CAROLINA FIRST CORP, 10-Q, 1998-08-14

CAROLINA FIRST CORP
10-Q, 1998-08-14
STATE COMMERCIAL BANKS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM to
----------- ---------

Commission file number 0-15083

CAROLINA FIRST CORPORATION
(Exact name of registrant as specified in its charter)

South Carolina 57-0824914
-------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

102 South Main Street, Greenville, South Carolina 29601
- ------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (864) 255-7900

- -----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] [No]

The number of outstanding shares of the issuer's $1.00 par value common stock as
of August 10, 1998 was 18,152,750.

<PAGE>
CONSOLIDATED BALANCE SHEETS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
(UNAUDITED)
($ IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

JUNE 30, December 31,
-------------------------- -----------
ASSETS 1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash and due from banks .......................................... $ 72,052 $ 69,191 $ 73,326
Interest-bearing bank balances ................................... 37,144 28,401 34,703
Federal funds sold and resale agreements ......................... 35,000 -- --
Securities
Trading ....................................................... 2,445 1,619 2,349
Available for sale ............................................ 386,785 227,946 262,329
Held for investment (market value $33,880, $32,416 and
$34,494, respectively) ........................................ 33,240 32,126 33,855
----------- ----------- -----------
Total securities ............................................ 422,470 261,691 298,533
----------- ----------- -----------
Loans held for sale .............................................. 86,373 50,181 235,151
Loans held for investment ........................................ 1,477,842 1,220,024 1,379,039
Less unearned income .......................................... (9,349) (14,514) (11,775)
Less allowance for loan losses ................................ (15,625) (12,175) (16,211)
----------- ----------- -----------
Net loans ................................................... 1,539,241 1,243,516 1,586,204
----------- ----------- -----------
Premises and equipment ........................................... 41,606 30,298 39,682
Accrued interest receivable ...................................... 17,394 12,336 15,484
Intangible assets ................................................ 57,109 15,794 58,228
Other assets ..................................................... 55,975 44,550 50,186
----------- ----------- -----------
$ 2,277,991 $ 1,705,777 $ 2,156,346
=========== =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing .......................................... $ 230,717 $ 228,933 $ 206,938
Interest-bearing ............................................. 1,607,800 1,103,618 1,539,604
----------- ----------- -----------
Total deposits ............................................. 1,838,517 1,332,551 1,746,542
Borrowed funds ................................................. 125,101 217,124 153,369
Subordinated notes ............................................. 25,554 25,425 25,489
Accrued interest payable ....................................... 15,377 10,529 13,518
Other liabilities .............................................. 16,517 9,707 15,769
----------- ----------- -----------
Total liabilities ........................................... 2,021,066 1,595,336 1,954,687
----------- ----------- -----------
Shareholders' Equity
Preferred stock-no par value; authorized 10,000,000 shares;
issued and outstanding none .................................. -- -- --
Common stock-par value $1 per share; authorized 100,000,000
shares; issued and outstanding 18,142,554, 11,379,286 and
15,659,338 shares, respectively .............................. 18,143 11,379 15,659
Surplus ........................................................ 212,802 85,029 164,517
Retained earnings .............................................. 27,455 14,201 20,059
Guarantee of employee stock ownership plan debt and
nonvested restricted stock ................................. (3,411) (588) (3,129)
Accumulated other comprehensive income, net of tax ............. 1,936 420 4,553
----------- ----------- -----------
Total shareholders' equity .................................. 256,925 110,441 201,659
=========== =========== ===========
$ 2,277,991 $ 1,705,777 $ 2,156,346
=========== =========== ===========
</TABLE>
1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
(UNAUDITED)
($ IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
INTEREST INCOME
<S> <C> <C> <C> <C>
Interest and fees on loans .................................. $ 35,950 $ 28,353 $ 72,179 $ 55,271
Interest and dividends on securities ........................ 6,130 3,365 10,945 6,625
Interest on short-term investments .......................... 1,423 232 2,506 446
----------- ----------- ----------- -----------
Total interest income ..................................... 43,503 31,950 85,630 62,342
----------- ----------- ----------- -----------

INTEREST EXPENSE
Interest on deposits ........................................ 20,009 12,605 39,284 25,306
Interest on borrowed funds .................................. 2,145 3,484 4,770 5,723
----------- ----------- ----------- -----------
Total interest expense .................................... 22,154 16,089 44,054 31,029
----------- ----------- ----------- -----------
Net interest income ....................................... 21,349 15,861 41,576 31,313

PROVISION FOR LOAN LOSSES ..................................... 3,447 3,041 5,583 5,993
----------- ----------- ----------- -----------
Net interest income after provision for loan losses ....... 17,902 12,820 35,993 25,320
----------- ----------- ----------- -----------

NONINTEREST INCOME
Service charges on deposit accounts ......................... 2,258 1,733 4,134 3,362
Mortgage banking income ..................................... 782 824 2,275 1,352
Fees for trust services ..................................... 369 375 721 758
Loan securitization income .................................. 114 (105) 33 (164)
Gain on sale of securities .................................. 183 798 323 882
Gain on sale of branches .................................... -- 2,250 -- 2,250
Sundry ...................................................... 1,377 729 2,210 1,256
----------- ----------- ----------- -----------
Total noninterest income .................................. 5,083 6,604 9,696 9,696
----------- ----------- ----------- -----------

NONINTEREST EXPENSES
Personnel expense ........................................... 7,310 6,449 14,803 12,702
Occupancy ................................................... 1,364 1,228 2,833 2,472
Furniture and equipment ..................................... 1,049 951 2,144 1,871
Amoritzation of intangibles ................................. 818 413 1,692 413
Sundry ...................................................... 3,682 3,198 8,010 7,647
----------- ----------- ----------- -----------
Total noninterest expenses ................................ 14,223 12,239 29,482 25,105
----------- ----------- ----------- -----------
Income before income taxes ................................ 8,762 7,185 16,207 9,911
Income taxes ................................................ 3,226 2,524 5,977 3,533
----------- ----------- ----------- -----------
Net income ................................................ $ 5,536 $ 4,661 $ 10,230 $ 6,378
=========== =========== =========== ===========

NET INCOME PER COMMON SHARE:
Basic ..................................................... $ 0.31 $ 0.41 $ 0.59 $ 0.56
Diluted ................................................... 0.31 0.41 0.59 0.56

AVERAGE COMMON SHARES OUTSTANDING:
Basic ..................................................... 17,682,632 11,371,845 17,138,421 11,338,141
Diluted ................................................... 18,088,100 11,484,690 17,509,212 11,481,436

CASH DIVIDENDS DECLARED PER COMMON SHARE ...................... $ 0.08 $ 0.07 $ 0.16 $ 0.14
</TABLE>

2
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
(UNAUDITED)
($ IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Shares of
Common Preferred Common
Stock Stock Stock Surplus
---------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 ........................... 11,225,568 $ 943 $ 11,226 $ 83,598

Net income ......................................... -- -- -- --

Other comprehensive income, net of tax:
Unrealized losses on securities:
Unrealized holding gains arising during
period, net of taxes of $290 ............... -- -- -- --
Less: reclassification adjustment for gains
included in net income, net of taxes of $326 -- -- -- --

Other comprehensive income ..................... -- -- -- --

Comprehensive income ............................. -- -- -- --

Common stock issued pursuant to:
Dividend reinvestment plan ....................... 29,265 -- 29 428
Employee stock purchase plan ..................... 4,882 -- 5 71
Exercise of stock options and stock warrants ..... 11,230 -- 11 97
Conversion and redemption of preferred stock ..... 108,341 (943) 108 835
Cash dividends paid/accrued:
Common stock ..................................... -- -- -- --
Miscellaneous ..................................... -- -- -- --

---------------------------------------------------
BALANCE, JUNE 30, 1997 ............................... 11,379,286 -- $ 11,379 $ 85,029
===================================================

BALANCE, DECEMBER 31, 1997 ........................... 15,659,338 -- $ 15,659 $ 164,517

Net income ......................................... -- -- -- --

Other comprehensive income, net of tax:
Unrealized losses on securities:
Unrealized holding losses arising during
period, net of taxes of $1,418 ............. -- -- -- --
Less: reclassification adjustment for gains
included in net income, net of taxes of $120 -- -- -- --

Other comprehensive income ..................... -- -- -- --

Comprehensive income ............................. -- -- -- --

Common stock issued pursuant to:
Stock offering ................................... 2,000,000 -- 2,000 36,375
Purchase accounting acquisition .................. 398,610 -- 399 10,386
Dividend reinvestment plan ....................... 29,179 -- 29 657
Restricted stock plan ............................ 28,945 -- 29 594
Employee stock purchase plan ..................... 4,132 -- 4 93
Exercise of stock options and stock warrants ..... 22,350 -- 23 109
Cash dividends paid/accrued:
Common stock ..................................... -- -- -- --
Miscellaneous ..................................... -- -- -- 71

---------------------------------------------------
BALANCE, JUNE 30, 1998 ............................... 18,142,554 -- $ 18,143 $ 212,802
===================================================
</TABLE>
<TABLE>
<CAPTION>

Retained Accumulated
Earnings Other
and Comprehensive
Other* Income Total
------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 ........................... $ 8,714 $ 483 $ 104,964

Net income ......................................... 6,378 -- 6,378

Other comprehensive income, net of tax:
Unrealized losses on securities:
Unrealized holding gains arising during
period, net of taxes of $290 ............... -- 493 --
Less: reclassification adjustment for gains
included in net income, net of taxes of $326 -- (556) --
----------
Other comprehensive income ..................... -- (63) (63)
---------- ----------
Comprehensive income ............................. -- -- 6,315
----------

Common stock issued pursuant to:
Dividend reinvestment plan ....................... -- -- 457
Employee stock purchase plan ..................... -- -- 76
Exercise of stock options and stock warrants ..... -- -- 108
Conversion and redemption of preferred stock ..... -- -- --
Cash dividends paid/accrued:
Common stock ..................................... (1,723) -- (1,723)
Miscellaneous ..................................... 244 -- 244

----------------------------------------
BALANCE, JUNE 30, 1997 ............................... $ 13,613 $ 420 $ 110,441
========================================

BALANCE, DECEMBER 31, 1997 ........................... $ 16,930 $ 4,553 $ 201,659

Net income ......................................... 10,230 -- 10,230

Other comprehensive income, net of tax:
Unrealized losses on securities:
Unrealized holding losses arising during
period, net of taxes of $1,418 ............. -- (2,414) --
Less: reclassification adjustment for gains
included in net income, net of taxes of $120 -- (203) --
----------
Other comprehensive income ..................... -- (2,617) (2,617)
---------- ----------
Comprehensive income ............................. -- -- 7,613
----------

Common stock issued pursuant to:
Stock offering ................................... -- -- 38,375
Purchase accounting acquisition .................. -- -- 10,785
Dividend reinvestment plan ....................... -- -- 686
Restricted stock plan ............................ 623
Employee stock purchase plan ..................... -- -- 97
Exercise of stock options and stock warrants ..... -- -- 132
Cash dividends paid/accrued:
Common stock ..................................... (2,835) -- (2,835)
Miscellaneous ..................................... (281) -- (210)

----------------------------------------
BALANCE, JUNE 30, 1998 ............................... $ 24,044 $ 1,936 $ 256,925
========================================
</TABLE>
* Other includes guarantee of employee stock ownership plan debt and nonvested
restricted stock.

3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
(UNAUDITED)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------
1998 1997
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ..................................................... $ 10,230 $ 6,378
Adjustments to reconcile net income to net cash provided by
(used for) operations
Depreciation................................................ 1,818 1,256
Amortization of intangibles................................. 1,692 413
Provision for loan losses................................... 5,583 5,993
Gain on sale of branches.................................... -- (2,250)
Gain on sale of securities.................................. (323) (882)
Unrealized loss on trading securities....................... 16 2
Originations of mortgage loans held for sale................ (248,796) (89,495)
Sale of mortgage loans held for sale........................ 357,234 65,380
Proceeds from sale of trading securities.................... 602,219 455,269
Proceeds from maturity of trading securities................ 19,314 9,043
Purchase of trading securities.............................. (621,448) (463,792)
Increase in accrued interest receivable..................... (1,926) (423)
Increase in accrued interest payable........................ 2,230 857
Increase in other assets.................................... (2,003) (2,150)
(Decrease) increase in other liabilities.................... (3,416) 3,383
------------------------------
Net cash provided by (used for) operating activities.......... 122,424 (11,018)
------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in interest-earning deposits with banks............ (2,441) (2,364)
Net increase in federal funds sold and resale agreements........ (35,000) --
Proceeds from sale of securities available for sale............. 26,733 2,084
Proceeds from maturity of securities available for sale......... 176,846 91,877
Proceeds from maturity of securities held for investment........ 4,493 1,092
Purchase of securities available for sale....................... (331,924) (107,350)
Purchase of securities held for investment...................... (3,878) (3,753)
Purchase of loans............................................... -- (18,779)
Net increase in loans........................................... (69,437) (108,496)
Capital expenditures............................................ (2,077) (817)
Net cash acquired in transactions accounted for under the
purchase method of accounting................................ 7,453 --
Net cash outflow from sale of branches.......................... (38,480) (35,656)
------------------------------
Net cash used for investing activities ....................... (267,712) (182,162)
------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits........................................ 135,621 106,109
(Decrease) increase in borrowed funds........................... (28,268) 70,854
Cash dividends paid............................................. (3,000) (1,581)
Issuance of common stock ....................................... 38,375 --
Other common stock activity..................................... 1,286 667
------------------------------
Net cash provided by financing activities..................... 144,014 176,049
------------------------------
Net change in cash and due from banks............................. (1,274) (17,131)
Cash and due from banks at beginning of period.................... 73,326 86,322
------------------------------
Cash and due from banks at end of period.......................... $ 72,052 $ 69,191
==============================
</TABLE>
4
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAROLINA FIRST CORPORATION AND SUBSIDIARIES

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of these policies is included in the 1997 Annual Report to
Shareholders.

Effective January 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for
reporting comprehensive income and its components in a full set of
general purpose financial statements. The objective of SFAS 130 is to
report a measure of all changes in equity of an enterprise that result
from transactions and other economic events during the period other
than transactions with owners. Comprehensive income is divided into net
income and other comprehensive income. Adoption of SFAS 130 will not
change total shareholders' equity as previously reported. In accordance
with the provisions of SFAS 130, comparative financial statements
presented for earlier periods have been reclassified to reflect the
provisions of this statement.

(2) STATEMENTS OF CASH FLOWS

Cash includes currency and coin, cash items in process of collection
and due from banks. Interest paid, net of interest capitalized as a
part of the cost of construction, amounted to approximately $42,195,000
for the six months ended June 30, 1998. Income tax payments of
$1,450,000 and $3,000,000 were made for the six months ended June 30,
1998 and June 30, 1997, respectively.

(3) BUSINESS COMBINATIONS

On June 1, 1998, the Company completed the acquisition of Resource
Processing Group, Inc. ("RPGI"), a credit card origination and
servicing company headquartered in Columbia, South Carolina. RPGI
became a wholly-owned subsidiary of the Company. The RPGI transaction
was accounted for as a purchase and resulted in the issuance of 398,610
shares of the Company's common stock for the outstanding shares of RPGI
common stock. Additional shares of the Company's common stock may
become issuable in the event that certain performance related criteria
are met. The excess of the purchase price over the fair market value of
the net identifiable assets acquired of approximately $3.4 million has
been recorded as goodwill and is being amortized on a straight-line
basis over 25 years. At June 30, 1998, RPGI operated through one
location, had approximately $16.0 million is assets and was servicing
approximately $257 million in credit card receivables.

The following unaudited pro forma financial information presents the
combined results of operations of the Company and RPGI as if the merger
had occurred as of the beginning of 1998 and 1997, after giving effect
to certain adjustments, including amortization of intangible assets and
reduced earnings related to the lost interest on the cash portion of
the purchase price. The pro forma financial information does not
necessarily reflect the results of operations that would have occurred
had the Company and RPGI constituted a single entity during such
periods. In addition, the pro forma financial information does not
reflect any potential cost savings or synergies expected to be achieved
following the merger.

5
<PAGE>

Six months ended June 30,
1998 1997
($ in thousands, except share data)

Total revenue........................ $104,571 $ 81,840
Net income........................... 9,927 6,042
Earnings per share (diluted)......... $ 0.56 $ 0.51

On June 12, 1998, Carolina First Bank completed the sale of three
branches located in Belton, Calhoun Falls and Honea Path to two bank
subsidiaries of Community Capital Corporation. All three branches were
former locations of First Federal Savings and Loan Association of
Anderson, a subsidiary of First Southeast Financial Corporation ("First
Southeast"), which was acquired by the Company in November 1997. The
deposit premium received of approximately $2.7 million was used to
reduce intangible asset balances (recorded in connection with the First
Southeast acquisition), and accordingly no gain was recorded. In
connection with the sale, Carolina First Bank sold loans of
approximately $2.2 million and transferred deposits of approximately
$43.6 million.

On June 22, 1998, the Company signed a reorganization agreement to
acquire First National Bank of Pickens County ("First National"), a
national bank headquartered in Easley, South Carolina. The
reorganization agreement provides for the merger of First National with
and into Carolina First Bank, a wholly-owned subsidiary of the Company.
At June 30, 1998, First National operated through three locations and
had total assets, loans, deposits and shareholders' equity of
approximately $120.6 million, $64.6 million, $97.6 million and $16.4
million, respectively. Under the terms of the merger, First National
shareholders will receive consideration of $750.08 per share for each
First National share for an aggregate consideration of approximately
$60 million, payable in the form of the Company's common stock. The per
share consideration increases to $769.89 in the event that the closing
of the transaction occurs after September 30, 1998. The exchange ratio
is based on the Company's average common stock price for the twenty
days preceding the merger closing date. The proposed merger is
anticipated to be accounted for using the pooling of interest method of
accounting.

On June 26, 1998, the Company signed a reorganization agreement to
acquire Poinsett Financial Corporation ("Poinsett"), a thrift holding
company headquartered in Travelers Rest, South Carolina. The
reorganization agreement provides for the merger of Poinsett with and
into the Company. After the merger, Poinsett will be operated as a
separate subsidiary of the Company (except that after the merger,
Poinsett's name may be changed to "Carolina First Savings Bank" and
certain branch locations of Poinsett may be transferred to Carolina
First Bank). 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, Poinsett
shareholders will receive consideration of $82.00 per share for each
Poinsett share for an aggregate consideration of approximately $15.6
million, payable in the form of the Company's common stock. The
exchange ratio is based on the Company's average common stock price for
the twenty days preceding the merger closing date. The proposed merger
is anticipated to be accounted for using the purchase method of
accounting.

<PAGE>
28,000 shares, or 4.8%, of Colonial Bank's outstanding common stock. At
June 30, 1998, Colonial Bank 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, Colonial Bank shareholders
will receive consideration of $23.00 per share for each Colonial Bank
share for an aggregate consideration of approximately $12.8 million
(excluding the shares owned by the Company), payable in the form of the
Company's common stock. The exchange ratio is based on the Company's
average common stock price for the twenty days preceding the merger
closing date. The proposed merger is anticipated to be accounted for
using the purchase method of accounting.

The pending acquisitions, which are subject to the receipt of
regulatory approval and First National, Poinsett and Colonial Bank
shareholder approval, are expected to close in the third quarter of
1998.

(4) SECURITIES

The net unrealized gain on securities available for sale decreased $2.6
million for the six months ended June 30, 1998. The majority of the
decrease is attributable to the decline in the market value of the
Affinity Technology Group, Inc. shares.

(5) COMMON STOCK

Basic earnings per share is based on the weighted average number of
common shares outstanding during each period. Basic earnings per share
also reflects provisions for dividend requirements on all outstanding
shares of preferred stock.

Diluted earnings per share is based on the weighted average number of
common shares outstanding during each period, including the assumed
conversion of convertible preferred stock into common stock and the
assumed exercise of dilutive stock options using the treasury stock
method.

(6) COMMITMENTS AND CONTINGENT LIABILITIES

The Company is subject to various legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of
management based on consultation with legal counsel, any outcome of
such pending litigation would not materially affect the Company's
consolidated financial position or results of operations.

<PAGE>
Affinity Technology Group, Inc. (as reward for their efforts in
connection with the Company's procurement of stock in Affinity
Technology Group, Inc.), statements to former shareholders in
connection with the Company's acquisition of Midlands National Bank,
and alleged mismanagement by certain executive officers involving
financial matters. The complaint seeks damages for the benefit of the
Company aggregating $41 million and recision of the Affinity Technology
Group, Inc. bonus.

In an action brought by the same attorneys who brought the
above-mentioned derivative action, on December 31, 1996, certain
individuals filed a class action lawsuit against the Company, Carolina
First Bank, and a number of officers and directors of the Company and
Carolina First Bank. In connection with the judge's granting the motion
to dismiss in the above-referenced derivative action, the plaintiffs'
attorneys withdrew this lawsuit, without prejudice.

(7) MANAGEMENT'S OPINION

The financial statements in this report are unaudited. In the opinion
of management, all adjustments necessary to present a fair statement of
the results for the interim periods have been made. All such
adjustments are of a normal, recurring nature.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES AND WITH THE
STATISTICAL INFORMATION AND FINANCIAL DATA APPEARING IN THIS REPORT AS WELL AS
THE ANNUAL REPORT OF CAROLINA FIRST CORPORATION (THE "COMPANY") ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1997. RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD
ENDED JUNE 30, 1998 ARE NOT NECESSARILY INDICATIVE OF RESULTS TO BE ATTAINED FOR
ANY OTHER PERIOD.

OVERVIEW

The Company, a South Carolina corporation headquartered in Greenville,
South Carolina, is a financial institution, which commenced banking operations
in December 1986, and currently conducts business through 61 locations in South
Carolina. The Company operates through four subsidiaries: Carolina First Bank, a
state-chartered commercial bank; Carolina First Mortgage Company ("CF
Mortgage"), a mortgage banking company; Blue Ridge Finance Company, Inc. ("Blue
Ridge"), a consumer finance company; and Resource Processing Group, Inc.
("RPGI"), a credit card servicing company. Through its subsidiaries, the Company
provides a full range of banking services, including mortgage, trust and
investment services, designed to meet substantially all of the financial needs
of its customers. At June 30, 1998, the Company had approximately $2.3 billion
in assets, $1.6 billion in loans, $1.8 billion in deposits and $256.9 million in
shareholders' equity.

Net income for the second quarter of 1998 was $5.5 million, or $0.31
per diluted share, compared with $4.7 million, or $0.41 per diluted share, for
the same time period of 1997. Second quarter 1997 earnings included $1.5 million
(after-tax), or $0.13 per diluted share, from a gain associated with the sale of
five branches. The increase in net income during the second quarter of 1998 was
principally attributable to an increase in net interest income. The increase in
net interest income was a result of a 38% increase in average earning assets
which was partially offset by an increase in the provision for loan losses and
higher noninterest expenses. Net income for the first six months of 1998
increased 60% to $10.2 million, or $0.59 per diluted share, compared with $6.4
million, or $0.56 per diluted share, for the same period of 1997. Common shares
outstanding increased approximately 60% during the past year, principally from
the completion of two bank mergers and a secondary stock offering.

On February 13, 1998, the Company completed the sale of 2.0 million
shares of its $1.00 par common stock ("Common Stock") to certain overseas
investors (the "Regulation S Offering"). The shares were offered and sold only
to non-U.S. persons under an exemption from registration provided by Regulation
S under the Securities Act of 1933. In connection with this offering, the
Company received net proceeds of approximately $39 million which is being used
to support internal growth, acquisitions, the expansion of its finance
subsidiary and for general corporate purposes. Subsequent to the consummation of
the Regulation S Offering, the Company filed a registration statement with the
Securities and Exchange Commission registering the further sale of such shares
by the institutional investors which purchased the shares in the Regulation S
Offering. This registration statement became effective on March 11, 1998.

<PAGE>
of RPGI common stock. Additional shares of the Company's Common Stock may become
issuable in the event that certain performance related criteria are met. The
excess of the purchase price over the fair market value of the net identifiable
assets acquired of approximately $3.4 million has been recorded as goodwill and
is being amortized on a straight-line basis over 25 years. At June 30, 1998,
RPGI operated through one location, had approximately $16.0 million is assets
and was servicing approximately $257 million in credit card receivables.

On June 12, 1998, Carolina First Bank completed the sale of three
branches located in Belton, Calhoun Falls and Honea Path to two bank
subsidiaries of Community Capital Corporation. All three branches were former
locations of First Federal Savings and Loan Association of Anderson, a
subsidiary of First Southeast Financial Corporation ("First Southeast"), which
was acquired by the Company in November 1997. The deposit premium received of
approximately $2.7 million was used to reduce intangible asset balances
(recorded in connection with the First Southeast acquisition), and accordingly
no gain was recorded. In connection with the sale, Carolina First Bank sold
loans of approximately $2.2 million and transferred deposits of approximately
$43.6 million.

On June 22, 1998, the Company signed a reorganization agreement to
acquire First National Bank of Pickens County ("First National"), a national
bank headquartered in Easley, South Carolina. The reorganization agreement
provides for the merger of First National with and into Carolina First Bank, a
wholly-owned subsidiary of the Company. At June 30, 1998, First National
operated through three locations and had total assets, loans, deposits and
shareholders' equity of approximately $120.6 million, $64.6 million, $97.6
million and $16.4 million, respectively. Under the terms of the merger, First
National shareholders will receive consideration of $750.08 per share for each
First National share for an aggregate consideration of approximately $60
million, payable in the form of the Company's common stock. The per share
consideration increases to $769.89 in the event that the closing of the
transaction occurs after September 30, 1998. The exchange ratio is based on the
Company's average common stock price for the twenty days preceding the merger
closing date. The proposed merger is anticipated to be accounted for using the
pooling of interest method of accounting.

On June 26, 1998, the Company signed a reorganization agreement to
acquire Poinsett Financial Corporation ("Poinsett"), a thrift holding company
headquartered in Travelers Rest, South Carolina. The reorganization agreement
provides for the merger of Poinsett with and into the Company. After the merger,
Poinsett will be operated as a separate subsidiary of the Company (except that
after the merger, Poinsett's name may be changed to "Carolina First Savings
Bank" and certain branch locations of Poinsett may be transferred to Carolina
First Bank). 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, Poinsett shareholders will receive consideration of $82.00
per share for each Poinsett share for an aggregate consideration of
approximately $15.6 million, payable in the form of the Company's common stock.
The exchange ratio is based on the Company's average common stock price for the
twenty days preceding the merger closing date. The proposed merger is
anticipated to be accounted for using the purchase method of accounting.

<PAGE>
million, $43.0 million and $5.3 million, respectively. Under the terms of the
merger, Colonial Bank shareholders will receive consideration of $23.00 per
share for each Colonial Bank share for an aggregate consideration of
approximately $12.8 million (excluding the shares owned by the Company), payable
in the form of the Company's common stock. The exchange ratio is based on the
Company's average common stock price for the twenty days preceding the merger
closing date. The proposed merger is anticipated to be accounted for using the
purchase method of accounting.

The pending acquisitions, which are subject to the receipt of
regulatory approval and First National, Poinsett and Colonial Bank shareholder
approval, are expected to close in the third quarter of 1998.

EQUITY INVESTMENTS

INVESTMENT IN NET.B@NK, INC.

At June 30, 1998, the Company owned 1,175,000 shares of Net.B@nk, Inc.
("Net.B@nk") common stock, or approximately 18% of the outstanding shares. These
shares are carried on the Company's books (as securities available for sale) at
a basis of approximately $979,000. Net.B@nk owns and operates Net.B@nk, FSB
(which recently changed its name from Atlanta Internet Bank, FSB), a
FDIC-insured federal savings bank that provides banking services to consumers
utilizing the Internet for their commercial and financial services. Under the
terms of the Office of Thrift Supervision's approval, certain affiliates of
Net.B@nk, including the Company, may not sell their shares in Net.B@nk until
July 31, 2000.

INVESTMENT IN AFFINITY TECHNOLOGY GROUP, INC.

At June 30, 1998, the Company (through its subsidiary Blue Ridge) owned
2,528,366 shares of common stock of Affinity Technology Group, Inc. ("Affinity")
and a warrant to purchase an additional 3,471,340 shares for approximately
$0.0001 per share ("Affinity Warrant"). These Affinity shares and the shares
represented by the Affinity Warrant constitute approximately 17% of Affinity's
outstanding common stock. The investment in Affinity's common stock, which is
included in securities available for sale and has a basis of approximately of
$301, was recorded at its market value of approximately $2.1 million. During the
first six months in 1998, the market value of Affinity's common stock declined
substantially decreasing the net unrealized gain on securities available for
sale by approximately $3.9 million. The Affinity Warrant was not reported on the
Company's balance sheet as of June 30, 1998.

The Company's shares in Affinity and the shares issuable upon the
exercise of the Affinity Warrant are "restricted" securities, as that term is
defined in federal securities laws.

INVESTMENTS IN COMMUNITY BANKS

The Company has also made equity investments in seven community banks
in South Carolina and North Carolina. In each case, the Company owns less than
5% of the community bank's outstanding common stock. The Company has made these
investments to develop correspondent banking relationships and to promote
community banking in the Carolinas.

<PAGE>
CF INVESTMENT COMPANY

In September 1997, the Company's subsidiary, CF Investment Company,
became licensed through the Small Business Administration to operate as a Small
Business Investment Company. CF Investment Company is a wholly-owned subsidiary
of Blue Ridge. CF Investment Company's principal focus is on companies that
offer bank-related products, technology or services. In 1997, the Company
capitalized CF Investment Company with a contribution of $3.0 million. CF
Investment Company has invested in companies specializing in electronic document
management, Internet development and credit decision systems.

EARNINGS REVIEW

NET INTEREST INCOME

The largest component of the Company's net income is Carolina First
Bank's net interest income. Net interest income is the difference between the
interest earned on assets and the interest paid for the liabilities used to
support such assets. Fully tax-equivalent net interest income adjusts the yield
for assets earning tax-exempt income to a comparable yield on a taxable basis.
Fully tax equivalent net interest income increased $10.2 million, or 32%, to
$41.9 million for the first six months of 1998 from $31.7 million for the first
six months of 1997. The increase resulted principally from a higher level of
average earning assets partially offset by a lower net interest margin. The
growth in average earning assets, which increased $568.4 million, or 40%, to
approximately $2.0 billion in the first six months of 1998 from $1.4 billion in
the first six months of 1997, resulted from an increase in both loans and
investment securities primarily from two acquisitions completed during the
second half of 1997. Average loans and average investment securities increased
$361.7 million and $129.0 million, respectively, in the first six months of 1998
compared with the first six months of 1997.

The net interest margin for the six months ended June 30, 1998 of 4.22%
was lower than the margin of 4.45% for the same period of 1997. The lower net
interest margin for the first six months of 1998 resulted from lower earning
asset yields and higher deposit costs. The yield on loans was lower in the first
half of 1998 as a result of a change in the mix of loans and a higher level of
investments. Approximately 89% of the loans acquired in the First Southeast
acquisition (which closed in November 1997) were mortgage loans which typically
have a lower yield than commercial or consumer loans. During the first half of
1998, the Company made significant progress in restructuring the balance sheet
through mortgage loan sales. Approximately $153 million of the First Southeast
mortgage loans were sold in the first quarter of 1998. The Company is
redeploying the proceeds from these mortgage loan sales into higher yielding
commercial and consumer loans. During the second quarter of 1998, the Company's
average investments increased due to temporarily investing proceeds from First
Southeast mortgage loans sales. Going forward, the Company plans to continue to
redeploy balances currently invested in securities into loans. Average
investments, including temporary investments, as a percentage of average earning
assets were 22.5% and 17.0% for the six months ended June 30, 1998 and June 30,
1997, respectively. The earning asset yield was enhanced somewhat by higher
credit card loan yields from repricing the credit card portfolio.

The higher deposit costs in 1998 resulted from the large number of
certificates of deposit acquired from First Southeast. Approximately 73% of
First Southeast's total deposits were certificates of deposit or individual
retirement accounts. Certificates of deposit typically have higher rates than
transaction accounts. The Company is currently focusing on shifting the deposit
mix to more closely resemble a commercial bank by increasing deposit transaction
accounts.

<PAGE>
The net interest margin of 4.31% for the second quarter of 1998 showed
improvement over the net interest margin of 4.17% for the first quarter of 1998.
The increase from the first quarter to the second quarter of 1998 resulted from
redeploying the proceeds from First Southeast mortgage loan sales into higher
yielding assets and repricing the credit card portfolio. The net interest margin
also improved as a result of improving the mix of deposits by adding more
transaction accounts.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $5.6 million for the first six months
of 1998 and $6.0 million for the first six months of 1997. The higher 1997
provision for loan losses reflected higher levels of net credit card
charge-offs. During the first six months of 1998, credit card charge-offs
totaled $2.1 million compared with $3.4 million in the first six months of 1997.

Management currently anticipates that loan growth will continue in
1998. New market areas are expected to contribute to 1998 portfolio growth.
Management intends to closely monitor economic trends and the potential effect
on Carolina First Bank's loan portfolio.

NONINTEREST INCOME

Noninterest income remained constant at $9.7 million for both the six
months ended June 30, 1998 and the six months ended June 30, 1997. During the
second quarter of 1997, the Company recorded a gain on the sale of five branches
of $2,250,000. The Company recognized gains on the sale of securities of
$323,000 and $882,000 in the first six months of 1998 and 1997, respectively.
The securities gain in 1997 included $745,000 from the sale of ComSouth
Bankshares, Inc. stock. Excluding the asset sale and securities transactions
discussed above, noninterest income increased $2.8 million to $9.4 million for
the six months ended June 30, 1998 from $6.6 million for the same period of
1997. This increase was primarily attributable to higher service charges on
deposit accounts, mortgage banking income and sundry income.

Service charges on deposit accounts, the largest contributor to
noninterest income, rose 23% to $4.1 million in the first six months of 1998
from $3.4 million in the first six months of 1997. Average deposits for the same
period increased 41.4%. The increase in service charges was attributable to
attracting new transaction accounts and improved collection results. In
addition, effective June 1, 1998, Carolina First Bank implemented a new service
charge on accounts with overdraft protection.

Mortgage banking income includes origination fees, gains from the sale
of loans and servicing fees (which are net of the related amortization for the
mortgage servicing rights and subservicing payments). Mortgage banking income in
the first six months of 1998 increased 68% to $2.3 million, compared with $1.4
million in the first six months of 1997. The increase is attributable to higher
origination fees and gains on the sale of loans partially offset by lower
servicing income.

Income from originations and sales of mortgage loans, including sales
of loans originated by Carolina First Bank, totaled $2.1 million in the first
six months of 1998, up significantly from $957,000 for the first six months of
1997. The increase in the first six months of 1998 resulted from increased
origination volumes resulting from the positive mortgage rate environment and
higher gains on mortgage loans sold. Mortgage originations totaled approximately
$249 million in the first six months of 1998 compared with approximately $89
million in the same period in 1997. Mortgage loans totaling approximately $215
million and $24 million

<PAGE>
were sold in the first half of 1998 and 1997, respectively. In 1998, mortgage
loans sold included approximately $153 million in First Southeast mortgage loans
sold in connection with the Company's plan to redeploy these loans into higher
yielding assets.

CF Mortgage's mortgage servicing operations consist of servicing loans
that are owned by Carolina First Bank and subservicing loans, to which the
rights to service are owned by Carolina First Bank or other non-affiliated
financial institutions. At June 30, 1998, CF Mortgage was servicing or
subservicing 21,458 loans having an aggregate principal balance of approximately
$1.8 billion.

Servicing income from non-affiliated companies, net of the related
amortization for the mortgage servicing rights and subservicing payments, was
$128,000 in the first six months of 1998, compared with $395,000 for the first
six months of 1997. Although the volume of loans serviced increased to $1.8
billion at June 30, 1998 from $1.4 billion at June 30, 1997, the related
amortization for the mortgage servicing rights increased due to accelerated
prepayments leading to a decline in servicing income. The servicing income does
not include the benefit of interest-free escrow balances related to mortgage
loan servicing activities.

Fees for trust services in the first six months of 1998 of $721,000
were 5% below the $758,000 earned in the same period of 1997. At June 30, 1998,
Carolina First Bank's trust department had assets under management of
approximately $311 million. The trust department is continuing to concentrate on
improving the profitability of its accounts and has elected to terminate some
relationships and certain trust products.

During the first six months of 1998, the Company had income of $33,000
from its interests in the credit card and commercial real estate loan trusts,
compared to a loss of $164,000 for the same period in 1997. Loan securitization
income is net of charge-offs associated with the loans in the trusts. Loan
securitization income related to credit cards improved significantly to $29,000
for the first half of 1998, compared with a loss of $479,000 for the first half
of 1997. The loan securitization income in 1997 was negatively impacted by
greater than expected charge-offs in the credit card securitization. During the
first half of 1998, credit card charge-offs showed improvement over previous
months. The commercial real estate loan trust income totaled $4,000 during the
first six months of 1998 compared with $315,000 during the first six months of
1997. Total balances in the commercial real estate loan trust decline as loans
are paid off, resulting in lower income. At June 30, 1998, the off-balance sheet
balance in the commercial real estate loan trust was approximately $24 million.
In addition, expenses related to the formation of this trust are being amortized
over the life of the loans. As a result, the Company expects the income
associated with the commercial real estate loan trust to continue to decline.

Sundry noninterest income was $2.2 million in the first half of 1998
compared with $1.3 million in the first half of 1997. This increase was due to
additional credit card servicing fees received by RPGI, higher insurance
commissions, increased merchant processing fees and servicing fee income
received from Net.B@nk related to loans purchased from Carolina First Bank
during 1997 which continue to be serviced by Carolina First Bank.

During the second quarter of 1998, the Company expanded its brokerage
service offerings through Carolina First Securities, Inc. ("CF Securities"), a
subsidiary of Carolina First Bank. CF Securities offers a complete line of
investment products and services, including mutual funds, stocks, bonds and
annuities. Income from these investment activities is not expected to be
significant in 1998.

<PAGE>
NONINTEREST EXPENSES

Noninterest expenses increased $4.4 million, or 17%, to $29.5 million
in the first six months of 1998 from $25.1 million in the first six months of
1997. With the acquisitions of Lowcountry Savings Bank, Inc. ("Lowcountry") and
First Southeast, intangible amortization for the first six months of 1998
increased significantly over the first six months of 1997. Excluding intangible
amortization, noninterest expenses on a cash basis increased $3.1 million, or
13%, to $27.8 million for the first half of 1998 from $24.7 million for the
first half of 1997. The increase in expenditures reflects operational costs
associated with acquired branches, new markets and additional automated teller
machines ("ATMs").

Salaries and wages and employee benefits increased $2.1 million to
$14.8 million in the first six months of 1998 compared with $12.7 million in the
first six months of 1997. Full-time equivalent employees increased to 787 at
June 30, 1998 from 622 at June 30, 1997. The staffing cost increases were
primarily due to the costs of expanding in existing and new markets (including
Lowcountry and First Southeast acquisitions) and back office support functions
to support growth.

Occupancy and furniture and equipment expenses increased $634,000, or
15%, to $5.0 million for the six months ended June 30, 1998 from $4.3 million
for the six months ended June 30, 1997. This increase resulted principally from
additional costs associated with the Lowcountry and First Southeast branches and
the operating costs associated with additional ATMs.

Sundry noninterest expenses increased $363,000, or 5%, to $8.0 million
in the first six months of 1998 from $7.6 million in the first six months of
1997. The overall increase in sundry noninterest expenses was principally
attributable to the overhead and operating expenses associated with higher
lending and deposit activities. The largest items of sundry noninterest expense
were telephone, servicing fees, stationery, supplies, printing, and advertising.
The Company expects intangible amortization to increase by approximately
$300,000 during the fourth quarter of 1998 in connection with the pending
acquisitions of Poinsett and Colonial Bank.

COMPARISON FOR THE QUARTERS ENDED JUNE 30, 1998 AND JUNE 30, 1997

Net income increased in the second quarter of 1998 to $5.5 million from
$4.7 million in the second quarter of 1997. Diluted earnings per share decreased
to $0.31 in the second quarter of 1998, compared with $0.41 in the second
quarter of 1997. Second quarter 1997 earnings included $1.5 million (after-tax),
or $0.13 per fully diluted share, from a gain associated with the sale of five
branches.

Net interest income increased $5.4 million to $21.3 million for the
three months ended June 30, 1998 from $15.9 million for the comparable period in
1997. This increase was primarily attributable to a higher level of average
earning assets. Earning assets averaged $2.0 billion and $1.5 billion in the
second quarters of 1998 and 1997, respectively. The net interest margin was
slightly lower in 1998 at 4.31% for the second quarter, compared with 4.38% for
the second quarter of 1997. The lower net interest margin in the second quarter
of 1998 resulted from lower earning asset yields associated with the change in
the mix of earning assets and higher deposit costs associated with the change in
the mix of deposits (see "EARNINGS REVIEW - Net Interest Income").

Noninterest income, excluding gains on the sale of branches and
securities, increased $1.3 million to $4.9 million for the second quarter of
1998 compared with $3.6 million for the second quarter of 1997.

15
<PAGE>
Service charges on deposit accounts increased to $2.3 million in the second
quarter of 1998 compared with $1.8 million in the second quarter of 1997. This
increase was due to attracting new transaction accounts, improved collection
results, and the implementation of a new service charge on accounts with
overdraft protection. Loan securitization income was $114,000 compared to a loss
of $105,000 for the second quarter of 1997. This increase was attributable to an
improvement in net charge-offs for credit card loans in the credit card
securitization trust. These increases were offset slightly by decreases in
mortgage banking income and fees for trust services. Sundry noninterest income
for the second quarter of 1998 increased $648,000 primarily due to credit card
servicing fees received by RPGI.

Noninterest expenses increased $2.0 million, or 16%, to $14.2 million
for the three months ended June 30, 1998 from $12.2 million for the three months
ended June 30, 1997. Personnel expense increased from $6.4 million for the
second quarter of 1997 to $7.3 million for the second quarter of 1998 due to the
hiring of additional employees as a result of expansion in existing and new
markets. Occupancy and furniture and equipment expense increased slightly to
$2.4 million during second quarter 1998 from $2.2 million during second quarter
1997. Amortization of intangibles increased from $413,000 in the second quarter
of 1997 to $818,000 in the second quarter of 1998 as a result of the Lowcountry
and First Southeast acquisitions, which were completed in the second half of
1997. Sundry noninterest expenses increased 16% from second quarter 1997 to
second quarter 1998, largely because of increases in servicing fees, legal fees
and credit card processing expenses.

YEAR 2000

The Company recognizes that there is a business risk in computerized
systems as the calendar rolls over into the next century. If the computer
systems misinterpret the date, items such as interest calculations on loans and
deposits will be incorrect. This problem is commonly called the "Year 2000
Problem." Computer systems used by the Company in its day-to-day operations will
be affected by this problem.

Management has established a committee (the "Y2K Project Team")
which has identified all affected systems and is currently working to ensure
that this event will not disrupt operations. A full-time staff member has been
assigned to the Y2K Project Team to assist in record keeping and disseminating
information. The Y2K Project Team reports regularly to the Audit Committee of
the Company's Board of Directors who report to the Board of Directors on a
quarterly basis on year 2000 compliance. At its June 1998 meeting, the Company's
Board of Directors approved a Year 2000 project plan and members of the Y2K
Project Team. The Company is also working closely with outside computer vendors
to ensure that all software corrections and warranty commitments are obtained
and to arrange mock conversion testing. The estimated cost to the Company for
these corrective actions is $250,000, all of which is included in the Company's
1998 budget. Estimated costs for 1999 have not yet been determined but are not
expected to exceed the Company's costs for 1998. Incomplete or untimely
compliance, however, would have a material adverse effect on the Company, the
dollar amount of which cannot be accurately quantified at this time because of
the inherent variables and uncertainties involved.

BALANCE SHEET REVIEW

LOANS

The Company's loan portfolio consists of commercial mortgage loans,
commercial loans, consumer loans and one-to-four family residential mortgage
loans. A substantial majority of these borrowers are located in South Carolina
and are concentrated in the Company's market areas. The Company has no foreign
loans or loans for highly leveraged transactions. The loan portfolio does not
contain any industry concentrations of credit risk exceeding 10% of the
portfolio. At June 30, 1998, the Company had total loans outstanding of $1.6
billion which equaled approximately 85% of the Company's total deposits and
approximately 68% of the

16
<PAGE>
Company's total assets. The composition of the Company's loan portfolio at June
30, 1998 follows: commercial and commercial mortgage 64%, residential mortgage
16%, consumer 10%, lease receivables 4%, credit card 3% and construction 3%.

The Company's loans increased $299.2 million, or 24%, to approximately
$1.6 billion at June 30, 1998 from $1.3 billion at June 30, 1997 and decreased
$47.5 million from approximately $1.6 billion at December 31, 1997. This
decrease was net of 1998 loan sales of approximately $217 million. Adjusting for
the 1998 loan sales, internal loan growth was approximately $169.7 million, or
an annualized rate of 21.2%, during the first six months of 1998.

The Company had loans to 69 borrowers having principal amounts ranging
from $2 million to $5 million, which loans accounted for $210.6 million, or 14%,
of the Company's loan portfolio in 1998. The Company had loans to 22 borrowers
having principal amounts in excess of $5 million, which loans accounted for
$144.0 million, or 9%, of the Company's loan portfolio in 1998. For the same
time period in 1997, the Company had loans to 92 borrowers with principal
amounts ranging from $2 million to $5 million, which accounted for $281.0
million, or 22%, of the Company's loan portfolio. The Company had loans to 13
borrowers having principal amounts in excess of $5 million, which loans
accounted for $87.0 million, or 7%, of the Company's loan portfolio in 1997. Any
material deterioration in the quality of any of these larger loans could have a
significant impact on the Company's earnings.

For the first six months of 1998, the Company's loans averaged $1.6
billion with a yield of 9.35%, compared with $1.2 billion and a yield of 9.33%
for the same period of 1997. The increase in loan yield was attributable to an
increase in the credit card yield and a shift in the mix of loans due to
mortgage loan sales. The credit card yield increased as a result of a first
quarter 1997 credit card solicitation teaser rate that expired in August 1997
and as a result of repricing credit card rates upward in 1998. Mortgage loans
comprised approximately 22% of the average loan portfolio in the first quarter
of 1998 compared with 17% in the second quarter of 1998. This shift reflects the
Company's efforts to redeploy the proceeds from the mortgage loan sales into
higher yielding assets.

The interest rates charged on loans vary with the degree of risk and
the maturity and amount of the loan. Competitive pressures, money market rates,
availability of funds and government regulations also influence interest rates.

ALLOWANCE FOR LOAN LOSSES

Management maintains an allowance for loan losses which it believes is
adequate to cover possible losses in the loan portfolio. However, management's
judgment is based upon a number of assumptions about future events which are
believed to be reasonable, but which may or may not prove valid. Thus, there can
be no assurance that charge-offs in future periods will not exceed the allowance
for loan losses or that additional increases in the allowance for loan losses
will not be required.

The allowance for loan losses is established through charges in the
form of a provision for loan losses. Loan losses and recoveries are charged or
credited directly to the allowance. The amount charged to the provision for loan
losses by the Company is based on management's judgment as to the amount
required to maintain an allowance adequate to provide for potential losses in
the Company's loan portfolio. The level of this allowance is dependent upon the
total amount of past due loans, general economic conditions and management's
assessment of potential losses.

17
<PAGE>
The allowance for loan losses totaled $15.6 million, or 1.00% of loans
net of unearned income at the end of June 1998, compared with $12.2 million, or
.97% of loans net of unearned income at the end of June 1997. At December 31,
1997, the allowance for loan losses was $16.2 million, or 1.01% of loans net of
unearned income. The allowance for loan losses as a percentage of nonperforming
loans was 883% and 591% as of June 30, 1998 and 1997, respectively.

The following table presents changes in the allowance for loan losses.

ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(dollars in thousands)
<TABLE>
<CAPTION>
At and for
At and for the six months the year ended
ended June 30, December 31,
------------------------- --------------
1998 1997 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $ 16,211 $ 11,290 $ 11,290
Purchase accounting acquisitions 0 0 3,550
Valuation allowance for loans purchased 0 364 658
Provision for loan losses 5,583 5,993 11,646
Charge-offs:
Credit cards 2,141 3,386 5,325
Bank loans, leases & Blue Ridge 4,643 2,943 6,794
Recoveries 615 857 1,186
- -------------------------------------------------------------------------------------------------------------------
Net charge-offs 6,169 5,472 10,933
- -------------------------------------------------------------------------------------------------------------------
Allowance at end of period $ 15,625 $ 12,175 $ 16,211
===================================================================================================================
</TABLE>
At June 30, 1998, the recorded investment in loans that were considered
to be impaired under Statement of Financial Accounting Standards 114,
"Accounting by Creditors for Impairment of a Loan", was $487,000. The related
allowance for these impaired loans was $373,000. The average recorded investment
and foregone interest on impaired loans during the six months ended June 30,
1998 was approximately $812,000 and $44,000, respectively. For the six months
ended June 30, 1998, the Company recognized interest income on impaired loans of
$46,000.

SECURITIES

At June 30, 1998, the Company's total investment portfolio had a book
value of $419.3 million and a market value of $423.1 million for an unrealized
net gain of approximately $3.8 million. The investment portfolio had a weighted
average maturity of approximately 5.3 years. Securities (i.e., securities held
for investment, securities available for sale and trading securities) averaged
$357.3 million in the first six months of 1998, 57% above the first six month
1997 average of $228.4 million. The increase in the securities balance was
primarily attributable to proceeds from the sale of First Southeast mortgage
loans. The average portfolio yield increased to 6.40% for the first six months
of 1998 from 6.18% for the first six months of 1997. The portfolio yield
increased as a result of changing the mix of securities. As securities matured,
they were reinvested in higher yielding agencies and mortgage-backed securities.
At June 30, 1998, securities totaled $422.5 million, up $160.8 million from the
$261.7 million invested as of the second quarter end 1997 and up $124.0 million
from the December 31, 1997 balance of $298.5 million.

18
<PAGE>
At June 30, 1998, the Company owned 2,528,366 shares of common stock of
Affinity and the Affinity Warrant entitling the Company to purchase an
additional 3,471,340 shares of common stock at a purchase price of $0.0001 per
share, all of which, in the aggregate, constituted approximately 17% of
Affinity's outstanding common stock. The investment in Affinity's common stock,
included in securities available for sale, was recorded at its market value of
approximately $2.1 million. The Affinity Warrant was not included in securities
at June 30, 1998.

At June 30, 1998, the Company owned 1,175,000 shares of common stock of
Net.B@nk, or approximately 18% of the outstanding shares. The investment in Net.
B@nk's common stock, included in securities available for sale, was recorded at
its basis of approximately $979,000. The Net.B@nk investment is not marked to
market value since regulators have precluded certain affiliates of Net.B@nk,
including the Company, from selling their shares until July 31, 2000.

INTANGIBLE ASSETS AND OTHER ASSETS

The intangible assets balance at June 30, 1998 of $57.1 million was
attributable to goodwill of $48.5 million, core deposit balance premiums of $8.5
million and purchased credit card premiums of $104,000. The intangible assets
balance at June 30, 1997 of $15.8 million was attributable to goodwill of $7.3
million, core deposit balance premiums of $8.3 million and purchased credit card
premiums of $173,000. The Company recorded approximately $7.8 million in
intangible assets related to its July 1997 acquisition of Lowcountry and $31.7
million in intangible assets (net of adjustments related to mortgage loans and
branch sales) related to its November 1997 acquisition of First Southeast. In
connection with the pending acquisitions of Poinsett and Colonial Bank, the
Company expects to record approximately $25 million in intangible assets.

At June 30, 1998, other assets included other real estate owned of
$677,000 and mortgage servicing rights of $23.4 million. At June 30, 1997, other
assets included other real estate owned of $2.4 million and mortgage servicing
rights of $17.5 million.

INTEREST-BEARING LIABILITIES

During the first six months of 1998, interest-bearing liabilities
averaged $1.8 billion, compared with $1.3 billion for the comparable period of
1997. This increase resulted principally from internal deposit growth related to
account promotions and sales efforts and acquisitions. The average interest
rates were 5.07% and 4.94% for the first six months of 1998 and 1997,
respectively. At June 30, 1998, interest-bearing deposits comprised
approximately 87% of total deposits and 91% of interest-bearing liabilities. For
the first six months of 1998, average borrowed funds, which included Federal
Home Loan Bank ("FHLB") advances and other short-term borrowings, totaled $128.1
million, compared with $161.8 million for the first six months of 1997. This
decrease was attributable to average advances from the FHLB which declined to
$10.0 million for the first six months of 1998 from $62.5 million for the
comparable period a year earlier. The Company's FHLB advances have remained
constant at $10.0 million since December 31, 1997. FHLB advances are a source of
funding which the Company uses depending on the current level of deposits and
management's willingness to raise deposits through market promotions.

Carolina First Bank's primary source of funds for loans and investments
is its deposits which are gathered through Carolina First Bank's branch network.
Deposits grew 38% to $1.8 billion at June 30, 1998 from $1.3 billion at June 30,
1997. At December 31, 1997, deposits totaled $1.7 billion. Approximately $44

19
<PAGE>
million and $55 million in deposits were sold as part of the sale of branch
offices during the second quarters of 1998 and 1997, respectively. The Company
acquired approximately $64 million in deposits from the Lowcountry acquisition
and approximately $285 million in deposits from the First Southeast acquisition.
Internal growth, particularly from account promotions, generated the remainder
of the new deposits. During the first six months of 1998, total interest-bearing
deposits averaged $1.6 billion with a rate of 4.97%, compared with $1.1 billion
with a rate of 4.74% in 1997. The increased rate paid on deposits during the
first six months of 1998 reflects the large number of CDs and IRAs acquired from
First Southeast. The Company focused on increasing deposit transaction accounts
during the first half of 1998 and will continue this effort going forward.
During the first six months of 1998, deposit pricing continued to be very
competitive in Carolina First Bank's market areas, resulting in upward pressure
on deposit interest rates. The Company expects this competitive deposit
environment to continue. The Company does not believe that it has any brokered
deposits.

The Company has filed applications with the appropriate regulatory
agencies to open a branch in the Cayman Islands. The branch is to be a "shell"
branch of Carolina First Bank, and accordingly, will involve minimal start-up
costs. The primary function of the branch will be to obtain deposits from the
Eurocurrency interbank markets, which will be utilized in funding Carolina First
Bank's domestic loan portfolio. The bank views this branch primarily as a
vehicle for entrance into a funds market in which it is not currently active.

Average noninterest-bearing deposits, which increased 4% during the
year, decreased to 11.7% of average total deposits in the first six months of
1998 from 15.9% in the first six months of 1997. During the first half of 1997,
noninterest-bearing deposits included deposits of Net.B@nk, FSB (then known as
Atlanta Internet Bank) which were transferred to Net.B@nk on July 31, 1997
resulting in a $43 million reduction in Carolina First Bank's total deposits.
The decrease in noninterest-bearing deposits also reflects the change in the mix
of deposits related to the Lowcountry and First Southeast acquisitions.

The Company's core deposit base consists of consumer time deposits,
savings, NOW accounts, money market accounts and checking accounts. Although
such core deposits are becoming increasingly interest sensitive for both the
Company and the industry as a whole, such core deposits continue to provide the
Company with a large and stable source of funds. Core deposits as a percentage
of average total deposits averaged approximately 87% for the first six months of
1998. The Company closely monitors its reliance on certificates of deposit
greater than $100,000, which are generally considered less stable and less
reliable than core deposits.

CAPITAL RESOURCES AND DIVIDENDS

Total shareholders' equity amounted to $256.9 million, or 11.28% of
total assets, at June 30, 1998, compared with $110.4 million, or 6.47% of total
assets, at June 30, 1997. At December 31, 1997, shareholders' equity totaled
$201.7 million, or 9.35% of total assets. The $55.2 million increase in total
shareholders' equity since December 31, 1997 resulted principally from the
Regulation S Offering of the Company's Common Stock, shares issued related to
the RPGI merger and retention of earnings less cash dividends paid.

The Company's capital needs have been met principally through public
offerings of common stock, preferred stock and subordinated notes and through
the retention of earnings. In addition, the Company issued capital stock in
connection with acquisitions. During the first quarter of 1998, the Company
raised approximately $39 million in new capital through the sale of 2.0 million
shares of its Common Stock to certain

<PAGE>
overseas investors in the Regulation S offering.

Book value per share at June 30, 1998 and 1997 was $14.16 and $9.71,
respectively. Tangible book value per share at June 30, 1998 and 1997 was $11.01
and $8.32, respectively. At December 31, 1997, book value and tangible book
value were $12.88 and $9.17, respectively. Tangible book value was below book
value as a result of the purchase premiums associated with branch acquisitions
and the acquisitions of CF Mortgage, Lowcountry and First Southeast (all of
which were accounted for as purchases).

At June 30, 1998, the Company and Carolina First Bank were in
compliance with each of the applicable regulatory capital requirements. The
table below sets forth various capital ratios for the Company and Carolina First
Bank.

CAPITAL RATIOS
<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------
As of Well Capitalized Adequately Capitalized
6/30/98 Requirement Requirement
- -------------------------------------------------------------------------------------------------------------------
Company:
<S> <C> <C> <C>
Total Risk-based Capital 14.11% 10.0% 8.0%
Tier 1 Risk-based Capital 11.68 6.0 4.0
Leverage Ratio 8.91 5.0 4.0

Carolina First Bank:
Total Risk-based Capital 10.98 10.0 8.0
Tier 1 Risk-based Capital 10.13 6.0 4.0
Leverage Ratio 7.70 5.0 4.0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company and its subsidiaries are subject to certain regulatory
restrictions on the amount of dividends they are permitted to pay. The Company
has paid a cash dividend each quarter since the initiation of cash dividends on
February 1, 1994. At the December 17, 1997 meeting, the Board of Directors
approved an $0.08 per share cash dividend on the common stock, which represents
an effective annual increase of approximately 14%. The Company presently intends
to pay a quarterly cash dividend on the Common Stock; however, future dividends
will depend upon the Company's financial performance and capital requirements.

MARKET RISK

Market risk is the risk of loss from adverse changes in market prices
and rates. The Company's market risk arises principally from interest rate risk
inherent in its lending, deposit and borrowing activities. Management actively
monitors and manages its interest rate risk exposure. Although the Company
manages other risks, such as credit quality and liquidity risk, in the normal
course of business, management considers interest rate risk to be its most
significant market risk and could potentially have the largest material effect
on the Company's financial condition and results of operations. Other types of
market risks, such as foreign currency exchange risk and commodity price risk,
do not arise in the normal course of the Company's business activities.

<PAGE>
Achieving consistent growth in net interest income is the primary goal
of the Company's asset/liability function. The Company attempts to control the
mix and maturities of assets and liabilities to achieve consistent growth in net
interest income despite changes in market interest rates. The Company seeks to
accomplish this goal while maintaining adequate liquidity and capital. The
Company's asset/liability mix is sufficiently balanced so that the effect of
interest rates moving in either direction is not expected to be significant over
time.

The Company's Asset/Liability Committee uses a simulation model to
assist in achieving consistent growth in net interest income while managing
interest rate risk. The model takes into account interest rate changes as well
as changes in the mix and volume of assets and liabilities. The model simulates
the Company's balance sheet and income statement under several different rate
scenarios. The model's inputs (such as interest rates and levels of loans and
deposits) are updated on a monthly basis in order to obtain the most accurate
forecast possible. The forecast presents information over a twelve month period.
It reports a base case in which interest rates remain flat and reports
variations that occur when rates increase and decrease 200 basis points.
According to the model as of June 30, 1998, the Company is positioned so that
net interest income will increase $8.5 million if interest rates rise in the
near term and will decrease $4.8 million if interest rates decline in the near
term.

As of June 30, 1998, there was no substantial change from the interest
rate risk sensitivity analysis for various changes in interest rates calculated
as of December 31, 1997. The foregoing disclosures related to the market risk of
the Company should be read in conjunction with the Company's audited
consolidated financial statements, related notes and management's discussion and
analysis of financial condition and results of operations for the year ended
December 31, 1997 included in the Company's 1997 Annual Report on Form 10K.

The static interest sensitivity gap position, while not a complete
measure of interest sensitivity, is also reviewed periodically to provide
insights related to the static repricing structure of assets and liabilities. At
June 30, 1998, on a cumulative basis through twelve months, rate-sensitive
liabilities exceeded rate-sensitive assets, resulting in a liability sensitive
position of $363.6 million.

LIQUIDITY

Liquidity management involves meeting the cash flow requirements of the
Company both at the holding company level as well as at the subsidiary level.
The holding company and non-banking subsidiaries of the Company require cash for
various operating needs including general operating expenses, payment of
dividends to shareholders, interest on borrowing, extensions of credit at Blue
Ridge, business combinations and capital infusions into subsidiaries. Sources of
liquidity for the Company's holding company and non- banking subsidiaries
include dividends from Carolina First Bank and non-banking subsidiaries to the
holding company, existing cash reserves and earnings.

Carolina First Bank's cash flow requirements involve withdrawals of
deposits, extensions of credit and payment of operating expenses. Carolina First
Bank's principal sources of funds for liquidity purposes are customers'
deposits, principal and interest payments on loans, loan sales or
securitizations, securities available for sale, maturities of securities,
temporary investments and earnings. Carolina First Bank's liquidity is also
enhanced by the ability to acquire new deposits through its established branch
network of 58 branches in South Carolina. Carolina First Bank's liquidity needs
are a factor in developing its deposit pricing structure; deposit pricing may be
altered to retain or grow deposits if deemed necessary. Carolina First Bank has
access

<PAGE>
to borrowing from the FHLB and maintains unused short-term lines of credit from
unrelated banks.

The liquidity ratio is an indication of a company's ability to meet its
short-term funding obligations. At June 30, 1998, Carolina First Bank's
liquidity ratio was approximately 24%. At June 30, 1998, Carolina First Bank had
unused short-term lines of credit totaling approximately $48 million (which are
withdrawable at the lender's option). In addition, Carolina First Bank has
access to borrowing from the FHLB. At June 30, 1998, unused borrowing capacity
from the FHLB totaled approximately $170 million with an outstanding balance of
$10 million. Management believes that these sources are adequate to meet its
liquidity needs.

ASSET QUALITY

Prudent risk management involves assessing risk and managing it
effectively. Certain credit risks are inherent in making loans, particularly
commercial, real estate and consumer loans. The Company attempts to manage
credit risks by adhering to internal credit policies and procedures. These
policies and procedures include a multi-layered loan approval process, officer
and customer limits, periodic documentation examination and follow-up procedures
for any exceptions to credit policies. Loans are assigned a grade and those that
are determined to involve more than normal credit risk are placed in a special
review status. Loans that are placed in special review status are required to
have a plan under which they will be either repaid or restructured in a way that
reduces credit risk. Loans in this special review status are reviewed monthly by
the Loan Committee of the Board of Directors.

As demonstrated by the following analytical measures of asset quality,
management believes the Company has effectively managed its credit risk. Net
loan charge-offs, including credit card receivables, totaled $6.2 million and
$5.5 million in the first six months of 1998 and 1997, respectively, or 0.79%
and 0.92%, respectively, as an annualized percentage of average loans. Excluding
credit card receivables, annualized net loan charge-offs as a percentage of
average loans were 0.55% and 0.37% during the first six months of 1998 and 1997,
respectively. In the first six months of 1998, net charge-offs for credit cards
totaled $2.1 million compared with $3.4 million for the same period in 1997.
Credit card charge-offs improved during the first half of the year, and the
Company hopes to achieve greater control over credit card collections through
the acquisition of RPGI. The majority of the increase in accruing loans past due
90 days is attributable to one-to-four family residential loans acquired from
First Southeast.

<PAGE>
NONPERFORMING ASSETS AND PAST DUE LOANS
($ in thousands)
<TABLE>
<CAPTION>

June 30, December 31,
--------------------- -------------
1998 1997 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans $ 487 $ 778 $ 1,165
Restructured loans 1,283 1,283 1,283
- -------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 1,770 2,061 2,448
Other real estate 677 2,426 1,319
- -------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 2,447 $ 4,487 $ 3,767
- -------------------------------------------------------------------------------------------------------------------
Nonperforming assets as a % of loans
and foreclosed property 0.16% 0.36% 0.23%

Accruing loans past due 90 days $ 4,514 $ 2,560 $ 4,125
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
INDUSTRY DEVELOPMENTS

Certain recently-enacted and proposed legislation could have an effect on
both the costs of doing business and the competitive factors facing the
financial institutions industry. The Company is unable at this time to assess
the impact of this legislation on its financial condition or operations.

FORWARD-LOOKING STATEMENTS

From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products and similar matters. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated results
or other expectations expressed in the Company's forward-looking statements. The
risks and uncertainties that may affect the operations, performance, development
and results of the Company's business include, but are not limited to, the
following: risks from changes in economic and industry conditions; changes in
interest rates; risks inherent in making loans including repayment risks and
value of collateral; dependence on senior management; and recently-enacted or
proposed legislation. Statements contained in this filing regarding expected
levels of past due credit cards may be forward-looking statements and are
subject to uncertainties and risks, including, but not limited to, the demand
for the Company's products and services, changing economic conditions, interest
rates, consumer spending and numerous other factors.

<PAGE>
PART II

ITEM 1 LEGAL PROCEEDINGS

The Company and its subsidiaries are from time to time parties to
various legal actions arising in the normal course of business. Such
items are not expected to have any material adverse effect on the
business or financial position of the Company or any of its
subsidiaries.

On November 4, 1996, a derivative shareholder action was filed in
Greenville County Court of Common Pleas against the Company, the
majority of the Company's and Carolina First Bank's directors and
certain executive and other officers. The named plaintiffs are the
Company by and through certain minority shareholders. The Company filed
a motion to dismiss with respect to all claims in this complaint, which
was granted in December 1997. Plaintiffs have filed a motion for
reconsideration and have the right to appeal the grant of the motion to
dismiss. Plaintiffs allege as causes of action the following:
conversion of corporate opportunity; fraud and constructive fraud; and
negligent management. The factual basis upon which these claims are
made generally involves the payment to Company officers and other
individuals of a bonus in stock held by the Company in Affinity (as
reward for their efforts in connection with the Company's procurement
of stock in Affinity), statements to former shareholders in connection
with the Company's acquisition of Midlands National Bank, and alleged
mismanagement by certain executive officers involving financial
matters. The complaint seeks damages for the benefit of the Company
aggregating $41 million and recision of the Affinity bonus.

ITEM 2 CHANGE IN SECURITIES

None.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None.

<PAGE>
PART II
(CONTINUED)

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

On April 30, 1998, the Company held its 1998 Annual Meeting of
Shareholders. The results of the 1998 Annual Meeting of Shareholders
follow.

PROPOSAL #1 - ELECTION OF DIRECTORS

The following persons were elected as Directors with the votes
indicated.
<TABLE>
<CAPTION>

Voting Shares in Favor
---------------------- Withheld
# % Authority
--- --- ---------
<S> <C> <C> <C>
Judd B. Farr 12,640,920 99.72% 34,876
C. Claymon Grimes, Jr. 12,637,794 99.73% 34,392
Elizabeth P. Stall 12,637,637 99.73% 34,489
David C. Wakefield III 12,644,963 99.79% 27,157
Mack I. Whittle, Jr. 12,639,816 99.74% 32,487
</TABLE>
M. Dexter Hagy, William S. Hummers III, Vernon E. Merchant, Jr.,
William R. Phillips, H. Earle Russell, Jr., Charles B. Schooler, Eugene
E. Stone IV and William R. Timmons, Jr. continued in their present
terms as directors.

PROPOSAL #2 - AMENDMENTS TO THE COMPANY'S DIRECTORS' STOCK OPTION PLAN

The shareholders approved an amendment to the Company's Directors'
Stock Option Plan (the "Directors' Plan" and, as amended, the "Amended
Directors' Plan") to increase the number of shares which may be subject
to options thereunder from 250,000 shares to 500,000 shares, and to
amend the compensation payable thereunder to Company directors
("Company Directors") to be consistent with the director compensation
program adopted by the Company for 1998. Under the Directors' Plan's
existing provisions, all non-employee directors of the Company and its
principal subsidiaries receive options to purchase 1,000 shares of
Common Stock on an annual basis. The Directors' Plan is being amended
to differentiate between Company Directors and directors of
subsidiaries who do not also serve as Company Directors ("Subsidiary
Directors"). Subsidiary Directors will continue to receive the annual
1,000 share grant. However, the Company has approved a program whereby
Company Directors will receive 60% of their total director compensation
(calculated assuming 100% attendance at all scheduled Board and
committee meetings) in the form of options to purchase Common Stock.
The options will be valued based on the Black-Scholes valuation method.
The Amended Directors' Plan also contains provisions for the immediate
vesting of options upon a change of control. These items were approved
with the votes indicated.

% of
Outstanding
# of Shares Shares
----------- ------
For 11,953,670 93.52%
Against 622,730 4.87
Abstain 205,477 1.61
Broker Non-Votes 1 ----

<PAGE>
PART II
(CONTINUED)

ITEM 5 OTHER INFORMATION

PENDING ACQUISITIONS

On June 22, 1998, the Company signed a reorganization agreement to acquire First
National Bank of Pickens County ("First National"), a national bank
headquartered in Easley, South Carolina. The reorganization agreement provides
for the merger of First National with and into Carolina First Bank, a
wholly-owned subsidiary of the Company. At June 30, 1998, First National
operated through three locations and had total assets, loans, deposits and
shareholders' equity of approximately $120.6 million, $64.6 million, $97.6
million and $16.4 million, respectively. Under the terms of the merger, First
National shareholders will receive consideration of $750.08 per share for each
First National share for an aggregate consideration of approximately $60
million, payable in the form of the Company's common stock. The per share
consideration increases to $769.89 in the event that the closing of the
transaction occurs after September 30, 1998. The exchange ratio is based on the
Company's average common stock price for the twenty days preceding the merger
closing date. The proposed merger is anticipated to be accounted for using the
pooling of interest method of accounting.

On June 26, 1998, the Company signed a reorganization agreement to acquire
Poinsett Financial Corporation ("Poinsett"), a thrift holding company
headquartered in Travelers Rest, South Carolina. The reorganization agreement
provides for the merger of Poinsett with and into the Company. After the merger,
Poinsett will be operated as a separate subsidiary of the Company (except that
after the merger, Poinsett's name may be changed to "Carolina First Savings
Bank" and certain branch locations of Poinsett may be transferred to Carolina
First Bank). 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, Poinsett shareholders will receive consideration of $82.00
per share for each Poinsett share for an aggregate consideration of
approximately $15.6 million, payable in the form of the Company's common stock.
The exchange ratio is based on the Company's average common stock price for the
twenty days preceding the merger closing date. The proposed merger is
anticipated to be accounted for using the purchase method of accounting.

On July 9, 1998, the Company signed a reorganization agreement to acquire
Colonial Bank of South Carolina, Inc. ("Colonial Bank"), a state-chartered
banking corporation headquartered in Camden, South Carolina. The reorganization
agreement provides for the merger of Colonial Bank with and into Carolina First
Bank, a wholly-owned subsidiary of the Company. The Company currently owns
28,000 shares, or 4.8%, of Colonial Bank's outstanding common stock. At June 30,
1998, Colonial Bank 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,
Colonial Bank shareholders will receive consideration of $23.00 per share for
each Colonial Bank share for an aggregate consideration of approximately $12.8
million (excluding the shares owned by the Company), payable in the form of the
Company's common stock. The exchange ratio is based on the Company's average
common stock price for the twenty days preceding the merger closing date. The
proposed merger is anticipated to be accounted for using the purchase method of
accounting.

The pending acquisitions, which are subject to the receipt of regulatory
approval and First National, Poinsett and Colonial Bank shareholder approval,
are expected to close in the third quarter of 1998.

<PAGE>
PART II
(CONTINUED)

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

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 Bank of Pickens County: Incorporated by reference to the
Company's Registration Statement on Form S-4, Commission File No.
333-60433.

2.2 Agreement and Plan of Reorganization entered into as of June 26, 1998
between Carolina First Corporation and Poinsett Financial Corporation:
Incorporated by reference to the Company's Registration Statement on
Form S-4, Commission File No. 333-60753.

11.1 Computation of Primary and Fully Diluted Earnings Per Share.

12.1 Computation of Earnings to Fixed Charges Ratio.

27.1 Financial Data Schedules.

(b) Reports on Form 8-K

None.

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

Carolina First Corporation

/S/ William S. Hummers, III
---------------------------
William S. Hummers, III
Executive Vice President

EXHIBIT 11.1

COMPUTATION OF EARNINGS PER SHARE
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YTD
1ST QUARTER 1998 2ND QUARTER 1998 2ND QUARTER 1998
---------------- ---------------- ----------------
BASIC
<S> <C> <C> <C>
Net income .......................................................... $ 4,694,000 $ 5,536,000 $10,230,000
Less dividends on preferred stock ................................... 0 0 0
----------- ----------- -----------
Net income applicable to common
shareholders (numerator) ......................................... $ 4,694,000 $ 5,536,000 $10,230,000
=========== =========== ===========
Average common shares outstanding
(denominator) .................................................... 16,588,163 17,682,632 17,138,421

Per share amount .................................................... $ 0.28 $ 0.31 $ 0.59
=========== =========== ===========

DILUTED
Net income (numerator) .............................................. $ 4,694,000 $ 5,536,000 $10,230,000

Average common shares outstanding ................................... 16,588,163 17,682,632 17,138,421
Dilutive average shares outstanding under options ................... 802,304 849,096 850,399
Exercise prices ..................................................... $4.81 to $21.56 $4.81 to $24.79
Assumed proceeds on exercise ........................................ $10,929,294 $12,133,226 $12,143,687
Average market value per share ...................................... $ 23.34 $ 27.35 $ 25.32
Less: Treasury stock purchased with the assumed
proceeds from exercise of options ................................ 468,265 443,628 479,608
----------- ----------- -----------
Adjusted average shares ............................................. 16,922,202 18,088,100 17,509,212
----------- ----------- -----------
Convertible preferred stock assumed
converted ........................................................ 0 0 0
Average diluted shares outstanding
----------- ----------- -----------
(denominator) .................................................... 16,922,202 18,088,100 17,509,212
----------- ----------- -----------

Per share amount .................................................... $ 0.28 $ 0.31 $ 0.59
=========== =========== ===========
</TABLE>

EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CAROLINA FIRST CORPORATION AND SUBSIDIARIES
($ in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
--------------------------- -------------------------
EARNINGS:
<S> <C>
Income from continuing operations
before income taxes.......................................... $ 8,762 $ 16,207

ADD:
(a) Fixed charges............................................... 22,368 44,535

DEDUCT:
(a) Interest capitalized during year............................ ------ ------
------------------------- -------------------------

Earnings, for computation purposes................................ $ 31,130 $ 60,742
========================= =========================

FIXED CHARGES:
Interest on indebtedness, expensed or capitalized............... $ 22,154 $ 44,054
Portion of rents representative of the
interest factor.............................................. 182 416
Amortization of debt expense.................................... 32 64
------------------------- -------------------------

Fixed charges, for computation purposes.......................... $ 22,368 $ 44,534
========================= =========================

RATIO OF EARNINGS TO FIXED CHARGES................................ 1.39X 1.36X
</TABLE>

<ARTICLE> 9
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 72,052
<INT-BEARING-DEPOSITS> 37,144
<FED-FUNDS-SOLD> 35,000
<TRADING-ASSETS> 2,445
<INVESTMENTS-HELD-FOR-SALE> 386,785
<INVESTMENTS-CARRYING> 33,240
<INVESTMENTS-MARKET> 33,880
<LOANS> 1,554,866
<ALLOWANCE> 15,625
<TOTAL-ASSETS> 2,277,991
<DEPOSITS> 1,838,517
<SHORT-TERM> 111,309
<LIABILITIES-OTHER> 31,894
<LONG-TERM> 39,346
0
0
<COMMON> 18,143
<OTHER-SE> 238,782
<TOTAL-LIABILITIES-AND-EQUITY> 2,277,991
<INTEREST-LOAN> 72,179
<INTEREST-INVEST> 10,945
<INTEREST-OTHER> 2,506
<INTEREST-TOTAL> 85,630
<INTEREST-DEPOSIT> 39,284
<INTEREST-EXPENSE> 44,054
<INTEREST-INCOME-NET> 41,576
<LOAN-LOSSES> 5,583
<SECURITIES-GAINS> 323
<EXPENSE-OTHER> 29,482
<INCOME-PRETAX> 16,207
<INCOME-PRE-EXTRAORDINARY> 16,207
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,230
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
<YIELD-ACTUAL> 9.35
<LOANS-NON> 487
<LOANS-PAST> 4,514
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 16,211
<CHARGE-OFFS> 6,784
<RECOVERIES> 615
<ALLOWANCE-CLOSE> 15,625
<ALLOWANCE-DOMESTIC> 15,625
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0

</TABLE>