<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -----------------------
COMMISSION FILE NUMBER 0-17939
-------
CAROLINA FIRST BANCSHARES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-165582
- --------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
402 East Main Street
Lincolnton, North Carolina 28092
- --------------------------------------- -----------------------
(Address of principal executive office) (Zip Code)
704-732-2222
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
-----------------------------------------------------
(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
--- ---
1,642,010 SHARES OF COMMON STOCK, PAR VALUE $2.50
PER SHARE, OUTSTANDING AS OF August 09, 1996
---------------
<PAGE> 2
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
INDEX PAGE
- ----- ----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets-June 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations-
Three and Six Months Ended June 30, 1996
and 1995 4
Consolidated Statements of Changes in
Shareholder's Equity-Six Months Ended
June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8-13
PART II. OTHER INFORMATION 14
Signatures 15
</TABLE>
<PAGE> 3
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------- --------------
1996 1995
---------- --------------
<S> <C> <C>
Assets:
Cash and due from banks $ 13,334,197 $ 14,361,366
Federal funds sold --- 1,030,000
------------ ------------
Total cash and cash equivalents 13,334,197 15,391,366
Interest bearing deposits in other banks 383,493 350,128
Securities held to maturity (market value $48,790,289
in 1996 and $57,660,405 in 1995) 48,812,004 56,561,646
Securities available for sale (cost of $31,483,764 in
1996 and $27,335,383 in 1995) 31,179,908 27,462,764
Loans, net of unearned income ( $341,927 in 1996 and
$327,450 in 1995) 288,104,526 257,177,863
Allowance for loan losses (4,042,346) (3,588,489)
------------ ------------
Loans, net 284,062,180 253,589,374
Premises and equipment, net 8,890,987 8,572,044
Other real estate owned 656,476 683,409
Other assets 7,282,753 7,222,708
------------ ------------
Total Assets $394,601,998 $369,833,439
------------ ------------
Liabilities and Shareholders' Equity
Deposits:
Demand $ 32,491,155 $ 30,295,524
Interest bearing demand accounts 84,925,552 81,171,081
Savings 41,644,508 41,751,256
Time, $100,000 and over 35,162,625 30,658,383
Other time 160,437,818 151,726,502
------------ ------------
Total deposits 354,661,658 335,602,746
Repurchase agreements 4,083,750 ------
Other liabilities 3,029,067 3,107,714
------------ ------------
Total Liabilities 361,774,475 338,710,460
Shareholders' Equity:
Common stock, $2.50 par value;
value; authorized --- 5,000,000 shares
issued and outstanding - 1,638,769 shares in
1996, and 1,632,458 in 1995 4,096,923 4,081,145
Additional paid-in capital 17,428,233 17,377,333
Retained earnings 11,525,211 9,585,436
Net unrealized loss on available for sale securities (222,844) 79,065
------------ ------------
Total Shareholders' Equity 32,827,523 31,122,979
Commitments and Contingent Liabilities
Total Liabilities and Shareholders' Equity $394,601,998 $369,833,439
============ ============
Book Value Per Share $ 20.03 $ 19.06
============ ============
</TABLE>
3
<PAGE> 4
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
---------------------------- ------------------------------
1996 1995 1996 1995
-------------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans................ $6,716,202 $5,704,710 $12,972,363 $11,077,321
Interest and dividends ---------- ---------- ----------- -----------
on securities:
Taxable income........................ 1,143,045 900,649 2,282,601 1,778,547
Non-taxable income.................... 159,919 179,510 308,184 361,031
Interest on federal funds sold............ 30,074 77,570 77,616 112,640
---------- ---------- ----------- -----------
Total interest income.................. 8,049,240 6,862,439 15,640,764 13,329,539
Interest Expense:
Interest on deposits...................... 3,423,766 3,118,393 6,826,246 5,896,991
Interest on notes payable................. 82,845 6,853 112,211 41,791
---------- ---------- ----------- -----------
Total interest expense................. 3,506,611 3,125,246 6,938,457 5,938,782
---------- ---------- ----------- -----------
Net Interest Income....................... 4,542,629 3,737,193 8,702,307 7,390,757
Provision for Loan Losses................. 306,000 170,200 537,000 310,200
---------- ---------- ----------- -----------
Net Credit Income......................... 4,236,629 3,566,993 8,165,307 7,080,557
Other Income:
Charges on deposit accounts............... 519,277 401,895 998,596 796,618
Insurance commissions..................... 118,879 225,720 233,558 464,468
Other service fees and
commissions........................... 177,748 149,775 369,236 287,047
Mortgage banking income................... 85,768 106,742 205,689 186,235
Securities gains (losses), net............ (870) --- 8,641 ---
Other income.............................. 150,147 145,305 225,062 271,651
---------- ---------- ----------- -----------
Total other income..................... 1,050,949 1,029,437 2,040,782 2,006,019
Operating Expenses:
Salaries and benefits..................... 1,826,800 1,636,246 3,603,991 3,289,521
Occupancy and equipment................... 380,229 375,973 770,590 706,528
Federal and other insurance
premiums.............................. 74,057 179,900 145,709 360,624
Office supplies........................... 90,194 97,177 192,975 185,995
Data processing .......................... 97,313 100,874 188,355 197,513
Other expenses............................ 908,814 732,550 1,655,613 1,471,849
---------- ---------- ----------- -----------
Total operating expenses............... 3,377,407 3,122,720 6,557,233 6,212,030
---------- ----------
Income Before Income Taxes................ 1,910,171 1,473,710 3,648,856 2,874,546
Income Taxes.............................. 696,963 487,210 1,316,199 931,891
---------- ---------- ----------- -----------
Net income................................ $1,213,208 $ 986,500 $ 2,332,657 $ 1,942,655
---------- ---------- ----------- -----------
Net Income Per Common Share............... $ 0.73 $ 0.66 $ 1.40 $ 1.30
---------- ---------- ----------- -----------
Cash Dividend Per Common Share............ $ 0.12 $ 0.11 $ 0.24 $ 0.22
---------- ---------- ----------- -----------
</TABLE>
4
<PAGE> 5
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN RETAINED VALUATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS RESERVE EQUITY
-------- --------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 1,402,028 $3,505,070 $12,661,483 $8,231,596 $(509,311) $23,888,838
ISSUANCE OF STOCK 150,000 375,000 2,787,088 3,162,088
EXERCISE OF STOCK OPTIONS 668 1,670 6,820 8,490
CASH DIVIDEND ($.11 PER SHARE) (250,793) (250,793)
RETIREMENT OF STOCK (370) (925) (6,548) (7,473)
DIVIDEND REINVESTMENT PLAN 2,566 6,415 51,320 (57,735) 0
INCREASE IN UNREALIZED GAIN
ON SECURITIES AVAILABLE FOR SALE 383,478 383,478
NET INCOME 1,942,656 1,942,656
--------- ---------- ----------- ----------- -------- -----------
BALANCE, JUNE 30, 1995 1,554,892 3,887,230 15,500,163 9,865,724 (125,833) 29,127,284
BALANCE, DECEMBER 31, 1995 1,632,458 4,081,145 17,377,333 9,585,436 79,065 31,122,979
EXERCISE OF STOCK OPTIONS 5,912 14,781 40,836 55,617
CASH DIVIDEND ($.12 PER SHARE) (392,882) (392,882)
RETIREMENT OF STOCK (2,193) (5,483) (62,668) (68,151)
DIVIDEND REINVESTMENT PLAN 2,592 6,480 72,732 79,212
INCREASE IN UNREALIZED GAIN
ON SECURITIES AVAILABLE FOR SALE (301,909) (301,909)
NET INCOME 2,332,657 2,332,657
--------- ---------- ----------- ----------- -------- -----------
BALANCE, JUNE 30, 1996 1,638,769 $4,096,923 $17,428,233 $11,525,211 $(222,844) $32,827,523
========= ========== =========== =========== ======== ===========
</TABLE>
5
<PAGE> 6
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 2,332,657 $ 1,942,656
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 370,217 429,936
Accretion and amortization of securities discounts
and premiums, net 154,179 131,228
Provision for loan losses 537,000 310,200
Deferred taxes (benefit) (345,186) 661,109
Gains on sales of securities available for sale (900) --
Gains on calls and maturities of securities held to maturity (8,490) --
Losses on calls and maturities of securities held to maturity 750 --
Losses (gains) on sales of equipment, net (4,097) 74
Gains on sales of real estate, net (46,701) --
Federal Home Loan Bank stock dividend (39,012) (38,904)
Increase in repurchase agreements 4,083,750 --
Decrease (increase) in other assets 54,791 (596,941)
Increase (decrease) in other liabilities (69,494) 318,177
------------ ------------
Net cash provided by operating activities 7,019,464 3,157,535
------------ ------------
INVESTING ACTIVITIES:
Proceeds from maturities of securities available for sale 3,091,510 577,699
Proceeds from sales of securities available for sale 3,500,000 --
Purchases of securities available for sale (10,836,689) (7,582,715)
Proceeds from calls and maturities of securities held to maturity 12,763,776 4,017,942
Purchases of securities held to maturity (5,074,375) (1,563,605)
Purchases and maturities of certificates of deposit, net (33,365) (391,950)
Originations of loans, net (30,754,157) (13,254,531)
Proceeds from sale of real estate 270,175 231,111
Increase in investment in joint ventures -- (39,200)
Proceeds from sales of premises and equipment 9,852 10
Capital expenditures (736,915) (463,818)
------------ ------------
Net cash used in investing activities (27,800,188) (18,469,057)
------------ ------------
FINANCING ACTIVITIES:
Increase in time deposits, net 13,215,558 16,036,829
Net increase in other deposits, net 5,843,354 3,238,802
Repayment of notes payable (9,153) (8,878)
Repurchase of stock (68,151) (7,473)
Payment of cash dividends and fractional shares (392,882) (308,528)
Issuance of stock 134,829 3,228,313
------------ ------------
Net cash provided by financing activities 18,723,555 22,179,065
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,057,169) 6,867,543
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 15,391,366 11,526,564
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 13,334,197 $ 18,394,107
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 6,844,203 $ 5,680,193
Income taxes paid 1,696,157 2,127,700
Supplemental disclosure on noncash investing and
financing activities:
Decrease in net unrealized loss (301,909) (125,833)
Assets transferred to other real estate 255,649 98,000
Transferred from investment securities to securities
available for sale -- --
Disclosure of accounting policy:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, due from banks and federal funds sold.
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. In the opinion of Management, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of Carolina First
BancShares, Inc. and Subsidiary Companies as of June 30, 1996 and December 31,
1995 the results of operations for the three-month and six-month periods ended
June 30, 1996 and 1995, and cash flows for the six-month periods ended June 30,
1996 and 1995.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's audited financial statements for the year ended December 31, 1995.
2. The consolidated financial statements include the accounts of the holding
company, and its wholly owned subsidiaries, Cabarrus Bank of North Carolina,
("Cabarrus Bank"), and Lincoln Bank of North Carolina, ("Lincoln Bank").
Jointly, Lincoln Bank and Cabarrus Bank own a mortgage company, Carolina First
Mortgage Corporation and a financial services company, Carolina First Financial
Services Corporation. All significant intercompany items and transactions have
been eliminated in consolidation.
3. The results of operations for the three-month and six-month periods ended
June 30, 1996 and 1995, are not necessarily indicative of the results that
might be expected for the full year ending December 31, 1996 and 1995.
4. The Company's Board of Directors declared a 5% stock dividend payable
December 22, 1995. The market value of the common stock at December 22, 1995
was $27.00. Earnings per share for the periods presented have been computed
after giving retroactive effect to the stock dividend.
7
<PAGE> 8
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following discussion and analysis sets forth the major factors which
affected the Company's results of operations and financial condition reflected
in the unaudited financial statements for the three-month and six-month periods
ended June 30, 1996 and 1995.
General
Net income for the quarter ended June 30, 1996, was $1,213,208, or $ .73 per
share, compared to income of $986,500, or $ .66 per share, for the same period
in 1995. Net income for the six-months ended June 30, 1996, was $2,332,657, or
$ .24 per share, compared to $1,942,655, or $ .22 per share, for the same
period in 1995.
During June, 1995, the Company sold 150,000 shares of newly issued common stock
on a best efforts basis. The stock was sold for $22.50 per share or, $21.43
adjusted for a 5% stock dividend paid on December 22, 1995, and generated in
excess of $3.1 million of capital.
Net Interest Income/Margins
Net interest income of $8,702,703 during the first six-months of 1996 resulted
from a net interest margin of 4.91% on average earning assets of $355.7
million. This compares with a net interest margin of 4.94% on average earning
assets of $300.0 million generating net interest income of $7,390,757 for the
same period in 1995. Interest rates decreased slightly during the first
quarter of 1996, but have remained stable since. Each decrease in the prime
lending rate initially decreases the Company's net interest income since a
large number of loans are tied to the prime lending rate and are directly and
immediately effected. However, with the passage of time, interest sensitive
liabilities will decrease and the Company's interest margins should stabilize.
The increase in loan demand experienced by the Company positively affects the
net interest margin, as noted by the large volume related increase, and is an
indicator of the continued expanding local economy. The increase in net
interest income consists of an decrease of $43,000 relative to rate and an
increase of $1,355,000 relative to volume.
Management reviews asset/liability volumes and rates on a weekly basis. As
Carolina First's loans have continued to grow, the funds have been obtained
primarily through customer deposits. Deposit and loan rates are adjusted as
market conditions and Company needs allow.
Analysis of average balances and interest rates for the six months ended June
30, 1996 and 1995, is presented on pages 12 and 13 of this report. Such
analysis is presented on a fully-taxable equivalent basis at the federal
statutory rate of 34%.
8
<PAGE> 9
Loan Loss Allowance/Provision
The allowance for loan losses represents management's determination as to an
adequate amount in relation to the risk of future losses inherent in the loan
portfolio. In evaluating the allowance and its adequacy, management considers
the bank's loan loss experience, the amount of past due and non-performing
loans, current and anticipated economic conditions and other appropriate
information. While it is the Company's policy to charge-off in the current
period the loans in which a loss is considered probable, there are additional
risks for future losses which cannot be quantified precisely or attributed to
particular loans or classes of loans. Because these risks are continually
changing in response to facts beyond the control of the Company, such as the
state of the economy, management's judgment as to the adequacy of the provision
is approximate and imprecise. It is also subject to regulatory examinations
and determinations as to adequacy, which may take into account such factors as
methodology used to calculate the allowance for loan losses and the size of the
loan loss allowance in comparison to a group of peer banks identified by the
regulatory agencies.
In assessing the adequacy of the allowance, management relies predominantly on
its ongoing review of the loan portfolio, which is undertaken to both ascertain
whether there are probable losses which must be charged-off and to assess the
risk characteristics of the portfolio in the aggregate. This review considers
the judgments of management, and also those of bank regulatory agencies that
review the loan portfolio as part of their regular bank examination process.
There are no loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that the Company reasonably expects will
materially impact future operating results, liquidity, or capital resources.
The Company has no concentrations or credit risks by type of credit or industry
group within its loan or investment portfolio.
On a monthly basis, Carolina First reviews the adequacy of its allowance for
loan losses. The loan review staff prepares a listing of loans believed to be
deserving of a closer review by management. These loans are rated as to the
presumed collectibility, and a statistical loss factor is assigned to each
category of loans that directly relates to the associated risk. In addition to
these specific allowances, an additional component of the allowance is computed
by applying a factor based on historical loss experience to all loans by type
that are not listed on the above referenced schedule. Finally, an additional
factor is assigned to the entire portfolio to cover unexpected losses from any
borrower that may not be identified. This final component reflects the
economic conditions of the market areas served. These factors are multiplied
by the balances in each category and totaled to determine the required
allowance for loan losses. The actual allowance for loan losses (after
charge-offs) is compared with the required level to determine if an additional
provision should be made in the current period. The allowance for loan losses
was $4,042,346 or 1.40% of outstanding loans, at June 30, 1996 and $3,588,489
or 1.39% of outstanding loans, at December 31, 1995.
9
<PAGE> 10
The provision for loan losses charged to operations during the first six months
was $537,000 in 1996 and $310,200 in 1995. Charge-offs, net of recoveries,
were $83,142 or .03% of average loans outstanding, during the six months ended
June 30, 1996, as compared to $116,068 or .05% of average loans outstanding,
during the same period in 1995. The ratio of non-accrual loans to total loans
was .20% at June 30, 1996, .31% at December 31, 1995, and .21% at June 30,
1995. Management believes that reserves and asset values are adequate to
facilitate the timely disposition of these assets.
Net Non-Interest Income
Non-interest income increased 1.73% for the first six months of 1996 as
compared to the same period a year earlier. This increase is primarily the
result of the growth of the Company's credit card department, ATM income and
fee income from FGB for operational support provided by Lincoln Bank. The
Company expects this income to increase as these departments continue to grow.
During October, 1995, Lincoln Bank sold North State Insurance Agency.
Consequently, Insurance commission income and related expenses decreased.
Non-interest expense increased $345,203 or 5.56%, for the six-month period
ended June 30, 1996, as compared to the same period a year earlier. The
increase is a result of the general growth in business volume and the related
increase in salaries and employee benefits (resulting from a larger number of
employees from two new branch locations) and the reduction in the FDIC
insurance premium. During the third quarter of 1995, the FDIC announced that
the bank insurance fund (BIF) reached the required level of funding.
Accordingly, the deposit premium assessed "well capitalized" commercial banks
has been significantly reduced going forward and a rebate of excess premiums
paid since June 1, 1995 was distributed in September 1995. Lincoln Bank
received a rebate of approximately $130,000; however, Cabarrus Bank is a member
of the savings association insurance fund (SAIF) which received no such rebate.
Because the SAIF fund has not reached the desired funding level and is not
expected to do so for some time, Congress is debating a one time assessment for
all SAIF members to equalize the assessment level among financial institutions.
Should this occur, the amount of the assessment will significantly impact
earnings; however, earnings going forward will improve due to reduced premiums
for SAIF members.
Financial Condition
The Company's total assets at June 30, 1996 and 1995, were $394,601,998, and
$343,428,386, respectively, and $369,833,439 at December 31, 1995. Average
earning assets for the first six months of 1996 were $355,748,000 versus
$300,020,000 for the same period a year earlier, an increase of 18.51%. This
growth is the result of the strong local economy and the Company's continued
expansion of its customer base and market share.
Average loans of $268,052,000 represented 75.35% of average earning assets
during the first six months of 1996. During the same period in 1995, average
loans totaled $225,928,000, or 75.30% of average earning assets. However,
gross loans increased to $288,104,526 at June 30, 1996, a 12.03% increase over
loans at December 31, 1995. It is anticipated that general loan
10
<PAGE> 11
growth will continue to mirror the economy generally, although lower interest
rates may effect the net interest margins.
Securities averaged $84,223,000 during the six months ended June 30, 1996
versus $70,314,000 for the same period a year ago. The securities portfolio
represented 23.67% of earning assets at June 30, 1996 and 23.44% at June 30,
1995. At June 30, 1996, the securities portfolio had unrealized losses of
approximately $222,844. A loss of $870 was realized during the first half of
1996. Securities held to maturity with a carrying value of approximately $38.9
million were scheduled to mature within the next five years. Of this amount,
$10.5 million were scheduled to mature within one year. Securities available
for sale with a carrying value of $27.8 million were scheduled to mature within
the next five years. Of this amount, $9.5 million were scheduled to mature
within one year. The Company currently has the ability and intent to hold its
investment securities to maturity. Certain debt securities are designated by
management as held for sale and are carried at the lower of cost or market
because management may sell them before they mature.
Average interest bearing liabilities rose 11.70%, to $319,542,000 in the first
six months of 1996, from an average of $274,533,000 in the first six months of
1995. Total deposits increased 13.71% from June 30, 1996 to June 30, 1995, and
5.68% from December 31, 1995 to June 30, 1996.
The Company continues to maintain capital ratios in excess of regulatory
minimum requirements. The current capital standards call for a minimum total
capital of 8% of risk-adjusted assets, including 4% Tier I capital, and a
minimum leverage ratio of Tier I capital to total tangible assets of at least
4-5%. At June 30, 1996, the Company's ratio of total Tier I capital to total
assets, adjusted for the loans loss allowance and intangibles, was 8.52% and
the Company's ratio of total capital to risk-adjusted assets was 13.19% which
includes 11.94% Tier I capital.
Liquidity
The liquidity position of the Company's subsidiaries, Lincoln Bank ("Lincoln")
and Cabarrus Bank of North Carolina ("Cabarrus"), is primarily dependent upon
their need to respond to withdrawals from deposit accounts and upon the
liquidity of their assets. Primary liquidity sources include cash and due from
banks, federal funds sold, short-term investment securities and loan
repayments. At June 30, 1996, Lincoln Bank had a liquidity ratio of 27.31% and
Cabarrus had a liquidity ratio of 18.87%. Management believes the liquidity
sources are adequate to meet operating needs. Except as discussed above, there
are no known trends, events or uncertainties that will have or that are
reasonably likely to have a material effect on the Company's liquidity, capital
resources or operations.
11
<PAGE> 12
CAROLINA FIRST BANCSHARES, INC.
AVERAGE BALANCE SHEET AS JUNE 30,
(In Thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- --------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Taxable securities $ 72,728 $ 2,283 6.28% $ 59,839 $ 1,779 5.95%
Non-taxable securities 11,495 308 5.36% 10,475 361 6.89%
Federal funds sold and securities
purchased with agreements to
resell 3,473 78 4.49% 3,778 113 5.98%
Loans 268,052 12,972 9.68% 225,928 11,077 9.81%
-------- ------- -------- --------
Interest earning assets 355,748 15,641 8.79% 300,020 13,330 8.89%
-------- ------- ---- -------- ------- ----
Cash and due from banks $ 13,186 $ 10,054
Other assets 16,369 16,015
-------- --------
Total assets $385,303 $326,089
======== ========
Liabilities and Shareholders' Equity
Interest bearing deposits
Demand $ 83,706 $ 973 2.32% $ 74,990 $ 1,046 2.79%
Savings 41,066 514 2.50% 41,155 622 3.02%
Time 190,194 5,339 5.61% 157,415 4,229 5.37%
Other borrowings 4,576 112 4.90% 973 42 8.63%
-------- ------- ---- -------- -------
Interest bearing liabilities 319,542 6,938 4.34% 274,533 5,939 4.33%
-------- ------- ---- -------- ------- ----
Other liabilities 34,883 26,182
Shareholders' equity 30,878 25,374
-------- --------
Total liabilities and shareholders'
equity $385,303 $326,089
======== ========
Interest rate spread 4.45% 4.56%
==== ====
Net interest earned and net
yield on earning assets $ 8,703 4.91% $ 7,391 4.94%
======= ==== ======= ====
</TABLE>
12
<PAGE> 13
CAROLINA FIRST BANCSHARES, INC.
RATE / VOLUME ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 1996 AND 1995
(In Thousands)
<TABLE>
<CAPTION>
Increase/(Decrease)
due to
1995 Volume Rate 1996
Inc/exp Inc/exp
------- ------ ---- -------
<S> <C> <C> <C> <C>
Interest Income:
Loans 11,077 2,039 (144) 12,972
Securities - tax - exempt 361 27 (80) 308
Securities - taxable 1,779 405 99 2,283
Federal funds sold & interest bearing
balances in other banks 113 (7) (28) 78
------ ----- ---- ------
Total Interest Income 13,330 2,464 (153) 15,641
Interest Expense:
Interest Bearing Demand 1,046 101 (174) 973
Savings 622 (1) (107) 514
Time 4,229 920 190 5,339
Other Borrowings 42 88 (18) 112
------ ----- ---- ------
Total Interest Expense 5,939 1,109 (110) 6,938
------ ----- ---- ------
Net Interest Income 7,391 1,355 (43) 8,703
====== ===== ==== ======
</TABLE>
13
<PAGE> 14
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item
<S> <C>
1 - Legal Proceedings None
2 - Changes in Securities None
3 - Defaults upon Senior Securities None
4 - Submission of Matters to a Vote of
Security Holders None
5 - Other Information None
6 - Exhibits and Reports on Form 8-K
(a) Exhibits: 27 - Financial Data Schedule
(SEC Use Only)
(b) Reports on Form 8-K
</TABLE>
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAROLINA FIRST BANCSHARES, INC.
-------------------------------
(Registrant)
Date: August 9, 1996 By: /s/ James E. Burt, III
----------------------------- -------------------------
James E. Burt, III
President
Date: August 9, 1996 By: /s/ Jan H. Hollar
------------------------------ ---------------------------
Jan H. Hollar
Principal Accounting Officer
15
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000846465
<NAME> CAROLINA FIRST BANCSHARES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 13,334,197
<INT-BEARING-DEPOSITS> 383,493
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 31,179,908
<INVESTMENTS-CARRYING> 48,812,004
<INVESTMENTS-MARKET> 48,790,289
<LOANS> 288,104,526
<ALLOWANCE> 4,042,346
<TOTAL-ASSETS> 394,601,998
<DEPOSITS> 354,661,658
<SHORT-TERM> 0
<LIABILITIES-OTHER> 7,112,817
<LONG-TERM> 0
0
0
<COMMON> 4,096,923
<OTHER-SE> 28,730,600
<TOTAL-LIABILITIES-AND-EQUITY> 394,601,998
<INTEREST-LOAN> 6,716,202
<INTEREST-INVEST> 1,302,964
<INTEREST-OTHER> 30,074
<INTEREST-TOTAL> 8,049,240
<INTEREST-DEPOSIT> 3,423,766
<INTEREST-EXPENSE> 82,845
<INTEREST-INCOME-NET> 4,542,629
<LOAN-LOSSES> 306,000
<SECURITIES-GAINS> (870)
<EXPENSE-OTHER> 3,377,407
<INCOME-PRETAX> 1,910,171
<INCOME-PRE-EXTRAORDINARY> 1,910,171
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,213,208
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.73
<YIELD-ACTUAL> 4.91
<LOANS-NON> 570,615
<LOANS-PAST> 15,690
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,588,488
<CHARGE-OFFS> 127,483
<RECOVERIES> 44,341
<ALLOWANCE-CLOSE> 4,042,346
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
