SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 2002 Commission File No. 333-76512
CAROLINA NATIONAL CORPORATION
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(Exact name of small business issuer as specified in its charter)
South Carolina 57-1101005
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1350 MAIN STREET
COLUMBIA, SOUTH CAROLINA 29201
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(Address of principal executive offices)
(803) 779-0411
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ] (Issuer has not been subject to filing requirements for
past 90 days)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: Common Stock:
95,780 Shares held by organizers Outstanding on April 30, 2002.
Transitional Small Business Format (Check one): Yes [ ] No [X]
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CAROLINA NATIONAL CORPORATION
FORM 10-QSB
Index
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet................................................ 3
Statements of Operations..................................... 4
Statements of Cash Flows..................................... 5
Notes to Unaudited Financial Statements...................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation.... 7-13
PART II - OTHER INFORMATION
Item 2. Changes in Securities........................................ 13
Item 6. Exhibits and Reports on Form 8-K............................. 13
SIGNATURES ............................................................. 14
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PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CAROLINA NATIONAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
MARCH 31, 2002
(UNAUDITED)
<Table>
<Caption>
ASSETS
ASSETS
Cash and cash equivalents ............................................................................. $ 17,257
Prepaid expenses ...................................................................................... 15,545
Miscellaneous accounts receivable ..................................................................... 12,441
Office equipment ...................................................................................... 9,741
Deferred stock offering costs ......................................................................... 50,943
---------
Total assets ...................................................................................... $ 105,927
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accrued expenses ...................................................................................... $ 53,004
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Total liabilities ................................................................................. 53,004
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized, none issued ............................................ -
Common stock, no par value, 20,000,000 shares
authorized, 96,000 shares issued, 95,780 shares outstanding ......................................... 960,000
Unearned stock compensation ........................................................................... (2,200)
Deficit accumulated during the development stage ...................................................... (904,877)
---------
Total stockholders' equity .......................................................................... 52,923
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Total liabilities and stockholders' equity ........................................................ $ 105,927
=========
</Table>
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CAROLINA NATIONAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
For the period from
For the three February 14, 2000
months ended (inception) through
March 31, 2002 March 31, 2002
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EXPENSES
Consulting fees ............................................................ $ - $ 92,129
Salaries and benefits ...................................................... 71,172 373,749
Severance .................................................................. - 145,000
Relocation ................................................................. - 50,000
Other professional fees .................................................... 12,975 37,975
Occupancy .................................................................. 23,902 76,573
Advertising and promotion .................................................. - 17,185
Legal fees ................................................................. 6,465 54,880
Bank charges ............................................................... 75 10,305
Insurance .................................................................. 3,715 10,287
Other ...................................................................... 18,158 36,794
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Total expenses and loss
from pre-operating activities .......................................... $136,462 $904,877
======== ========
</Table>
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CAROLINA NATIONAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<Table>
<Caption>
For the period from
For the three February 14, 2000
Months ended (inception) through
March 31,2002 March 31, 2002
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NET CASH USED FOR PRE-
OPERATING ACTIVITIES
Net loss ..................................................................... $ (136,462) $ (904,877)
Services rendered for common stock ........................................... - 15,000
Deferred stock offering costs ................................................ (27,500) (50,943)
Prepaid expenses ............................................................. (2,598) (15,545)
Miscellaneous accounts receivable ............................................ 566 (12,441)
Accrued salaries ............................................................. (11,795) -
Accrued expenses ............................................................. (3,200) 50,804
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Net cash used for pre-operating activities ................................ (180,989) (918,002)
----------- -----------
INVESTING ACTIVITIES
Purchase of office equipment ................................................. (5,181) (9,741)
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FINANCING ACTIVITIES
Proceeds from sale of stock .................................................. 100,000 1,045,000
Redemption of stock .......................................................... - (100,000)
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Net cash provided by financing activities ................................. 100,000 945,000
=========== ===========
Net increase (decrease) in cash ........................................ (86,170) 17,257
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .......................................................... 103,427 -
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD ................................................................ $ 17,257 $ 17,257
=========== ===========
</Table>
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CAROLINA NATIONAL CORPORATION
(A DEVELOPMENTAL STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies and Activities
A summary of these policies is included in the registration statement
filed under the Securities Act of 1933 and declared effective by the Securities
and Exchange Commission on March 11, 2002 and is incorporated herein by
reference.
Basis of Presentation
The accompanying unaudited financial statements at March 31, 2002 and for
the three-month period ending March 31, 2002 for the period from inception
(February 14,2000) through March 31, 2002 have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B of the Securities and Exchange Commission. Accordingly, they do
not include all information and footnotes required by GAAP for complete
financial statements. However, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included.
Operating results for the three-month period ended March 31, 2002 or for
the period from inception through March 31, 2002 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2002 or for
any other period.
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Item 2. - Management's Discussion and Analysis
This discussion is intended to assist in understanding the financial
condition and results of operations of Carolina National Corporation. The
information should be reviewed in conjunction with the financial statements and
the related notes contained elsewhere in this report.
Carolina National Corporation is currently in the process of making an
initial public offering of its common stock pursuant to a registration statement
filed under the Securities Act of 1933 and declared effective by the Securities
and Exchange Commission on March 11, 2002. Carolina National Corporation has not
yet issued any shares and proceeds of all subscriptions are being held in escrow
as described in the Prospectus dated March 11, 2002, which Prospectus is a part
of the Registration Statement.
If Carolina National Corporation receives all regulatory approvals to
organize Carolina National Bank & Trust Company and raises proceeds of at least
$8,665,000 in its public offering, Carolina National Corporation intends to use
the proceeds of the offering and proceeds of prior stock sales to directors to
capitalize Carolina National Bank & Trust Company and to pay its organizational
and pre-opening expenses.
FORWARD LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of
the securities laws. All statements that are not historical facts are
"forward-looking statements." You can identify these forward-looking statements
through our use of words such as "may," "will," "expect," "anticipate,"
"believe," "intend, " "estimate," "project, " "continue," or other similar
words. Forward-looking statements include, but are not limited to, statements
regarding our future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, income, business operations and proposed
services.
These forward-looking statements are based on current expectations,
estimates and projections about our industry, management's beliefs, and
assumptions made by management. Such information includes, without limitation,
discussions as to estimates, expectations, beliefs, plans, strategies, and
objectives concerning our future financial and operating performance. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and assumptions that are difficult to predict, particularly in
light of the fact that we are a new company with no operating history.
Therefore, actual results may differ materially from those expressed or
forecasted in such forward-looking statements. The risks and uncertainties
include, but are not limited to:
o our growth and our ability to maintain growth;
o governmental monetary and fiscal policies, as well as
legislative and regulatory changes;
o the effect of interest rate changes on our level and
composition of deposits, loan demand and the value of our loan
collateral and securities;
o the effects of competition from other financial institutions
operating in our market area and elsewhere, including
institutions operating locally, regionally, nationally and
internationally, together with competitors that offer banking
products and services by mail, telephone and computer and/or
the Internet;
o failure of assumptions underlying the establishment of our
allowance for loan losses, including the value of collateral
securing loans; and
o loss of consumer confidence and economic disruptions resulting
from terrorist activities.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties, and assumptions,
the forward-looking events discussed in this report might not occur.
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PLAN OF OPERATION OF CAROLINA NATIONAL CORPORATION
AND ORGANIZATION OF CAROLINA NATIONAL BANK & TRUST COMPANY
Organization and Plan of Operation of Carolina National Corporation
Carolina National Corporation was incorporated under the laws of South
Carolina in May, 2000. Carolina National Corporation was organized for the
purpose of becoming the holding company for Carolina National Bank & Trust
Company, a proposed national bank. Before Carolina National Corporation can
acquire Carolina National Bank & Trust Company, however, it must obtain the
approval of the Federal Reserve. An application for approval of the Federal
Reserve has been filed.
For the foreseeable future, Carolina National Corporation expects that
its primary business activity will be ownership and operation of Carolina
National Bank & Trust Company. At some point in the future, if the directors of
Carolina National Corporation determine that it is appropriate to do so and any
necessary regulatory approvals can be obtained, Carolina National Corporation
may engage in other activities permitted for bank holding companies and may
organize or acquire additional banks, though there can be no assurances that it
will do so.
Organization of Carolina National Bank & Trust Company
On December 3, 2001, the Organizers of Carolina National Bank & Trust
Company (the "Organizers") filed an application to obtain a national bank
charter with the Comptroller of the Currency. The Comptroller of the Currency
granted preliminary approval to the application on March 28, 2002. Carolina
National Bank & Trust Company will not be permitted to receive deposits, make
loans, or otherwise engage in banking activities unless and until it receives a
certificate from Comptroller of the Currency to the effect that it has complied
with all provisions of law required to entitle it to commence banking
operations, including securing insurance of its deposits from the FDIC. Prior to
receiving such a certificate, Carolina National Bank & Trust Company must
establish capital in the amount of $9,000,000, and must satisfy any
administrative conditions imposed by the Comptroller of the Currency. The
Comptroller of the Currency has the authority to alter, suspend, or rescind the
approval of Carolina National Bank & Trust Company's application at any time if
the Comptroller of the Currency deems any development warrants such action.
The Organizers have also submitted an application to the FDIC for the
insurance of Carolina National Bank & Trust Company's deposit accounts. In
evaluating applications for insurance, the FDIC considers several factors,
including the adequacy of the applicant's capital structure, the general
character of its management, its future earnings prospects, the risk to federal
insurance funds, and the convenience and needs of the community to be served by
the proposed bank. In addition, prior to approving an application, the FDIC must
be satisfied that, among other things, the projected ratio of equity capital
plus reserves to assets is at least 8% at the end of the third year of Carolina
National Bank & Trust Company's operations and profitable operations are
projected for the third year of operations. The FDIC preliminarily approved the
application on April 3, 2002.
Although the Organizers are taking the actions they believe are
necessary to obtain a certificate to operate a banking business from the
Comptroller of the Currency and deposit insurance from the FDIC, there can be no
assurance that the Comptroller of the Currency will grant a certificate to
commence business or that Carolina National Bank & Trust Company will obtain
FDIC insurance.
Management Philosophy and Policy
The Organizers believe that, with the increased demand for banking
services arising from steady growth in population, personal income, and
employment, the banking market will continue to grow in the Greater Columbia,
South Carolina area. It is their opinion that there is a need for an additional
locally owned and managed bank to serve the needs of the community, including
individuals and small and medium-sized business enterprises. The Organizers
intend for Carolina National Bank & Trust Company to concentrate on this
hometown market with a professional staff that is sensitive to local needs.
The Organizers of Carolina National Bank & Trust Company are dedicated
to providing personalized banking to the citizens of the Greater Columbia area.
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Based on their knowledge of the area as long-time residents and business people,
the Organizers believe that a bank owned and managed by people living and
working in the local area can best serve the community for the following
reasons:
o Decisions regarding credit and services of a bank can best be
made at a local level.
o Funds made available from local deposits should be re-invested
in the depositors' community.
o Stability and continuity of management within a banking
institution without frequent changes are important to its
customers.
The wave of bank mergers and consolidations has resulted in most banks
in the Greater Columbia market area being controlled by large out-of-state
institutions. A primary objective of the Organizers of Carolina National Bank &
Trust Company is to provide citizens of Greater Columbia with more opportunity
to have their banking needs met locally. The Organizers are involved extensively
in business in the Greater Columbia service area and intend to make meeting the
credit needs of this area a first priority. The Organizers believe that a large
number of bank customers prefer a local bank, and that this preference should
result in the successful and profitable operation of Carolina National Bank &
Trust Company, though no assurances can be given that this will be the case.
Carolina National Bank & Trust Company intends to offer a wide range of
banking services including checking and savings accounts; commercial,
installment, and personal loans; and other associated services. While trust
services will not be offered immediately, the Organizers would expect Carolina
National Bank & Trust Company to consider offering such services when a need for
offering these services is indicated and when the appropriate staff can be
developed and regulatory approvals obtained. The goals of the new Bank will be
to provide banking services to satisfy the needs of its customers, while
investing its funds in accordance with sound banking practices and earning the
maximum profit for shareholders.
Carolina National Bank & Trust Company intends to provide personalized
banking services, with emphasis on knowledge of the individual financial needs
and objectives of its customers and an appropriate array of services to meet
those needs and objectives, coupled with timely response. The Bank will seek to
promote continuous long-term relationships between officers and customers by
minimizing transfers of account officers to different customers, departments or
locations. The Bank will also seek to limit the number of accounts served by
each of its officers to a level that will permit personal attention to each
customer and full development of each customer's business relationship with
Carolina National Bank & Trust Company. Because the management of the Bank will
be located in Columbia, all credit and related decisions will be made locally,
which is expected to facilitate prompt response.
The Organizers anticipate that Carolina National Bank & Trust Company's
initial capitalization will enable it to commence operations as a significant
competitor. With an initial capitalization of approximately $9,000,000, the Bank
will have a legal lending limit of approximately $1,350,000 for loans to a
single customer. The Organizers anticipate that the Bank will establish
correspondent relationships with The Bankers Bank, and other banks to
participate loans when loan amounts exceed the Bank's legal lending limits or
internal lending policies. The Organizers believe that Carolina National Bank &
Trust Company's initial capitalization should support substantial growth in
deposits and loans, and will be sufficient to meet its capital requirements for
at least its first three years of operations.
PROPOSED SERVICES OF CAROLINA NATIONAL BANK & TRUST COMPANY
The proposed services of Carolina National Bank & Trust Company are
described below. Although this information is derived from the Bank's business
plan and represents the Organizers current plans for operation of the Bank,
these plans are subject to change based on various factors, including, among
others, changes in local and national economic conditions, changes in
competitive conditions, changes in market demands, and actual operating
experience of the Bank.
Deposits
Carolina National Bank & Trust Company intends to offer the full range
of deposit services typically available in most banks and savings and loan
associations, including checking accounts, NOW accounts, and savings and other
time deposits of various types, ranging from daily money market accounts to
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longer-term certificates of deposit. The transaction accounts and time
certificates will be tailored to the principal market area at rates competitive
with those offered in the area. In addition, retirement accounts such as IRA's
(Individual Retirement Accounts) will be made available. All deposit accounts
will be insured by the FDIC up to the maximum amount permitted by law. Carolina
National Bank & Trust Company intends to solicit these accounts from
individuals, businesses, associations and organizations, and government
authorities. Although the Bank intends to be competitive in its efforts to
attract deposit accounts, it does not plan to aggressively seek jumbo
certificates of deposit (certificates in amounts greater than $100,000) and does
not intend to accept brokered deposit accounts.
Lending Activities
Carolina National Bank & Trust Company intends to emphasize a range of
lending services, including real estate, commercial and consumer loans.
To address the risks inherent in making loans, management will maintain
an allowance for loan losses based on, among other things, an evaluation of
Carolina National Bank & Trust Company's loan loss experience, management's
experience at other financial institutions in the market area, the amount of
past due and nonperforming loans, current and anticipated economic changes and
the values of certain loan collateral. Based upon such factors, management will
make various assumptions and judgments about the ultimate collectibility of the
loan portfolio and provide an allowance for loan losses equal to the estimated
losses inherent in the loan portfolio. However, because there are certain risks
that cannot be precisely quantified, management's judgment of the allowance is
necessarily approximate and imprecise. The adequacy and methodology of the
allowance for loan losses will be subject to regulatory examination and compared
to a peer group of financial institutions identified by the regulatory agencies.
Real Estate Loans
The Organizers expect that one of the primary components of Carolina
National Bank & Trust Company's loan portfolio will be loans secured by first or
second mortgages on residential and commercial real estate. These loans will
generally consist of commercial real estate loans, construction and development
loans and residential real estate loans (including home equity and second
mortgage loans). Interest rates may be fixed or adjustable and Carolina National
Bank & Trust Company will generally charge an origination fee. Fixed rate
residential loans are expected to be sold into the secondary market and not held
in the portfolio. The Bank will seek to manage credit risk in the commercial
real estate portfolio by emphasizing loans on owner-occupied office and retail
buildings where the loan-to-value ratio, established by independent appraisals,
does not exceed 80%. The Organizers presently anticipate that the loan-to-value
ratio for first and second mortgage loans and for construction loans generally
will not exceed 80%. In addition, the Bank may require personal guarantees of
the principal owners of the property. The Bank may also originate mortgage loans
for sale into the secondary market, earning a fee, but avoiding the interest
rate risk of holding long-term, fixed-rate loans.
The principal economic risk associated with all loans, including real
estate loans, is the creditworthiness of Carolina National Bank & Trust
Company's borrowers. The ability of a borrower to repay a real estate loan will
depend upon a number of economic factors, including employment levels and
fluctuations in the value of real estate. In the case of a real estate
construction loan, there is generally no income from the underlying property
during the construction period, and the developer's personal obligations under
the loan are typically limited. Each of these factors increases the risk of
nonpayment by the borrower. In the case of a real estate purchase loan, the
borrower may be unable to repay the loan at the end of the loan term and may
thus be forced to refinance the loan at a higher interest rate, or, in certain
cases, the borrower may default as a result of its inability to refinance the
loan. In either case, the risk of nonpayment by the borrower is increased.
Carolina National Bank & Trust Company will also face additional credit
risks to the extent that it engages in making adjustable rate mortgage loans
("ARMs"). In the case of an ARM, as interest rates increase, the borrower's
required payments increase, thus increasing the potential for default. The
marketability of all real estate loans, including ARMs, is also generally
affected by the prevailing level of interest rates.
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Commercial Loans
Carolina National Bank & Trust Company will make loans for commercial
purposes in various lines of business. The commercial loans will include both
secured and unsecured loans for working capital (including inventory and
receivables), loans for business expansion (including acquisition of real estate
and improvements), Small Business Administration ("SBA") loans for new
businesses (as well as other governmentally guaranteed business loans), and
loans for purchases of equipment and machinery. The Organizers anticipate that
equipment loans will typically be made for a term of five years or less at
either fixed or variable rates, with the loan fully amortized over the term and
secured by the financed equipment. Working capital loans will typically have
terms not exceeding one year and will usually be secured by accounts receivable,
inventory or personal guarantees of the principals of the business. Commercial
loans will vary greatly depending upon the circumstances and loan terms will be
structured on a case-by-case basis to better serve customer needs.
The risks associated with commercial loans vary with many economic
factors, including the economy in the Bank's market area. The well-established
banks in the Bank's market area will make proportionately more loans to medium-
to large-sized businesses than Carolina National Bank & Trust Company. Many of
Carolina National Bank & Trust Company's anticipated commercial loans will
likely be made to small- to medium-sized businesses, which are typically
smaller, have shorter operating histories, and less sophisticated record keeping
systems than larger entities. As a result, these smaller entities may be less
able to withstand adverse competitive, economic and financial conditions than
larger borrowers. In addition, because payments on loans secured by commercial
property generally depend to a large degree on the results of operations and
management of the properties, repayment of such loans may be subject, to a
greater extent than other loans, to adverse conditions in the real estate market
or the economy.
Consumer Loans
Carolina National Bank & Trust Company will make a variety of loans to
individuals for personal and household purposes, including secured and unsecured
installment and term loans, home equity loans and lines of credit and unsecured
revolving lines of credit such as credit cards. The secured installment and term
loans to consumers will generally consist of loans to purchase automobiles,
boats, recreational vehicles, mobile homes and household furnishings, with the
collateral for each loan being the purchased property. The underwriting criteria
for home equity loans and lines of credit will generally be the same as applied
by Carolina National Bank & Trust Company when making a first mortgage loan, as
described above, and home equity lines of credit will typically expire 15 years
or less after origination, unless renewed or extended.
Consumer loans generally involve more credit risks than other loans
because of the type and nature of the underlying collateral or because of the
absence of any collateral. Consumer loan repayments are dependent on the
borrower's continuing financial stability and are likely to be adversely
affected by job loss, divorce and illness. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans in
the case of default. In most cases, any repossessed collateral will not provide
an adequate source of repayment of the outstanding loan balance. Although the
underwriting process for consumer loans includes a comparison of the value of
the security, if any, to the proposed loan amount, Carolina National Bank &
Trust Company cannot predict the extent to which the borrower's ability to pay,
and the value of the security, will be affected by prevailing economic and other
conditions.
Loan Approval and Review
Carolina National Bank & Trust Company's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds an individual officer's lending
authority, the loan request will be considered and approved by an officer with a
higher lending limit or by the Loan Committee of the Board of Directors. The
Loan Committee will set the lending limits for the Bank's loan officers, and any
loan in excess of such lending limits must be approved by the Loan Committee.
Carolina National Bank & Trust Company will not make any loans to any director,
officer or employee of the Bank unless the loan is approved by the Bank's Board
of Directors, or a committee thereof, and is made on terms not more favorable to
such person than would be available to a person not affiliated with the Bank
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Other Services
Carolina National Bank & Trust Company plans to participate in a
regional network of automated teller machines that may be used by Bank customers
in major cities throughout the Southeast. The Bank plans to offer both VISA and
MasterCard brands of bank cards together with related lines of credit. The lines
of credit may be used for overdraft protection as well as pre-authorized credit
for personal purchases and expenses.
Carolina National Bank & Trust Company will provide safe deposit boxes,
travelers checks, direct deposit of payroll and social security checks, banking
by mail, and automatic drafts for various accounts, but will not provide
international or trust banking services in the near future.
Asset and Liability Management
The primary earning assets of Carolina National Bank & Trust Company
will consist of the loan portfolio and investment account. Efforts will be made
generally to match maturities and rates of loans and the investment portfolio
with those of deposits, although exact matching will not be possible. The
majority of Carolina National Bank & Trust Company's securities investments will
be in marketable obligations of the United States government, federal agencies
and state and municipal governments, generally with varied maturities.
Long-term loans will be priced primarily to be interest-rate sensitive.
Long-term fixed rate loans are not expected to be held in the portfolio, but,
rather, are expected to be sold in the secondary market.
Deposit accounts will represent the majority of the liabilities of
Carolina National Bank & Trust Company. These will include transaction accounts,
time deposits and certificates of deposit. The maturities of the majority of
interest-sensitive accounts are expected to be 12 months or less.
Premises
The main offices of Carolina National Bank & Trust Company and Carolina
National Corporation will be located at 1350 Main Street, on the corner of Main
and Washington Streets, in downtown Columbia. The space, which comprises
approximately 9,718 square feet on three floors, was previously used as a bank,
and the Organizers, therefore, believe it is well-suited for its purpose. The
Bank also plans to open a branch office at 4840 Forest Drive in a building which
comprises approximately 2,600 square feet, and which was previously used as a
bank branch. This branch facility has ample parking and four drive-through
teller stations. Both properties have been leased pursuant to long term leases.
Employees
Carolina National Corporation has hired Roger B. Whaley as President
and Chief Executive Officer of the Company and the Bank, and has hired John W.
Hobbs as Chief Operating Officer and Chief Financial Officer of the Company and
the Bank. Other employees will be hired in phases beginning prior to the opening
of Carolina National Bank & Trust Company. It is anticipated that the Bank will
make available to its employees competitive benefits, which should enable the
Bank to attract and retain quality employees.
Pre-Opening Activities
The Organizers will monitor and supervise the acquisitions of Carolina
National Bank & Trust Company's facilities, hiring and training its staff,
arrangements to purchase or lease and install equipment necessary for the
transaction of business, establishment of correspondent banking relationships,
and make other arrangements for necessary services.
Lack of Profitability in the Early Period of Operation
It has been the experience in the banking industry for new banks to
operate at a loss in the first several years of operation. Every reasonable
effort will be made to reach a level of profitability as quickly as possible,
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but there can be no assurances that Carolina National Bank & Trust Company will
be profitable during its first 3 years of operation or at any time thereafter.
The Organizers of Carolina National Bank & Trust Company, who are
mostly local residents of the Bank's market area, believe that the existing and
future bank market in the Greater Columbia area presents an excellent
opportunity for a new locally owned bank. Their belief is based upon their
review of the economic outlook for the area and the size, nature, and growth
potential of the existing market for banking services and the experience of Mr.
Whaley, the Chief Executive Officer, in the banking industry.
Item 2. Changes in Securities
(d) A Registration Statement on Form SB-2 relating to the sale of up to
1,166,500 shares of Carolina National Corporation common stock (Commission File
No. 333-76512) was declared effective on March 11, 2002. The offering price is
$10.00 per share, or a maximum aggregate amount of $11,665,000. The offering is
ongoing and all subscription proceeds are being held in escrow pending receipt
of subscriptions for a minimum of 866,500 shares. No underwriters or selling
agents are being used in the offering. As of May 14, 2002 reservations and
subscriptions for 839,022 shares, or $8,390,220, had been received. Because all
subscription funds are held in escrow, no proceeds of the offering have been
used.
As of March 31, 2002, total offering expenses reasonably estimated at
$50,943 had been incurred.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K.
(a) Exhibits. None
(b) Reports on Form 8-K. None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CAROLINA NATIONAL CORPORATION
May 14, 2002 /s/ Roger B. Whaley
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Roger B. Whaley, President and Chief
Executive Officer
May 14, 2002 /s/ John W. Hobbs
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John W. Hobbs, Chief Operating Officer
and Chief Financial Officer
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