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United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
- ----- TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM to
Commission file number 0-15083
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CAROLINA FIRST CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-0824914
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
102 South Main Street, Greenville, South Carolina 29601
- ------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (864) 255-7900
Securities registered pursuant to Section 12(b) of the Act:
None None
---- ----
(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
- --------------------------------------------------------------------------------
(Title of Class)
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
--- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates
(shareholders holding less than 5% of an outstanding class of stock, excluding
directors and executive officers), computed by reference to the closing price of
such stock, as of March 13, 1998 was $417,236,000.
The number of shares outstanding of the Registrant's common stock, $1.00 par
value was 17,709,941 at March 13, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Incorporated Document Location in Form 10-K
- --------------------- ---------------------
Portions of 1997 Annual Report to Shareholders Part II; IV
Portions of Proxy Statement dated March 20, 1998 Part III
PART I
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ITEM 1 - BUSINESS
The Company
Carolina First Corporation (the "Company"), a South Carolina
corporation organized in 1986, is a bank holding company headquartered in
Greenville, South Carolina. At December 31, 1997, it operated through four
subsidiaries: Carolina First Bank, a state-chartered bank headquartered in
Greenville, South Carolina; Carolina First Mortgage Company, a South Carolina
corporation headquartered in Columbia, South Carolina ("CF Mortgage"); Blue
Ridge Finance Company, Inc., a consumer finance company headquartered in
Greenville, South Carolina ("Blue Ridge"); and CF Investment Company, a small
business investment company headquartered in Greenville, South Carolina ("CF
Investment"). Through its subsidiaries, the Company provides a full range of
banking services, including mortgage, trust and investment services, designed to
meet substantially all of the financial needs of its customers. The Company
currently conducts business through 65 locations in South Carolina. At December
31, 1997, the Company had approximately $2.2 billion in assets, $1.6 billion in
loans, $1.7 billion in deposits, $201.7 million in shareholders' equity and
$336.7 million in market capitalization.
The Company was formed principally in response to opportunities
resulting from the takeovers of several South Carolina-based banks by large
southeastern regional bank holding companies. A significant number of the
Company's executive officers and management personnel were previously employed
by certain of the larger South Carolina-based banks that were acquired by these
southeastern regional institutions. Consequently, these officers and management
personnel have significant customer relationships and commercial banking
experience that have contributed to the Company's loan and deposit growth. The
Company targets individuals and small- to medium-sized businesses in South
Carolina that require a full range of quality banking services.
The Company currently serves four principal market areas: the
Greenville and Anderson metropolitan areas and surrounding counties (located in
the Upstate region of South Carolina); the Columbia metropolitan area and
surrounding counties (located in the Midlands region of South Carolina);
Georgetown and Horry counties (located in the northern Coastal region of South
Carolina); and the Charleston metropolitan area (located in the central Coastal
region of South Carolina). The Company's principal market areas represent the
four largest Metropolitan Statistical Areas in the state. The Company also has
branch locations in other counties in South Carolina.
The Company began its operations with the de novo opening of
Carolina First Bank in Greenville and has pursued a strategy of growth through
internal expansion and through the acquisition of branch locations and financial
institutions in selected market areas. The Company has emphasized internal
growth through the acquisition of market share from the large out-of-state bank
holding companies. It attempts to acquire market share by providing quality
banking services and personal service to individuals and business customers.
Approximately half of the Company's total deposits have been generated through
acquisitions. See "Acquisitions and Dispositions."
At December 31, 1997, the Company owned 2,528,366 shares of common
stock of Affinity Technology Group, Inc. ("Affinity") and a warrant to purchase
an additional 3,471,340 shares for
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approximately $0.0001 per share ("Affinity Warranty"). These Affinity shares and
the shares represented by the Affinity Warrant constitute approximately 17% of
Affinity's outstanding common stock. The investment in Affinity's common stock,
included in securities available for sale, was recorded at its market value of
approximately $6 million. The Affinity Warrant was not reported on the Company's
balance sheet as of December 31, 1997. Affinity develops and markets
technologies, including automated lending machines, that enable financial
institutions and other businesses to provide consumer financial services
electronically.
On December 29, 1997, the Company exercised a portion of the
Affinity Warrant and was issued 2,400,000 shares of common stock of Affinity for
an exercise price of $226.
As a result of this exercise of the Affinity Warrant, total
shareholders' equity of the Company increased by approximately $3.8 million from
recording the unrealized gain (net of taxes) related to reporting the Affinity
common stock (classified as securities available for sale) at its market value.
The Company's shares in Affinity and the shares issuable upon the
exercise of the Affinity Warrant are "restricted" securities, as that term is
defined in federal securities law.
On July 31, 1997, Net.B@nk, Inc. ("Net.B@nk") completed its initial
public offering in which it sold 3,450,000 shares of its common stock. Net.B@nk
owns and operates the Atlanta Internet Bank, FSB ("Atlanta Internet Bank"), a
FDIC-insured federal savings bank that provides banking services to consumers
utilizing the Internet for their commercial and financial services. Carolina
First Bank assisted with the development of Atlanta Internet Bank, including
offering of Atlanta Internet Bank as a service of Carolina First Bank prior to
the completion of Net.B@nk's initial public offering. Upon consummation of the
offering, the Internet banking deposits of Carolina First Bank were transferred
to the Atlanta Internet Bank. In connection with such agreement, the Company was
issued 1,325,000 shares of Net.B@nk's common stock, 150,000 of which were sold
in the initial public offering as a selling shareholder for a net gain of
approximately $1.25 million.
The Company currently owns 1,175,000 shares of Net.B@nk common
stock, or approximately 18% of the outstanding shares. These shares are carried
on the Company's books (as securities available for sale) at a basis of
approximately $979,000. In connection with these transactions, the Company also
received approximately $2.1 million as reimbursement for funds invested in the
start-up of Net.B@nk. Under the terms of the Office of Thrift Supervision's
approval of Atlanta Internet Bank, certain affiliates of Net.B@nk, including the
Company, may not sell their shares in Net.B@nk until July 31, 2000.
Carolina First Bank
Carolina First Bank engages in a general banking business through 62
branches in 40 communities in 18 South Carolina counties. Carolina First Bank's
primary focus is on commercial and consumer lending to customers in its market
areas, with mortgage lending being of secondary emphasis. It also provides
demand transaction accounts and time deposit accounts to businesses and
individuals. Since the acquisition of CF Mortgage in 1993, Carolina First Bank's
mortgage origination and servicing activities have been performed by CF
Mortgage.
Carolina First Bank provides a full range of commercial and consumer
banking services, including short and medium-term loans, mortgage loans,
revolving credit arrangements, inventory and accounts receivable financing,
equipment financing, real estate lending, credit card loans, safe deposit
services, savings accounts, interest- and noninterest-bearing checking accounts
and installment and other personal loans.
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Carolina First Bank also provides trust services, investment products and
various cash management programs.
CF Mortgage
On September 30, 1993, the Company acquired First Sun Mortgage
Corporation (subsequently renamed Carolina First Mortgage Company). CF Mortgage
is engaged primarily in originating, underwriting and servicing one-to-four
family residential mortgage loans. CF Mortgage also buys or sells mortgage
servicing rights to keep its servicing balances at economically desirable levels
or to benefit from favorable terms.
CF Mortgage's mortgage loan origination operation is conducted
principally through six offices in South Carolina. Mortgage loan applications
are forwarded to CF Mortgage's headquarters in Columbia for processing in
accordance with GNMA, FNMA and other applicable guidelines. During 1997, 1,278
mortgage loans totaling $153 million were originated. The Company generally
sells all conforming fixed rate mortgage loans into the secondary market.
CF Mortgage's mortgage servicing operations consist of servicing
loans that are owned by Carolina First Bank and subservicing loans, to which the
right to service is owned by Carolina First Bank and other non-affiliated
financial institutions. This servicing operation is conducted at its
headquarters located in Columbia, South Carolina. At December 31, 1997, CF
Mortgage was servicing approximately 20,187 loans having an aggregate principal
balance of approximately $1.7 billion.
Blue Ridge
On December 29, 1995, the Company completed its acquisition of Blue
Ridge, a consumer finance company headquartered in Greenville, South Carolina.
Blue Ridge operates from one location and, at December 31, 1997, had
approximately $19 million in total assets. Blue Ridge is engaged primarily in
indirect automobile lending.
CF Investment Company
In September 1997, CF Investment became licensed through the Small
Business Administration to operate as a Small Business Investment Company. CF
Investment Company will principally focus on companies that offer bank-related
products, technology or services. In 1997, the Company capitalized CF Investment
with a contribution of $3.0 million. CF Investment made its first investment in
December 1997 investing in ITS, Inc. ("ITS"), which specializes in electronic
document management. CF Investment has agreed to lend up to $1.2 million to ITS
and has received a 49% equity ownership position.
Acquisitions and Dispositions
On April 6, 1997, the Company completed the sale of five branches
located in Barnwell, Blackville, Salley, Springfield and Williston to the Bank
of Barnwell County, a wholly-owned subsidiary of Community Capital Corporation
("Community Capital"), headquartered in Greenwood, South Carolina. In connection
with this transaction, Carolina First Bank recorded a gain of $2.3 million, sold
loans of approximately $15
4
million and transferred deposits of approximately $55 million.
On July 18, 1997, the Company acquired Lowcountry Savings Bank,
Inc., a South Carolina-chartered savings bank headquartered in Mt. Pleasant,
South Carolina ("Lowcountry"), through the merger of Lowcountry into Carolina
First Bank. The Lowcountry transaction was accounted for as a purchase and
resulted in the payment of approximately $13 million for the outstanding shares
of Lowcountry common stock. Of this amount, approximately $4.8 million was paid
in cash, and approximately $8.2 million was paid in the form of 508,415 shares
of the Company's $1.00 par value common stock ("Common Stock"). At June 30,
1997, Lowcountry operated through five locations in the Charleston area and had
approximately $80 million in assets, $73 million in loans and $64 million in
deposits. Three branches were subsequently consolidated to achieve operating
efficiencies.
On November 21, 1997, the Company acquired First Southeast Financial
Corporation ("First Southeast"), the holding company for First Federal Savings
and Loan Association of Anderson ("First Federal"), a thrift based in Anderson,
South Carolina. At September 30, 1997, First Southeast had approximately $350
million in assets, $275 million in loans and $285 million in deposits. First
Federal had 13 offices located in Anderson, Greenville, Greenwood and Abbeville
counties in South Carolina which were converted into Carolina First Bank offices
upon consummation of the merger. Two of Carolina First Bank's branches were
subsequently consolidated with two of First Federal's branches to achieve
operating efficiencies. In connection with such acquisition, 3,497,400 shares of
the Company's Common Stock valued (as of the closing date of the acquisition) at
approximately $70 million were exchanged for all outstanding shares of First
Southeast common stock. The transaction was accounted for using the purchase
method of accounting.
In February 1998, the Company signed a definitive merger agreement
to acquire Resource Processing Group, Inc. ("RPG"), a privately-held credit card
services company with total assets of approximately $19.3 million and total
equity of approximately $10.6 million as of December 31, 1997. In connection
with the merger, the Company will issue to RPG's shareholders of Common Stock
valued at the time of closing at approximately $11.3 million. Substantially all
of RPG's activities are related to the origination and servicing of credit cards
on behalf of third parties, one of which is the Company. RPG does not have any
receivables associated with credit cards or other loans. The Company expects
that the closing of this transaction will occur in the second quarter of 1998.
It will be accounted for using the purchase method of accounting.
In February 1998, the Company announced the divestiture of three
branches located in Belton, Calhoun Falls and Honea Path with approximately $45
million in deposits. The branches are being sold to Community Capital. This
transaction is scheduled to be completed in the second quarter of 1998 and is
subject to regulatory approval, among other conditions.
The following list summarizes the Company's acquisition activity
during the past three years.
Total Assets Method of
Acquisition Date Acquired Accounting
- ----------- ---- -------- ----------
Aiken National Bank April 1995 $39 million Pooling
Aiken, South Carolina
Midlands National Bank June 1995 $44 million Pooling
Prosperity, South Carolina
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Total Assets Method of
Acquisition Date Acquired Accounting
- ----------- ---- -------- ----------
Blue Ridge Finance Company, Inc. December 1995 $4 million Pooling
Greenville, South Carolina
Lowcountry Savings Bank, Inc. July 1997 $80 million Purchase
Mt. Pleasant, South Carolina
First Southeast Financial November 1997 $350 million Purchase
Corporation
Anderson, South Carolina
Resource Processing Group, Inc. Pending $19 million Purchase
Columbia, South Carolina
Dividends
The Company and its subsidiaries are subject to certain regulatory
restrictions on the amount of dividends they are permitted to pay.
In each year from 1989 through 1995, the Company issued 5% common
stock dividends to common shareholders. At its December 1996 meeting, the Board
of Directors of the Company declared a six-for-five stock split effected in the
form of a 20% common stock dividend which was issued on January 30, 1997 to
shareholders of record as of January 15, 1997. Share and per share data for all
periods presented have been retroactively restated to reflect the additional
shares outstanding resulting from the stock dividend.
In November 1993, the Board of Directors initiated a regular
quarterly cash dividend of $0.05 per share payable on the Common Stock, the
first of which was paid on February 1, 1994. Cash dividends have been paid on a
quarterly basis since the initiation of the cash dividend. The Board of
Directors increased the quarterly cash dividend to $0.06 per share beginning in
the first quarter of 1995 and to $0.07 per share beginning in the first quarter
of 1996. At the December 1997 meeting, the Board of Directors approved an $0.08
per share cash dividend on the common stock which represents an effective annual
increase of 14%. The Company presently intends to continue to pay this quarterly
cash dividend on the Common Stock; however, future dividends will depend upon
the Company's financial performance and capital requirements.
Competition
Each of the Company's markets is a highly competitive banking market
in which all of the largest banks in the state are represented. The competition
among the various financial institutions is based upon a variety of factors
including interest rates offered on deposit accounts, interest rates charged on
loans, credit and service charges, the quality of services rendered, the
convenience of banking facilities and, in the case of loans to large commercial
borrowers, relative lending limits. In addition to banks and savings
associations, the Company competes with other financial institutions including
securities firms, insurance companies, credit unions, leasing companies and
finance companies. Size gives larger banks certain advantages in competing for
business from large corporations. These advantages include higher lending limits
and the ability to offer
6
services in other areas of South Carolina and the region. As a result, the
Company does not generally attempt to compete for the banking relationships of
large corporations, but concentrates its efforts on small to medium-sized
businesses and on individuals. The Company believes it has competed effectively
in this market segment by offering quality, personal service.
Employees
At December 31, 1997, the Company employed a total of 709 full-time
equivalent employees. The Company believes that its relations with its employees
are good.
Monetary Policy
The earnings of bank holding companies are affected by the policies
of regulatory authorities, including the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), in connection with its regulation
of the money supply. Various methods employed by the Federal Reserve Board
include open market operations in U.S. Government securities, changes in the
discount rate on member bank borrowings and changes in reserve requirements
against member bank deposits. These methods are used in varying combinations to
influence overall growth and distribution of bank loans, investments and
deposits, and their use may also affect interest rates charged on loans or paid
on deposits. The monetary policies of the Federal Reserve Board have had a
significant effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future.
Impact of Inflation
Unlike most industrial companies, the assets and liabilities of
financial institutions such as the Company's subsidiaries are primarily monetary
in nature. Therefore, the Company's performance is not generally affected by the
general levels of inflation on the price of goods and services. While the
Company's noninterest income and expense and the interest rates earned and paid
are affected by the rate of inflation, the Company believes that the effects of
inflation are generally manageable through asset/liability management.
Industry Developments
Certain recently-enacted and proposed legislation could have an
effect on both the costs of doing business and the competitive factors facing
the financial institutions industry. The Company is unable at this time to
assess the impact of this legislation on its financial condition or operations.
In August 1995, the FDIC approved a reduction in the insurance
assessments for Bank Insurance Fund ("BIF") deposits. This reduction decreased
Carolina First Bank's insurance assessment for BIF deposits from 0.26% to 0.04%
of the average assessment base. This decrease was retroactive to June 1, 1995.
Effective January 1, 1996, the insurance assessment for Carolina First Bank's
BIF deposits was set at zero (although banks pay a $2,000 annual fee). The FDIC
insurance assessment reduction applied only to BIF-insured deposits and did not
include deposits insured by the SAIF. In connection with the merger of Carolina
First Savings Bank into Carolina First Bank and Carolina First Bank's assumption
of other SAIF-insured deposits in connection with various acquisitions,
approximately 35% of Carolina First Bank's total deposits
7
are subject to SAIF insurance assessments imposed by the FDIC. Through September
30, 1996, Carolina First Bank's SAIF-insured deposits were assessed at 0.23% of
the average assessment base, excluding the special assessment discussed below.
On September 30, 1996, the President signed into law legislation
requiring a special assessment to recapitalize the SAIF. This assessment was
applied at a rate of 0.657% of SAIF-insured deposits as of March 31, 1995. Banks
that have acquired "Oakar" deposits before March 31, 1995 were allowed a 20%
reduction to the assessment base. The result for Carolina First Bank was a
charge of $1.2 million pre-tax ($746,000 after-tax) based on approximately $223
million of SAIF deposits. The legislation also changed future annual assessment
rates for both BIF-insured deposits and SAIF-insured deposits. For 1998 through
1999, the annual assessment rates will be 0.0129% for BIF-insured deposits and
0.0644% for SAIF-insured deposits.
Accounting Issues
In June 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") 130, "Reporting
Comprehensive Income." SFAS 130 requires that all items that are required to be
recognized under accounting standards as comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS 130 requires that an enterprise classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of a statement of
financial position. The Statement is effective for fiscal years beginning after
December 15, 1997. The Company does not anticipate that the adoption of SFAS 130
will have a material impact on its financial statements.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS 131 requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. SFAS 131 requires that a public
enterprise report a measure of segment profit or loss, certain specific revenue
and expense items, segment assets, information about the way that the operating
segments were determined and other items. The Statement is effective for fiscal
years beginning after December 15, 1997. The Company does not anticipate that
adoption of SFAS 131 will have a material effect on its financial statements.
Supervision and Regulation
General
The Company and its subsidiaries are extensively regulated under
federal and state law. To the extent that the following information describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions. Any change in applicable
laws may have a material effect on the business and prospects of the Company.
The operations of the Company may be affected by possible legislative and
regulatory changes and by the monetary policies of the United States.
The Company. As a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the "BHCA"), the Company is subject to
regulation and supervision by the Federal Reserve.
8
Under the BHCA, the Company's activities and those of its subsidiaries are
limited to banking, managing or controlling banks, furnishing services to or
performing services for its subsidiaries or engaging in any other activity that
the Federal Reserve determines to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. The BHCA prohibits the
Company from acquiring direct or indirect control of more than 5% of any class
of outstanding voting stock, or substantially all of the assets of any bank, or
merging or consolidating with another bank holding company without prior
approval of the Federal Reserve. The BHCA also prohibited the Company from
acquiring control of any bank operating outside the State of South Carolina
until September 29, 1995 unless such action was specifically authorized by the
statutes of the state where the bank to be acquired was located. See " --
Supervision and Regulation -- Interstate Banking."
Additionally, the BHCA prohibits the Company from engaging in or
from acquiring ownership or control of more than 5% of the outstanding voting
stock of any company engaged in a nonbanking business unless such business is
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be properly incident thereto. The BHCA
generally does not place territorial restrictions on the activities of such
nonbanking-related entities.
Further, the Federal Deposit Insurance Act, as amended ("FDIA"),
authorizes the merger or consolidation of any Bank Insurance Fund ("BIF") member
with any Savings Association Insurance Fund ("SAIF") member, the assumption of
any liability by any BIF member to pay any deposits of any SAIF member or vice
versa, or the transfer of any assets of any BIF member to any SAIF member in
consideration for the assumption of liabilities of such BIF member or vice
versa, provided that certain conditions are met. In the case of any acquiring,
assuming or resulting depository institution which is a BIF member, such
institution will continue to make payment of SAIF assessments on the portion of
liabilities attributable to any acquired, assumed or merged SAIF-insured
institution (or, in the case of any acquiring, assuming or resulting depository
institution which is a SAIF member, that such institution will continue to make
payment of BIF assessments on the portion of liabilities attributable to any
acquired, assumed or merged BIF-insured institution).
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by law and
regulatory policy that are designed to minimize potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance funds in
the event the depository institution becomes in danger of defaulting or in
default under its obligations to repay deposits. For example, under current
federal law, to reduce the likelihood of receivership of an insured depository
institution subsidiary, a bank holding company is required to guarantee the
compliance of any insured depository institution subsidiary that may become
"undercapitalized" with the terms of any capital restoration plan filed by such
subsidiary with its appropriate federal banking agency up to the lesser of (i)
an amount equal to 5% of the institution's total assets at the time the
institution became undercapitalized, or (ii) the amount that is necessary (or
would have been necessary) to bring the institution into compliance with all
applicable capital standards as of the time the institution fails to comply with
such capital restoration plan. Under a policy of the Federal Reserve with
respect to bank holding company operations, a bank holding company is required
to serve as a source of financial strength to its subsidiary depository
institutions and to commit resources to support such institutions in
circumstances where it might not do so absent such policy. The Federal Reserve
also has the authority under the BHCA to require a bank holding company to
terminate any activity or relinquish control of a nonbank subsidiary (other than
a nonbank subsidiary of a bank) upon the Federal Reserve's determination that
such activity or control constitutes a serious risk to the financial soundness
or stability of any subsidiary depository institution of the bank holding
company. Further, federal law grants federal bank regulatory authorities
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's
9
financial condition.
In addition, the "cross-guarantee" provisions of the FDIA require
insured depository institutions under common control to reimburse the FDIC for
any loss suffered by either the SAIF or the BIF as a result of the default of a
commonly controlled insured depository institution or for any assistance
provided by the FDIC to a commonly controlled insured depository institution in
danger of default. The FDIC may decline to enforce the cross-guarantee
provisions if it determines that a waiver is in the best interest of the SAIF or
the BIF, or both. The FDIC's claim for damages is superior to claims of
stockholders of the insured depository institution or its holding company but is
subordinate to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institutions.
The Company is subject to the obligations and restrictions described
above. However, management currently does not expect that any of these
provisions will have any material impact on its operations.
As a bank holding company registered under the South Carolina Bank
Holding Company Act, the Company is also subject to regulation by the State
Board. Consequently, the Company must receive the approval of the State Board
prior to engaging in the acquisitions of banking or nonbanking institutions or
assets. The Company must also file with the State Board periodic reports with
respect to its financial condition and operations, management, and intercompany
relationships between the Company and its subsidiaries.
Carolina First Bank. Carolina First Bank is an FDIC-insured, South
Carolina-chartered banking corporation and is subject to various statutory
requirements and rules and regulations promulgated and enforced primarily by the
State Board and the FDIC. These statutes, rules and regulations relate to
insurance of deposits, required reserves, allowable investments, loans, mergers,
consolidations, issuance of securities, payment of dividends, establishment of
branches and other aspects of the business of Carolina First Bank. The FDIC has
broad authority to prohibit Carolina First Bank from engaging in what it
determines to be unsafe or unsound banking practices. In addition, federal law
imposes a number of restrictions on state-chartered, FDIC-insured banks and
their subsidiaries. These restrictions range from prohibitions against engaging
as a principal in certain activities to the requirement of prior notification of
branch closings. Carolina First Bank also is subject to various other state and
federal laws and regulations, including state usury laws, laws relating to
fiduciaries, consumer credit and equal credit and fair credit reporting laws.
Carolina First Bank is not a member of the Federal Reserve System.
CF Investment Company. CF Investment is licensed through the Small
Business Administration and operates as a Small Business Investment Company. It
is subject to regulation and supervision by the Small Business Administration.
Dividends. The holders of the Company's common stock are entitled to
receive dividends when and if declared by the Board of Directors out of funds
legally available therefor. The Company is a legal entity separate and distinct
from its subsidiaries and depends for its revenues on the payment of dividends
from its subsidiaries. Current federal law would prohibit, except under certain
circumstances and with prior regulatory approval, an insured depository
institution, such as Carolina First Bank, from paying dividends or making any
other capital distribution if, after making the payment or distribution, the
institution would be considered "undercapitalized," as that term is defined in
applicable regulations. In addition, as a South Carolina-chartered bank,
Carolina First Bank is subject to legal limitations on the amount of dividends
it is permitted to pay. In particular, Carolina First Bank must receive the
approval of the South Carolina Commissioner of Banking prior to paying dividends
to the Company.
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Capital Adequacy
The Company. The Federal Reserve has adopted risk-based capital
guidelines for bank holding companies. Under these guidelines, the minimum ratio
of total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least half of the total
capital is required to be "Tier 1 capital," principally consisting of common
stockholders' equity, noncumulative preferred stock, a limited amount of
cumulative perpetual preferred stock, and minority interests in the equity
accounts of consolidated subsidiaries, less certain goodwill items. The
remainder (Tier 2 capital) may consist of a limited amount of subordinated debt
and intermediate-term preferred stock, certain hybrid capital instruments and
other debt securities, perpetual preferred stock, and a limited amount of the
general loan loss allowance. In addition to the risk-based capital guidelines,
the Federal Reserve has adopted a minimum Tier 1 (leverage) capital ratio under
which a bank holding company must maintain a minimum level of Tier 1 capital (as
determined under applicable rules) to average total consolidated assets of at
least 3% in the case of bank holding companies which have the highest regulatory
examination ratios and are not contemplating significant growth or expansion.
All other bank holding companies are required to maintain a ratio of at least
100 to 200 basis points above the stated minimum. At December 31, 1997, the
Company was in compliance with both the risk-based capital guidelines and the
minimum leverage capital ratio.
Carolina First Bank. As a state-chartered, FDIC-insured institution
which is not a member of the Federal Reserve System, Carolina First Bank is
subject to capital requirements imposed by the FDIC. The FDIC requires
state-chartered nonmember banks to comply with risk-based capital standards
substantially similar to those required by the Federal Reserve, as described
above. The FDIC also requires state-chartered nonmember banks to maintain a
minimum leverage ratio similar to that adopted by the Federal Reserve. Under the
FDIC's leverage capital requirement, state nonmember banks that (a) receive the
highest rating during the examination process and (b) are not anticipating or
experiencing any significant growth are required to maintain a minimum leverage
ratio of 3% of Tier 1 capital to total assets; all other banks are required to
maintain a minimum ratio of 100 to 200 basis points above the stated minimum,
with an absolute minimum leverage ratio of not less than 4%. As of December 31,
1997, Carolina First Bank was in compliance with each of the applicable
regulatory capital requirements.
Federal Deposit Insurance Corporation Improvement Act of 1991
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") required each federal banking agency to revise its risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk, concentration of credit risk and the risk of nontraditional activities, as
well as reflect the actual performance and expected risk of loss on multifamily
mortgages. The Federal Reserve, the FDIC and the OCC have issued a joint advance
notice of proposed rulemaking, and have issued a revised proposal, soliciting
comments on a proposed framework for implementing these revisions. Under the
proposal, an institution's assets, liabilities, and off-balance sheet positions
would be weighted by risk factors that approximate the instrument's price
sensitivity to a 100 basis point change in interest rates. Institutions with
interest rate risk exposure in excess of a threshold level would be required to
hold additional capital proportional to that risk. The notice also asked for
comments on how the risk-based capital guidelines of each agency may be revised
to take account of concentration and credit risk and the risk of nontraditional
activities. Carolina First Corporation cannot assess at this point the impact
the proposal would have on the capital requirements of Carolina First
Corporation or its subsidiary depository institutions.
As a FDIC-insured institution, Carolina First Bank is subject to
insurance assessments imposed by the
11
FDIC. Under current law, the insurance assessment to be paid by insured
institutions shall be as specified in a schedule required to be issued by the
FDIC that specifies, at semiannual intervals, target reserve ratios designed to
increase the FDIC insurance fund's reserve ratio to 1.25% of estimated insured
deposits (or such higher ratio as the FDIC may determine in accordance with the
statute) in 15 years. Further, the FDIC is authorized to impose one or more
special assessments in any amount deemed necessary to enable repayment of
amounts borrowed by the FDIC from the United States Department of the Treasury
(the "Treasury Department").
Effective January 1, 1993, the FDIC implemented a risk-based
assessment schedule where the actual assessment to be paid by each FDIC-insured
institution is based on the institution's assessment risk classification. This
classification is determined based on whether the institution is considered
"well capitalized," "adequately capitalized" or "undercapitalized," as such
terms have been defined in applicable federal regulations adopted to implement
the prompt corrective action provisions of FDICIA (see "-- Supervision and
Regulation -- Other Safety and Soundness Regulations"), and whether such
institution is considered by its supervisory agency to be financially sound or
to have supervisory concerns. Effective January 1, 1996, the insurance
assessment for Carolina First Bank's BIF deposits was set at zero (although
banks pay a $2,000 annual fee). The FDIC insurance assessment reduction applies
only to BIF-insured deposits and does not include deposits insured by the
Savings Association Insurance Fund ("SAIF").
In connection with the merger of Carolina First Savings Bank into
Carolina First Bank and Carolina First Bank's assumption of other SAIF-insured
deposits in connection with various acquisitions, Carolina First Bank has
deposits subject to SAIF insurance assessments imposed by the FDIC. On September
30, 1996, the President signed into law legislation requiring a special
assessment to recapitalize the SAIF. This assessment was applied at a rate of
0.657% of SAIF-insured deposits as of March 31, 1995. Banks that have acquired
"Oakar" deposits before March 31, 1995 were allowed a 20% reduction to the
assessment base. The result for Carolina First Bank was a charge of $1.2 million
pre-tax ($746,000 after-tax) based on approximately $223 million of SAIF
deposits. The legislation also changed future annual assessment rates for both
BIF-insured deposits and SAIF-insured deposits. For 1998 through 1999, the
annual assessment rates will be 0.0129% for BIF-insured deposits and 0.0644% for
SAIF-insured deposits.
Other Safety and Soundness Regulations
Prompt Corrective Action. Current law provides the federal banking
agencies with broad powers to take prompt corrective action to resolve problems
of insured depository institutions. The extent of these powers depends upon
whether the institutions in question are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" or
"critically undercapitalized." Under uniform regulations defining such capital
levels issued by each of the federal banking agencies, a bank is considered
"well capitalized" if it has (i) a total risk-based capital ratio of 10% or
greater, (ii) a Tier 1 risk-based capital ratio of 6% or greater, (iii) a
leverage ratio of 5% or greater, and (iv) is not subject to any order or written
directive to meet and maintain a specific capital level for any capital measure.
An "adequately capitalized" bank is defined as one that has (i) a total
risk-based capital ratio of 8% or greater, (ii) a Tier 1 risk-based capital
ratio of 4% or greater, and (iii) a leverage ratio of 4% or greater (or 3% or
greater in the case of a bank with a composite CAMELS rating of 1). A bank is
considered (A) "undercapitalized" if it has (i) a total risk-based capital ratio
of less than 8%, (ii) a Tier 1 risk-based capital ratio of less than 4% or (iii)
a leverage ratio of less than 4% ( or 3% in the case of a bank with a composite
CAMELS rating of 1); (B) "significantly undercapitalized" if the bank has (i) a
total risk-based capital ratio of less than 6%, or (ii) a Tier 1 risk-based
capital ratio of less than 3%, or (iii) a leverage ratio of less than 3%; and
(C) "critically undercapitalized" if the bank has a ratio of tangible equity to
total assets equal to or less than 2%. Carolina First Corporation and Carolina
First Bank each currently meet the definition of well capitalized.
12
Brokered Deposits. Current federal law also regulates the acceptance
of brokered deposits by insured depository institutions to permit only a "well
capitalized" depository institution to accept brokered deposits without prior
regulatory approval. Under FDIC regulations, "well capitalized" insured
depository institutions may accept brokered deposits without restriction,
"adequately capitalized" insured depository institutions may accept brokered
deposits with a waiver from the FDIC (subject to certain restrictions on
payments of interest rates) while "undercapitalized" insured depository
institutions may not accept brokered deposits. The regulations provide that the
definitions of "well capitalized," "adequately capitalized" and
"undercapitalized" are the same as the definitions adopted by the agencies to
implement the prompt corrective action provisions of FDICIA (as described in the
previous paragraph). Carolina First Corporation does not believe that these
regulations will have a material adverse effect on its current operations.
Other FDICIA Regulations. To facilitate the early identification of
problems, FDICIA required the federal banking agencies to review and, under
certain circumstances, prescribe more stringent accounting and reporting
requirements than those required by generally accepted accounting principles.
The FDIC has issued final regulations implementing those provisions. The rule,
among other things, requires that management report on the institution's
responsibility for preparing financial reporting and compliance with designated
laws and regulations concerning safety and soundness, and that independent
auditors attest to and report separately on assertions in management's reports
concerning compliance with such laws and regulations, using FDIC approved audit
procedures.
FDICIA required each of the federal banking agencies to develop
regulations addressing certain safety and soundness standards for insured
depository institutions (such as Carolina First Bank) and depository institution
holding companies (such as Carolina First Corporation), including operational
and managerial standards, asset quality, earnings and stock valuation standards,
as well as compensation standards (but not dollar levels of compensation). Each
of the federal banking agencies has issued a joint notice of proposed
rulemaking, which requested comment on the implementation of these standards.
The proposed rule sets forth general operational and managerial standards in the
areas of internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth and
compensation fees and benefits. The proposed rule also establishes a maximum
ratio of classified assets to capital, and requires institutions to meet minimum
capital standards as a measure of whether such institutions have minimum
earnings sufficient to absorb losses without impairing capital. Finally, the
proposed rule would define compensation as excessive if it is unreasonable or
disproportionate to the services actually performed. Bank holding companies
would not be subject to the standards on compensation. The proposal contemplates
that each federal agency would determine compliance with these standards through
the examination process, and if necessary to correct weaknesses, require an
institution to file a written safety and soundness compliance plan. Carolina
First Corporation has not yet determined the effect the proposed rule would have
on its operations and the operations of its depository institution subsidiary if
it is adopted substantially as proposed.
In December 1996, the Federal Financial Institutions Examination
Council ("FFIEC") adopted a revised Uniform Financial Institutions Rating System
("CAMELS rating system"). This revised CAMELS rating system is used by federal
and state regulators to assess the soundness of financial institutions on a
uniform basis and to identify those institutions requiring special supervisory
attention. The basic structure of the original CAMEL rating system was retained
with the addition of a sixth component related to a bank's sensitivity to market
risk. The six components of the CAMELS rating system are: 1) capital adequacy,
2) asset quality, 3) management, 4) earnings, 5) liquidity and 6) sensitivity to
market risk. The new component involves measuring the degree to which changes in
interest rates, foreign exchange rates, commodity prices or equity prices can
adversely affect a financial institution's earnings or capital and management's
ability to control this market risk. The evaluation of these six components is
the basis for a composite rating assigned to each financial institution. The
revised CAMELS rating system was used on all examinations started on or after
January 1, 1997.
13
Community Reinvestment Act
Carolina First Bank is subject to the requirements of the Community
Reinvestment Act ("CRA"). The CRA requires that financial institutions have an
affirmative and ongoing obligation to meet the credit needs of their local
communities, including low- and moderate-income neighborhoods, consistent with
the safe and sound operation of those institutions. Each financial institution's
efforts in meeting community credit needs are evaluated as part of the
examination process pursuant to twelve assessment factors. These factors also
are considered in evaluating mergers, acquisitions and applications to open a
branch or facility. Carolina First Bank received an "outstanding" rating in its
most recent evaluation.
As a result of a Presidential initiative, each of the federal
banking agencies has issued a notice of proposed rulemaking that would replace
the current CRA assessment system with a new evaluation system that would rate
institutions based on their actual performance (rather than efforts) in meeting
community credit needs. Under the proposal, each institution would be evaluated
based on the degree to which it is providing loans (the lending test), branches
and other services (the service test) and investments to low- and
moderate-income areas (the investment test). Under the lending test, as
proposed, an institution would be evaluated on the basis of its market share of
reportable loans in low- and moderate-income areas in comparison to other
lenders subject to CRA in its service area, and in comparison with the
institution's market share of reportable loans in other service areas. An
institution would be evaluated under the investment test based on the amount of
investments made that have had a demonstrable impact on low- and moderate-income
areas or persons as compared to its risk-based capital. The service test would
evaluate a retail institution primarily based on the percentage of its branches
located in, or that are readily accessible to, low- and moderate-income areas.
Each depository institution would have to report to its federal supervisory
agency and make available to the public data on the geographic distribution of
its loan applications, denials, originations and purchases. Small institutions
could elect to be evaluated under a streamlined method that would not require
them to report this data. All institutions, however, would receive one of five
ratings based on their performance: Outstanding, High Satisfactory, Low
Satisfactory, Needs to Improve or Substantial Noncompliance. An institution that
received a rating of Substantial Noncompliance would be subject to enforcement
action. The Company currently is studying the proposal and determining whether
the regulation, if adopted, would require changes to Carolina First Bank's CRA
action plans.
Transactions Between the Company, Its Subsidiaries and Affiliates
The Company's subsidiaries are subject to certain restrictions on
extensions of credit to executive officers, directors, principal stockholders or
any related interest of such persons. Extensions of credit (i) must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unaffiliated persons;
and (ii) must not involve more than the normal risk of repayment or present
other unfavorable features. Aggregate limitations on extensions of credit also
may apply. The Company's subsidiaries also are subject to certain lending limits
and restrictions on overdrafts to such persons.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on extensions of credit to the
bank holding company or its nonbank subsidiary, on investments in their
securities and on the use of their securities as collateral for loans to any
borrower. Such restrictions may limit the Company's ability to obtain funds from
its bank subsidiary for its cash needs, including funds for acquisitions,
interest and operating expenses. Certain of these restrictions are not
applicable to transactions between a bank and a savings association owned by the
same bank holding company, provided that every bank and savings association
controlled by such bank holding company complies with all applicable capital
14
requirements without relying on goodwill.
In addition, under the BHCA and certain regulations of the Federal
Reserve, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services. For example, a
subsidiary may not generally require a customer to obtain other services from
any other subsidiary or the Company, and may not require the customer to promise
not to obtain other services from a competitor, as a condition to an extension
of credit to the customer.
Interstate Banking
In 1986, South Carolina adopted legislation which permitted banks
and bank holding companies in certain southern states to acquire banks in South
Carolina to the extent that such other states had reciprocal legislation which
was applicable to South Carolina banks and bank holding companies. The
legislation resulted in a number of South Carolina banks being acquired by large
out-of-state bank holding companies.
In July 1994, South Carolina enacted legislation which effectively
provides that, after June 30, 1996, out-of-state bank holding companies
(including bank holding companies in the Southern Region, as defined under the
statute) may acquire other banks or bank holding companies having offices in
South Carolina upon the approval of the South Carolina State Board of Financial
Institutions and assuming compliance with certain other conditions, including
that the effect of the transaction not lessen competition and that the laws of
the state in which the out-of-state bank holding company filing the applications
has its principal place of business permit South Carolina bank holding companies
to acquire banks and bank holding companies in that state. Although such
legislation may increase takeover activity in South Carolina, the Company does
not believe that such legislation will have a material impact on its competitive
position. However, no assurance of such fact may be given.
In 1996, Congress enacted the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1996 ("Riegle-Neal Act"), which increased the
ability of bank holding companies and banks to operate across state lines. Under
the Riegle-Neal Act, the existing restrictions on interstate acquisitions of
banks by bank holding companies will be repealed one year following enactment,
such that the Company and any other bank holding company located in South
Carolina would be able to acquire a bank located in any other state, and a bank
holding company located outside South Carolina could acquire any South
Carolina-based bank, in either case subject to certain deposit percentage and
other restrictions. The legislation also provides that, unless an individual
state elects beforehand either (i) to accelerate the effective date or (ii) to
prohibit out-of-state banks from operating interstate branches within its
territory, on or after June 1, 1997, adequately capitalized and managed bank
holding companies will be able to consolidate their multistate bank operations
into a single bank subsidiary and to branch interstate through acquisitions. De
novo branching by an out-of-state bank would be permitted only if it is
expressly permitted by the laws of the host state. The authority of a bank to
establish and operate branches within a state will continue to be subject to
applicable state branching laws. The Company believes that this legislation may
result in increased takeover activity of South Carolina financial institutions
by out-of-state financial institutions. However, the Company does not presently
anticipate that such legislation will have a material impact on its operations
or future plans.
The General Assembly of the State of South Carolina has adopted
legislation designed to implement the Riegle-Neal Act.
15
Other Regulations
Interest and certain other charges collected or contracted for by
Carolina First Bank, CF Mortgage Company and Blue Ridge are subject to state
usury laws and certain federal laws concerning interest rates. Carolina First
Bank's, CF Mortgage Company's and Blue Ridge's loan operations are also subject
to certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, CRA requiring financial institutions to meet their obligations to
provide for the total credit needs of the communities they serve, including
investing their assets in loans to low- and moderate-income borrowers, the Home
Mortgage Disclosure Act of 1975 requiring financial institutions to provide
information to enable the public and public officials to determine whether a
financial institution is fulfilling its obligation to help meet the housing
needs of the community it serves, the Equal Opportunity Act prohibiting
discrimination on the basis of race, creed or other prohibited factors in
extending credit, the Fair Credit Reporting Act of 1978 governing the use and
provision of information to credit reporting agencies, the Fair Debt Collection
Act governing the manner in which consumer debts may be collected by collection
agencies, and the rules and regulations of the various federal agencies charged
with the responsibility of implementing such federal laws. The deposit
operations of Carolina First Bank also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records, and the Electronic Funds Transfer Act and
Regulation E issued by the Federal Reserve to implement that act, which govern
automatic deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller machines and
other electronic services.
Forward Looking Statements
From time to time, the Company may publish forward-looking statements,
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products and similar matters. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated results
or other expectations expressed in the Company's forward-looking statements. The
risks and uncertainties that may affect the operations, performance, development
and results of the Company's business include, but are not limited to, the
following: risks from changes in economic and industry conditions; changes in
interest rates; risks inherent in making loans including repayment risks and
value of collateral; and recently-enacted or proposed legislation.
16
ITEM 1 - STATISTICAL DISCLOSURE
Comparative Average Balances -- Yields and Costs........................................................18
Rate/Volume Variance Analysis...........................................................................19
Securities Held for Investment Composition..............................................................20
Securities Available for Sale Composition...............................................................20
Trading Account Composition.............................................................................20
Securities Held for Investment and Securities Available for Sale Maturity Schedule......................21
Loan Portfolio Composition..............................................................................22
Loan Maturity and Interest Sensitivity..................................................................22
Nonperforming Assets....................................................................................23
Summary of Loan Loss Experience.........................................................................23
Composition of Allowance for Loan Losses................................................................24
Types of Deposits.......................................................................................25
Certificates of Deposit Greater than $100,000...........................................................25
Return on Equity and Assets.............................................................................26
Short-Term Borrowings...................................................................................27
Interest Rate Sensitivity...............................................................................28
Market Risk.............................................................................................29
Noninterest Income......................................................................................31
Noninterest Expense.....................................................................................31
17
Comparative Average Balances -- Yields and Costs
(dollars in thousands)
Years Ended December 31,
-----------------------------------------------------------------------------------
1997 1996
-------------------------------------- -------------------------------------------
Average/ Income/ Yield/ Average/ Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
ASSETS
Earning assets
Loans (net of unearned income)(1) ............ $ 1,286,503 $ 120,385 9.36 % $ 1,085,680 $ 103,040 9.49 %
Investment securities (taxable) .............. 210,558 12,824 6.09 187,485 10,959 5.85
Investment securities (nontaxable) ........... 31,165 2,225 (2) 7.14 26,897 1,889 (2) 7.02
Federal funds sold and resale agreements ..... ----- ----- ---- 10,112 676 6.69
Interest-bearing bank balances ............... 18,010 1,051 5.84 10,484 633 6.04
------------- ---------- ---------------- ---------
Total earning assets ..................... 1,546,236 136,485 8.83 % 1,320,658 117,197 8.87 %
------------- ---------- ---------------- ---------
Non-earning assets ........................... 155,722 160,036
Total assets ............................. $ 1,701,958 $ 1,480,694
============= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking .......................... $ 216,126 $ 6,665 3.08 % $ 157,596 $ 3,897 2.47 %
Savings .................................... 56,773 1,600 2.82 62,529 1,772 2.83
Money market ............................... 186,601 7,940 4.26 192,026 8,071 4.20
Certificates of deposit .................... 649,393 37,023 5.70 563,773 31,923 5.66
Other ...................................... 61,822 3,692 5.97 50,566 2,986 5.91
------------- ---------- ---------------- ---------
Total interest-bearing deposits .......... 1,170,715 56,920 4.86 % 1,026,490 48,649 4.74 %
Short-term borrowings ....................... 169,220 9,488 5.61 158,294 8,657 5.47
Long-term borrowings ........................ 27,550 2,592 9.41 26,356 2,495 9.47
------------- ---------- ---------------- ---------
Total interest-bearing liabilities ......... 1,367,485 69,000 5.05 % 1,211,140 59,801 4.94 %
------------- ---------- ---------------- ---------
Non-interest bearing liabilities
Non-interest bearing deposits .............. 197,504 154,261
Other non-interest liabilities ............. 13,611 16,107
------------- ----------------
Total liabilities .......................... 1,578,600 1,381,508
------------- ----------------
Shareholders' equity ........................... 123,358 99,186
Total liabilities and shareholders' equity ... $ 1,701,958 $ 1,480,694
============= ================
Net interest margin ........................... $ 67,485 4.36 % $ 57,396 4.35 %
========== =========
Years Ended December 31,
-----------------------------------------------------------
1995
-----------------------------------------------------------
Average/ Income/ Yield/
Balance Expense Rate
------- ------- ----
ASSETS
Earning assets ................................ $ 965,632 $ 92,731 9.60 %
Loans (net of unearned income)(1) ............ 134,894 7,500 5.56
Investment securities (taxable) .............. 22,930 1,674 (2) 7.30
Investment securities (nontaxable) ........... 5,870 360 6.13
Federal funds sold and resale agreements ..... 919 71 7.73
Interest-bearing bank balances -------------------- -----------
1,130,245 102,336 9.05 %
Total earning assets ..................... -------------------- -----------
Non-earning assets ........................... 139,512
Total assets ............................. $ 1,269,757
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking .......................... $ 114,897 $ 2,332 2.03 %
Savings .................................... 75,407 2,235 2.96
Money market ............................... 158,742 6,473 4.08
Certificates of deposit .................... 497,358 27,544 5.54
Other 45,850 2,595 5.66
-------------------- -----------
Total interest-bearing deposits .......... 892,254 41,179 4.62 %
Short-term borrowings ....................... 136,799 8,196 6.00
Long-term borrowings ........................ 16,875 1,603 9.50
-------------------- -----------
Total interest-bearing liabilities ......... 1,045,928 50,978 4.87 %
-------------------- -----------
Non-interest bearing liabilities ............
Non-interest bearing deposits .............. 130,775
Other non-interest liabilities ............. 2,812
--------------------
Total liabilities .......................... 1,179,515
--------------------
Shareholders' equity ........................... 90,242
Total liabilities and shareholders' equity ... $ 1,269,757
====================
Net interest margin ........................... $ 51,358 4.54 %
===========
- ---------------------------------
(1)Includes nonaccruing loans.
(2)Fully tax-equivalent basis at a 35% tax rate.
Note: Average balances are derived from daily balances.
18
Rate/Volume Variance Analysis
(dollars in thousands)
1997 Compared to 1996 1996 Compared to 1995
--------------------------------------- --------------------------------------
Total Change in Change in Total Change in Change in
Change Volume Rate Change Volume Rate
------ ------ ---- ------ ------ ----
Earning assets
Loans, net of unearned income ......... $ 17,345 $ 18,792 $ (1,447)$ 10,309 $ 11,393 $ (1,084)
Securities, taxable ................... 1,865 1,405 460 3,459 3,074 385
Securities, nontaxable ................ 336 305 31 215 278 (63)
Federal funds sold .................... (676) (676) 0 316 284 32
Interest-bearing bank balances ........ 418 439 (21) 562 578 (16)
----------- ------------ ------------ ---------- ------------ ------------
Total interest income ....... 19,288 20,265 (977) 14,861 15,607 (746)
----------- ------------ ------------ ---------- ------------ ------------
Interest-bearing liabilities
Interest-bearing deposits
Interest checking .................. 2,768 1,805 963 1,565 1,056 509
Savings ............................ (172) (162) (10) (463) (365) (98)
Money market ....................... (131) (231) 100 1,598 1,399 199
Certificates of deposit ............ 5,100 4,881 219 4,379 3,761 618
Other .............................. 706 672 34 391 278 113
----------- ------------ ------------ ---------- ------------ ------------
Total interest-bearing deposits 8,271 6,965 1,306 7,470 6,129 1,341
Short-term borrowings .................... 831 613 218 460 1,175 (715)
Long-term borrowings ..................... 97 112 (15) 893 898 (5)
----------- ------------ ------------ ---------- ------------ ------------
Total interest expense ...... 9,199 7,690 1,509 8,823 8,202 621
----------- ------------ ------------ ---------- ------------ ------------
Net interest income ...... $ 10,089 $ 12,575 $ (2,486)$ 6,038 $ 7,405 $ (1,367)
=========== ============ ============ ========== ============ ============
Note: Changes which are not solely attributable to volume or rate have been
allocated to volume and rate on a pro-rata basis.
19
Securities Held for Investment Composition
(dollars in thousands)
December 31, (at amortized cost)
-------------------------------------------
1997 1996 1995
---- ---- ----
U.S. Treasury securities ........................................... $ 0 $ 0 $ 0
Obligations of U.S. Government agencies and corporations ........... 0 0 0
Obligations of states and political subdivisions ................... 33,503 29,113 25,937
Other securities ................................................... 352 352 352
------------- ------------- -------------
$ 33,855 $ 29,465 $ 26,289
============= ============== ==============
Securities Available for Sale Composition
(dollars in thousands)
December 31, (at fair value)
-------------------------------------------
1997 1996 1995
---- ---- ----
U.S. Treasury securities ........................................... $ 102,261 $ 167,430 $ 97,140
Obligations of U.S. Government agencies and corporations ........... 140,197 39,234 36,706
Other securities ................................................... 19,871 7,225 12,426
------------- ------------- -------------
$ 262,329 $ 213,889 $ 146,272
============= ============= =============
Trading Account Composition
(dollars in thousands)
December 31, (at fair value)
------------------------------ -------------
1997 1996 1995
---- ---- ----
U.S. Treasury and Government agencies .............................. $ 2,196 $ 1,990 $ 4,954
State and political subdivisions ................................... 153 15 851
------------- ------------- ------------
$ 2,349 $ 2,005 $ 5,805
============= ============= =============
20
Securities Held for Investment and
Securities Available for Sale Maturity Schedule
(dollars in thousands)
Held for Investment -- Amortized Cost
------------------------------------------------------------------------------------------
After One After Five
But But No
Within Within Within After Contractual
One Year Five Years Ten Years Ten Years Maturity Total
-------- ---------- --------- --------- -------- -----
U.S Treasury ....................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
U.S. Government agencies
and corporations ................ 0 0 0 0 0 0
States and political subdivisions .. 5,913 17,641 9,949 0 0 33,503
Other securities ................... 0 52 0 300 0 352
------------- ----------- ---------- ----------- ------------ -----------
$ 5,913 $ 17,693 $ 9,949 $ 300 $ 0 $ 33,855
============= =========== ========== =========== ============ ===========
Weighted average yield
U.S Treasury ....................... 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
U.S. Government agencies
and corporations ................ 0.00 0.00 0.00 0.00 0.00 0.00
States and political subdivisions .. 4.23 4.41 4.95 0.00 0.00 4.54
Other securities ................... 0.00 7.33 0.00 1.67 0.00 2.51
----------- ------------- ------------ -------------- ------------- -------------
4.23 % 4.42 % 4.95 % 1.67 % 0.00 % 4.52 %
=========== ============= ============ ============== ============= =============
Available for Sale -- Fair Value
--------------------------------------------------------------------------------------------
After One After Five
But But No
Within Within Within After Contractual
One Year Five Years Ten Years Ten Years Maturity Total
-------- ---------- --------- --------- -------- -----
U.S Treasury ....................... $ 100,620 $ 1,640 $ 0 $ 0 $ 0 $ 102,260
U.S. Government agencies
and corporations ................ 63,036 42,502 31,149 3,511 0 140,198
States and political subdivisions .. 0 0 0 0 0 0
Other securities ................... 0 0 0 0 19,871 19,871
---------- ------------- -------------- ------------ ------------- ----------
$ 163,656 $ 44,142 $ 31,149 $ 3,511 $ 19,871 $ 262,329
========== ============= ============== ============ ============= ==========
Weighted average yield
U.S Treasury ....................... 6.09 % 5.79 % 0.00 % 0.00 % 0.00 % 6.08 %
U.S. Government agencies
and corporations ................ 5.85 6.39 7.30 7.01 0.00 6.37
States and political subdivisions .. 0.00 0.00 0.00 0.00 0.00 0.00
Other securities ................... 0.00 0.00 0.00 0.00 3.46 3.46
---------- ------------- ------------- ----------- ------------- -----------
6.00 % 6.37 % 7.30 % 7.01 % 3.46 % 6.04 %
========== ============= ============= =========== ============= ===========
21
Loan Portfolio Composition
(dollars in thousands)
December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Commercial, financial and agricultural .. $ 225,021 $ 196,206 $ 188,255 $ 179,876 $ 137,340
Real Estate
Construction ......................... 42,229 36,757 31,552 24,039 22,752
Mortgage
Residential .......................... 321,572 245,096 217,899 206,980 157,460
Commercial and multifamily (1) ....... 516,253 378,471 234,153 275,083 157,528
Consumer ................................ 141,842 140,206 149,216 129,106 89,788
Credit cards ............................ 52,525 40,480 86,901 36,954 53,305
Lease financing receivables ............. 79,597 91,321 36,740 208 ------
Loans held for sale ..................... 235,151 10,449 125,000 71,695 7,700
------------- ------------ ------------ ----------- -----------
Total gross loans ................. $ 1,614,190 $ 1,138,986 $ 1,069,716 $ 923,941 $ 625,873
Unearned income ......................... (11,775) (14,211) (7,056) (873) (2,227)
------------- ------------ ------------ ----------- -----------
Total loans net of unearned income 1,602,415 1,124,775 1,062,660 923,068 623,646
Allowance for loan losses ............... (16,211) (11,290) (8,661) (6,002) (6,679)
------------- ------------ ------------ ----------- -----------
Total net loans ................... $ 1,586,204 $ 1,113,485 $ 1,053,999 $ 917,066 $ 616,967
============= ============ ============ =========== ===========
- ---------------------------------------
(1) The majority of these loans are made to operating businesses where real
property has been taken as additional collateral.
Loan Maturity and Interest Sensitivity
(dollars in thousands)
Over One
But Over
One Year Less Than Five
or Less Five Years Years Total
--------------------------------------------------
Commercial, financial, agricultural and
commercial real estate ...............$ 232,096 $ 397,428 $ 111,750 $ 741,274
Real estate -- construction ............. 36,317 5,912 0 42,229
Total of loans with:
Predetermined interest rates ......... 54,830 160,227 37,940 252,997
Floating interest rates .............. 213,583 243,113 73,810 530,506
22
Nonperforming Assets
(dollars in thousands)
December 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Nonaccrual loans ................................ $ 1,165 $ 960 $ 1,275 $ 2,051 $ 2,487
Restructured loans .............................. 1,283 1,909 1,085 675 0
-------- -------- ------- -------- --------
Total nonperforming loans ............. 2,448 2,869 2,360 2,726 2,487
Other real estate owned ......................... 1,319 3,011 2,508 1,996 2,879
-------- -------- ------- -------- --------
Total nonperforming assets ............ $ 3,767 $ 5,880 $ 4,868 $ 4,722 $ 5,366
======== ======== ======= ======== ========
Loans past due 90 days still accruing interest .. $ 4,125 $ 2,371 $ 2,748 $ 1,285 $ 2,060
======== ======== ======= ======== ========
Total nonperforming assets as a percentage
of loans and foreclosed property ............ 0.23% 0.52% 0.46% 0.51% 0.86%
======== ======= ====== ======== ========
Allowance for loan losses as a percentage
of nonperforming loans ....................... 662.21% 393.52% 366.99% 220.18% 268.59%
======== ======= ====== ======= ========
Summary of Loan Loss Experience
(dollars in thousands)
December 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ -------------- ----------- -------------- -----------
Loan loss reserve at beginning of period .......... $ 11,290 $ 8,661 $ 6,002 $ 6,679 $ 5,276
Purchase accounting acquisitions .................. 3,550 0 128 0 0
Valuation allowance for loans purchased ........... 658 1,261 633 1,077 1,811
Charge-offs:
Commercial, financial and agricultural ........ 415 335 1,201 519 401
Real estate - construction ................... 0 115 0 85 0
Real estate - mortgage ....................... 362 1,475 85 263 267
Consumer ..................................... 6,017 3,463 1,437 583 423
Credit cards ................................. 5,325 4,072 2,536 1,641 488
------------ -------------- ----------- -------------- -----------
Total loans charged-off............... 12,119 9,460 5,259 3,091 1,579
------------ -------------- ----------- -------------- -----------
Recoveries:
Commercial, financial and agricultural ....... 114 67 180 69 23
Real estate - construction .................. 0 0 0 0 0
Real estate - mortgage ...................... 1 7 14 9 23
Consumer .................................... 1,071 95 114 62 19
Credit cards ................................ 0 396 3 0 0
------------ -------------- ----------- -------------- -----------
Total loans recovered ............... 1,186 565 311 140 65
------------ -------------- ----------- -------------- -----------
Net charge-offs ................................... 10,933 8,895 4,948 2,951 1,514
Provision charged to expense ................ 11,646 10,263 6,846 1,197 1,106
------------ -------------- ----------- -------------- -----------
Loan loss reserve at end of period ................ $ 16,211 $ 11,290 $ 8,661 $ 6,002 $ 6,679
============ ============== =========== ============== ===========
Average loans ..................................... $ 1,286,503 $ 1,085,680 $ 965,632 $ 781,503 $ 548,619
Total loans, net of unearned income (period end) .. 1,602,415 1,124,775 1,062,660 923,068 623,646
Net charge-offs as a percentage of average loans .. 0.84% 0.82% 0.51% 0.38 % 0.28%
Allowance for loan losses as a percentage of loans
excluding loans held for sale .................. 1.19 1.01 0.92 0.71 1.08
Note: In 1996 and 1997, the Company experienced increased charge-offs
related to its credit card activities. The Company expects this trend
of higher credit card losses to continue, and perhaps increase.
23
Composition of Allowance for Loan Losses
(dollars in thousands)
Allowance Breakdown
December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Commercial, financial and
agricultural .........$ 2,754 $ 2,415 $ 2,287 $ 1,730 $ 1,866
Real Estate
Construction ......... 255 203 151 130 148
Mortgage:
Residential ........ 358 267 233 135 145
Commercial and
multifamily ..... 1,359 1,218 946 581 627
Consumer .................. 5,011 2,890 1,535 1,071 1,965
Credit cards .............. 5,426 3,157 2,643 1,757 1,262
Loans held for sale ....... 162 11 0 0 0
Unallocated ............... 886 1,129 866 598 666
-------- --------- -------- -------- --------
Total ..........$ 16,211 $ 11,290 $ 8,661 $ 6,002 $ 6,679
======== ========= ======== ======== ========
Percentage of Loans in Category
Dececember 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Commercial, financial and
agricultural ......... 16.46% 17.61% 20.08% 21.13% 22.30%
Real Estate
Construction ......... 3.09 3.30 3.36 2.82 3.69
Mortgage:
Residential ........ 23.52 21.99 23.23 24.31 25.55
Commercial and
multifamily ..... 37.76 33.96 24.97 32.31 25.56
Consumer .................. 15.34 19.51 19.09 15.09 14.25
Credit cards .............. 3.83 3.63 9.27 4.34 8.65
-------- ------- ---------- ---------- ----------
Total (1) ...... 100.00% 100.00% 100.00% 100.00% 100.00%
======== ======= ============= ============ ===========
(1) The figure used in calculating total loans excludes loans held for sale and
is net of unearned income.
24
Types of Deposits
(dollars in thousands)
Balance as of December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Demand deposit accounts ..... $ 206,938 $ 194,067 $ 160,393 $ 126,974 $ 72,950
NOW accounts ................ 314,994 184,450 132,063 117,271 85,910
Savings accounts ............ 74,248 57,977 66,552 94,774 70,897
Money market accounts ....... 183,032 177,665 178,662 155,695 156,519
Time deposits ............... 736,781 474,553 403,914 371,169 297,499
Time deposits of $100,000 or
over ..................... 230,549 192,338 153,907 135,865 120,774
------------- ------------ ----------- ----------- ---------
Total deposits ......... $1,746,542 $1,281,050 $1,095,491 $1,001,748 $804,549
============= ============ =========== =========== =========
Percent of Deposits as of December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Demand deposit accounts ....... 11.85% 15.15% 14.64% 12.68% 9.07%
NOW accounts .................. 18.04 14.40 12.06 11.71 10.68
Savings accounts .............. 4.25 4.53 6.07 9.46 8.81
Money market accounts ......... 10.47 13.87 16.31 15.54 19.45
Time deposits ................. 42.19 37.04 36.87 37.05 36.98
Time deposits of $100,000 or
over ....................... 13.20 15.01 14.05 13.56 15.01
------------ ------------- ------------ ----------- ----------
Total deposits ........... 100.00% 100.00% 100.00% 100.00% 100.00%
============ ============= =========== =========== ==========
Certificates of Deposit Greater than $100,000
(dollars in thousands)
Maturing in three months or less .................................... $ 58,096
Maturing in over three through six months. .......................... 48,044
Maturing in over six through twelve months. ......................... 80,048
Maturing in over twelve months ...................................... 44,361
----------
Total .................................................... $ 230,549
==========
25
Return on Equity and Assets
Years Ended December 31,
---------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Return on average assets ......... 0.84% 0.71% 0.74% (0.16)% 0.69%
Return on average equity ......... 11.62 10.56 10.43 (1.99) 8.27
Return on average common equity .. 11.63 10.97 17.07 (3.08) 12.60
Average equity as a percentage of
average assets ................ 7.25 6.70 7.11 8.27 8.37
Dividend payout ratio ............ 24.58 27.17 25.00 n/m 0.00
26
Short Term Borrowings
(dollars in thousands)
Maximum
Outstanding Average Interest
At Any Average Interest Ending Rate at
Year Ended December 31, Month End Balance Rate Balance Year End
- ----------------------- --------- ------- ---- ------- --------
1997
Federal funds purchased and
repurchase agreements ... $ 113,421 $ 91,289 5.33% $ 112,161 5.22%
Advances from the FHLB ..... 115,000 57,407 5.84 -- --
Commercial paper ........... 27,254 20,370 6.25 27,254 6.33
Other ...................... 324 154 7.50 324 7.55
------------------------------ ----------------------------
$ 169,220 5.61% $ 139,739 5.44%
============================== ===========================
1996
Federal funds purchased and
repurchase agreements ... $ 95,013 $ 80,644 5.26% $ 87,144 5.32%
Advances from the FHLB ..... 115,000 64,554 5.52 40,000 6.95
Commercial paper ........... 18,558 13,067 6.29 18,016 6.40
Other ...................... 29 29 7.81 29 7.72
------------------------------ ----------------------------
$ 158,294 5.47% $ 145,189 5.90%
============================== ============================
1995
Federal funds purchased and
repurchase agreements ... $ 107,717 $ 63,611 5.68% $ 91,532 5.54%
Advances from the FHLB ..... 90,000 70,526 6.11 90,000 5.75
Commercial paper ........... 2,405 37 6.76 2,405 6.76
Other ...................... 2,852 2,625 9.00 2,852 9.00
------------------------------ ----------------------------
$ 136,799 6.00% $ 186,789 5.71%
============================== ============================
27
Interest Rate Sensitivity
(dollars in thousands)
Total
0-3 4-6 7-12 Within Over One
Months Months Months One Year Year
------ ------ ------ -------- ----
Assets
Earning assets
Loans, net of unearned income ................. $ 947,212 $ 59,376 $ 108,879 $ 1,115,467 $ 485,918
Investment securities, taxable ................ 108,526 14,354 42,914 165,794 92,243
Investment securities, nontaxable ............. 2,996 1,395 1,521 5,912 27,590
Federal funds sold ............................ 0 0 0 0 0
Interest bearing balances with
other banks ................................. 34,103 600 0 34,703 0
----------- --------- ----------- ------------ -----------
Total earning assets .............. 1,092,837 75,725 153,314 1,321,876 605,751
Non-earning assets, net .......................... 0 0 0 0 0
----------- --------- ----------- ------------ -----------
Total assets ...................... $ 1,092,837 $ 75,725 $ 153,314 $ 1,321,876 $ 605,751
=========== ========= =========== ============= ===========
Liabilities and Shareholders' Equity
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest Checking ...................... $ 314,993 $ 0 $ 0 $ 314,993 $ 0
Savings ................................ 74,248 0 0 74,248 0
Money Market ........................... 183,032 0 0 183,032 0
Certificates of Deposit ................ 223,367 196,863 266,863 687,093 198,007
Other .................................. 20,750 18,288 24,790 63,828 18,403
----------- --------- ----------- ------------ -----------
Total interest-bearing deposits ...... 816,390 215,151 291,653 1,323,194 216,410
----------- --------- ----------- ------------ -----------
Short-term borrowings ...................... 138,157 983 275 139,415 0
Long-term borrowings ....................... 81 81 162 324 39,119
----------- --------- ----------- ------------ -----------
Total interest-bearing liabilities ... 954,628 216,215 292,090 1,462,933 255,529
Noninterest bearing liabilities
Noninterest bearing deposits ............... 0 0 0 0 0
Other noninterest bearing liabilities, net . 0 0 0 0 0
----------- --------- ----------- ------------ -----------
Total liabilities .................... 954,628 216,215 292,090 1,462,933 255,529
----------- --------- ----------- ------------ -----------
Shareholders'equity .............................. 0 0 0 0 0
----------- --------- ----------- ------------ -----------
Total liabilities and shareholders'
equity ............................ $ 954,628 $ 216,215 $ 292,090 $ 1,462,933 $ 255,529
=========== ========= =========== =========== ===========
Interest sensitive gap ........................... $ 138,209 $(140,490) $ (138,776) $ (141,057) $ 350,222
Cumulative interest sensitive gap ................ $ 138,209 $ (2,281) $ (141,057) $ (141,057) $ (209,165)
Non-
Sensitive Total
--------- -----
Assets
Earning assets
Loans, net of unearned income ................. $ 0 $ 1,601,385
Investment securities, taxable ................ 0 258,037
Investment securities, nontaxable ............. 0 33,502
Federal funds sold ............................ 0 0
Interest bearing balances with
other banks ................................. 0 34,703
----------- -----------
Total earning assets .............. 0 1,927,627
Non-earning assets, net .......................... 228,719 228,719
----------- -----------
Total assets ...................... $ 228,719 2,156,346
=========== ===========
Liabilities and Shareholders' Equity
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest Checking ...................... $ 0 $ 314,993
Savings ................................ 0 74,248
Money Market ........................... 0 183,032
Certificates of Deposit ................ 0 885,100
Other .................................. 0 82,231
----------- -----------
Total interest-bearing deposits ...... 0 1,539,604
----------- -----------
Short-term borrowings ...................... 0 139,415
Long-term borrowings ....................... 0 39,443
----------- -----------
Total interest-bearing liabilities ... 0 1,718,462
Noninterest bearing liabilities
Noninterest bearing deposits ............... 206,938 206,938
Other noninterest bearing liabilities, net . 29,287 29,287
----------- -----------
Total liabilities .................... 236,225 1,954,687
----------- -----------
Shareholders'equity .............................. 201,659 201,659
----------- -----------
Total liabilities and shareholders'
equity ............................ $ 437,884 $ 2,156,346
=========== ===========
Interest sensitive gap ........................... $ (209,165) --
Cumulative interest sensitive gap ................ -- --
28
MARKET RISK
Market risk is the risk of loss from adverse changes in market
prices and rates. The Company's market risk arises principally from interest
rate risk inherent in its lending, deposit and borrowing activities. Management
actively monitors and manages its interest rate risk exposure. Although the
Company manages other risks, such as credit quality and liquidity risk, in the
normal course of business, management considers interest rate risk to be its
most significant market risk and could potentially have the largest material
effect on the Company's financial condition and results of operations. Other
types of market risks, such as foreign exchange rate risk, equity risk and
commodity price risk, do not arise in the normal course of the Company's
business activities.
Achieving consistent growth in net interest income is the primary
goal of the Company's asset/liability function. The Company attempts to control
the mix and maturities of assets and liabilities to achieve consistent growth in
net interest income despite changes in market interest rates. The Company seeks
to accomplish this goal while maintaining adequate liquidity and capital. The
Company's asset/liability mix is believed to be sufficiently balanced so that
the effect of interest rates moving in either direction is not expected to be
significant over time.
The Company's Asset/Liability Committee uses a simulation model to
assist in achieving consistent growth in net interest income while managing
interest rate risk. The model takes into account interest rate changes as well
as changes in the mix and volume of assets and liabilities. The model simulates
the Company's balance sheet and income statement under several different rate
scenarios. The model's inputs (such as interest rates and levels of loans and
deposits) are updated on a monthly basis in order to obtain the most accurate
forecast possible. The forecast presents information over a twelve month period.
It reports a base case in which interest rates remain flat and reports
variations that occur when rates increase and decrease 200 basis points.
According to the model as of December 31, 1997, the Company is positioned so
that net interest income will increase $9.9 million if interest rates rise in
the near term and will decrease $7.2 million if interest rates decline in the
near term.
Computation of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and deposit decay rates, and should not be
relied upon as indicative of actual results. Further, the computations do not
contemplate any actions the Company could undertake in response to changes in
interest rates.
The table on the following page shows the Company's ending balance
sheet and the associated average yield/cost as of December 31, 1997 and reflects
the impact that an increase and decrease of 200 basis points would have on net
interest income within a one year time frame.
29
INTEREST RATE RISK
($ in thousands)
PROJECTED
-----------------------------------------------
No Rate Changes Increase Rates 200 BP
----------------------- -----------------------
Ending Average Average Average
Balance Yield/Rate 1998 Income/ Yield/Cost 1998 Income/ Yield/Cost
12/31/97 12/31/97 Expense 1998 Expense 1998
-------- -------- ------- ---- ------- ----
ASSETS
Earning assets
Loans (net of unearned income)(1) ............. $ 1,602,415 9.36% $ 163,333 9.45% $ 184,779 10.69%
Investment securities (taxable) ............... 33,503 6.09 14,413 5.80 16,651 6.70
Investment securities (nontaxable) ............ 265,030 7.14(1) 2,431 7.32(1) 2,534 7.63(1)
Federal funds sold and resale agreements ...... -- -- 45 5.50 155 7.50
Interest bearing deposits with other banks .... 34,703 5.84 1,299 5.53 1,299 5.53
----------- --------- -------
Total earning assets ...................... 1,935,651 8.83% $ 181,522 8.88% $ 205,418 10.04%
Non-earning assets ............................ 220,695 --------- -------
-----------
Total assets .............................. $ 2,156,346
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking ........................... $ 314,994 3.08% $ 9,837 3.20% $ 11,340 3.60%
Savings ..................................... 74,248 2.82 2,208 2.82 2,959 3.78
Money market ................................ 183,032 4.26 8,777 4.19 11,802 5.63
Certificates of deposit ..................... 967,330 5.72 59,718 5.67 66,514 6.31
----------- --------- -------
Total interest-bearing deposits ........... 1,539,604 4.86% 80,540 5.13% 92,616 5.81%
Short-term borrowings ........................ 139,739 5.61 6,217 5.64 8,068 7.34
Long-term borrowings ......................... 39,119 9.41 2,747 9.07 2,800 9.24
----------- --------- -------
Total interest-bearing liabilities .......... 1,718,462 5.05% $ 89,505 5.29% $ 103,484 6.02%
Non-interest bearing liabilities --------- -------
Non-interest bearing deposits ............... 206,938
Other non-interest liabilities .............. 29,287
-----------
Total liabilities ........................... 1,954,687
-----------
Shareholders' equity ............................ 201,659
Total liabilities and shareholders' equity .... $ 2,156,346
===========
Net interest margin ............................. 4.36% $ 92,017 4.54% $ 101,934 5.03%
======= ========= ===== ======= ====
-------------------------
Decrease Rates 200 BP
-------------------------
Average
1998 Income/ Yield/Cost
Expense 1998
------- ----
ASSETS
Earning assets
Loans (net of unearned income)(1) ............. $ 141,235 8.17%
Investment securities (taxable) ............... 12,175 4.90
Investment securities (nontaxable) ............ 2,329 7.02(1)
Federal funds sold and resale agreements ...... 8 3.50
Interest bearing deposits with other banks .... 1,299 5.53
---------
Total earning assets ...................... $ 157,047 7.68%
Non-earning assets ............................ ---------
Total assets ..............................
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest checking ........................... $ 8,815 2.79%
Savings ..................................... 1,457 1.86
Money market ................................ 5,751 2.75
Certificates of deposit ..................... 49,342 4.68
---------
Total interest-bearing deposits ........... 65,365 4.19%
Short-term borrowings ........................ 4,181 3.94
Long-term borrowings ......................... 2,723 8.90
---------
Total interest-bearing liabilities .......... $ 72,268 4.36%
Non-interest bearing liabilities ---------
Non-interest bearing deposits ...............
Other non-interest liabilities ..............
Total liabilities ...........................
Shareholders' equity ............................
Total liabilities and shareholders' equity ....
Net interest margin ............................. $ 84,778 4.18%
========= ====
(1) Fully tax-equivalent basis at a 35% tax rate.
30
Noninterest Income
(dollars in thousands)
Years Ended December 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Service charges on deposits ................. $ 6,997 $ 6,490 $ 5,524 $ 4,089 $ 2,916
Loan securitization income .................. (545) 2,865 2,775 0 0
Mortgage banking income:
Origination fees ......................... 1,688 1,358 1,086 954 1,051
Gain on sale of mortgage loans ........... 798 34 699 112 509
Servicing and other ...................... 935 1,394 377 572 228
Fees for trust services ..................... 1,407 1,286 1,042 919 542
Gain on sale of branches .................... 2,250 0 0 0 0
Gain on sale of credit cards ................ 0 4,293 0 0 0
Gain on sale of securities .................. 3,011 973 769 75 680
Gain on sale of mortgage servicing rights ... 212 107 2,943 0 0
Sundry ...................................... 2,862 2,541 2,111 1,505 839
---------- ----------- ----------- ------------- ----------
Total noninterest income .......... $ 19,615 $ 21,341 $ 17,326 $ 8,226 $ 6,765
========== =========== =========== ============= ==========
Noninterest Expense
(dollars in thousands)
Years Ended December 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Salaries and wages ....................... $ 21,154 $ 20,573 $ 17,524 $ 15,023 $ 10,630
Benefits ................................. 4,967 4,649 4,584 4,375 2,510
Occupancy ................................ 5,221 4,336 4,209 3,728 2,301
Furniture and equipment .................. 3,951 3,621 3,182 2,577 1,933
Other real estate owned and other losses . 416 2,120 364 280 223
Intangibles amortization ................. 1,541 1,889 1,774 2,410 875
Savings Association Insurance
Fund assessment ....................... 0 1,184 0 0 0
Stationery, supplies and printing ........ 1,321 1,183 1,037 1,223 772
Postage .................................. 1,349 1,105 1,127 861 536
Advertising .............................. 1,647 821 1,427 959 386
Federal deposit insurance premiums ....... 494 469 1,983 2,114 1,605
Credit card solicitation charge .......... 0 383 1,910 0 0
Credit card restructuring charges ........ 0 0 0 12,214 0
Sundry ................................... 10,182 9,342 7,761 6,075 5,523
------------ ------------- ------------- ------------- -------------
Total noninterest expense ...... $ 52,243 $ 51,675 $ 46,882 $ 51,839 $ 27,294
============ ============= ============ ============= =============
31
ITEM 2 - PROPERTIES
At December 31, 1997, the Company conducted business through 65
locations in South Carolina. At December 31, 1997, the total net tangible book
value of the premises and equipment and leasehold improvements owned by the
Company was $39,682,000. The Company believes that its physical facilities are
adequate for its current operations.
The Company's headquarters are located on Main Street in
Greenville's downtown commercial area which is currently the site of Carolina
First Bank's Greenville main office branch. The Company has temporarily
relocated many administrative functions from the Main Street location to another
office building, purchased in October 1993, with approximately 27,000 square
feet in downtown Greenville. This building also houses Carolina First Bank's
trust department and a CF Mortgage origination office. The Company has entered
into a lease agreement with Poinsett Plaza, LLC to lease approximately 100,000
square feet in a building to be constructed by the landlord on the property
adjoining Carolina First Bank's Greenville main office branch. This lease is
expected to commence in the summer of 1999. Blue Ridge's headquarters are
located in an office park in Greenville and occupy approximately 3,000 square
feet.
In February 1993, the Company entered into a lease on a 42,000
square foot building in Columbia, South Carolina. This facility houses the
Company's operations center, regional administrative offices, investments
division and a Columbia main office branch, which opened in September 1993. In
September 1993, the Company purchased an office building in Columbia, South
Carolina for its mortgage banking operations. CF Mortgage's headquarters are
located in this building. In June 1994, the Company completed the construction
of a 16,000 square foot main office branch in Myrtle Beach which serves as the
regional headquarters for the coastal offices. In September 1995, the Company
completed renovations on its Charleston main office situated in the historic
district of downtown Charleston. This office occupies approximately 9,000 square
feet and serves as home to the branch office as well as to additional
administrative offices.
The Company's subsidiaries operate through 65 locations, which
include the buildings described above. Of these locations, the Company or a
subsidiary of the Company owns 26 locations and leases 39 locations. The rental
payments due under the leases approximate the market rates. Leases generally
have options for extensions under substantially the same terms as in the
original lease period with certain rate escalations. The leases generally
provide that the lessee pay property taxes, insurance and maintenance costs.
All locations of the Company and its subsidiaries are considered
suitable and adequate for their intended purposes. Individually, none of the
above leases are considered material.
32
ITEM 3 - LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims which
arise in the ordinary course of its business. Any litigation is vigorously
defended by the Company and, in the opinion of management based on consultation
with external legal counsel, any outcome of such litigation would not materially
affect the Company's consolidated financial position or results of operations.
On November 4, 1996, a derivative shareholder action was filed in
Greenville County Court of Common Pleas against the Company, the majority of the
Company's and Carolina First Bank's directors and certain executive and other
officers. The named plaintiffs are the Company by and through certain minority
shareholders. The Company filed a motion to dismiss with respect to all claims
in this complaint, which was granted in December 1997. Plaintiffs have filed a
motion for reconsideration and have the right to appeal the grant of the motion
to dismiss. Plaintiffs allege as causes of action the following: conversion of
corporate opportunity; fraud and constructive fraud; and negligent management.
The factual basis upon which these claims are made generally involves the
payment to Company officers and other individuals of a bonus in stock held by
the Company in Affinity (as reward for their efforts in connection with the
Company's procurement of stock in Affinity), statements to former shareholders
in connection with the Company's acquisition of Midlands National Bank ("MNB"),
alleged mismanagement by certain executive officers involving financial matters
and employee matters. The complaint seeks damages for the benefit of the Company
aggregating $41 million and recision of the Affinity bonus.
In an action brought by the same attorneys who brought the
above-mentioned derivative action, on December 31, 1996, certain individuals
filed a class action lawsuit against the Company, Carolina First Bank, and a
number of officers and directors of the Company and Carolina First Bank. In
connection with the judge's granting the motion to dismiss in the
above-referenced derivative action, the plaintiffs' attorneys have agreed to
withdraw this lawsuit, without prejudice. In this class action lawsuit,
plaintiffs allege that they are former shareholders of MNB and seek to represent
a class of all MNB shareholders involved in the merger of MNB into Carolina
First Bank, asserting that the defendants committed fraud, constructive fraud,
and breach of fiduciary duty against the defendants by overstating earnings and
thereby adversely affecting the consideration received by the MNB shareholders
in connection with the merger of MNB into Carolina First Bank. The complaint
seeks compensatory damages of approximately $1.8 million and punitive damages in
an amount to be determined by a jury, attorneys' fees and other costs.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote of security holders
by solicitation of proxies during the fourth quarter of 1997: i)consideration of
the reorganization agreement dated as of July 1, 1997, between Carolina First
Corporation, Carolina First Bank, First Southeast and First Federal, pursuant to
which First Southeast was merged into a subsidiary of Carolina First Corporation
and First Southeast shareholders received Carolina First Corporation Common
Stock in exchange for their shares of First Southeast common stock; ii)expansion
of the Board of Directors to 13 and election of three persons (who were at the
time members of the First Southeast Board of Directors) to the Carolina First
Corporation Board of Directors and iii)consideration of amendments to Carolina
First Corporation's Stock Option Plan and Restricted Stock Agreement Plan
increasing to 1,500,000 and 500,000, respectively, the number of shares of
common stock to be issued pursuant to such plans.
33
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The Company has paid a cash dividend each quarter since the
initiation of cash dividends on February 1, 1994. In December 1995, the Board
approved an increase in the quarterly cash dividend to $0.07 per share from
$0.06 per share in 1995. At the December 1996 meeting, concurrent with the
declaration of a six-for-five stock split, the Board of Directors also approved
a $0.07 per share cash dividend on the common stock. At the December 17, 1997
meeting, the Board of Directors approved an $0.08 per share cash dividend on the
common stock, which represents an effective annual increase of approximately
14%. The Company presently intends to continue to pay this quarterly cash
dividend on the common stock; however, future dividends will depend upon the
Company's financial performance and capital requirements.
The Company generates cash to pay dividends primarily through
dividends paid to it by its subsidiaries. South Carolina's banking regulations
restrict the amount of dividends that may be paid from Carolina First Bank. All
dividends paid from Carolina First Bank are subject to prior approval by the
South Carolina Commissioner of Banking and are payable only from the undivided
profits of Carolina First Bank. At December 31, 1997, Carolina First Bank's
retained earnings were $40.2 million. However, the payments of any such
dividends would be subject to receipt of appropriate regulatory approvals.
The Board of Directors declared a six-for-five stock split effected
in the form of a 20% common stock dividend, issued on January 30, 1997, to
common stockholders of record as of January 15, 1997. This dividend resulted in
the issuance of 1,870,130 shares of the Company's $1.00 par value common stock.
Per share data of prior periods have been restated to reflect this dividend.
On February 13, 1998, the Company completed the sale of 2.0 million
shares of its Common Stock to certain overseas investors. The shares were
offered and sold only to non-U.S. persons under an exemption from registration
pursuant to Regulation S under the Securities Act of 1933. In connection with
this offering, the Company received net proceeds of approximately $39 million
which will be used to support internal growth, acquisitions, the expansion of
its finance subsidiary and for general corporate purposes.
The remaining information required by this Item 5 is set forth on
page 48 of the Company's 1997 Annual Report to Shareholders and is incorporated
by reference herein. On February 1, 1997, all outstanding shares of the Series
1993B Cumulative Convertible Preferred Stock ("Series 1993B Preferred Stock")
were converted into the Company's Common Stock. As of March 13, 1998, there were
3,930 common shareholders of record.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is set forth on page 12 in the
Company's 1997 Annual Report to Shareholders, which information is incorporated
herein by reference.
34
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth on pages 13
through 22 in the Company's 1997 Annual Report to Shareholders, which
information is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth on pages 23
through 45 in the Company's 1997 Annual Report to Shareholders, which
information is incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
35
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth on pages 2, 5 and
17 of the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders
and is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item may be found on pages 6
through 14 of the Company's Proxy Statement for the 1998 Annual Meeting of
Shareholders and is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth on page 16 of the
Company's Proxy Statement for the 1998 Annual Meeting of the Shareholders and is
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth on page 17 of the
Company's Proxy Statement for the 1998 Annual Meeting of the Shareholders and is
incorporated herein by reference.
36
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Certain documents filed as part of this Form 10-K:
1. Financial Statements
The information required by this item is set forth on pages 23
through 45 in the Company's 1997 Annual Report to Shareholders,
which information is incorporated herein by reference. The Report of
Independent Auditors, dated January 22, 1998 of KPMG Peat Marwick
LLP is included on page 23 of the Company's 1997 Annual Report to
Shareholders, which information is incorporated herein by reference.
2. Financial Statement Schedules
All other financial statements or schedules have been omitted since
the required information is included in the consolidated financial
statements or notes thereto, or is not applicable or required.
3. Listing of Exhibits
3.1 -- Articles of Incorporation: Incorporated by reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-4, Commission File No. 57389
3.2 -- Amended and Restated Bylaws of Carolina First Corporation, as amended and restated as of
December 18, 1996: Incorporated by reference to Exhibit 3.1 of Carolina First Corporation's Current
Report on Form 8-K dated December 18, 1996, Commission File No. 0-15083.
4.1 -- Specimen CFC Common Stock certificate: Incorporated by reference to Exhibit 4.1 of Carolina First
Corporation's Registration Statement on Form S-1, Commission File No. 33-7470.
4.2 -- Articles of Incorporation: Included as Exhibit 3.1.
4.2 -- Bylaws: Included as Exhibit 3.2.
4.3 -- Carolina First Corporation Amended and Restated Common Stock Dividend Reinvestment Plan:
Incorporated by reference to the Prospectus in Carolina First Corporation's Registration Statement
on Form S-3, Commission File No. 333-06975.
4.6 -- Amended and Restated Shareholder Rights Agreement: Incorporated by reference to Exhibit 4.1 of
Carolina First Corporation's Current Report on Form 8-K dated December 18, 1996, Commission
File No. 0-15083.
4.7 -- Form of Indenture between Carolina First Corporation and First American Trust Company, N.A.,
as Trustee: Incorporated by reference to Exhibit 4.11 of the Company's Registration Statement on
Form S-3, Commission File No. 22-58879.
10.1 -- Carolina First Corporation Amended and Restated Restricted Stock Plan: Incorporated by reference
to Exhibit 99.1 from the Company's Registration Statement on Form S-8, Commission File No. 33-
82668/82670.
10.2 -- Carolina First Corporation Employee Stock Ownership Plan: Incorporated by reference to
Exhibit 10.2 of Carolina First Corporation's Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 0-15083.
10.3 -- Carolina First Corporation Amended and Restated Stock Option Plan: Incorporated by reference to
Exhibit 99.1 from the Company's Registration Statement on Form S-8, Commission File No. 33-
80822.
37
10.4 -- Carolina First Corporation Salary Reduction Plan: Incorporated by reference to Exhibit 28.1 of
Carolina First Corporation's Registration Statement on Form S-8, Commission File No. 33-25424.
10.5 -- Amended and Restated Noncompetition and Severance Agreement dated February 21, 1996, between
Carolina First Corporation and Mack I. Whittle, Jr.: Incorporated by reference to Exhibit 10.5 of
Carolina First Corporation's Annual Report on Form 10-K for the year ended December 31, 1995,
Commission File No. 0-15083.
10.6 -- Amended and Restated Noncompetition and Severance Agreement dated February 21, 1996, between
Carolina First Corporation and William S. Hummers III: Incorporated by reference to Exhibit 10.6
of Carolina First Corporation's Annual Report on Form 10-K for the year ended December 31, 1995,
Commission File No. 0-15083.
10.7 -- Amended and Restated Noncompetition and Severance Agreement dated February 21, 1996, between
Carolina First Corporation and James W. Terry, Jr.: Incorporated by reference to Exhibit 10.7 of
Carolina First Corporation's Annual Report on Form 10-K for the year ended December 31, 1995,
Commission File No. 0-15083.
10.8 -- Noncompetition and Severance Agreement dated February 21, 1996, between Carolina First
Corporation and David L. Morrow: Incorporated by reference to Exhibit 10.8 of Carolina First
Corporation's Annual Report on Form 10-K for the year ended December 31, 1995, Commission File
No. 0-15083.
10.9 -- Short-Term Performance Plan: Incorporated by reference to Exhibit 10.3 of Carolina First
Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993,
Commission File No. 0-15083.
10.10 -- Carolina First Corporation Long-Term Management Performance Plan: Incorporated by reference
to Exhibit 10.11 of Carolina First Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994, Commission File No. 0-15083.
10.11 -- Carolina First Corporation Employee Stock Purchase Plan: Incorporated by reference to Exhibit 99.1
from the Company's Registration Statement on Form S-8, Commission File No. 33-79668.
10.12 -- Carolina First Corporation Directors Stock Option Plan: Incorporated by reference to Exhibit 99.1
from the Company's Registration Statement on Form S-8, Commission File No. 33-82668/82670.
10.13 -- Pooling and Servicing Agreement dated as of December 31, 1994 between Carolina First Bank, as Seller
and Master Servicer, and The Chase Manhattan Bank, as Trustee. Incorporated by reference to Exhibit
28.1 of Carolina First Corporation's Current Report on Form 8-K dated as of January 24, 1995.
10.14 -- 1994-A Supplement dated as of December 31, 1994 between Carolina First Bank, as Seller and Master
Servicer, and The Chase Manhattan Bank, as Trustee. Incorporated by reference to Exhibit 28.2 of
Carolina First Corporation's Current Report on Form 8-K dated as of January 24, 1995.
10.15 -- Servicing Rights Purchase Agreement between Bank of America, F.S.B. and Carolina First Bank
dated as of March 31, 1995: Incorporated by reference to Exhibit 10.17 of Amendment No. 1 to
Carolina First Corporation's Annual Report on Form 10-K for the year ended, December 31, 1994,
Commission File No. 0-15083.
10.16 -- Warrant to Purchase Common Stock of Affinity Financial Group, Inc. and Amendment No. 1 with
respect to Warrant to Purchase Common Stock of Affinity Financial Group, Inc. Incorporated by
reference to Exhibit 10.16 of Carolina First Corporation's Annual Report on Form 10-K for the year
ended December 31, 1995, Commission File No. 0-15083.
10.17 -- Letter Agreement between Carolina First Corporation and the Board of Governors of the Federal Reserve
Board regarding warrant to purchase shares of Affinity Technology Group, Inc. common stock.
Incorporated by reference to Exhibit 10.1 of Carolina First Corporation's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996, Commission File No. 0-15083.
10.18 -- Amended and Restated Agreement regarding the Atlanta Internet Banking Operation by and among
Carolina First Bank, Internet Organizing Group, Inc., the Organizers (as set forth on the Signature
Page of the Agreement), and the Kelton Group of Investors.
38
11.1 -- Computation of Per Share Earnings.
12.1 -- Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends.
13.1 -- 1997 Annual Report to Shareholders of the Company.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank, Carolina First Mortgage Company, Blue Ridge
Finance Company and CF Investment Company.
23.1 -- Consent of KPMG Peat Marwick LLP.
(b) None.
(c) Exhibits required to be filed with this Form 10-K by Item 601 of
Regulation S-K are filed herewith or incorporated by reference
herein.
(d) Certain additional financial statements. Not applicable
39
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) 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 CORPORATION
Signature Title Date
- --------- ----- ----
/s/Mack I. Whittle, Jr. President, Chief March 26, 1998
- ----------------------- Executive Officer and Director
Mack I. Whittle, Jr.
/s/William S. Hummers III Executive Vice President and March 26,1998
- ------------------------- Secretary
William S. Hummers III (Principal Accounting and
Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/William R. Timmons, Jr. Director March 26, 1998
- ---------------------------
William R. Timmons, Jr.
/s/Mack I. Whittle, Jr. Director March 26, 1998
- ---------------------------
Mack I. Whittle, Jr.
/s/William S. Hummers III Director March 26, 1998
- ---------------------------
William S. Hummers III
/s/Judd B. Farr Director March 26, 1998
- ---------------------------
Judd B. Farr
/s/C. Claymon Grimes, Jr. Director March 26, 1998
- ---------------------------
C. Claymon Grimes, Jr.
/s/M. Dexter Hagy Director March 26, 1998
- ---------------------------
M. Dexter Hagy
/s/Vernon E. Merchant, Jr. Director March 26, 1998
- ---------------------------
Vernon E. Merchant, Jr.
/s/William R. Phillips Director March 26, 1998
- ---------------------------
William R. Phillips
/s/H. Earle Russell, Jr. Director March 26, 1998
- ---------------------------
H. Earle Russell, Jr.
/s/Charles B. Schooler Director March 26, 1998
- ---------------------------
Charles B. Schooler
40
/s/Elizabeth P. Stall Director March 26, 1998
- ---------------------------
Elizabeth P. Stall
/s/Eugene E. Stone IV Director March 26, 1998
- ---------------------------
Eugene E. Stone IV
/s/David C. Wakefield Director March 26, 1998
- ---------------------------
David C. Wakefield III
41
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
10.10 Carolina First Corporation Long-Term Management Performance Plan
11.1 Computation of Per Share Earnings.
12.1 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends.
13.1 1997 Annual Report to Shareholders of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
42