average of the
closing prices as quoted on the Nasdaq National Market for Carolina First
Corporation common stock for the 20 days for which the Carolina First
Corporation common stock was traded immediately prior to such announcement or
acknowledgment shall be determined and, if such average is less than the average
derived from the 20 trading days immediately prior to the Closing Date, then the
smaller average shall be the fair market value. See "THE PROPOSED TRANSACTION --
General Description of the Terms of the Reorganization Agreement."
VOTE REQUIRED AND RECORD DATE. Only First National shareholders of record
at the close of business on July 15, 1998 ("Record Date") will be entitled to
notice of and to vote at the Special Meeting. The Merger must be approved by the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of First National common stock eligible to vote at the Special Meeting. As of
the Record Date, there were 80,000 shares of First National's common stock
entitled to vote. As of the date hereof, the directors and executive officers of
First National and their affiliates beneficially owned 46,652 shares, or
approximately 58.3% of First National's common stock. Upon consummation of the
transactions contemplated hereby (and assuming a "fair market value" of $26.00
per share of Carolina First Corporation common stock and consummation on or
before September 30, 1998), such persons will beneficially own 1,345,873 shares
of Carolina First Corporation common stock, or 6.6% of the outstanding Carolina
First Corporation common stock.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF FIRST NATIONAL HAS APPROVED THE REORGANIZATION
AGREEMENT AND BELIEVES THAT THE REORGANIZATION AGREEMENT IS IN THE BEST
INTERESTS OF FIRST NATIONAL AND ITS SHAREHOLDERS. IT RECOMMENDS THAT FIRST
NATIONAL'S SHAREHOLDERS VOTE FOR THE REORGANIZATION AGREEMENT. SEE "THE PROPOSED
TRANSACTION -- RECOMMENDATION OF BOARD OF DIRECTORS."
RIGHTS OF DISSENTING SHAREHOLDERS. Shareholders of First National who
give written notice at or prior to the Special Meeting that they dissent to the
proposed Merger, or who vote against the proposed Merger will be entitled to
obtain payment of the value of their shares of First National common stock under
federal law. Failure to comply strictly with certain statutory procedures may
result in the forfeiture of such rights. It is a condition to consummation of
the Merger that dissenters' rights not have been perfected with respect to more
than 10% of First National's outstanding shares of common stock. See
6
<PAGE>
"THE PROPOSED TRANSACTION -- Rights of Dissenting Shareholders of First
National."
CERTAIN DIFFERENCE IN SHAREHOLDERS' RIGHTS. Upon effectiveness of the
Merger, the former First National shareholders will become shareholders of
Carolina First Corporation, and their rights as shareholders will be determined
by Carolina First Corporation's Articles of Incorporation and Bylaws. The rights
of shareholders of Carolina First Corporation differ from the rights of
shareholders of First National in several important respects, including, among
other things, with respect to required shareholder votes on certain matters and
the existence of certain antitakeover provisions, as well as other differences
resulting from Carolina First Corporation's being a South Carolina corporation
instead of a national banking association (like First National). See
"COMPARATIVE RIGHTS OF SHAREHOLDERS."
CONDITIONS AND REGULATORY APPROVALS. Consummation of the transactions
contemplated by the Reorganization Agreement is subject to various conditions,
including receipt of the necessary regulatory approvals (including, without
limitation, the approval by the FDIC and the South Carolina State Board of
Financial Institutions (the "State Board")), and the requisite shareholder
approval of First National. Applications to the necessary regulatory authorities
seeking approval of the proposed transaction have been filed. The parties expect
that such applications will be approved. Carolina First Corporation and First
National may waive certain of the conditions to their respective obligations to
consummate the Merger, other than conditions required by law. See "THE PROPOSED
TRANSACTION -- Conditions to Consummation of the Merger" and "THE PROPOSED
TRANSACTION -- Required Regulatory Approvals."
TERMINATION OF THE REORGANIZATION AGREEMENT. The Reorganization Agreement
may be terminated at any time prior to the Closing Date: (a) by mutual consent
of the parties; (b) by either Carolina First Corporation or First National, at
that party's option, (i) if a permanent injunction or other order (including any
order denying any required regulatory consent or approval) shall have been
issued by any Federal or state court of competent jurisdiction in the United
States or by any United States Federal or state governmental or regulatory body,
which order prevents the consummation of the transactions contemplated herein,
or (ii) if the First National shareholder approval is not received at the
Special Meeting; (c) by either Carolina First Corporation or First National if
the other party (or its subsidiaries) has failed to comply with the agreements
or fulfill the conditions contained in the Reorganization Agreement except that
any such failure of compliance or fulfillment must result in a "material adverse
event" (as defined in the Reorganization Agreement) and the breaching party must
be given notice of the failure to comply and a reasonable period of time to
cure; or (d) by either Carolina First Corporation or First National in the event
that closing has not occurred by March 31, 1999. The Reorganization Agreement
may be amended by mutual written consent of all the parties.
EFFECTIVE TIME OF THE MERGER. The effective time of the Merger will be
the time and date specified in the Articles of Merger ("Effective Time") that
are delivered for filing to the Secretary of State of South Carolina. The
Effective Time will occur after all conditions specified in the Reorganization
Agreement have been satisfied or waived, on such date as Carolina First
Corporation shall notify First National in writing not less than five days prior
thereto, which date shall not be more than 30 days after all conditions have
been satisfied or waived in writing. The Effective Time currently is anticipated
to be approximately September 30, 1998, although delays in the satisfaction of
the conditions to consummation of the Merger could result in a later Effective
Time. See "THE PROPOSED TRANSACTION -- Conditions to Consummation of the
Merger."
OPINION OF FINANCIAL ADVISER. Orr Management Company ("Orr Management")
has served as financial adviser to First National in connection with the
Reorganization Agreement and has rendered an opinion to the First National Board
of Directors that the consideration to be received by shareholders of
7
<PAGE>
First National is fair from a financial point of view to the First National
shareholders. For additional information concerning Orr Management and its
opinion, see "THE PROPOSED TRANSACTION -- Opinion of First National's Financial
Adviser" and the opinion of Orr Management attached as Annex B to this Proxy
Statement/Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. First National will receive an
opinion of counsel to Carolina First Corporation stating that the Merger will
constitute a tax-free reorganization within the meaning of Section 368(a)(1)(A)
and Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
("Code"), subject to certain conditions. However, this opinion of counsel is not
binding on the Internal Revenue Service ("IRS"). In such opinion, counsel will
opine that if certain conditions are met, no taxable gain or loss for federal
income tax purposes will be recognized by First National shareholders upon the
exchange of First National common stock solely for Carolina First Corporation
common stock. To the extent that shareholders receive cash consideration for
fractional shares, such shareholders will be taxed to the extent that the cash
exceeds such shareholder's allocated basis in such First National common stock.
A dissenting shareholder who receives cash in lieu of Carolina First Corporation
common stock will be taxed to the extent that the cash exceeds such dissenting
shareholder's basis in the First National common stock. See "THE PROPOSED
TRANSACTION -- Certain Federal Income Tax Consequences." Because of the
complexities of the federal income tax laws and because the tax consequences may
vary depending upon a holder's individual circumstances or tax status, it is
recommended that each shareholder of First National consult his or her tax
adviser concerning the federal (and any applicable state, local or other) tax
consequences of the Merger.
INTERESTS OF CERTAIN PERSONS. Carolina First Corporation has agreed under
the Reorganization Agreement to nominate and elect James H. Grantham to the
board of Carolina First Bank immediately following the Closing Date and to
re-elect Mr. Grantham to such directorship for a period of five years. The
Reorganization Agreement also provides that Carolina First Corporation will
indemnify First National directors and executive officers against certain
liabilities and will maintain such directors' and officers' insurance for these
persons after the Closing Date as shall be obtainable for annual premiums of
$25,000. James H. Grantham, J. Rodger Anthony and Nicholas Clark, all executive
officers of First National, will receive certain payments and benefits provided
for in their employment agreements with First National because the Merger
constitutes a change of control giving rise to a right to those payments and
benefits under those employment contracts. Carolina First Corporation has also
specifically agreed to honor or assume (as applicable) First National's
obligations under its various existing benefit plans. See "THE PROPOSED
TRANSACTION -- Interests of Certain Persons in the Merger."
RESTRICTIONS OF RESALES BY AFFILIATES. First National has agreed that,
prior to closing, it will use its best efforts to cause certain affiliates of
First National to deliver written agreements to Carolina First Corporation that
they will not dispose of any shares of Carolina First Corporation common stock
received upon consummation of the Merger except in compliance with the
Securities Act and rules and regulations promulgated thereunder. See "THE
PROPOSED TRANSACTION -- Restrictions on Resales by Affiliates."
ACCOUNTING TREATMENT. The Merger will be accounted for as a
"pooling-of-interests" of First National by Carolina First Corporation under
generally accepted accounting principles. See "THE PROPOSED TRANSACTION --
Accounting Treatment."
MARKET PRICES AND DIVIDENDS. Carolina First Corporation common stock is
traded on the Nasdaq National Market. Carolina First Corporation currently pays
a regular quarterly dividend of $.08 per share. Although Carolina First
Corporation currently expects to continue payment of its regular cash dividend
on the Carolina First Corporation common stock, there can be no assurance that
Carolina First
8
<PAGE>
Corporation's current dividend policy will continue unchanged after consummation
of the Merger. The declaration and payment of dividends on Carolina First
Corporation common stock is subject to legal restrictions and further depends
upon business conditions, operating results, capital and reserve requirements
and the Carolina First Corporation Board of Directors' consideration of other
relevant factors.
First National common stock is not traded on any established market and
has experienced very limited trading. First National has paid dividends of
$2.35, $2.45 and $2.70 per share during its fiscal years ended June 30, 1996,
1997 and 1998, respectively. Federal banking regulations restrict the amount of
dividends that First National can pay to shareholders. See "COMPARATIVE RIGHTS
OF SHAREHOLDERS -- Dividends."
The information presented in the following table reflects the last
reported sales prices for Carolina First Corporation common stock on May 11,
1998, the last trading day prior to the public announcement of the proposed
Merger, and the First National common stock on an equivalent per share basis,
calculated by multiplying the closing price of the Carolina First Corporation
common stock on such date by the assumed Conversion Ratio of 28.8492 (which
assumes a fair market value per share of $26.00 for Carolina First Corporation
common stock and consummation on or before September 30, 1998). As noted above,
the Conversion Ratio is subject to adjustment depending on the fair market value
of Carolina First Corporation common stock. The table also reflects the last
reported sales price for Carolina First Corporation common stock on August ___,
1998:
Market Values Per Share
---------------------------------------------------------
Carolina First Corporation First National
---------------------------- --------------------------
Historical Historical Equivalent
---------- ---------- ----------
May 11, 1998 $27.50 $75.00 $793.35
August ____, 1998 _______ _______ __.__
First National shareholders are advised to obtain current market
quotations for the Carolina First Corporation common stock. The market price of
Carolina First Corporation common stock at the Effective Time may be higher or
lower than the market price at the time the Reorganization Agreement was
executed, at the date of mailing this Proxy Statement/Prospectus, or at the time
of the Special Meeting.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present selected unaudited historical financial
information and selected unaudited combined pro forma financial information of
Carolina First Corporation (consolidated) and First National. This information
is derived from the historical financial statements of Carolina First
Corporation (consolidated) and First National, and should be read in conjunction
with such historical financial statements and the notes thereto either contained
elsewhere in this Proxy Statement/Prospectus, the documents that accompany this
Proxy Statement/Prospectus or incorporated herein by reference. The pro forma
financial data are presented using the pooling of interests method of
accounting. The selected pro forma combined unaudited financial information
showing the combined results of Carolina First Corporation and First National
(consolidated) is provided for informational purposes only. It is not
necessarily indicative of actual results that would have been achieved had the
Reorganization Agreement been consummated on the dates or at the beginning of
the periods presented, nor is it necessarily indicative of future results. For
additional pro forma information, see "PRO FORMA COMBINED FINANCIAL
INFORMATION."
<TABLE>
<S> <C>
CAROLINA FIRST CORPORATION
(Dollars in thousands, except per share data)
Three Months
Years Ended December 31, Ended March 31,
--------------------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(unaudited)
STATEMENT OF INCOME DATA
Net interest income $29,358 $43,260 $50,772 $57,070 $66,706 $15,452 $20,227
Provision for loan losses 1,106 1,197 6,846 10,263 11,646 2,952 2,136
Noninterest income, excluding
securities transactions 6,085 8,151 16,557 20,368 16,604 3,008 4,473
Securities transactions 680 75 769 973 3,011 84 140
Noninterest income 6,765 8,226 17,326 21,341 19,615 3,092 4,613
Noninterest expenses (1) 27,2945 1,839 46,882 51,675 52,243 12,866 15,259
Net income (loss) (1) 5,418 (1,740) 9,414 10,474 14,340 1,717 4,694
Dividends on preferred stock 1,930 2,433 2,752 63 -- -- --
Net income (loss) applicable
to common shareholders (1) 3,488 (4,173) 6,662 10,411 14,340 1,717 4,694
BALANCE SHEET DATA (Period End)
Total assets $904,474 $1,204,350 $1,414,922 $1,574,204 $2,156,346 $1,613,906 $2,250,747
Securities and temporary
investments 190,683 137,091 187,029 271,396 333,236 278,185 542,180
Loans, net of unearned income 623,646 923,068 1,062,660 1,124,775 1,602,415 1,183,443 1,494,590
Allowance for loan losses 6,679 6,002 8,661 11,290 16,211 12,039 15,349
Nonperforming assets 5,366 4,722 4,868 5,880 3,767 5,109 3,164
Total earning assets 814,579 1,059,455 1,249,689 1,396,171 1,935,651 1,461,628 2,036,770
Total deposits 804,549 1,001,748 1,095,491 1,281,050 1,746,542 1,257,005 1,826,029
Borrowed funds 16,779 106,074 186,789 145,189 139,739 171,379 110,390
Long-term debt 1,274 1,162 26,347 26,442 39,119 26,476 39,395
Preferred stock 15,662 37,014 32,909 943 -- -- --
Shareholders' equity 70,415 86,482 94,967 104,964 201,659 105,339 243,383
PER SHARE DATA (2)
Net income (loss) per common share:
Basic(1) $0.63 $(0.59) $0.89 $0.97 $1.19 $0.15 $0.28
Diluted(1) 0.63 (0.59) 0.84 0.92 1.18 0.15 0.28
Cash dividends declared 0.04 0.17 0.21 0.25 0.29 0.07 0.08
Book value per common
share (period end) 7.70 6.61 7.61 9.26 12.88 9.28 13.74
Common shares outstanding:
Weighted average - basic 5,505,461 7,004,214 7,516,620 10,705,107 11,989,517 11,304,437 16,588,163
Weighted average - diluted 8,208,935 10,114,812 11,183,726 11,368,035 12,175,561 11,478,383 16,922,202
Period end 6,969,484 7,079,866 7,820,839 11,225,568 15,659,338 11,355,443 17,709,935
FINANCIAL RATIOS
Return on average assets 0.69% (0.16)% 0.74% 0.71% 0.84% 0.44% 0.86%
Return on average equity 8.27 (1.99) 10.43 10.56 11.62 6.50 8.42
Net interest margin 4.16 4.65 4.54 4.35 4.36 4.52 4.17
</TABLE>
- -------------------------------------------
(1) Includes 1996 Savings Association Insurance Fund special assessment of
$1,184 (pre-tax) and 1994 restructuring charges of $12,214 (pre-tax).
(2) Adjusted for stock dividends and stock split.
10
<PAGE>
<TABLE>
<S> <C>
FIRST NATIONAL BANK OF PICKENS COUNTY
(Dollars in thousands, except share data)
Twelve Months
Ended Three Months Ended
Dec. 31, Years Ended June 30, March 31,
---------------- ------------------------------------------ ----------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(unaudited) (unaudited)
STATEMENT OF INCOME DATA
Net interest income $ 3,743 $ 3,690 $ 4,020 $ 4,070 $ 4,890 $ 1,233 $ 1,331
Provision for loan losses 114 50 79 -- 184 -- --
Noninterest income, excluding
securities transactions 393 470 415 436 518 139 134
Securities transactions 4 -- (1) (9) (109) 3 --
Noninterest income 397 470 414 427 409 142 134
Noninterest expenses 2,714 2,776 2,964 2,817 2,834 736 805
Net income 927 950 961 1,186 1,604 439 441
BALANCE SHEET DATA (Period End)
Total assets $ 85,876 $90,853 $92,889 $98,357 $108,653 $110,132 $117,539
Securities and temporary
investments 40,777 44,462 39,400 40,760 39,657 43,359 46,696
Loans, net of unearned income 39,100 38,725 46,096 50,779 61,302 59,439 64,012
Allowance for loan losses 563 532 566 496 654 577 712
Nonperforming assets 1,269 1,020 686 403 747 771 450
Total earning assets 79,877 82,122 85,496 91,539 100,959 102,798 110,708
Total deposits 74,518 80,301 79,331 83,774 91,850 93,633 96,241
Borrowed funds -- -- 970 1,028 1,595 1,789 4,572
Long-term debt -- -- -- -- -- -- --
Preferred stock -- -- -- -- -- -- --
Shareholders' equity 10,760 10,974 11,947 12,904 14,532 13,887 15,871
PER SHARE DATA
Net income per common share:
Basic $11.59 $11.87 $12.01 $14.82 $20.05 $ 5.49 $ 5.51
Diluted 11.59 11.87 12.01 14.82 20.05 5.49 5.51
Cash dividends declared 2.05 2.48 2.35 2.35 2.45 -- --
Book value per common
share (period end) 134.50 137.18 149.34 161.30 181.65 173.59 198.39
Common shares outstanding:
Weighted average - basic 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Weighted average - diluted 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Period end 80,000 80,000 80,000 80,000 80,000 80,000 80,000
FINANCIAL RATIOS
Return on average assets 1.10% 1.08% 1.05% 1.24% 1.55% 1.63% 1.54%
Return on average equity 8.93 8.86 8.38 9.55 11.69 12.74 11.27
Net interest margin 5.07 4.69 5.07 4.63 5.11 5.19 5.24
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
UNAUDITED PRO FORMA COMBINED
SELECTED FINANCIAL DATA
CAROLINA FIRST CORPORATION AND FIRST NATIONAL BANK OF PICKENS COUNTY
(Dollars in thousands, except per share data)
Three Months Ended
Years Ended December 31,(3) March 31,
-------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
STATEMENT OF INCOME DATA
Net interest income $ 33,101 $ 46,950 $ 54,792 $ 61,140 $ 71,596$ 16,685 $ 21,558
Provision for loan losses 1,220 1,247 6,925 10,263 11,830 2,952 2,136
Noninterest income, excluding
securities transactions 6,478 8,621 16,972 20,804 17,122 3,147 4,607
Securities transactions 684 75 768 964 2,902 87 140
Noninterest income 7,162 8,696 17,740 21,768 20,024 3,234 4,747
Noninterest expenses (1) 30,008 54,615 49,846 54,492 55,077 13,602 16,064
Net income (loss) (1) 6,345 (790) 10,375 11,660 15,944 2,156 5,135
Dividends on preferred stock 1,930 2,433 2,752 63 -- -- --
Net income (loss) applicable
to common shareholders (1) 4,415 (3,223) 7,623 11,597 15,944 2,156 5,135
BALANCE SHEET DATA (PERIOD END)
Total assets $ 990,350 $1,295,203 $1,507,811 $1,672,561 $2,264,999 $1,724,038 $2,368,286
Securities and temporary
investments 231,460 181,553 226,429 312,156 372,893 321,544 588,876
Loans, net of unearned income 662,746 961,793 1,108,756 1,175,554 1,663,717 1,242,882
1,558,602
Allowance for loan losses 7,242 6,534 9,227 11,786 16,865 12,616 16,061
Nonperforming assets 6,635 5,742 5,554 6,283 4,514 5,880 3,614
Total earning assets 894,456 1,141,577 1,335,185 1,487,710 2,036,610 1,564,426 2,147,478
Total deposits 879,067 1,082,049 1,174,822 1,364,824 1,838,392 1,350,638 1,922,270
Borrowed funds 16,779 106,074 187,759 146,217 141,334 173,168 114,962
Long-term debt 1,274 1,162 26,347 26,442 39,119 26,476 39,395
Preferred stock 15,662 37,014 32,909 943 -- -- --
Shareholders' equity 81,175 97,456 106,914 117,868 216,191 119,226 258,504
PER SHARE DATA (2)
Net income (loss) per common share:
Basic (1) $0.57 $(0.35) $0.78 $0.89 $1.12 $0.16 $0.27
Diluted (1) 0.57 (0.35) 0.77 0.85 1.10 0.16 0.27
Cash dividends declared 0.04 0.17 0.21 0.25 0.29 0.07 0.08
Book value per common
share (period end) 7.06 6.44 7.31 8.64 12.03 8.73 12.91
Common shares outstanding:
Weighted average - basic 7,813,399 9,312,152 9,824,558 13,013,045 14,297,455 13,612,375 18,896,101
Weighted average - diluted 10,516,873 12,422,750 13,491,664 13,675,973 14,483,499 13,786,321 19,230,140
Period end 9,277,422 9,387,804 10,128,777 13,533,506 17,967,276 13,663,381 20,017,873
FINANCIAL RATIOS
Return on average assets 0.73% (0.07)% 0.76% 0.74% 0.88% 0.52% 0.89%
Return on average equity 8.36 (0.81) 10.20 10.45 11.63 7.22 8.61
Net interest margin 4.25 4.65 4.58 4.38 4.42 4.57 4.23
</TABLE>
(1) Includes Carolina First Corporation's 1996 Savings Association Insurance
Fund special assessment of $1,184 (pre-tax) and 1994 restructuring charges of
$12,214 (pre-tax).
(2) Adjusted for stock dividends and stock split.
(3) Includes First National's historical financial information for the years
ended June 30 (which is First National's fiscal year end) for each year
indicated, except for 1993.
12
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables present at the dates and for the periods indicated
(i) certain consolidated historical and pro forma combined per share data for
the Carolina First Corporation common stock after giving effect to the
Reorganization Agreement and (ii) certain historical and pro forma data for the
First National common stock. The pro forma financial data are presented using
the pooling of interests method of accounting, and an assumed Conversion Ratio
of 28.8492 shares of Carolina First Corporation common stock for each share of
First National common stock. The data presented should be read in conjunction
with the historical financial statements and the related notes thereto included
elsewhere herein or incorporated herein by reference and in conjunction with the
pro forma combined condensed financial information included elsewhere herein.
The data are not necessarily indicative of actual results that would have been
achieved had the Reorganization Agreement been consummated at the beginning of
the periods presented and are not indicative of future results.
<TABLE>
Carolina First
Corporation First National
----------------- ------------------
Three Months Ended Three Months Ended Pro Forma First National
March 31, 1998 March 31, 1998 Combined Equivalent(1)
-------------- -------------- -------- -------------
<S> <C> <C> <C> <C>
Diluted earnings per
common share $0.28 $5.51 $0.27 $7.79
Cash dividends declared per
common share 0.08 -- 0.08 2.31
Book value per common
share (period end) 13.74 198.39 12.91 372.44
</TABLE>
(1) Calculated by multiplying the Pro Forma Combined by an assumed Conversion
Ratio of 28.8492.
<TABLE>
Carolina First
Corporation First National
----------------- ------------------
Year Ended Year Ended Pro Forma FirstNational
December 31, 1997 December 31, 1997(1) Combined Equivalent(2)
----------------- -------------------- --------- -------------
<S> <C> <C> <C> <C>
Diluted earnings per
common share $1.18 $ 22.08 $1.11 $32.02
Cash dividends declared per
common share 0.29 2.70 0.29 8.37
Book value per common
share (period end) 12.88 192.81 12.03 347.06
</TABLE>
(1)Historical earnings per share for First National, which has a June 30 fiscal
year end, have been adjusted to reflect a December 31 fiscal year end by
adding the subsequent six month period and subtracting the comparable
preceding year interim results from the results for the year ended June 30,
1997.
(2)Calculated by multiplying the Pro Forma Combined by the assumed Conversion
Ratio of 28.8492.
<TABLE>
Carolina First
Corporation First National
---------------- --------------
Year Ended Year Ended Pro Forma FirstNational
December 31, 1996 June 30, 1997 Combined Equivalent(1)
----------------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Diluted earnings per
common share $0.92 $20.05 $0.88 $25.39
Cash dividends declared per
common share 0.25 245 0.25 7.21
Book value per common
share (period end) 9.26 181.65 8.83 254.74
</TABLE>
(1) Calculated by multiplying the Pro Forma Combined by an assumed Conversion
Ratio of 28.8492.
13
<PAGE>
<TABLE>
Carolina First
Corporation First National
Year Ended Year Ended Pro Forma FirstNational
December 31, 1995 June 30, 1996 Combined Equivalent (1)
----------------- ------------- -------- --------------
<S> <C> <C> <C> <C>
Diluted earnings per
common share $0.84 $14.82 $0.79 $22.79
Cash dividends declared per
common share 0.21 235 0.21 6.06
Book value per common
share (period end) 7.61 161.30 7.40 213.48
</TABLE>
(1) Calculated by multiplying the Pro Forma Combined by an assumed Conversion
Ratio of 28.8492.
14
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY WHEN
EVALUATING CAROLINA FIRST CORPORATION AND THE CAROLINA FIRST CORPORATION COMMON
STOCK.
DEPENDENCE ON SENIOR MANAGEMENT. Carolina First Corporation is
dependent upon the services of certain of the senior executive officers of
Carolina First Corporation and its subsidiaries. The loss of the services of one
or more of such individuals could have an adverse effect on Carolina First
Corporation. No assurance can be given that replacements for any of these
officers could be employed if their services were no longer available. Carolina
First Corporation maintains key employee insurance on Mack I. Whittle, Jr.,
Carolina First Corporation's Chief Executive Officer.
GROWTH THROUGH ACQUISITION. Carolina First Corporation has experienced
significant growth in assets as a result of acquisitions. Moreover, Carolina
First Corporation anticipates engaging in selected acquisitions of financial
institutions and branch locations in the future. There are certain risks
associated with Carolina First Corporation's acquisition strategy that could
adversely impact net income. Such risks include, among others, incorrectly
assessing the asset quality of a particular institution being acquired,
encountering greater than anticipated costs of incorporating acquired businesses
into Carolina First Corporation and being unable to profitably deploy funds
acquired in an acquisition. Furthermore, there can be no assurance as to the
extent that Carolina First Corporation can continue to grow through
acquisitions. In the past, Carolina First Corporation has engaged in
acquisitions accounted for by the purchase method of accounting. Acquisitions
accounted for by the purchase method of accounting may lower the capital ratios
of the entities involved. Consequently, in the event that Carolina First
Corporation engages in significant acquisitions accounted for by the purchase
method of accounting in the future, Carolina First Corporation may be required
to raise additional capital in order to maintain capital levels required by the
Board of Governors of the Federal Reserve System ("Federal Reserve"). In the
future, Carolina First Corporation may issue capital stock in connection with
additional acquisitions. Such acquisitions and related issuances of stock may
have a dilutive effect on earnings per share and ownership. Although Carolina
First Corporation is engaged from time to time in discussions relating to
possible acquisitions, Carolina First Corporation presently has no agreements or
understandings relating to any acquisitions except for the pending acquisitions
of Colonial Bank of South Carolina, Inc. and Poinsett Financial Corporation
described below in "INFORMATION ABOUT CAROLINA FIRST CORPORATION--Recent
Developments."
ANTITAKEOVER MEASURES. Carolina First Corporation has certain
antitakeover measures in place. These include (i) a Shareholders' Rights Plan
which, among other things, provides for the dilution of the Carolina First
Corporation common stock holdings of certain shareholders who acquire 20% or
more of the Carolina First Corporation common stock and attempt to acquire
Carolina First Corporation without the consent of management, (ii) certain
management contracts which provide for additional management compensation in the
event that executive officers who are a party thereto are terminated after a
change in control of Carolina First Corporation, and (iii) various charter
provisions providing for, among other things, a "staggered" board of directors
and supermajority voting requirements in connection with the removal of
directors without cause and certain business combinations involving Carolina
First Corporation. Any one or more of these measures may impede the takeover of
Carolina First Corporation without the approval of Carolina First Corporation's
Board of Directors and may prevent shareholders from taking part in a
transaction in which they could realize a premium over the current market price
of Carolina First Corporation common stock. See "CAROLINA FIRST CORPORATION
CAPITAL STOCK."
COMMERCIAL LENDING ACTIVITIES. Over the past several years, Carolina First
Corporation has experienced significant growth in commercial and commercial
mortgage loans. These loans are generally more risky than one-to-four family or
consumer loans because they are unique in character, generally larger in
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amount and dependent upon the borrower's ability to generate cash to service the
loan. There are certain risks inherent in making all loans, including risks with
respect to the period of time over which loans may be repaid, risks resulting
from uncertainties as to the future value of collateral, risks resulting from
changes in economic and industry conditions and risks inherent in dealing with
individual borrowers. While Carolina First Corporation's nonperforming loans as
a percentage of total loans is below its peer group average, there is a risk
that the quality of Carolina First Corporation's loan portfolio could decline,
particularly in connection with the rapid growth in loans Carolina First
Corporation has experienced over the past several years.
INFORMATION CONCERNING THE SPECIAL MEETING
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to shareholders of
First National as of the Record Date in connection with the solicitation of
proxies by the Board of Directors of First National for use at the Special
Meeting and at any adjournments thereof. The Special Meeting is to be held on
September 7, 1998 at 10:00 a.m., local time, at the main office of First
National, 200 South Pendleton Street, Easley, South Carolina. Holders of First
National common stock are requested to complete, date and sign the accompanying
Proxy and return it promptly to First National in the enclosed postage-paid
envelope.
PURPOSE OF THE SPECIAL MEETING. The purpose of the Special Meeting is
to consider and take action with respect to approval of the Reorganization
Agreement. As required by Federal law, approval of the Reorganization Agreement
will require the affirmative vote of the holders of two-thirds of the
outstanding shares of First National common stock entitled to vote on the
Reorganization Agreement. See "--First National Record Date and Voting Rights."
This Proxy Statement/Prospectus, Notice of Special Meeting and the Proxy are
first being mailed to shareholders of First National on or about August 7, 1998.
FIRST NATIONAL RECORD DATE AND VOTING RIGHTS. Only the holders of First
National common stock on the Record Date are entitled to receive notice of and
to vote at the Special Meeting and at any adjournments thereof. On the Record
Date, there were 80,000 shares of First National common stock outstanding, which
were held by approximately 146 holders of record. Each share of First National
common stock outstanding on the Record Date is entitled to one vote as to each
of the matters submitted at the Special Meeting.
A majority of the shares entitled to be voted at the Special Meeting
constitutes a quorum. If a share is represented for any purpose at the Special
Meeting by the presence of the registered owner or a person holding a valid
proxy for the registered owner, it is deemed to be present for purposes of
establishing a quorum. Therefore, valid proxies which are marked "Abstain," as
to which no vote is marked, including proxies submitted by brokers that are the
record owners of shares (so-called "broker non-votes"), will be included in
determining the number of shares present or represented at the Special Meeting.
THE MERGER MUST BE APPROVED BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT
LEAST TWO-THIRDS OF THE OUTSTANDING SHARES OF FIRST NATIONAL COMMON STOCK
ELIGIBLE TO VOTE AT THE SPECIAL MEETING. ACCORDINGLY, PROXIES MARKED "ABSTAIN"
AND SHARES THAT ARE NOT VOTED (INCLUDING BROKER NON-VOTES) WILL HAVE THE SAME
EFFECT AS VOTES AGAINST THE REORGANIZATION AGREEMENT.
On July 15, 1998, the directors and executive officers of First National
and their affiliates owned a total of 46,652 shares, or approximately 58.3% of
First National's common stock.
PROXIES. The accompanying Proxy is for use at the Special Meeting. A
record shareholder may use this
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Proxy if he is unable to attend the Special Meeting in person or wishes to have
his shares voted by proxy even if he does attend the Special Meeting. All shares
represented by valid proxies received pursuant to this solicitation that are not
revoked before they are exercised will be voted in the manner specified therein.
If no specification is made, the proxies will be voted FOR approval of the
Reorganization Agreement. The Board of Directors of First National is not aware
of any other matters that may be presented for action at the Special Meeting,
but if other matters do properly come before the Special Meeting, it is intended
that shares represented by proxies in the accompanying form will be voted by the
persons named in the Proxy in accordance with their best judgment.
If a quorum is not obtained, or if fewer shares of First National common
stock are voted in favor of approval of the Reorganization Agreement than the
number required for approval, it is expected that the Special Meeting will be
postponed or adjourned for the purpose of allowing additional time for obtaining
additional proxies or votes, and, at any subsequent reconvening of the Special
Meeting, all proxies will be voted in the same manner as such proxies would have
been voted at the original convening of the meeting (except for any proxies
which have theretofore effectively been revoked).
The presence of a record shareholder at the Special Meeting will not
automatically revoke such shareholder's proxy. The proxy may be revoked by the
record shareholder (i) by giving written notice to the Secretary of First
National at any time before it is voted, (ii) by submitting a proxy having a
later date, or (iii) by such person appearing at the Special Meeting and giving
notice of revocation to the corporate officers responsible for maintaining the
list of shareholders.
Solicitation of proxies may be made in person or by mail, or by telephone
or other electronic means, by directors, officers and regular employees of First
National, who will not be specially compensated in such regard. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to forward
solicitation materials to beneficial owners and secure their voting
instructions, if necessary, and will be reimbursed for the expenses incurred in
sending proxy materials to beneficial owners. First National will bear the costs
associated with the solicitation of proxies and other expenses associated with
the Special Meeting.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized by First National, Carolina
First Corporation or any other person. The delivery of this Proxy
Statement/Prospectus will not, under any circumstances, create any implication
that there has been no change in the affairs of First National or Carolina First
Corporation since the date of this Proxy Statement/Prospectus.
. THE FIRST NATIONAL BOARD OF DIRECTORS HAS APPROVED THE REORGANIZATION
AGREEMENT AND BELIEVES THAT THE PROPOSED TRANSACTION IS FAIR TO AND IN THE BEST
INTERESTS OF FIRST NATIONAL AND ITS SHAREHOLDERS. THE FIRST NATIONAL BOARD OF
DIRECTORS RECOMMENDS THAT FIRST NATIONAL'S SHAREHOLDERS VOTE FOR APPROVAL OF THE
REORGANIZATION AGREEMENT.
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THE PROPOSED TRANSACTION
THE FOLLOWING DESCRIPTION OF THE TERMS AND PROVISIONS OF THE
REORGANIZATION AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
REORGANIZATION AGREEMENT, WHICH IS SET FORTH IN FULL AS ANNEX A TO THIS PROXY
STATEMENT/PROSPECTUS AND INCORPORATED HEREIN BY REFERENCE.
GENERAL DESCRIPTION OF THE TERMS OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement provides for the merger of First National
with and into Carolina First Bank, a wholly-owned subsidiary of Carolina First
Corporation. As a result of the Merger, the separate corporate existence of
First National will cease and Carolina First Bank, as the surviving entity, will
possess all rights, franchises and interests of First National. As of the
Effective Time of the Merger, certificates of First National common stock will
represent only the right to receive the requisite number of shares of Carolina
First Corporation common stock and cash for any fractional shares. The
Reorganization Agreement also provides that Carolina First Corporation may
restructure the transactions contemplated therein, provided that any such
restructuring shall not (i) alter the type of consideration to be issued to the
holders of First National common stock as provided for in the Reorganization
Agreement, (ii) reduce the value of such consideration, (iii) adversely affect
the intended tax-free treatment to First National's shareholders as a result of
receiving such consideration or prevent the parties from obtaining the tax
opinion of Wyche, Burgess, Freeman & Parham, P.A. referred to herein, (iv)
materially impair the ability to receive the required regulatory approvals, or
(v) materially delay the closing.
Pursuant to the terms of the Reorganization Agreement, upon consummation
of the Merger, holders of First National's common stock will be entitled to
receive shares of Carolina First Corporation common stock having a "fair market
value" (as defined in the Reorganization Agreement) of $750.08 (subject to
adjustment upward to $769.89 in the event the consummation of the Merger occurs
after September 30, 1998) for each outstanding share of First National common
stock held by them. Assuming a fair market value of $26.00 per share, and
consummation on or before September 30, 1998, this results in a Conversion Ratio
of 28.8492.
The "fair market value" is defined in the Reorganization Agreement as the
average of the closing prices as quoted on the Nasdaq National Market for
Carolina First Corporation common stock for the twenty days in which Carolina
First Corporation common stock was traded immediately prior to the Closing Date,
except that if prior to the effective time of the Merger, any other person or
entity shall have publicly announced an intention to acquire control of Carolina
First Corporation by merger or otherwise or Carolina First Corporation shall
have publicly acknowledged that it is seeking to be acquired by another person
or entity or is discussing being acquired by another person or entity, then the
average of the closing prices as quoted on the Nasdaq National Market for
Carolina First Corporation common stock for the 20 days for which the Carolina
First Corporation common stock was traded immediately prior to such announcement
or acknowledgment shall be determined and, if such average is less than the
average derived from the 20 trading days immediately prior to the Closing Date,
then the smaller average shall be the fair market value. All of the stock prices
set forth above are subject to equitable adjustment for stock splits, stock
dividends, reverse stock splits and similar items.
Because the number of shares of Carolina First Corporation common stock
to be received by First National shareholders will depend on the market price of
Carolina First Corporation common stock, the exact number of shares to be
received by First National shareholders will not be known until the effective
date of the Merger. On August ____, 1998, the most recent date for which it was
practicable to obtain information prior to the printing of this Prospectus/Proxy
Statement, the closing price per share of Carolina First Corporation common
stock, as reported on the Nasdaq National Market, was $_____. First National
shareholders should note, however, that the market price of the Carolina First
Corporation common stock they receive will continue to be subject to market
fluctuations, as well as the future results of operations and financial
condition of Carolina First Corporation, among other factors, and therefore may
be worth less than, or more than, such amount as of the date
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they receive their Carolina First Corporation common stock certificates.
No fractional shares of Carolina First Corporation common stock will be
issued as a result of the Merger. In lieu of the issuance of fractional shares,
cash will be paid to the holders of the First National common stock in respect
of any fractional share that would otherwise be issuable based on the fair
market value of Carolina First Corporation common stock.
The Reorganization Agreement generally provides that Carolina First
Corporation and First National will each bear and pay their own costs and
expenses incurred in connection with the transactions contemplated in the
Reorganization Agreement, including fees of attorneys and accountants. The
Reorganization Agreement specifically provides that Carolina First Corporation
will bear the cost of the filing fees for the Registration Statement and the
cost for all filing fees associated with obtaining necessary regulatory
approvals.
The Merger will become effective at the Effective Time, which will be
specified in the Articles of Merger to be filed with the South Carolina
Secretary of State. At the Effective Time, by operation of law, First National
shareholders will no longer be owners of First National common stock and (to the
extent that they receive Carolina First Corporation common stock as
consideration) will automatically become owners of Carolina First Corporation
common stock. After the Effective Time, each outstanding certificate
representing shares of First National common stock prior to the Effective Time
shall be deemed for all corporate purposes (other than the payment of dividends
and other distributions by First National to which the former shareholders of
First National common stock may be entitled) to evidence only the right of the
holder thereof to surrender such certificate and receive the consideration as
provided in the Reorganization Agreement.
BACKGROUND OF AND REASONS FOR THE REORGANIZATION AGREEMENT
FIRST NATIONAL REASONS. First National is headquartered in Easley,
South Carolina and conducts its business through four office facilities in
Pickens County. In connection with its normal strategic planning process, First
National continuously reviews its strategic business alternatives, including
devoting attention to the continuing consolidation and increasing competition in
the banking and financial services industries in South Carolina. In recent
years, competition in the local banking and financial services industries has
intensified and required increased efforts to enhance First National's ability
to remain competitive in this environment.
In late February, 1998 the Chief Executive Officer of Carolina First
Corporation met with the Chairman of First National and expressed a possible
interest in Carolina First Corporation's acquiring First National. The Chairman
then met with the First National Board of Directors and advised them of Carolina
First Corporation's interest. The Board of Directors discussed the desirability
of engaging a financial advisor to assist it in considering Carolina First
Corporation's proposal and to determine what other interest might be present.
The Board of Directors instructed the Chairman to make a recommendation to the
Board of Directors with respect to a financial advisor. Subsequently the
Chairman recommended to the Board of Directors that the Board of Directors
engage Orr Management to assist First National. The First National Board of
Directors met with its counsel and discussed the legal aspects of considering a
merger proposal and the other options available to First National. The Board
of Directors then voted to engage Orr Management and asked Orr Management to
seek acquisition proposals from potential acquirors.
Orr Management prepared information about First National and contacted a number
of potential acquirors. The Chairman met with representatives of a number of the
potential acquirors that had expressed some interest in First National.
Discussions were held with several proposed acquirors regarding the possible
terms of a merger and the Chairman and Orr Management concluded that the best
proposal available was the proposal being made
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by Carolina First Corporation. The Board of Directors met on May 11 with
representatives of Orr Management and the First National's counsel to discuss
the Carolina First Corporation proposal and the other proposals received by Orr
Management on behalf of First National. The Board of Directors of Directors then
authorized the Chairman to execute a nonbinding letter of intent with Carolina
First Corporation. On May 12, 1998, Carolina First Corporation publicly
announced that it had entered into a letter of intent to acquire First National.
Thereafter the Chairman, Orr Management and counsel for First National
negotiated the terms of the Reorganization Agreement with Carolina First
Corporation's officers and counsel. On June 9, 1998, the First National Board of
Directors met again to review the proposed Reorganization Agreement. After a
lengthy discussion the Board of Directors instructed the Chairman to negotiate
certain changes in the terms of the Agreement. The terms of the proposed
Reorganization Agreement were modified and the officers and counsel of both
First National and Carolina First Corporation agreed upon the terms of the
Reorganization Agreement.
On June 22, 1998, the Board of Directors met again and considered the
terms of the Reorganization Agreement. The Board of Directors voted unanimously
to authorize the Chairman to execute the Reorganization Agreement on behalf of
First National and recommended approval of the Merger to the shareholders.
In deciding to approve the Reorganization Agreement the Board of
Directors received information and advice from the officers of First
National, First National's counsel and Orr Management, including its opinion
that the consideration to be received by the shareholders of First National
was fair from a financial point of view. In reaching its decision the First
National Board of Directors considered a number of factors. Without assigning
any relative or specific weights to the factors, the First National Board of
Directors considered the following material factors:
(i) First National's business, operations, earnings, managerial
requirements and resources, prospects and financial condition;
(ii) Carolina First Corporation's business, operations, earnings,
financial condition and lending capacity on both an historical and prospective
basis;
(iii) The enhanced opportunities for operating efficiencies that could
result from the Merger, the enhanced opportunities for growth in First
National's market areas that the Merger would make possible and the respective
contributions the parties would bring to a combined institution;
(iv) The First National Board of Directors' belief that Carolina First
Bank would retain valued First National employees and continue to make
substantial contributions in the communities served by First National;
(v) The terms of the Reorganization Agreement and the value of the
Carolina First Corporation common stock to be received by First National
shareholders;
(vi) Carolina First Corporation as an ongoing institution and its
growth prospects, asset quality, reserves for losses, capital adequacy and
profitability;
(vii) The liquidity of the Carolina First Corporation common stock and
the number of unaffiliated shareholders of Carolina First Corporation;
(viii) Alternatives to the Merger, including the alternatives of
remaining independent and growing internally, or remaining independent for a
period of time and then selling;
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(ix) Possible affiliation partners for First National (other than
Carolina First Corporation), prospects for such other possible affiliation
partners, and the consideration which might be available from such other
partners;
(x) The expectation that the Merger will be a tax free transaction to
First National and its shareholders;
(xi) Factors that may affect the market value of Carolina First
Corporation common stock in the near future and the long term; and
(xii) Current and prospective economic environment, competitive
constraints and regulatory burdens facing financial institutions, including
First National.
The terms of the Reorganization Agreement were the result of arm's length
negotiations between representatives of First National and Carolina First
Corporation.
CAROLINA FIRST CORPORATION REASONS. After consideration of relevant
business, financial, and market factors, the Board of Directors of Carolina
First Corporation believes that the Merger will provide it with a favorable
means for strengthening its presence in Pickens County. Carolina First
Corporation's goal is to be the leading South Carolina-headquartered, state-wide
financial institution, and having a strong market presence in First National's
market areas is an important step in achieving this goal. Carolina First
Corporation believes that acquiring an existing institution is a superior means
of expanding in First National's markets, as compared to branching DE NOVO,
primarily because of the acquisition of the established customer relationships.
Carolina First Corporation believes that First National has valuable community
relationships which it will be able to use to expand its banking operations in
First National's market areas. Carolina First Corporation also believes that the
terms of the proposed Merger are fair from its point of view and from a
financial perspective.
OPINION OF FIRST NATIONAL'S FINANCIAL ADVISER
First National retained Orr Management on April 14, 1998, to render to the
Board of Directors of First National, a written opinion as to the fairness, from
a financial point of view, to the shareholders of First National of the terms of
the proposed Merger. On July 15, 1998, Orr Management presented its written
opinion to First National's Board of Directors.
The full text of Orr Management's opinion, dated as of June 22, 1998, is
attached as Annex B hereto and should be read in its entirety with respect to
the procedures followed, assumptions made, matters considered and qualifications
and limitations on the review undertaken by Orr Management in connection with
its opinion. First National's shareholders are urged to read the opinion in its
entirety.
Orr Management's opinion to First National's Board of Directors on the
Merger is directed only to the Conversion Ratio and does not address the
fairness, from a financial point of view, of any Conversion Ratio that may be
agreed upon by First National and Carolina First Corporation pursuant to the
provisions of the First National Agreement that provides for possible adjustment
of the Conversion Ratio. Orr Management's opinion does not constitute a
recommendation to any shareholder of First National as to how such shareholder
should vote at the Special Meeting.
First National selected Orr Management as its investment banker on the
basis of its expertise in merger and acquisition advisory services. Orr
Management is an investment banking firm whose principals have over 75 years of
combined banking experience and have been involved with over 35 bank related
mergers and acquisitions.
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No limitations were imposed by First National upon Orr Management with
respect to rendering its opinion.
In arriving at its opinion, Orr Management reviewed, among other things:
(i) the Reorganization Agreement; (ii) certain publicly available information
concerning First National and Carolina First Corporation, including the
respective Annual Reports on Form 10-K of Carolina First Corporation for each of
the years in the three year period ended December 31, 1995, 1996 and 1997, the
respective Quarterly Reports on Form 10-Q for Carolina First Corporation for the
quarter ended March 31, 1998; (iii) certain available financial forecasts
concerning the business and operations of First National and Carolina First
Corporation; and (iv) certain publicly available information with respect to
other companies that Orr Management believes to be comparable in certain
respects to First National and Carolina First Corporation and the trading
markets for such other companies' securities.
In Orr Management's review and analysis, Orr Management assumed and relied
upon the accuracy and completeness of all of the financial and other information
provided Orr Management, or that was publicly available, and has not attempted
independently to verify nor assumed responsibility for verifying any such
information. With respect to the financial projections, Orr Management assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of First National or Carolina First
Corporation, as the case may be, and Orr Management expresses no opinion with
respect to such forecasts or the assumptions on which they are based. Orr
Management has not made or obtained or assumed any responsibility for making or
obtaining any independent evaluations or appraisals of any of the assets
(including properties and facilities) or liabilities of First National or
Carolina First Corporation.
The following summary does not purport to be a complete description of the
analyses performed or the matters considered by Orr Management in arriving at is
opinion.
In addressing the fairness, from a financial point of view, of the
consideration to be issued by Carolina First Corporation to the shareholders of
First National, Orr Management addressed certain issues relating to the
financial fairness of the proposed Merger, including: (i) how the Merger
compares to similar bank transactions; (ii) the financial impact of the Merger
to the current shareholders of First National; and (iii) whether Carolina First
Corporation's operations and currency are of similar value to other acquirors in
similar transactions. To address the impact of the proposed Merger, Orr
Management reviewed analyses of recently announced bank acquisitions, First
National's contribution to the new combined entity, its analysis of
shareholders' claims on the new entity, a present value analysis of First
National's common stock on a stand-alone basis, and Carolina First Corporation's
operations and stock compared to its peers. In summary, Orr Management reached
the conclusions that the proposed Merger is comparable to similar bank
transactions, the financial impact to the current shareholders of First National
is positive and fair, and Carolina First Corporation's operations and stock are
well within the range of comparable acquirors in the industry.
Orr Management employed a variety of methodologies in its analyses,
including analyses of the financial impact of the transaction based on a pro
forma contribution analysis, a shareholder's claims analysis, and a discounted
dividend analysis. The pro forma contribution analysis looked at the financial
impact of the Merger on certain balance sheet and income statement items. Such
analysis included calculations, among others, that showed the percentage
contributions of First National and Carolina First Corporation to the total
equity capital of the combined entities would be 7.11% and 92.89%, respectively;
and the percent of contribution to market capitalization at June 22, 1998, would
be 1.26% by First National and 98.74% by Carolina First Corporation.
Shareholder's Claims Analysis. In its shareholder's claims analysis, Orr
Management calculated an earnings per share claims analysis (including Carolina
First Corporation's proposed merger with Colonial and assuming a 21% savings
factor), and Orr Management concluded that the Merger would result in an
increase of
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38.9% in the earnings per share (basic). In Orr Management's dividend claims
analysis as part of its shareholder's claims analysis, based on Carolina First
Corporation's annualized first quarter 1998 dividend of $.08 per share of
Carolina First Corporation's common stock, the new equivalent dividend per share
(basic) for First National would increase by 195.5%.
Discounted Dividends Analysis. Orr Management's discounted divided
analysis compared the value of First National's current stock value to the value
it will receive in the exchange for shares of Carolina First Corporation common
stock. The five year financial projections were supplied by First National. Orr
Management discounted the dividends at rates of 12%, 14%, and 16% and assumed a
take out value at the end of year five based on price-to-earnings multiples of
16, 18, and 20. The discounted values ranged from a low of $232.28 per share to
a high of $341.75 per share. The analysis revealed that the current offer from
Carolina First Corporation, $750.08 or $769.89 per share (depending in when the
Merger is consummated), is higher than the stock price of holding the shares of
First National common stock.
Comparable Bank Transactions Analysis. Orr Management reviewed 16
comparable bank transactions involving sellers with assets less than $300
million announced between February 1997 and May 1998. Orr Management noted the
prices paid in these mergers as a multiple of book values and earnings, and Orr
Management reviewed other data in connection with these mergers, including the
amount of total assets, the return on average assets and the return on average
equity of the acquired institutions. Orr Management then compared this data to
that of First National and the value to be received by First National
shareholders in the Merger.
The comparable bank transactions showed a range of transaction values as
multiples of book value per share of a low of 1.51 times to a high of 4.78 times
and an average of 3.04 times. The range of transaction values as multiples of
earnings per share revealed a low of 15.4 times a high of 36.3 times and an
average of 22.3 times. The First National acquisition multiple of book value was
3.99 times, and the multiple of earnings per share was 34.9 times.
No company or transaction used in the above analyses as a comparison is
identical to First National, Carolina First Corporation or the Merger.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial growth
and operating characteristics of the companies and other factors that could
affect the public trading value of the companies to which they are being
compared. Mathematical analysis in and of itself does not necessarily provide
meaningful intercompany comparisons.
Orr Management will be paid a fee in connection with the proposed Merger
equal to 0.80% of the gross transaction value. The payment of that fee is
contingent upon consummation of the Merger. Further, First National has agreed
to reimburse legal and other reasonable expenses and to indemnify Orr Management
and its affiliates, directors, agents, employees and controlling persons in
connection with certain matters related to rendering its opinion, including
liabilities under securities laws.
THE WRITTEN OPINION OF ORR MANAGEMENT TO FIRST NATIONAL IS ATTACHED AS
ANNEX B TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. THE DESCRIPTION OF THE FIRST NATIONAL FAIRNESS OPINION IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO ANNEX B. FIRST NATIONAL SHAREHOLDERS ARE URGED
TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY ORR MANAGEMENT IN CONNECTION WITH
RENDERING ITS OPINION.
EXCHANGE OF FIRST NATIONAL STOCK CERTIFICATES
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As soon as practicable after the Effective Time (but in no event more than
five days after the Effective Time), Carolina First Corporation or its transfer
agent (in such capacity, the "Exchange Agent") will mail, and otherwise make
available to each former record holder of shares of First National common stock,
a form of the letter of transmittal and instructions for use in effecting
surrender and exchange of certificates which immediately before the Effective
Time represented shares of First National common stock ("Certificates") for
payment therefor. Adequate provisions shall be made to permit Certificates to be
surrendered and exchanged in person not later than the business day following
the Effective Time.
FIRST NATIONAL SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE TRANSMITTAL FORMS.
Upon receipt of such notice and transmittal form, each holder of
Certificates at the Effective Time should send or provide the Certificate, or
Certificates, to the Exchange Agent, whereupon the holder shall promptly receive
the Carolina First Corporation common stock issuable to him in exchange for such
Certificates. If any portion of the payment to be made upon surrender and
exchange of a Certificate is to be paid to a person other than the person in
whose name the Certificate is registered, it shall be a condition of such
payment that the Certificate shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay in
advance any transfer or other taxes or establish to the satisfaction of Carolina
First Corporation that no such tax is applicable.
Carolina First Corporation is not obligated to deliver the Carolina First
Corporation common stock to which any former holder of First National common
stock is entitled as a result of the Merger until such holder surrenders his or
her Certificates, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be reasonably required in each case by
Carolina First Corporation or First National. In addition, no dividend or other
distribution payable to the holders of record of Carolina First Corporation
common stock as of any time subsequent to the Effective Time shall be paid to
the holder of any certificate representing shares of First National Common Stock
issued and outstanding at the Effective Time until such holder surrenders such
Certificate to the Exchange Agent for exchange. However, upon surrender of the
Certificates, both the Carolina First Corporation common stock certificate,
together with all such withheld dividends or other distributions and any
withheld cash payments in respect of fractional share interest, but without any
obligation for payment of interest by such withholding, shall be delivered and
paid with respect to each share represented by such Certificates.
After the Effective Time, each outstanding Certificate shall be deemed for
all corporate purposes (other than voting and the payment of dividends and other
distributions to which the former shareholders of First National common stock
may be entitled) to evidence only the right of the holder thereof to surrender
such Certificate and receive the requisite number of shares of Carolina First
Corporation common stock in exchange therefore (and cash in lieu of fractional
shares) as provided in the Reorganization Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of Carolina First Corporation and Carolina First Bank to
consummate the transactions contemplated in the Reorganization Agreement are
subject to the satisfaction of the following conditions (among others) at or
before the Closing Date: (i) the compliance by First National with its covenants
set forth in the Reorganization Agreement and the material accuracy, on the
Closing Date, of each of the representations and warranties of First National
set forth in the Reorganization Agreement (subject to certain limited
exceptions); (ii) the receipt by Carolina First Corporation of an opinion of
counsel of First National in form and substance reasonably satisfactory to
Carolina First Corporation and its counsel; (iii) that there shall have been no
"material
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adverse event" (as defined in the Reorganization Agreement) with respect to
First National through the Closing Date; (iv) the receipt of necessary
regulatory approvals; (v) the receipt of the necessary shareholder approval of
First National; (vi) that immediately prior to Closing, the First National
allowance for loan losses meets certain requirements; (vii) the execution of the
consulting agreement between Carolina First Corporation and James H. Grantham;
and (viii) that the holders of 10% or more of the First National common stock
outstanding at the time of the Shareholders' Meeting shall not have dissented to
the Merger.
The obligations of First National to consummate the transactions
contemplated in the Reorganization Agreement are subject to the satisfaction of
the following conditions (among others) at or before the Closing Date: (i) the
compliance by Carolina First Corporation and Carolina First Bank with their
respective covenants set forth in the Reorganization Agreement and the material
accuracy, on the Closing Date, of each of the representations and warranties of
Carolina First Corporation and Carolina First Bank set forth in the
Reorganization Agreement (subject to certain limited exceptions); (ii) the
receipt by First National of an opinion of counsel of Carolina First Corporation
and Carolina First Bank in form and substance reasonably satisfactory to First
National and its counsel; (iii) that there shall have been no "material adverse
event" (as defined in the Reorganization Agreement) with respect to Carolina
First Corporation or Carolina First Bank through the Closing Date; (iv) the
receipt of necessary regulatory approvals; (v) the receipt of the necessary
shareholder approvals of Carolina First Corporation and First National; (vi) the
receipt of a tax opinion from Wyche, Burgess, Freeman & Parham, P.A., reasonably
satisfactory to First National, opining, subject to reasonable qualifications,
that the Merger shall, upon compliance with reasonable conditions, qualify as a
tax-free reorganization under Section 368(a) of the Code; and (vii) the
execution of the consulting agreement between Carolina First Corporation and
James H. Grantham.
Carolina First Corporation and First National may, to the extent permitted
by applicable law, waive certain of the conditions imposed with respect to their
respective obligations to consummate the Reorganization Agreement.
TERMINATION
The Reorganization Agreement may be terminated at any time prior to the
Closing Date: (a) by mutual consent of the parties; (b) by either Carolina First
Corporation or First National, at that party's option, (i) if a permanent
injunction or other order (including any order denying any required regulatory
consent or approval) shall have been issued by any Federal or state court of
competent jurisdiction in the United States or by any United States Federal or
state governmental or regulatory body, which order prevents the consummation of
the transactions contemplated herein, or (ii) if the requisite First National
shareholder approval is not received at the Special Meeting; (c) by either
Carolina First Corporation or First National if the other party (or its
subsidiaries) has failed to comply with the agreements or fulfill the conditions
contained in the Reorganization Agreement except that any such failure of
compliance or fulfillment must result in a "material adverse event" (as defined
in the Reorganization Agreement) and the breaching party must be given notice of
the failure to comply and a reasonable period of time to cure; or (d) by either
Carolina First Corporation or First National in the event that closing has not
occurred by March 31, 1999.
AMENDMENT
The Reorganization Agreement may be amended or supplemented in writing by
mutual agreement of Carolina First Corporation, Carolina First Bank and First
National. The Reorganization Agreement also provides that Carolina First
Corporation may restructure the transactions contemplated therein, provided that
any such restructuring shall not (i) alter the type of consideration to be
issued to the holders of First National common stock as provided for in the
Reorganization Agreement, (ii) reduce the value of such consideration, (iii)
adversely affect
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<PAGE>
the intended tax-free treatment to First National's shareholders as a result of
receiving such consideration or prevent the parties from obtaining the tax
opinion of Wyche, Burgess, Freeman & Parham, P.A. referred to herein, (iv)
materially impair the ability to receive the required regulatory approvals, or
(v) materially delay the closing.
CONDUCT OF FIRST NATIONAL'S AND CAROLINA FIRST CORPORATION'S BUSINESS PRIOR TO
THE EFFECTIVE TIME
Under the terms of the Reorganization Agreement, First National has agreed
with respect to the conduct of its respective businesses pending closing, among
other things: (a) to carry on its business only in the ordinary course and to
use all reasonable efforts to preserve intact its business organization and
goodwill, maintain the services of its present officers and employees and
preserve its relationships with customers, suppliers and others having business
dealings; (b) not to amend its charter or bylaws; (c) not to issue or acquire
any shares of its capital stock of any class or any securities convertible into
its capital stock or declare or pay any dividends or distributions, or make any
change in its capital structure; (d) to promptly advise Carolina First
Corporation of any material adverse change in the business of First National;
(e) not to breach the Reorganization Agreement or cause any of the
representations of First National contained in the Reorganization Agreement to
become untrue; (f) not to incur any indebtedness other than in the ordinary
course of business; (g) except for Merger-related expenses and current
contractual obligations, not to incur any expense in excess of $25,000; (h) not
to grant any executive officers any increase in compensation (except in the
ordinary course of business) or enter into any employment agreement; (i) not to
engage in acquisitions, mergers or other reorganizations; (j) except as may be
directed by any regulatory authority or in certain other limited instances, not
change its lending, investment, liability management or other material banking
or other policies in any material respect, or implement or adopt any change in
accounting principles, practices or methods; or (k) except in limited instances,
not impose, or permit or suffer the imposition of any liens on any of its
assets.
Under the terms of the Reorganization Agreement, Carolina First
Corporation has agreed, with respect to the conduct of its business pending
closing, among other things: (i) to carry on its business in substantially the
same manner as heretofore conducted; (ii) not to amend its Articles of
Incorporation or Bylaws in any manner that will adversely affect the First
National shareholders in any material respect; (iii) to promptly advise First
National of any material adverse change in its business; and (iv) not to take
any action that would be contrary to or breach any of the terms or provisions of
the Reorganization Agreement, or which would cause Carolina First Corporation's
representations in the Reorganization Agreement to become untrue in any material
respect.
REQUIRED REGULATORY APPROVALS
The Merger is subject to certain regulatory approvals as set forth below.
To the extent that the following information describes statutes and regulations,
it is qualified in its entirety by reference to the particular statutes and
regulations promulgated under such statutes.
The acquisition of First National as contemplated herein is subject to
approval of the FDIC pursuant to both the Bank Merger Act (12 U.S.C. ss. 1828 et
seq.) ("BMA") and Section 5(d)(3) of the Federal Deposit Insurance Act ("FDI
Act"). The BMA requires that the relevant regulatory agency take into
consideration, among other factors, the financial and managerial resources and
future prospects of the institutions and the convenience and needs of the
communities to be served. The BMA prohibits the FDIC from approving the
acquisition (i) if such transaction would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or (ii) if
the effect of such transaction in any section of the country may be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner be a restraint of trade, unless the relevant
regulatory agency finds that the anticompetitive effects of such merger are
clearly outweighed by the public interest and by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. In addition, the
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<PAGE>
FDIC must take into account the record of performance of the existing and
proposed institutions under the Community Reinvestment Act of 1977 ("CRA") in
meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by such institutions. Applicable
regulations also require publication of notice of the application for approval
of the Merger and provide an opportunity for the public to comment on the
application in writing and to request a hearing. Subject to certain exceptions,
the BMA provides that no bank merger may be consummated until the 15th day after
approval, during which time the United States Department of Justice ("DOJ") may
challenge the Reorganization Agreement on antitrust grounds. Carolina First
Corporation has submitted an application to the FDIC for approval to consummate
the Merger.
The Merger also is subject to approval by the State Board under Section
34-24-30 of the South Carolina Bank Holding Company Act ("SCBHCA"). Under
Section 34-24-50 of the SCBHCA, the State Board may approve the Merger only
after determining that the Merger would not create anticompetitive or
monopolistic effects on the South Carolina banking business. The State Board
also must take into consideration the financial and managerial resources and
future prospects of the companies and banks involved as well as the convenience
and needs of the communities to be served. In making its determination, the
State Board will wait until after the FDIC makes its determination and will deny
the application only if the State Board finds that the FDIC's determination is
not supported by evidence that is substantial when viewed in light of the whole
record considered by the FDIC. Carolina First Corporation has submitted an
application to the State Board for approval to consummate the Merger.
First National is required to provide prior notice of the Merger to the
Office of the Comptroller of the Currency (the "OCC"). This notice has been
provided.
Carolina First Corporation and First National are not aware of any other
governmental approvals or actions that are required for consummation of the
Merger except as described above. Should any such approval or action be
required, it is presently contemplated that such approval or action would be
sought or taken. There can be no assurance that any such approval or action, if
needed, could be obtained or would not delay consummation of the Merger.
OPERATIONS AFTER THE MERGER
After consummation of the Merger, it is expected all of the former First
National banking locations will be operated as branch locations of Carolina
First Bank and such locations are expected to conduct their business in
generally the same manner as prior to the Merger. It is generally expected that
the retained First National officers and employees will continue in similar
positions of Carolina First Bank in an at-will employment capacity. In general,
retained First National officers and employees will continue at approximately
their current levels of compensation and will be eligible for benefits available
to other similarly situated officers and employees of Carolina First Bank. After
consummation of the Merger, it is anticipated that Carolina First Bank will
continue to conduct its business in generally the same manner in which it is now
conducted. See "--Interests of Certain Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
DIRECTORS. In accordance with the Reorganization Agreement, Carolina
First Corporation will nominate and elect James H. Grantham to the Board of
Directors of Carolina First Bank for a period of five years following the
Merger.
INDEMNIFICATION; ADVANCEMENT OF EXPENSES; DIRECTORS' AND OFFICERS'
INSURANCE. The Reorganization Agreement provides that Carolina First Corporation
will indemnify the First National directors and executive officers against
certain liabilities (and will advance certain expenses) to the fullest extent
that such persons would
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<PAGE>
have been entitled to indemnification (or advancement of expenses) under the
laws of the federal law of the United States of America and the First National
Articles of Association and Bylaws as in effect on the date of the
Reorganization Agreement. The Reorganization Agreement also provides that prior
to closing, First National shall use its best efforts to extend its existing
directors' and officers' liability insurance policy past the Closing Date
(spending up to $25,000) and after closing, Carolina First Corporation shall
take no action to terminate prematurely such policy.
EMPLOYMENT AGRREMENTS. James H. Grantham, J. Rodger Anthony and
Nicholas Clark, all executive officers of First National (the "Officers"), have
employment arrangements with First National which provide for certain payments,
among other things, in connection with the termination of their employment after
a change in control (as defined in such agreements). The parties agree that the
payments and benefits to be paid or provided to each of the Officers under the
employment contracts shall have an aggregate present value, determined as of the
Effective Time, of approximately $375,000, $300,000 and $85,000 in the case of
Messrs. Grantham, Rodgers and Clark, respectively.
In connection with this transaction, Carolina First Corporation and James
H. Grantham will enter into a consulting agreement that will be effective upon
consummation of the Merger, whereby Mr. Grantham, as an independent contractor,
will assist Carolina First Corporation in the assimilation of First National.
Compensation under such agreement is expected to be at a rate not in excess of
his current total compensation and will include the provision of health and
other employee benefits to Mr. Grantham and his family.
OTHER MATTERS RELATED TO EMPLOYEES AND EMPLOYEE BENEFIT PLANS. In the
Reorganization Agreement, Carolina First Corporation and First National agreed
to cooperate to develop staffing plans which will result in retention of as many
First National managers and employees as is practical (as determined by Carolina
First Corporation). Carolina First Corporation agreed that First National
employees shall also be eligible for consideration for any other available
positions for which they are qualified at Carolina First Corporation and its
subsidiaries. Carolina First Corporation agreed that those former First National
employees who are employed by Carolina First Corporation or its subsidiaries
immediately following the Closing Date: (i) will be eligible, on the same basis
as current Carolina First Corporation employees, for all Carolina First
Corporation Benefit Plans (as defined in the Reorganization Agreement); and (ii)
will receive past service credit for eligibility and vesting (but not benefit
accrual) purposes under Carolina First Corporation Benefit Plans for years of
service with First National as if such service had been with Carolina First
Corporation or its subsidiaries. Carolina First Corporation agreed that First
National may elect to fully vest its employees under some or all First National
Benefit Plans prior to consummation of the Merger. Any First National Benefit
Plans that are intended to be qualified under Section 401(a) of the Code and
exempt from tax under Section 501(a) of the Code will be terminated by proper
action of the Board of Directors of First National prior to the Effective Time.
Carolina First Corporation further agrees that those former First National
employees who are employed by Carolina First Corporation or its subsidiaries
immediately following the Closing Date will not be subject to any pre-existing
condition exclusion under Carolina First Corporation's medical Benefit Plans.
ACCOUNTING TREATMENT
Carolina First Corporation expects to account for the acquisition of First
National as a pooling-of-interests. For the transaction to qualify for the
pooling-of-interests method, it must satisfy certain conditions, including the
condition that substantially all (at least 90%) of the outstanding First
National common stock must be exchanged for Carolina First Corporation common
stock. Under the pooling-of-interests method, the assets and liabilities of
Carolina First Bank and First National will be combined and carried forward at
their previously recorded amounts. The revenues and expenses of Carolina First
Bank and First National will be retroactively combined for the entire fiscal
period in which the combination occurs and for all periods prior to the
combination at historically recorded amounts.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material federal income tax
consequences of the Merger, including certain consequences to holders of the
First National common stock who are citizens or residents of the United States
and who hold their shares as capital assets. It does not discuss all tax
consequences that may be relevant to First National shareholders subject to
special federal income tax treatment (such as insurance companies, dealers in
securities, certain retirement plans, financial institutions, tax exempt
organizations or foreign persons), or to First National shareholders who
acquired their shares of First National's common stock pursuant to the exercise
of employee stock options or rights or otherwise as compensation. Shareholders
are urged to consult their own tax advisers as to the specific tax consequences
to them of the Merger, including the applicability and effect of state, local
and other tax laws. The following summary does not address the state, local or
foreign tax consequences of the Merger, if any.
Pursuant to the terms of the Reorganization Agreement, First National will
receive the opinion of Wyche, Burgess, Freeman & Parham, P.A., dated as of the
Effective Time, to the effect that based upon the Code and regulations
thereunder and rulings issued by the IRS in transactions similar to those
contemplated by the Reorganization Agreement and assuming the Merger occurs in
accordance with the Reorganization Agreement and conditioned on the accuracy of
certain representations made by First National and Carolina First Corporation,
for federal income tax purposes:
1. The Merger will qualify as a reorganization under the provisions
of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code,
provided that substantially all of the assets of First National
are acquired in such a Merger.
2. No gain or loss will be recognized either to Carolina First
Corporation or First National as a result of the Merger.
3. No gain or loss will be recognized to the shareholders of First
National upon their receipt of shares of Carolina First
Corporation common stock in the Merger (disregarding for this
purpose any cash received for fractional shares or in connection
with the exercise of dissenters' rights).
4. The receipt of cash by First National shareholders in the Merger
in exchange for fractional shares will be treated for federal
income tax purposes as a redemption of such shares.
5. The tax basis of the Carolina First Corporation common stock so
received by First National shareholders in connection with the
Merger will be the same as the basis in the First National common
stock surrendered in exchange for such Carolina First Corporation
common stock as set forth above.
6. The holding period of the Carolina First Corporation common stock
received by a First National shareholder will include the holding
period of the shares of First National surrendered therefor
provided that the First National shares are capital assets in the
hand of the shareholder at the time of the Merger.
FRACTIONAL SHARE INTERESTS. A First National shareholder who receives
cash in lieu of a fractional share
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<PAGE>
interest in Carolina First Corporation common stock will be treated as having
received the cash in redemption of the fractional share interest. The receipt of
cash in lieu of a fractional share interest should generally result in capital
gain or loss to the holder equal to the difference between the amount of cash
received and the portion of the holder's federal income tax basis in the First
National common stock allocable to the fractional share interest. Such capital
gain or loss will be long-term capital gain or loss if the holder's holding
period for the Carolina First Corporation common stock received, determined as
set forth above, is longer than one year.
CASH RECEIVED BY HOLDERS OF FIRST NATIONAL COMMON STOCK WHO DISSENT. A
shareholder of First National who perfects his dissenter's rights under federal
law and who receives payment of the value of his shares of First National common
stock will be treated as having received such payment in redemption of such
stock. Such redemption will be subject to the conditions and limitations of
Section 302 of the Code, including the attribution rules of Section 318 of the
Code. In general, if the shares of First National common stock are held by the
holder as a capital asset at the Effective Time, such holder will recognize
capital gain or loss measured by the difference between the amount of cash
received by such holder and the basis for such shares. Each holder of First
National common stock who contemplates exercising his dissenter's rights should
consult his own tax adviser as to the possibility that any payment to him will
be treated as dividend income.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED ON THE CODE (AND AUTHORITIES THEREUNDER) AS IN
EFFECT ON THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, WITHOUT CONSIDERATION OF
THE PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER. SHAREHOLDERS ARE URGED
TO CONSULT WITH THEIR OWN TAX ADVISERS WITH RESPECT TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR SITUATIONS, AS WELL AS
CONSEQUENCES UNDER ANY APPLICABLE STATE, LOCAL OR FOREIGN TAX LAWS.
RESTRICTIONS ON RESALES BY AFFILIATES
The issuance of the Carolina First Corporation Shares has been registered
under the Securities Act. Accordingly, resales of the Carolina First Corporation
Shares by non-affiliates of First National will not require registration.
However, under existing law, any person who is an "affiliate" of First National
(as defined below) at the time the proposed exchange is submitted to a vote of
the First National shareholders who wishes to sell Carolina First Corporation
Shares will be required either to (a) register the sale of the Carolina First
Corporation Shares under the Securities Act, (b) sell in compliance with Rule
145 promulgated under the Securities Act (permitting limited sales under certain
circumstances), or (c) utilize an exemption (if any) from registration. Rule
145(d) requires that persons deemed to be First National affiliates resell their
Carolina First Corporation Shares pursuant to certain of the requirements of
Rule 144 under the Securities Act if such Carolina First Corporation Shares are
sold within one year after receipt thereof. After one year, if such person is
not an affiliate of Carolina First Corporation and Carolina First Corporation is
current in the filing of its periodic securities law filings, a former First
National affiliate may freely sell the Carolina First Corporation Shares without
limitation. After two years from the issuance of the Carolina First Corporation
Shares, if such person is not a Carolina First Corporation affiliate at the time
of sale or for at least three months prior to such sale, such person may freely
sell such Carolina First Corporation Shares without limitation, regardless of
the status of Carolina First Corporation's periodic securities law filings.
First National has agreed that it will use its best efforts to cause affiliates
of First National to agree in writing that they will not sell the Carolina First
Corporation common stock to be received by them except as provided above. Stop
transfer instructions will be given by Carolina First Corporation to the
Exchange Agent with respect to the Carolina First Corporation common stock to be
received by persons subject to the restrictions described above, and the
certificates for such stock may be appropriately legended. An "affiliate" of
First National, as defined by the rules promulgated pursuant to the Securities
Act, is a person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control
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with, First National at the time of consummation of the Merger. In this context,
an "affiliate" will generally include the following persons: directors or
executive officers, and the holders of 10% or more of First National common
stock (and any relative or spouse of any such person having the same home as
such person and any trusts, estates, corporations, or other entities in which
such persons have a 10% or greater beneficial or equity interest).
RIGHTS OF DISSENTING SHAREHOLDERS OF FIRST NATIONAL
THE FOLLOWING DISCUSSION IS MERELY A SUMMARY OF RIGHTS OF DISSENTING
SHAREHOLDERS PURSUANT TO FEDERAL LAW AND IS QUALIFIED IN ITS ENTIRETY BY THE
PROVISIONS OF 12 U.S.C.SS 214A(B), A COPY OF WHICH IS INCLUDED HEREWITH AS ANNEX
C. DISSENTING SHAREHOLDERS HAVE ONLY THOSE RIGHTS PROVIDED BY 12 U.S.C.SS
214A(B). ANY SHAREHOLDER WISHING TO EXERCISE DISSENTERS' RIGHTS IS STRONGLY
ADVISED TO CONSULT WITH AN ATTORNEY.
Any shareholder of First National who has voted against the Merger at the
Special Meeting, or has given notice in writing at or prior to such meeting to
the presiding officer that he dissents from the Merger, shall be entitled to
receive in cash the value of the shares so held by him upon written request made
to Carolina First Corporation at any time before thirty days after the date of
consummation of the Merger, accompanied by the surrender of his stock
certificates.
The value of such shares shall be ascertained, as of the date of the
Special Meeting, by an appraisal made by a committee of three persons, composed
of (1) one selected by the majority vote of the dissenting shareholders entitled
to payment in cash; (2) one selected by the directors of Carolina First Bank;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the OCC, which shall cause a reappraisal to be made which
shall be final and binding as to the value of the shares of the appealing
shareholder.
If, within 90 days from the date of consummation of the Merger, for any
reason one or more of the appraisers is not selected, or the appraisers fail to
determine the value of such shares, the OCC shall upon written request of any
interested party cause an appraisal to be made which shall be final and binding
on all parties. The expenses of the OCC in making the reappraisal or the
appraisal, as the case may be, shall be paid by Carolina First Bank.
In the event the OCC is requested to make an appraisal of the First
National common stock, such valuation will be made in accordance with the
guidelines set forth in the OCC's Bank Circular 259.
RECOMMENDATION OF THE FIRST NATIONAL BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF FIRST NATIONAL HAS CONCLUDED THAT THE MERGER IS
IN THE BEST INTERESTS OF FIRST NATIONAL AND HAS AUTHORIZED CONSUMMATION THEREOF,
SUBJECT TO APPROVAL OF THE FIRST NATIONAL SHAREHOLDERS, RECEIPT OF ALL REQUISITE
REGULATORY APPROVALS, AND SATISFACTION OF CERTAIN OTHER CONDITIONS. THE BOARD OF
DIRECTORS OF FIRST NATIONAL RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE REORGANIZATION AGREEMENT.
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PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Condensed Balance Sheet is based on
combining the historical consolidated balance sheet for Carolina First
Corporation at March 31, 1998 with the historical consolidated balance sheet of
First National at March 31, 1998, adjusting for the issuance of additional
shares expected to be issued in the Merger.
The unaudited Pro Forma Combined Capitalization is based on combining the
historical consolidated capitalization of Carolina First Corporation at March
31, 1998 with the historical capitalization of First National at March 31, 1998,
adjusting for the issuance of additional shares expected to be issued in the
Merger.
The unaudited Pro Forma Combined Condensed Statement of Income is based on
combining the historical consolidated statements of income of Carolina First
Corporation for the year ended December 31, 1997 with the historical
consolidated statements of income of First National for the twelve months ended
December 31, 1997, and the historical consolidated statements of income of
Carolina First Corporation for the three months ended March 31, 1998 with the
historical consolidated statements of income of First National for the three
months ended March 31, 1998. Historical earnings for First National, which has a
June 30 fiscal year, have been adjusted to reflect a December 31 fiscal year-end
by adding the subsequent six-month period and subtracting the comparable
preceding year interim results from the results for the year ended June 30,
1997.
For 1996 and 1995, the unaudited Pro Forma Combined Condensed Statements
of Income are presented combining the historical consolidated statements of
income of Carolina First Corporation for the years ended December 31 with the
historical consolidated statements of income of First National for its fiscal
years ended June 30, 1997 and June 30, 1996, respectively.
The Merger is expected to be accounted for under the pooling of interests
method of accounting, and pro forma data are derived in accordance with such
method.
The pro forma data do not, given the operational and market overlap
between Carolina First Corporation and First National, reflect any potential
benefits from potential cost savings or synergies expected to be achieved
following the Merger. The pro forma data also exclude merger costs related to
the Merger.
Financial information presented at and for the three months ended March 31,
1998 and for the twelve months ended December 31, 1997 also includes pro forma
data for Carolina First Corporation's pending acquisitions of Colonial Bank of
South Carolina, Inc. ("Colonial") and Poinsett Financial Corporation
("Poinsett"). See "INFORMATION ABOUT CAROLINA FIRST CORPORATION - Recent
Developments."
Information set forth below should be read in conjunction with such
historical and pro forma financial statements and the notes thereto. The
unaudited pro forma information is provided for informational purposes only and
is not necessarily indicative of actual results that would have been achieved
had the Merger been consummated at the beginning of the period presented, nor is
it necessarily indicative of future results.
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UNAUDITED PRO FORMA COMBINED CAPITALIZATION
AT MARCH 31, 1998
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Purchase
Carolina First First Pro Forma Accounting Pro Forma
Corporation National Adjustments Combined Colonial Poinsett Adjustments Combined
------------ --------- ---------- ---------- -------- -------- ---------- --------
<S> <C>
LONG-TERM DEBT
Subordinated notes $ 25,522 $ -- $ -- $ 25,522 $ -- $ -- $ -- $ 25,522
FHLB advances 10,000 -- -- 10,000 4,000 -- -- 14,000
ESOP debt 2,800 -- -- 2,800 -- -- -- 2,800
Mortgage debt 1,073 -- -- 1,073 -- -- -- 1,073
-------- ------ ------ --------- ---- --- --- --------
Total long-term debt 39,395 -- -- 39,395 4,000 -- -- 43,395
-------- ------ ----- --------- ------ --- --- -------
SHAREHOLDERS' EQUITY
Common stock 17,710 200 2,108(a) 20,018 583 2 504 (c) 21,107
Surplus 201,967 300 (2,108)(a) 200,159 4,412 1,387 21,424 (c) 230,782
3,400 (d)
Retained earnings 23,337 15,038 (750)(b) 37,625 231 3,512 (3,743)(c) 37,625
Nonvested restricted stock and
guarantee of ESOP debt (3,617) -- -- (3,617) -- -- -- (3,617)
Unrealized gain (loss) on
securities available for sale 3,986 333 -- 4,319 (2) 3 -- 4,320
--------- ------- -------- -------- ------- ----- ---------- --------
Total shareholders' equity 243,383 15,871 (750) 258,504 5,224 4,904 21,585 290,217
------- ------- -------- -------- ---------- ------- ------------ -------
Total capitalization $282,778 $15,871 $ (750) $297,899 $ 9,224 $ 4,904 $ 21,585 $ 333,612
======== ======= ============ ======== ========= ======= ============ =========
</TABLE>
(a) To reflect the issuance of 2,307,938 shares of Carolina First Corporation
common stock to holders of First National's common stock based on an assumed
market price of $26.00 per share of Carolina First Corporation common stock.
(b) To record estimated Merger costs, including transaction costs and buyout of
employee contracts.
(c) To reflect the issuance of 490,978 shares of Carolina First Corporation
common stock to holders of Colonial's common stock and 598,017 shares of
Carolina First Corporation common stock to holders of Poinsett's common
stock, based on an assumed market price of $26.00 per share of Carolina
First Corporation common stock.
(d) To record the value of options acquired.
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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOOTNOTES)
<TABLE>
<CAPTION>
Purchase
Carolina First First Pro Forma Accounting Pro Forma
Corporation National Adjustments Combined Colonial Poinsett Adjustments Combined
------------ --------- ---------- ---------- -------- -------- ---------- --------
<S> <C>
ASSETS
Cash and due from banks $ 67,095 $ 4,712 $ -- $ 71,807 $ 2,027 $ 16,194 $ -- $ 90,028
Interest-bearing bank balances 47,229 -- -- 47,229 4,129 -- -- 51,358
Fed funds sold & resale
agreements 105,000 6,575 -- 111,575 -- -- -- 111,575
Investment securities 389,951 40,121 -- 430,072 4,024 1,483 (308)(b) 435,271
Loans held for sale 139,033 -- -- 139,033 -- -- -- 139,033
Loans held for investment 1,366,018 64,012 -- 1,430,030 44,940 68,631 -- 1,543,601
Less unearned income (10,461) -- -- (10,461) -- (30) -- (10,491)
Less allowance for loan losses (15,349) (712) -- (16,061) (368) (561) -- (16,990)
---------- ----- -------- -------- -------- ------- ------ --------
Net loans 1,479,241 63,300 -- 1,542,541 44,572 68,040 -- 1,655,153
Premises and equipment 38,774 1,566 -- 40,340 1,798 2,231 350(c) 44,719
Intangible assets 56,885 -- -- 56,885 224 -- 23,909(d) 81,018
Other assets 66,572 1,265 -- 67,837 662 921 -- 69,420
------------ ---------- -------- --------- --------- ------- ------ ----------
Total assets $ 2,250,747 $ 117,539 $ -- $2,368,286 $ 57,436 $ 88,869 $ 23,951 $2,538,542
=========== ========= ======== ========== ======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 228,866 $ 17,481 $ -- $ 246,347 $ 3,146 $ 3,060 $ -- $ 252,553
Interest-bearing 1,597,163 78,760 -- 1,675,923 40,480 78,624 -- 1,795,027
--------- ------ ----- --------- ------- --------- --------- ---------
Total deposits 1,826,029 96,241 -- 1,922,270 43,626 81,684 -- 2,047,580
Borrowed funds 149,785 4,572 -- 154,357 8,500 2,044 -- 164,901
Other liabilities 31,550 855 750(a) 33,155 86 237 866 (e) 35,844
--------- ------ ---- ------- ------- -------- --------- --------
1,500 (a)
Total liabilities 2,007,364 101,668 750 2,109,782 52,212 83,965 2,366 2,248,325
--------- ------- ---- --------- ------ ------ ----- ---------
Total shareholders' equity 243,383 15,871 (750)(a) 258,504 5,224 4,904 18,185 (f) 290,217
------- ------ ----- ------- -------- -------- ---------- --------
3,400 (g)
Total liabilities and
shareholders' equity $ 2,250,747 $ 117,539 $ -- $ 2,368,286 $ 57,436 $ 88,869 $23,951 $ 2,538,542
=========== ========= ====== =========== ======== ========= ======= ===========
</TABLE>
(a) To record estimated Merger costs, including transactions costs and buyout of
employee contracts.
(b) To remove the carrying value of Colonial shares owned by Carolina First
Corporation.
(c) To adjust the fixed assets and property of Colonial to estimated market
value.
(d) To record the excess cost of acquisition over the estimated market value of
the net assets acquired (goodwill of $18,630,000), the valuation of options
acquired (goodwill of $3,400,000) and the core deposit premium ($1,879,000).
(e) To adjust the deferred tax liabilities as a result of the purchase
accounting adjustments using Carolina First's statutory rate of 38%.
(f) To give effect to the acquisitions of Colonial and Poinsett, assuming the
issuance of 490,978 and 598,017 shares of Carolina First Corporation common
stock, respectively, based on an assumed market price of $26.00 per share of
Carolina First Corporation common stock and conversion ratios of 0.885 and
3.154, respectively. The total value of Carolina First Corporation common
stock exchanged would be $12,765,000 and $15,548,000, respectively.
(g) To record the value of options acquired.
34
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Twelve Months Ended December 31, 1997
(Dollars in thousands, except share data)
Purchase
Carolina First First Pro Forma Accounting Pro Forma
Corporation National Adjustments Combined Colonial Poinsett Adjustments Combined
------------ --------- ---------- ---------- -------- -------- ---------- --------
<S> <C>
Interest income $ 135,706 $ 8,400 $ -- $ 144,106 $ 3,968 $ 6,076 $ -- $154,150
Interest expense 69,000 3,204 -- 72,204 2,203 3,251 -- 77,658
------- -------- ----- ------- --------- ------ ------ ------
Net interest income 66,706 5,196 -- 71,902 1,765 2,825 -- 76,492
Provision for loan losses 11,646 151 -- 11,797 309 69 -- 12,175
------- ------ ----- ------- -------- -------- ------ ------
Net interest income after
provision for loan losses 55,060 5,045 -- 60,105 1,456 2,756 -- 64,317
Noninterest income 19,615 528 -- 20,143 335 819 -- 21,297
Noninterest expenses 52,243 3,019 -- 55,262 1,807 2,864 881(a) 61,174
------- -------- ----- ------- --------- ------ ------
342(b)
18(c)
Income before income taxes 22,432 2,554 -- 24,986 (16) 711 (1,241) 24,440
Income taxes 8,092 788 -- 8,880 59 240 (137)(d) 9,042
-------- ------ ----- ------ ------- -------- ------- -----
Net income $ 14,340 $ 1,766 $ -- $ 16,106 ($75) $ 471 $ (1,104) $15,398
========== ========= ====== ========== ===== ======== ============ =======
Net income per common share:
Basic $1.19 $22.08 $ -- $1.13 ($0.15) $2.48 $ -- $1.00
Diluted 1.18 22.08 -- 1.11 (0.15) 2.41 -- 0.99
Average shares outstanding:
Basic 11,989,517 80,000 -- 14,297,455 486,851 189,426 -- 15,386,450
Diluted 12,175,561 80,000 -- 14,483,499 497,362 195,426 -- 15,572,494
</TABLE>
(a) Record amortization of goodwill using the straight-line method over 25
years.
(b) Record amortization of core deposit intangible using the sum-of-the-year's
digits method over 10 years.
(c) To increase depreciation expense from mark-up of Colonial premises and
equipment to an estimated market value.
(d) To show impact of taxes at 38% tax rate.
35
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Three Months Ended March 31, 1998
(Dollars in thousands, except share data)
Purchase
Carolina First First Pro Forma Accounting Pro Forma
Corporation National Adjustments Combined Colonial Poinsett Adjustments Combined
------------ --------- ---------- ---------- -------- -------- ---------- --------
<S> <C>
Interest income $ 42,127 $ 2,160 $ -- $ 44,287 $ 1,122 $ 1,643 $ -- $ 47,052
Interest expense 21,900 829 -- 22,729 601 916 -- 24,246
------- ------ ----- ------- ------- -------- ------ --------
Net interest income 20,227 1,331 -- 21,558 521 727 -- 22,806
Provision for loan losses 2,136 -- -- 2,136 20 326 -- 2,482
------ ----- ----- ------ ------- -------- ------ -------
Net interest income after
provisions for loan losses 18,091 1,331 -- 19,422 501 401 -- 20,324
Noninterest income 4,613 134 -- 4,747 79 284 -- 5,110
Noninterest expenses 15,259 805 -- 16,064 477 828 220(a) 17,679
------- ------ ----- ------- ------- ------- --------
86 (b)
4 (c)
Income before income taxes 7,445 660 -- 8,105 103 (143) (310) 7,755
Income taxes 2,751 219 -- 2,970 33 (45) (34)(d) 2,924
-------- ------ ----- ------ ------- -------- ------- -------
Net income $ 4,694 $ 441 $ -- $ 5,135 $ 70 $ (98) $ (276) $ 4,831
========= ======= ====== ========= ======== ======== ========= =======
Net income per common share:
Basic $0.28 $5.51 $ -- $0.27 $ 0.12 ($0.52) $ -- $0.24
Diluted 0.28 5.51 -- 0.27 0.12 (0.52) -- 0.24
Average shares outstanding:
Basic 16,588,163 80,000 -- 18,896,101 583,019 189,615 -- 19,985,096
Diluted 16,922,202 80,000 -- 19,230,140 593,530 189,615 -- 20,319,135
</TABLE>
(a) Record amortization of goodwill using the straight-line method over 25
years.
(b) Record amortization of core deposit intangible using the sum-of-the-year's
digits method over 10 years.
(c) To increase depreciation expense from mark-up of Colonial premises and
equipment to an estimated market value.
(d) To show impact of taxes at 38% tax rate.
36
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Twelve Months Ended
December 31, June 30,
1996 1997
------------------ ------
Carolina First First Pro Forma
Corporation National Adjustments Combined
------------ ---------- ----------- ----------
<S> <C>
Interest income $ 116,872 $ 7,964 $ -- $ 124,836
Interest expense 59,802 3,074 -- 62,876
--------- -------- ---------- ---------
Net interest income 57,070 4,890 -- 61,960
Provision for loan losses 10,263 184 -- 10,447
---------- --------- ------- ---------
Net interest income after
provision for loan losses 46,807 4,706 -- 51,513
Noninterest income 21,341 409 -- 21,750
Noninterest expenses 51,675 2,834 -- 54,509
------- -------- ------ ---------
Income before income taxes 16,473 2,281 -- 18,754
Income taxes 5,999 677 -- 6,676
------ -------- ------ --------
Net income 10,474 1,604 -- 12,078
Dividends on preferred stock 63 -- -- 63
--------- ------ ------ --------
Net income applicable to
common shareholders $ 10,411 $ 1,604 $ -- $ 12,015
======== ======== ======= ========
Net income per common share:
Basic $ 0.97 $ 20.05 $ -- $ 0.92
Diluted 0.92 20.05 -- 0.88
Average shares outstanding:
Basic 10,705,107 80,000 -- 13,013,045
Diluted 11,368,035 80,000 -- 13,675,973
</TABLE>
37
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Twelve Months Ended
December 31, June 30,
1995 1996
-----------------------
Carolina First First Pro Forma
Corporation National Adjustments Combined
------------- -------- ----------- ------------
<S> <C>
Interest income $ 101,750 $ 6,967 $ -- $ 108,717
Interest expense 50,978 2,897 -- 53,875
--------- -------- ---------- ---------
Net interest income 50,772 4,070 -- 54,842
Provision for loan losses 6,846 -- -- 6,846
--------- --------- ------- --------
Net interest income after
provision for loan losses 43,926 4,070 -- 47,996
Noninterest income 17,326 427 -- 17,753
Noninterest expenses 46,882 2,817 -- 49,699
------- -------- ------ ---------
Income before income taxes 14,370 1,680 -- 16,050
Income taxes 4,956 494 -- 5,450
------ -------- ------ --------
Net income 9,414 1,186 -- 10,600
Dividends on preferred stock 2,752 -- -- 2,752
-------- ------ ------ --------
Net income applicable to
common shareholders $ 6,662 $ 1,186 $ -- $ 7,848
======== ======== ======== ========
Net income per common share:
Basic $ 0.89 $ 14.82 $ -- $ 0.80
Diluted 0.84 14.82 -- 0.79
Average shares outstanding:
Basic 7,516,620 80,000 -- 9,824,558
Diluted 11,183,726 80,000 -- 13,491,664
</TABLE>
38
<PAGE>
INFORMATION ABOUT CAROLINA FIRST CORPORATION
GENERAL
CAROLINA FIRST CORPORATION. Carolina First Corporation is a bank
holding company headquartered in Greenville, South Carolina which engages in
a general banking business through its four principal operating
subsidiaries: (1) Carolina First Bank, a South Carolina-chartered bank
headquartered in Greenville, South Carolina, (2) Carolina First Mortgage
Company, a mortgage loan origination and servicing company headquartered in
Columbia, South Carolina, (3) Blue Ridge Finance Company, Inc., an
automobile finance company headquartered in Greenville, South Carolina, and
(4) Resource Processing Group, Inc., a credit card origination and servicing
company headquartered in Columbia, South Carolina. Through its subsidiaries,
Carolina First Corporation 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. Carolina First
Corporation, which commenced operations in December 1986, currently conducts
business in 61 locations in South Carolina and is one of the largest
independent South Carolina-headquartered financial institutions. At March
31, 1998, it had total assets of approximately $2.3 billion, total loans of
approximately $1.5 billion, total deposits of approximately $1.8 billion and
approximately $245 million in shareholders' equity.
Carolina First Corporation was formed principally in response to
opportunities resulting from the takeovers of several South Carolina-based
banks by large southeastern regional bank holding companies. A significant
number of Carolina First Corporation's executive officers and management
personnel were previously employed by certain of the larger South
Carolina-based banks that were acquired by these southeastern regional
institutions. Consequently, these officers and management personnel have
significant customer relationships and commercial banking experience that
have contributed to Carolina First Corporation's loan and deposit growth.
Carolina First Corporation targets individuals and small- to medium-sized
businesses in South Carolina that require a full range of quality banking
services typically provided by larger regional banking concerns, but that
prefer the personalized service afforded by a South Carolina-based
institution.
Carolina First Corporation's objective is to become the leading South
Carolina-based banking institution headquartered in the state. It believes
that it can accomplish this goal by being a "super-community" bank which
offers both the personalized service and "relationship" banking typically
found in community banks, as well as the sophisticated banking products
offered by the regional and super-regional institutions. Carolina First
Corporation 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). Carolina First Corporation's market areas are located in the four
largest Metropolitan Statistical Areas of the state. Carolina First
Corporation also has branch locations in other counties in South Carolina.
Carolina First Corporation 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 the acquisition in August 1990 of First
Federal Savings and Loan Association of Georgetown (subsequently renamed
Carolina First Savings Bank, which was subsequently merged into Carolina
First Bank on February 3, 1995), the acquisition of 12 branch locations of
Republic National Bank in March 1993, and the acquisition of First Southeast
Financial Corporation in November 1997. Approximately half of Carolina First
Corporation's total deposits have been generated through acquisitions.
Carolina First Corporation anticipates that it will continue to expand in
the future and is frequently in discussions regarding possible acquisitions.
See "--Recent Developments."
39
<PAGE>
Carolina First Corporation is a legal entity separate and distinct from
its subsidiary bank and non-banking subsidiaries. Accordingly, the right of
Carolina First Corporation, and thus the right of Carolina First Corporation's
creditors and shareholders, to participate in any distribution of the assets or
earnings of any subsidiary is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of Carolina First
Corporation in its capacity as a creditor may be recognized. The principal
source of Carolina First Corporation's revenues is dividends from its
subsidiaries.
CAROLINA FIRST BANK. Carolina First Bank is a South Carolina-chartered,
Federal Reserve non-member bank and a wholly-owned subsidiary of Carolina First
Corporation. It currently engages in a general banking business through 58
locations, which are located throughout South Carolina. It began its operations
in December 1986 and at March 31, 1998 had total assets of approximately $2.2
billion, total loans of approximately $1.5 billion and total deposits of
approximately $1.9 billion. Its deposits are insured by the FDIC.
CAROLINA FIRST MORTGAGE COMPANY. Carolina First Mortgage Company is a
South Carolina corporation which principally originates and services one-to-four
family mortgage loans through its six offices located in South Carolina. It is
headquartered in Columbia, South Carolina. At March 31, 1998, Carolina First
Mortgage Company was servicing or subservicing approximately 20,504 loans having
an aggregate principal balance of approximately $1.8 billion.
BLUE RIDGE FINANCE COMPANY, INC. On December 29, 1995, Carolina First
Corporation acquired Blue Ridge Finance Company, an automobile finance company
headquartered in Greenville, South Carolina. Blue Ridge operates from one
location and, at March 31, 1998, had approximately $22 million in total assets.
Blue Ridge is engaged primarily in indirect automobile lending.
RESOURCE PROCESSING GROUP, INC. On June 1, 1998, Carolina First
Corporation acquired Resource Processing Group, Inc., a credit card origination
and servicing company headquartered in Columbia, South Carolina. Resource
Processing Group, Inc. operates from one location and, at March 31, 1998, was
servicing approximately $350 million in credit card receivables.
CAPITAL ADEQUACY
CAROLINA FIRST CORPORATION. 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 shareholders' 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 March 31,
1998, Carolina First Corporation 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
40
<PAGE>
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%. At March 31, 1998, Carolina
First Corporation and Carolina First Bank were both in compliance with each of
the applicable regulatory capital requirements.
PRO FORMA REGULATORY CAPITAL. The following tables sets forth Carolina
First Bank's and Carolina First Corporation's regulatory capital position at
March 31, 1998, on a historical basis as well as a pro forma basis assuming
consummation of the Merger. See "PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION."
41
<PAGE>
CAROLINA FIRST BANK
At March 31, 1998
---------------------------------------
Historical Pro Forma
----------------- --------------------
(Dollars in thousands)
Shareholders' Equity.............. $ 216,150 9.75% $ 231,271 9.90%
========= ==== ========= ====
Regulatory Capital
Tier 1 risk-based:
Actual.......................... $ 161,095 10.20% $ 175,883 10.77%
Required*....................... 63,158 4.00 65,353 4.00
---------- ---- ------------ ----
Excess.......................... $ 97,937 6.20% $ 110,530 6.77%
========== ==== =========== ====
Total risk-based:
Actual.......................... $ 175,284 11.10% $ 190,784 11.68%
Required*....................... 126,316 8.00 130,706 8.00
---------- ---- ----------- ----
Excess.......................... $ 48,968 3.10% $ 60,078 3.68%
========== ===== =========== ====
Leverage:
Actual.......................... $ 161,095 7.45% $ 175,883 7.71%
Required*....................... 86,524 4.00 91,225 4.00
---------- ---- ---------- ----
Excess.......................... $ 74,571 3.45% $ 84,658 3.71%
========== ===== =========== =====
Total risk-based assets........... $1,578,949 $1,633,822
========== ==========
Total assets...................... $2,217,672 $2,335,211
========== ==========
- ---------------------------
* For capital adequacy purposes.
CAROLINA FIRST CORPORATION
At March 31, 1998
--------------------------------------
Historical Pro Forma
------------------- -----------------
(Dollars in thousands)
Shareholders' Equity............. $ 243,383 10.81% $ 258,504 10.92 %
========== ===== =========== =====
Regulatory Capital
Tier 1 risk-based:
Actual......................... $ 181,432 11.31% $ 199,836 12.04%
Required*...................... 64,150 4.00 66,405 4.00
----------- ----- ----------- -----
Excess......................... $ 117,282 7.31% $ 133,431 8.04%
========== ====== =========== =====
Total risk-based:
Actual......................... $ 222,281 13.86% $ 241,397 14.54%
Required*...................... 128,300 8.00 132,810 8.00
----------- ----- ----------- -----
Excess......................... $ 93,981 5.86% $ 108,587 6.54%
=========== ==== =========== ====
Leverage:
Actual......................... $ 181,432 8.27% $ 199,836 8.65%
Required*...................... 87,759 4.00 92,461 4.00
----------- ---- ------------ ----
Excess......................... $ 93,673 4.27% $ 107,375 4.65%
=========== ==== =========== ====
Total risk-based assets.......... $1,603,755 $1,660,128
========== ==========
Total assets..................... $2,250,747 $2,368,286
========== ==========
- ---------------------------------------
* For capital adequacy purposes.
42
<PAGE>
RECENT DEVELOPMENTS
SECOND QUARTER 1998 EARNINGS AND FINANCIAL DATA. On July 16, 1998,
Carolina First Corporation announced its earnings and other financial data at
and for the quarter ended June 30, 1998. For the quarter, Carolina First
Corporation's net income totaled $5.5 million, or $0.33 per diluted share,
compared with second quarter 1997 net income of $4.7 million, or $0.41 per
diluted share. Second quarter 1997 earnings included a $1.5 million after-tax
gain on the sale of branches. At June 30, 1998, Carolina First Corporation's
total assets, loans, deposits and shareholders' equity were approximately $2.3
billion, $1.6 billion, $1.8 billion and $257 million, respectively. At June 30,
1998, Carolina First Corporation's ratio of nonperforming assets to loans and
other real estate owned was 0.16%.
ACQUISITION OF RESOURCE PROCESSING GROUP, INC. On June 1, 1998, Carolina
First Corporation acquired Resource Processing Group, Inc., a credit card
origination and servicing company headquartered in Columbia, South Carolina
("RPGI"), through the merger of RPGI with and into an interim subsidiary of
Carolina First Corporation. The RPGI transaction was accounted for as a purchase
and resulted in the issuance of approximately 398,600 shares of Carolina First
Corporation common stock for the outstanding shares of RPGI common stock.
Additional shares of Carolina First Corporation common stock may become issuable
in the event that certain performance related criteria are met. At June 30,
1998, RPGI operated through one location, had approximately $16.0 million in
assets and was servicing approximately $135 million in credit card receivables.
For the years ended December 31, 1996 and 1997, RPGI had net income of
approximately $448,000 and a loss of $2,296,000, respectively. RPGI does not
have any receivables associated with credit cards or other loans.
PENDING ACQUISITION OF POINSETT FINANCIAL CORPORATION. On June 26, 1998,
Carolina First Corporation signed a definitive agreement to acquire Poinsett
Financial Corporation through the merger of Poinsett with and into Carolina
First Corporation. Poinsett is a thrift holding company headquartered in
Travelers Rest, South Carolina, and owns 100% of the stock of Poinsett Bank,
F.S.B. At June 30, 1998, Poinsett operated through three locations and had total
assets, loans, deposits and shareholders' equity of approximately $88.3 million,
$67.5 million, $81.6 million and $5.8 million, respectively. Under the terms of
the merger agreement, Poinsett shareholders will receive compensation of $82.00
per share for each Poinsett share (for an aggregate consideration amount of
approximately $15.5 million), payable in the form of Carolina First Corporation
common stock. The Carolina First Corporation common stock will be determined in
a manner similar to which it is being determined for purposes of the Merger
(i.e. based on the 20 trading days immediately prior to the closing date of the
transaction, except in certain instances involving a change of control, in which
case the value may be determined based on the 20 trading days immediately prior
to the announcement regarding such matter).
PENDING ACQUISITION OF COLONIAL BANK OF SOUTH CAROLINA, INC. On July 9,
1998, Carolina First Corporation signed a definitive agreement to acquire
Colonial Bank of South Carolina, Inc. through the merger of Colonial with and
into Carolina First Bank. Colonial is a state-chartered banking corporation
headquartered in Camden, South Carolina. At June 30, 1998, Colonial operated
through four locations and had total assets, loans, deposits and shareholders'
equity of approximately $59.8 million, $48.1 million, $43.0 million and $5.3
million, respectively. Under the terms of the merger agreement, Colonial
shareholders will receive compensation of $23.00 per share for each Colonial
share (for an aggregate consideration amount of approximately $12.8 million,
excluding the shares owned by Carolina First Corporation), payable in the form
of Carolina First Corporation common stock. The Carolina First Corporation
common stock will be determined in a manner similar to which it is being
determined for purposes of the Merger (i.e. based on the 20 trading days
immediately prior to the closing date of the transaction, except in certain
instances involving a change of control, in which case the value may be
determined based on the 20 trading days immediately prior to the announcement
regarding such matter).
43
<PAGE>
OTHER ACQUISITIONS. Carolina First Corporation continues to explore
opportunities to acquire banks and other companies engaging in financial
institutions-related activities. It is not presently known whether, or on what
terms, such discussions will result in further acquisitions. Carolina First
Corporation's acquisition strategy is flexible in that it does not require
Carolina First Corporation to effect specific acquisitions so as to enter
certain markets or to attain specified growth levels. Rather than being market
driven or size motivated, Carolina First Corporation's acquisition strategy
reflects its willingness to consider potential acquisitions wherever and
whenever such opportunities arise based on the then-existing market conditions
and other circumstances. Carolina First Corporation's acquisitions may be made
by the exchange of stock, through cash purchases, or with other consideration.
Other than as described above, Carolina First Corporation does not currently
have any definitive understandings or agreements for any acquisitions material
to Carolina First Corporation. However, Carolina First Corporation anticipates
that it will continue to expand by acquisition in the future.
INFORMATION ABOUT FIRST NATIONAL
HISTORY AND BUSINESS
FIRST NATIONAL. First National, a national banking association, was
organized in 1947 for the purpose of conducting a general banking business in
Pickens County, South Carolina. At March 31, 1998, First National had total
assets of $117.5 million, total deposits of $96.2 million and shareholders'
equity of $15.9 million. First National is regulated by the OCC and its deposits
are insured up to applicable limits under the Bank Insurance Fund of the FDIC.
First National's principal business consists of accepting deposits from
the general public through a variety of deposit programs and originating
commercial, consumer and mortgage loans.
RECENT DEVELOPMENTS
Second Quarter 1998 Earnings and Financial Data
For the quarter ended June 30, 1998 First National Bank's net income totaled
$475,000 or $5.94 per share. This compares to $445,000 or $5.56 per share for
the quarter ended June 30, 1997. As of June 30, 1998, First National Bank's
total assets, loans, deposits, and shareholders equity were $120,621,585,
$64,634,259.09, $97,629,495, and $16,350,170, respectively. At June 30, 1998,
First National Bank's ratio of nonperforming assets to loans and other real
estate owned was 1.97%.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This discussion is intended to assist in understanding the financial condition
and results of operations of First National, and should be read in conjunction
with the financial statements and related notes contained elsewhere herein.
EARNINGS PERFORMANCE
NINE MONTHS ENDED MARCH 31, 1998 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1997
Net income for the nine months ended March 31, 1998 was $1,322,656 or $16.53 per
share. This compares to net income of $1,146,883 or $14.34 per share for the
nine months ended March 31, 1997. This was an increase of $175,773 or $2.20 per
share. The increase in earnings reflects a rise in net interest income resulting
from management's increased emphasis on loan growth and a continued effort to
control operating expenses.
1997 COMPARED WITH 1996
First National experienced record earnings of $1,604,221 or $20.05 per share for
the year ended June 30, 1997. This compared to $1,185,842 or $14.82 per share
for the year ended June 30, 1996. This was an increase of $418,379 or $5.23 per
share, a 35% increase. The improvement in earnings was achieved by an $819,874
or a 20% rise in net interest income and a $16,396 or a .58% decline in
noninterest expenses. Due to strong loan growth, the provision for loan losses
amounted to $183,973 for the year ended June
44
<PAGE>
30, 1997. This compared to no provision for loan losses for the year ended
June 30, 1996. Noninterest income remained relatively flat at $409,023 and
$427,149 for the years ended June 30, 1997 and 1996, respectively.
1996 COMPARED WITH 1995
Net income for the year ended June 30, 1996 was $1,185,842 or $14.82 per share.
This compared to net income of $960,903 or $12.01 per share for the year ended
June 30, 1995. This was an increase of $224,939 or $2.81 per share, a 23.4%
increase. The improvement in earnings in 1996 was largely the result of a
$147,224 or a 5% decline in noninterest expenses. Net interest income grew
by $50,213 or 1.25% to $4,069,885 for the year ended June 30, 1996. First
National made no provision for loan losses in 1996 versus a $78,803 provision
for loan losses in 1995. Noninterest income grew a modest 3% to $427,149 for the
year ended June 30, 1996.
NET INTEREST INCOME
Net interest income is the amount of interest earned on interest earning assets
(loans, investment securities, and federal funds sold), less the interest
expense incurred on interest bearing liabilities (interest bearing deposits),
and is the principal source of First National's earnings. Net interest income is
affected by the level of interest rates, volume and mix of interest earning
assets and interest bearing liabilities and the relative funding of these
assets.
For the year ended June 30, 1997, net interest income increased $819,874 or
20.14% to $4,889,759. Much of this growth can be attributed to a 19.19% increase
in loan interest income and fees. For the years ended June 30, 1997 and 1996
loan interest income amounted to $5,397,700 and $4,528,821, respectively.
Investment income grew 6.7% to $2,419,445 for the year ended June 30, 1997. Much
of this growth is attributed to First National's restructuring of the investment
portfolio to improve yield and earnings. Due to strong loan growth, fed funds
sold income declined by 14.0% to $147,077 in 1997. A favorable rate
environment contributed to only a 6.11% rise in interest expense for the twelve
months ended June 30, 1997. This resulted in a .08% reduction in First
National's total cost of funds to 3.19%. For the year ended June 30, 1997 the
net interest margin improved by .48% to 5.08%.
Net interest income was $4,069,885 and $4,019,672 for the years ended June 30,
1996 and 1995, respectively. The nominal $50,213 or 1.25% increase in 1996 when
compared to 1995 is largely attributed to a $224,154 or an 8.39% rise in
interest expense. This increase contributed to a .17% decline in First
National's net interest margin to 4.63% for the year ended June 30, 1996. This
decline occurred despite an 11.70% increase in loan interest income and fees.
For the nine months ended March 31, 1998, net interest income increased $381,000
or 10.57% to $3,985,000 when compared to the nine months ended March 31, 1997.
This increase is attributed to a rise in investment income resulting from the
recent restructuring of the investment portfolio and an increased emphasis on
loan growth.
The table "Comparative Average Balances, Yields and Rates" provides a detailed
analysis of the effective yields and rates on the categories of interest earning
assets and interest bearing liabilities for the years ended June 30, 1997, and
1996 and the nine months ended March 31, 1998.
45
<PAGE>
COMPARATIVE AVERAGE BALANCES, YIELDS AND RATES
(Dollars in thousands)
<TABLE>
<CAPTION>
<S><C>
Year Ended Year Ended Nine months ended
June 30, 1996 June 30, 1997 March 31, 1998
---------------------------- -------------------------- ----------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balances Expense Rate Balances Expense Rate Balances Expense Rate
-------- ------- ------- -------- ------- ----- -------- ------- ------
ASSETS
Earning assets
Loans (including fees) $ 47,907 $ 4,529 9.45% $ 55,466 $ 5,398 9.73% $ 61,974 $ 4,472 7.22%
Securities 38,230 2,267 5.93% 39,584 2,419 6.11% 39,702 1,774 4.47%
Federal funds sold 1,850 171 9.24% 625 147 8.32% 3,474 193 5.55%
----- --- --- --- ----- ---
Total earnings assets 87,987 6,967 7.92% 95,675 7,964 8.32% 105,150 6,439 6.12%
------ ----- ------ ----- ------- -----
Non-earning assets
Cash and due from banks 4,575 4,768 5,001
Property and equipment 1,638 1,611 1,575
Other 1,423 1,454 1,370
-------- --------- ----------
Total assets $ 95,624 $ 103,508 $ 113,097
======== ========= =========
LIABILITIES
Interest-bearing liabilities
Demand and savings deposits $ 28,611 $ 838 2.93% $ 29,161 $ 796 2.73% $ 31,855 $ 602 1.89%
Time deposits >$100,000 8,737 451 5.16% 10,338 474 4.59% 11,441 379 3.31%
Time deposits <$100,000 27,598 1,577 5.71% 29,882 1,700 5.69% 32,253 1,347 4.18%
Repurchase agreements 998 31 3.10% 1,313 104 7.92% 3,084 127 4.12%
--- -- ----- ----- --- ----- ----- --- -----
Total interest bearing liabilities 65,944 2,897 4.39% 70,694 3,074 4.35% 78,633 2,455 3.12%
Noninterest-bearing liabilities
Noninterest-bearing deposits 16,608 18,432 18,497
Other liabilities 646 664 765
--- --- ---
Total liabilities 83,198 89,790 97,895
Stockholders' equity 12,426 13,718 15,202
------ ------ ------
Total liabilities and stockholders'
equity $ 95,624 $ 103,508 $ 113,097
========== ========= =========
Net interest income and net yield
on earning assets (1) $ 4,070 4.63% $ 4,890 5.11% $ 3,984 3.79%
======= ========= ========
Interest rate spread (2) 3.53% 3.97% 3.00%
</TABLE>
(1) Net interest income divided by total average earning assets.
(2) Total interest earning assets yield minus total interest bearing liabilities
rate.
46
<PAGE>
The table "Volume and Rate Variance Analysis" provides a summary of
changes in net interest income resulting from changes in volumes of interest
earning assets and interest bearing liabilities, and the rates earned and paid
on such assets and liabilities. As reflected in the table, net interest income
for 1997 increased $820,000. Increased volumes accounted for $443,000 or 54.0%
of the increase in net interest income, with changes in rates accounting for
$377,000 or 46.0% of the increase. The rate/volume variance for each category
has been allocated on a consistent basis between rate and volume variances based
on the percentage of rate or volume variance to the sum of the two absolute
variances.
VOLUME AND RATE VARIANCE ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1996 compared June 30, 1997 compared
to June 30, 1997 to March 31, 1998
------------------------------ ----------------------------
Amount Amount Amount Amount
Caused Caused Caused Caused
By By By By
Total Change in Change in Total Change in Change in
Change Volume (1) Rate (1) Change Volume (1) Rate (1)
------ ---------- --------- ------ ---------- --------
<S> <C>
Earning assets
Loans (including fees) $ 869 $ 715 $ 154 $ (926) $ 634 $ (1,560)
Securities 152 80 72 (645) 7 (652)
Federal funds sold (24) (113) 89 46 670 (624)
---- ----- -- -- --- -----
Total interest income 997 682 315 (1,525) 1,311 (2,836)
--- --- --- ------- ----- -------
Interest-bearing liabilities
Demand and savings deposits$ (42)$ 16 $ (58) $ (194) $ 74 $ (268)
Time deposits >$100,000 23 83 (60) (95) 50 (146)
Time deposits <$100,000 123 131 (8) (353) 135 (488)
Repurchase agreements 73 9 64 23 140 (117)
-- - -- -- --- -----
Total interest expense 177 239 (62) (619) 399 (1,018)
--- --- ---- ----- --- -------
Net interest income $ 820 $ 443 $ 377 $ (906) $ 912 $ (1,818)
=== === === ===== === =======
</TABLE>
(1)The rate/volume variance for each category has been allocated on a consistent
basis between rate and volume variances based on the percentage of rate or
volume variance to the sum of the two absolute variances.
INTEREST RATE SENSITIVITY
Interest rate sensitivity management is concerned with the management of
the timing and magnitude of repricing assets compared to liabilities and is an
important part of asset/liability management. It is the objective of interest
rate sensitivity management to generate stable growth in net interest income,
and to control the risks associated with interest rate movement. The
Asset/Liability Management Committee, along with First Nationals'
asset/liability management consultant, monthly reviews interest rate risk
exposure and the expected interest rate environment so that adjustments in
interest rate sensitivity can be timely made.
The table, "Interest Sensitivity Analysis," indicates that, on a
cumulative basis through twelve months, rate sensitive liabilities exceeded rate
sensitive assets, resulting in a liability sensitive position at the end of
March 31, 1998 of $31,970,000. When interest sensitive assets exceed interest
sensitive liabilities for a specific repricing "horizon," a positive interest
sensitivity gap results. The gap is negative when interest sensitive liabilities
exceed interest sensitive assets, as is the case at March 31, 1998 with respect
to the one year time horizon. For a bank with a negative gap, falling interest
rates would be expected to have a positive effect on net interest income and
rising rates would be expected to have the opposite effect.
47
<PAGE>
The table below reflects the balances of interest earnings assets and
interest bearing liabilities at the earlier of their repricing or maturity
dates. Scheduled payment amounts to amortizing fixed rate loans are reflected at
each scheduled payment date. Variable rate amortizing loans reflect scheduled
payments at each scheduled payment date until the loan may be repriced
contractually; the unamortized balances are reflected at that point. Overnight
federal funds sold are reflected in the earliest repricing interval due to the
immediately available nature of these funds. Interest bearing liabilities with
no contractual maturity, such as interest bearing transaction accounts and
savings deposits are reflected in the earliest repricing interval due to
contractual arrangements which give management the opportunity to vary the rates
paid on these deposits within a thirty-day or shorter period. However, First
National is under no obligation to vary the rates paid on those deposits within
any given period. Fixed rate time deposits, principally certificates of deposit,
are reflected at their contractual maturity dates. Variable rate time deposits,
principally Individual Retirement Accounts, are reflected at the earlier of
their next repricing or maturity dates.
During 1997, management managed the repricing characteristics of the loan
portfolio by increasing the proportion of variable rate versus fixed rate loans
in order to stabilize First National's negative gap ratio. The success of this
strategy was evidenced by the increase in net interest income due to rate
changes during 1997. During 1998, management will attempt to reduce First
National's liability sensitive position by further increasing the mix of
variable versus fixed rate loans and attempting to extend the maturities of
fixed rate time deposits. This strategy is designed to provide a stable net
interest spread and soften the negative effects of any increase in interest
rates that might occur.
INTEREST RATE SENSITIVITY AS OF MARCH 31, 1998
(Dollars in thousands) Within 4-12 Over 1-5 Over 5
3 months months years years Total
-------- ------ ------- ------- -------
Assets
Earning assets
Loans (including fees) $ 23,332 $ 7,989 $ 23,697 $ 8,282 $ 63,300
Securities 1,115 2,403 20,657 15,946 40,121
Federal funds sold 6,575 -- -- -- 6,575
----- ------ ------ ------ -----
Total earning assets 31,022 10,392 44,354 24,228 109,996
Non-earning assets
Cash and due from banks -- -- -- 4,712 4,712
Property and equipment -- -- -- 1,566 1,566
Other -- -- -- 1,265 1,265
-------- -------- -------- -------- ---------
Total assets $ 31,022 $ 10,392 $ 44,354 $ 31,771 $ 117,539
======== ======== ======== ======== =========
LIABILITIES
Interest-bearing
liabilities
Demand and savings
deposits $ 33,990 $ -- $ -- $ -- $ 33,990
Time deposits >$100,000 5,293 5,206 610 628 11,737
Time deposits <$100,000 9,285 15,038 7,608 1,102 33,033
Repurchase agreements 4,572 -- -- -- 4,572
----- --------- -------- -------- -----
Total interest bearing
liabilities 53,140 20,244 8,218 1,730 83,332
Noninterest-bearing
liabilities
Non-interest bearing
deposits -- -- -- 17,481 17,481
Other liabilities -- -- -- 855 855
-------- -------- -------- --- ---
Total liabilities $ 53,140 $ 20,244 $ 8,218 $ 20,066 $ 101,668
Stockholders' equity -- -- -- 15,871 15,871
-------- -------- ------- ------ ------
Total liabilities and
stockholders'
equity $ 53,140 $ 20,244 $ 8,218 $ 35,937 $ 117,539
======== ======== ======= ======== =========
48
<PAGE>
Interest sensitive gap $ (22,118) $ (9,852) $ 36,136 $ 22,498 $ --
Cumulative interest
sensitive gap $ (22,118) $(31,970) $ 4,166 $ 26,664 $ --
PROVISION FOR LOAN LOSSES
The provision for loan losses is charged to earnings based on management's
continuing review and evaluation of the loan portfolio and general economic
conditions. Provisions for loan losses were $184,000 for the year ended June 30,
1997. No provision for loan losses was made for the year ended June 30, 1996.
The larger provision in 1997 resulted principally from an increase in loan
volume.
Net loan charge-offs for 1997 totaled $26,000, compared with $70,000 in
1996. Management is not aware of any trend toward significantly higher
charge-offs in any particular loan category in 1997. See "Nonperforming Loans;
Other Problem Assets" and "Allowance for Loan Losses" for a discussion of the
factors management considers in its review of the adequacy of the allowance and
provisions for loan losses.
For the nine months ended March 31, 1998, the provision for loan losses
was $75,000 and for the same period, net charge-offs were $17,000.
OTHER INCOME
For the year ended June 30, 1997, other income decreased $18,126 or 4.2%
from the 1996 period. This decrease primarily resulted from an increase in
losses on the sale of securities of $99,561. Offsetting these losses were
increases in service fees on deposits of $29,749 and an increase in other fees
of $51,686.
For the year ended September 30, 1996, other income increased $12,699 or
3.1% from the comparable period in 1995. Losses on the sale of securities for
1996 increased $8,550 from 1995. This was more than offset by an increase of
$13,384 in service fees on deposits and an increase of $7,865 in other fees.
GENERAL AND ADMINISTRATIVE EXPENSES
For the year ended June 30, 1997, general and administrative expenses grew
$16,396 or 0.6% to $2,833,588. The increased expenses reflect slightly higher
salaries and other operating expenses.
General and administrative expenses for the year ended June 30, 1996
decreased $147,224 or 5.0% over the 1995 period.
INCOME TAXES
For 1997, federal and state income tax expense increased $183,000 or 37.0%
from the 1996 period due to the increase in operating earnings. Income taxes for
1997 were charged to expense at the regular income tax rates. Management
estimates that the effective combined federal and state income tax rates on
income before income taxes will be approximately 38% for 1998.
INVESTMENT PORTFOLIO
At June 30, 1997, securities comprised approximately 36.2% of First
National's assets. The following table summarizes the carrying value amounts of
securities held by First National at each of the dates indicated.
Available-for-sale securities are stated at estimated fair value and
held-to-maturity and investment securities are stated at amortized cost.
49
<PAGE>
SECURITIES PORTFOLIO COMPOSITION
(Dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1997 1998
----------------------------------- ------------------------------ ---------------------------
Book Net Unrealized Fair Book Net Unrealized Fair Book Net Unrealized Fair
Value Holding Value Value Holding Value Value Holding Value
Gain/(Loss) Gain/(Loss) Gain/(Loss)
<S> <C>
AVAILABLE FOR SALE:
U.S. Treasury obligations $ 8,419 $ (78) $ 8,341 $ 5,263 $ 31 $ 5,294 $ 3,583 $ 30 $ 3,613
U.S. Agency obligations 7,488 (100) 7,388 20,944 53 20,997 21,027 162 21,189
Municipal obligations -- -- -- 8,046 75 8,121 8,946 283 9,229
Mortgage backed obligations -- -- -- 4,605 15 4,620 5,005 61 5,066
Corporate obligations 247 -- 247 249 1 250 1,006 3 1,009
------- ------- --------- ------ ------ ------ ------ ----- ------
$ 16,154 $ (178) $ 15,976 $ 39,107 $ 175 $ 39,282 $ 39,567 $ 539 $ 40,106
======== ======= ======== ======== ===== ======== ======== ===== ========
HELD TO MATURITY:
U.S. Treasury obligations $ 16,437 $ (27) $ 16,410 -- -- -- -- -- --
U.S. Agency obligations 898 (13) 885 -- -- -- -- -- --
Municipal obligations 6,574 (65) 6,509 -- -- -- -- -- --
------ -------- -------- ------ ------ ------ ------ ------ ------
$ 23,909 $ (105) $ 23,804 $ -- $ -- $ -- $ -- $ -- $ --
======== ========= ======== ======= ======= ======= ======= ======= ======
</TABLE>
50
<PAGE>
SECURITIES PORTFOLIO MATURITIES AND YIELDS
(Dollars in thousands)
MARCH 31, 1998
Book Fair
Value Value Yield (%)
----- ----- -----
AVAILABLE FOR SALE:
U.S. Treasury obligations
0 to 1 years $ 1,793 $ 1,798 6.53
1 to 5 years 1,790 1,815 6.53
----- -----
Total 3,583 3,613 6.53
U.S. Agency obligations
0 to 1 years 1,500 1,503 6.25
1 to 5 years 14,661 14,794 6.54
5 to 10 years 4,866 4,892 6.69
----- -----
Total 21,027 21,189 6.55
Municipal obligations
0 to 1 years 200 202 7.14
1 to 5 years 2,758 2,843 7.95
5 to 10 years 3,655 3,758 7.54
Over 10 years 2,333 2,426 8.02
----- -----
Total 8,946 9,229 7.78
Mortgage backed obligations
5 to 10 years 5,005 5,066 6.73
Corporate obligations
1 to 5 years 1,006 1,009 6.17
TOTAL
0 to 1 years 3,493 3,503 6.45
1 to 5 years 20,215 20,461 6.71
5 to 10 years 13,526 13,716 6.93
Over 10 years 2,333 2,426 8.02
----- ----- ----
$ 39,567 $ 40,106 6.84
======== ======== ====
LOAN PORTFOLIO COMPOSITION
Management believes the loan portfolio is adequately diversified. There
are no significant concentrations of loans in any particular individuals or
industry or group of related individuals or industries, and there are no foreign
loans.
The amount of loans outstanding at June 30, 1996 and 1997 and at March 31,
1998 are shown in the following table according to type of loan:
51
<PAGE>
LOAN PORTFOLIO COMPOSITION
(Dollars in thousands)
JUNE 30, MARCH 31,
----------------------- ------------
1996 1997 1998
Real estate - mortgage $ 21,150 $ 24,957 $ 25,250
Real estate - construction 8,835 11,084 10,346
Commercial 10,050 13,756 16,513
Installment loans to individuals 10,599 11,161 11,770
Other 145 344 133
-------- ------- ----------
$ 50,779 $ 61,302 $ 64,012
======= ======== ========
A certain degree of risk taking is inherent in the extension of credit.
Management has established loan and credit policies designed to control both the
types and amounts of risks assumed and to ultimately minimize losses. Such
policies include limitations on loan-to-collateral values for various types of
collateral, requirements for appraisals of real estate collateral, problem loan
management practices and collection procedures, and nonaccrual and charge-off
guidelines.
Commercial loans primarily represent loans made to businesses, and may be
made on either a secured or an unsecured basis. When taken, collateral consists
of liens on receivables, equipment, inventories, furniture and fixtures.
Unsecured business loans are generally short-term with emphasis on repayment
strengths and low debt to worth ratios. During 1997, total commercial and
industrial loans increased $3,264 or 23.7%. Also, loans for business purposes
that are secured by real estate (nonfarm, nonresidential) increased by $638 or
6.3% during 1997. Commercial lending involves significant risk because repayment
usually depends on the cash flows generated by a borrower's business, and the
debt service capacity of a business can deteriorate because of downturns in
national and local economic conditions. To control risk, sophisticated initial
and continuing financial analysis of a borrower's financial information is
required.
Real estate construction loans generally consist of financing the
construction of 1-4 family dwellings and some nonfarm, nonresidential real
estate. Usually, loan to cost ratios are limited to 75% and permanent financing
commitments are required prior to the advancement of loan proceeds.
Loans secured by real estate mortgages comprised approximately 59% and 59%
of First National's loam portfolio at end of 1997 and 1996, respectively.
Residential real estate loans consist mainly of first and second mortgages on
single family homes, with some multifamily loans. Loan-to-value ratios for these
instruments are generally limited to 95%. Nonfarm, nonresidential loans are
secured by business and commercial properties with loan-to-value ratios
generally limited to 80%. The repayment of both residential and business real
estate loans is dependent primarily on the income and cash flows of the
borrowers, with the real estate serving as a secondary or liquidation source of
repayment.
NONPERFORMING LOANS; OTHER PROBLEM ASSETS
NON-ACCRUAL AND PAST DUE LOANS
(Dollars in thousands)
JUNE 30, MARCH 31,
---------------------- -------------
1996 1997 1998
Non-accrual loans $ 344 $ 582 $ 442
Loans contractually past due -- 12 --
90 days or more on which
interest is still being accrued
Other real estate owned 59 164 8
Total nonperforming assets $ 403 $ 758 $ 450
===== ===== =====
52
<PAGE>
When a loan is 90 days past due as to interest or principal or there is serious
doubt as to collectibility, the accrual of interest income is generally
discontinued unless the estimated net realizable value of collateral is
sufficient to assure collection of the principal balance and accrued interest.
Previously accrued interest on loans placed in a nonaccrual status is reversed
against current income, and subsequent interest income is recognized when
received. At March 31, 1998, First National had $442,000 in non-accrual loans,
no loans past due 90 days and still accruing interest, and $8,000 in other real
estate owned, compared to $582,000, $12,000 and $164,000, respectively, at June
30, 1997. Non-accrual loans amounted to 0.7% of total loans at March 31, 1998,
compared to 1.0% of total loans at June 30, 1997.
When the collectibility of a significant amount of principal is in serious
doubt, the principal balance is reduced to the estimated fair value of
collateral by charge-off to the allowance for loan losses and any subsequent
collections are credited first to the remaining principal balance and then to
the allowance for loan losses as a recovery of the amount charged off. A
nonaccrual loan is not returned to accrual status unless principal and interest
are current and the borrower has demonstrated the ability to continue making
payments as agreed.
Net loan charge-offs for 1997 were $26,000 or 0.05% of average loans compared to
$70,000 or 0.15% of average loans for 1996. During the nine month period ended
March 31, 1998, net charge-offs were $17,000 or .03% of average loans.
POTENTIAL PROBLEM LOANS
Management has identified and maintains a list of potential problem loans.
These are loans that are not included in the nonaccrual or the past due 90 days
or more and still accruing categories. A loan is added to the potential problem
list when management becomes aware of information about possible credit problems
of borrowers that causes serious doubts as to the ability of such borrowers to
comply with the current loan repayment terms.
The total amount of loans determined by management to be potential problem
loans was $3,667,266 at June 30, 1997 and $4,082,355 at March 31, 1998. These
amounts do not represent management's estimate of potential losses since a large
proportion of such loans is secured by various types of collateral.
OTHER REAL ESTATE OWNED
Real estate owned consists of foreclosed and in-substance foreclosed
properties and was $8,000 at March 31, 1998, $164,000 at June 30, 1997 and
$59,000 at June 30, 1996. Real estate owned is located in areas where sales of
the property are expected to be moderate to quick. Real estate owned is
initially recorded at the lower of net loan principal balance or its estimated
fair market value less estimated selling costs. The estimated fair value is
determined by appraisal at the time of acquisition.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by direct charges to operating
expense. Losses on loans are charged against the allowance in the period in
which management has determined that it is more likely than not such loans have
become uncollectible. Recoveries of previously charged off loans are credited to
the allowance. The table "Summary of Loan Loss Experience" summarizes loan
balances at the end of each period indicated, changes in the allowance arising
from charge-offs and recoveries by loan category, and additions to the allowance
which have been charged to expense.
53
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
JUNE 30, MARCH 31,
-------------------- --------------
1996 1997 1998
Balance at beginning of period $ 566 $ 496 $ 654
Charge-offs:
Real estate (66) (27) --
Installment (6) (5) (29)
Commercial -- -- (3)
Recoveries:
Real estate -- -- --
Installment 1 5 15
Commercial 1 1 --
Net charge-offs (70) (26) (17)
Provision charged to expense -- 184 75
Balance at end of period $ 496 $ 654 $ 712
======== ======== ======
Net charge-offs to average loans 0.15% 0.05% 0.03%
========= ======== =======
In reviewing the adequacy of the allowance for loan losses at each year
end, management took into consideration the historical loan losses experienced
by First National, current economic conditions affecting the borrowers' ability
to repay, the volume of loans, the trends in delinquent, nonaccruing, and
potential problem loans, and the quality of collateral securing nonperforming
and problem loans. After charging off all known losses, management considers the
allowance for loan losses adequate to cover its estimate of possible future loan
losses inherent in the loan portfolio as of June 30, 1997 and at March 31, 1998.
In calculating the amount required in the allowance for loan losses,
management applies a consistent methodology that is updated monthly. The
methodology utilizes a loan risk grading system, detailed loan reviews to assess
credit risks, mix of the loan portfolio and the overall quality of the loan
portfolio, as well as other off-balance-sheet credit risks such as loan
commitments and standby letters of credit. Also, the calculation provides for
management's assessment of trends in national and local economic conditions that
might affect the general quality of the loan portfolio. Regulators review the
adequacy of the allowance for loan losses as part of their examination of First
National and may require adjustments to the allowance based upon information
available to them at the time of the examination. Although management's
calculation of the allowance for loan losses does not provide an allocation by
individual loan categories, the various categories have differing degrees of
risk.
DEPOSITS
The average amounts and percentage composition of deposits held by First
National for the years ended June 30, 1997 and 1996 and the nine months ended
March 31, 1998 are summarized below:
54
<PAGE>
AVERAGE DEPOSITS
(Dollars in thousands)
<TABLE>
<S> <C>
JUNE 30, MARCH 31
1996 1997 1998
Amount % Amount % Amount %
-------- ------ -------- --- ------- ----
Noninterest-bearing demand $ 16,608 20.4 $ 18,432 21.0 $ 18,497 19.7
Interest-bearing demand and savings 28,611 35.1 29,161 33.2 31,855 33.9
Time deposits $100,000 and greater 8,737 10.7 10,338 11.8 11,441 12.1
Time deposits under $100,000 27,598 33.8 29,882 34.0 32,253 34.3
------ ----- ------ ----- ------ -----
$ 81,554 100.0 $ 87,813 100.0 $ 94,046 100.0
====== ===== ====== ===== ====== =====
</TABLE>
Average wholesale time deposits (certificates generated through
corporations, banks, credit unions, etc., on a national level) were $8,737,000
in 1996, $10,338,000 in 1997, and $11,441,000 through the first nine months of
1998. The vast majority of time deposits of $100,000 and over are acquired from
customers within First National's service area in the ordinary course of
business. It is a common industry practice not to consider these types of
deposits as core deposits because their retention can be expected to be heavily
influenced by rates offered, and therefore they have the characteristics of
shorter-term purchased funds. Wholesale time deposits involve the maintenance of
an appropriate matching of maturity distribution and a diversification of
sources to achieve an appropriate level of liquidity. Such deposits are
generally more volatile and interest rate sensitive than other deposits.
RETURN ON EQUITY AND ASSETS
The following table shows the return on assets (net income divided by
average total assets), return on equity (net income divided by average equity),
and equity to assets ratio (average equity divided by average total assets) for
each period indicated.
RETURN ON EQUITY AND ASSETS
FOR THE
NINE MONTHS
FOR THE YEARS ENDED ENDED
JUNE 30, MARCH 31,
--------------------- -------------
1996 1997 1998
----- ---- ------
Return on average equity 9.57% 11.70% 11.55%
Return on average assets 1.24% 1.53% 1.56%
Average equity to average assets 12.93% 13.11% 13.53%
LIQUIDITY
Liquidity is the ability to meet current and future obligations through
liquidation or maturity of existing assets or the acquisition of additional
liabilities. Adequate liquidity is necessary to meet the requirements of
customers for loans and deposit withdrawals in the most timely and economical
manner. Some liquidity is ensured by maintaining assets which may be immediately
converted into cash at minimal cost (amounts due from banks and federal funds
sold). However, the most manageable sources of liquidity are composed of
liabilities, with the primary focus on liquidity management being on the ability
to obtain deposits within First National's service area. Core deposits (total
deposits less wholesale time deposits) provide a relatively stable funding base,
and were equal to $77,475,000 or 88.2% of total assets at June 30, 1997 compared
with $72,817 or 89.3% at the end of fiscal 1996. Asset liquidity is provided
from several sources, including amounts due from banks and federal funds sold,
and funds from maturing loans. First National also has available unused
short-term lines of credit to purchase up to $2.0 million of federal funds from
unrelated correspondent institutions. Management believes that First National's
overall liquidity sources are adequate to meet its operating needs.
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CAPITAL RESOURCES
The equity capital of First National increased by $1,627,510 and $957,407
during 1997 and 1996, respectively, as the result of net income. During the
first nine months of the 1998 fiscal year, First National also increased equity
capital $1,339,291.
First National is subject to regulatory capital adequacy standards. Under
these standards, financial institutions are required to maintain certain minimum
ratios of capital to risk-weighted assets and average total assets. Under the
provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), federal financial institution regulatory authorities are required to
implement prescribed "prompt corrective actions" upon the deterioration of the
capital position of a bank. If the capital position of an affected institution
were to fall below certain levels, increasingly stringent regulatory corrective
actions are mandated.
First National's March 31, 1998 capital ratios are presented in the
following table, compared with the "well capitalized" and minimum ratios under
the FDIC regulatory definitions and guidelines:
Total
Capital Tier 1 Leverage
------- -------- -----------
Minimum requirement 8.00% 4.00% 3.00%
Well-capitalized requirement 10.00% 6.00% 5.00%
------ ------ ------
Actual 9.50% 21.81% 13.59%
INFLATION
Since the assets and liabilities of a bank are primarily monetary in
nature (payable in fixed, determinable amounts), the performance of a bank is
affected more by changes in interest rates than by inflation. Interest rates
generally increase as the rate of inflation increases, but the magnitude of the
change in rates may not be the same.
While the effect of inflation on banks is normally not as significant as
is its influence on those businesses which have large investments in plant and
inventories, it does have an effect. During periods of high inflation, there are
normally corresponding increases in the money supply, and banks will normally
experience above-average growth in assets, loans and deposits. Also general
increases in the prices of goods and services will result in increased operating
expenses.
CORRESPONDENT BANKING
Correspondent banking involves the providing of services by one bank to
another bank which does not provide that service for itself from an economic or
practical standpoint. First National uses correspondent services offered by
larger banks, including check collections, purchase of Federal funds, security
safekeeping, investment services, coin and currency supplies, overline and
liquidity loan participations and sales of loans to or participations with
correspondent banks and other secondary lenders.
DATA PROCESSING
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First National has a data-processing department which performs a full
range of data processing for First National. Such services include an automated
general ledger, deposit accounting and commercial and installment lending data
processing.
EMPLOYEES
At March 31, 1998, First National employed 50 persons on a full-time
basis, and two persons on a part-time basis.
MONETARY POLICIES
The results of operations of First National are affected by credit
policies of monetary authorities, particularly the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve include open
market operations in U.S. Government securities, changes in the discount rate on
member bank borrowings, changes in reserve requirements against member bank
deposits and limitations on interest rates which member banks may pay on time
and savings deposits. In view of changing conditions in the national economy and
in the money markets, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve, no prediction can be made as to
possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of First National.
SUPERVISION AND REGULATION
First National operates in a highly regulated environment, and its
business activities are governed by statute, regulation and administrative
policies. The business activities of First National are supervised by a number
of federal regulatory agencies, including the Federal Reserve, the OCC and the
FDIC.
First National was organized as a national banking association under the
National Bank Act. Its deposits are insured to $100,000 per account by the FDIC,
subject to aggregation rules. First National is subject to supervision and
periodic examination by the OCC, which oversees substantially all aspects of
First National's operations, including security devices and procedures, loan and
securities policies, adequacy of capitalization and loss reserves, loan
portfolio evaluation, payment of dividends, location of branch offices and
facilities, reserves against deposits, maintenance of required books and
records, and adequacy of staff training to carry on safe lending and deposit
gathering practices.
All national banks are required to be members of the Federal Reserve
System. First National is subject to rules and regulations from time to time
promulgated by the Board of Governors of the Federal Reserve System. Also, the
Glass-Steagall Act prohibits Federal Reserve member banks from being affiliated
with any company engaged principally in the issue, flotation, underwriting,
public sale or distribution of securities. However, the OCC has ruled that
national banks may engage in discount brokerage activities.
The Change in Bank Control Act provides that the OCC must be notified in
writing in advance if any person or persons acting in concert propose to acquire
25% or more of any class of First National's voting stock. In addition, if any
person or persons acting in concert purpose to acquire 10% or more of any class
of First National's voting stock, such person or persons will be presumed to
have acquired control of First National (subject to rebuttal) if (i) First
National has issued any class of securities subject to the registration
requirements of Section 12 of the Securities Exchange Act of 1934, or (ii)
immediately after the transaction, no other person will own a greater proportion
of the class of voting securities. Approval of the OCC is required before any
change in control of First National may be effectuated.
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In addition to a variety of generally applicable state and federal laws
governing businesses and employers, such as the Equal Employment Opportunity Act
prohibiting employment discrimination, the Occupational Safety and Health Act
governing employee working conditions, First National is subject to a variety of
special federal statutes and regulations applicable only to financial
institutions. These include (i) the Truth in Lending Act and Federal Reserve
Regulation Z, which require disclosure of the terms of consumer finance
transactions and regulate certain credit card practices, (ii) the Equal Credit
Opportunity Act and Federal Reserve Regulation B, which prohibit discrimination
in the evaluation and extension of credit, (iii) the Home Mortgage Disclosure
Act and Federal Reserve Regulation C, which are intended to provide information
to enable the public and public officials to determine if a financial
institution is fulfilling its obligation to help meet the housing needs of the
community it serves, (iv) the Electronic Funds Transfer Act and Federal Reserve
Regulation E, which provide for consumer rights and safeguards in electronic
funds transfer systems, (v) the Community Reinvestment Act and regulations
applicable thereto, which require financial institutions to meet their
obligation to provide for the total credit needs of the communities they serve,
including their assets in loans to low and moderate income borrowers, (vi) the
Fair Debt Collection Practices Act, which govern practices which may be used by
associations and other credit grantors to eliminate abusive debt collection
practices, (vii) the Fair Credit Reporting Act, which governs the collection and
use of credit information by credit reporting agencies to insure the
confidentiality, accuracy, relevancy, and proper utilization of consumer credit
information, (viii) the Right to Financial Privacy Act, which imposes a duty to
maintain the confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of financial records,
(ix) the Bank Secrecy Act, which requires banks to file a report with the
Internal Revenue Service of each deposit, withdrawal, exchange of currency or
other payment or transfer, by, through, or to First National which involves a
transaction in currency of more than $10,000, and (x) the Financial Institutions
Regulatory and Interest Rate Control Act of 1978 and Federal Reserve Regulation
O, which place restrictions on extensions of credit to executive officers,
directors and principal shareholders of First National.
National banks are subject to restrictions under federal law in dealing
with affiliates. For instance, extensions of credit to an affiliate, investment
in the securities of an affiliate and the purchase of assets from an affiliate
are limited to no more than 10% of First National's capital stock and surplus to
any single affiliate and 20% to all affiliates.
The National Bank Act imposes on national banks to same limitations on
branch banking as are imposed by state law on state-chartered banks in the state
where the national bank is located. In South Carolina, a bank may establish
branch offices throughout the state by means of merger with an existing bank or
by opening branches de novo. South Carolina prohibits a bank from merging with
another bank unless the target bank has been in existence for at least five
years. South Carolina law likewise prohibits First National from being acquired
by a bank holding company until it has been in existence and continuously
operating for at least two years.
In August, 1989, the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA") was enacted. FIRREA, among other things,
abolished the Federal Savings and Loan Insurance Corporation and established two
new insurance funds under the jurisdiction of the FDIC: the Savings Association
Insurance Fund ("SAIF") and the Bank Insurance Fund ("BIF"). The law also
provided for a phased-in increase in the rate of annual insurance assessments
paid by a bank, deposits of which are insured by the BIF from the current rate
of 1/18th of 1% of such bank's average assessment base (as defined) to 0.15% of
such assessment base on and after January 1, 1991, subject to increases in the
assessment rate to a rate not in excess of 0.325% of such assessment base upon
the occurrence of certain circumstances relating to the BIF.
FIRREA also gives banking agencies more potent enforcement mechanisms. The
authority of a banking agency to issue a cease-and-desist order now specifically
includes the power to order affirmative action to correct any harm resulting
from a violation or practice. The non-exhaustive list of actions that may be
ordered
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includes restitution, reimbursement, indemnification or guaranty against loss if
violation or practice showed a reckless disregard for the law, applicable
regulations or a prior banking agency order. Other specific actions which may be
ordered include restricting the growth of the institutions, disposing of any
loan or assets, rescinding contracts, hiring qualified officers or employees, or
"other action as the banking agency determines to be appropriate." Moreover, the
power to issue a cease-and-desist order includes "the authority to place
limitations on the activities or functions of an insured depository institution
or any institution-affiliated party."
Finally, FIRREA expanded the enforcement powers of bank regulatory
agencies, including the expansion of the FDIC's power to act as a conservator
and receiver for troubled financial institutions. The FDIC may appoint itself
conservator or receiver for an insured depository institution for any of the
following reasons: the institution is insolvent in that the assets of the
institution are less than its obligations to creditors and others; a substantial
dissipation of the assets or earnings has occurred due to any violation of law
or regulation of any unsafe or unsound practice; the institution is in an unsafe
or unsound position to transact business including substantially insufficient
capital or otherwise; the institution has willfully violated a cease-and-desist
order that has become final; the institution conceals or withholds its books or
records from banking regulators; it is unlikely that the institution will be
able to meet depositors' demands or pay its obligations in the normal course of
business; the institution has or is likely to incur losses that will deplete all
or substantially all of its capital and there is no reasonable prospect for the
capital to be replenished without federal assistance; or there exists one or
more violations of laws, rules or regulations or an unsafe or unsound practice
or condition that is likely to cause insolvency or substantially dissipate the
assets or earnings or is likely to weaken the bank's condition or seriously
prejudice the depositors' interests. The FDIC as conservator or receiver may
take over the assets of and operate the institution with all of the powers of
its management, may conduct all business of the institution, and perform all of
the functions of the institution in its own name. The FDIC may take action to
put the institution in a sound and solvent condition and dispose of it as a
going concern, or it may liquidate it and proceed to realize upon its assets.
The FDICIA, which was enacted on December 19, 1991, provides for a number
of reforms relating to the safety and soundness of the deposit insurance system,
supervision of domestic and foreign depository institutions and improvement of
accounting standards. One aspect of FDICIA involves the development of a
regulatory monitoring system requiring "prompt corrective action" on the part of
banking regulators with regard to certain classes of undercapitalized
institutions. While FDICIA does not change any of the minimum capital
requirements, it directs each of the federal banking agencies to issue
regulations putting the monitoring plan into effect. FDICIA creates five
"capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in FDICIA and which will be used to
determine the severity of corrective action the appropriate regulator may take
in the event an institution reaches a given level of undercapitalization. For
example, an institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will take
to become adequately capitalized. Upon approving the plan, the regulator will
monitor the institution's compliance. Before a capital restoration plan will be
approved, an entity controlling a bank (i.e., holding companies) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of 5% of the institution's total assets or the amount
which is necessary to bring the institution into compliance with all capital
standards. In addition, "undercapitalized" institutions will be restricted from
paying management fees, dividends and other capital distributions, will be
subject to certain asset growth restrictions and will be required to obtain
prior approval from the appropriate regulator to open new branches or expand
into new lines of business.
As an institution drops to lower capital levels, the extent of action to
be taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
FDICIA also provides that banks will have to meet new safety and soundness
standards that must be
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adopted by the regulators. Regulators are charged with promulgating regulations
defining operational and managerial standards relating to internal controls,
loan documentation, credit underwriting, interest rate exposure, asset growth,
director and officer compensation, asset quality, earnings and stock valuation.
Both the capital standards and the safety and soundness standards which
FDICIA seeks to implement are designed to bolster and protect the deposit
insurance fund. The BIF funding provisions under FDICIA could result in a
significant increase in the assessment rate on deposits over the next 15 years.
No assurance can be given at this time as to what the level of premiums will be
over this 15 year period.
In response to the directive issued by FDICIA, the regulators have issued
regulations which, among other things, prescribe the capital thresholds for each
of the five capital categories established by FDICIA. The following table
reflects the proposed capital thresholds:
<TABLE>
<S> <C>
Total Risk-based Tier 1 Risk-based Tier 1 Leverage
Capital Ratio Capital Ratio Ratio
Well capitalized (1) 10% 6% 5%
Adequately capitalized (1) 8% 4% 4%(2)
Undercapitalized (3) < 8% < 4% < 4%
Significantly undercapitalized (3) < 6% 3% < 3%
Critically undercapitalized -- -- < 2%
</TABLE>
- ------------------------
(1) An institution must meet all three minimums.
(2) 3% for composite CAMELS 1-rated institutions, subject to appropriate
federal banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for ANY of the three capital measures.
With respect to the compliance with federal, state and local provisions
relating to the protection of the environment, First National does not believe
that such compliance will have any substantial or material effect upon the
capital expenditures, earnings and competitive position of First National.
The scope of regulation and permissible activities of First National is
subject to change by future federal and state legislation.
DESCRIPTION OF PROPERTY
First National's main office, which is located on approximately five acres
of land on Pendleton Street in Easley, South Carolina, is a two story building
containing approximately 8,000 square feet. The main office consists of a main
banking floor with eight teller stations and eleven offices, a night depository,
a drive-in window, three vaults, and a board room. The second floor of the
facility consists of a lounge and storage rooms.
First National's data processing center is located adjacent to the main
office with approximately 3,000 square feet of work space. This two story
facility consists of five offices, a record vault, a lounge, storage rooms, and
an operating area.
A spare office building is also located adjacent to the main office. This
single story, two office facility contains approximately 1,500 square feet of
work space.
In addition to its main location, First National has a branch office
located on approximately one acre of land on East Main Street in Pickens, South
Carolina. The branch office is a single story building containing approximately
2,700 square feet. The branch consists of six teller stations, two offices, a
drive-up window, a lounge, and a vault.
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First National's branch office in Liberty, South Carolina is located on
approximately one acre of land on North Commerce Street. The branch office is a
single story building containing approximately 2,250 square feet. The branch
consists of six teller stations, two offices, a drive-up window, a lounge, and a
vault.
First National's Easley, South Carolina branch office is located on
approximately one acre of land on Calhoun Memorial Highway. The branch office is
a single story building containing approximately 2,250 square feet. The branch
consists of six teller stations, three offices, a drive-up window, a lounge, and
a vault.
First National owns all of its banking locations. First National does not
own any other real estate. The net book value of First National's land and
buildings was $1,342,476 on June 30, 1998.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which First National is
a party of which any of its properties is subject; nor are there material
proceedings known to be contemplated by an governmental authority; nor are there
material proceedings known to First National, pending or contemplated, in which
any director, officer or affiliate of First National or any holder of 5% or more
of First National's outstanding stock, or any associate of any of the foregoing
is a party or has an interest adverse to First National.
MARKET FOR COMMON STOCK AND DIVIDENDS
There is very limited trading in the First National common stock. The
common stock is not a Nasdaq quoted stock, nor is it quoted by the National
Quotation Bureau, Inc., nor are there any market makers. Management is aware of
only one transaction in the First National common stock in 1998, which was the
sale of 200 shares at $75.00 per share. Such trade may not be an arm's length
transactions and may not be indicative of the market value of the First National
common stock. Management is not aware of any other trades in First National
common stock during 1998.
As of July 15, 1998, there were approximately 146 holders of record of
First National's common stock, excluding individual participants in security
position listings.
First National paid cash dividends of $2.35 per share in fiscal year ended
June 30, 1996, $2.45 per share in fiscal year ended June 30, 1997 and $2.70 per
share in fiscal year ended June 30, 1998. Federal banking regulations restrict
the amount of dividends that First National can pay to shareholders. Generally,
the approval of the OCC is required to pay dividends in excess of First
National's earnings retained in the current year plus retained net profits for
the preceding two years.
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MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF FIRST NATIONAL
The following table sets forth (i) as of July 15, 1998, the number and
percent of total outstanding shares of First National common stock beneficially
owned by all directors and executive officers of First National individually and
by all directors and executive officers of First National as a group, and (ii)
pro forma upon consummation of the Merger, the number and percent of total
outstanding shares of Carolina First Corporation common stock beneficially owned
by such persons individually and as a group.
<TABLE>
<S> <C>
Pro Forma After Merger
--------------------------------------
Number of First Number of Percent
Name and address of National Shares Bene- Percent Carolina First Corporation of
5% Beneficial Owner ficially Owned of Class Shares Beneficially Owned Class
- -------------------- ------------------- -------- ------------------------- -------
Kenneth D. Acker 400 * 11,540 *
J. Rodger Anthony 100 * 2,885 *
Dorothy G. Deglmann- 9,903 12.4% 285,694 1.4%
Schwartz
2724 Wilmot Ave.,
Columbia, S.C.
James H. Grantham 24,079 30.1% 694,660 3.4%
200 South Pendleton St.
Easley, S.C.
G.L. Grantham III 6,036 7.5% 174,134 *
204 Augusta St.
Easley, S.C.
Richard A. Jones 400 * 11,540 *
Richard A. Jones, Jr. 5,234 6.5% 150,997 *
1306 South Church St.
Greenville, S.C.
Christopher P. Robinson 500 * 14,425 *
All Executive Officers and
Directors as a group
(8 persons) 46,652 58.3% 1,345,873 6.6%
</TABLE>
- ----------------------
* Less than 1%.
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COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time, all of the outstanding shares of First National
common stock will be converted into Carolina First Corporation common stock.
Accordingly, shareholders of First National will become shareholders of Carolina
First Corporation, and their rights as Carolina First Corporation shareholders
will be determined by South Carolina law and Carolina First Corporation's
Articles of Incorporation and Bylaws. The rights of Carolina First Corporation
shareholders differ from the rights of First National's shareholders with
respect to certain important matters, including the required shareholder votes
as to mergers, consolidations, exchanges, sales of assets or dissolution,
removal of directors and amendments to the articles of incorporation,
classification of the board of directors, cumulative voting rights, nomination
of directors, and statutory and other restrictions on certain business
combinations and control share acquisitions.
A comparison of the respective rights of First National shareholders and
Carolina First Corporation shareholders with respect to these matters is set
forth immediately below. A description of the Carolina First Corporation common
stock is set forth below under "CAROLINA FIRST CORPORATION CAPITAL STOCK."
COMPARISON OF CAROLINA FIRST CORPORATION COMMON STOCK AND FIRST NATIONAL COMMON
STOCK
The rights of Carolina First Corporation shareholders are governed by
Carolina First Corporation's Articles of Incorporation and Bylaws and the
applicable provisions of the South Carolina Business Corporation Act of 1988, as
amended (the "SCBCA"). By contrast, the rights of First National shareholders
are governed by First National's Articles of Association and Bylaws and by
federal law. If the holders of First National common stock approve the Merger
Agreement and the Merger is subsequently consummated, holders of First National
common stock will become holders of Carolina First Corporation common stock.
Although it is impracticable to note all the differences between the SCBCA and
federal law generally, and all of the differences between the applicable
governing documents of Carolina First Corporation and First National, the
following is intended to be a summary of certain significant differences between
the rights of holders of Carolina First Corporation common stock and First
National common stock. This comparison of the rights of holders of First
National common stock and Carolina First Corporation common stock is based on
the current terms of the governing documents of the respective companies and on
the current provisions of state and federal law and is qualified in its entirety
thereby.
CAPITALIZATION. The authorized capital stock of First National consists of
80,000 shares of First National common stock, par value $2.50 per share. As of
July 15, 1998, First National had 80,000 shares of common stock outstanding. The
authorized capital stock of Carolina First Corporation consists of 100,000,000
shares of Carolina First Corporation common stock, par value $1.00 per share,
and 10,000,000 shares of "blank check" preferred stock. As of July 15, 1998,
Carolina First Corporation had 18,144,302 shares of common stock outstanding and
no shares of preferred stock outstanding.
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VOTING IN GENERAL. In general, holders of both First National common stock
and Carolina First Corporation common stock are entitled to one vote per share
and to the same and identical voting rights as other holders of such common
stock. However, in the election of directors, First National shareholders have
the right to cumulate votes, i.e. the right to give one candidate as many votes
as equals the number of directors multiplied by the number of his shares, or to
distribute them on the same principle among as many candidates as he shall think
fit. Holders of Carolina First Corporation common stock are not entitled to
cumulate votes under any circumstances.
MERGERS, CONSOLIDATIONS, EXCHANGES, SALES OF ASSETS OR DISSOLUTION. A vote
of two-thirds of the outstanding shares of First National is required to approve
any merger, consolidation, exchange, sale of substantially all of the assets of,
or dissolution of First National. Carolina First Corporation's Articles of
Incorporation require the affirmative vote of holders of at least 80% of the
outstanding stock of Carolina First Corporation entitled to vote for approval
before Carolina First Corporation may (a) merge or consolidate with any other
corporation, (b) sell or exchange all or a substantial part of its assets to or
with any other corporation, or (c) issue or deliver any stock or other
securities in exchange or payment for any properties or assets of any other
corporation, or securities issued by any other corporation, or in a merger of
any subsidiary of Carolina First Corporation with or into any other corporation
(the foregoing being hereinafter referred to as a "business combination"). This
80% supermajority is reduced to 66.67% if such business combination was approved
and recommended without condition by the affirmative vote of at least 80% of the
directors.
DIRECTORS. The Articles of Association of First National provide for a
Board of Directors having not less than five or more than twenty-five members as
determined from time to time by vote of a majority of the members of the Board
of Directors or by resolution of the shareholders of First National. Vacancies
may be filled by the other or remaining directors, provided, however, that the
directors may not increase the number of directors to a number that (i) exceeds
by more than two the number of directors last elected by the shareholders where
the number was fifteen or less, or (ii) exceeds by more than four the number of
directors last elected by shareholders where the number was 16 or more. Carolina
First Corporation's Articles of Incorporation provide that the number of
directors shall be set by the Board of Directors or the shareholders. However,
the Board of Directors cannot change the size of the Board by more than 30%
without shareholder approval. Vacancies may be filled by existing directors. The
Carolina First Corporation Board of Directors currently has thirteen members. In
accordance with Carolina First Corporation's Articles of Incorporation, whenever
the Board consists of nine or more persons, the Board shall be divided into
three classes of directors (with each class having as close to an equal number
as possible). The members of each class are elected for staggered three-year
terms.
NOMINATION OF DIRECTORS. The Articles of Association of First National
provide that nominations for election to the board of directors may be made by
the board of directors or by any shareholder of First National entitled to vote
for election of directors. Nominations other than those made by or on behalf of
the existing First National management must be made in writing and be delivered
or mailed to the president of First National and to the OCC not less than 14
days nor more than 50 days prior to any meeting of shareholders called for the
election of directors; provided, however, that if less than 21 days notice of
the meeting is given to shareholders, such nominations must be mailed or
delivered to the president of First National and to the OCC not later than the
close of business on the seventh day following the day on which the notice of
meeting was mailed. Such notification must contain certain specified information
to the extent known to the notifying shareholder. Carolina First Corporation's
Articles of Incorporation provide that, in addition to the Board of Directors,
any shareholder entitled to vote for the election of directors may make
nominations for the election of directors only by giving written notice to the
Secretary of Carolina First Corporation at least 30 days but not more than 60
days prior to the annual meeting of shareholders at which directors are to be
elected, unless such requirement is waived in advance of the meeting by the
Board of Directors.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The SCBCA and federal law, and
the governing documents of both Carolina First Corporation and First National,
generally provide that the parties have the power to indemnify any director,
officer or employee, his or her heirs, executors or administrators, and agents
for
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expenses, judgments, decrees and any liability incurred in actions to which
the director, officer or employee is a party, or potential party, by reason of
the performance of his official duties, assuming he conducted himself in good
faith and reasonably believed his conduct in his official capacity to be in the
parties' best interest. Such indemnification provisions do not apply in
instances where such person acted in bad faith or engaged in conduct against the
interest of First National or Carolina First Corporation.
ASSESSMENT. Under the National Bank Act, if the capital stock of a
national bank (such as First National) is impaired, by losses or otherwise, the
OCC is authorized to seek payment of the deficiency by assessment upon its
shareholders, pro rata, but the assessment is only enforceable by selling the
stock of any shareholder who does not pay the assessment. There are no
assessment provisions applicable to Carolina First Corporation common stock.
CONVERSION; REDEMPTION; SINKING FUND. Neither Carolina First Corporation
common stock nor First National common stock is convertible, redeemable nor
entitled to any sinking fund.
LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or
winding-up of the affairs of First National, holders of outstanding shares of
First National common stock are entitled to share, in proportion to their
respective interests, in First National's assets and funds remaining after
payment, or provision for payment, of all debts and other liabilities of First
National. In the event of the liquidation, dissolution or winding-up of the
affairs of Carolina First Corporation, holders of Carolina First Corporation
common stock are entitled to share, pro rata, in Carolina First Corporation's
assets and funds remaining after payment, or provision for payment, of all debts
and other liabilities of Carolina First Corporation, and after payment of all
amounts due to holders of Preferred Stock upon liquidation.
DIVIDENDS. Holders of First National common stock and Carolina First
Corporation common stock are entitled to receive such dividends as the
respective Board of Directors may declare out of funds legally available
therefor.
AMENDMENT. First National's Articles of Association provide that they may
be amended by the affirmative vote of a majority of First National's
shareholders, unless a greater vote is required by law. Carolina First
Corporation's Articles of Incorporation generally may be amended only upon the
approval of holders of two-thirds of the outstanding shares entitled to vote,
and with respect to the items listed below, such two-thirds requirement is
increased to 80%:
(i) supermajority voting requirements to approve certain mergers,
sales or exchanges of assets or stock exchanges (See
"--Shareholder Voting in Certain Business Combinations");
(ii) provisions regarding the Board of Director's powers to evaluate
proposals for business combinations;
(iii) provision of notice requirements for shareholder nominations of
directors;
(iv) supermajority voting requirements for removal of directors
without cause;
(v) provision of staggered terms for three classes of directors; and
(vi) supermajority voting provisions for dissolution of Carolina
First Corporation.
If 80% of the directors approve amendments pertaining to the Articles of
Incorporation listed above, then only the affirmative vote of shareholders
holding two-thirds of the outstanding shares entitled to vote is needed to
approve the amendments.
ANTI-TAKEOVER MEASURES. First National has not implemented any material
anti-takeover measures. By contrast, Carolina First Corporation has implemented
a number of provisions which have the effect of impeding a takeover of Carolina
First Corporation that is not favored by Carolina First Corporation management.
Furthermore, South Carolina law has business combination and control share
acquisition statutes which may serve to impede takeovers not favored by
management.
65
<PAGE>
The South Carolina control share statute provides that upon the
acquisition by a person of certain threshold percentages of stock (20%, 33% and
50%), a shareholders' meeting must be held in order to determine whether or not
to confer voting rights upon such acquiring person's shares. An affirmative vote
of holders of a majority of all outstanding company's stock (excluding shares
held by the acquiring person, company officers and company employees who are
also directors of the company) is required to confer voting rights upon such
acquiring person's shares.
The South Carolina business combinations statute provides that a 10% or
greater shareholder of a resident domestic corporation cannot engage in a
"business combination" (as defined in the statute) with such corporation for a
period of two years following the date on which the 10% shareholder became such,
unless the business combination or the acquisition of shares is approved by a
majority of the disinterested members of such corporation's board of directors
before the 10% shareholder's share acquisition date. This statute further
provides that at no time (even after the two-year period subsequent to such
share acquisition date) may the 10% shareholder engage in a business combination
with the relevant corporation unless certain approvals of the board of directors
or disinterested shareholders are obtained or unless the consideration given in
the combination meets certain minimum standards set forth in the statute.
There are no comparable federal statutes which are applicable to First
National.
OTHER CONSIDERATIONS. Shares of common stock of First National, being
stock of a national bank, may be treated differently from shares of Carolina
First Corporation for state and local tax purposes, including for purposes of
any intangibles taxes. First National shareholders should consult their tax
advisers with respect to relevant differences in First National common stock and
Carolina First Corporation common stock.
Generally, First National is prohibited from purchasing its own shares.
Carolina First Corporation, however, may purchase, hold and dispose of its own
shares subject only to restrictions on distributions by a corporation which
prohibit any distribution which would render a company insolvent.
CAROLINA FIRST CORPORATION CAPITAL STOCK
COMMON STOCK
Carolina First Corporation has 100,000,000 shares of common stock
authorized, of which 18,144,302 shares were outstanding as of July 15, 1998. The
holders of the Carolina First Corporation common stock are entitled to dividends
when, as and if declared by the Board of Directors in their discretion out of
funds legally available therefor. The principal source of funds for Carolina
First Corporation is dividends from its subsidiaries. Carolina First
Corporation's subsidiaries are subject to certain legal restrictions on the
amount of dividends they are permitted to pay. See "INFORMATION ABOUT CAROLINA
FIRST CORPORATION." All outstanding shares of Carolina First Corporation common
stock are fully paid and nonassessable. No holder of Carolina First Corporation
common stock has any redemption or sinking fund privileges, any preemptive or
other rights to subscribe for any other shares or securities, or any conversion
rights. In the event of liquidation, the holders of Carolina First Corporation
common stock are entitled to receive pro rata any assets distributable to
shareholders in respect of shares held by them, subject to the rights of any
senior stock which may be issued in the future. Holders of the Carolina First
Corporation common stock are entitled to one vote per share.
PREFERRED STOCK
Carolina First Corporation has 10,000,000 shares of "blank check"
preferred stock authorized ("Preferred Stock"), none of which is outstanding.
Carolina First Corporation's Board of Directors has the sole authority, without
shareholder vote, to issue shares of authorized but unissued Preferred Stock to
whomever and for whatever purposes it, in its sole discretion, deems
appropriate. The relative rights, preferences and limitations
66
<PAGE>
of the Preferred Stock are determined by Carolina First Corporation's Board
of Directors in its sole discretion. Among other things, the Board may designate
with respect to the Preferred Stock, without further action of the shareholders
of Carolina First Corporation, the dividend rate and whether dividends shall be
cumulative or participating or possess other special rights, the voting rights,
Carolina First Corporation's rights and terms of redemption, the liquidation
preferences, any rights of conversion and any terms related thereto, and the
price or other consideration for which the Preferred Stock shall be issued. The
Preferred Stock could be utilized by Carolina First Corporation to impede the
ability of third parties who attempt to acquire control of Carolina First
Corporation without the cooperation of Carolina First Corporation's Board of
Directors.
CERTAIN MATTERS
SHAREHOLDERS' RIGHTS AGREEMENT. In 1993, the Carolina First Corporation
Board of Directors adopted a Shareholders' Rights Agreement, which was
subsequently amended and restated in December 1996 ("Rights Agreement"). Under
the Rights Agreement, the Board of Directors declared a distribution of one
common stock purchase right (a "Right") for each outstanding share of Carolina
First Corporation common stock outstanding on November 23, 1993 and each share
to be issued by Carolina First Corporation thereafter. Each Right entitles the
registered holder to purchase from Carolina First Corporation one-half share of
Carolina First Corporation common stock at a cash exercise price of $30.00,
subject to adjustment.
Initially, the Rights are not exercisable and no separate rights
certificates are distributed. However, the Rights will separate from the
Carolina First Corporation common stock and a "Distribution Date" will occur
upon the earlier of (i) the close of business on the 10th calendar day after the
Share Acquisition Date (as defined below), or (ii) the close of business on the
10th business day after the date of (x) the commencement, by any person, other
than an "exempt person", of, or (y) the first public announcement of the
intention of any person (other than an exempt person) to commence, a tender or
exchange offer if, upon consummation thereof, such person would be an Acquiring
Person (defined as a person or group which has acquired beneficial ownership of
20% or more of the outstanding shares of the Carolina First Corporation common
stock) (the date of said announcement being referred to as the "Share
Acquisition Date"). Until the Distribution Date, (i) the Rights will be
evidenced by the Carolina First Corporation common stock certificates and will
be transferred with and only with such certificates, and (ii) the surrender for
transfer of any certificates for Carolina First Corporation common stock will
also constitute the transfer of the Rights associated with the Carolina First
Corporation common stock represented by such certificate. The Rights are not
exercisable until the Distribution Date and will expire at the close of business
on December 18, 2006, unless previously redeemed by Carolina First Corporation
as described below. As soon as practicable after the Distribution Date, rights
certificates will be mailed to holders of record of Carolina First Corporation
common stock as of the close of business on the Distribution Date and,
thereafter, the separate rights certificates alone will represent the Rights.
Except as otherwise determined by the Board of Directors, only shares of
Carolina First Corporation common stock issued prior to the Distribution Date
will be issued with Rights.
In the event that (i) a person acquires beneficial ownership of 20% or
more of the Carolina First Corporation common stock, (ii) Carolina First
Corporation is the surviving corporation in a merger with an Acquiring Person or
any Affiliate or Associate (as defined in the Rights Agreement) and the Carolina
First Corporation common stock is not changed or exchanged, (iii) an Acquiring
Person engages in one of a number of self-dealing transactions specified in the
Rights Agreement, or (iv) an event occurs which results in an Acquiring Person's
ownership interest being increased by more than 1% (e.g., a reverse stock
split), proper provision will be made so that each holder of a Right will
thereafter have the right to receive upon exercise thereof at the then current
exercise price, that number of shares of Carolina First Corporation common stock
(or in certain circumstances, cash, property, or other securities of Carolina
First Corporation) having a market value of two times such exercise price.
However, the Rights are not exercisable following the occurrence of any of the
events set forth above until such time as the Rights are no longer redeemable as
set forth below. Notwithstanding any of the foregoing, Rights that are or were
beneficially owned by an Acquiring Person shall become null and void. In the
event that following the Share Acquisition Date, (i) Carolina First Corporation
is acquired in a
67
<PAGE>
merger or other business combination transaction, or (ii) 50% or more of
Carolina First Corporation's assets or earning power is sold, each holder of a
Right shall thereafter have the right to receive, upon exercise, common stock of
the acquiring company having a market value equal to two times the exercise
price of the Right. At any time after any person becomes an Acquiring Person and
prior to such time such Acquiring Person, together with its Affiliates and
Associates, becomes the Beneficial Owner of 50% or more of the outstanding
Carolina First Corporation common stock, the Board of Directors may exchange the
Rights (other than Rights which have become void), in whole or in part, at the
exchange rate of one share of Carolina First Corporation common stock per Right,
subject to adjustment as provided in the Rights Agreement.
The exercise price payable, and the number of shares of Carolina First
Corporation common stock or other securities or property issuable, upon exercise
of the Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Carolina First Corporation common stock, (ii) if
holders of the Carolina First Corporation common stock are granted certain
rights or warrants to subscribe for Carolina First Corporation common stock or
securities convertible into Carolina First Corporation common stock at less than
the current market price of the Carolina First Corporation common stock, or
(iii) upon the distribution to holders of the Carolina First Corporation common
stock of evidence of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
The Rights may be redeemed in whole, but not in part, at a price of $.001
per Right (payable in cash, Carolina First Corporation common stock or other
consideration deemed appropriate by the Board of Directors) by the Board of
Directors at any time prior to a Share Acquisition Date or the final expiration
date of the Rights (whichever is earlier); provided that under certain
circumstances, the Rights may not be redeemed unless there are Disinterested
Directors (as defined in the Rights Agreement) in office and such redemption is
approved by two-thirds of such Disinterested Directors. After the redemption
period has expired, Carolina First Corporation's right of redemption may be
reinstated upon the approval of the Board of Directors if an Acquiring Person
reduces his beneficial ownership to 15% or less of the outstanding shares of
Carolina First Corporation common stock in a transaction or series of
transactions not involving Carolina First Corporation and there are no other
Acquiring Persons. Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and thereafter the
only right of the holders of Rights will be to receive the redemption price.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of Carolina First Corporation prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement, other than those
relating to the principal economic terms of the Rights, may be amended by the
Board to cure any ambiguity, defect or inconsistency, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement. Amendments adjusting time periods may, under certain
circumstances, require the approval of two-thirds of Disinterested Directors, or
otherwise be limited. This summary description of the Rights does not purport to
be complete and is qualified in its entirety by reference to the Shareholder
Rights Agreement, a copy of which has been included in Carolina First
Corporation's public filings with the Securities and Exchange Commission.
MANAGEMENT CONTRACTS. Carolina First Corporation has entered into
Noncompetition, Severance and Employment Agreements with Mack I. Whittle, Jr.,
William S. Hummers III, James W. Terry, Jr. and David L. Morrow. These
agreements set forth general provisions regarding compensation, confidentiality,
termination and noncompetition. However, they also provide that in the event
that the named executive's employment with Carolina First Corporation is
voluntarily or involuntarily terminated after a "change in control" (as defined
in such agreements), then, except in very limited instances, the named executive
becomes entitled to receive immediately amounts substantially equal to three
years' compensation (including bonus compensation).
BOARD OF DIRECTORS.
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<PAGE>
Classification of Board of Directors. Carolina First Corporation's Board
of Directors currently consists of thirteen persons. In accordance with its
Articles of Incorporation, whenever the Board consists of nine or more persons,
the Board shall be divided into three classes of directors (with each class
having as close to an equal number as possible). The members of each class are
elected for staggered three-year terms. The staggering of Board terms has the
effect of making it more difficult to replace current Directors than would
otherwise be the case. Accordingly, unless the shareholders vote to remove one
or more Directors as described below, it would take three annual meetings for
shareholders to change the members of the entire Board of Directors. Carolina
First Corporation's Articles of Incorporation also provide that any shareholder
entitled to vote for the election of directors may make nominations for the
election of directors only by giving written notice to the Secretary of Carolina
First Corporation at least 30 days but not more than 60 days prior to the annual
meeting of shareholders at which directors are to be elected, unless such
requirement is waived in advance of the meeting by the Board of Directors.
Removal of Directors. Carolina First Corporation's Articles of
Incorporation require the affirmative vote of the holders of not less than 80%
of the outstanding voting securities of Carolina First Corporation to remove any
Director or the entire Board of Directors without cause. Directors may be
removed for cause as provided under South Carolina law.
Limitation of Director Liability. The members of the Board of Directors of
Carolina First Corporation are exempt under Carolina First Corporation's
Articles of Incorporation from personal monetary liability to the extent
permitted by Section 33-2-102(e) of the SCBCA. This statutory provision provides
that a director of the corporation shall not be personally liable to the
corporation or any of its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision shall not be deemed
to eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involved gross negligence, intentional
misconduct, or a knowing violation of law, (iii) imposed under Section 33-8-330
of the SCBCA (improper distribution to shareholder), or (iv) for any transaction
from which the director derived an improper personal benefit.
Evaluation of Proposed Business Combinations. Carolina First Corporation's
Articles of Incorporation provide that the Board of Directors, when evaluating
any proposed business combination with Carolina First Corporation, shall give
due consideration to (i) all relevant factors, including without limitation, the
social, legal, environmental and economic effects on the employees, customers,
suppliers and other constituencies of Carolina First Corporation, and on its
subsidiaries, the communities and geographical areas in which Carolina First
Corporation and its subsidiaries operate or are located, and on any of the
businesses and properties of Carolina First Corporation or any of its
subsidiaries, as well as such other factors as the directors deem relevant, and
(ii) not only the consideration being offered in relation to the then current
market price for Carolina First Corporation's outstanding shares, but also in
relation to the then current value of Carolina First Corporation in a
freely-negotiated transaction and in relation to the Board of Directors'
estimate of the future value of Carolina First Corporation (including the
unrealized value of its properties and assets) as an independent going concern.
VOTING.
Voting For Directors. Carolina First Corporation's Articles of
Incorporation provide that shareholders may not cumulate votes for the election
of directors. Accordingly, holders of more than 50% of the shares voting at the
election of directors can elect all of the directors if they choose to do so
and, in such event, the holders of the remaining shares (less than 50%) voting
are not able to elect any board members. In cases where there are more nominees
for Directors than positions available, the nominees receiving the largest
number of votes are elected.
Supermajority Voting Requirements. Carolina First Corporation's Articles
of Incorporation require the affirmative vote of holders of at least 80% of the
outstanding stock of Carolina First Corporation entitled to vote for approval
before Carolina First Corporation may (i) merge or consolidate with any other
corporation, (ii) sell
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<PAGE>
or exchange all or a substantial part of its assets to or with any other
corporation, or (iii) issue or deliver any stock or other securities of its
issue in exchange or payment for any properties or assets of any other
corporation, or securities issued by any other corporation, or in a merger of
any subsidiary of Carolina First Corporation with or into any other corporation
(the foregoing being hereinafter referred to as a "business combination"). This
80% supermajority is reduced to the percentage required by applicable law if
such business combination was approved (or adopted) and recommended without
condition by the affirmative vote of at least 80% of the directors. The Articles
of Incorporation expressly permit the Board of Directors to condition its
approval (or adoption) of any business combination upon the approval of holders
of 80% of the outstanding stock of Carolina First Corporation entitled to vote
on such business combination. The 80% supermajority provision is not applicable
to any transaction solely between Carolina First Corporation and another
corporation, 50% or more of the voting stock of which is owned by Carolina First
Corporation. Under present South Carolina law, a merger or the sale of
substantially all the assets requires the approval of holders of two-thirds of
the outstanding shares entitled to vote. The amendment of the foregoing business
combination provisions requires the approval of holders of 80% of the
outstanding shares entitled to vote. The foregoing supermajority voting
provision could impede the ability of third parties who attempt to acquire
control of Carolina First Corporation without the cooperation of Carolina First
Corporation's Board of Directors.
CONTROL SHARE ACQUISITION/BUSINESS COMBINATION STATUTES. The SCBCA has
business combination and control share acquisition statutes which may serve to
impede takeovers not favored by management. See "COMPARATIVE RIGHTS OF
SHAREHOLDERS -- Change in Control, Business Combinations and Anti-Takeover
Provisions."
TRANSFER AGENT. The transfer agent for the Carolina First Corporation
common stock is Reliance Trust Company, Atlanta, Georgia.
DIVIDEND REINVESTMENT PLAN. Carolina First Corporation has in place a
dividend reinvestment plan with respect to the Carolina First Corporation common
stock. As set forth in the plan, holders of such shares may elect to receive
Carolina First Corporation common stock in lieu of receiving the cash dividends
to which such holder may otherwise be entitled. The plan also provides for
purchases of Carolina First Corporation common stock through optional cash
payments.
LEGAL MATTERS
Certain legal matters in connection with the Reorganization Agreement,
including the validity of the Carolina First Corporation Shares offered hereby,
will be passed upon for Carolina First Corporation by Wyche, Burgess, Freeman &
Parham, P.A., Greenville, South Carolina. Wyche, Burgess, Freeman & Parham, P.A.
is also rendering a tax opinion to First National regarding the Reorganization
Agreement. As of July 15, 1998, members and attorneys of Wyche, Burgess, Freeman
& Parham, P.A. beneficially owned a total of approximately 18,944 shares of
Carolina First Corporation common stock.
Certain legal matters in connection with the Reorganization Agreement will
be passed upon for First National by Sinkler & Boyd, P.A., Columbia, South
Carolina.
EXPERTS
The financial statements of First National as of June 30, 1995, 1996 and
1997, and for each of the years in the three-year period ended June 30, 1997,
have been included herein and in the registration statement in reliance upon the
report of Elliott, Davis & Company, LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
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<PAGE>
The consolidated financial statements of Carolina First Corporation as of
December 31, 1997 and 1996 and for each of the years in the three year period
ended December 31, 1997 have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
OTHER MATTERS
The Board of Directors of First National is not aware of any other matters
which may be presented for action at the Special Meeting, but if other matters
do properly come before the meeting, it is intended that the shares of First
National common stock represented by proxies in the accompanying form will be
voted by the persons named in the proxies in accordance with their best
judgment.
71
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INDEX TO FINANCIAL STATEMENTS
Report on Financial Statements for the
Years Ended June 30, 1997 and 1996.......................................F-2
Report on Financial Statements for the
Years Ended June 30, 1995 and 1994.......................................F-18
F-1
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
REPORT ON FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
F-2
<PAGE>
MEMBERS OF THE
AMERICAN INSTITUTE
E OF CERTIFIED PUBLIC
D ACCOUNTANTS
GREENVILLE, S.C.
GREENWOOD, S.C.
ELLIOTT, DAVIS & COMPANY, L.L.P. ANDERSON, S.C.
Certified Public Accountants AIKEN, S.C.
COLUMBIA, S.C.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Directors and Stockholders
FIRST NATIONAL BANK OF PICKENS COUNTY
Easley, South Carolina
We have audited the accompanying balance sheets of FIRST NATIONAL BANK
OF PICKENS COUNTY as of June 30, 1997 and 1996, and the related statements of
income, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of FIRST NATIONAL BANK
OF PICKENS COUNTY as of June 30, 1997 and 1996 and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
August 1, 1997
Internationally - Moore Stephens Elliott Davis, L.L.C.
870 S. PLEASANTBURG DRIVE POST OFFICE BOX 8286
GREENVILLE, SOUTH CAROLINA 29606-6286
TELEPHONE (664) 242-3370 TELEFAX (664) 232-7161
F-3
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
BALANCE SHEETS
JUNE 30,
------------------------
1997 1996
---------- -----------
ASSETS
CASH AND DUE FROM BANKS $ 5,289,515 $ 4,244,781
FEDERAL FUNDS SOLD 375,000 875,000
SECURITIES
Available for sale 39,281,700 15,975,675
Held to maturity - 23,909,128
LOANS 60,648,241 50,282,979
PROPERTY AND EQUIPMENT 1,583,179 1,637,671
ACCRUED INTEREST RECEIVABLE 1,130,327 1,123,953
OTHER ASSETS 344,660 307,908
------------ -----------
$108,652,622 $98,357,095
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 91,849,627 $83,773,957
SECURITIES SOLD UNDER REPURCHASE
AGREEMENTS 1,594,807 1,027,726
ACCRUED INTEREST PAYABLE 571,093 484,865
OTHER LIABILITIES 105,386 166,348
------------ -----------
94,120,913 85,452,896
------------ -----------
COMMITMENTS AND CONTINGENCIES - NOTE 9
STOCKHOLDERS' EQUITY
Common stock - $2.50 par value;
80,000 shares
authorized and issued 200,000 200,000
Capital surplus 300,000 300,000
Retained earnings 13,923,261 12,515,040
Net unrealized holding gain (loss)
on securities available for sale 108,448 (110,841)
--------- -----------
14,531,709 12,904,199
------------ -----------
$108,652,622 $98,357,095
============ ===========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
STATEMENTS OF INCOME
FOR THE YEARS ENDED
JUNE 30,
----------------------------
1997 1996
------------- -------------
INTEREST INCOME
Loans (including fees) $ 5,397,700 $ 4,528,821
Securities 2,419,445 2,267,444
Federal funds sold 147,077 170,933
------------ -----------
Total interest income 7,964,222 6,967,198
INTEREST EXPENSE 3,074,463 2,897,313
------------ -----------
Net interest income 4,889,759 4,069,885
PROVISION FOR LOAN LOSSES 183,973 -
------------ -----------
Net interest income after provision
for loan losses 4,705,786 4,069,885
--------- ----------
NONINTEREST INCOME
Service charges on deposits accounts 387,551 357,802
Other service charges and fees 130,171 78,485
Loss on sale of securities (108,699) (9,138)
------------ -----------
Total noninterest income 409,023 427,149
------------ -----------
NONINTEREST EXPENSES
Salaries and employee benefits 1,696,810 1,638,527
Occupancy, office and equipment 534,465 616,037
Other operating expenses 602,313 562,628
------------ -----------
Total noninterest expenses 2,833,588 2,817,192
------------ -----------
Income before income taxes 2,281,221 1,679,842
PROVISION FOR INCOME TAXES 677,000 494,000
------------ -----------
Net income $ 1,604,221 $ 1,185,842
============ ===========
NET INCOME PER COMMON SHARE $ 20.05 $ 14.82
============ ===========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
HOLDING GAIN
COMMON STOCK (LOSS) ON SECURITIES TOTAL
----------------------- CAPITAL RETAINED AVAILABLE STOCKHOLDERS'
SHARES AMOUNT SURPLUS EARNINGS FOR SALE EQUITY
-------- --------- -------- --------- ----------------- --------------
<S> <C>
BALANCE, JUNE 30, 1995 80,000 $200,000 $ 300,000 $11,517,198 $ (70,406) $11,946,792
Cash dividends - - - (188,000) - (188,000)
Change in net unrealized
holding loss on
securities available
for sale - - - - (40,435) (40,435)
Net income - - - 1,185,842 - 1,185,842
---- ------ ------- ---------- --------- ------------
BALANCE, JUNE 30, 1996 80,000 200,000 300,000 12,515,040 (110,841) 12,904,199
Cash dividends - - - (196,000) - (196,000)
Change in net unrealized
holding loss on securities
available for sale - - - - 219,289 219,289
Net income - - - 1,604,221 - 1,604,221
----- ------- -------- --------- --------- ------------
BALANCE, JUNE 30, 1997 80,000 $200,000 $ 300,000 $13,923,261 $ 108,448 $14,531,709
====== ======== ========= =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30,
-----------------------------
1997 1996
----------- ---------------
<S> <C>
OPERATING ACTIVITIES
Net income $ 1,604,221 $ 1,185,842
Adjustments to reconcile net income to net cash provided
by operating activities
Amortization of premiums and accretion of discounts
on securities 23,584 155,244
Depreciation 158,960 180,006
Deferred tax expense (benefit) (3,800) 4,500
Provision for loan losses 183,973 -
Gain on sale of other real estate owned (936) (3,500)
Gain on the sale of property and equipment - (5,132)
Loss on sale of securities 108,699 9,138
Increase in accrued interest receivable (6,374) (71,625)
Decrease (increase) in other assets (62,459) 56,021
Increase in accrued interest payable 86,228 14,984
Decrease in other liabilities (60,962) (5,840)
----------- -----------
Net cash provided by operating activities 2,031,134 1,519,638
----------- -----------
INVESTING ACTIVITIES
Purchase of securities available for sale (23,904,091) (7,765,065)
Purchase of securities held to maturity (294,922) (5,705,079)
Proceeds from the sale of securities held to maturity 3,252,607 501,563
Proceeds from the sale of securities available for sale 12,985,293 1,507,453
Proceeds from the maturity of securities held to maturity 1,750,000 4,822,000
Proceeds from the maturity of securities available for sale 7,035,626 3,100,000
Net decrease in federal funds sold 500,000 1,950,000
Net increase in loans (10,709,587) (4,995,455)
Purchase of property and equipment (104,469) (202,893)
Proceeds from the sale of property and equipment - 27,750
Proceeds from sale of other real estate owned 56,392 266,156
----------- -----------
Net cash used for investing activities (9,433,151) (6,493,570)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits 8,075,670 4,443,032
Net increase in securities sold under repurchase agreements 567,081 58,059
Cash dividends paid (196,000) (188,000)
----------- -----------
Net cash provided by financing activities 8,446,751 4,313,091
----------- -----------
Net increase (decrease) in cash and due from banks 1,044,734 (660,841)
CASH AND DUE FROM BANKS, BEGINNING OF YEAR 4,244,781 4,905,622
----------- -----------
CASH AND DUE FROM BANKS, END OF YEAR $ 5,289,515 $ 4,244,781
=========== ===========
CASH PAID FOR
Interest $ 2,988,235 $ 2,882,329
=========== ===========
Income taxes $ 783,903 $ 381,656
=========== ===========
NONCASH INVESTING ACTIVITY
Additions to other real estate owned $ 160,352 $ 242,053
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
BUSINESS ACTIVITY
FIRST NATIONAL BANK OF PICKENS COUNTY (the Bank) is primarily engaged in the
business of accepting savings and demand deposits insured by The Federal
Deposit Insurance Corporation, and providing mortgage, consumer and
commercial loans to the general public.
CONCENTRATIONS OF CREDIT RISK
The Bank makes loans to individuals and small businesses located primarily
in upstate South Carolina for various personal and commercial purposes. The
Bank has a diversified loan portfolio and the borrowers' ability to repay
their loans is not dependent upon any specific economic sector.
The Bank places its temporary cash investments with high credit quality
financial institutions. At times such investments may be in excess of the
FDIC insurance limits.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of interest and noninterest
income and expenses during the reporting period. Actual results could differ
from those estimates.
SECURITIES
The Bank accounts for securities in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115 "Accounting for Certain Investments in
Debt and Equity Securities." Under the statement, debt securities are
classified upon purchase as available for sale, held to maturity or trading.
Such assets classified as available for sale are carried at fair value. Net
unrealized holding gains or losses are reported as a component of
stockholders' equity net of deferred income taxes. Securities classified as
held to maturity are carried at cost, adjusted for the amortization of
premiums and the accretion of discounts. In order to qualify as held to
maturity, the Bank must have the ability to hold the securities to maturity.
The Bank has no trading securities.
Gains or losses on disposition of securities are based on the difference
between the net proceeds and the adjusted carrying amount of the securities
sold, using the specific identification method. Premiums and discounts on
securities are amortized or accreted as adjustments to income over the
estimated life of the security using a method approximating the level yield
method. The fair value of securities is based on quoted market prices or
dealer quotes.
LOANS
Loans are recorded at cost. Mortgage loans consist principally of
conventional one to four family residential loans and interim and permanent
financing of non-residential loans that are secured by real estate.
Commercial loans are made primarily on the strength of the borrower's
general credit standing, the ability to generate repayment from income
sources and the collateral securing such loans. Consumer loans generally
consist of home equity loans, second mortgage loans, automobile and other
personal loans.
(Continued)
F-8
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
In many lending transactions, collateral is taken to provide an additional
measure of security. Generally, the cash flow or earning power of the
borrower represents the primary source of repayment, and collateral
liquidation as a secondary source of repayment. The Bank determines the need
for collateral on a case-by-case basis. Factors considered include the
current and prospective creditworthiness of the customer, terms of the
instrument and economic conditions.
INTEREST INCOME ON LOANS
Interest on loans is accrued daily based on the principal amount
outstanding. The Bank places loans on non-accrual status when they become
greater than 90 days delinquent and management has determined that
collectibility of the accrued interest is doubtful. When a loan is placed in
non-accrual status, all accrued interest receivable from the current year is
reversed as a charge against income. When interest is received on a
non-accrual loan, it is recognized as a principal reduction or interest
income based upon management's determination of the loan's ultimate
collectibility.
ALLOWANCE FOR LOAN LOSSES
The Bank provides for loan losses on the allowance method. Accordingly, all
loan losses are charged to the related allowance and all recoveries are
credited to the allowance. Additions to the allowance for possible loan
losses are provided by charges to operations based on various factors which,
in management's judgment, deserve current recognition in estimating possible
losses. Such factors considered by management include the market value of
the underlying collateral, the borrowers' ability to repay from other
economic resources, growth and composition of the loan portfolios, the
relationship of the allowance for loan losses to outstanding loans, loss
experience, delinquency trends and economic conditions. Management evaluates
the carrying value of loans periodically, and the allowance is adjusted
accordingly. While management uses the best information available to make
evaluations, future adjustments to the allowance may be necessary if
economic conditions differ substantially from the assumptions used in making
the evaluations.
The Company accounts for impaired loans in accordance with the provisions
of SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan." SFAS No. 114, as amended by SFAS No. 118, requires that impaired
loans be measured based on the present value of expected future cash flows
or the underlying collateral values as defined in the pronouncement. The
Company includes the provisions of SFAS No. 114, if any, in the allowance
for loan losses. When the ultimate collectibility of an impaired loan's
principal is in doubt, wholly or partially, all cash receipts are applied to
principal. When this doubt does not exist, cash receipts are applied under
the contractual terms of the loan agreement first to principal then to
interest income. Once the recorded principal balance has been reduced to
zero, future cash receipts are applied to interest income, to the extent
that any interest has been foregone. Further cash receipts are recorded as
recoveries on any amounts previously charged off. As of June 30, 1997 and
1996, the Bank had no impaired loans.
OTHER REAL ESTATE OWNED
Real estate acquired in settlement of loans represents real estate acquired
through foreclosure and is initially recorded at the lower of cost
(principal balance of the former mortgage loan less any specific valuation
allowances) or estimated fair value less costs to sell. Subsequent
improvements are capitalized. Costs of holding real estate, such as property
taxes, insurance, maintenance and interest expense, less related revenues
during the holding period, are expensed as period costs. Market values of
real estate are reviewed regularly, and allowances for possible losses are
established when the carrying values of real estate acquired in settlement
of loans exceeds fair values less estimated costs to sell. Gains on the sale
of real estate are recorded at the time of the sale provided certain
criteria relating to property type, cash down payment, loan terms and other
factors are met.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and betterments
are capitalized, while maintenance and repairs which do not improve or
extend the useful lives of the assets are charged to expense as incurred.
Assets are depreciated over their estimated useful lives using primarily the
straight-line method.
(Continued)
F-9
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
INCOME TAXES
Income taxes are accounted for under SFAS 109. Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. A valuation allowance is established for deferred
tax assets that may not be realized.
NET INCOME PER COMMON SHARE
Earnings per share is based on the weighted average number of common shares
outstanding.
STATEMENTS OF CASH FLOWS
In accordance with the provisions of SFAS No. 95, "Statement of Cash Flows",
the Company considers cash and cash equivalents to be those amounts included
in the balance sheet caption "Cash and Due from Banks".
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current presentation. These reclassifications have no effect on previously
reported net income.
NOTE 2 - SECURITIES
AVAILABLE FOR SALE - The amortized cost, gross unrealized holding gains and
losses and fair values of securities available for sale consist of the
following:
<TABLE>
<CAPTION>
GROSS
UNREALIZED HOLDING
AMORTIZED -------------------------
COST GAINS LOSSES FAIR VALUE
------------ ------ ------- ----------
<S> <C>
JUNE 30, 1997
U. S. Treasury obligations $ 5,262,939 $ 31,718 $ 291 $ 5,294,366
U. S. Agency obligations 20,944,155 81,344 28,971 20,996,528
Municipal obligations - tax exempt 8,046,057 117,770 42,758 8,121,069
Mortgage backed obligations 4,604,939 21,809 7,221 4,619,527
Corporate obligations 248,693 1,517 - 250,210
------------ -------- -------- -----------
$ 39,106,783 $254,158 $ 79,241 $39,281,700
============ ======== ======== ===========
JUNE 30, 1996
U. S. Treasury obligations $ 8,418,768 $ - $ 77,776 $ 8,340,992
U. S. Agency obligations 7,487,592 - 100,079 7,387,513
Corporate obligations 248,090 - 920 247,170
------------ -------- -------- -----------
$ 16,154,450 $ - $178,775 $15,975,675
============ ======== ======== ===========
HELD TO MATURITY - The amortized cost, gross unrealized holding gains and
losses and fair values of securities held to maturity consist of the
following:
JUNE 30, 1996
U. S. Treasury obligations $ 16,437,341 $ 53,967 $ 81,004 $16,410,304
U. S. Agency obligations 897,861 - 13,329 884,532
Municipal obligations - tax exempt 6,573,926 52,340 117,720 6,508,546
------------ -------- -------- -----------
$ 23,909,128 $106,307 $212,053 $23,803,382
============ ======== ======== ===========
</TABLE>
(Continued)
F-10
<PAGE>
NOTE 2 - SECURITIES, CONTINUED
The amortized cost and fair value of securities by contractual maturities
are as follows:
<TABLE>
<S> <C>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------- ---------------------
AMORTIZED AMORTIZED
COST FAIR VALUE COST FAIR VALUE
---------- ---------- ---------- ----------
JUNE 30, 1997
Due in one year or less $4,516,657 $ 4,527,147 $ - $ -
Due after one year through
five years 22,122,605 22,233,200 - -
Due after five years through
ten years 5,924,091 5,951,356 - -
Due after ten years 1,938,491 1,950,470 - -
---------- ----------- ---------- -----------
34,501,844 34,662,173 - -
Mortgage backed obligations 4,604,939 4,619,527 - -
---------- ----------- ---------- -----------
$39,106,783 $39,281,700 $ - $ -
=========== =========== ========== ===========
JUNE 30, 1996
Due in one year or less $4,447,208 $ 4,427,253 $7,525,966 $ 7,545,157
Due after one year through
five years 8,267,384 8,156,080 11,997,433 11,951,069
Due after five years through
ten years 3,439,858 3,392,342 3,504,384 3,451,806
Due after ten years - - 881,345 855,350
---------- ----------- ---------- -----------
$16,154,450 $15,975,675 $23,909,128 $23,803,382
=========== =========== =========== ============
</TABLE>
Securities with an amortized cost of $11,715,912 and $9,757,254 and a
fair value of $11,774,734 and $9,766,539, at June 30, 1997 and 1996,
respectively, were pledged as collateral for certain deposits.
On October 1, 1996, the Bank sold held to maturity securities with an
amortized cost of $3,289,022 and realized a loss of $36,415. The Bank sold these
securities and replaced them with higher yielding securities to improve the
overall securities portfolio yield. In accordance with Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities," the Bank reclassified its remaining held to maturity
securities into the available for sale classification on October 1, 1996. These
securities had an amortized cost of $19,160,124 and an unrealized gain of
$10,508 on the reclassification date. During the year ended June 30, 1996 the
Bank sold a held to maturity security with an amortized cost of $500,059 and
realized a gain of $1,504. The Bank sold this security to maximize the
security's life-time yield. The sale occurred within 45 days of the security's
maturity date.
Gross realized gains and gross realized losses on sales or calls of
available for sale securities were $4,147 and $76,431, respectively, in 1997 and
$798 and $11,440, respectively, in 1996.
NOTE 3 - LOANS
Loans consist of the following:
JUNE 30,
-------------------------
1997 1996
----------- ------------
Mortgage Loans
Construction $11,084,000 $ 8,835,000
Residential 14,869,000 11,976,000
Commercial 10,088,000 9,174,000
----------- ------------
Total real estate loans 36,041,000 29,985,000
----------- ------------
(Continued)
F-11
<PAGE>
NOTE 3 - LOANS, CONTINUED
JUNE 30,
----------------------
1997 1996
---------- ----------
Consumer and Commercial
Consumer 11,161,000 10,599,000
Commercial 13,756,000 10,050,000
Other 345,782 160,142
----------- -------------
Total consumer and commercial loans 25,262,782 20,809,142
----------- ------------
Total loans 61,303,782 50,794,142
Less unearned interest 1,979 14,723
Less allowance for loan losses 653,562 496,440
----------- ------------
NET LOANS $60,648,241 $ 50,282,979
=========== ============
Contractual principal repayments of fixed rate loans are approximated
as follows:
JUNE 30,
----------------------
1997 1996
----------- ------------
Due in one year or less $17,731,000 $ 12,260,000
Due from one year to five years 21,415,000 16,479,000
Due beyond five years 7,997,000 7,318,000
----------- ------------
$47,143,000 $ 36,057,000
=========== =============
Variable rate loans totaled approximately $14,161,000 and $14,737,000
at June 30, 1997 and 1996, respectively, including $575,000 and $735,000 in
adjustable-rate mortgages. All such loans are subject to rate adjustments within
one year.
Changes in the allowance for loan losses are summarized as follows:
JUNE 30,
------------------------
1997 1996
------------ ------------
BALANCE, BEGINNING OF YEAR $ 496,440 $ 566,193
Provision for loan losses 183,973 -
Loans charged off, net of recoveries (26,851) (69,753)
----------- ------------
BALANCE, END OF YEAR $ 653,562 $ 496,440
=========== ============
At June 30, 1997 and 1996, loans which were accounted for on a
nonaccrual basis totaled $583,178 and $344,000. The amount the Bank will
ultimately realize from the loans could differ from their carrying value because
of future developments affecting the underlying collateral or the borrower's
ability to repay the loans. During the years ended June 30, 1997 and 1996, the
Bank recognized interest income on these loans of $40,370 and $34,218,
respectively. Under the original terms of these loans, the Bank would have
recognized interest income of approximately $45,557 and $38,600, respectively.
In the normal course of business, the Bank has made loans to certain
directors, officers, employees and their affiliates under terms consistent with
the Bank's normal lending policies. The unpaid principal balances of such loans
totaled approximately $574,000 and $291,000 at June 30, 1997 and 1996,
respectively.
F-12
<PAGE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
JUNE 30,
-------------------------
1997 1996
------------ ----------
Land $ 321,131 $ 317,131
Building 1,740,873 1,696,897
Furniture, fixtures and equipment 1,388,766 1,365,595
----------- ------------
3,450,770 3,379,623
Less accumulated depreciation 1,867,591 1,741,952
----------- ------------
$ 1,583,179 $ 1,637,671
=========== ============
Depreciation expense for the years ended June 30, 1997 and 1996 was
$158,960 and $180,006, respectively.
NOTE 5 - DEPOSITS
Deposits consist of the following:
JUNE 30,
------------------------
1997 1996
----------- ----------
Demand (noninterest-bearing) $19,512,048 $ 17,351,698
Demand (interest-bearing) and savings 29,719,787 28,601,023
Time
$100,000 and over 11,145,000 9,530,000
Under $100,000 31,472,792 28,291,236
----------- ------------
TOTAL $91,849,627 $ 83,773,957
=========== ============
Scheduled maturities of time deposits are approximated as follows:
JUNE 30,
-------------------------
1997 1996
----------- ------------
One year or less $34,471,792 $ 32,073,236
From one year to five years 8,146,000 5,748,000
----------- ------------
$42,617,792 $ 37,821,236
=========== ============
Interest expense on time deposits in excess of $100,000 was
approximately $410,864 and $405,211 for the years ended June 30, 1997 and 1996,
respectively.
NOTE 6 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Securities sold under repurchase agreements consist of the following:
JUNE 30,
-------------------------
1997 1996
------------ ----------
U. S. Government securities with an amortized
cost of $1,789,108 ($1,805,158 fair value)
and $1,066,585 ($1,062,000 fair value) at
June 30, 1997 and 1996, respectively, are
used as collateral for the agreements. $1,594,807 $1,027,726
========== ==========
(Continued)
F-13
<PAGE>
NOTE 6 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS, CONTINUED
The Bank enters into sales of securities under agreements to
repurchase. These obligations to repurchase securities sold are reflected as
liabilities in the balance sheets. The dollar amount of securities underlying
the agreements are book entry securities maintained by a safekeeping agent. The
weighted-average interest rate of these agreements was 5.0 percent and 5.25
percent at June 30, 1997 and 1996, respectively. Securities sold under
repurchase agreements averaged approximately $1,527,000 and $590,000 during 1997
and 1996, respectively. The maximum amounts outstanding at any month-end were
$1,594,807 and $1,027,726 during 1997 and 1996, respectively.
NOTE 7 - LINES OF CREDIT
At June 30, 1997, the Bank had one unused short-term line of credit
totaling $2,000,000 to purchase Federal Funds from an unrelated bank. This line
of credit is available on a one-to-seven day basis for general corporate
purposes of the Bank. This lender has reserved the right to withdraw this line
at its option.
NOTE 8 - INCOME TAXES
The following summary of the provision for income taxes includes tax
deferrals which arise from temporary differences in the recognition of certain
items of revenue and expense for tax and financial reporting purposes:
FOR THE YEARS
ENDED JUNE 30,
------------------------
1997 1996
---------- -----------
Current income tax expense
Federal $ 622,800 $ 413,900
State 58,000 75,600
----------- -----------
680,800 489,500
Deferred income tax expense (benefit) due
to the loan loss provision (3,800) 4,500
----------- -----------
Provision $ 677,000 $ 494,000
=========== ===========
The provision for income taxes differs from the amount of income tax
computed at the federal statutory rate on income before income taxes due to tax
exempt interest income.
Deferred tax assets are included in other assets and consist of the
following:
JUNE 30,
------------------------
1997 1996
------------ ----------
Loan loss provision $ 134,874 $ 131,074
Net unrealized holding (gain) loss on
securities available for sale (66,468) 67,935
$ 68,406 $ 199,009
=========== ===========
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit and
standby 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 contract amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
(Continued)
F-14
<PAGE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES, CONTINUED
Financial instruments whose contract amounts represent credit risk at June 30,
1997:
CONTRACT
AMOUNT
------------
Commitments to extend credit $ 7,664,000
============
Standby letters of credit $ 204,000
============
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 Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by the
Bank upon extension of credit is based on management's credit evaluation.
The Bank is party to litigation and claims arising in the normal course
of business. Management, after consultation with legal counsel, believes that
the liabilities, if any, arising from such litigation and claims will not be
material to the Bank's financial position.
NOTE 10 - REGULATORY MATTERS
The Bank is subject to the dividend restrictions set forth by the
Comptroller of the Currency. Under such restrictions, the Bank may not, without
the prior approval of the Comptroller of the Currency, declare dividends in
excess of the sum of the current year's earnings, as defined, plus the retained
earnings, as defined, from the prior two years.
The Bank is required by the Federal Reserve Bank to maintain average cash
reserve balances at the Federal Reserve Bank and in working funds. The average
amounts of the required reserve balances for the years ended June 30, 1997 and
1996 were approximately $771,000 and $689,000, respectively.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the financial statements. The regulations require the Bank to
meet specific capital adequacy guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The capital classification is also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the maintenance of minimum amounts and ratios (set forth in the
table below) of total and Tier I capital to risk-weighted assets, and Tier I
capital to average assets. Management believes, as of June 30, 1997, that the
bank meets all capital adequacy requirements to which it is subject.
As of June 30, 1997, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
(Continued)
F-15
<PAGE>
NOTE 10 - REGULATORY MATTERS, CONTINUED
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ADEQUACY PURPOSES ACTION PROVISIONS
----------------- -----------------
ACTUAL MINIMUM MINIMUM
--------------- -------------- --------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ------ ------ ------ ------- ------
(AMOUNTS IN $000)
<S> <C>
JUNE 30, 1997
Total Capital (to risk-weighted assets) $ 15,186 23.11% $ 5,258 8.0% $ 6,572 10.0 %
Tier I Capital (to risk-weighted assets) 14,531 22.11 2,629 4.0 3,943 6.0
Tier I Capital (to average assets) 14,531 13.36 4,349 4.0 5,437 5.0
JUNE 30, 1996
Total Capital (to risk-weighted assets) 13,511 25.33 4,267 8.0 5,334 10.0
Tier I Capital (to risk-weighted assets) 13,015 24.40 2,133 4.0 3,200 6.0
Tier I Capital (to average assets) 13,015 13.37 3,895 4.0 4,869 5.0
</TABLE>
NOTE 11 - EMPLOYEE BENEFIT PLAN
The Bank maintains a Profit Sharing Plan for all eligible employees.
The Bank contributes to the Plan annually upon approval by the Board of
Directors. Contributions made for the years ended June 30, 1997 and 1996 were
approximately $155,700 and $169,400, respectively.
NOTE 12 - 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 practical to estimate the fair
value. SFAS 107 defines a financial instrument as cash, evidence of an ownership
interest in an entity or contractual obligations which require the exchange of
cash or other financial instruments. Certain items are specifically excluded
from the disclosure requirements, including the Bank's common stock, property
and equipment 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 and federal funds sold.
Fair value for variable rate loans that reprice frequently and for
loans that mature in less than one year is based on the carrying value. Fair
value for mortgage loans, personal loans and all other loans (primarily
commercial) 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 noninterest-bearing deposit accounts and
interest-bearing deposit accounts with no fixed maturity date is equal to the
carrying value. Securities sold under repurchase agreements and certificate of
deposit accounts maturing within one year are valued at their carrying value.
Certificate of deposit accounts maturing after one year are estimated by
discounting cash flows from expected maturities using current interest rates on
similar instruments.
Fair value for the Bank's variable rate off-balance sheet financial
instruments and for off-balance sheet financial instruments that mature in less
than one year is based on the carrying value.
(Continued)
F-16
<PAGE>
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
The Bank 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 value
presented.
The estimated fair values of the Bank's financial instruments at June
30, 1997 are as follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------------------------------------
1997 1996
------------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ----------- ---------
<S> <C>
FINANCIAL ASSETS
Cash and due from banks $ 5,289,515 $5,289,515 $ 4,244,781 $ 4,244,781
Federal funds sold 375,000 375,000 875,000 875,000
Securities available for sale 39,281,700 39,281,700 15,975,675 15,975,675
Securities held to maturity - - 23,909,128 23,803,382
Loans 61,301,803 61,550,573 50,779,419 51,074,917
FINANCIAL LIABILITIES
Deposits 91,849,627 91,942,078 83,773,957 83,903,169
Securities sold under
repurchase agreements 1,594,807 1,594,807 1,027,726 1,027,726
FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET RISK
Commitments to extend credit 7,664,000 7,664,000 6,327,000 6,327,000
Standby letters of credit 204,000 204,000 240,000 240,000
</TABLE>
F-17
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
EASLEY, SOUTH CAROLINA
REPORT ON FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
F-18
<PAGE>
MEMBERS OF THE
AMERICAN INSTITUTE
E OF CERTIFIED PUBLIC
D ACCOUNTANTS
GREENVILLE, S.C.
GREENWOOD, S.C.
ELLIOTT, DAVIS & COMPANY, L.L.P. ANDERSON, S.C.
Certified Public Accountants AIKEN, S.C.
COLUMBIA, S.C.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Directors and Stockholders
FIRST NATIONAL BANK OF PICKENS COUNTY
Easley, South Carolina
We have audited the accompanying balance sheets of FIRST NATIONAL BANK
OF PICKENS COUNTY as of June 30, 1995 and 1994, and the related statements of
income, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of FIRST NATIONAL BANK
OF PICKENS COUNTY as of June 30, 1995 and 1994 and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
July 21, 1995
Internationally - Moore Stephens Elliott Davis, L.L.C.
870 S. PLEASANTBURG DRIVE POST OFFICE BOX 8286
GREENVILLE, SOUTH CAROLINA 29606-6286
TELEPHONE (664) 242-3370 TELEFAX (664) 232-7161
F-19
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
BALANCE SHEETS
JUNE 30,
--------------------------
1995 1994
------------ -----------
ASSETS
CASH AND DUE FROM BANKS $ 4,905,622 $ 4,861,863
FEDERAL FUNDS SOLD 2,825,000 1,600,000
SECURITIES - Note 2
Available for sale - at fair value 12,999,210 12,915,981
Held to maturity - at amortized cost
(fair value $23,823,270
and $29,945,387 at June 30, 1995 and 1994) 23,576,074 29,945,519
LOANS - net - Note 3 45,529,569 38,192,743
PREMISES AND EQUIPMENT, net of accumulated
depreciation - Note 4 1,637,401 1,737,910
ACCRUED INTEREST RECEIVABLE 1,052,328 1,085,238
OTHER ASSETS - Note 5 364,249 514,010
------------ -----------
$ 92,889,453 $90,853,264
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits - Note 7
Interest-bearing $ 64,437,036 $64,925,959
Noninterest-bearing 15,863,556 14,470,697
------------ -----------
Total deposits 80,300,592 79,396,656
ACCRUED INTEREST PAYABLE 469,881 335,550
OTHER LIABILITIES 172,188 146,667
------------ -----------
Total liabilities 80,942,661 79,878,873
------------ -----------
COMMITMENTS AND CONTINGENT LIABILITIES - Note 9
SHAREHOLDERS' EQUITY
Common stock - $2.50 par value; 80,000 shares
authorized and issued 200,000 200,000
Capital surplus 300,000 300,000
Retained earnings 11,517,198 10,744,295
Net unrealized holding loss on securities
available for sale (70,406) (269,904)
------------ -----------
11,946,792 10,974,391
------------ -----------
Total liabilities and stockholders'
equity $ 92,889,453 $90,853,264
============ ===========
See Notes to Financial Statements which are an integral part of these
statements.
F-20
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
STATEMENTS OF INCOME
FOR THE YEARS ENDED
JUNE 30,
1995 1994
------------ -------=---
INTEREST INCOME
Loans (including fees) $ 4,054,585 $ 3,375,821
Securities 2,561,176 2,330,913
Federal funds sold 77,070 116,169
------------ -----------
Total interest income 6,692,831 5,822,903
INTEREST EXPENSE 2,673,159 2,132,548
------------ -----------
Net interest income 4,019,672 3,690,355
PROVISION FOR LOAN LOSSES 78,803 50,462
------------ -----------
Net interest income after provision
for loan losses 3,940,869 3,639,893
------------ -----------
NONINTEREST INCOME
Service charges on deposits accounts 344,418 342,087
Other service charges and fees 70,620 127,726
------------ -----------
Total noninterest income 415,038 469,813
------------ -----------
NONINTEREST EXPENSES
Salaries and employee benefits 1,497,267 1,607,562
Occupancy, office and equipment 596,704 475,705
Other operating expenses 871,033 692,822
------------ -----------
Total noninterest expenses 2,965,004 2,776,089
------------ -----------
Income before income taxes 1,390,903 1,333,617
PROVISION FOR INCOME TAXES - Note 8 430,000 384,000
------------ -----------
Net income $ 960,903 $ 949,617
============ ===========
NET INCOME PER COMMON SHARE $ 12.01 $ 11.87
============ ===========
See Notes to Financial Statements which are an integral part of these
statements.
F-21
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
NET
UNREALIZED
HOLDING LOSS
COMMON STOCK ON SECURITIES TOTAL
----------------------- CAPITAL RETAINED AVAILABLE SHAREHOLDERS'
SHARES AMOUNT SURPLUS EARNINGS FOR SALE EQUITY
---------- ---------- --------- ------------ --------- ------------
<S> <C>
BALANCE, JUNE 30, 1993 80,000 $200,000 $ 300,000 $ 9,962,678 $ - $ 10,462,678
Cash dividends - - - (168,000) - (168,000)
Change in net unrealized
holding loss on securities
available for sale - - - - (269,904) (269,904)
Net income - - - 949,617 - 949,617
----- ------- -------- --------- ---------- --------
BALANCE, JUNE 30, 1994 80,000 $200,000 $ 300,000 10,744,295 (269,904) 10,974,391
Cash dividends - - - (188,000) - (188,000)
Change in net unrealized
holding loss on securities
available for sale - - - - 199,498 199,498
Net income - - - 960,903 - 960,903
------ ------- -------- --------- ---------- --------
BALANCE, JUNE 30, 1995 80,000 $200,000 $ 300,000 $11,517,198 $(70,406) $11,946,792
====== ======== ========= ============ ======== ============
</TABLE>
See Notes to Financial Statements which are an integral part of these
statements.
F-22
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
JUNE 30,
----------------------
1995 1994
----------- ----------
OPERATING ACTIVITIES
Net income $ 960,903 $ 949,617
Adjustments to reconcile net income to net
cash provided by operating activities
Amortization of security premiums and
accretion of discounts 265,965 318,512
Depreciation 165,967 108,472
Provision for loan losses 78,803 50,462
Gain on sale of other real estate owned (12,531) (84,495)
Loss on sale of securities 588 -
Decrease (increase) in accrued interest
receivable 32,910 (12,208)
Increase in other assets (58,223) (182,010)
Increase (decrease) in accrued interest payable 134,331 (2,463)
Increase in other liabilities 25,521 15,308
----------- -----------
Net cash provided by operating activities 1,594,234 1,161,195
----------- -----------
INVESTING ACTIVITIES
Purchase of securities available for sale (293,210) (6,421,156)
Purchase of securities held to maturity (2,431,893) (6,804,292)
Proceeds from the sale of securities held to
maturity 1,299,703 -
Proceeds from the maturity of securities held
to maturity 7,066,768 7,305,000
Proceeds from the maturity of securities for sale 500,000 -
Net increase in federal funds sold (1,225,000) (575,000)
Net (increase) decrease in loans (7,415,629) 798,884
Purchase of equipment and premises (65,457) (849,329)
Proceeds from sale of other real estate owned 298,307 382,805
----------- -----------
Net cash used for investing activities (2,266,411) (6,163,088)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits 903,936 5,961,705
Cash dividends paid (188,000) (168,000)
----------- -----------
Net cash provided by financing activities 715,936 5,793,705
----------- -----------
Net increase in cash and due from banks 43,759 791,812
CASH AND DUE FROM BANKS, BEGINNING OF YEAR 4,861,863 4,070,051
----------- -----------
CASH AND DUE FROM BANKS, END OF YEAR $ 4,905,622 $ 4,861,863
=========== ===========
CASH PAID FOR
Interest $ 2,041,562 $ 2,136,450
=========== ===========
Income taxes $ 433,585 $ 376,730
=========== ===========
NONCASH INVESTING ACTIVITY
Additions to other real estate owned $ 225,128 $ 307,385
=========== ===========
See Notes to Financial Statements which are an integral part of these
statements.
F-23
<PAGE>
FIRST NATIONAL BANK OF PICKENS COUNTY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Bank is primarily engaged in the business of accepting savings and
demand deposits insured by The Federal Deposit Insurance Corporation, and
providing mortgage, consumer and commercial loans to the general public.
CONCENTRATIONS OF CREDIT RISK
The Bank makes loans to individuals and small businesses located primarily
in upstate South Carolina for various personal and commercial purposes. The
Bank has a diversified loan portfolio and the borrowers' ability to repay
their loans is not dependent upon any specific economic sector.
SECURITIES
On June 30, 1994, the Bank adopted Statement of Financial Accounting
Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and
Equity Securities." Under the statement, debt securities are classified upon
purchase as available for sale, held to maturity or trading. Such assets
classified as available for sale are carried at fair value. Net unrealized
holding gains or losses are reported as a component of shareholders' equity
net of deferred income taxes. Securities classified as held to maturity are
carried at cost, adjusted for the amortization of premiums and the accretion
of discounts. In order to qualify as held to maturity, the Bank must have
the ability to hold the securities to maturity. The Bank has no trading
securities. Gains or losses on disposition of securities are based on the
difference between the net proceeds and the adjusted carrying amount of the
securities sold, using the specific identification method. Premiums and
discounts on securities are amortized or accreted as adjustments to income
over the estimated life of the security using a method approximating the
level yield method. The fair value of securities is based on quoted market
prices or dealer quotes.
LOANS
Loans are recorded at cost. Mortgage loans consist principally of
conventional one-to four-family residential loans and interim and permanent
financing of non-residential loans that are secured by real estate.
Commercial loans are made primarily on the strength of the borrower's
general credit standing, the ability to generate repayment from income
sources and the collateral securing such loans. Consumer loans generally
consist of home equity loans, second mortgage loans, automobile and other
personal loans.
In many lending transactions, collateral is taken to provide an additional
measure of security. Generally, the cash flow or earning power of the
borrower represents the primary source of repayment, and collateral
liquidation as a secondary source of repayment. The Bank determines the need
for collateral on a case-by-case basis. Factors considered include the
current and prospective creditworthiness of the customer, terms of the
instrument and economic conditions.
INTEREST INCOME ON LOANS
Interest on loans is accrued daily based on the principal amount
outstanding. The Bank places loans on non-accrual status when they become
greater than 90 days delinquent and management has determined that
collectibility of the accrued interest is doubtful. When a loan is placed in
non-accrual status, all accrued interest receivable from the current year is
reversed as a charge against income. When interest is received on a
non-accrual loan, it is recognized as a principal reduction or interest
income based upon management's determination of the loan's ultimate
collectibility.
(Continued)
F-24
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
ALLOWANCE FOR LOAN LOSSES
The Bank provides for loan losses on the allowance method. Accordingly, all
loan losses are charged to the related allowance and all recoveries are
credited to the allowance. Additions to the allowance for possible loan
losses are provided by charges to operations based on various factors which,
in management's judgment, deserve current recognition in estimating possible
losses. Such factors considered by management include the market value of
the underlying collateral, the borrowers' ability to repay from other
economic resources, growth and composition of the loan portfolios, the
relationship of the allowance for loan losses to outstanding loans, loss
experience, delinquency trends and economic conditions. Management evaluates
the carrying value of loans periodically, and the allowance is adjusted
accordingly. While management uses the best information available to make
evaluations, future adjustments to the allowance may be necessary if
economic conditions differ substantially from the assumptions used in making
the evaluations.
The Financial Accounting Standards Board recently issued statement No. 114,
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN (FASB 114), which addresses
the accounting by creditors for impairment of certain loans. It requires
that impaired loans be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical matter, at the loan's observable market value or fair value of the
collateral if the loan is collateral dependent. The Statement applies to
financial statements for fiscal years beginning after December 15, 1994.
Management determined that the Statement will not be applied early;
implementation of the Statement is not expected to have any material impact
on financial condition or results of operations.
OTHER REAL ESTATE OWNED
Real estate acquired in settlement of loans represents real estate acquired
through foreclosure and is initially recorded at the lower of cost
(principal balance of the former mortgage loan less any specific valuation
allowances) or estimated fair value less costs to sell. Subsequent
improvements are capitalized. Costs of holding real estate, such as property
taxes, insurance, maintenance and interest expense, less related revenues
during the holding period, are expensed as period costs. Market values of
real estate are reviewed regularly, and allowances for possible losses are
established when the carrying values of real estate acquired in settlement
of loans exceeds fair values less estimated costs to sell. Gains on the sale
of real estate are recorded at the time of the sale provided certain
criteria relating to property type, cash down payment, loan terms and other
factors are met.
PREMISES AND EQUIPMENT
Premises and equipment are presented at cost, net of accumulated
depreciation and amortization. Depreciation and amortization of premises and
equipment are provided principally on a straight-line basis over the
estimated useful lives of the related assets. Estimated lives are 31 to 40
years for building and improvements and generally five to ten years for
furniture, fixtures and equipment.
The cost of maintenance and repairs is charged to expense as incurred, and
improvements and other expenditures, which materially increase property
lives, are capitalized. The costs and accumulated depreciation applicable to
premises and equipment retired or otherwise disposed of are eliminated from
the related accounts, and any resulting gains or losses are credited or
charged to income.
INCOME TAXES
Income taxes are accounted for under FASB 109. Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. A valuation allowance is established for deferred
tax assets that may not be realized.
(Continued)
F-25
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
STATEMENTS OF CASH FLOWS
In accordance with the provisions of Statements of Financial Accounting
Standards No. 95, "Statement of Cash Flows", the Company considers cash and
cash equivalents to be those amounts included in the balance sheet caption
"Cash and Due from Banks".
NOTE 2 - SECURITIES
AVAILABLE FOR SALE - The amortized cost, gross unrealized holding gains and
losses and fair values of securities available for sale consisted of the
following:
<TABLE>
<CAPTION>
GROSS
UNREALIZED HOLDING
AMORTIZED -----------------
COST GAINS LOSSES FAIR VALUE
------------ -------- -------- ----------
<S> <C>
JUNE 30, 1995
U. S. Treasury obligations $ 9,672,102 $ - $126,493 $ 9,545,609
U. S. Agency obligations 3,440,666 38,397 25,462 3,453,601
------------ -------- -------- -----------
$ 13,112,768 $ 38,397 $151,955 $12,999,210
============ ======== ======== ===========
JUNE 30, 1994
U. S. Treasury obligations $ 10,286,253 $ - $338,672 $ 9,947,581
U. S Agency obligations 3,063,812 13,530 108,942 2,968,400
------------ -------- -------- -----------
$ 13,350,065 $ 13,530 $447,614 $12,915,981
============ ======== ======== ===========
</TABLE>
HELD TO MATURITY - The amortized cost, gross unrealized holding gains and
losses and fair values of securities held to maturity consisted of the
following:
<TABLE>
<CAPTION>
GROSS
UNREALIZED HOLDING
AMORTIZED ------------------
COST GAINS LOSSES FAIR VALUE
------------ -------- -------- ----------
<S> <C>
JUNE 30, 1995
U. S. Treasury obligations $ 17,513,603 $216,426 $ 43,476 $17,686,553
U. S. Agency obligations 600,000 11,004 - 611,004
Municipals - tax exempt 5,462,471 109,938 46,696 5,525,713
------------ -------- -------- -----------
$ 23,576,074 $337,368 $ 90,172 $23,823,270
============ ======== ======== ===========
JUNE 30, 1994
U. S. Treasury obligations $ 24,264,083 $210,972 $171,828 $24,303,227
U. S. Agency obligations 300,000 - - 300,000
Municipals - tax exempt 5,381,436 68,896 108,172 5,342,160
------------ -------- -------- -----------
$ 29,945,519 $279,868 $280,000 $29,945,387
============ ======== ======== ===========
</TABLE>
(Continued)
F-26
<PAGE>
NOTE 2 - SECURITIES, CONTINUED
The amortized cost and fair value of securities at June 30, 1995 and
1994, by contractual maturities, follow:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
----------------------- ---------------------
AMORTIZED AMORTIZED
COST FAIR VALUE COST FAIR VALUE
---------- ----------- ---------- -----------
<S> <C>
JUNE 30, 1995
Due in one year or less $2,320,637 $ 2,305,920 $4,496,950 $ 4,498,234
Due after one year through
five years 7,667,432 7,551,408 14,975,514 15,180,445
Due after five years through
ten years 3,124,699 3,141,882 3,571,966 3,606,441
Due after ten years - - 531,644 538,150
---------- ----------- ---------- -----------
$13,112,768 $12,999,210 $23,576,074 $23,823,270
=========== =========== =========== ===========
JUNE 30, 1994
Due in one year or less $ 499,459 $ 494,800 $8,856,636 $ 8,913,362
Due after one year through
five years 10,104,030 9,752,571 18,224,443 18,238,404
Due after five years through
ten years 2,746,576 2,668,610 2,522,746 2,472,699
Due after ten years - - 341,694 320,922
---------- ----------- ---------- -----------
$13,350,065 $12,915,981 $29,945,519 $29,945,387
=========== =========== =========== ===========
</TABLE>
Securities with an amortized cost of $9,824,969 and $14,972,965 and a
fair value of $9,971,249 and $15,000,811, at June 30, 1995 and 1994,
respectively, were pledged as collateral for certain deposits.
During the year ended June 30, 1995 the Bank sold two held to maturity
securities with an amortized cost of $1,299,703 and realized a loss of $588. The
Bank sold these securities in order to improve their short-term liquidity. The
sales occurred within fifteen days of the securities maturity dates.
NOTE 3 - LOANS
The Bank's loan portfolio is summarized below:
JUNE 30,
-------------------------
1995 1994
----------- ------------
Mortgage Loans
Construction $10,055,000 $ 6,258,000
Residential 11,202,000 11,557,000
Commercial 8,468,000 7,577,000
----------- ------------
Total real estate loans 29,725,000 25,392,000
----------- ------------
Consumer and Commercial
Consumer 7,221,000 7,734,000
Commercial 9,017,000 5,473,000
Other 200,561 268,058
----------- -----------
Total consumer and commercial loans 16,438,561 13,475,058
----------- ------------
Total loans 46,163,561 38,867,058
Less unearned interest 67,799 142,000
Less allowance for loan losses 566,193 532,315
----------- ------------
NET LOANS $45,529,569 $ 38,192,743
=========== ============
(Continued)
F-27
<PAGE>
NOTE 3 - LOANS, CONTINUED
Contractual principal repayments of fixed rate loans are approximated
as follows:
JUNE 30,
-------------------------
1995 1994
----------- -----------
Due in one year or less $12,271,000 $ 9,323,000
Due from one year to five years 12,087,000 7,625,000
Due beyond five years 6,911,000 6,933,000
----------- ------------
$31,269,000 $ 23,881,000
=========== ============
Variable rate loans totaled approximately $14,895,000 and $14,986,000
at June 30, 1995 and 1994, respectively, including $1,100,000 and $1,622,000 in
adjustable-rate mortgages. All such loans are subject to rate adjustments within
one year.
Changes in the allowance for loan losses are summarized as follows:
JUNE 30,
---------------------
1995 1994
------------ ---------
BALANCE, BEGINNING OF YEAR $ 532,315 $ 553,638
Provision for loan losses 78,803 50,462
Loans charged off, net of recoveries (44,925) (71,785)
----------- ---------
BALANCE, END OF YEAR $ 566,193 $ 532,315
=========== =========
At June 30, 1995 and 1994, loans which were accounted for on a
nonaccrual basis totaled $606,000 and $826,900. The amount the Bank will
ultimately realize from the loans could differ from their carrying value because
of future developments affecting the underlying collateral or the borrower's
ability to repay the loans. During the years ended June 30, 1995 and 1994, the
Bank recognized interest income on these loans of $56,532 and $26,427,
respectively. Under the original terms of these loans, the Bank would have
recognized interest income of approximately $58,956 and $76,471, respectively.
In the normal course of business, the Bank has made loans to certain
directors, officers, employees and their affiliates under terms consistent with
the Bank's normal lending policies. The unpaid principal balances of such loans
totaled approximately $179,000 and $60,363 at June 30, 1995 and 1994,
respectively.
F-28
<PAGE>
NOTE 4 - PREMISES AND EQUIPMENT
The principal categories and estimated useful lives of premises and
equipment are summarized below:
<TABLE>
<CAPTION>
JUNE 30,
ESTIMATED -----------------------
USEFUL LIVES 1995 1994
------------- ------------ ------------
<S> <C>
Land - $ 317,131 $ 317,131
Building 31 - 40 1,643,782 1,477,254
Furniture, fixtures and equipment 5 - 10 1,248,300 1,179,113
Construction in progress - - 170,258
----------- ------------
3,209,213 3,143,756
Less accumulated depreciation 1,571,812 1,405,846
----------- ------------
$ 1,637,401 $ 1,737,910
=========== ============
</TABLE>
Depreciation expense for the years ended June 30, 1995 and 1994 was
$165,967 and $108,472, respectively.
NOTE 5 - OTHER ASSETS
Other assets include the following:
JUNE 30,
--------------------------
1995 1994
----------- -------------
Prepaid expenses $ 110,234 $ 52,012
Deferred tax asset 174,226 296,498
Other real estate owned 79,789 165,500
----------- ------------
$ 364,249 $ 514,010
=========== =============
NOTE 6 - LEASE COMMITMENTS
On June 30, 1995, the Bank was obligated under six non-cancelable
operating leases for equipment that had initial or remaining terms of more than
one year. Future minimum rental payments under these leases on June 30, 1995
are:
PAYABLE IN THE YEAR
ENDING JUNE 30, AMOUNT
- ----------------------- --------------
1996 $ 107,760
1997 107,760
1998 107,760
1999 53,122
Total minimum payments required $ 376,402
=============
Lease payments charged to operations were $113,915 and $41,951 for the
years ended June 30, 1995 and 1994, respectively. The above leases provide that
the Bank pay maintenance costs and include renewal options at fair rental value.
F-29
<PAGE>
NOTE 7 - DEPOSITS
Deposits are summarized as follows:
JUNE 30,
------------------------
1995 1994
----------- ------------
Demand (noninterest-bearing) $15,863,556 $ 14,470,697
Demand (interest-bearing) and savings 35,415,129 31,736,959
Time
$100,000 and over 7,943,000 7,228,000
Under $100,000 21,078,907 25,961,000
----------- ------------
TOTAL $80,300,592 $ 79,396,656
=========== ============
Scheduled maturities of time deposits are approximated as follows:
JUNE 30,
-------------------------
1995 1994
----------- ------------
One year or less $30,843,000 $ 29,806,000
From one year to five years 535,000 3,383,000
----------- ------------
$31,378,000 $ 33,189,000
=========== =============
Interest expense on time deposits was approximately $260,600 and
$277,600 for the years ended June 30, 1995 and 1994, respectively.
NOTE 8 - INCOME TAXES
The following summary of the provision for income taxes includes tax
deferrals which arise from temporary differences in the recognition of certain
items of revenue and expense for tax and financial reporting purposes:
FOR THE YEARS
ENDED JUNE 30,
-------------------
1995 1994
-------- --------
Income taxes currently payable
Federal $374,100 $380,000
State 60,400 57,150
------ -------
434,500 437,150
Deferred income tax benefit due to the loan
loss provision (4,500) (53,150)
------ -------
Provision $430,000 $384,000
======== =========
The provision for income taxes differs from the amount of income tax
computed at the federal statutory rate on income before income taxes due to tax
exempt interest income.
(Continued)
F-30
<PAGE>
NOTE 8 - INCOME TAXES, CONTINUED
Deferred tax assets are included in other assets and consist of the
following:
JUNE 30,
------------------------
1995 1994
----------- -----------
Loan loss provision $ 135,573 $ 131,073
Unrealized holding loss on securities
available for sale 43,152 165,425
----------- -----------
178,725 296,498
Valuation allowance - -
----------- -----------
$ 178,725 $ 296,498
=========== ===========
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit and
standby 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 contract amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
FINANCIAL INSTRUMENTS WHOSE CONTRACT AMOUNTS REPRESENT CREDIT RISK AT JUNE 30,
1995:
CONTRACT
AMOUNT
-------------
Commitments to extend credit $ 2,823,000
============
Standby letters of credit $ 306,000
============
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 Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by the
Bank upon extension of credit is based on management's credit evaluation.
The Bank is party to litigation and claims arising in the normal course
of business. Management, after consultation with legal counsel, believes that
the liabilities, if any, arising from such litigation and claims will not be
material to the Bank's financial position.
NOTE 10 - REGULATORY MATTERS
The Bank is subject to the dividend restrictions set forth by the
Comptroller of the Currency. Under such restrictions, the Bank may not, without
the prior approval of the Comptroller of the Currency, declare dividends in
excess of the sum of the current year's earnings, as defined, plus the retained
earnings, as defined, from the prior two years.
(Continued)
F-31
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NOTE 10 - REGULATORY MATTERS, CONTINUED
The Bank is required by the Federal Reserve Bank to maintain average cash
reserve balances at the Federal Reserve Bank and in working funds. The average
amounts of the reserve balances for the years ended June 30, 1995 and 1994 were
approximately $626,700 and $641,800, respectively.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the financial statements. The regulations require the Bank to
meet specific capital adequacy guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The capital classification is also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the maintenance of minimum amounts and ratios (set forth in the
table below) of Tier I capital to adjusted total assets (leverage capital
ratio), and minimum ratios of Tier I capital and total capital to risk-weighted
assets. To be considered adequately capitalized under the regulatory framework
for prompt corrective action, the Bank must maintain minimum Tier I leverage,
Tier I risk-based, total risk-based ratios as set forth in the table. The Bank's
actual capital ratios as of June 30, 1995 are as follows:
RATIOS
------------------------
REQUIRED
MINIMUM ACTUAL
--------- -----------
Tier I Leverage Capital 4.0% 13.56%
Tier I Risk-based Capital 4.0 24.16
Total Risk-based Capital 8.0 25.14
Management believes, as of June 30, 1995, that the Bank meets all
capital requirements.
NOTE 11 - EMPLOYEE BENEFIT PLAN
The Bank maintains a Profit Sharing Plan for all eligible employees. The
Bank contributes to the Plan annually upon approval by the Board of Directors.
Contributions made for the years ended June 30, 1995 and 1994 were approximately
$182,000 and $170,000, respectively.
F-32
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ANNEX A
REORGANIZATION AGREEMENT
BY AND AMONG
CAROLINA FIRST CORPORATION,
CAROLINA FIRST BANK,
AND
FIRST NATIONAL BANK OF PICKENS COUNTY
DATED AS OF JUNE 22, 1998
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TABLE OF CONTENTS
SECTION I. DEFINITIONS......................................................6
1.1. Articles of Merger...............................................6
1.2. Benefit Plans....................................................6
1.3. CERCLA...........................................................6
1.4. CFB..............................................................6
1.5. CFC..............................................................6
1.6. CFC Benefit Plans................................................6
1.7. CFC Common Stock.................................................6
1.9. Code.............................................................6
1.10. Confidential Information.........................................6
1.11. Derivative Contract..............................................6
1.12. ERISA............................................................7
1.13. Effective Time...................................................7
1.14. Exchange Act.....................................................7
1.16. FDIC.............................................................7
1.17. Federal Reserve..................................................7
1.18. First National...................................................7
1.19. First National Benefit Plans.....................................7
1.20. First National Common Stock......................................7
1.21. GAAP.............................................................7
1.22. IRS..............................................................7
1.23. Knowledge........................................................7
1.24. Lien.............................................................7
1.25. Material Adverse Event; Material Adverse Effect..................7
1.26. Merger...........................................................7
1.27. OCC..............................................................7
1.28. OTS..............................................................8
1.29. PBGC.............................................................8
1.30. Person...........................................................8
1.31. Plan of Merger...................................................8
1.32. Proxy Statement..................................................8
1.33. Registration Statement...........................................8
1.34. Regulations......................................................8
1.35. Regulatory Approvals.............................................8
1.36. Regulatory Authority.............................................8
1.37. Reorganization Agreement.........................................8
1.38. Rights...........................................................8
1.39. SEC..............................................................8
1.40. Securities Act...................................................8
1.41. State Board......................................................8
1.42. Shareholder Approval.............................................8
1.43. Shareholders' Meeting............................................8
SECTION II. THE MERGER......................................................8
2.1. Merger...........................................................8
2.2. The Closing......................................................8
2.3. Consideration for the Merger.....................................9
2.4. Shareholder Approval; Registration Statement.....................9
2.5. Cooperation; Regulatory Filings..................................9
2.6. Tax Treatment....................................................9
2
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SECTION III. REPRESENTATIONS AND WARRANTIES OF FIRST NATIONAL...............9
3.1. Organization, Good Standing and Conduct of Business.............10
3.2. Subsidiaries....................................................10
3.3. Corporate Authority.............................................10
3.4. Binding Effect..................................................10
3.5. Capitalization of First National................................10
3.6. Compliance with Laws; Absence of Defaults.......................10
3.7. Non-Contravention and Defaults; No Liens........................11
3.8. Necessary Approvals.............................................11
3.9. Financial Statements............................................11
3.10. Tax Returns.....................................................11
3.11. Undisclosed Liabilities.........................................11
3.12. Properties, Encumbrances........................................12
3.13. Litigation......................................................12
3.14. Reports.........................................................12
3.15. Brokers.........................................................12
3.16. Expenditures....................................................12
3.17. Insurance.......................................................12
3.18. Contracts and Commitments.......................................12
3.19. Employee Benefit Plans and Contracts............................13
3.20. Allowance for Loan Losses.......................................14
3.21. Environmental Matters...........................................14
3.22. First National Information......................................15
3.23. Asset Classification............................................15
3.24. Derivatives Contracts, Etc......................................15
3.25. Labor Matters...................................................15
3.26. Securities Reports..............................................15
3.27. Ownership of CFC Common Stock...................................15
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC AND CFB..................15
4.1. Organization, Good Standing and Conduct of Business.............15
4.2. Subsidiaries....................................................16
4.3. Corporate Authority.............................................16
4.4. Binding Effect..................................................16
4.5. Capitalization of CFC...........................................16
4.6. Compliance with Laws; Absence of Defaults.......................17
4.7. Non-Contravention and Defaults; No Liens........................17
4.8. Necessary Approvals.............................................17
4.9. Financial Statements............................................17
4.10. Undisclosed Liabilities.........................................17
4.11. Litigation and Regulatory Agreements............................17
4.12. Reports.........................................................18
4.13. CFC Information.................................................18
4.14. Securities Reports..............................................18
4.15. Due Diligence...................................................18
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING............................18
5.1. Conduct of First National Pending Closing.......................18
5.2. Conduct of CFC Pending Closing..................................19
SECTION VI. COVENANTS OF THE PARTIES.......................................20
6.1. Access to Properties and Records................................20
6.2. Confidentiality.................................................20
3
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6.3. Cooperation.....................................................20
6.4. Affiliates' Letters.............................................20
6.5. Listing of CFC Common Stock.....................................20
6.6. Letters from Accountants........................................20
6.7. Tax Treatment...................................................21
6.8. Expenses........................................................21
6.9. Material Events.................................................21
6.10. Public Announcements............................................21
6.11. Updating of Schedules...........................................21
6.12. Certain Policies of First National..............................21
6.13. Employee Matters................................................21
6.14. Directors.......................................................22
6.15. Charitable Contributions........................................22
6.16. Agreements with First National Officers.........................22
6.17. Prohibited Actions..............................................22
SECTION VII. CONDITIONS TO CFC'S AND CFB'S OBLIGATIONS TO CLOSE...........22
7.1. Performance of Acts and Representations by First National.......22
7.2. Opinion of Counsel for First National...........................22
7.3. Conduct of Business.............................................23
7.4. Consents........................................................23
7.5. Certificate.....................................................23
7.6. Shareholder Approval............................................23
7.7. Securities Laws.................................................23
7.8. First National Allowance........................................23
7.9. Consulting Agreement............................................23
7.10. Limit on Dissent...............................................23
7.11. Pooling of Interests...........................................23
SECTION VIII. CONDITIONS TO THE OBLIGATION OF FIRST NATIONAL TO CLOSE.......23
8.1. Performance of Acts and Representations by CFC and CFB..........23
8.2. Opinion of Counsel for CFC......................................24
8.3. Conduct of Business.............................................24
8.4. Consents........................................................24
8.5. Certificate.....................................................24
8.6. Tax Opinion.....................................................24
8.7. Shareholder Approval............................................24
8.8. Securities Laws.................................................25
8.9. Consulting Agreement............................................25
SECTION IX. TERMINATION...................................................25
9.1. Termination.....................................................25
SECTION X. INDEMNIFICATION................................................25
10.1. Information for Application and Statements.....................25
10.2. Indemnification of Officers and Directors......................25
10.3. Insurance......................................................26
SECTION XI. MISCELLANEOUS.................................................26
11.1. Survival of Representations and ...............................26
11.2. Entire Agreement...............................................26
11.3. Binding Agreement..............................................26
11.4. Notices........................................................27
4
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11.5. Counterparts...................................................27
11.6. Headings.......................................................27
11.7. Law Governing..................................................27
11.8. Amendment......................................................27
11.9. Waiver.........................................................27
APPENDICES
Appendix A Plan of Merger
SCHEDULES
Schedule 3.6: Violations
Schedule 3.11: Material Liabilities or Obligations Not Disclosed in First
National Financial Statements
Schedule 3.12: Exceptions to No Liens
Schedule 3.13: Litigation
Schedule 3.16: Proposed Expenditures Exceeding $50,000
Schedule 3.17: Insurance
Schedule 3.18: Contracts or Other Commitments of First National; Other Material
Contracts
Schedule 3.19: First National Employee Benefit and Welfare Plans
Schedule 3.21: Exceptions to First National's Environmental Representations
Schedule 3.23: Classified Assets
Schedule 3.24: Derivatives Contracts, Etc.
Schedule 4.5: Exceptions to CFC Capitalization Representations
Schedule 4.6: Violations
Schedule 4.10: CFC Tax Matters
Schedule 4.11: Material Liabilities or Obligations Not Disclosed in the CFC
Financial Statements
Schedule 4.12: Litigation
Schedule 4.14: CFC Employee Benefit and Welfare Plans
Schedule 6.15: Charitable Contributions
Schedule 6.16: Consulting Agreement
5
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This REORGANIZATION AGREEMENT is entered into as of this 22nd day of June,
1998 among Carolina First Corporation ("CFC"), a corporation organized and
existing under the laws of the State of South Carolina, Carolina First Bank
("CFB"), a corporation organized and existing under the laws of the State of
South Carolina, and First National Bank of Pickens County ("First National"), a
national banking association organized and existing under the laws of the United
States of America.
RECITALS
A. First National is a national banking association headquartered in
Easley, South Carolina.
B. CFC is a South Carolina corporation headquartered in Greenville,
South Carolina, and a registered bank holding company under the Bank Holding
Company Act of 1956, as amended ("BHCA").
C. CFB is a South Carolina-chartered, non-member banking corporation
headquartered in Greenville, South Carolina.
D. The parties hereto desire that First National be merged with and into
CFB, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, CFC, CFB and First
National hereby agree as follows:
SECTION I. DEFINITIONS
1.1. ARTICLES OF MERGER. The Articles of Merger to be executed by CFB and
First National in a form appropriate for filing with the Secretary of State of
South Carolina and relating to the effective consummation of the Merger as
contemplated by the Plan of Merger.
1.2. BENEFIT PLANS. All employee benefit plans within the meaning of
Section 3(3) of ERISA and any related or separate contracts, plans, trusts,
annuities, programs, policies, arrangements, practices, customs and
understandings that provide benefits of economic value to any present or former
employee, or current or former beneficiary, dependent or assignee of any such
employee or former employee.
1.3. CERCLA. The Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. 9601 ET SEQ.
1.4. CFB. Carolina First Bank, a South Carolina corporation and a
wholly-owned subsidiary of CFC.
1.5. CFC. Carolina First Corporation, a bank holding company
headquartered in Greenville, South Carolina.
1.6. CFC BENEFIT PLANS. All Benefit Plans, and all other material fringe
benefit plans or programs, sponsored or maintained by CFC or CFB or under which
CFC or CFB may be obligated.
1.7. CFC COMMON STOCK. The common stock, par value $1.00 per share,
of CFC.
1.8. CLOSING; CLOSING DATE. The terms "Closing" and "Closing Date" shall
have the meanings ascribed to them in Section 2.2 hereof.
1.9. CODE. The Internal Revenue Code of 1986, as amended, including, if
the context permits, the applicable regulations promulgated pursuant thereto.
1.10. CONFIDENTIAL INFORMATION. The term "Confidential Information" shall
mean all information of any kind concerning a party hereto that is furnished by
such party or on its behalf pursuant to Section 6.1 hereof as a result of the
transactions contemplated herein, except information (i) ascertainable or
obtained from public or published information, (ii) received from a third party
not known to the recipient of Confidential Information to be under an obligation
to keep such information confidential, (iii) which is or becomes known to the
public (other than through a breach of this Reorganization Agreement), (iv) of
which the recipient was in possession prior to disclosure thereof in connection
with the Merger, or (v) which was independently developed by the recipient
without the benefit of Confidential Information.
1.11. DERIVATIVE CONTRACT. Any exchange-traded or over-the-counter swap,
forward, future, option, cap, floor or collar financial contract or any other
contract not included on a balance sheet which is a derivative contract
(including various combinations thereof).
6
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1.12. ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
1.13. EFFECTIVE TIME. The date and time which the Merger becomes effective
as set forth in the Articles of Merger. Subject to the terms and conditions
hereof, the Effective
Time shall be such time on such date as CFC shall notify First National in
writing not less than five days prior thereto, which date shall not be more than
30 days after all conditions have been satisfied or waived in writing.
1.14. EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
1.15. "Fair Market Value" shall mean the average of the closing prices as
quoted on the Nasdaq National Market for CFC Common Stock for the twenty days in
which CFC Common Stock was traded immediately prior to the Closing Date;
provided, however, if prior to the Effective Time, any other Person shall have
publicly announced an intention to acquire control of CFC by merger or otherwise
or CFC shall have publicly acknowledged that it is seeking to be acquired by
another Person or is discussing being acquired by another Person, then the
average of the Closing Prices as quoted on the Nasdaq National Market for CFC
Common Stock for the 20 days for which the CFC Common Stock was traded
immediately prior to such announcement or acknowledgment shall be determined
and, if such average is less than the average determined pursuant to the first
clause of this sentence, then the smaller average shall be the Fair Market
Value.
1.16. FDIC. The Federal Deposit Insurance Corporation.
1.17. FEDERAL RESERVE. The Board of Governors of the Federal Reserve
System.
1.18. FIRST NATIONAL. First National Bank of Pickens County, a national
banking association organized and existing under the laws of the United States
of America.
1.19. FIRST NATIONAL BENEFIT PLANS. All Benefit Plans, and all other
material fringe benefit plans or programs, sponsored or maintained by First
National or under which First National may be obligated.
1.20. FIRST NATIONAL COMMON STOCK. The common stock, par value $2.50 per
share, of First National.
1.21. GAAP. Generally accepted accounting principles consistently applied.
1.22. IRS. The Internal Revenue Service.
1.23. KNOWLEDGE. When used in the phrase "to the knowledge" or a similar
phrase, shall mean the actual knowledge of the executive officers of the
referenced party or parties, as applicable, after reasonable inquiry of the
other executive officers and the directors of the parties and the Persons
responsible for the day-to-day operations of the parties or their subsidiaries
(although this definition shall not give rise to any duty of any independent
verification or confirmation by members of senior management or board of
directors of the entity making the representation or warranty from other
Persons).
1.24. LIEN. Any lien, claim, encumbrance, security interest, assessment,
charge, restriction (including restriction on voting rights or rights of
disposition), mortgage, deed of trust, equity of any character, third party
right of whatever nature or other similar or like charge.
1.25. MATERIAL ADVERSE EVENT; MATERIAL ADVERSE EFFECT. This shall mean an
event, effect, occurrence or circumstance which, alone or when taken with other
breaches, events, effects, occurrences or circumstances existing concurrently
therewith (including without limitation, any breach of a representation or
warranty contained herein by such party) (i) has or is reasonably expected to
have a material adverse effect on the properties, financial condition, results
of operations, or business of such party and its subsidiaries, taken as a whole,
or (ii) would materially prevent such party's, or any affiliated party's,
ability to perform its obligations under this Reorganization Agreement or the
consummation of any of the transactions contemplated hereby; provided, however,
that in determining whether a Material Adverse Effect or Material Adverse Event
has occurred, there shall be excluded any effect the cause of which is (A) any
change in banking, tax and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (B) any change in
GAAP or regulatory accounting requirements applicable to the parties hereto, (C)
any action or omission of First National or CFC or a subsidiary thereof taken
with the prior written consent of CFC or First National, as applicable, in
contemplation of the transaction contemplated herein, (D) the actions
contemplated by Section 6.12, or (E) any changes in general economic conditions
affecting financial institutions generally, including but not limited to changes
in interest rates.
1.26. MERGER. The Merger of First National with and into CFB, all as
provided herein.
1.27. OCC. Office of the Comptroller of the Currency.
1.28. OTS. Office of Thrift Supervision.
7
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1.29. PBGC. The Pension Benefit Guaranty Corporation.
1.30. PERSON. An individual, a partnership, a corporation, a commercial
bank, an industrial bank, a savings association, a savings bank, a limited
liability company, an association, a joint stock company, a trust, a business
trust, a joint venture, an unincorporated organization, a governmental entity
(or any department, agency, or political subdivision thereof) or other entity.
1.31. PLAN OF MERGER. The Plan of Merger attached to this Reorganization
Agreement as Appendix A.
1.32. PROXY STATEMENT. The joint proxy statement/prospectus included in
the Registration Statement which shall be furnished to the First National
shareholders in connection with the Shareholders' Meeting and the matters
contemplated hereby.
1.33. REGISTRATION STATEMENT. The Registration Statement on Form S-4 to be
filed with the SEC registering the issuance of the CFC Common Stock to be issued
to the First National shareholders in connection with the Merger.
1.34. REGULATIONS. The regulations issued by the IRS under the Code.
1.35. REGULATORY APPROVALS. The orders, approvals, or exemptions of the
FDIC, the OCC, the State Board, or any other Regulatory Authority approving the
Merger and the transactions contemplated herein.
1.36. REGULATORY AUTHORITY. Any Federal or state governmental agency or
authority charged with the supervision or regulation of depository institutions
or engaged in the insurance of deposits (including, without limitation, the OCC,
the State Board and the FDIC) and any other Federal or state bank, thrift or
other financial institution, insurance or securities regulatory authorities, and
any and all other agencies or departments of Federal, state or local government,
including without limitation the SEC.
1.37. REORGANIZATION AGREEMENT. This Reorganization Agreement, including
all schedules, appendices and exhibits attached hereto.
1.38. RIGHTS. Rights shall mean warrants, calls, commitments, options,
rights (whether stock appreciation rights, conversion rights, exchange rights,
profit participation rights, or otherwise), securities or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, and other arrangements or commitments which obligate a
Person to issue, otherwise cause to become outstanding, sell, transfer, pledge,
or otherwise dispose of any of its capital stock or other ownership interests,
or any voting rights thereof or therein, or to pay monetary sums by reference to
the existence or market valuation of, any of its capital stock or ownership
interests therein.
1.39. SEC. The Securities and Exchange Commission.
1.40. SECURITIES ACT. The Securities Act of 1933, as amended.
1.41. STATE BOARD. The South Carolina State Board of Financial
Institutions.
1.42. SHAREHOLDER APPROVAL. The approval of the Merger by the requisite
vote of the shareholders of First National at the Shareholders' Meeting, all in
accordance with this Reorganization Agreement and the Plan of Merger.
1.43. SHAREHOLDERS' MEETING. The meeting of First National shareholders at
which the Merger will be voted upon.
SECTION II. THE MERGER
2.1. MERGER. Subject to the terms and conditions of this Reorganization
Agreement, including the Plan of Merger, First National shall merge with and
into CFB (the "Merger"), the separate existence of First National shall cease,
and CFB shall survive and the name of the surviving corporation shall be
"Carolina First Bank". The parties agree that the Merger will be effected
pursuant to the terms set forth in the Plan of Merger, the terms of which are
incorporated herein.
2.2. THE CLOSING. The Closing of the transaction contemplated herein shall
be held as soon as reasonably practicable after fulfillment of all conditions
set forth in Section VII and Section VIII hereof (the "Closing Date"), at the
offices of Wyche, Burgess, Freeman & Parham, P.A. or at such other place and
time as the parties hereto may mutually agree; provided, however, that in the
event that Closing has not occurred by March 31, 1999, any party hereto shall
have the right to terminate this Reorganization Agreement.
8
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2.3. CONSIDERATION FOR THE MERGER. The manner of converting the shares of
First National into shares of CFC shall be as set forth in the Plan of Merger.
2.4. SHAREHOLDER APPROVAL; REGISTRATION STATEMENT. CFC shall vote all
shares of CFB in favor of this Reorganization Agreement and the Merger. First
National shall call its Shareholders' Meeting in accordance with the applicable
provisions of Federal law for the purpose of considering and voting on this
Reorganization Agreement and the transactions contemplated hereby. The
Shareholders' Meeting shall be held as soon as practicable. The board of
directors of First National shall recommend (subject to compliance with their
legal and fiduciary duties, as advised by counsel) to its shareholders and use
its best efforts to obtain their approval of this Reorganization Agreement and
the Merger. CFC shall file the Registration Statement with the SEC and shall pay
the required filing fees. The parties will use their respective best efforts and
cooperate with each other to obtain promptly the effectiveness of the
Registration Statement. CFC shall also take any reasonable action required to be
taken under the blue sky laws in connection with the issuance of CFC Common
Stock in the Merger. CFC and First National shall jointly prepare the Proxy
Statement, which shall be reasonably acceptable to all parties. The Proxy
Statement shall be mailed to the First National shareholders as soon as
reasonably practicable after the SEC's declaration of effectiveness of the
Registration Statement, with due consideration given to the anticipated length
of time that will be required to obtain the Regulatory Approvals. First National
shall mail, at its expense, the Proxy Statement to its shareholders.
2.5. COOPERATION; REGULATORY FILINGS. Subject to the terms and conditions
of this Reorganization Agreement, CFC and First National shall cooperate, and
shall cause each of their subsidiaries to cooperate, in the preparation and
submission by CFC and First National, as promptly as reasonably practicable, of
such applications, petitions, and other documents and materials as any of them
may reasonably deem necessary or desirable to the SEC, the OCC, the appropriate
Regulatory Authorities of South Carolina, the shareholders of First National,
and any other Persons for the purpose of obtaining any approvals or consents
necessary to consummate the transactions contemplated by this Reorganization
Agreement. Prior to the making of any such filings with any Regulatory Authority
or the making of any written disclosures with respect to the transactions
contemplated hereby to shareholders or to any third person (such as mailings to
shareholders or press releases), the parties shall submit to each other the
material to be filed, mailed, or released. Any such materials shall be
reasonably acceptable to all parties prior to the filings with any Regulatory
Authorities or the disclosures to shareholders or to any third person, except to
the extent that any person is legally required to proceed prior to obtaining the
approvals of the other parties. CFC shall be responsible for all filings fees
associated with the Regulatory Approvals.
2.6. TAX TREATMENT. CFC and First National intend that the Merger shall
qualify as a tax-free reorganization under Section 368(a) of the Code.
2.7. RESERVATION OF RIGHT TO REVISE TRANSACTION. CFC may at any time
change the method of effecting the acquisition of First National (including
without limitation the provisions of this Section II) if and to the extent it
deems such change to be desirable; provided, however, that no such change shall
(i) alter the type of consideration to be issued to the holders of First
National Common Stock as provided for in this Reorganization Agreement, (ii)
reduce the value of such consideration, (iii) adversely affect the intended
tax-free treatment to First National's stockholders as a result of receiving
such consideration or prevent the parties from obtaining the tax opinion of
Wyche, Burgess, Freeman & Parham, P.A. referred to herein, (iv) materially
impair the ability to receive the Regulatory Approvals, or (v) materially delay
the Closing.
SECTION III. REPRESENTATIONS AND WARRANTIES OF FIRST NATIONAL
First National hereby represents and warrants to CFC and CFB the following
matters on and as of the date of this Reorganization Agreement and at the
Effective Time; provided, however, that before any breach of or inaccuracy in
any of the representations or warranties given in this Section III shall be
actionable or shall constitute grounds for termination of or failure to perform
under the terms of this Reorganization Agreement by CFC or CFB, such breach or
inaccuracy must have a Material Adverse Effect.
3.1. ORGANIZATION, GOOD STANDING AND CONDUCT OF BUSINESS. First National
is a corporation, duly organized, validly existing and in good standing under
the laws of the United States of America, and has full
9
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power and authority and all governmental and regulatory authorizations
("Authorizations") necessary to own all of its properties and assets and to
carry on its business as it is presently being conducted, and is properly
licensed, qualified and in good standing as a foreign corporation in all
jurisdictions wherein the character of the properties or the nature of the
business transacted by First National makes such license or qualification
necessary.
3.2. SUBSIDIARIES. First National neither owns nor controls five percent
(5%) or more of the outstanding equity securities, either directly or
indirectly, of any Person.
3.3. CORPORATE AUTHORITY. The execution, delivery and performance of this
Reorganization Agreement have been duly authorized by the Board of Directors of
First National. Other than the Shareholder Approval, no further corporate acts
or proceedings on the part of First National are required or necessary to
authorize this Reorganization Agreement or the Merger.
3.4. BINDING EFFECT. Subject to receipt of the Shareholder Approval and
the Regulatory Approvals, when executed, this Reorganization Agreement will
constitute valid and legally binding obligations of First National, enforceable
against First National in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to rights of creditors of FDIC-insured institutions
or the relief of debtors generally, (ii) laws relating to the safety and
soundness of depository institutions, and (iii) general principles of equity.
Each document and instrument contemplated by this Reorganization Agreement, when
executed and delivered by First National in accordance with the provisions
hereof, shall be duly authorized, executed and delivered by First National and
enforceable against First National in accordance with its terms, subject to the
exceptions in the previous sentence.
3.5. CAPITALIZATION OF FIRST NATIONAL. The authorized capital stock of
First National consists solely of 80,000 authorized shares of common stock
($2.50 par value), of which 80,000 shares are issued and outstanding as of the
date hereof. All of the issued and outstanding shares of First National are
validly issued and fully paid and nonassessable (except as provided pursuant to
Section 55 of the National Bank Act). There are no outstanding Rights to
purchase shares of any class of capital stock of First National, or outstanding
agreements pursuant to which First National is or may become obligated to issue
any shares of its capital stock. None of the shares of the First National Common
Stock is subject to any restrictions as to the transfer thereof, except as set
forth in First National's Articles of Association or Bylaws and except for
restrictions on account of applicable Federal or state securities laws.
3.6. COMPLIANCE WITH LAWS; ABSENCE OF DEFAULTS. (a) First National is not
in default under, or in violation of, any provision of its Articles of
Association or Bylaws. First National is not in default under, or in violation
of, any material agreement to which First National is a party.
(b) Except as disclosed on Schedule 3.6, First National is not in
violation of any applicable law, rule or regulation. First National has not
received any notification or communication from, or consented to or entered into
any memorandum, agreement or order with, any Regulatory Authority (i) asserting
that First National is not in compliance with any of the statutes, regulations,
rules or ordinances which such Regulatory Authority has promulgated or enforces,
or the internal policies and procedures of First National, as applicable, (ii)
threatening to revoke any Authorization, (iii) requiring or threatening to
require First National, or indicating that First National may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement restricting or limiting or purporting to restrict or limit
in any manner the operations of First National, or (iv) directing, restricting
or limiting, or threatening to direct, restrict or limit in any manner the
operations of First National (any such notification, communication, memorandum,
agreement or order described in this sentence herein referred to as a
"Regulatory Agreement").
(c) First National is "well capitalized" as defined in applicable OCC
regulations and is not in "troubled condition" as defined therein, and is in
compliance in all material respects with all fair lending laws or other laws
relating to discrimination, including, without limitation, the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Fair Housing Act, the
Community Reinvestment Act and the Home Mortgage Disclosure Act and similar
Federal and state laws and regulations.
3.7. NON-CONTRAVENTION AND DEFAULTS; NO LIENS. Neither the execution or
delivery of this Reorganization Agreement, nor the fulfillment of, or compliance
with, the terms and provisions hereof, will (i) result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in a
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violation of, termination of or acceleration of the performance provided by the
terms of, any material agreement to which First National is a party or by which
it may be bound, (ii) violate any provision of any law, rule or regulation,
(iii) result in the creation or imposition of any Lien on any asset of First
National, or (iv) violate any provisions of First National's Articles of
Association or Bylaws. To the best of First National's knowledge, no other party
to any material agreement to which First National is a party is in default
thereunder or in breach of any provision thereof. To the best of First
National's knowledge, there exists no condition or event which, after notice or
lapse of time or both, would constitute a default by any party to any such
agreement.
3.8. NECESSARY APPROVALS. First National has obtained all certificates of
authority, licenses, permits, franchises, registrations of foreign ownership or
other regulatory approvals in every jurisdiction necessary for the continuing
conduct of its business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no such certificate,
license, permit, franchise, registration or other approval is about to expire or
lapse, has been threatened to be revoked or has otherwise become restricted by
its terms which would, upon such expiration, lapse, revocation or restriction,
have a Material Adverse Effect. Further, there is no reasonable basis for any
such expiration, lapse, revocation, threat of revocation or restriction. Except
for any necessary Regulatory Approvals, no consent, approval, Authorization,
registration, or filing with or by any governmental authority, foreign or
domestic, is required on the part of First National in connection with the
execution and delivery of this Reorganization Agreement or the consummation by
First National of the transactions contemplated hereby. Except for the
Regulatory Approvals, First National is not required to procure the approval of
any Person in order to prevent the termination of any right, privilege, license
or contract of First National as a result of this Reorganization Agreement.
3.9. FINANCIAL STATEMENTS. The audited financial statements of First
National at and for each of the twelve month periods ended June 30, 1995, 1996
and 1997 and the unaudited quarterly statements at and for the nine months ended
March 31, 1998 (the "First National Financial Statements") all of which have
been provided to CFC, are true, correct and complete in all material respects
and present fairly, in conformity with GAAP, the financial position of First
National at the dates indicated and the results of its operations for each of
the periods indicated, except with respect to the unaudited statements, normal
year end adjustments. The books and records of First National have been kept,
and will be kept to the Closing Date, in reasonable detail, and will fairly and
accurately reflect in all material respects to the Closing Date, the
transactions of First National.
3.10. TAX RETURNS. First National files its income tax returns and
maintains its tax books and records on the basis of a taxable year ending
December 31. First National has duly filed all tax reports and returns required
to be filed by any Federal, state and local taxing authorities (including,
without limitation, those due in respect of its properties, income, franchises,
licenses, sales, payrolls, and trusts established by First National) through the
date hereof, and First National has duly paid all taxes with respect to the
periods covered thereby and has established adequate reserves in accordance with
GAAP for the payment of all income, franchises, property, sales, employment or
other taxes anticipated to be payable after the date hereof. First National is
not delinquent in the payment of any taxes, assessments or governmental charges
and no deficiencies have been asserted or assessed, which have not been paid or
for which adequate reserves have not been established and which are not being
contested in good faith. First National does not have in effect any waiver
relating to any statute of limitations for assessment of taxes with respect to
any Federal, state or local income, property, franchise, sales, license or
payroll tax. First National does not know of, or have reason to know of, any
questions which have been raised or which may be raised by any taxing authority
relating to taxes or assessments of First National which, if determined
adversely, would result in the assertion of any deficiency. All tax information
reported by First National to Federal and state authorities and other Persons
has been accurately and timely reported, except such as will not have a Material
Adverse Effect.
3.11. UNDISCLOSED LIABILITIES. Except for the liabilities which are
disclosed in the First National Financial Statements or as set forth on Schedule
3.11, First National has no material liabilities or material obligations of any
nature, whether absolute, accrued, contingent or otherwise, and whether due or
to become due. Since March 31, 1998, there has been no (i) Material Adverse
Event with respect to First National, or (ii) any incurrence by or subjection of
First National to any obligation or liability (whether fixed, accrued or
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contingent) or commitment material to First National not referred to in this
Reorganization Agreement, except such obligations or liabilities as were or may
be incurred in the ordinary course of business and which are reflected on the
First National Financial Statements at and for the periods subsequent to March
31, 1998.
3.12. PROPERTIES, ENCUMBRANCES. First National has good and marketable
title to all of the real property and depreciable tangible personal property
owned by it, free and clear of any Lien, except for any Lien for (i) current
taxes not yet due and payable, (ii) pledges to secure deposits and other Liens
incurred in the ordinary course of the banking business, (iii) such
imperfections of title, easements and other encumbrances, if any, as are not
material in character, amount or extent, or (iv) such items as are set forth on
Schedule 3.12. Set forth on Schedule 3.12 are all business locations of First
National, including whether such locations are owned or leased and a statement
of when such locations were first occupied by First National. All buildings and
all fixtures, equipment, and other property and assets which are material to its
business are held by First National under valid leases or subleases enforceable
in accordance with their respective terms.
3.13. LITIGATION. Except as shown on Schedule 3.13, there are no claims,
actions, suits or proceedings pending or threatened against First National, or
to its knowledge affecting First National, at law or in equity, before or by any
Federal, state, municipal, administrative or other court, governmental
department, commission, board, or agency, an adverse determination of which
could have a Material Adverse Effect, and First National knows of no basis for
any of the foregoing. There is no order, writ, memorandum, agreement,
injunction, or decree of any court, domestic or foreign, or any Federal or state
agency affecting First National specifically or to which First National is
subject. Schedule 3.13 also sets forth each pending claim against First National
related to the Occupational Safety and Health Act, each claim related to First
National pending before the Wage/Hour Division of the Department of Labor, each
claim against First National relating to conciliation agreements or complaints
by the Office of Federal Contract Compliance Programs, charges filed with the
Equal Employment Opportunity Commission with respect to First National and
charges filed with the Department of Labor alleging violations of the Family
Medical Leave Act by First National, regardless of whether such matters are
expected to have a Material Adverse Affect.
3.14. REPORTS. First National has duly made all reports and filings
required to be made pursuant to applicable law.
3.15. BROKERS. Except for its agreement with Orr Management Company (a
copy of which has been provided to CFC), First National has not incurred any
liability for any commission or fee in the nature of a finder's, originator's or
broker's fee in connection with the transaction contemplated herein.
3.16. EXPENDITURES. Schedule 3.16 sets forth any single expenditure of
$50,000 or more proposed to be made by First National after the date hereof and
a summary of the terms and conditions pertaining thereto. At least 20 business
days prior to the Closing Date, First National will advise CFC of any changes to
Schedule 3.16 reflecting additions or deletions thereto since the date hereof.
3.17. INSURANCE. Attached hereto as Schedule 3.17 is a list of the
policies of fire, liability, life and other types of insurance held by First
National, setting forth with respect to each such policy, the policy number,
name of the insured party, type of insurance, insurance company, annual premium,
expiration date, deductible amount, if any, and amount of coverage. First
National management believes that each such policy is in an amount reasonably
sufficient for the protection of the assets and business covered thereby, and,
in the aggregate, all such policies are reasonably adequate for the protection
of all the assets and business of First National taking into account the
availability and cost of such coverage. To the extent permissible pursuant to
such policies, all such policies shall remain in full force and effect for a
period of at least 90 days following the Closing Date. There is no reason known
to First National that any such policy would not be renewable on terms and
conditions as favorable as those set forth in such policy.
3.18. CONTRACTS AND COMMITMENTS. (a) Schedule 3.18 attached hereto sets
forth each contract or other commitment of First National which requires an
aggregate payment by First National after the date hereof of more than $50,000,
and any other contract or commitment that in the opinion of First National
management Materially Adversely Affects the business of First National. Except
for the contracts and commitments described in this Reorganization Agreement or
as set forth on Schedule 3.18, First National is not party to or subject to:
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1. Any contracts or commitments which are material to its business,
operations or financial condition other than loans or agreements with
respect thereto entered into in the ordinary course of business;
2. Any employment contract or arrangement, whether oral or written,
with any officer, consultant, director or employee which is not terminable
on 30 days' notice without penalty or liability to make any payment
thereunder for more than 30 days after such termination;
3. Any plan or contract or other arrangement, oral or written,
providing for insurance for any officer or employee or members of their
families;
4. Any plan or contract or other arrangement, oral or written,
providing for bonuses, pensions, options, deferred compensation,
retirement payments, profit-sharing or other benefits for employees;
5. Any contract or agreement with any labor union;
6. Any contract or agreement with customers for the sale of products
or the furnishing of services, or any sales agency, broker, distribution
or similar contract, except contracts made in the ordinary course of
business;
7. Any instrument or arrangement evidencing or related to
indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of purchase money obligation, guaranty, conditional
sale, lease-purchase, or otherwise (other than banking items being
processed in the ordinary course of business);
8. Any joint venture contract or arrangement or any other agreement
involving a sharing of profits;
9. Any license agreement in which First National is the licensor or
licensee;
10. Any material contract or agreement, not of the type covered by
any of the other items of this Section 3.18, which by its terms is either
(i) not to be performed prior to 30 days from the date hereof, or (ii) does not
terminate, or is not terminable without penalty to First National, or any
successors or assigns prior to 30 days from the date hereof.
3.19. EMPLOYEE BENEFIT PLANS AND CONTRACTS. (a) Schedule 3.19 contains a
complete list of all First National Benefit Plans. First National has delivered
to CFC (i) accurate and complete copies of all First National Benefit Plan
documents and all other material documents relating thereto, including all
summary plan descriptions, summary annual reports and insurance contracts, (ii)
accurate and complete detailed summaries of all unwritten First National
Benefit Plans, (iii) accurate and complete copies of the most recent financial
statements and actuarial reports with respect to all First National Benefit
Plans for which financial statements or actuarial reports are required or have
been prepared, (iv) accurate and complete copies of all annual reports for all
First National Benefit Plans (for which annual reports are required) prepared
within the last two years, and (v) accurate and complete copies of determination
letters from the IRS for any First National Benefit Plan maintained or intended
to be maintained under Section 401(a) of the Code. Any First National Benefit
Plan providing benefits that are funded through a policy of insurance is
indicated by the word "insured" placed by the listing of the First National
Benefit Plan on Schedule 3.19.
(b) All First National Benefit Plans conform in all material respects to,
and are being administered and operated in material compliance with, all
applicable requirements of ERISA and the Code. All returns, reports and
disclosure statements required to be filed or delivered under ERISA and the Code
with respect to all First National Benefit Plans have been filed or delivered.
There have not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving any of the First
National Benefit Plans that could subject First National to any material penalty
or tax imposed under the Code or ERISA.
(c) Except as set forth on Schedule 3.19, any First National Benefit Plan
that is intended to be qualified under Section 401(a) of the Code and exempt
from tax under Section 501(a) of the Code has been determined by the IRS to be
so qualified, and such determination is current, remains in effect and has not
been revoked. Nothing has occurred since the date of any such determination that
is reasonably likely to affect adversely such qualification or exemption, or
result in the imposition of excise taxes or income taxes on unrelated business
income under the Code or ERISA with respect to any First National Benefit Plan.
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(d) First National adequately reserved for all liabilities accrued prior
to the Effective Time under First National's nonqualified retirement or deferred
compensation plans.
(e) Except as set forth on Schedule 3.19, First National has no current or
contingent obligation to contribute to any multiemployer plan (as defined in
Section 3(37) of ERISA). First National has no liability with respect to any
employee benefit plan (as defined in Section 3(3) of ERISA) other than with
respect to the First National Benefit Plans.
(f) There are no pending or threatened claims by or on behalf of any First
National Benefit Plan, or by or on behalf of any individual participants or
beneficiaries of any First National Benefit Plan, alleging any breach of
fiduciary duty on the part of First National or any of its officers, directors
or employees under ERISA, the Code or any applicable regulations, or claiming
benefit payments other than those made in the ordinary operation of such plans.
The First National Benefit Plans are not the subject of any investigation, audit
or action by the IRS, the Department of Labor or the PBGC. First National has
made all required contributions under the First National Benefit Plans,
including the payment of any premiums payable to the PBGC and other insurance
premiums. There is no underfunding liability for any First National Benefit Plan
that is subject to the funding requirements of Section 412 of the Code.
(g) First National does not maintain any defined benefit plan, and neither
has incurred, nor has any reason to expect that it will incur, any liability to
the PBGC or otherwise under Title IV or ERISA (including early withdrawal
liability) or under the Code with respect to any such plan. No First National
Benefit Plan has been subject to a reportable event for which notice would be
required to be filed with the PBGC, and no proceeding by the PBGC to terminate
any First National Benefit Plan has been instituted or threatened.
(h) With respect to any First National Benefit Plan that is an employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA) (in this
subsection, a "Welfare Plan"), (i) each such Welfare Plan for which
contributions are claimed as deductions under any provision of the Code is in
material compliance with all applicable requirements pertaining to such
deduction, (ii) with respect to any welfare benefit fund (within the meaning of
Section 419 of the Code) related to such a Welfare Plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a tax under Section 4976(a) of the Code, (iii)
any First National Benefit Plan that is a group health plan (within the meaning
of Section 4980B(g)(2) of the Code) complies, and in each and every case has
complied, with all of the material requirements of Section 4980B of the Code,
ERISA, Title XXII of the Public Health Service Act and the applicable provisions
of the Social Security Act, (iv) such Welfare Plan may be amended or terminated
at any time on or after the Closing Date, and (v) there are no benefits to be
provided to retirees under a group health plan that are subject to disclosure
under Financial Accounting Standards Board No. 106.
(i) Except as set forth on Schedule 3.19, as of the Closing Date, there
will be no contract, agreement, plan or arrangement covering any person that
provides for the payment of an amount that would not be deductible to CFC by
reason of Section 280G or any other provision of the Code.
3.20. ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses (the "First
National Allowance") shown on the First National Call Report dated as of March
31, 1998 and provided to the OCC, as of such date has been determined, in the
opinion of management of First National in accordance with GAAP, to be adequate
to provide for losses relating to or inherent in the loan portfolios of First
National.
3.21. ENVIRONMENTAL MATTERS. First National is in material compliance with
all local, state and Federal environmental statutes, laws, rules, regulations
and permits, including but not limited to CERCLA and the Toxic Substances
Control Act, 15 U.S.C. 2601 et seq. First National has not, nor to the best of
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First National's knowledge have other parties, used, stored, disposed of or
permitted any "hazardous substance" (as defined in CERCLA), petroleum
hydrocarbon, polychlorinated biphenyl, asbestos or radioactive material
(collectively, "Hazardous Substances") to remain at, on, in or under any of the
real property owned or leased by First National (including, without limitation,
the buildings or structures thereon) (the "Real Property"). First National has
not, nor to the best of First National's knowledge have other parties,
installed, used, or disposed of any asbestos or asbestos-containing material on,
in or under any of the Real Property. First National has not, nor to the best of
First National's knowledge have other parties, installed or used underground
storage tanks in or under any of the Real Property. First National has provided
CFC with copies of all complaints, citations, orders, reports, written data,
notices or other communications sent or received by
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it with respect to any local, state or Federal environmental law, ordinance,
rule or regulation as any of them relate to First National. Any exceptions to
the foregoing are set forth on Schedule 3.21.
3.22. FIRST NATIONAL INFORMATION. The written information with respect to
First National and its officers, directors, and affiliates which shall have been
supplied by First National (or any of its accountants, counsel or other
authorized representatives) specifically for use in soliciting the Shareholder
Approval, or which shall be contained in the Registration Statement, will not,
on the date the Proxy Statement is first mailed to shareholders of First
National or on the date of the Shareholders' Meeting, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
3.23. ASSET CLASSIFICATION. Set forth on Schedule 3.23 is a list, accurate
and complete in all material respects, of the aggregate amounts of loans,
extensions of credit or other assets of First National that have been classified
by it as of March 31, 1998 (the "Asset Classification"); and no amounts of
loans, extensions of credit or other assets that have been classified as of
March 31, 1998 by any regulatory examiner as "Other Loans Specially Mentioned",
"Substandard", "Doubtful", "Loss", or words of similar import are excluded from
the amounts disclosed in the Asset Classification, other than amounts of loans,
extensions of credit or other assets that were charged off by First National
prior to March 31, 1998.
3.24. DERIVATIVES CONTRACTS, ETC. First National is not a party to nor has
agreed to enter into an exchange-traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract or any other contract
not included on the balance sheet which is a derivative contract (including
various combinations thereof) (each a "Derivatives Contract") or owns securities
that (i) are referred to as "structured notes", "high risk mortgage
derivatives", "capped floating rate notes" or "capped floating rate mortgage
derivatives", or (ii) are likely to have changes in value as a result of
interest rate changes that significantly exceed normal changes in value
attributable to interest rate changes, except for those Derivatives Contracts
and other instruments legally purchased or entered into in the ordinary course
of business and set forth on Schedule 3.24, including a list, as applicable, of
any First National assets pledged as security for each such instrument.
3.25. LABOR MATTERS. No material work stoppage involving First National is
pending or, to the best knowledge of First National, threatened. First National
is not involved in, or, to the best knowledge of First National's management,
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding which might reasonably be expected to have a Material
Adverse Effect. Employees of First National are not represented by any labor
union, and, to the best knowledge of First National's management, no labor union
is attempting to organize employees of First National.
3.26. SECURITIES REPORTS. Within the last two (2) years, First National
has filed on a timely basis all securities-related reports, registrations, and
statements, together with any amendments, required by applicable Regulatory
Authorities, all of which, as of their respective dates, were in compliance in
all material respects with the applicable rules and regulations.
3.27. OWNERSHIP OF CFC COMMON STOCK. No shares of CFC Common Stock are
beneficially owned (as defined in Rule 13d-3 under the Exchange Act) by First
National.
SECTION IV. REPRESENTATIONS AND WARRANTIES BY CFC AND CFB
Each of CFC and CFB hereby represents and warrants to First National the
following matters on and as of the date of this Reorganization Agreement and at
the Effective Time; provided, however, that before any breach of or inaccuracy
in any of the representations or warranties given in this Section IV shall be
actionable or shall constitute grounds for termination of or failure to perform
under the terms of this Reorganization Agreement by First National, such breach
or inaccuracy must have a Material Adverse Effect.
4.1. ORGANIZATION, GOOD STANDING AND CONDUCT OF BUSINESS. CFC is a
corporation, duly organized, validly existing and in good standing under the
laws of South Carolina, is duly registered as a bank holding company under the
BHCA, and has full power and authority and all Authorizations necessary to own
all of its properties and assets and to carry on its business as it is presently
being conducted, and is properly
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licensed, qualified and in good standing as a foreign corporation in all
jurisdictions wherein the character of the properties or the nature of the
business transacted by CFC makes such license or qualification necessary. CFB is
a direct subsidiary of CFC. CFB is a state banking corporation, duly organized,
validly existing and in good standing under the laws of the state of South
Carolina, and has full power and authority and all Authorizations necessary to
own all of its properties and assets and to carry on its business as it is
presently being conducted, and is properly licensed, qualified and in good
standing as a foreign corporation in all jurisdictions wherein the character of
the properties or the nature of the business transacted by CFB makes such
license or qualification necessary. CFB is a state, non-member bank and is an
"insured depository institution" as defined in the Federal Deposit Insurance Act
and the applicable regulations thereunder. The deposits of CFB are insured by
the Bank Insurance Fund of the FDIC.
4.2. SUBSIDIARIES. (a) Other than CFB, Carolina First Mortgage Company,
and Blue Ridge Finance Company, Inc. (collectively, the "Subsidiaries") or
except as provided below, CFC neither owns nor controls five percent (5%) or
more of the outstanding equity securities, either directly or indirectly, of any
Person. CFC is the direct, record and beneficial owner of 100% of the
outstanding shares of capital stock of the Subsidiaries. There are no contracts,
commitments, understandings or arrangements by which CFC is or may be bound to
sell or otherwise issue any shares of the Subsidiaries' capital stock, and there
are no contracts, commitments, understandings or arrangements relating to the
rights of CFC to vote or to dispose of such shares. All of the shares of capital
stock of the Subsidiaries are fully paid and nonassessable and are owned by CFC
free and clear of any Liens. CFC has, or has the right to acquire, in excess of
15% of the common stock of (i) Affinity Technology Group, Inc., a Delaware
corporation headquartered in Columbia, South Carolina, (ii) Net.B@nk, Inc., a
Georgia corporation and savings and loan holding company headquartered in
Atlanta, Georgia and (iii) ITS, Inc. None of the Subsidiaries either owns or
controls five percent (5%) or more of the outstanding equity securities, either
directly or indirectly, of any Person, except that CFB owns Carolina First
Securities, Inc. and Blue Ridge Finance Company, Inc. owns CF Investments
Company.
4.3. CORPORATE AUTHORITY. The execution, delivery and performance of this
Reorganization Agreement have been duly authorized by the respective Boards of
Directors of CFC and CFB. No further corporate acts or proceedings on the part
of CFC or CFB are required or necessary to authorize this Reorganization
Agreement or the Merger.
4.4. BINDING EFFECT. Subject to receipt of the Regulatory Approvals, when
executed, this Reorganization Agreement will constitute valid and legally
binding obligations of CFC and CFB, enforceable against CFC and CFB in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to rights of creditors of FDIC-insured institutions or the relief of
debtors generally, (ii) laws relating to the safety and soundness of depository
institutions, and (iii) general principles of equity. Each document and
instrument contemplated by this Reorganization Agreement, when executed and
delivered by CFC and/or CFB in accordance with the provisions hereof, shall be
duly authorized, executed and delivered by CFC and/or CFB (as applicable) and
enforceable against CFC and/or CFB (as applicable) in accordance with its terms,
subject to the exceptions in the previous sentence.
4.5. CAPITALIZATION OF CFC. The authorized capital stock of CFC consists
solely of (i) 100,000,000 authorized shares of common stock ($1.00 par value),
of which 18,119,186 shares were issued and outstanding as of June 15, 1998 and
(ii) 10,000,000 shares of preferred stock, none of which is outstanding. All of
the issued and outstanding shares of CFC are validly issued and fully paid and
nonassessable. Except for (i) stock or options to purchase shares of CFC Common
Stock granted under director or employee benefit plans or stock issued by CFC to
its Employee Stock Ownership Plan, (ii) shares which may be issued pursuant to
CFC's Shareholders' Rights Plan entered into as of November 9, 1993 between CFC
and CFB, as amended and restated (the "Rights Plan"), (iii) existing dividend
reinvestment plans, (iv) shares which may be issued in connection with
acquisitions of other financial institutions or assets, or (v) as otherwise set
forth on Schedule 4.5, there are no outstanding Rights or any outstanding
securities or other instruments convertible into shares of any class of capital
stock of CFC, or pursuant to which CFC is or may become obligated to issue any
shares of its capital stock, and no shares of CFC common stock were issued
between June 15, 1998 and the date hereof except pursuant to clauses (i) through
(v) of this sentence. None of the shares of CFC Common Stock is subject to any
restrictions as to the transfer thereof, except as set forth in CFC's Articles
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of Incorporation or Bylaws or the Rights Plan and except for restrictions on
account of applicable Federal or state securities laws. The Common Stock to be
issued in connection with this Reorganization Agreement and the Merger will,
when issued, (i) be validly issued, fully paid and nonassessable, (ii) have been
issued pursuant to an effective registration statement, (iii) have been properly
registered for trading on the Nasdaq National Market, and (iv) will be entitled
to all benefits accorded other shares of CFC Common Stock under the Rights Plan.
4.6. COMPLIANCE WITH LAWS; ABSENCE OF DEFAULTS. (a) Neither CFC nor CFB is
in default under, or in violation of, any provision of its Articles of
Incorporation or Bylaws. Neither CFC nor CFB is in default under, or in
violation of, any material agreement to which either CFC or CFB is a party.
Neither CFC nor CFB is in violation of any applicable law, rule or regulation
the effect of which would have a Material Adverse Effect on CFC or CFB or their
business operations or prospects.
4.7. NON-CONTRAVENTION AND DEFAULTS; NO LIENS. Neither the execution or
delivery of this Reorganization Agreement, nor the fulfillment of, or compliance
with, the terms and provisions hereof, will (i) result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in a
violation of, termination of or acceleration of the performance provided by the
terms of, any material agreement to which CFC or CFB is a party or by which they
may be bound, (ii) violate any provision of any law, rule or regulation, (iii)
result in the creation or imposition of any Lien on any asset of CFC or CFB, or
(iv) violate any provisions of CFC's or CFB's Articles of Incorporation or
Bylaws. To the best of CFC's and CFB's knowledge, no other party to any material
agreement to which CFC or CFB is a party is in default thereunder or in breach
of any provision thereof. To the best of CFC's and CFB's knowledge, there exists
no condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such agreement.
4.8. NECESSARY APPROVALS. Each of CFC and CFB have obtained all
certificates of authority, licenses, permits, franchises, registrations of
foreign ownership or other regulatory approvals in every jurisdiction necessary
for the continuing conduct of its business and ownership of its assets. Except
for those which may be renewed or extended in the ordinary course of business,
no such certificate, license, permit, franchise, registration or other approval
is about to expire or lapse, has been threatened to be revoked or has otherwise
become restricted by its terms which would, upon such expiration, lapse,
revocation or restriction, have a Material Adverse Effect. Further, there is no
basis for any such expiration, lapse, revocation, threat of revocation or
restriction. Except for any necessary Regulatory Approvals (including the filing
with the SEC of the Registration Statement and filings with blue sky
authorities), no consent, approval, Authorization, registration, or filing with
or by any governmental authority, foreign or domestic, is required on the part
of CFC or CFB in connection with the execution and delivery of this
Reorganization Agreement or the consummation by CFC and CFB of the transactions
contemplated hereby. Except for the Regulatory Approvals, neither CFC nor CFB is
required to procure the approval of any Person in order to prevent the
termination of any right, privilege, license or contract of CFC or CFB as a
result of this Reorganization Agreement.
4.9. FINANCIAL STATEMENTS. The audited financial statements of CFC at and
for each of the fiscal years ended December 31, 1995, 1996 and 1997, and the
unaudited quarterly statements at and for the quarter ended March 31, 1998 (the
"CFC Financial Statements") all of which have been provided to First National,
are true, correct and complete in all material respects and present fairly, in
conformity with GAAP, the financial position of CFC at the dates indicated and
the results of its operations for each of the periods indicated. The books and
records of CFC have been kept, and will be kept to the Closing Date, in
reasonable detail, and will fairly and accurately reflect in all material
respects to the Closing Date, the transactions of CFC.
4.10. UNDISCLOSED LIABILITIES. Except for the liabilities which are
disclosed in the CFC Financial Statements or as set forth on Schedule 4.10, CFC
has no material liabilities or material obligations of any nature, whether
absolute, accrued, contingent or otherwise, and whether due or to become due.
Since March 31, 1998, there has been no (i) Material Adverse Event with respect
to either CFC or CFB, or (ii) any incurrence by or subjection of CFC or CFB to
any obligation or liability (whether fixed, accrued or contingent) or commitment
material to CFC or CFB not referred to in this Reorganization Agreement, except
such obligations or liabilities as were or may be incurred in the ordinary
course of business and which are reflected on the CFC Financial Statements at
and for the periods subsequent to March 31, 1998.
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4.11. LITIGATION AND REGULATORY AGREEMENTS. Except as set forth on
Schedule 4.11, there are no claims, actions, suits or proceedings pending or
threatened against or, to its knowledge, affecting CFC or CFB at law or in
equity, before or by any Federal, state, municipal, administrative or other
court, governmental department, commission, board, or agency, an adverse
determination of which could have a Material Adverse Effect, and neither CFC nor
CFB knows of any basis for any of the foregoing. There is no order, writ,
memorandum or agreement, injunction, or decree of any court, domestic or
foreign, or any Federal or state agency affecting CFC or CFB or to which CFC or
CFB is subject, except for (i) agreements between CFC and the Federal Reserve
regarding CFC's ownership interest in Affinity Technology Group, Inc. and (ii)
agreements between CFC and the Federal Reserve, and CFC and the OTS regarding
CFC's ownership interest in Net.B@nk, Inc.
4.12. REPORTS. CFC has duly made all reports and filings required to be
made pursuant to applicable law.
4.13. CFC INFORMATION. The written information with respect to CFC and its
officers, directors, and affiliates which shall have been supplied by CFC (or
any of its accountants, counsel or other authorized representatives)
specifically for use in soliciting the Shareholder Approval, or which shall be
contained in the Registration Statement, will not, on the date the Proxy
Statement is first mailed to shareholders of First National or on the date of
the Shareholders' Meeting, or in the case of the Registration Statement, at the
time it becomes effective, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4.14. SECURITIES REPORTS. Within the last two (2) years, CFC has filed on
a timely basis all reports, registrations, and statements, together with any
amendments, required under the Securities Act and the Exchange Act, all of
which, as of their respective dates, were in compliance in all material respects
with the rules and regulations of the SEC.
4.15. DUE DILIGENCE. All information provided by CFC in connection with
the due diligence investigation by First National was, at the time that such
information was provided, fair, accurate and complete in all material respects.
Since the date of such provision of information, there have been no changes in
such information, which, taken in the aggregate, represent a Material Adverse
Event. CFC has not failed to provide or make available to First National all
material information regarding CFC.
SECTION V. CONDUCT OF BUSINESS PENDING CLOSING
5.1. CONDUCT OF FIRST NATIONAL PENDING CLOSING. During the period
commencing on the date hereof and continuing until the Closing Date, First
National covenants and agrees to the following (except to the extent that CFC
shall otherwise expressly consent in writing, which consent shall not be
unreasonably delayed or withheld); provided, however, that any breach of or
inaccuracy in any of the covenants given in this Section 5.1 must have a
Material Adverse Effect before such breach shall be actionable or shall
constitute grounds for termination or failure to perform under this
Reorganization Agreement.
(a) First National will carry on its business only in the ordinary
course in substantially the same manner as heretofore conducted and, to
the extent consistent with such business, will use all reasonable efforts
to preserve intact its business organization and goodwill, maintain the
services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business
dealings with First National. First National shall not purchase or
otherwise acquire or enter into a contract to acquire servicing or
subservicing rights with respect to loans not originated by First National
without the written consent of CFC, which consent shall not be
unreasonably withheld.
(b) First National will not amend its Articles of Association or
Bylaws as in effect on the date hereof, except as may be required by
applicable law or regulation.
(c) First National will not issue, grant, pledge or sell, or
authorize the issuance of, reclassify or redeem, purchase or otherwise
acquire, any shares of its capital stock of any class or Rights to acquire
any such shares or any shares; nor will it enter into any arrangement or
contract
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with respect to the issuance of any such shares or other Rights to acquire
shares; nor will it declare, set aside or pay any dividends (of any type)
or make any other change in its equity capital structure.
(d) First National will promptly advise CFC in writing of any change
in the businesses of First National which has, or may reasonably be
expected to have, a Material Adverse Effect.
(e) First National will not take, agree to take, or knowingly permit
to be taken (except as may be required by applicable law or regulation)
any action or do or knowingly permit to be done anything in the conduct of
the business of First National, or otherwise, which would be contrary to
or in breach of any of the terms or provisions of this Reorganization
Agreement, or which would cause any of the representations of First
National contained herein to be or become untrue in any material respect.
(f) First National will not incur any indebtedness for borrowed
money, issue or sell any debt securities, or assume or otherwise become
liable, whether directly, contingently or otherwise, for the obligation of
any other party, other than in the ordinary course of business.
(g) Except for expenses attendant to the Merger and current
contractual obligations, First National will not incur any expense in an
amount in excess of $25,000 after the execution of this Reorganization
Agreement without the prior written consent of CFC.
(h) First National will not grant any executive officers any
increase in compensation (except in the ordinary course of business in
accordance with past practice and only upon prior notice to CFC), or enter
into any employment agreement with any executive officer without the
consent of CFC except as may be required under employment or termination
agreements in effect on the date hereof which have been previously
disclosed to CFC in writing.
(i) First National will not acquire or agree to acquire by merging
or consolidating with, purchasing substantially all of the assets of or
otherwise, any business or any corporation, partnership, association or
other business organization or division thereof.
(j) Except as may be directed by any Regulatory Authority, as may be
undertaken in the ordinary course of business in accordance with past
practices, or as may be reasonably appropriate in view of changes in
economic circumstances, First National shall not (1) change its lending,
investment, liability management or other material banking or other
policies in any material respect, or (2) implement or adopt any change in
accounting principles, practices or methods, other than as may be required
by GAAP.
(k) First National shall not impose, or permit or suffer the
imposition of any Liens (except in the ordinary course of business) on any
of its assets, other than Liens on such assets that, individually or in
the aggregate, are not material to the business, properties or operations
of First National. 5.2. CONDUCT OF CFC PENDING CLOSING. During the period
commencing on the date hereof and
continuing until the Closing Date, CFC covenants and agrees to the following
(except to the extent that First National shall otherwise expressly consent in
writing, which consent shall not be unreasonably delayed or withheld); provided,
however, that any breach of or inaccuracy in any of the covenants given in this
Section 5.2 must have a Material Adverse Effect before such breach shall be
actionable or shall constitute grounds for termination or failure to perform
under this Reorganization Agreement.
(a) CFC shall carry on its business in substantially the same manner
as heretofore conducted.
(b) CFC will not amend its Articles of Incorporation or Bylaws as in
effect on the date hereof in any manner that will adversely affect the
First National shareholders in any material respect.
(c) CFC will promptly advise First National orally and in writing of
any change in its business which is or may reasonably be expected to be
materially adverse to CFC.
(d) CFC will not take, agree to take, or knowingly permit to be
taken any action or do or knowingly permit to be done anything in the
conduct of its business or otherwise, which would be contrary to or in
breach of any of the terms or provisions of this Reorganization Agreement,
or which would cause any of the representations of CFC contained herein to
be or become untrue in any material respect.
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SECTION VI. COVENANTS OF THE PARTIES
6.1. ACCESS TO PROPERTIES AND RECORDS. Between the date of this
Reorganization Agreement and the Closing Date, the parties will provide to each
other and to their respective accountants, counsel and other authorized
representatives reasonable access, during reasonable business hours and upon
reasonable notice, to their respective premises, properties, contracts,
commitments, books, records and other information and will cause their
respective officers to furnish to the other party and its authorized
representatives such financial, technical and operating data and other
information pertaining to their respective businesses, as the parties shall from
time to time reasonably request.
6.2. CONFIDENTIALITY. Each party will and will cause its employees and
agents to hold in strict confidence, unless disclosure is compelled by judicial
or administrative process, or in the opinion of its counsel, by other
requirements of law, all Confidential Information and will not disclose the same
to any Person. The party gaining access to such Confidential Information shall
exercise the same degree of care with respect thereto that any such party uses
to preserve and safeguard its own confidential proprietary information.
Confidential Information shall be used only for the purpose of and in connection
with consummating the transaction contemplated herein. If this Reorganization
Agreement is terminated, each party hereto will promptly return all documents
received by it from each other party containing Confidential Information. Each
party will and will cause its employees and agents to hold in strict confidence,
unless disclosure is compelled by judicial or administrative process, or in the
opinion of its counsel, by other requirements of law, the status of the Merger.
Each party shall coordinate with the other parties, any public statements
regarding the Merger.
6.3. COOPERATION. Each party shall use its respective, reasonable best
efforts to take any and all necessary or appropriate actions, and to use its
reasonable best efforts to cause its officers, directors, employees, agents, and
representatives to use their reasonable best efforts and to take all steps in
good faith within their power, to cause to be fulfilled those of the conditions
precedent to its obligations to consummate the Merger which are dependent upon
its or their actions, including but not limited to (i) requesting the delivery
of appropriate opinions and letters from its counsel and (ii) obtaining any
consents, approvals, or waivers required to be obtained from other parties.
6.4. AFFILIATES' LETTERS. First National shall deliver to CFC a letter
identifying all Persons who are, at the time the Merger is submitted to a vote
of the shareholders of First National, "affiliates" of First National for
purposes of Rule 145 of the General Rules and Regulations under the Securities
Act. First National shall use its reasonable best efforts to cause each Person
who is identified as an "affiliate" in the letter referred to above to deliver
to CFC on or prior to the Effective Time a written agreement, in form reasonably
satisfactory to CFC that such Person shall not sell, pledge, transfer or
otherwise dispose of any capital stock of First National or any CFC Common Stock
owned by such person or to be received by such person as part of the
consideration except in compliance with the applicable provisions of the
Securities Act.
6.5. LISTING OF CFC COMMON STOCK. CFC shall cause the shares of CFC Common
Stock to be issued in the transactions contemplated by this Reorganization
Agreement to be approved for quotation on the Nasdaq National Market, subject to
official notice of issuance, prior to the Effective Time. CFC shall give such
notice to the Nasdaq Stock Market as may be required to permit the listing of
the CFC Common Stock issued in connection with the Merger.
6.6. LETTERS FROM ACCOUNTANTS. Prior to the date the Registration
Statement is declared effective and prior to the Effective Time, First National
will deliver to CFC letters from Elliott, Davis & Company, LLP addressed to CFC
and dated not more than two business days before the date on which such
Registration Statement shall have become effective and not more than two
business days prior to the Effective Time, respectively, in form and substance
satisfactory to CFC, and CFC will deliver to First National letters from KPMG
Peat Marwick LLP, addressed to First National and dated not more than two
business days before the Registration Statement shall have become effective and
not more than two business days prior to the Effective Time, respectively, in
form and substance satisfactory to First National, in each case with respect to
the financial condition of the other party and such other matters as are
customary in accountants' comfort letters.
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6.7. TAX TREATMENT. First National and CFC shall each take such acts
within their power as may be reasonably necessary to cause the Merger to qualify
as a "reorganization" within the meaning of Section 368(a) of the Code, except
to the extent such performance or failure would be prohibited by law or
regulation.
6.8. EXPENSES. Except to the extent expressly provided otherwise herein,
the parties shall pay their own fees and expenses (including legal and
accounting fees) incurred in connection with the Merger.
6.9. MATERIAL EVENTS. At all times prior to the Closing Date, each party
shall promptly notify the other parties in writing of the occurrence of any
event which will or may result in a breach of any covenant, representation or
warranty in this Reorganization Agreement, or the failure to satisfy the
conditions specified in Section VII or Section VIII of this Reorganization
Agreement or other material developments relevant to the consummation of the
Merger, and shall use its reasonable best efforts to prevent or promptly to
remedy the same.
6.10. PUBLIC ANNOUNCEMENTS. At all times until after the Closing Date,
neither First National nor CFC shall issue or permit any of its respective
subsidiaries, affiliates, officers, directors or employees to issue any press
release or other information to the press with respect to this Reorganization
Agreement, without the express prior consent of the other party, except as may
be required by law or the policies of the Nasdaq Stock Market. The parties shall
cooperate to prepare a joint press release with respect to the transactions
contemplated herein.
6.11. UPDATING OF SCHEDULES. First National and CFC shall, at the
Effective Time, prepare and deliver to each other such supplements to the
schedules attached hereto as may be necessary or appropriate to ensure the
accuracy and completeness of the information required to be disclosed in such
schedules at all times prior to the Effective Time, provided that the furnishing
of any such supplement to such Schedules shall not modify, limit, or otherwise
affect any representations or warranties of First National or CFC contained
herein or any right of First National or CFC to terminate this Reorganization
Agreement. First National and CFC shall provide to each other drafts of such
supplemental Schedules at least three (3) business days prior to the Closing
Date.
6.12. CERTAIN POLICIES OF FIRST NATIONAL. First National shall, consistent
with GAAP and regulatory accounting principles, use its best efforts to record
any accounting adjustments required to conform its loan, litigation and other
reserve and real estate valuation policies and practices (including loan
classifications and levels of reserves) so as to reflect consistently on a
mutually satisfactory basis the policies and practices of CFC; provided,
however, that First National shall not be obligated to record any such
accounting adjustments pursuant to this Section (i) unless and until First
National shall be reasonably satisfied that all the conditions to the obligation
of the parties to consummate the Merger will be satisfied or waived on or before
the Effective Time, and (ii) in no event until the day prior to the Closing
Date. Notwithstanding any other provision hereof, until the Effective Time, the
management of First National and the authority to establish and implement its
business policies shall continue to reside solely in First National officers and
board of directors, and the election of First National directors shall be solely
the prerogative of First National shareholders.
6.13. EMPLOYEE MATTERS. (a) CFC and First National agree to cooperate and
use reasonable efforts to develop staffing plans which will result in the
retention of as many First National managers and employees as is practical (as
determined by CFC). CFC agrees that First National employees shall also be
eligible for consideration for any other available positions for which they are
qualified at CFC and its subsidiaries. CFC agrees that those former First
National employees who are employed by CFC or its subsidiaries immediately
following the Closing Date: (i) will be eligible to participate in CFC Benefit
Plans; and (ii) will receive past service credit for eligibility and vesting
(but not benefit accrual) purposes under CFC qualified retirement plans for
years of service with First National. CFC agrees that First National may elect
to fully vest its employees under some or all First National Benefit Plans prior
to consummation of the Merger. Any First National Benefit Plans that are
intended to be qualified under Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code will be terminated by proper action of the
Board of Directors of First National prior to the Effective Time. From and after
the Effective Time, CFC agrees to provide credit for service as required by the
Health Insurance Portability and Accountability Act of 1996, as amended, for
purposes of determining any preexisting condition exclusion that may apply to an
employee of First National who becomes covered by a medical plan sponsored by
CFC.
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(b) Except as set forth on Schedule 3.19, as of the Closing Date, there
will be no contract, agreement, plan or arrangement covering any person that
provides for the payment of an amount that would not be deductible to CFC by
reason of Section 280G or any other provision of the Code.
6.14. DIRECTORS. Upon closing, CFC will nominate and elect James H.
Grantham to the Board of Directors of CFB, and will nominate and re-elect him
for a period of at least five years.
6.15. CHARITABLE CONTRIBUTIONS. CFC shall honor First National's
obligations to make the charitable contributions set forth on Schedule 6.15
(which contributions shall not exceed $15,000 annually).
6.16. AGREEMENTS WITH FIRST NATIONAL OFFICERS. (a) Upon closing, CFB shall
enter into a consulting agreement with James H. Grantham in substantially the
form set forth on Schedule 6.16 (the "Consulting Agreement"). Upon Closing,
Carolina First Bank shall employ James H. Grantham at his current salary and
benefits through December 31, 1998.
(b) CFB shall offer J. Rodger Anthony a senior position with CFB, with
responsibility for the geographic area currently targeted by Mr. Anthony.
6.17. PROHIBITED ACTIONS. (a) Except as expressly provided in this
Reorganization Agreement, as agreed to by CFC or as required by applicable law,
rules or regulations (including the fiduciary duties of the First National
directors under applicable law), during the period from the date of this
Reorganization Agreement to the Effective Time, First National shall (i) take no
action which would adversely affect or delay the ability of the parties hereto
to obtain any necessary Regulatory Approvals or Authorizations required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Reorganization Agreement and (ii) take no action that
could reasonably be expected to have a Material Adverse Effect on First
National.
(b) Except as expressly provided in this Reorganization Agreement, as
agreed to by First National or as required by applicable law, rules or
regulations, during the period from the date of this Reorganization Agreement to
the Effective Time, CFC shall, and shall cause its subsidiaries to, (i) take no
action which would adversely affect or delay the ability of the parties hereto
to obtain any necessary Regulatory Approvals or Authorizations required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Reorganization Agreement and (ii) take no action that
could reasonably be expected to have a Material Adverse Effect on CFC.
SECTION VII. CONDITIONS TO CFC'S AND CFB'S OBLIGATIONS TO CLOSE
The obligations of CFC and CFB to consummate the transactions contemplated
in this Reorganiza tion Agreement are subject to the satisfaction of the
following conditions at or before the Closing Date:
7.1. PERFORMANCE OF ACTS AND REPRESENTATIONS BY FIRST NATIONAL. Each of
the acts and undertakings of First National to be performed on or before the
Closing Date pursuant to the terms of this Reorganization Agreement shall have
been duly authorized and duly performed, and each of the representations and
warranties of First National set forth in this Reorganization Agreement shall be
true in all material respects on the Closing Date, except as to transactions
contemplated by this Reorganization Agreement or representations which are as of
a specific date.
7.2. OPINION OF COUNSEL FOR FIRST NATIONAL. First National shall have
furnished CFC with an opinion of its counsel, dated as of the Closing Date, and
in form and substance reasonably satisfactory to CFC and its counsel, to the
effect that, except as disclosed herein: (i) First National is duly organized,
validly existing and in good standing under the laws of the United States of
America; (ii) the consummation of the transactions contemplated by this
Reorganization Agreement will not (A) violate any provision of First National's
Articles of Association or Bylaws, as applicable, (B) violate any provision of,
result in the termination of, or result in the acceleration of any obligation
under, any agreement listed on Schedule 3.18 or any order, arbitration award,
judgment or decree known to counsel to which First National is a party, or by
which it is bound, except as such would not, in the aggregate, have a Material
Adverse Effect, except as disclosed on schedules to the Reorganization
Agreement, or (C) violate or conflict with any other restriction of any kind or
character of which such counsel has knowledge and to which First National is
subject; (iii) all of the shares of First National Common Stock are validly
authorized and issued, fully paid and non-assessable
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(except as provided in Section 55 of the National Bank Act); (iv) First National
has the legal right and power, and all authorizations and approvals required by
law, to enter into this Reorganization Agreement, and to consummate the
transactions contemplated herein and all applicable regulatory waiting periods
have passed; (v) other than filings and registrations required under applicable
law to be made by CFC or CFB, all filings and registrations with, and
notifications to, all Federal and state authorities required on the part of
First National for the consummation of the Merger have been made; (vi) First
National has full corporate power and authority to enter into this
Reorganization Agreement, and this Reorganization Agreement has been duly
authorized, executed and delivered by First National and constitutes a valid and
legally binding obligation of First National enforceable against First National
in accordance with its terms, except as such enforceability may be limited by
(x) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to rights of creditors of
FDIC-insured institutions or the relief of debtors generally, (y) laws relating
to the safety and soundness of depository institutions, and (z) general
principles of equity; and (vii) to the best knowledge of such counsel, no
material suit or proceeding is pending or threatened against First National or
other parties which would have a Material Adverse Effect on First National's
business or properties or its ability to make the representations and warranties
and perform the obligations set forth herein.
7.3. CONDUCT OF BUSINESS. There shall have been no Material Adverse Event
with respect to First National from the date hereof through the Closing Date.
7.4. CONSENTS. All Regulatory Approvals and other authorizations
necessary, in the reasonable opinion of counsel for CFC, to the consummation of
the transactions contemplated hereby shall have been obtained, and no
governmental agency or department or judicial authority shall have issued any
order, writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Regulatory Approvals shall have been obtained
without the imposition of any condition or requirement that, in the reasonable
judgment of CFC, renders the consummation of this transaction unduly burdensome
(excluding conditions or requirements that are typically imposed in transactions
of the type contemplated herein).
7.5. CERTIFICATE. CFC shall have been furnished with such certificates of
officers of First National, in form and substance reasonably satisfactory to
CFC, dated as of the Closing Date, certifying to such matters as CFC may
reasonably request, including but not limited to the fulfillment of the
conditions specified in this Section VII.
7.6. SHAREHOLDER APPROVAL. The Shareholder Approval shall have been
obtained.
7.7. SECURITIES LAWS. The Registration Statement shall have been declared
effective. No order suspending the sale of the shares of CFC Common Stock in any
jurisdiction shall have been issued, and no proceedings for that purpose shall
have been instituted.
7.8. FIRST NATIONAL ALLOWANCE. Immediately prior to Closing, the First
National Allowance shall not be less than 1.1% of the total First National loans
then outstanding, unless required otherwise by GAAP or applicable law.
7.9. CONSULTING AGREEMENT. The Consulting Agreement shall have been
executed.
7.10. LIMIT ON DISSENT. The holders of 10% or more of the First National
Common Stock outstanding at the time of the Shareholders' Meeting shall not have
dissented to the Merger by demanding payment for fair value of their shares in
the manner provided by 12 U.S.C.A. ss.214a.
7.11. POOLING OF INTERESTS. CFC shall have received reasonable assurance
from KPMG Peat Marwick that the Merger will qualify for pooling of interests
accounting treatment under general accepted accounting practices.
SECTION VIII. CONDITIONS TO THE OBLIGATION OF FIRST NATIONAL TO CLOSE
The obligation of First National to consummate the transactions
contemplated in this Reorganization Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
8.1. PERFORMANCE OF ACTS AND REPRESENTATIONS BY CFC AND CFB. Each of the
acts and undertakings of CFC and CFB to be performed on or before the Closing
Date pursuant to the terms of this Reorganization Agreement shall have been duly
authorized and duly performed, and each of the representations and
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warranties of CFC and CFB set forth in this Reorganization Agreement shall be
true in all material respects on the Closing Date, except as to transactions
contemplated by this Reorganization Agreement or representations which are as of
a specific date.
8.2. OPINION OF COUNSEL FOR CFC. CFC shall have furnished First National
with an opinion of its counsel, dated as of the Closing Date, and in form and
substance reasonably satisfactory to First National and its counsel, to the
effect that, except as disclosed herein: (i) CFC and CFB are duly organized,
validly existing and in good standing under the laws of the State of South
Carolina; (ii) the consummation of the transactions contemplated by this
Reorganization Agreement will not (A) violate any provision of CFC's or CFB's
Articles of Incorporation or Bylaws, (B) violate any provision of, result in the
termination of, or result in the accelera tion of any obligation under, any
mortgage, lien, lease, franchise, license, permit, agreement, instrument, order,
arbitration award, judgment or decree known to counsel to which CFC or CFB is a
party, or by which it is bound, except as such would not, in the aggregate, have
a Material Adverse Effect on the business or financial condition of CFC, or (C)
violate or conflict with any other restriction of any kind or character of which
such counsel has knowledge and to which CFC or CFB is subject; (iii) all of the
shares of CFC Common Stock to be issued in connection with the Merger will be,
when issued, validly authorized and issued, fully paid and non-assessable; (iv)
CFC and CFB have the legal right and power, and all authorizations and approvals
required by law, to enter into this Reorganization Agreement, and to consummate
the transactions contemplated herein and all applicable regulatory waiting
periods have passed; (v) all filings and registrations with, and notifications
to, all Federal and state authorities required on the part of First National for
the consummation of the Merger have been made; (vi) CFC and CFB have full
corporate power and authority to enter into this Reorganization Agreement, and
this Reorganization Agreement has been duly authorized, executed and delivered
by CFC and CFB and constitutes a valid and legally binding obligation of CFC and
CFB enforceable against CFC and CFB in accordance with its terms, except as such
enforceability may be limited by (x) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to rights of creditors of FDIC-insured institutions or the relief of
debtors generally, (y) laws relating to the safety and soundness of depository
institutions, and (z) general principles of equity; (vii) to the best knowledge
of such counsel, no material suit or proceeding is pending or threatened against
CFC or other parties which would have a Material Adverse Effect on CFC's
business or properties or its abilities to make the representations and
warranties and perform the obligations set forth herein, and (viii) the
Registration Statement became effective on [date] and no stop order suspending
the effectiveness of the Registration Statement or any part thereof has been
issued and no proceedings for that purpose have been instituted or are pending
under the Securities Act.
8.3. CONDUCT OF BUSINESS. There shall have been no Material Adverse Event
with respect to CFC or CFB from the date hereof through the Closing Date.
8.4. CONSENTS. All Regulatory Approvals or other authorizations necessary,
in the reasonable opinion of counsel for First National, to the consummation of
the transactions contemplated hereby shall have been obtained, and no
governmental agency or department or judicial authority shall have issued any
order, writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Approvals of all applicable regulatory
agencies shall have been obtained without the imposition of any condition or
requirements that, in the reasonable judgment of First National, renders the
consummation of this transaction unduly burdensome (excluding conditions or
requirements that are typically imposed in transactions of the type contemplated
herein).
8.5. CERTIFICATE. First National shall have been furnished with such
certificates of officers of CFC and CFB, in form and substance reasonably
satisfactory to First National, dated as of the Closing Date, certifying to such
matters as First National may reasonably request, including but not limited to
the fulfillment of the conditions specified in this Section VIII.
8.6. TAX OPINION. First National shall have received from Wyche, Burgess,
Freeman & Parham, P.A. a tax opinion, reasonably satisfactory to First National,
opining, subject to reasonable qualifications, that the Merger shall, upon
compliance with reasonable conditions, qualify as a tax-free reorganization
under Section 368(a) of the Code.
8.7. SHAREHOLDER APPROVAL. The Shareholder Approval shall have been
obtained.
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8.8. SECURITIES LAWS. The Registration Statement shall have been declared
effective. No order suspending the sale of the shares of CFC Common Stock in any
jurisdiction shall have been issued, and no proceedings for that purpose shall
have been instituted.
8.9. CONSULTING AGREEMENT. The Consulting Agreement shall have been
executed.
SECTION IX. TERMINATION
9.1. TERMINATION. This Reorganization Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual consent of the parties;
(b) by either CFC or First National, at that party's option, (A) if
a permanent injunction or other order (including any order denying any
required regulatory consent or approval) shall have been issued by any
Federal or state court of competent jurisdiction in the United States or
by any United States Federal or state governmental or regulatory body,
which order prevents the consummation of the transactions contemplated
herein, or (B) if the Shareholder Approval is not received at the
Shareholder Meeting;
(c) by either CFC or First National if the other party (or any of
its subsidiaries) has failed to comply with the agreements or fulfill the
conditions contained herein, provided, however, that any such failure of
compliance or fulfillment must result in a Material Adverse Event and the
breaching party must be given notice of the failure to comply and a
reasonable period of time to cure; or
(d) by either CFC or First National as set forth in Section 2.2
hereof.
SECTION X. INDEMNIFICATION
10.1. INFORMATION FOR APPLICATION AND STATEMENTS. Each of CFC and First
National represents and warrants that all information concerning it which is or
will be included in any statement and application made to any governmental
agency (including the Registration Statement) in connection with the
transactions contemplated by the Agreement shall be true and correct in all
material respects and shall not omit any material fact required to be stated
therein or necessary to make the statements made, in light of the circumstances
under which they were made, not misleading. Each of CFC and First National so
representing and warranting will indemnify and hold harmless the other, each of
its directors and officers, who controls the other within the meaning of the
Securities Act, from and against any and all losses, claims, damages, expenses
or liabilities to which any of them may become subject under applicable laws and
rules and regulations thereunder and will reimburse them for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any actions whether or not resulting in liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any such application or statement or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing by the
representing and warranting party expressly for use therein. Each of CFC and
First National agrees, at any time upon the request of the other, to furnish to
the other a written letter or statement confirming the accuracy of the
information contained in any proxy statement, registration statement, report or
other application or statement, or in any draft of any such document, and
confirming that the information contained in such document or draft was
furnished expressly for use therein or, if such is not the case, indicating the
inaccuracies contained in such document or draft or indicating the information
not furnished expressly for use therein. The indemnity agreement contained in
this Section X shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the other party.
10.2. INDEMNIFICATION OF OFFICERS AND DIRECTORS. (a) CFC covenants and
agrees that it will cause each person who is an officer or director of First
National (an "Indemnitee") on the Closing Date to be indemnified
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for any costs and expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") arising
out of such person's service as an officer or director of First National to the
fullest extent to which such indemnification is permitted under the Articles of
Incorporation and Bylaws of CFC in effect on the date hereof (except that this
provision shall not be construed so as to cause CFC to violate applicable law).
Except for expenses associated with claims described in the immediately
succeeding sentence and except for, in particular, expenses associated with any
claims or threatened or actual litigation between Indemnitees and CFC, CFC, upon
request of such Indemnitees, shall advance expenses in connection with such
indemnification, provided that such advancement need be made if and only to the
extent that such advancement would have been proper under Section 33-8-530 if
such Indemnitees had been directors or officers of CFC. Notwithstanding the
foregoing or anything to the contrary herein, this indemnification shall not
cover any breach of a First National Indemnitee's fiduciary duty which breach
shall constitute a breach by First National of this Reorganization Agreement and
which breach is the subject of a lawsuit between CFC and such Indemnitee. The
provisions of this Section X shall survive the closing and shall be enforceable
directly by each officer and director of First National benefited by this
Section X.
(b) Any Indemnitee wishing to claim indemnification under this Section X,
upon learning of such claims or liabilities, shall promptly notify CFC thereof;
provided, that the failure so to notify shall not affect the obligations of CFC
hereunder unless such failure materially increases CFC's liability hereunder. In
the event of any litigation giving rise to a claim hereunder, (i) CFC shall have
the right to assume the defense thereof, if it so elects, and CFC shall pay all
reasonable fees and expenses of counsel for the Indemnitees promptly as
statements therefor are received; provided, however, that CFC shall be obligated
pursuant to this Section to pay for only one firm of counsel for all Indemnitees
in any jurisdiction for any single action, suit or proceeding or any group of
actions, suits or proceedings arising out of or related to a common body of
facts, (ii) the Indemnitees shall cooperate in the defense of any such matter,
(iii) CFC shall not be liable for any settlement effected without its prior
written consent and (iv) CFC shall have no obligation hereunder in the event a
Federal banking agency or a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that indemnification of an Indemnitee in the manner contemplated hereby is
prohibited by applicable law.
10.3. INSURANCE. First National and CFC shall use their reasonable best
efforts to maintain First National's existing directors' and officers' liability
insurance policy (or a policy, similar to First National's existing policy,
providing comparable coverage on terms no less favorable) past the Closing Date
covering persons who are currently covered by such insurance; provided that CFC
or First National shall not make a premium payment in respect of such policy (or
replacement policy) which exceeds $25,000 and provided further that First
National and CFC shall obtain the maximum amount of such coverage as can be
obtained by paying a premium of $25,000. CFC shall take no action to terminate
prematurely such policy.
SECTION XI. MISCELLANEOUS
11.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Reorganization Agreement, or in any other documents
delivered pursuant hereto, shall survive the Closing of the transactions
contemplated hereby for one year. Notwithstanding any investigation made by or
on behalf of the parties, whether before or after Closing Date, the parties
shall be entitled to rely upon the representations and warranties given or made
by the other party(ies) herein.
11.2. ENTIRE AGREEMENT. This Reorganization Agreement, including any
schedules, exhibits, lists and other documents referred to herein which form a
part hereof, contains the entire agreement of the parties with respect to the
subject matter contained herein and there are no agreements, warranties,
covenants or undertakings other than those expressly set forth herein.
11.3. BINDING AGREEMENT. This Reorganization Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Agreement shall not be
assigned by any of the parties hereto without the prior written consent of the
other parties hereto.
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11.4. NOTICES. Any notice given hereunder shall be in writing and shall be
deemed delivered and received upon reasonable proof of receipt. Unless written
designation of a different address is filed with each of the other parties
hereto, notice shall be transmitted to the following addresses:
For CFC/CFB: William S. Hummers III
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
Fax: 864-239-4605
Copy to: William P. Crawford, Jr.
Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, South Carolina 29602
Fax: 864-242-8324
For First National: James H. Grantham
First National Bank of Pickens County
Post Office Box 289
Easley, South Carolina 29641-0289
Fax: 864-855-8222
Copies to: George S. King, Jr.
Sinkler & Boyd
Post Office Box 11889
Columbia, South Carolina 29211
Fax: 803-765-1243
11.5. COUNTERPARTS. This Reorganization Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
11.6. HEADINGS. The section and paragraph headings contained in this
Reorganization Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretations of this Reorganization Agreement.
11.7. LAW GOVERNING. This Reorganization Agreement shall be governed by
and construed in accordance with the laws of the State of South Carolina.
11.8. AMENDMENT. This Reorganization Agreement may not be amended except
by an instrument in writing signed on behalf of all of the parties.
11.9. WAIVER. Any term, provision or condition of this Reorganization
Agreement (other than that required by law) may be waived in writing at any time
by the party which is entitled to the benefits thereof.
END OF PAGE
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IN WITNESS WHEREOF, this Reorganization Agreement has been duly entered as
of the date first written above.
WITNESS:
CAROLINA FIRST CORPORATION
/s/ By: /s/ William S. Hummers III
- ------------------------- ------------------------------------------
/s/ William S. Hummers III
- ------------------------- Executive Vice President
CAROLINA FIRST BANK
/s/ By: /s/ William S. Hummers III
- ------------------------- ------------------------------------------
/s/ William S. Hummers III
- ------------------------- Executive Vice President
FIRST NATIONAL BANK OF PICKENS COUNTY
/s/ By: /s/ James H. Grantham
- ------------------------- -----------------------------------------
/s/ James H. Grantham
- ------------------------- Chairman of the Board
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Schedules to the Reorganization Agreement omitted but will be provided to the
Commission upon request.
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APPENDIX A TO AGREEMENT AND PLAN OF REORGANIZATION
PLAN OF MERGER OF
FIRST NATIONAL BANK OF PICKENS COUNTY
WITH AND INTO
CAROLINA FIRST BANK
Pursuant to this Plan of Merger (the "Plan of Merger"), First National
Bank of Pickens County ("First National"), a national banking association
headquartered in Easley, South Carolina, shall be merged with and into Carolina
First Bank ("CFB"), a South Carolina banking corporation headquartered in
Greenville, South Carolina.
ARTICLE I. DEFINITIONS
The capitalized terms set forth below shall have the indicated meanings.
Defined terms used herein, and not otherwise defined herein, shall have the
meanings ascribed to such terms in the Reorganization Agreement.
1.1. "Articles of Merger" shall mean the Articles of Merger to be executed
by CFB and First National in a form appropriate for filing with the Secretary of
State of South Carolina, relating to the effective consummation of the Merger.
1.2. "BCA" shall mean the South Carolina Business Corporation Act of 1988,
as amended.
1.3. CFB shall mean Carolina First Bank, a South Carolina corporation and
a wholly-owned subsidiary of Carolina First Corporation ("CFC").
1.4. "CFC Common Stock" shall mean the common stock, par value $1.00 per
share, of CFC.
1.5. "Conversion Ratio" shall mean the number of shares of CFC Common
Stock issuable in exchange for one share of First National Common Stock, as
calculated pursuant to Section 3.1 hereof.
1.6. "Effective Time" shall mean the date and time which the Merger
becomes effective as more particularly set forth in Section 2.2 hereof. Subject
to the terms and conditions hereof, the Effective Time shall be such time on
such date as CFC shall notify First National in writing not less than five days
prior thereto, which date shall not be more than 30 days after all conditions
have been satisfied or waived in writing.
1.7. "Fair Market Value" shall mean the average of the closing prices as
quoted on the Nasdaq National Market for CFC Common Stock for the twenty days in
which CFC Common Stock was traded immediately prior to the Closing Date;
provided, however, if prior to the Effective Time, any other Person shall have
publicly announced an intention to acquire control of CFC by merger or otherwise
or CFC shall have publicly acknolwedged that it is seeking to be acquired by
another Person or is discussing being acquired by another Person, then the
average of the Closing Prices as quoted on the Nasdaq National Market for CFC
Common Stock for the 20 days for which the CFC Common Stock was traded
immediately prior to such announcement or acknowledgement shall be determined
and, if such average is less than the average determined pursuant to the first
clause of this sentence, then the smaller average shall be the Fair Market
Value.
1.8. "First National Common Stock" shall mean the common stock, par value
$2.50 per share, of First National.
1.9. "Merger" shall mean the merger of First National with and into CFB as
more particularly set forth herein and in the Reorganization Agreement.
1.10. "OCC" shall mean the Office of the Comptroller of the Currency.
1.11. "Person" shall mean an individual, a partnership, a corporation, a
commercial bank, an industrial bank, a savings association, a savings bank, a
limited liability company, an association, a joint stock company, a trust, a
business trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
1.12. "Reorganization Agreement" shall mean the Reorganization Agreement
among CFC, CFB, and First National dated as of the date hereof, to which this
Plan of Merger is attached as Appendix A.
1.13. "Rights" shall mean warrants, calls, commitments, options, rights
(whether stock appreciation rights, conversion rights, exchange rights, profit
participation rights, or otherwise), securities or obligations convertible into
or exchangeable for, or giving any Person any right to subscribe for or acquire,
and other arrangements or commitments which obligate a Person to issue,
otherwise cause to become outstanding, sell, transfer, pledge, or otherwise
dispose of any of its capital stock or other ownership interests, or any voting
rights thereof or therein, or to pay monetary sums by reference to the existence
or market valuation, or in lieu and place, of any of its capital stock or
ownership interests therein.
1.14. "Shareholder Approvals" shall mean, as the context may require, the
duly authorized written consent of CFC to the merger of First National with and
into CFB; and the approval by the requisite vote of the shareholders of First
National at the Shareholders' Meeting of the merger of First National with and
into CFB, all in accordance with the Reorganization Agreement and this Plan of
Merger.
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1.15. "Shareholders' Meeting" shall mean the meeting of the shareholders
of First National at which the Merger shall be voted upon.
1.16. "Surviving Corporation" shall mean CFB after consummation of the
Merger.
ARTICLE II. THE MERGER
2.1. Merger. At the Effective Time, subject to the terms and conditions of
the Reorganization Agreement and this Plan of Merger, First National shall merge
with and into CFB, the separate existence of First National shall cease, and CFB
(the "Surviving Corporation") shall survive and the name of the Surviving
Corporation shall be "Carolina First Bank". By virtue of the Merger and without
any action on the part of the holders thereof, each of the shares of First
National Common Stock issued and outstanding immediately prior to the Effective
Time (excluding shares held by First National, in each case other than in a
fiduciary capacity or as a result of debts previously contracted (the "Excluded
Shares")) shall be converted into the right to receive the Merger Consideration
referenced in Article III below. Each of the shares of CFB capital stock and any
shares of any CFB subsidiary outstanding immediately prior to the Effective Time
shall continue to be issued and outstanding, and shall not be converted,
exchanged or altered in any manner as a result of the Merger.
2.2. Effective Time. The Merger shall become effective on the date and at
the time specified in the Articles of Merger, and in the form to be filed with
the Secretary of State of the State of South Carolina.
2.3. Capitalization. The number of authorized shares of capital stock of
the Surviving Corporation shall be the same as immediately prior to the Merger.
2.4. Articles of Incorporation. The articles of incorporation of CFB as in
effect at the Effective Time shall be and remain the articles of incorporation
of the Surviving Corporation.
2.5. Bylaws. The Bylaws of CFB, as in effect at the Effective Time, shall
continue in full force and effect as the bylaws of the Surviving Corporation
until otherwise amended as provided by law or by such bylaws.
2.6. Properties and Liabilities of First National and CFB; Management. At
the Effective Time, the separate existence and corporate organization of First
National shall cease, and CFB shall thereupon and thereafter, to the extent
consistent with applicable law and with its articles of incorporation and the
changes, if any, provided by the Merger, possess all the rights, privileges,
immunities, liabilities and franchises, of a public as well as a private nature,
of First National without further act or deed. The directors and officers of CFB
in office immediately prior to the Merger's becoming effective shall be the
directors and officers of the Surviving Corporation, together with such
additional directors and officers as may thereafter be elected, who shall hold
office until such time as their successors are elected and qualified.
ARTICLE III. MERGER CONSIDERATION
3.1. Merger Consideration. In connection with the Merger, each share of
First National Common Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be exchanged for and converted into shares of CFC Common
Stock (the "Conversion Ratio") having an aggregate value of $750.08 (with the
CFC Common Stock being valued at the Fair Market Value). Notwithstanding the
foregoing, in the event that the Effective Time is after September 30, 1998, the
aggregate value of CFC Common Stock to be issued in exchange for each share of
First National Common Stock will be $769.89.
3.2. CFB Common Stock. None of the shares of CFB shall be converted in the
Merger and the capitalization of CFB after the Merger shall remain unchanged.
3.3. Authorized or Treasury Shares. Any and all shares of First National
Common Stock held as treasury shares by First National or authorized but
unissued shares shall be canceled and retired at the Effective Time, and no
consideration shall be issued or given in exchange therefor.
3.4. Fractional Shares. No fractional shares of CFC Common Stock will be
issued as a result of the Merger. In lieu of the issuance of fractional shares
pursuant to Section 3.1 hereof, cash will be paid to the holders of the First
National Common Stock in respect of any fractional share that would otherwise be
issuable based on the Fair Market Value.
3.5. Excluded Shares. Each of the Excluded Shares shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.6. Equitable Adjustments. In the event of any change in the outstanding
CFC Common Stock by reason of a stock dividend, stock split, stock
consolidation, recapitalization, reorganization, merger, split up or the
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like, the Conversation Ratio and all stock prices set forth in this Article III
shall be appropriately adjusted so as to preserve, but not increase, the
benefits of this Plan of Merger to the holders of First National Common Stock.
3.7. Transfers. At the Effective Time, the stock transfer books of First
National shall be closed and no transfer of First National Common Stock shall
thereafter be made or recognized. Any other provision of this Plan of Merger
notwithstanding, none of the parties to the Reorganization Agreement or any
affiliate of the foregoing shall be liable to a holder of First National Common
Stock for any amount paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat, or similar law.
ARTICLE IV. EXCHANGE OF COMMON STOCK CERTIFICATES
4.1. Issuance of CFC Certificates; Cash for Fractional Shares. As soon as
practicable after the Effective Time (but in no event more than five days after
the Effective Time), CFC or its transfer agent (in such capacity, the "Exchange
Agent") shall mail, or cause to be mailed, and otherwise make available to each
record holder of First National Common Stock, a form of the letter of
transmittal and instructions for use in effecting surrender and exchange of
certificates which immediately before the Effective Time represented shares of
First National Common Stock ("Certificates") for payment therefor. Upon receipt
of such notice and transmittal form, each holder of Certificates at the
Effective Time shall surrender the Certificate or Certificates to the Exchange
Agent, and shall promptly upon surrender receive in exchange therefor the Merger
Consideration provided in Article III of this Plan of Merger. If any portion of
the payment to be made upon surrender and exchange of a Certificate is to be
paid to a person other than the person in whose name the Certificate is
registered, it shall be a condition of such payment that the Certificate shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay in advance any transfer or other taxes
or establish to the satisfaction of CFC that no such tax is applicable. Upon
surrender, each Certificate shall be canceled. In addition, Certificates
surrendered for exchange by any person constituting an affiliate of First
National for purposes of Rule 145(c) under the Securities Act of 1933, as
amended (the "Securities Act"), shall not be exchanged for certificates
representing shares of CFC Common Stock until CFC has received the written
agreement from such person as provided for in Section 6.4 of the Reorganization
Agreement. Adequate provisions shall be made to permit Certificates to be
surrendered and exchanged in person not later than the business day following
the Effective Time.
4.2. Authorized Withholdings. CFC shall not be obligated to deliver the
consideration to which any former holder of First National Common Stock is
entitled as a result of the Merger until such holder surrenders his or her
certificate or certificates representing the shares of First National Common
Stock for exchange as provided in this Article IV, or, in default thereof, an
appropriate affidavit of loss and indemnity agreement and/or a bond as may be
reasonably required in each case by CFC or First National. In addition, no
dividend or other distribution payable to the holders of record of CFC Common
Stock as of any time subsequent to the Effective Time shall be paid to the
holder of any certificate representing shares of First National Common Stock
issued and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 4.1 above. However, upon
surrender of the First National Common Stock certificate both the CFC Common
Stock certificate, together with all such withheld dividends or other
distributions and any withheld cash payments in respect of fractional share
interest, but without any obligation for payment of interest by such
withholding, shall be delivered and paid with respect to each share represented
by such certificate.
4.3. Limited Rights of Former First National Shareholders. After the
Effective Time, each outstanding certificate representing shares of First
National Common Stock prior to the Effective Time shall be deemed for all
corporate purposes (other than voting and the payment of dividends and other
distributions to which the former shareholder of First National Common Stock may
be entitled) to evidence only the right of the holder thereof to surrender such
certificate and receive the requisite number of shares of CFC Common Stock in
exchange therefor (and cash in lieu of fractional shares) as provided in this
Plan of Merger.
ARTICLE V. STOCK OPTIONS AND OTHER RIGHTS
5.1. Options. There are no Rights to purchase First National Common Stock
or securities convertible into First National Common Stock.
ARTICLE VI. MISCELLANEOUS
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6.1. Conditions Precedent. Consummation of the Merger is conditioned upon
the fulfillment of the conditions precedent set forth in Section VII and Section
VIII of the Reorganization Agreement, subject to waiver of any such conditions,
if appropriate, as provided thereunder.
6.2. Termination. This Plan of Merger may be terminated at any time prior
to the Effective Time as provided in Section IX of the Reorganization Agreement.
6.3. Amendments. To the extent permitted by law, this Plan of Merger may
be amended by a subsequent writing signed by all of the parties to the
Reorganization Agreement upon the approval of the board of directors of each of
the parties thereto; provided, however, that this Plan of Merger may not be
amended after the Shareholders' Meeting except in accordance with applicable
law.
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Annex B
[ORR MANAGEMENT COMPANY LETTERHEAD]
June 22, 1998
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial point of view, to the stockholders, ("Company Common Stock"), of First
National Bank of Pickens County (the "Company") of the consideration to be
received by such stockholders in the proposed merger (the "Merger") of the
Company with Carolina First Corporation ("Acquiror") pursuant to an Agreement
and Plan of Reorganization (the "Merger Agreement"), between the Company and
Acquiror. Upon the effectiveness of the Merger, each issued and outstanding
share of Company Common Stock (other than shares owned by stockholders who
properly exercise dissenters' rights) will be converted into shares having an
aggregate value of $750.08 (with the Acquiror's Stock valued at the Fair Market
Value). Notwithstanding the foregoing, in the event that the Effective Time is
after September 30, 1998, the aggregate value of the Acquiror's Common Stock to
be issued in exchange for each share of the Company Common Stock will be $769.89
(the "Merger Consideration").
In connection with rendering our opinion, we have reviewed and analyzed, among
other things, the following: (i) the Merger Agreement; (ii) certain publicly
available information concerning the Company and Acquiror, including the Annual
Reports on Form 10-K of the Company for each of the years in the three year
period ended December 31, 1995-1997 and of the Acquiror for each of the years in
the three year period ended December 31, 1995-1997, the Quarterly Reports on
Form 10-Q of the Company and Acquiror for the quarter ended March 31, 1998,
(iii) certain available financial forecasts concerning the business and
operations of the Company and Acquiror that were prepared by management of the
Company and Acquiror, respectively, and (iv) certain publicly available
information with respect to other companies that we believe to be comparable in
certain respects to the Company and Acquiror and the trading markets for such
other companies' securities. We have held discussions with certain officers and
employees of the Company and Acquiror to discuss the past and current business
operations, financial condition and prospects of the Company and Acquiror, as
well as matters we believe relevant to our inquiry. We have also considered
other information, financial studies, analyses, investigations and financial,
economic and market criteria that we deemed relevant.
In our review and analysis, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information provided us, or that
is publicly available, and have not attempted independently to verify nor
assumed responsibility for verifying any such information. With respect to the
financial projections, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
Company or Acquiror, as the case may be, and we express no opinion with respect
to such forecasts or the assumptions on which they are based. We have not made
or obtained or assumed any responsibility for making or obtaining any
independent evaluations or appraisals of any of the assets (including properties
and facilities) or liabilities of the Company or Acquiror.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors that we have deemed appropriate
under the circumstances, including the following: (i) the historical and current
financial position and results of operations of the Company and Acquiror; (ii)
the historical and current market for the equity securities of the Company,
Acquiror and other companies that we believe to be comparable in certain
respects to the Company or Acquiror; (iii) the nature and terms of certain other
acquisition transactions that we believe to be relevant; and (iv) the current
and historical relationships between the trading levels of the Company Common
Stock and Acquiror Common Stock. We have taken into account our assessment of
general economic, market and financial conditions and our knowledge of the
banking industry, as well as our experience in connection with similar
<PAGE>
transactions and securities valuation generally. Our opinion is based upon
conditions as they exist and can be evaluated on the date hereof, and we assume
no responsibility to update or revise our opinion based upon circumstance or
events occurring after the date hereof. Our opinion expressed below does not
imply any conclusion as to the likely trading range for Acquiror Common Stock
following the consummation of the Merger, which may vary depending upon, among
other factors, changes in interest rates, dividend rates, market conditions,
general economic conditions and factors that generally influence the price of
securities. Our opinion does not address the Company's underlying business
decision to effect the Merger. Our opinion is directed only to the fairness,
from a financial point of view, of the Merger Consideration and does not
constitute a recommendation concerning how holders of Company Common Stock
should vote with respect to the Merger Agreement. Orr Management Company was
requested to solicit third-party offers to acquire all of the Company
immediately preceding or in connection with the process resulting in the
proposed Merger and Orr Management Company did participate in the discussions
and negotiations with respect to the proposed Merger. Our opinion does not
address the fairness, from a financial point of view, of any Exchange Ratio that
may be agreed upon by the Company and Acquiror pursuant to the provision of the
Merger Agreement that provides for renegotiation of the Exchange Ratio.
In rendering our opinion we have assumed that in the course of obtaining the
necessary regulatory approvals for the Merger no restrictions will be imposed
that would have a material adverse affect on the contemplated benefits of the
Merger to the Company following the Merger. We understand that the Merger will
qualify as a tax-free reorganization under the Internal Revenue Code and that,
for accounting purposes, the Merger will be accounted for as a pooling of
interests.
We will receive a fee from the Company for delivery of this fairness opinion,
the payment of which is contingent upon consummation of the Merger.
Subject to the foregoing, it is our opinion that, as of the date hereof, the
Merger Consideration to be received by the stockholders is fair to such holders
from a financial point of view.
Very truly yours,
\s\ Orr Management Company
Orr Management Company
<PAGE>
ANNEX C
DISSENTERS' RIGHTS
SS. 214A. PROCEDURE FOR CONVERSION, MERGER, OR CONSOLIDATION; VOTE OF
STOCKHOLDERS
A national banking association may, by vote of the holders of at least
two-thirds of each class of its capital stock, convert into, or merge or
consolidate with, a State bank in the same State in which the national banking
association is located, under a State charter, in the following manner:
(A) APPROVAL OF BOARD OF DIRECTORS; PUBLICATION OF NOTICE OF STOCKHOLDERS
MEETING; WAIVER OF PUBLICATION; NOTICE BY REGISTERED OR CERTIFIED MAIL
The plan of conversion, merger, or consolidation must be approved by a
majority of the entire board of directors of the national banking association.
The bank shall publish notice of the time, place, and object of the
shareholders' meeting to act upon the plan, in some newspaper with general
circulation in the place where the principal office of the national banking
association is located, at least once a week for four consecutive weeks:
PROVIDED, That newspaper publication may be dispensed with entirely if waived by
all the shareholders and in the case of a merger or consolidation one
publication at least ten days before the meeting shall be sufficient if
publication for four weeks is waived by holders of at least two-thirds of each
class of capital stock and prior written consent of the Comptroller of the
Currency is obtained. The national banking association shall send such notice to
each shareholder of record by registered mail or by certified mail at least ten
days prior to the meeting, which notice may be waived specifically by any
shareholder.
(B) RIGHTS OF DISSENTING STOCKHOLDERS
A shareholder of a national banking association who votes against the
conversion, merger, or consolidation, or who has given notice in writing to the
bank at or prior to such meeting that he dissents from the plan, shall be
entitled to receive in cash the value of the shares held by him, if and when the
conversion, merger, or consolidation is consummated, upon written request made
to the resulting State bank at any time before thirty days after the date of
consummation of such conversion, merger, or consolidation, accompanied by the
surrender of his stock certificates. The value of such shares shall be
determined as of the date on which the shareholders' meeting was held
authorizing the conversion, merger, or consolidation, by a committee of three
persons, one to be selected by majority vote of the dissenting shareholders
entitled to receive the value of their shares, one by the directors of the
resulting State bank, and the third by the two so chosen. The valuation agreed
upon by any two of three appraisers thus chosen shall govern; but, if the value
so fixed shall not be satisfactory to any dissenting shareholder who has
requested payment as provided herein, such shareholder may within five days
after being notified of the appraised value of his shares appeal to the
Comptroller of the Currency, who shall cause a reappraisal to be made, which
shall be final and binding as to the value of the shares of the appellant. If,
within ninety days from the date of consummation of the conversion, merger, or
consolidation, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party, cause an
appraisal to be made, which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal, or the appraisal as the
case may be, shall be paid by the resulting State bank. The plan of conversion,
merger, or consolidation shall provide the manner of disposing of the shares of
the resulting State bank not taken by the dissenting shareholders of the
national banking association.
<PAGE>
ANNEX D
CONDENSED SUMMARY OF EARNINGS
CAROLINA FIRST BANK
(unaudited)
Years Ended December 31,
------------------------------------------
(dollars in thousands)
1995 1996 1997
-------- ------- --------
Interest income.................. $100,770 $114,195 $132,077
Interest expense................. 49,301 56,732 65,484
-------- ------- -------
Net interest income............ 51,469 57,463 66,593
Provision for loan losses........ 6,718 9,787 9,300
------- ----- -----
Net interest income after provision
for loan losses............. 44,751 47,676 57,293
-------- ------ ------
Noninterest income............... 16,136 17,682 14,171
Noninterest expenses............. 44,457 46,399 47,321
------- ------ ------
Income (loss) before income taxes 16,430 18,959 24,143
Income taxes..................... 5,827 7,016 8,699
------- ------ ------
Net income (loss).............. $ 10,603 $ 11,943 $ 15,444
======== ======== ========
<PAGE>
CONDENSED BALANCE SHEET
CAROLINA FIRST BANK
(unaudited)
Years Ended December 31,
-----------------------------------
(dollars in thousands)
1996 1997
---- ----
Assets:
Cash and due from banks........ $86,312 $67,098
Interest-earning deposits with banks 26,037 47,229
Fed funds sold and resale agreements -- 105,000
Investment securities.......... 243,182 377,649
Loans.......................... 1,123,006 1,488,816
Less unearned income.......... (12,731) (7,431)
Less allowance for loan losses (11,146) (14,189)
---------- --------
Net loans.................. 1,099,129 1,467,196
Premises and equipment......... 32,211 38,548
Intangible assets.............. 14,175 54,698
Other assets................... 51,365 60,254
-------- ---------
Total assets..................... $ 1,552,411 $ 2,217,672
========== =========
Liabilities and stockholders' equity:
Liabilities
Deposits
Noninterest-bearing........ $ 194,685 $ 230,755
Interest bearing........... 1,092,583 1,626,783
--------- ---------
Total deposits......... 1,287,268 1,857,538
Borrowed funds................. 128,228 118,055
Other liabilities.............. 15,193 25,929
------------ ------------
Total liabilities............ 1,430,689 2,001,522
----------- -----------
Total stockholders' equity....... 121,722 216,150
---------- ----------
Total liabilities and stockholders'
equity $ 1,552,411 $ 2,217,672
========= =========
<PAGE>
PART-II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Chapter 8, Article 5 of Title 33 of the 1976 Code of
Laws of South Carolina, as amended, which provides for indemnification of
officers and directors of South Carolina corporations in certain instances in
connection with legal proceedings involving any such persons because of being or
having been an officer or director. Carolina First Corporation's Bylaws provide
that the Corporation shall indemnify any individual made a party to a proceeding
because he is or was a Director of the Corporation against liability incurred in
the proceeding to the fullest extent permitted by law, and that the Corporation
shall pay for or reimburse the reasonable expenses incurred by a Director who is
a party to a proceeding in advance of final disposition of the proceeding to the
fullest extent permitted by law. Carolina First Corporation has entered into
indemnification agreements with each of its Directors, which make the
above-referenced Bylaws provisions the basis of a contract between Carolina
First Corporation and each director.
Chapter 8, Article 5 of Title 33 of the 1976 Code of Laws of South
Carolina, as amended, also permits a corporation to purchase and maintain
insurance on behalf of a person who is or was an officer or director. Carolina
First Corporation maintains directors' and officers' liability insurance.
Reference is made to Chapter 2 of Title 33 of the 1976 Code of Laws of
South Carolina, as amended, respecting the limitation in a corporation's
articles of incorporation of the personal liability of a director for breach of
the director's fiduciary duty. Reference is made to Carolina First Corporation's
Articles of Amendment filed with the South Carolina Secretary of State on
April 18, 1989 which state: "A director of the corporation shall not be
personally liable to the corporation or any of its shareholders for monetary
damages for breach of fiduciary duty as a director, provided that this provision
shall not be deemed to eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
gross negligence, intentional misconduct, or a knowing violation of laws,
(iii) imposed under Section 33-8-330 of the [South Carolina Business Corporation
Act of 1988] (improper distribution to shareholder), or (iv) for any transaction
from which the director derived an improper personal benefit."
ITEM 21: EXHIBITS
(A) LISTING OF EXHIBITS
Exhibit
2.1 -- Agreement and Plan of Reorganization entered into as of June 22, 1998
between and among Carolina First Bank, Carolina First Corporation
and First National: Included as Annex A to the Proxy
Statement/Prospectus.
3.1 -- Articles of Incorporation: Incorporated by reference to Exhibit 3.1
of Carolina First Corporation's Registration Statement on Form S-4,
Commission File No. 33-57389.
3.2 -- Articles of Amendment dated June 1, 1997. Incorporated by reference
to Exhibit 3.2 of Carolina First Corporation's Registration Statement
on Form S-4 filed on July 30, 1997, Commission File No. 333-32459.
3.3 -- Amended and Restated Bylaws of Carolina First Corporation, as
amended and restated as of December 18, 1996: Incorporated by reference
to Exhibit 3.1 of Carolina First Corporation's Current Report on Form
8-K dated December 18, 1996, Commission File No. 0-15083.
4.1 -- Specimen Carolina First Corporation 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 -- Articles of Incorporation: Included as Exhibits 3.1 and 3.2.
II-1
<PAGE>
4.2 -- Bylaws: Included as Exhibit 3.3.
4.3 -- Carolina First Corporation Amended and Restated 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. 333-06975.
4.6 -- Amended and Restated Shareholder Rights Agreement: Incorporated by
reference to Exhibit 4.1 of Carolina First Corporation's Current Report
on Form 8-K dated December 18, 1996, 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 Carolina First Corporation's Registration Statement on
Form S-3, Commission File No. 22-58879.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding legality
of shares of the Carolina First Corporation.
8.1 -- See "THE PROPOSED TRANSACTION -- Certain Federal Income Tax
Consequences" for discussion regarding tax matters.
11.1-- Computation of Per Share Earnings: Incorporated by reference to
Exhibit 11.1 of Carolina First Corporation's Annual Report on Form 10-K
for the year ended December 31, 1997, Commission File No. 0-15083.
12.1-- Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends: Incorporated by reference to
Exhibit 12.1 of Carolina First Corporation's Annual Report on Form 10-K
for the year ended December 31, 1997, Commission File No. 0-15083.
13.1-- 1998 Annual Report to Shareholders of Carolina First Corporation.
Incorporated by reference to Exhibit 13.1 of Carolina First
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997, Commission File No. 0-15083.
21.1-- Subsidiaries of the Registrant: Carolina First Bank, Carolina
First Mortgage Company, Resource Processing Group, Inc. CF
Investment Company and Blue Ridge Finance Company, Inc., all of
which are South Carolina corporations.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Elliott, Davis & Company, L.L.P.
23.3 -- Consent of Orr Management Company.
23.4 -- Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in
Exhibit 5.1.
24.1 -- The Power of Attorney: Contained on the signature page of the
initial filing of this Registration Statement.
27.1-- Financial Data Schedule: Incorporated by reference to Exhibit 10.18
of Carolina First Corporation's Annual Report on Form 10-K for the year
ended December 31, 1997, Commission File No. 0-15083.
99.1 -- Form of Proxy
(b) Certain additional financial statements. Not applicable.
(c) The information required by this paragraph is included as an Annex to
the Proxy Statement/Prospectus.
ITEM 22: UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
II-2
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change in such information in the registration statement:
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greenville, State of
South Carolina, on July 18, 1998.
Carolina First Corporation
By: /s/ William S. Hummers III
------------------------------
William S. Hummers III,
Executive Vice President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mack I. Whittle, Jr. and William S.
Hummers III, and each of them, as true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement,
and to file the same, with all annexes thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do, or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated:
Signature Title Date
/s/ William R. Timmons, Jr. Chairman of the Board July 18, 1998
- ---------------------------
William R. Timmons, Jr.
/s/ Mack I. Whittle, Jr. President, Chief Executive Officer July 18, 1998
- -------------------------- and Director (Principal Executive
Mack I. Whittle, Jr. Officer)
/s/ William S. Hummers III Executive Vice President, Director July 18, 1998
- ---------------------------- (Principal Accounting and Financial
William S. Hummers III Officer)
/s/ M. Dexter Hagy Director July 18, 1998
- ------------------
M. Dexter Hagy
/s/ Eugene E. Stone IV Director July 18, 1998
- ----------------------
Eugene E. Stone IV
/s/ H. Earle Russell, Jr. Director July 18, 1998
- -------------------------
H. Earle Russell, Jr.
/s/ Judd B. Farr Director July 18, 1998
- ----------------
Judd B. Farr
Director July 18, 1998
- ---------------------
Charles B. Schooler
/s/ Elizabeth P. Stall Director July 18, 1998
- ----------------------
Elizabeth P. Stall
/s/ David C. Wakefield III Director July 18, 1998
- --------------------------
David C. Wakefield III
- --------------------------- Director July 18, 1998
Vernon E. Merchant, Jr.
- --------------------------- Director July 18, 1998
II-4
<PAGE>
William R. Phillips
- --------------------------- Director July 18, 1998
C. Claymon Grimes, Jr.
II-5
<PAGE>
EXHIBIT INDEX
2.1 -- Agreement and Plan of Reorganization entered into as of June 22, 1998
between and among Carolina First Bank, Carolina First Corporation and
First National: Included as Annex A to the Proxy Statement/Prospectus.
3.1 -- Articles of Incorporation: Incorporated by reference to Exhibit 3.1 of
Carolina First Corporation's Registration Statement on Form S-4,
Commission File No. 33-57389.
3.2 -- Articles of Amendment dated June 1, 1997. Incorporated by reference to
Exhibit 3.2 of Carolina First Corporation's Registration Statement on
Form S-4 filed on July 30, 1997, Commission File No. 333-32459.
3.3 -- Amended and Restated Bylaws of Carolina First Corporation, as amended
and restated as of December 18, 1996: Incorporated by reference to
Exhibit 3.1 of Carolina First Corporation's Current Report on Form 8-K
dated December 18, 1996, Commission File No. 0-15083.
4.1 -- Specimen Carolina First Corporation 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 -- Articles of Incorporation: Included as Exhibits 3.1 and 3.2.
4.2 -- Bylaws: Included as Exhibit 3.3.
4.3 -- Carolina First Corporation Amended and Restated 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. 333-06975.
4.6 -- Amended and Restated Shareholder Rights Agreement: Incorporated by
reference to Exhibit 4.1 of Carolina First Corporation's Current Report
on Form 8-K dated December 18, 1996, 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 Carolina First Corporation's Registration Statement on
Form S-3, Commission File No. 22-58879.
5.1 -- Opinion of Wyche, Burgess, Freeman & Parham, P.A. regarding legality of
shares of the Carolina First Corporation.
8.1 -- See "THE PROPOSED TRANSACTION--Certain Federal Income Tax Consequences"
for discussion regarding tax matters.
11.1-- Computation of Per Share Earnings: Incorporated by reference to Exhibit
11.1 of Carolina First Corporation's Annual Report on Form 10-K for the
year ended December 31, 1997, Commission File No. 0-15083.
12.1-- Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends: Incorporated by reference to
Exhibit 12.1 of Carolina First Corporation's Annual Report on Form 10-K
for the year ended December 31, 1997, Commission File No. 0-15083.
13.1-- 1998 Annual Report to Shareholders of Carolina First Corporation.
Incorporated by reference to Exhibit 13.1 of Carolina First
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997, Commission File No. 0-15083.
21.1-- Subsidiaries of the Registrant: Carolina First Bank, Carolina First
Mortgage Company, Resource Processing Group, Inc., CF Investment
Company and Blue Ridge Finance Company, Inc., all of which are South
Carolina corporations.
23.1-- Consent of KPMG Peat Marwick LLP.
23.2-- Consent of Elliott, Davis & Company, L.L.P.
23.3-- Consent of Orr Management Company.
23.4-- Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in
Exhibit 5.1.
24.1-- The Power of Attorney: Contained on the signature page of the initial
filing of this Registration Statement.
27.1-- Financial Data Schedule: Incorporated by reference to Exhibit 10.18 of
Carolina First Corporation's Annual Report on Form 10-K for the year
ended December 31, 1997, Commission File No. 0-15083.
99.1-- Form of Proxy
Exhibit 5.1
JULY 30, 1998
[WYCHE, BURGESS, FREEMAN & PARHAM, P.A. LETTERHEAD]
Carolina First Corporation
102 South Main Street
Greenville, South Carolina 29601
First National Bank of Pickens County
200 South Pendleton Street
Easley, South Carolina 29640
RE: Registration Statement on Form S-4 with respect to 2,370,000 shares of
Carolina First Corporation Common Stock
Gentlemen/Ladies:
The opinions set forth herein are rendered with respect to the 2,370,000 shares,
$1.00 par value per share, of the Common Stock (the "Common Stock") of Carolina
First Corporation, a South Carolina corporation (the "Company"), which may be
issued by the Company in connection with its acquisition of First National Bank
of Pickens County ("First National"), all as set forth in that certain
Reorganization Agreement entered into as of June 22, 1998 by and among the
Company, Carolina First Bank and First National. The Common Stock is being
registered with the Securities and Exchange Commission by the Company's
Registration Statement on Form S-4 (the "Registration Statement") filed on or
about July 20, 1998, pursuant to the Securities Act of 1933, as amended.
We have examined the Company's Articles of Incorporation, as amended, and the
Company's Bylaws, as amended, and reviewed the records of the Company's
corporate proceedings. We have made such investigation of law as we have deemed
necessary in order to enable us to render this opinion. With respect to matters
of fact, we have relied upon information provided to us by the Company and no
further investigation. With respect to all examined documents, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to authentic originals of all documents
submitted to us as certified, conformed or photostatic copies and the accuracy
and completeness of the information contained therein.
Based on and subject to the foregoing and subject to the comments, limitations
and qualifications set forth below, we are of the opinion that the shares of
Common Stock to be sold pursuant to the Registration Statement will, when issued
to the First National shareholders in accordance with the Reorganization
Agreement, be legally and validly issued and fully paid and non-assessable.
The foregoing opinion is limited to matters governed by the laws of the State of
South Carolina in force on the date of this letter. We express no opinion with
regard to any matter which may be (or purports to be) governed by the laws of
any other state or jurisdiction. In addition, we express no opinion with respect
to any matter arising under or governed by the South Carolina Uniform Securities
Act, as amended, any law respecting disclosure, or any law respecting any
environmental matter.
This opinion is rendered as of the date of this letter and applies only to the
matters specifically covered by this opinion, and we disclaim any continuing
responsibility for matters occurring after the date of this letter.
Except as noted below, this opinion is rendered solely for your benefit in
connection with the Registration Statement and may not be relied upon, quoted or
used by any other person or entity or for any other purpose without our prior
written consent.
<PAGE>
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Yours truly,
Wyche, Burgess, Freeman & Parham, P.A.
By: /s/ William P. Crawford, Jr.
------------------------------
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Carolina First Corporation
We consent to the use of our report dated January 22, 1998 included in Carolina
First Corporation's Annual Report on Form 10-K for the year ended December 31,
1997, incorporated herein by reference and to the reference to our firm under
the heading "Experts" in the Proxy Statement/Prospectus for the acquisition of
First National Bank of Pickens County.
KPMG PEAT MARWICK LLP
Greenville, South Carolina
July 31, 1998
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
First National Bank of Pickens County
We consent to the use of our reports dated August 1, 1997 at and for the
years ended June 30, 1997 and 1996 and July 21, 1995 at and for the year ended
June 30, 1995, with respect to the financial statements of First National Bank
of Pickens County included in registration statement (Form S-4) for Carolina
First Corporation and to the reference to our firm under the heading "Experts"
in the Proxy Statement/Prospectus for the acquisition of First National Bank of
Pickens County.
/s/ Elliott, Davis & Company, LLP
ELLIOTT, DAVIS & COMPANY, LLP
Greenville, South Carolina
July 30, 1998
EXHIBIT 23.3
CONSENT OF FINANCIAL ADVISOR
We consent to the references to our firm under the caption "Opinion of First
National's Financial Advisor" in the Registration Statement on Form S-4 being
filed with the Securities and Exchange Commission by Carolina First Corporation
in connection with the proposed merger of First National Bank of Pickens County
with and into Carolina First Corporation, pursuant to an Agreement and Plan of
Merger dated June 22, 1998.
ORR MANAGEMENT COMPANY
/s/ Laney Orr
-----------------------------
By: Laney Orr
July 30, 1998
Exhibit 99.1
P
R
O FIRST NATIONAL BANK OF PICKENS COUNTY
X This Proxy is Solicited on Behalf of the Board of Directors
Y
Special Meeting, September 7, 1998
The undersigned shareholder of First National Bank of Pickens County, hereby
revoking all previous proxies, hereby appoints James H. Grantham and Nicholas
Clark and either of them, the attorney or attorneys and proxy or proxies of the
undersigned, with full power of substitution, to attend the Special Meeting of
Shareholders of First National Bank of Pickens County to be held September 7,
1998, at 10:00 a.m., local time, at 200 South Pendleton Street, Easley, South
Carolina 29640 and at any adjournments thereof, and to vote all shares of First
National Bank of Pickens County that the undersigned shall be entitled to vote
at such meeting. Said proxies are instructed to vote on the matters set forth in
the Proxy Statement/Prospectus as specified below.
1. To approve the Reorganization Agreement dated as of June 22, 1998,
providing for the merger of First National Bank of Pickens County
with and into Carolina First Bank, a wholly-owned subsidiary of
Carolina First Corporation, and, in connection therewith, the
conversion of each share of common stock of First National Bank of
Pickens County into the right to receive shares of common stock of
Carolina First Corporation having a fair market value of $750.08
(which amount shall be $769.89 in the event the consummation of the
merger occurs after September 30, 1998), subject to the terms and
conditions of the Reorganization Agreement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY SIGNED AND DATED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL NUMBER 1
AS SPECIFIED ABOVE.
Please sign exactly as name appears on stock certificate. When signing as
attorney, administrator, trustee, guardian or agent, please indicate the
capacity in which you are acting. If stock is held jointly, signature should
appear for both names. If more than one trustee, all should sign. If stock is
held by a corporation, please sign in full corporate name by authorized officer
and give title of office. This Proxy may be revoked any time prior to its
exercise.
Dated:______________________, 1998
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Print Name (and title if appropriate)
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Signature
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Print Name (and title if appropriate)
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Signature
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
