UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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
4,120,471 SHARES OF COMMON STOCK, PAR VALUE $2.50
PER SHARE, OUTSTANDING AS OF November 13, 1997
<PAGE>
<TABLE>
<CAPTION>
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
INDEX PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1997
and December 31, 1996 3
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1997
and 1996 4
Consolidated Statements of Changes in
Shareholder's Equity - Nine Months Ended
September 30, 1997 and 1996 5
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8 - 12
PART II. OTHER INFORMATION 13
Signatures 14
</TABLE>
<PAGE>
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------- ---------------------
1997 1996
-------------------- ---------------------
<S> <C> <C>
Assets:
Cash and due from banks $19,228,904 $16,343,459
Federal funds sold 6,300,000 2,982,000
------------ -----------
Total cash and cash equivalents 25,528,904 19,325,459
Interest bearing deposits in other banks 645,159 426,766
Investment securities (market value $31,836,722
in 1997 and $39,275,715 in 1996) 31,546,757 38,920,273
Securities available for sale (cost of $88,662,642 in
1997 and $48,612,087 in 1996) 89,529,121 48,696,412
Loans, net of unearned income ( $449,486 in 1997 and
$405,263 in 1996) 333,038,946 309,112,008
Allowance for loan losses (4,872,689) (4,488,958)
------------ ------------
Loans, net 328,166,257 304,623,050
Premises and equipment, net 9,721,666 9,509,172
Other real estate owned 410,734 141,067
Other assets 11,039,302 8,069,092
------------- -------------
Total Assets $496,587,900 $429,711,291
============= =============
Liabilities and Shareholders' Equity
Deposits:
Demand $49,380,307 $37,858,889
Interest bearing demand accounts 108,869,937 93,376,439
Savings 46,467,170 39,445,821
Time, $100,000 and over 48,281,382 40,355,803
Other time 195,402,494 173,966,334
------------- -------------
Total deposits 448,401,290 385,003,286
Repurchase agreements 4,931,298 5,862,026
Other liabilities 3,984,747 3,844,123
------------- -------------
Total Liabilities 457,317,335 394,709,435
Shareholders' Equity:
Common stock, $2.50 par value;
authorized --- 5,000,000 shares;
issued and outstanding - 4,120,471 shares in
1997, and 2,052,971 shares in 1996 10,301,178 5,132,428
Additional paid-in capital 11,371,347 16,442,810
Retained earnings 17,054,805 13,378,236
Net unrealized loss on available for sale securities 543,235 48,382
-------------- -------------
Total Shareholders' Equity 39,270,565 35,001,856
Commitments and Contingent Liabilities ----- -----
Total Liabilities and Shareholders' Equity $496,587,900 $429,711,291
============== =============
Book Value Per Share $9.53 $8.53
============== =============
</TABLE>
3
<PAGE>
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
-------------------------------------- --------------------------------------
1997 1996 1997 1996
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $8,109,543 $7,094,420 $23,028,438 $20,066,783
Interest and dividends on securities:
Taxable income 1,681,564 1,073,586 4,279,354 3,331,017
Non-taxable income 113,452 146,869 363,210 455,053
Interest on federal funds sold 111,135 48,133 336,550 124,148
Other interest income 10,203 (16,525) 36,960 10,246
---------- ----------- ----------- -----------
Total interest income 10,025,897 8,346,483 28,044,512 23,987,247
Interest Expense:
Interest on deposits 4,353,245 3,563,019 12,227,573 10,389,265
Interest on notes payable 29,483 28,874 37,373 80,461
Interest on repurchase accounts 48,663 53,331 154,386 113,955
---------- ----------- ----------- -----------
Total interest expense 4,431,391 3,645,224 12,419,332 10,583,681
---------- ----------- ----------- -----------
Net Interest Income 5,594,506 4,701,259 15,625,180 13,403,566
Provision for Loan Losses 242,000 284,000 740,333 821,000
---------- ----------- ----------- -----------
Net Credit Income 5,352,506 4,417,259 14,884,847 12,582,566
Other Income:
Charges on deposit accounts 613,861 545,104 1,763,278 1,543,700
Insurance commissions 64,074 155,447 465,390 389,005
Other service fees and commissions 293,223 198,307 787,031 567,543
Mortgage banking income 99,643 96,306 323,726 301,995
Securities gains (losses), net 55,740 4 66,629 8,645
Other income 220,287 176,546 589,069 401,608
---------- ----------- ----------- -----------
Total other income 1,346,828 1,171,714 3,995,123 3,212,496
Operating Expenses:
Salaries and benefits 2,325,593 1,976,495 6,498,565 5,580,486
Occupancy and equipment 543,589 433,126 1,494,381 1,203,716
Federal and other insurance premiums 35,296 517,265 98,725 662,974
Office supplies 189,984 138,943 475,670 331,918
Data processing 117,287 97,062 335,623 285,417
Other expenses 1,110,875 835,502 3,147,617 2,491,115
---------- ----------- ----------- -----------
Total operating expenses 4,322,624 3,998,393 12,050,581 10,555,626
---------- ----------- ----------- -----------
Income Before Income Taxes 2,376,710 1,590,580 6,829,389 5,239,436
Income Taxes 813,491 590,078 2,329,541 1,906,277
---------- ----------- ----------- -----------
Net income $1,563,219 $1,000,502 $4,499,848 $3,333,159
========== =========== =========== ===========
Net Income Per Common Share $0.37 $0.24 $1.07 $0.80
========== =========== =========== ===========
</TABLE>
4
<PAGE>
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (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, 1995 1,632,458 $4,081,145 $17,377,333 $9,585,436 $79,065 $31,122,979
EXERCISE OF STOCK OPTIONS 7,657 19,143 56,113 75,256
CASH DIVIDEND ($.17 PER SHARE) (639,195) (639,195)
5-FOR-4 STOCK SPLIT 409,586 1,023,965 (1,049,261) (25,296)
RETIREMENT OF STOCK (3,078) (7,695) (86,717) (94,412)
DIVIDEND REINVESTMENT PLAN 5,104 12,760 148,092 160,852
CHANGE IN UNREALIZED GAIN ON SECURITIES
AVAILABLE FOR SALE (217,460) (217,460)
NET INCOME 3,333,159 3,333,159
---------- --------- ---------- ---------- -------- ----------
BALANCE, SEPTEMBER 30, 1996 2,051,727 5,129,318 16,445,560 12,279,400 (138,395) 33,715,883
BALANCE, DECEMBER 31, 1996 2,052,971 5,132,428 16,442,810 13,378,236 48,382 35,001,856
EXERCISE OF STOCK OPTIONS 8,006 20,015 91,289 111,304
CASH DIVIDEND ($.20 PER SHARE) (823,279) (823,279)
2-FOR-1 STOCK SPLIT 2,060,298 5,150,745 (5,150,745) 0
RETIREMENT OF STOCK (1,694) (4,235) (43,605) (47,840)
DIVIDEND REINVESTMENT PLAN 890 2,225 31,598 33,823
CHANGE IN UNREALIZED GAIN
ON SECURITIES AVAILABLE FOR SALE 494,853 494,853
NET INCOME 4,499,848 4,499,848
---------- ----------- ----------- ----------- -------- -----------
BALANCE, SEPTEMBER 30, 1997 4,120,471 $10,301,178 $11,371,347 $17,054,805 $543,235 $39,270,565
========== =========== =========== =========== ======== ===========
</TABLE>
5
<PAGE>
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, September 30,
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
Operating Activities:
Net Income $ 4,499,848 $ 3,333,159
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,023,974 714,901
Accretion and amortization of securities discounts
and premiums, net (50,108) 218,191
Provision for loan losses 740,333 821,000
Deferred taxes (benefit) (634,148) (345,186)
Gains on sales of securities available for sale (27,324) --
Gains on calls and maturities of securities held to maturity (1,812) (8,490)
Losses on calls and maturities of securities held to maturity 98 750
Gains on sales of equipment, net (4,810) (2,417)
Gains on sales of real estate, net (66,179) (86,943)
Net increase in core deposit intangibles (2,541,876) --
Decrease in other assets 34,734 54,012
Increase in other liabilities 155,220 895,453
------------ ------------
Net cash provided by operating activities 3,127,950 5,594,430
------------ ------------
Investing Activities:
Proceeds from maturities of securities available for sale 21,180,881 7,178,228
Proceeds from sales of securities available for sale 1,776,467 3,500,000
Purchases of securities available for sale (63,191,157) (14,396,374)
Proceeds from calls and maturities of securities held to maturity 8,336,740 16,099,810
Purchases of securities held to maturity (988,125) (5,074,375)
Purchases and maturities of certificates of deposit, net (218,529) (69,275)
Originations of loans, net (24,613,827) (43,463,229)
Proceeds from sale of real estate 120,299 346,879
Proceeds from sales of premises and equipment 583,469 6,130
Capital expenditures (1,637,411) (1,284,226)
------------ ------------
Net cash used in investing activities (58,651,193) (37,156,432)
------------ ------------
Financing Activities:
Increase in time deposits, net 29,361,739 24,735,484
Increase in other deposits, net 34,036,265 12,830,943
Increase (decrease) in borrowed funds, net (930,728) 6,444,004
Repayment of notes payable (14,596) (13,811)
Repurchase of stock (47,840) (94,412)
Payment of cash dividends and fractional shares (823,279) (664,491)
Issuance of stock 145,127 236,108
------------ ------------
Net cash provided by financing activities 61,726,688 43,473,825
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 6,203,445 11,911,823
Cash and Cash Equivalents, Beginning of Year 19,325,459 15,391,366
============ ============
Cash and Cash Equivalents, End of Year $ 25,528,904 $ 27,303,189
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 12,197,107 $ 10,442,307
Income taxes paid 2,895,456 2,666,157
Supplemental disclosure on noncash investing and financing activities:
Decrease in net unrealized loss 494,853 (217,460)
Assets transferred to other real estate 330,287 289,649
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.
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
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 September 30, 1997 and December
31, 1996 the results of operations for the three and nine-month periods ended
September 30, 1997 and 1996, and cash flows for the nine-month periods ended
September 30, 1997 and 1996.
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, 1996.
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 nine-month periods ended
September 30, 1997 and 1996, are not necessarily indicative of the results that
might be expected for the full year ending December 31, 1997 and 1996.
4. The Company's Board of Directors declared a 2-for-1 stock split payable
August 22, 1997. Earnings per share in this filing have been adjusted for this
stock split.
7
<PAGE>
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 and nine-month periods ended
September 30, 1997 and 1996.
General
Net income for the quarter ended September 30, 1997, was $1,563,219, or $.37 per
share, compared to net income of $1,000,502, or $.24 per share, for the same
period in 1996. Net income for the nine-month period ended September 30, 1997,
was $4,499,848, or $1.07 per share, compared to net income of $3,333,159, or
$.80 per share, for the same period in 1996. Earnings for the third quarter of
1996 were negatively impacted by $284,211 or $.06 per share by the one time
assessment for all Savings Associations Insurance Fund (SAIF) members.
Net Interest Income/Margins
Net interest income of $15,625,180 during the first nine-months of 1997 resulted
from a net interest margin of 4.90% on average earning assets of $426.6 million.
This compares with a net interest margin of 4.953% on average earning assets of
$362.2 million generating net interest income of $13,403,566 for the same period
in 1996. The interest rate earned on taxable securities has been reduced as the
Company continues to invest in relatively short term government securities. The
Company has, however, been able to sustain the strong net interest margin as
average interest bearing liabilities have decreased slightly as a percentage of
total liabilities and capital. This is the result of both increased capital and
increases in noninterest bearing deposits. Interest rates have remained
relatively stable and thus the change in the net interest margin is more a
function of competition and investment options than changes in interest rates.
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 strong local economy. The increase in net interest
income consists of an increase of $100,000 relative to rate and an increase of
$2,122,000 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 and the maturing of investment securities.
Deposit and loan rates are adjusted as market conditions and Company needs
allow.
Analysis of average balances and interest rates for the nine-months ended
September 30, 1997 and 1996, 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>
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, the Company 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 $4,872,689 or
1.46% of outstanding loans, at September 30, 1997 and $4,488,958 or 1.45% of
outstanding loans, at December 31, 1996.
The provision for loan losses charged to operations during the first nine months
was $740,333 in 1997 and $821,000 in 1996. The decrease in the provision was a
result of the Company's comfort level with the loan quality, the level of the
allowance for loan losses and the stable growth in the loan portfolio.
Charge-offs, net of recoveries, were $356,602 or .11% of average loans
outstanding, during the nine months ended September 30, 1997, as compared to
$154,056 or .05% of average loans outstanding, during the same period in 1996.
The ratio of non-accrual loans to total loans was .25% at September 30, 1997,
.19% at December 31, 1996, and .17% at September 30, 1996. While this ratio
increased from December, it is still significantly less than peer banks.
Management believes that reserves and asset values are adequate to facilitate
the timely disposition of these assets.
9
<PAGE>
Net Non-Interest Income
Non-interest income increased 24.36% for the first nine months of 1997 as
compared to the same period a year earlier. Non-interest income from core
operations continues to increase as the Company expands fee income areas such as
trust services and credit cards. Also, the additional deposits recently acquired
have boosted deposit related income.
Non-interest expense increased $1,494,955 or 14.16%, for the nine-month period
ended September 30, 1997, as compared to the same period a year earlier.
Non-interest expense increased in relation to the additional branch acquisitions
and branch opening. Specifically, occupancy and supplies were directly effected
as well as other expenses which includes the amortization of the premium paid to
acquire the deposits. Additionally, the expenses relative to our technology
expenditures are apparent in the increase in equipment expense. Insurance
premiums on deposits insured by the savings association insurance fund of the
Federal Deposit Insurance Corporation were reduced during the fourth quarter of
1996 after a one-time assessment.
Financial Condition
The Company's total assets at September 30, 1997 and 1996, were $496,587,900 and
$417,318,416, respectively, and $429,711,291 at December 31, 1996. Average
earning assets for the first nine months of 1997 were $426,581,000 versus
$362,297,000 for the same period a year earlier, an increase of 17.74%. This
growth is the result of the strong local economy and the Company's continued
expansion of its customer base. During the second quarter of 1997 the Company
opened one new branch and acquired the deposits of three branches. During the
third quarter of 1997 the Company opened one new branch. The Company will
continue to look for ways to acquire business and grow in market share in the
existing markets.
Average loans of $315,820,000 represented 74.04% of average earning assets
during the first nine months of 1997. During the same period in 1996, average
loans totaled $276,562,000, or 76.34% of average earning assets. Gross loans
increased to $333,038,946 at September 30, 1997, a 7.74% increase over loans at
December 31, 1996. It is anticipated that general loan growth will continue to
mirror the economy generally, however, competition for quality loans may
adversely effect the net interest margins.
Securities averaged $101,914,000 during the nine months ended September 30, 1997
versus $81,865,000 for the same period a year ago. The securities portfolio
represented 23.89% of earning assets at September 30, 1997 and 22.60% at
September 30, 1996. At September 30, 1997, the securities portfolio had
unrealized losses of approximately $543,235. A gain of $55,740 was realized
during the first three quarters of 1997. Securities held to maturity with a
carrying value of approximately $24.1 million were scheduled to mature within
the next five years. Of this amount, $7.7 million were scheduled to mature
within one year. Securities available for sale with a carrying value of $87.2
million were scheduled to mature within the next five years. Of this amount,
$31.8 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. The Company's securities portfolio has shifted toward the available
for sale category due to the added flexibility allowed over the securities held
to maturity.
Average interest bearing liabilities rose 16.88%, to $379,273,000 in the first
nine months of 1997, from an average of $324,507,000 in the first nine months of
1996. Total deposits increased 20.16% from September 30, 1996 to September 30,
1997, and 16.47% from December 31, 1996 to September 30, 1997. The second
quarter acquisitions resulted in large growth rates. As the Company capitalizes
on these acquisitions and gains market share, deposits will continue to
increase.
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 September
30, 1997, the Company's ratio of total capital to risk-adjusted assets was
12.20% which includes 10.95% Tier I capital and the Company's ratio of total
Tier I capital to total assets, adjusted for the loans loss allowance and
intangibles, was 7.78%.
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 September 30, 1997, the Company had a liquidity ratio of 32.24%. 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.
10
<PAGE>
CAROLINA FIRST BANCSHARES, INC.
------------------------------------------------
AVERAGE BALANCE SHEET AS SEPTEMBER 30,
------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
Interest Interest
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
-------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest bearing deposits in other banks $553 $37 8.92% 468 $10 2.85%
Taxable securities 94,816 4,279 6.02% 71,505 $3,331 6.21%
Non-taxable securities 7,098 363 6.82% 10,360 $455 5.86%
Federal funds sold and securities
purchased with agreements to
resell 8,294 337 5.42% 3,402 124 4.86%
Loans 315,820 23,028 9.72% 276,562 20,067 9.67%
--------- ------- --------- --------
Interest earning assets 426,581 28,044 8.77% 362,297 23,987 8.83%
--------- ---------
Cash and due from banks $16,547 $13,239
Other assets 19,221 16,548
--------- ---------
Total assets $462,349 $392,084
========= =========
Liabilities and Shareholders' Equity
Interest bearing deposits
Demand $101,367 $1,845 2.43% $84,551 $1,480 2.33%
Savings 43,422 831 2.55% 41,148 777 2.52%
Time 229,319 9,551 5.55% 193,545 8,133 5.60%
Other borrowings 5,165 192 4.96% 5,263 194 4.91%
--------- ---------
Interest bearing liabilities 379,273 12,419 4.37% 324,507 10,584 4.35%
--------- ------- --------- -------
Other liabilities 45,338 35,887
Shareholders' equity 37,738 31,595
--------- ---------
Total liabilities and shareholders'
equity $462,349 $391,989
========= =========
Interest rate spread 4.40% 4.48%
===== =====
Net interest earned and net
yield on earning assets $15,625 4.90% $13,403 4.95%
======= ===== ======= =====
</TABLE>
11
<PAGE>
CAROLINA FIRST BANCSHARES, INC.
- ----------------------------------------------
RATE / VOLUME ANALYSIS
- ----------------------------------------------
FOR THE PERIOD ENDED SEPTEMBER, 1997 AND 1996
- ----------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
Increase/(Decrease)
1996 due to 1997
Inc/exp Volume Rate Inc/exp
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Loans 20,067 2,862 99 23,028
Securities - tax - exempt 455 (167) 75 363
Securities - taxable 3,331 1,052 (104) 4,279
Federal funds sold & interest bearing
balances in other banks 134 210 30 374
------ ------ ------ -------
Total Interest Income 23,987 3,958 99 28,044
Interest Expense:
Interest Bearing Demand 1,480 306 59 1,845
Savings 777 44 10 831
Time 8,133 1,490 (72) 9,551
Other Borrowings 194 (4) 2 192
------ ------ ------ -------
Total Interest Expense 10,584 1,836 (1) 12,419
------ ------ ------ -------
Net Interest Income 13,403 2,122 100 15,625
====== ====== ====== =======
</TABLE>
12
<PAGE>
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>
13
<PAGE>
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: November 13, 1997 By: /s/ D. Mark Boyd, III
-------------------------- -------------------------
D. Mark Boyd, III
Chairman and Chief Executive Officer
Date: November 13, 1997 By: /s/ Jan H.Hollar
-------------------------- ----------------------
Jan H. Hollar
Principal Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000846465
<NAME> CAROLINA FIRST BANCSHARES, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 19,228,904
<INT-BEARING-DEPOSITS> 645,159
<FED-FUNDS-SOLD> 6,300,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 89,529,121
<INVESTMENTS-CARRYING> 31,546,757
<INVESTMENTS-MARKET> 31,836,722
<LOANS> 333,038,946
<ALLOWANCE> 4,872,689
<TOTAL-ASSETS> 496,587,900
<DEPOSITS> 448,401,290
<SHORT-TERM> 0
<LIABILITIES-OTHER> 8,916,045
<LONG-TERM> 0
0
0
<COMMON> 10,301,178
<OTHER-SE> 28,969,387
<TOTAL-LIABILITIES-AND-EQUITY> 496,587,900
<INTEREST-LOAN> 23,028,438
<INTEREST-INVEST> 4,642,564
<INTEREST-OTHER> 373,510
<INTEREST-TOTAL> 28,044,512
<INTEREST-DEPOSIT> 12,227,573
<INTEREST-EXPENSE> 191,759
<INTEREST-INCOME-NET> 15,625,180
<LOAN-LOSSES> 740,333
<SECURITIES-GAINS> 66,629
<EXPENSE-OTHER> 12,050,581
<INCOME-PRETAX> 6,829,389
<INCOME-PRE-EXTRAORDINARY> 6,829,389
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,499,848
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
<YIELD-ACTUAL> 4.90
<LOANS-NON> 812,516
<LOANS-PAST> 329,801
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,488,958
<CHARGE-OFFS> 436,551
<RECOVERIES> 79,949
<ALLOWANCE-CLOSE> 4,872,689
<ALLOWANCE-DOMESTIC> 4,872,689
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
