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 June 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
2,060,298 SHARES OF COMMON STOCK, PAR VALUE $2.50
PER SHARE, OUTSTANDING AS OF August 13, 1997
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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, 1997
and December 31, 1996 3
Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1997
and 1996 4
Consolidated Statements of Changes in
Shareholder's Equity - Six Months Ended
June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows -
Six Months Ended June 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 - 13
PART II. OTHER INFORMATION 14
Signatures 15
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CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
- -------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------- -------------
1997 1996
------------- -------------
<S> <C> <C>
Assets:
Cash and due from banks .................................................. $ 21,763,662 $ 16,343,459
Federal funds sold ....................................................... 11,025,000 2,982,000
------------- -------------
Total cash and cash equivalents ........................................ 32,788,662 19,325,459
Interest bearing deposits in other banks ................................. 645,023 426,766
Investment securities (market value $35,326,916
in 1997 and $39,275,715 in 1996) ....................................... 35,018,311 38,920,273
Securities available for sale (cost of $80,448,652 in
1997 and $48,612,087 in 1996) ......................................... 81,367,179 48,696,412
Loans, net of unearned income ( $411,495 in 1997 and
$405,263 in 1996) ..................................................... 324,598,631 309,112,008
Allowance for loan losses .............................................. (4,852,905) (4,488,958)
------------- -------------
Loans, net ............................................................. 319,745,726 304,623,050
Premises and equipment, net .............................................. 10,180,912 9,509,172
Other real estate owned .................................................. 131,781 141,067
Other assets ............................................................. 10,803,784 8,069,092
------------- -------------
Total Assets ............................................................. $ 490,681,378 $ 429,711,291
============= =============
Liabilities and Shareholders' Equity
Deposits:
Demand ................................................................ $ 49,853,108 $ 37,858,889
Interest bearing demand accounts ...................................... 109,025,775 93,376,439
Savings ............................................................... 47,022,951 39,445,821
Time, $100,000 and over ............................................... 44,591,253 40,355,803
Other time ............................................................ 193,903,152 173,966,334
------------- -------------
Total deposits ........................................................ 444,396,239 385,003,286
Repurchase agreements .................................................... 4,253,977 5,862,026
Other liabilities ........................................................ 4,227,597 3,844,123
------------- -------------
Total Liabilities ........................................................ 452,877,813 394,709,435
Shareholders' Equity:
Common stock, $2.50 par value;
authorized --- 5,000,000 shares;
issued and outstanding - 2,059,029 shares in
1997, and 2,052,971 shares in 1996 .................................... 5,147,572 5,132,428
Additional paid-in capital ............................................. 16,493,345 16,442,810
Retained earnings ...................................................... 15,821,255 13,378,236
Net unrealized loss on available for sale securities ................... 341,393 48,382
------------- -------------
Total Shareholders' Equity ............................................. 37,803,565 35,001,856
Commitments and Contingent Liabilities ................................... -- --
Total Liabilities and Shareholders' Equity ............................... $ 490,681,378 $ 429,711,291
============= =============
Book Value Per Share ..................................................... $ 18.36 $ 17.05
============= =============
</TABLE>
3
<PAGE>
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------------------------------------------------------
1997 1996 1997 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans .................... $ 7,632,399 $ 6,716,202 $14,918,895 $12,972,363
Interest and dividends
on securities:
Taxable income ............................ 1,401,246 1,131,596 2,597,790 2,257,431
Non-taxable income ........................ 121,867 159,919 249,758 308,184
Interest on federal funds sold ................ 136,401 27,571 225,415 76,015
Other interest income ......................... 17,419 13,952 26,757 26,771
----------- ----------- ----------- -----------
Total interest income ...................... 9,309,332 8,049,240 18,018,615 15,640,764
Interest Expense:
Interest on deposits .......................... 4,076,045 3,423,766 7,874,328 6,826,246
Interest on notes payable ..................... 52,890 82,845 113,613 112,211
----------- ----------- ----------- -----------
Total interest expense ..................... 4,128,935 3,506,611 7,987,941 6,938,457
----------- ----------- ----------- -----------
Net Interest Income ........................... 5,180,397 4,542,629 10,030,674 8,702,307
Provision for Loan Losses ..................... 212,733 306,000 498,333 537,000
----------- ----------- ----------- -----------
Net Credit Income ............................. 4,967,664 4,236,629 9,532,341 8,165,307
Other Income:
Charges on deposit accounts ................... 591,266 519,277 1,149,417 998,596
Insurance commissions ......................... 228,739 118,879 401,316 233,558
Other service fees and
commissions ............................... 289,602 177,748 493,808 369,236
Mortgage banking income ....................... 115,498 85,768 224,083 205,689
Securities gains (losses), net ................ 10,365 (870) 10,889 8,641
Other income .................................. 204,662 150,147 368,782 225,062
----------- ----------- ----------- -----------
Total other income ......................... 1,440,132 1,050,949 2,648,295 2,040,782
Operating Expenses:
Salaries and benefits ......................... 2,195,298 1,826,800 4,172,972 3,603,991
Occupancy and equipment ....................... 524,204 380,229 950,792 770,590
Federal and other insurance
premiums .................................. 33,284 74,057 63,429 145,709
Office supplies ............................... 171,605 90,194 285,686 192,975
Data processing ............................... 115,788 97,313 218,336 188,355
Other expenses ................................ 1,108,627 908,814 2,036,742 1,655,613
----------- ----------- ----------- -----------
Total operating expenses ................... 4,148,806 3,377,407 7,727,957 6,557,233
----------- ----------- ----------- -----------
Income Before Income Taxes .................... 2,258,990 1,910,171 4,452,679 3,648,856
Income Taxes .................................. 759,774 696,963 1,516,050 1,316,199
----------- ----------- ----------- -----------
Net Income .................................... $ 1,499,216 $ 1,213,208 $ 2,936,629 $ 2,332,657
=========== =========== =========== ===========
Net Income Per Common Share ................... $ 0.71 $ 0.58 $ 1.40 $ 1.12
=========== =========== =========== ===========
Cash Dividend Per Common Share ................ $ 0.12 $ 0.10 $ 0.24 $ 0.19
=========== =========== =========== ===========
</TABLE>
4
<PAGE>
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 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 ........... 5,912 14,781 40,836 55,617
CASH DIVIDEND ($.19 PER SHARE) ...... (392,882) (392,882)
RETIREMENT OF STOCK ................. (2,193) (5,483) (62,668) (68,151)
DIVIDEND REINVESTMENT PLAN .......... 2,592 6,480 72,732 79,212
CHANGE IN UNREALIZED GAIN ON
SECURITIES AVAILABLE FOR SALE ... (301,909) (301,909)
NET INCOME .......................... 2,332,657 2,332,657
------------ ------------ ------------ ------------ ------------ -----------
BALANCE, JUNE 30, 1996 .............. 1,638,769 4,096,923 17,428,233 11,525,211 (222,844) 32,827,523
BALANCE, DECEMBER 31, 1996 .......... 2,052,971 5,132,428 16,442,810 13,378,236 48,382 35,001,856
EXERCISE OF STOCK OPTIONS ........... 6,970 17,425 79,309 96,734
CASH DIVIDEND ($.24 PER SHARE) ...... (493,610) (493,610)
RETIREMENT OF STOCK ................. (912) (2,281) (28,774) (31,055)
DIVIDEND REINVESTMENT PLAN
CHANGE IN UNREALIZED GAIN ON
SECURITIES AVAILABLE FOR SALE ... 293,011 293,011
NET INCOME .......................... 2,936,629 2,936,629
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1997 .............. 2,059,029 $ 5,147,572 $ 16,493,345 $ 15,821,255 $ 341,393 $ 37,803,565
============ ============ ============ ============ ============ ============
</TABLE>
5
<PAGE>
CAROLINA FIRST BANCSHARES, INC. AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, June 30,
--------------- ----------------
1997 1996
--------------- ----------------
<S> <C> <C>
Operating Activities:
Net Income ............................................................................... $ 2,936,629 $ 2,332,657
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ........................................................ 605,300 370,217
Accretion and amortization of securities discounts
and premiums, net .................................................................. (80,519) 154,179
Provision for loan losses ............................................................ 498,333 537,000
Deferred taxes (benefit) ............................................................. (634,148) (345,186)
Gains on sales of securities available for sale ...................................... (13,684) (900)
Gains on calls and maturities of securities held to maturity ......................... -- (8,490)
Losses on calls and maturities of securities held to maturity ........................ 98 750
Losses (gains) on sales of equipment, net ............................................ (4,810) (4,097)
Gains on sales of real estate, net ................................................... (64,013) (46,701)
Net increase in core deposit intangibles ............................................. (2,541,876) --
Decrease in other assets ............................................................. 371,276 54,791
Increase (decrease) in other liabilities ............................................. 393,153 (69,494)
------------ ------------
Net cash provided by operating activities ......................................... 1,465,739 2,974,726
------------ ------------
Investing Activities:
Proceeds from maturities of securities available for sale ................................ 12,816,008 3,091,510
Proceeds from sales of securities available for sale ..................................... 42,215 3,500,000
Purchases of securities available for sale ............................................... (45,121,806) (10,836,689)
Proceeds from calls and maturities of securities held to maturity ........................ 4,870,019 12,763,776
Purchases of securities held to maturity ................................................. (988,125) (5,074,375)
Purchases and maturities of certificates of deposit, net ................................. (218,257) (33,365)
Originations of loans, net ............................................................... (15,659,009) (30,754,157)
Proceeds from sale of real estate ........................................................ 106,299 270,175
Proceeds from sales of premises and equipment ............................................ 41,384 9,852
Capital expenditures ..................................................................... (1,238,558) (736,915)
------------ ------------
Net cash used in investing activities ............................................... (45,349,830) (27,800,188)
------------ ------------
Financing Activities:
Increase in time deposits, net ........................................................... 24,172,268 13,215,558
Net increase in other deposits, net ...................................................... 35,220,685 5,843,354
Net increase (decrease) in borrowed funds ................................................ (1,608,049) 4,083,750
Repayment of notes payable ............................................................... (9,679) (9,153)
Repurchase of stock ...................................................................... (31,055) (68,151)
Payment of cash dividends and fractional shares .......................................... (493,610) (392,882)
Issuance of stock ........................................................................ 96,734 134,829
------------ ------------
Net cash provided by financing activities ........................................... 57,347,294 22,807,305
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents ..................................... 13,463,203 (2,018,157)
Cash and Cash Equivalents, Beginning of Year ............................................. 19,325,459 15,391,366
============ ============
Cash and Cash Equivalents, End of Year ................................................... $ 32,788,662 $ 13,373,209
============ ============
Supplemental disclosures of cash flow information:
Interest paid ....................................................................... $ 7,803,269 $ 6,844,203
Income taxes paid ................................................................... 2,161,706 1,696,157
Supplemental disclosure on noncash investing and financing activities:
Decrease in net unrealized loss ..................................................... 293,011 (301,909)
Assets transferred to other real estate ............................................. 38,000 255,649
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 June 30, 1997 and December 31,
1996 the results of operations for the three and six-month periods ended June
30, 1997 and 1996, and cash flows for the six-month periods ended June 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 six-month periods ended
June 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 25% stock dividend payable August
23, 1996. The market value of the common stock was $27.60 at August 23, 1996.
Earnings per share for the periods presented have been computed after giving
retroactive effect to the stock dividend. The Company's Board of Directors
declared a 2 for 1 stock split payable August 22, 1997. Earnings per share in
this filing have not 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 six-month periods ended
June 30, 1997 and 1996.
General
Net income for the quarter ended June 30, 1997, was $1,499,216, or $.71 per
share, compared to net income of $1,213,208, or $.58 per share, for the same
period in 1996. Net income for the six-month period ended June 30, 1997, was
$2,936,629, or $1.40 per share, compared to net income of $2,332,657, or $1.12
per share, for the same period in 1996.
Net Interest Income/Margins
Net interest income of $10,030,674 during the first six-months of 1997 resulted
from a net interest margin of 4.89% on average earning assets of $413.9 million.
This compares with a net interest margin of 4.93% on average earning assets of
$355.7 million generating net interest income of $8,702,307 for the same period
in 1996. The interest rate earned on loans is being reduced as competition
increases for market share of quality loans. The Company has, however, been able
to sustain the strong net interest margin as average interest bearing
liabilities have decreased 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 than changes
in interest rates. Each increase in the prime lending rate initially increases
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 increase 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 strong local
economy. The increase in net interest income consists of a small decrease of
$50,000 relative to rate and an increase of $1,379,000 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 six-months ended June
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 $4,852,905 or
1.50% of outstanding loans, at June 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 six months
was $498,333 in 1997 and $537,000 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 $134,386 or .04% of average loans
outstanding, during the six months ended June 30, 1997, as compared to $83,142
or .03% of average loans outstanding, during the same period in 1996. The ratio
of non-accrual loans to total loans was .50% at June 30, 1997, .19% at December
31, 1996, and .20% at June 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 29.77% for the first six 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. The Company's financial services company
has continued to mature and is contributing favorably to non-interest income as
nontraditional banking services are considered by depositors.
Non-interest expense increased $1,170,724 or 17.85%, for the six-month period
ended June 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 June 30, 1997 and 1996, were $490,681,378 and
$394,601,998, respectively, and $429,711,291 at December 31, 1996. Average
earning assets for the first six months of 1997 were $413,970,000 versus
$355,748,000 for the same period a year earlier, an increase of 16.37%. 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. The Company
will continue to look for ways to grow in market share.
Average loans of $311,003,000 represented 75.13% of average earning assets
during the first six months of 1997. During the same period in 1996, average
loans totaled $268,052,000, or 75.35% of average earning assets. Gross loans
increased to $324,598,631 at June 30, 1997, a 5.01% 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 $93,697,000 during the six months ended June 30, 1997 versus
$84,223,000 for the same period a year ago. The securities portfolio represented
22.63% of earning assets at June 30, 1997 and 23.67% at June 30, 1996. At June
30, 1997, the securities portfolio had unrealized losses of approximately
$341,393. A gain of $10,889 was realized during the first half of 1997.
Securities held to maturity with a carrying value of approximately $27.5 million
were scheduled to mature within the next five years. Of this amount, $9.2
million were scheduled to mature within one year. Securities available for sale
with a carrying value of $79.7 million were scheduled to mature within the next
five years. Of this amount, $29.3 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.
10
<PAGE>
Average interest bearing liabilities rose 15.23%, to $368,204,000 in the first
six months of 1997, from an average of $319,542,000 in the first six months of
1996. Total deposits increased 25.30% from June 30, 1996 to June 30, 1997, and
15.43% from December 31, 1996 to June 30, 1997. The second quarter acquisitions
resulted in large deposit 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 June 30,
1997, the Company's ratio of total capital to risk-adjusted assets was 12.03%
which includes 10.78% 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 7.72%.
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, 1997, the Company had a liquidity ratio of 33.38%. 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>
CAROLINA FIRST BANCSHARES, INC.
- -----------------------------------------
AVERAGE BALANCE SHEET AS JUNE 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 .... $ 509 $ 15 5.89% 573 $ 27 9.42%
Taxable securities .......................... 86,347 2,598 6.02% 72,728 $ 2,257 6.21%
Non-taxable securities ...................... 7,350 250 6.80% 11,495 308 5.36%
Federal funds sold and securities
purchased with agreements to
resell ................................... 8,761 237 5.41% 2,900 76 5.24%
Loans ....................................... 311,003 14,919 9.59% 268,052 12,972 9.68%
-------- -------- -------- -------
Interest earning assets .................. 413,970 18,019 8.71% 355,748 15,640 8.79%
-------- -------
Cash and due from banks ..................... $ 15,812 $ 13,186
Other assets ................................ 18,579 16,369
-------- --------
Total assets ................................ $448,361 $385,303
======== ========
Liabilities and Shareholders' Equity
Interest bearing deposits
Demand .................................... $ 97,739 $ 1,177 2.41% $ 83,706 $ 973 2.32%
Savings ................................... 42,055 528 2.51% 41,066 514 2.50%
Time ...................................... 223,233 6,169 5.53% 190,194 5,339 5.61%
Other borrowings ............................ 5,177 114 4.40% 4,576 112 4.90%
-------- ------- ------- ------
Interest bearing liabilities ............. 368,204 7,988 4.34% 319,542 6,938 4.34%
-------- ------- ------- ------
Other liabilities ........................... 43,180 34,883
Shareholders' equity ........................ 36,977 30,878
-------- -------
Total liabilities and shareholders'
equity ................................... $448,361 $385,303
======== ========
Interest rate spread ........................ 4.37% 4.45%
====== =====
Net interest earned and net
yield on earning assets .................. $ 10,031 4.89% $ 8,702 4.93%
======== ====== ======= =====
</TABLE>
12
<PAGE>
CAROLINA FIRST BANCSHARES, INC.
- ----------------------------------------------------
RATE / VOLUME ANALYSIS
- ----------------------------------------------------
FOR THE PERIOD ENDED JUNE, 1997 AND 1996
- ----------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
Increase/(Decrease)
due to
1996 Volume Rate 1997
Inc/exp Inc/exp
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Loans ................................................... 12,972 2,060 (113) 14,919
Securities - tax - exempt ............................... 308 (141) 83 250
Securities - taxable .................................... 2,257 410 (69) 2,598
Federal funds sold & interest bearing
balances in other banks ............................ 103 158 (9) 252
------ ------ ------ ------
Total Interest Income .............................. 15,640 2,487 (108) 18,019
Interest Expense:
Interest Bearing Demand ................................. 973 169 35 1,177
Savings ................................................. 514 12 2 528
Time .................................................... 5,339 913 (83) 6,169
Other Borrowings ........................................ 112 13 (11) 114
------ ------ ------ ------
Total Interest Expense ............................. 6,938 1,108 (58) 7,988
------ ------ ------ ------
Net Interest Income ................................ 8,702 1,379 (50) 10,031
====== ====== ====== ======
</TABLE>
13
<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>
14
<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: August 13, 1997 By: /s/ D. Mark Boyd, III
------------------------- -----------------------------------
D. Mark Boyd, III
Chairman and Chief Executive Officer
Date: August 13, 1997 By: /s/ Jan H.Hollar
------------------------- ----------------------
Jan H. Hollar
Principal Accounting Officer
15
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000846465
<NAME> CAROLINA FIRST BANCSHARES, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 21,763,662
<INT-BEARING-DEPOSITS> 645,023
<FED-FUNDS-SOLD> 11,025,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,367,179
<INVESTMENTS-CARRYING> 35,018,311
<INVESTMENTS-MARKET> 35,326,916
<LOANS> 324,598,631
<ALLOWANCE> 4,852,905
<TOTAL-ASSETS> 490,681,378
<DEPOSITS> 444,396,239
<SHORT-TERM> 0
<LIABILITIES-OTHER> 8,481,574
<LONG-TERM> 0
0
0
<COMMON> 5,147,572
<OTHER-SE> 32,655,993
<TOTAL-LIABILITIES-AND-EQUITY> 490,681,378
<INTEREST-LOAN> 14,918,895
<INTEREST-INVEST> 2,847,548
<INTEREST-OTHER> 252,172
<INTEREST-TOTAL> 18,018,615
<INTEREST-DEPOSIT> 7,874,328
<INTEREST-EXPENSE> 113,613
<INTEREST-INCOME-NET> 10,030,674
<LOAN-LOSSES> 498,333
<SECURITIES-GAINS> 10,889
<EXPENSE-OTHER> 7,727,957
<INCOME-PRETAX> 4,452,679
<INCOME-PRE-EXTRAORDINARY> 4,452,679
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,936,629
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 4.89
<LOANS-NON> 1,603,444
<LOANS-PAST> 3,144,863
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,488,958
<CHARGE-OFFS> 199,951
<RECOVERIES> 65,565
<ALLOWANCE-CLOSE> 4,852,905
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
