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, 1994
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
CAROLINA FIRST CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0824914
(State or other jurisdiction of (I.R.S. Employer
incorporation 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 (803) 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; 7.50% Noncumulative Convertible
Preferred Stock Series 1993; 7.32% Noncumulative Convertible
Preferred Stock Series 1994
(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 1, 1995 was $98,199,000.
The number of shares outstanding of the Registrant's common stock, $1.00 Par
Value was 4,616,705 at March 24, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
Portions of 1994 Annual Report to Shareholders Part II; IV
Portions of Proxy Statement dated March 8, 1995 Part III
PART I
ITEM 1 - BUSINESS
The Company
Carolina First Corporation (the "Company") is a bank holding
company headquartered in Greenville, South Carolina. At December
31, 1994, it operated through three subsidiaries: Carolina First
Bank , a state-chartered bank headquartered in Greenville, South
Carolina (the"Bank"); Carolina First Savings Bank, F.S.B., a
federally-chartered savings bank headquartered in Georgetown,
South Carolina (the"Savings Bank"); and Carolina First Mortgage
Company, a South Carolina corporation headquartered in Columbia,
South Carolina (the "Mortgage Company"). On February 3, 1995,
the Company completed the merger of the Savings Bank into the
Bank. 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, which commenced
banking operations in December 1986, currently conducts business
through 46 locations in South Carolina. At December 31, 1994,
the Company had approximately $1.1 billion in assets, $865.9
million in loans, $925.4 million in deposits and $79.0 million in
shareholders' equity.
The Company was formed principally in response to perceived
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 three principal market areas:
the Greenville metropolitan area 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); and Georgetown and Horry
counties (located in the Coastal region of South Carolina). The
Company's principal market areas represent three of the four
largest Metropolitan Statistical Areas in the state. In April
1994, the Company entered the Charleston market, the second
largest Metropolitan Statistical Area in the state, with the
purchase of the insured deposits of Citadel Federal Savings and
Loan Association ("Citadel Federal"). The Company also has
branch locations in other counties in South Carolina.
The Company began its operations with the de novo opening of
the 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.
Its more significant acquisitions include the acquisition in
August 1990 of First Federal Savings and Loan Association of
Georgetown (subsequently renamed Carolina First Savings Bank) and
the acquisition in March 1993 of 12 branch locations of Republic
National Bank. Approximately half of the Company's total
deposits have been generated through acquisitions.
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The Bank
The Bank engages in a general banking business through 43
branches in 30 communities in 14 South Carolina counties. On
February 3, 1995, the Savings Bank was merged into the Bank,
increasing the number of Bank branch locations from 30 to 43.
The 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
to businesses and individuals. Since the acquisition of the
Mortgage Company in 1993, all of the Bank's mortgage origination
activities have been performed by the Mortgage Company.
The 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,
safe deposit services, savings accounts, interest- and
noninterest-bearing checking accounts and installment and other
personal loans. The Bank also provides trust services and
various cash management programs.
The Mortgage Company
On September 30, 1993, the Company acquired First Sun
Mortgage Corporation (subsequently renamed Carolina First
Mortgage Company). The Mortgage Company is engaged primarily in
originating, underwriting and servicing one-to-four family
residential mortgage loans.
The Mortgage Company's mortgage loan origination operation
is conducted principally through eight offices in South Carolina.
Mortgage loan applications are forwarded to the Mortgage
Company's headquarters in Columbia for processing in accordance
with GNMA, FNMA and other applicable guidelines. Beginning in
the third quarter of 1992, the Company expanded the activities
of its mortgage loan operations and began self-funding the loans
through the Savings Bank, now the Bank, prior to sale in the
secondary market. With the acquisition of the Mortgage Company,
substantially all of the Bank's mortgage loan origination
activity was transferred to the Mortgage Company. During 1994,
1,062 mortgage loans totaling $108 million were originated. The
Company's intention is to sell all conforming fixed rate mortgage
loans into the secondary market.
The Mortgage Company's mortgage servicing operations consist
of servicing loans that are owned by the Bank and subservicing
loans, to which the right to service is owned by the Bank and
other non-affiliated financial institutions. This servicing
operation is conducted at its headquarters location in Columbia,
South Carolina. At December 31, 1994, the Mortgage Company was
servicing or subservicing approximately 10,351 loans having an
aggregate principal balance of approximately $800 million. The
servicing portfolio includes purchased mortgage servicing rights
for approximately $675 million in mortgage loans; the related
intangible asset for excess and purchased mortgage servicing
rights totaled $8.7 million at December 31, 1994.
As of March 31, 1995, the Company entered into an agreement
with a non-affiliated company to sell the rights to service
approximately $450 million (face value) of mortgage loans. This
agreement is attached as an exhibit to this filing. This
transaction will result in a gain of approximately $2 million and
a reduction of the Company's purchased mortgage servicing rights
by approximately $7 million. The Company will continue to
subservice these loans until June 1995 and is actively pursuing a
strategy to replace this servicing volume.
3
Growth Strategy and Acquisitions
Since its inception in 1986, the Company 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.
The Company has grown through acquisitions. The following
discussion highlights the Company's acquisition activity during
1994.
On April 29, 1994, the Bank purchased the insured deposits
of Citadel Federal from the Resolution Trust Corporation, as
receiver for Citadel Federal. This acquisition resulted in the
acquisition of one branch office in Charleston, South Carolina,
with deposits of approximately $5.8 million, on which a premium
of approximately $533,000 was paid.
On May 2, 1994, the Company acquired six branches from
Republic National Bank. The acquired branches are located in
Columbia, Edgefield, Johnston, Bennettsville, Lake City and
McColl. In addition, the Company acquired the deposits and
select loans from Republic National Bank's main office branch in
Columbia, which was not acquired. With this transaction, the
Company acquired loans of approximately $37.5 million and
deposits of approximately $135.3 million, on which a premium of
approximately $5.4 million was paid.
On October 13, 1994, the Bank entered into an agreement with
Aiken County National Bank ("Aiken County National") for the
merger of Aiken County National into the Bank. The Bank will
acquire all the outstanding common shares of Aiken County
National in exchange for approximately 453,000 shares of the
Company's common stock. At year-end 1994, Aiken County National
had assets of approximately $42 million, loans of $29 million and
deposits of $38 million. The agreement requires that the merger
be accounted for as a pooling of interests. Shareholder and
regulatory approval have been received. The Company expects
the acquisition to close in April 1995.
On November 14, 1994, the Bank entered into an agreement
with Midlands National Bank ("Midlands") for the merger of
Midlands into the Bank. The Bank will acquire all the
outstanding common shares of Midlands in exchange for
approximately 584,000 shares of the Company's common stock. At
year end 1994, Midlands had assets of $43 million, loans of $28
million and deposits of $39 million. The agreement requires that
the merger be accounted for as a pooling of interests. The
acquisition requires shareholder and regulatory approval and is
expected to close in the second quarter of 1995. Regulatory
approval has been received.
Equity Offering and Dividends
On April 15, 1994, the Company issued 920,000 shares of
7.32% Noncumulative Convertible Preferred Stock Series 1994
("Series 1994 Preferred Stock"), which raised approximately $21.4
million in equity.
4
In the first quarter of 1994, the Company instituted a
quarterly cash dividend to common shareholders of $0.05 per
share. As of the first quarter of 1995, the Board of Directors
increased the quarterly cash dividend to $0.06 per share. On May
16, 1994, the Company issued a 5% common stock dividend to common
shareholders of record as of April 29, 1994. This is the sixth
consecutive year that Carolina First has issued a 5% common stock
dividend.
Restructuring Charges
During the fourth quarter of 1994, the Company announced a
restructuring that initiated a program of credit card
securitization, wrote down related intangible assets and merged
the Savings Bank into the Bank. One-time restructuring and
nonrecurring charges related to this plan amounted to $12.2
million pre-tax ($9.4 million after-tax). Management expects the
restructuring to increase future pre-tax income by approximately
$2.8 million a year, through increased operational efficiency,
lower amortization costs, and the reinvestment of the cash
currently invested in the credit card portfolio.
In connection with the program of credit card
securitization, the Company recorded charges of $12.2 million
pre-tax, primarily from the write down of intangible assets and
charges associated with the origination of credit card accounts.
On January 24, 1995, the Company completed the securitization of
approximately $100 million in credit card loans. The
securitization transferred the credit card receivables to a trust
in return for a payment equal to the principal balance of the
credit cards. The Company purchased a 30% interest in the trust,
and the remainder was sold to an institutional investor. Through
this securitization, the Company retains an interest in a portion
of the earnings from the securitized loans and at the same time
received initially approximately $70 million in additional funds
to make loans in its banking markets.
On February 3, 1995, the Company completed the merger of the
Savings Bank into the Bank. Management believes that there will
be significant economic and managerial benefits from this
combination including the elimination of duplicative
administration, the consolidation of regulators, the reduction of
regulatory burdens and increased management focus. As part of
the merger, the Company incurred income taxes of approximately
$1.0 million due to the different tax treatment accorded the
allowance for loan losses at the Savings Bank.
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 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 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.
5
Employees
At December 31, 1994, the Company employed a total of 499
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, 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.
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. 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 prohibits the
Company from acquiring control of any bank operating outside the
State of South Carolina (until September 29, 1995) unless such
action is specifically authorized by the statutes of the state
where the bank to be acquired is 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
6
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 and, in the case of any acquiring, assuming or resulting
depository institution which is a BIF member, that such
institution continues 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 continues 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 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.
7
As a bank holding company registered under the South
Carolina Bank Holding Company Act, the Company also is 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.
The Bank. The 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 the Bank. The FDIC
has broad authority to prohibit the 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. The 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. The Bank is not
a member of the Federal Reserve System.
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
holders of the Company's outstanding series of preferred stock
are also entitled to receive dividends when, as and if declared
by the Board of Directors in their discretion out of funds
legally available therefor and as set forth in the Company's
Articles of Incorporation. 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 the 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,
the Bank is subject to legal limitations on the amount of
dividends it is permitted to pay. In particular, the Bank must
receive the approval of the South Carolina Commissioner of
Banking prior to paying dividends to the Company.
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, 1994, the Company was in
compliance
8
with both the risk-based capital guidelines and the
minimum leverage capital ratio.
The Bank. As a state-chartered, FDIC-insured institution
which is not a member of the Federal Reserve System, the 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, 1994, the
Bank was in compliance with both the Tier 1 risk-based capital
guidelines and the minimum leverage capital ratio, but the total
risk-based capital ratio was 6.70%, which was below the minimum
level of 8.00%. In February 1995, after becoming aware of the
capital deficiency, the Bank took corrective actions and exceeded
the adequately capitalized standards as of the end of February.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Capital Resources."
Insurance
As an FDIC-insured institution, the Bank is subject to
insurance assessments imposed by the 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, having assessments ranging from 0.23% to
0.31% of an institution's average assessment base. The actual
assessment to be paid by each FDIC-insured institution is based
on the institution's assessment risk classification, which 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
S o u ndness Regulations"), and whether such institution is
considered by its supervisory agency to be financially sound or
to have supervisory concerns. The current risk-based assessment
schedule is being reviewed and may be revised downward during
1995, but no final decisions have be reached. The Bank's risk-
based insurance assessment currently is set at 0.26% of its
average assessment base.
In connection with the merger of the Savings Bank into the
Bank and the Bank's assumption of other SAIF-insured deposits in
connection with various acquisitions, approximately 28% of the
Bank's total deposits are subject to SAIF insurance assessments
imposed by the FDIC. Under current law, the insurance assessment
to be paid by SAIF-insured institutions must be the greater of
0.15% of the institution's average assessment base (as defined)
or such rate as the FDIC, in its sole discretion, determines to
be appropriate to be able to increase (or maintain) the SAIF
reserve ratio to 1.25% of estimated insured deposits (or such
higher ratio as the FDIC may determine in accordance with the
statute) within a reasonable period of time. From January 1,
1994 through December 31, 1997, the assessment rate must not be
less than 0.18% of the institution's average base assessment. In
each case, the assessment rate may be higher if the FDIC, in its
sole discretion,
9
determines a higher rate to be appropriate. In
addition, the FDIC has adopted for SAIF assessments the risk-
based assessment schedule described above. The Bank's risk-based
insurance assessment on its SAIF-insured deposits has been set at
0.23% of its average assessment base.
Community Reinvestment Act
The 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. The
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 the 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
10
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
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.
Congress recently enacted the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994, which will increase the
ability of bank holding companies and banks to operate across
state lines. Under the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, 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.
11
ITEM 1 - STATISTICAL DISCLOSURE
Comparative Average Balances -- Yields and Costs . . . . . . 13
Rate/Volume Variance Analysis . . . . . . . . . . . . . . . . 14
Securities Held for Investment Composition . . . . . . . . . 15
Securities Available for Sale Composition . . . . . . . . . . 15
Trading Account Composition . . . . . . . . . . . . . . . . . 15
Securities Held for Investment and Securities Available for Sale
Maturity Schedule . . . . . . . . . . . . . . . . . . . . . . 16
Loan Portfolio Composition . . . . . . . . . . . . . . . . . 17
Loan Maturity and Interest Sensitivity . . . . . . . . . . . 17
Nonperforming Assets . . . . . . . . . . . . . . . . . . . . 18
Summary of Loan Loss Experience . . . . . . . . . . . . . . . 18
Composition of Allowance for Loan Losses . . . . . . . . . . 19
Types of Deposits . . . . . . . . . . . . . . . . . . . . . . 20
Certificates of Deposit Greater than $100,000 . . . . . . . . 20
Return on Equity and Assets . . . . . . . . . . . . . . . . . 21
Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . 22
Interest Rate Sensitivity . . . . . . . . . . . . . . . . . . 23
Noninterest Income . . . . . . . . . . . . . . . . . . . . . 24
Noninterest Expense . . . . . . . . . . . . . . . . . . . . . 24
12
Comparative Average Balances -- Yields and Costs
(dollars in thousands)
Years Ended December 31,
1994 1993 1992
Average/ Income/ Yield/ Average/ Income/ Yield/ Average/ Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
ASSETS
Earning assets
Loans (net of unearned
income)(1)........$ 723,477 $ 65,302 9.03 % $ 489,891 $ 42,091 8.59 % $ 372,737 $ 34,316 9.21%
Investment securities
(taxable)......... 111,335 4,936 4.43 118,140 5,677 4.81 52,467 3,096 5.90
Investment securities
(nontaxable)...... 16,639 1,507 (2) 9.06 8,252 731 (2) 8.86 3,741 456 (2) 12.18
Federal funds sold.. 9,701 353 3.63 14,316 434 3.03 13,342 455 3.41
Interest bearing
deposits with
others banks....... 476 20 4.25 250 15 5.89 250 11 4.28
Total earning
assets........ 861,628 72,118 8.37 % 630,849 48,948 7.76 % 442,537 38,334 8.66%
Non-earning
assets............ 108,401 64,289 35,787
Total assets....$ 970,029 $ 695,138 $ 478,324
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Interest-bearing
deposits
Interest checking.$ $90,280 $ 1,963 2.17 % $ 57,174 $ 1,272 2.22 % $ 25,432 $ 726 2.85%
Savings........... 81,831 2,454 3.00 55,114 1,674 3.04 18,857 770 4.08
Money market...... 147,049 4,584 3.12 125,903 3,667 2.91 115,993 4,525 3.90
Certificates of
deposit........ 392,832 17,238 4.39 290,823 13,020 4.48 216,377 12,366 5.72
Other............. 40,324 1,967 4.88 30,362 1,569 5.17 26,654 1,731 6.49
Total interest-
bearing deposits 752,315 28,206 3.75 % 559,376 21,202 3.79 % 403,313 20,117 4.99%
Short-term
borrowings....... 41,362 1,638 3.96 14,023 427 3.05 2,290 128 5.55
Long-term
borrowings....... 1,264 120 9.50 1,318 120 9.10 1,374 110 8.00
Total interest-
bearing liabilities 794,941 29,964 3.77 % 574,717 21,749 3.78 % 406,977 20,355 5.00%
Non-interest bearing
liabilities
Non-interest bearing
deposits........ 94,573 56,405 27,922
Other non-interest
liabilities..... 800 5,777 3,427
Total liabilities.. 890,314 636,899 438,325
Stockholders' equity.. 79,715 58,239 39,999
Total liabilities and
stockholders'
equity............$ 970,029 $ 695,138 $ 478,324
Net interest
margin.... $ 42,154 4.89 % $ 27,199 4.31 % $ 17,979 4.06 %
(1)Includes nonaccruing loans.
(2)Fully tax-equivalent basis at a 35% tax rate.
Note: Average balances are derived from daily balances.
13
Rate/Volume Variance Analysis
(dollars in thousands)
1994 Compared to 1993 1993 Compared to 1992
Amount Amount Amount Amount
Caused Caused Caused Caused
by by by by
Total Change in Change in Total Change in Change in
Change Volume Rate Change Volume Rate
Earning assets
Loans, net of unearned income........$ 23,211 $ 20,987 $ 2,224 $ 7,774 $ 10,193 $ (2,419)
Securities, taxable.................. (741) (316) (425) 2,581 3,247 (666)
Securities, nontaxable............... 777 760 17 275 435 (160)
Federal funds sold................... (82) (209) 127 (21) 32 (53)
Interest-bearing deposits with
other banks....................... 5 8 (3) 4 0 4
Total interest income...... 23,170 21,230 1,940 10,613 13,907 (3,294)
Interest-bearing liabilities
Interest-bearing deposits
Interest checking................. 691 719 (28) 546 735 (189)
Savings........................... 780 801 (21) 904 1,146 (242)
Money market...................... 917 646 271 (858) 361 (1,219)
Certificates of deposit........... 4,218 4,470 (252) 654 3,692 (3,038)
Other............................. 398 480 (82) (162) 221 (383)
Total interest-bearing deposit 7,004 7,116 (112) 1,084 6,155 (5,071)
Short-term borrowings................... 1,211 1,049 162 300 382 (82)
Long-term borrowings.................... 0 (5) 5 10 (4) 14
Total interest expense..... 8,215 8,160 55 1,394 6,533 (5,139)
Net interest income.....$ 14,955 $ 13,070 $ 1,885 $ 9,219 $ 7,374 $ 1,845
Note: Changes which are not solely attributable to volume or rate have been
allocated to volume and rate on a pro-rata basis.
14
Securities Held for Investment Composition
(dollars in thousands)
December 31,
1994 1993 1992
U.S. Treasury securities..............................................$ 5,989 $ 3,995 $ ------
Obligations of U.S. Government agencies and corporations.............. 40,185 31,432 ------
Obligations of states and political subdivisions...................... 20,029 11,907 3,316
Other securities...................................................... 53 2,271 1,203
$ 66,256 $ 49,605 $ 4,519
Securities Available for Sale Composition
(dollars in thousands)
December 31,
1994 1993 1992
U.S. Treasury securities..............................................$ 20,920 $ 11,523 $ 30,574
Obligations of U.S. Government agencies and corporations.............. 26,779 51,357 38,311
Other securities...................................................... 1,949 1,991 4,896
$ 49,648 $ 64,871 $ 73,781
Trading Account Composition
(dollars in thousands)
December 31,
1994 1993 1992
U.S. Treasury and Government agencies.................................$ 178 $ ------ $ ------
State and political subdivisions...................................... 977 250 ------
$ 1,155 $ 250 $ ------
15
Securities Held for Investment and
Securities Available for Sale Maturity Schedule
(dollars in thousands)
Held for Investment -- Book Value
After One After Five
But But
Within Within Within After
One Year Five Years Ten Years Ten Years Total
U.S Treasury.............$ 0 $ 5,989 $ 0 $ 0 $ 5,989
U.S. Government
agencies and
corporations.......... 0 33,022 0 7,163 40,185
States and political
subdivisions.......... 1,396 5,709 9,498 3,426 20,029
Other securities......... 0 0 53 0 53
$ 1,396 $ 44,720 $ 9,551 $ 10,589 $ 66,256
Weighted average yield
U.S Treasury............. 0.00 % 5.18 % 0.00 % 0.00 % 5.18 %
U.S. Government
agencies and
corporations.......... 0.00 5.76 0.00 6.25 5.85
States and political
subdivisions.......... 4.69 4.19 4.68 5.14 4.62
Other securities......... 0.00 0.00 4.45 0.00 4.45
4.69 % 5.48 % 4.68 % 5.89 % 5.41 %
Available for Sale -- Book Value
After One After Five
But But
Within Within Within After
One Year Five Years Ten Years Ten Years Total
U.S Treasury.............$ 17,534 $ 3,959 $ 0 $ 0 $ 21,493
U.S. Government
agencies and
corporations.......... 24,411 3,001 0 0 27,412
States and political
subdivisions.......... 0 0 0 0 0
Other securities......... 1,999 0 0 0 1,999
$ 43,944 $ 6,960 $ 0 $ 0 $ 50,904
Weighted average yield
U.S Treasury............. 4.17 % 5.42 % 0.00 % 0.00 % 4.40 %
U.S. Government
agencies and
corporations.......... 4.30 4.71 0.00 0.00 4.34
States and political
subdivisions.......... 0.00 0.00 0.00 0.00 0.00
Other securities......... 3.89 0.00 0.00 0.00 3.89
4.23 % 5.11 % 0.00 % 0.00 % 4.35 %
16
Loan Portfolio Composition
(dollars in thousands)
December 31,
1994 1993 1992 1991 1990
Commercial, financial and agricultural............$ 164,190 $ 122,753 $ 97,748 $ 81,526 $ 58,287
Real Estate
Construction................................ 21,918 19,673 15,113 16,754 14,656
Mortgage
Residential............................... 198,590 148,888 115,813 118,591 118,219
Commercial and multifamily (1)............ 260,010 142,806 79,452 55,696 50,269
Consumer.................................... 150,339 125,559 85,573 69,900 36,475
Loans held for sale......................... 71,695 7,700 6,801 ------ ------
Total gross loans........................ 866,742 567,379 400,500 342,467 277,906
Unearned income............................. (873) (2,221) (3,943) (3,766) (2,591)
Total loans net of unearned income..... 865,869 565,158 396,557 338,701 275,315
Allowance for loan losses.................. (5,267) (5,688) (4,263) (3,727) (2,403)
Total net loans.........................$ 860,602 $ 559,470 $ 392,294 $ 334,974 $ 272,912
(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.......................$ 325,753 $ 69,314 $ 29,133 $ 424,200
Real estate - construction........................ 18,505 3,413 ------ 21,918
Total of loans with:
Predetermined interest rates................. 27,624 20,344 28,525 76,493
Floating interest rates...................... 317,311 52,314 ------ 369,625
17
Nonperforming Assets
(dollars in thousands)
December 31,
1994 1993 1992 1991 1990
Nonaccrual loans.................. $1,012 $ 558 $ 519 $ 843 $1,202
Restructured loans................ 675 -- 353 -- --
Total nonperforming loans...... 1,687 558 872 843 1,202
Other real estate owned........... 517 1,021 1,074 695 699
Total nonperforming assets..... $2,204 $1,579 $1,946 $1,538 $1,901
Loans past due 90 days still
accruing interest................ $1,285 $2,060 $2,121 $1,489 $ 424
Total nonperforming assets as a
percentage of loans and other real
estate owned..................... 0.25% 0.28% 0.49% 0.45% 0.69%
Allowance for loan losses as a
percentage of nonperforming loans.. 312% 1,019% 489% 442% 200%
Summary of Loan Loss Experience
(dollars in thousands)
December 31,
1994 1993 1992 1991 1990
Loan loss reserve at beginning of period..........$ 5,688 $ 4,263 $ 3,727 $ 2,402 $ 2,041
Valuation allowance for loans acquired............ 1,078 1,811 255 450 ------
Charge-offs:
Commercial, financial and agricultural........ 246 298 985 302 273
Real estate - construction................... ------ ------ ------ ------ ------
Real estate - mortgage....................... 168 179 59 57 12
Consumer..................................... 526 357 183 216 176
Credit cards................................. 1,622 487 ------ ------ ------
Total loans charged-off.............. 2,562 1,321 1,227 575 461
Recoveries:
Commercial, financial and agricultural....... 59 12 14 ------ 2
Real estate - construction.................. ------ ------ 1 ------ ------
Real estate - mortgage...................... ------ ------ 18 ------ ------
Consumer.................................... 54 14 22 27 30
Credit cards................................ ------ ------ ------ ------ ------
Total loans recovered............... 113 26 55 27 32
Net charge-offs................................... 2,449 1,295 1,172 548 429
Provision changed to expense................. 950 909 1,453 1,423 790
Loan loss reserve at end of period................$ 5,267 $ 5,688 $ 4,263 $ 3,727 $ 2,402
Average loans.....................................$ 723,477 $ 489,891 $ 372,737 $ 302,976 $ 251,961
Total loans, net of unearned income (period end).. 865,869 565,158 396,557 338,701 275,315
Net charge-offs as a percentage of average loans.. 0.34 % 0.26 % 0.31 % 0.18 % 0.17 %
Allowance for loan losses as a percentage of loans 0.61 1.01 1.08 1.10 0.87
18
Composition of Allowance for Loan Losses
(dollars in thousands)
Allowance Breakdown
December 31,
1994 1993 1992 1991 1990
Commercial, financial and
agricultural..................$ 1,500 $ 1,570 $ 1,500 $ 1,000 $ 750
Real Estate
Construction................ 100 100 300 200 147
Mortgage:
Residential............... 100 100 250 100 60
Commercial and
Multifamily............ 450 400 987 1,309 809
Consumer................. 2,592 3,125 800 745 397
Unallocated........................ 525 393 426 373 240
Total...................$ 5,267 $ 5,688 $ 4,263 $ 3,727 $ 2,403
Percentage of Loans in Category
December 31,
1994 1993 1992 1991 1990
Commercial, financial and
agricultural................... 18.94 % 21.64 % 24.41 % 23.81 % 20.97 %
Real Estate
Construction................ 2.53 3.47 3.77 4.89 5.27
Mortgage:
Residential............... 31.18 27.60 30.62 34.63 42.54
Commercial and
Multifamily............ 30.00 25.17 19.84 16.26 18.09
Consumer................. 17.35 22.12 21.36 20.41 13.13
Total.................... 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %
Note: The breakdown is based on a number of qualitative factors and the amounts
presented are not necessarily indicative of actual amounts which will be charged
to any particular category.
19
Types of Deposits
(dollars in thousands)
Balance as of December 31,
1994 1993 1992 1991 1990
Demand deposit accounts.................$ 119,950 $ 67,776 $ 39,563 $ 25,113 $ 23,226
NOW accounts............................ 105,966 75,078 32,699 21,824 11,519
Savings accounts........................ 89,329 65,198 21,103 14,492 11,180
Money market accounts................... 146,213 144,547 122,837 113,083 81,989
Time deposits........................... 338,194 261,674 187,931 176,712 124,800
Time deposits of $100,000 or
over................................. 125,796 110,312 72,135 56,147 47,219
Total deposits.....................$ 925,448 $ 724,585 $ 476,268 $ 407,371 $ 299,933
Percent of Deposits as of December 31,
1994 1993 1992 1991 1990
Demand deposit accounts................. 12.96 % 9.35 % 8.31 % 6.16 % 7.74 %
NOW accounts............................ 11.45 10.36 6.87 5.36 3.84
Savings accounts........................ 9.65 9.00 4.43 3.56 3.73
Money market accounts................... 15.80 19.95 25.79 27.76 27.34
Time deposits........................... 36.54 36.11 39.45 43.38 41.61
Time deposits of $100,000 or
over................................. 13.60 15.23 15.15 13.78 15.74
Total deposits..................... 100.00 % 100.00 % 100.00 % 100.00 % 100.00 %
Certificates of Deposit Greater than $100,000
(dollars in thousands)
Maturing in three months or less.......................................................................$ 49,724
Maturing in over three through six months.............................................................. 32,747
Maturing in over six through twelve months............................................................. 24,542
Maturing in over twelve months......................................................................... 18,783
Total........................................................................................$ 125,796
20
Return on Equity and Assets
Years Ended December 31,
1994 1993 1992 1991 1990
Return on average assets................ (0.19)% 0.71 % 0.53 % 0.43 % 0.32 %
Return on average equity................ (2.34) 8.50 6.29 5.39 3.54
Return on average common equity......... (3.82) 8.44 6.17 5.39 3.54
Average equity as a percentage of
average assets....................... 8.22 8.38 8.36 8.04 9.04
Dividend payout ratio................... n/m 0.00 0.00 0.00 0.00
21
Short Term Borrowings
(dollars in thousands)
Maximum Average
Outstanding Average Interest
At Any Average Interest Ending Rate at
Year Ended December 31, Month End Balance Rate Balance Year End
1994
Federal funds purchased.................$ 16,000 $ 5,474 4.50 % $ 16,000 5.58 %
Securities sold under
repurchase agreements................ 17,986 15,870 3.80 17,986 5.23
Advances from the FHLB............... 72,000 20,018 3.94 72,000 6.03
$ 105,986 $ 41,362 3.96 % $ 105,986 5.84 %
1993
Federal funds purchased.................$ 6,953 3,571 2.68 % $ 400 2.99 %
Securities sold under
repurchase agreements................ 16,325 5,827 2.49 16,325 2.74
Advances from the FHLB............... 15,550 4,625 4.04 ------ 3.44
$ 38,828 $ 14,023 3.05 % $ 16,725 2.75 %
1992
Federal funds purchased.................$ 6,695 $ 592 5.65 % $ 1,145 2.94 %
Securities sold under
repurchase agreements................ 1,825 756 5.72 1,392 2.69
Advances from the FHLB............... 12,000 942 5.35 ------ 3.39
$ 20,520 $ 2,290 5.55 % $ 2,537 2.80 %
22
Interest Rate Sensitivity
(dollars in thousands)
Over One
Total Year or
0-3 4-6 7-12 Within Non-
Months Months Months One Year Sensitive Total
Assets
Earning assets
Loans, net of unearned income.......... $ 489,064 $ 23,769 $ 48,732 $ 561,565 $ 304,304 $ 865,869
Investment securities, taxable............. 18,925 2,000 23,916 44,841 52,187 97,028
Investment securities, nontaxable...... 1,346 ------- 50 1,396 18,635 20,031
Federal funds sold............................... 500 ------- ------- 500 ------- 500
Interest bearing deposits with
other banks.................................... 500 ------- ------- 500 ------- 500
Total earning assets................. 510,335 25,769 72,698 608,802 375,126 983,928
Non-earning assets, net............................. ------- ------- ------- ------- 136,169 136,169
Total assets.........................$ 510,335 $ 25,769 $ 72,698 $ 608,802 $ 511,295 $ 1,120,097
Liabilities and Stockholders' Equity
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Interest Checking.........................$ 105,966 $ ------ $ ------ $ 105,966 $ ------ $ 105,966
Savings................................... 89,329 ------ ------ 89,329 ------ 89,329
Money Market.............................. 146,213 ------ ------ 146,213 ------ 146,213
Certificates of Deposit................... 132,248 109,207 102,985 344,440 77,702 422,142
Other..................................... 12,670 10,826 10,209 33,705 8,143 41,848
Total interest-bearing deposits......... 486,426 120,033 113,194 719,653 85,845 805,498
Short-term borrowings......................... 105,986 ------ 52 106,038 ------ 106,038
Long-term borrowings.......................... ------ ------ ------ ------ 1,162 1,162
Total interest-bearing liabilities...... 592,412 120,033 113,246 825,691 87,007 912,698
Noninterest bearing liabilities
Noninterest bearing deposits.................. ------ ------ ------ ------ 119,950 119,950
Other noninterest bearing liabilities, net ------ ------ ------ ------ 8,408 8,408
Total liabilities....................... 592,412 120,033 113,246 825,691 215,365 1,041,056
Stockholders'equity................................. ------ ------ ------ ------ 79,041 79,041
Total liabilities and stockholders'
equity...............................$ 592,412 $ 120,033 $ 113,246 $ 825,691 $ 294,406 $ 1,120,097
Interest sensitive gap..............................$ (82,077)$ (94,264)$ (40,548)$ (216,889)$ 216,889 $ -----
Cumulative interest sensitive gap...................$ (82,077)$ (176,341)$ (216,889)$ (216,889)
23
Noninterest Income
(dollars in thousands)
Years Ended December 31,
1994 1993 1992 1991 1990
Service charges on deposits.............$ 3,720 $ 2,536 $ 1,468 $ 835 $ 415
Mortgage banking income:
Origination fees..................... 954 1,051 778 461 309
Gain on sale of mortgage loans....... 112 509 496 ------ ------
Servicing and other.................. 572 228 ------ ------ ------
Fees for trust services................. 919 542 305 197 141
Gain on sale of securities.............. 234 662 517 664 (4)
Sundry.................................. 1,347 724 (108) 129 234
Total noninterest income......$ 7,858 $ 6,252 $ 3,456 $ 2,286 $ 1,095
Noninterest Expense
(dollars in thousands)
Years Ended December 31,
1994 1993 1992 1991 1990
Salaries and wages......................$ 13,883 $ 9,607 $ 5,989 $ 4,040 $ 2,982
Benefits................................ 4,043 2,115 1,260 1,292 906
Occupancy............................... 3,547 2,129 1,339 937 838
Furniture and equipment................. 2,242 1,558 1,152 847 614
Federal deposit insurance premiums...... 1,899 1,392 910 694 435
Credit card processing charges.......... 1,506 909 603 458 ------
Intangibles amortization................ 2,485 902 462 214 25
Credit card restructuring charges....... 12,214 ------ ------ ------ ------
Sundry.................................. 8,634 6,566 4,430 3,125 3,127
Total noninterest expense.....$ 50,453 $ 25,178 $ 16,145 $ 11,607 $ 8,927
24
ITEM 2 - PROPERTIES
At December 31, 1994, the Company conducted business through
46 locations in South Carolina. At December 31, 1994, the total
net tangible book value of the premises and equipment and
leasehold improvements owned by the Company was $36,842,000. 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. The headquarters, which
were built in 1900, are owned by the Company and have been
substantially renovated to suit their present purposes. The
Company's headquarters also serve as the Bank's headquarters.
The headquarters contain approximately 160,000 square feet, of
which approximately 67,000 square feet is currently being
utilized by the Company. The balance of the building will be
renovated as necessary to accommodate future expansion of the
Company. In October 1993, the Bank purchased another office
building, with approximately 27,000 square feet, in downtown
Greenville, which houses the Bank's trust department, the
Mortgage Company's mortgage origination offices and various
administrative functions.
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. 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.
The Company's subsidiaries operate through 46 locations,
which include the buildings described above. The Company or a
subsidiary of the Company owns 16 locations and leases 30
locations. The rental payments due under the leases approximate
the market rates. Leases have options for extensions under
substantially the same terms as in the original lease period with
certain rate escalations. The leases 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.
ITEM 3 - LEGAL PROCEEDINGS
The Company and its subsidiaries are from time to time
parties to various legal actions arising in the normal course of
business. Such items are not expected to have any material
adverse effect on the business or financial position of the
Company or any of its subsidiaries.
On October 31, 1994, JW Charles Clearing Corp. filed a
lawsuit against the Bank in the Court of Common Pleas in
Lexington County, South Carolina. Such action, in general,
claims that the Bank improperly paid approximately $600,000 in
checks to Harold McCarley and/or McCarley and Associates, Inc.
The complaint seeks actual and punitive damages in an amount to
be determined by a jury, plus interest on the damages and other
costs. The Bank has answered the complaint and plans to
vigorously defend such complaint. The Bank believes that there
are valid defenses available to it. In connection with the
litigation, the Bank also expects to make a claim under insurance
policies for any losses it may suffer which, if determined to
cover the loss, could pay for substantially all of the actual
damages, if any, determined to be appropriate by a jury.
However, no assurance can be given at this time regarding whether
it will be
25
determined that any losses suffered in this litigation
will be covered by the insurance policy. Furthermore, the
Company is not in a position at this time to assess the likely
outcome of the litigation or any damages for which it may become
liable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
26
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
In November 1993, the Board of Directors announced an
initial quarterly cash divided of $0.05 per share payable on the
common stock, which dividend was paid on February 1, 1994. A
cash dividend of $0.05 per share was paid to common shareholders
each quarter in 1994. In November 1994, the Board of Directors
increased the quarterly cash dividend on the common stock to
$0.06 per share, which dividend was paid on February 1, 1995.
The Company presently intends to continue to pay this quarterly
cash dividend on the common stock and all series of preferred
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 the Bank. South Carolina's
banking regulations restrict the amount of dividends that may be
paid from the Bank. All dividends paid from the Bank are subject
to prior approval by the S.C. Commissioner of Banking and are
payable only from the undivided profits of the Bank. At
December 31, 1994, the Bank's retained earnings were $5.1
million. After the merger of the Bank and the Savings Bank in
February 1995, the retained earnings of the Savings Bank are also
available to pay dividends to the Company. At December 31, 1994,
the Savings Bank's retained earnings were $8.4 million. However,
the payments of any such dividends would be subject to receipt of
appropriate regulatory approvals.
The Board of Directors approved a 5% common stock dividend,
issued on May 16, 1994, to common stockholders of record as of
April 29, 1994. This dividend resulted in the issuance of
214,380 shares of the Company's $1.00 par value common stock.
Per share data of prior periods have been restated to this
dividend. This is the sixth consecutive year that the Company
has issued a 5% common stock dividend.
The remaining information required by Item 5 is set forth on
page 47 of the Company's 1994 Annual Report to Stockholders and
is incorporated by reference herein. As of March 27, 1995, there
were 1,959 common shareholders of record, 154 Series 1994 preferred
shareholders of record and 199 Series 1993 preferred shareholders of
record.
27
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the
last five years. All per share data have been restated to
reflect 5% common stock dividends issued on the common stock in
the last six years.
Years Ended December 31,
1994 1993 1992 1991 1990
(dollars in thousands, except per share data)
Income Statement:
Net interest income....................$ 41,627 $ 26,943 $ 17,819 $ 12,866 $ 10,241
Provision for loan losses.............. 950 909 1,453 1,423 790
Noninterest income..................... 7,858 6,252 3,456 2,286 1,095
Noninterest expenses................... 50,453 25,178 16,145 11,607 8,927
Net income (loss) ..................... (1,869) 4,935 2,517 1,680 1,045
Per Common Share Data:
Net income(loss)...................... $ (0.95) $ 0.90 $ 0.57 $ 0.51 $ 0.32
Cash dividends declared............... 0.21 0.05 - - -
Balance Sheet (Period End):
Total assets.........................$1,120,097 $816,421 $529,063 $447,314 $345,745
Loans-net of unearned income......... 865,869 565,158 396,557 338,701 275,315
Nonperforming assets................. 2,204 1,579 1,946 1,538 1,901
Total earning assets................. 983,928 734,346 477,323 407,708 317,501
Total deposits....................... 925,448 724,585 476,268 407,371 299,933
Short-term borrowings................ 106,038 16,779 2,591 2,755 12,260
Long-term debt....................... 1,162 1,214 1,268 1,322 276
Shareholders' equity................. 79,041 62,869 44,225 31,875 30,235
Balance Sheet (Averages):
Total Assets.........................$ 970,029 $ 695,138 $478,324 $387,265 $ 326,598
Shareholders' equity................... 79,715 58,239 39,999 31,143 29,540
1 After fourth quarter 1994 restructuring charges of $9,415 (after tax).
28
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EARNINGS ANALYSIS
The one-time charge for the corporate restructuring
(discussed above in "Business - Restructuring Charges") resulted
in a net loss for 1994. The Company reported a net loss for 1994
of $1.9 million, or a loss of $0.95 per common share. The net
loss for 1994 includes one-time restructuring charges of $9.4
million (after-tax). Net income for 1993 was $4.9 million, or
$0.90 per common share, and 1992 net income was $2.5 million, or
$0.57 per common share. Increased net interest income, growth in
noninterest income and continued good credit quality were the
primary reasons for the growth in earnings excluding
restructuring charges.
Fully tax equivalent ("FTE") net interest income increased
$15.0 million, or 55%, due to a higher level of average earning
assets and an increased net interest margin. Increases in
average earning assets resulted primarily from the acquisition of
branches and internal growth. The net interest margin increased
to 4.89% from 4.31% in 1993 and 4.06% in 1992.
Noninterest income, excluding securities transactions
increased to $7.6 million, or 36%, from $5.6 million in 1993 and
$2.9 million in 1992. The increase in noninterest income was
attributable to higher service charges on deposit accounts, the
expansion of mortgage servicing and the generation of new trust
business.
Noninterest expenses increased to $50.5 million in 1994 from
$25.2 million in 1993 and $16.1 million in 1992. The 1994
noninterest expenses includes one-time restructuring charges of
$12.2 million. Also contributing to the increase in noninterest
expenses were the acquisition of seven branches and the opening
of four branches de novo, a higher level of loan and deposit
activity, amortization of intangibles and higher credit card
processing fees.
Net Interest Income
The largest component of Carolina First's operations is net
interest income, the difference between the interest earned on
assets and the interest paid for the liabilities used to support
such assets. Variations in the volume and mix of assets and
liabilities and their relative sensitivity to interest rate
movements determine changes in net interest income. As the
primary contributor to Carolina First's earnings, net interest
income constituted 84% of net revenues (net interest income plus
noninterest income) in 1994, compared with 81% in 1993 and 84% in
1992.
FTE net interest income adjusts the yield for assets earning
tax-exempt income to a comparable yield on a taxable basis. The
Company has experienced a markedly upward trend in FTE net
interest income, which increased 55% in 1994, 51% in 1993 and
38% in 1992. FTE net interest income was $42.2 million in 1994,
$27.2 million in 1993 and $18.0 million in 1992. The increase
resulted from a higher level of average earning assets and an
improvement in the net interest margin. The growth in average
earning assets, which increased to $861.6 million in 1994 from
$630.8 million in 1993 and $442.5 in 1992, resulted primarily
from internal loan growth and the acquisition of branches. The
majority of this increase was in loans, which averaged $233.6
million higher in 1994 than 1993 and $117.1 million higher in
1993 than 1992.
29
The net interest margin, defined as net interest income
divided by average earning assets, increased to 4.89% in 1994
from 4.31% in 1993 and 4.06% in 1992. The increase resulted
primarily from lower deposit interest rates and a higher
proportion of noninterest-bearing deposits. In addition, the
yield on loans has risen due to increases in the prime interest
rate, increased consumer loan volume from the retail branch
network and increased credit card loan volume from mail
solicitations.
Provision and Allowance for Loan Losses
Management maintains an allowance for loan losses which it
believes is adequate to cover possible losses in the loan
portfolio. However, management's judgment is based upon a number
of assumptions about future events which are believed to be
reasonable, but which may or may not prove valid. Thus, there
can be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional increases
in the allowance for loan losses will not be required.
The allowance for loan losses is established through charges
in the form of a provision for loan losses and purchased loan
adjustments. Loan losses and recoveries are charged or credited
directly to the allowance. The amount charged to the provision
for loan losses by the Company is based on management's judgment
as to the amount required to maintain an allowance adequate to
provide for potential losses in the Company's loan portfolio.
The level of this allowance is dependent upon the total amount of
past due loans, general economic conditions and management's
assessment of potential losses.
The Company attempts to deal with repayment risks through
the establishment of, and adherence to, internal credit policies.
These policies include officer and customer limits, periodic
documentation examination and follow-up procedures for any
exceptions to credit policies. A summary of the Bank's approach
to managing credit risk is provided below in the "Asset Quality"
section.
During 1994, 1993 and 1992, the Company expensed $950,000,
$909,000, and $1,453,000, respectively, through its provision for
loan losses. Net loan charge-offs, excluding credit card loans,
decreased to $779,000 in 1994, from $1.3 million in 1993 and $1.2
million in 1992. During 1994, net loan charge-offs as a
percentage of average loans have remained low at 0.34% including
credit card charge-offs, compared with 0.26% for 1993 and and
0.31% for 1992.
At December 31, 1994, the allowance for loan losses totaled
$5.3 million, or 0.7% of total loans excluding loans held for
sale, a decline from $5.7 million, or 1.0% of total loans, at the
end of 1993. Continued reductions in nonperforming asset levels
enabled the Company to reduce the allowance for loan losses
compared with the prior years' levels. Nonperforming assets as a
percentage of loans and foreclosed property were 0.25% and 0.28%
at December 31, 1994 and 1993, respectively. At December 31,
1994, the allowance for loan losses was 312% of nonperforming
loans. The Company's asset quality measures compare favorably to
its FDIC peer group.
The Bank was examined in December 1993 by the FDIC, and the
Savings Bank was examined in February 1994 by the OTS. No
significant increases in reserves resulted from these
examinations.
Noninterest Income
Noninterest income, excluding securities transactions,
increased $2.0 million, or 36%, to $7.6 million in 1994, up from
$5.6 million in 1993 and $2.9 million in 1992. This increase
resulted principally from
30
service charges on deposit accounts, fees for trust services and
mortgage banking servicing income. The Company realized gains on the
sale of securities of $234,000, $662,000 and $517,000 in 1994, 1993
and 1992, respectively.
Service charges on deposit accounts, the largest contributor
to noninterest income, rose $1.2 million, or 47%, to $3.7 million
in 1994, an increase from $2.5 million in 1993 and $1.5 million
in 1992. The increase in service charges is attributable to
acquiring branches and new deposit accounts, increasing fee
charges and improving collection rates. In 1994, average
deposits increased 38%, and the number of deposit accounts rose
44%.
Mortgage banking income was $1.6 million in 1994, $1.8
million in 1993 and $1.3 million in 1992. Mortgage banking
income includes origination fees, profits from the sale of loans
and servicing fees (which started in 1993). Origination fees
totaled $1.0 million in 1994, compared with $1.1 million in 1993
and $778,000 in 1992. During 1994, 1,062 mortgage loans totaling
$108 million were originated, similar to originations of 1,063
loans for $103 million in 1993. The increase in the level of
interest rates during 1994 made the origination of mortgage loans
more competitive resulting in a slightly lower origination fee
per loan.
Until the third quarter of 1992, mortgage loans were
originated primarily for the account of correspondent financial
institutions, with the Company retaining an origination fee.
Beginning in the third quarter of 1992, the Company expanded the
activities of its mortgage loan operations and began self-funding
the loans through the Savings Bank prior to sale in the secondary
market. Mortgage loans totaling approximately $55 million, $80
million and $16 million were sold in 1994, 1993 and 1992,
respectively. Income from this activity totaled $112,000 in
1994, $509,000 in 1993 and $496,000 in 1992.
The Mortgage Company's mortgage servicing operations consist
of servicing loans that are owned by the Bank and subservicing
loans, to which the right to service is owned by the Bank and
other non-affiliated financial institutions. Mortgage loans
serviced are all one-to-four family residential mortgage loans.
At December 31, 1994, 10,351 loans with an aggregate principal
amount of $800 million were being serviced or subserviced by the
Mortgage Company. Servicing and other mortgage banking income
from non-affiliated companies, net of the related amortization,
was $572,000 in 1994 and $228,000 in 1993.
The Company views its mortgage banking operation as a means
of increasing noninterest income without increasing assets. The
Company purchased the rights to service the loan portfolios to
take advantage of excess capacity, thereby creating a revenue
stream to more rapidly cover the fixed costs associated with its
mortgage banking operations. However, the Company's long-term
strategy is to have a servicing portfolio principally comprised
of loans originated by the Company but which have been sold into
the secondary market with servicing retained.
Subsequent to year end, the Company entered into an
agreement with a non-affiliated company to sell the rights to
service approximately $450 million (face value) of mortgage
loans. This transaction will result in a gain of approximately
$2 million and a reduction of the Company's purchased mortgage
servicing rights by approximately $7 million. The Company will
continue to subservice these loans until June 1995 and is
actively pursuing a strategy to replace this servicing volume.
Fees for trust services in 1994 increased to $919,000, up
70% from the $542,000 earned in 1993. Fees for trust services in
1992 were $305,000. Fees for trust services increased as a
result of the generation of new trust business and additional
assets under management, particularly in investment management
and custody accounts. Assets under management of the trust
department increased to approximately $214 million at December
31, 1994, up significantly from $129 million at year end 1993 and
$55 million at year end 1992.
31
Sundry income items were $623,000 higher in 1994, primarily
because of higher customer service fees, appraisal fee income and
insurance commissions. These increases are largely attributable
to increased lending and deposit activity. In addition, the
Company earned approximately $108,000 in 1994 real estate rental
income, the majority of which is not expected to continue. In
addition, earnings associated with the credit card securitization
are expected to be a new source of fee income in 1995.
On August 18, 1993, the Bank entered into an investor
services agreement with Edgar M. Norris & Co., Inc. ("Norris &
Co."), a broker-dealer registered with the National Association
of Securities Dealers, Inc., to offer certain brokerage services
to the Bank's customers. Under this affiliate arrangement, the
Bank offers certain brokerage services to its customers through
dual employees (a Bank employee who is also employed by Norris &
Co.). The commissions or mark up charges on transactions are
shared between the Bank and Norris & Co. as set forth in the
investor services agreement. Brokerage services activity for
1994 has been limited.
Noninterest Expense
Noninterest expenses were $50.5 million in 1994, $25.2
million in 1993 and $16.1 million in 1992. Included in 1994
noninterest expenses is a $12.2 million one-time restructuring
charge associated with the credit card securitization and the
write-down of other intangible assets. Excluding the
restructuring charges, 1994 noninterest expenses increased 52%
over 1993, while 1993 was 56% higher than 1992. The increased
expenditures primarily reflect the costs of additional personnel
to support the Company's current and anticipated growth.
Salaries and wages and benefits increased 53% to $17.9
million in 1994 from $11.7 million in 1993. This increase
follows an increase of 62% from $7.2 million in 1992. Full-time
equivalent employees rose to 499 at the end of 1994 from 430 and
228 at the end of 1993 and 1992, respectively. Staff increases
were attributable to the addition of 11 banking offices, higher
loan and deposit activity resulting from internal growth and
acquisitions, and the expansion of the mortgage banking
operations.
The 1994 occupancy and furniture and equipment expenses
increased $2.1 million, or 57%, due to the addition of 11 banking
offices, including a new Myrtle Beach main office, the opening of
a regional headquarters office in Columbia for the Midlands
region of South Carolina, the expansion of the Mortgage Company's
operations and the expansion of its administrative offices in
Greenville to a second location.
The 1994 restructuring charges include $12.2 million
primarily from the write down of intangible assets and charges
associated with the origination of credit card accounts.
Management expects the restructuring of its credit card
operations to increase future pre-tax income by approximately
$2.3 million a year, through increased lower amortization costs
and the reinvestment of the cash currently invested in the credit
card portfolio.
Sundry expense items increased $4.8 million, or 49%, to
$14.5 million in 1994 from $9.8 million in 1993 and $6.4 million
in 1992. Three expense items-- federal insurance premiums,
intangibles amortization and credit card processing fees --
accounted for approximately 46% of this increase. Federal
deposit insurance premiums increased $507,000, or 36%, in 1994 to
$1.9 million. This increase was primarily due to a higher levels
of deposits. Intangibles amortization increased $1.6 million, or
175%, in 1994 to $2.5 million, principally as a result of
intangibles relating to the acquisition of branches, credit card
receivables and the Mortgage Company. Credit card processing
fees increased $597,000, or 66%, to $1.5 million in 1994,
principally as a result of credit card solicitations by the
Company and the purchase of approximately $16.3
32
million in credit card receivables in June 1993 and November 1993.
With the securitization of the majority of credit card loans during the
first quarter of 1995, management expects credit card processing
fees to decrease significantly in 1995.
Advertising and public relations expenses increased
$526,000, or 136%, to $912,000 in 1994, due to the Company's
statewide expansion, advertising campaigns in key markets and
special deposit promotions. The remaining increase in sundry
noninterest expenses was primarily attributable to the overhead
and operating expenses associated with higher lending and deposit
activities. The largest sundry noninterest expenses were
stationery, supplies and printing, telephone, postage, and fees.
Income Taxes
The provision for income taxes in 1994 was a credit of
$49,000. The provision for income taxes was $2.2 million in 1993
and $1.2 million in 1992. Income taxes for 1994 include a one-
time reduction of $2.8 million from restructuring charges,
partially offset by $1 million of income tax expense in
connection with the merger of the Savings Bank into the Bank.
The Company's effective tax rates were 30.1% (excluding the
restructuring charges), 30.6%, and 31.6% in 1994, 1993 and 1992,
respectively.
BALANCE SHEET ANALYSIS
Total assets at December 31, 1994 were $1.1 billion, an
increase of $303.7 million, or 37%, from $816.4 million at the
end of 1993. Loans increased $300.7 million, or 53%, to $865.9
million at December 31, 1994 compared with $565.2 million at
December 31, 1993. Deposits at year end 1994 were $925.4
million, up 28% from $724.6 million at year end 1993. Total
shareholders' equity increased 26% to $79.0 million at December
31, 1994 from $62.9 million at the end of 1993. Significant
components of balance sheet growth include increases from
internal loan growth, branch acquisitions and the proceeds from
the Series 1994 preferred stock offering.
Average total assets in 1994 were $970.0 million, a 40%
increase over the 1993 average of $695.1 million. Average
earning assets were $861.6 million in 1994, a 37% increase over
the 1993 level of $630.8 million. For 1992, average total assets
and average earning assets were $478.3 million and $442.5
million, respectively.
Loans
The Company's loan portfolio consists principally of
commercial mortgage loans, other commercial loans, consumer loans
and one-to-four family residential mortgage loans. A substantial
portion of these borrowers are located in South Carolina and are
concentrated in the Company's market areas. The Company has no
foreign loans or loans for highly leveraged transactions. The
loan portfolio does not contain any concentrations of credit risk
exceeding 10% of the portfolio. At December 31, 1994, the
Company had total loans outstanding of $865.9 million which
equaled approximately 94% of the Company's total deposits and
approximately 77% of the Company's total assets. The level of
total loans, relative to total deposits and total assets, has
increased from the prior year. The composition of the Company's
loan portfolio at December 31, 1994 was as follows: commercial
and commercial mortgage 47%, residential mortgage 26%, consumer
11%, credit card 12% and construction 4%.
33
The Company's loans increased $300.7 million, or 53%, to
$865.9 million at December 31, 1994 from $565.2 million at
December 31, 1993. Of this increase, $37.5 million resulted from
loans acquired in branch acquisitions. The balance was internal
loan growth. This increase was net of $55.1 million of mortgage
loans sold, which were predominantly current production, fixed
rate mortgage loans. During 1994, the Bank began a mail campaign
to solicit new credit card customers. These solicitations
resulted in approximately $60 million in new credit card
balances, which nearly doubled the size of the Bank's credit card
portfolio.
As noted above, the Company has experienced significant
growth in its commercial and commercial mortgage loans over the
past several years. Furthermore, these loans constitute
approximately 47% of the Company's total loans at December 31,
1994. These loans generally range in size from $250,000 to
$500,000 and are typically made to small to medium-sized,
owner-operated companies.
For 1994, the Company's loans averaged $723.5 million with a
yield of 9.03%, compared with $489.9 million and a yield of 8.59%
for 1993. The interest rates charged on loans vary with the
degree of risk and the maturity and amount of the loan.
Competitive pressures, money market rates, availability of funds,
and government regulations also influence interest rates. The
increase in loan yield is largely attributable to the upward
repricing of variable rate loans, which constitute approximately
60% of the loan portfolio. During 1994, the average prime
interest rate rose approximately 114 basis points.
Loans held for sale at December 31, 1994 included $69.5
million in credit card loans and $2.2 million in mortgage loans.
On January 24, 1995, the Company completed the securitization of
the credit card loans held for sale at year end.
Securities
Debt securities held as assets are classified as investment
securities, securities available for sale or trading securities.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards 115, "Accounting for Certain
Investments in Debt and Equity Securities." Securities
classified as investments are carried at cost, adjusted for the
amortization of premiums and the accretion of discounts. In
order to qualify as an investment asset, the Company must have
the ability and a positive intention to hold them to maturity.
Securities available for sale are carried at market value with
unrealized gains or losses reported in stockholders' equity (net
of tax effect). These securities may be disposed of if
management believes that the sale would provide the Company and
its subsidiaries with increased liquidity or, based upon
prevailing or projected economic conditions, that such sales
would be a safe and sound banking practice and in the best
interest of the stockholders. Trading securities are carried at
market value with adjustments for unrealized gains or losses
reported in noninterest income. The Company's policy is to
acquire trading securities only to facilitate their sale to
customers.
The Company's subsidiaries are generally limited to
investments in (i) United States Treasury securities or United
States Government guaranteed securities, (ii) securities of
United States Government agencies, (iii ) mortgage-backed
securities, (iv) general obligation municipal bonds and revenue
bonds which are investment grade rated and meet certain other
standards, and (v) money market instruments which are investment
grade rated and meet certain other standards. To date, the
Company does not use derivative products.
During the first quarter of 1993, the Bank received approval
to establish dealer bank operations to sell United States
Treasury, Federal agency and municipal bonds to individuals,
corporations and municipalities through its investments division.
Income from the Company's dealer activity is not material.
34
At December 31, 1994, the total investment portfolio had a
book value of $118.3 million and a market value of $113.7 million
for an unrealized loss of $4.6 million. The investment portfolio
had a weighted average duration of approximately 2.15 years.
Securities (i.e., investment securities, securities available for
sale and trading securities) averaged $128.0 million in 1994, 1%
above the 1993 average of $126.4 million. The average portfolio
yield declined slightly from 5.07% in 1993 to 5.03% in 1994.
During the past two years, average securities have been a
lesser component of average earning assets, decreasing from 20.0%
in 1993 to 14.8% in 1994. The Company decreased the relative
level of its investment portfolio to fund loans in its banking
markets. At December 31, 1994, securities totaled $117.1
million, up $2.4 million from the $114.7 million invested at the
end of 1993.
Other Assets
At December 31, 1994, other assets included other real
estate owned of $517,000 and intangible assets of $29.8 million.
The intangible assets balance is attributable to goodwill of $9.1
million, core deposit balance premiums of $11.1 million, excess
and purchased mortgage servicing rights of $8.7 million and
purchased credit card premiums of $345,000.
Deposits
The primary source of funds for loans and investments is
deposits which are gathered through the Bank's branch network.
Competition for deposit accounts is primarily based on the
interest rates paid thereon and the convenience of and the
services offered by the branch locations. The Company's pricing
policy with respect to deposits takes into account liquidity
needs, the direction and levels of interest rates and local
market conditions. The Company does not believe that any of its
deposits qualify as brokered deposits. It is the Company's
policy not to accept brokered deposits.
During 1994, interest-bearing liabilities averaged $794.9
million, compared with $574.7 million for 1993. This increase
resulted principally from branch acquisitions. The average
interest rates were 3.77% and 3.78% for 1994 and 1993,
respectively. At December 31, 1994, interest-bearing deposits
comprised approximately 87% of total deposits and 88% of
interest-bearing liabilities. During 1994, the Company increased
its use of short-term borrowings to fund loan growth. Short-term
borrowings averaged $41.4 million and $14.0 million in 1994 and
1993, respectively.
The Company uses its deposit base as its primary source of
funds. Deposits grew 28% to $925.4 million at December 31, 1994
from $724.6 million at December 31, 1993. Of the $200.8 million
increase in deposits, approximately $141.2 million resulted from
the acquisition of branches. Internal growth generated the
remaining new deposits. During 1994, total interest-bearing
deposits averaged $752.3 million with a rate of 3.75%, compared
with $559.4 million with a rate of 3.79% in 1993. As the level
of interest rates fell in 1993, the Company was able to reprice
deposits to more than recover declines in the yields on earning
assets. During the first half of 1994, which was a period of
rising interest rates, the Company generally kept deposit
interest rates unchanged which caused the average deposit rate to
continue to decline, primarily from the repricing of certificates
of deposit. Beginning with the third quarter of 1994, however,
the Company raised deposit interest rates, causing the Company's
interest rate paid on deposits to rise.
Average noninterest-bearing deposits, which increased 68%
during the year, increased to 11.2% of average total deposits in
1994 from 9.2% in 1993. This increase was attributable to new
accounts from commercial loan customers and escrow balances
related to mortgage servicing operations.
35
The Company's core deposit base consists of consumer time
deposits, savings, NOW accounts, money market accounts and
checking accounts. Although such core deposits are becoming
increasingly interest sensitive for both the Company and the
industry as a whole, such core deposits continue to provide the
Company with a large and stable source of funds. Core deposits
as a percentage of average total deposits averaged approximately
86% in 1994. The Company closely monitors its reliance on
certificates of deposit greater than $100,000, which are
generally considered less stable and less reliable than core
deposits.
Generally, certificates of deposits greater than $100,000
have a higher degree of interest rate sensitivity than other
certificates of deposit. The percentage of the Company's
deposits represented by certificates of deposit greater than
$100,000 is higher than the percentage of such deposits held by
its peers. However, the Company does not believe that this
higher-than-peer percentage of certificates of deposits greater
than $100,000 will have a material adverse effect because such
certificates are principally held by long-term customers located
in the Company's market areas.
Capital Resources and Dividends
The Company's capital needs have been met principally
through public offerings of common and preferred stock and
through the retention of earnings. In addition, the Company
issued both common and preferred stock in connection with the
acquisitions of the Savings Bank and the Mortgage Company.
The Company's initial public offering in 1986 raised $15.3
million in common equity and, to date, represents the largest
amount of initial equity raised in connection with the startup of
a financial institution in South Carolina. Other public
offerings of capital stock include the offering of the 8.32%
Cumulative Convertible Preferred Stock ("Series 1992 Preferred
Stock") in May 1992, which raised $10.3 million, the offering of
the 7.50% Noncumulative Convertible Preferred Stock Series
("Series 1993 Preferred Stock") in March 1993, which raised $14.5
million, and the offering of the Series 1994 Preferred Stock in
April 1994, which raised $21.4 million. In December 1993, the
Company redeemed the Series 1992 Preferred Stock. In connection
with such redemption, substantially all of the outstanding shares
of Series 1992 Preferred Stock were converted into 1,089,674
shares of Common Stock.
On September 30, 1993, the Company completed the acquisition
of all of the outstanding stock of First Sun Mortgage Corporation
in exchange for 60,000 shares of Series 1993B Preferred Stock
which added $1.2 million in equity. There is currently no market
for the Series 1993B Preferred Stock, and it is not expected that
any market for such stock will develop.
The Company completed the offering of its Series 1994
Preferred Stock on April 15, 1994. In connection with this
offering, the Company raised approximately $21.4 million after
deduction of the related expenses and issued 920,000 shares of
its Series 1994 Preferred Stock. Each share of Series 1994
Preferred Stock provides for cash dividends, when, as, and if
declared by the Board of Directors, at the annual rate of $1.83
per share. Dividends on the Series 1994 Preferred Stock are not
cumulative. A Series 1994 Preferred Stock share may be converted
at the option of the holder into 1.7931 shares of common stock.
The conversion ratio has been restated to reflect the 5% common
stock dividend issued in May 1994. In addition, and upon
compliance with certain conditions, the Company may redeem the
Series 1994 Preferred Stock at the redemption prices set forth in
the Company's Articles of Amendment related to the Series 1994
Preferred Stock.
Total stockholders' equity increased $16.1 million, or 26%,
to $79.0 million at December 31, 1994 from $62.9 million at
December 31, 1993. This change primarily reflects the capital
raised in connection with
36
the Series 1994 Preferred Stock offering discussed above,
which was issued on April 15, 1994, partially offset by the
payment of dividends and the net loss for 1994.
Book value per share was $8.58 and $10.27 at December 31,
1994 and 1993, respectively. The decline in book value is
attributable to the one-time restructuring charges. Tangible
book value per share at December 31, 1994 was $4.16, down from
$7.37 at December 31, 1993. Tangible book value is significantly
below book value as a result of the purchase premiums associated
with branch acquisitions and the purchase of the Mortgage
Company. Tangible book value declined during 1994 from the
addition of intangible assets related to the branch acquisitions
and reclassifications of loan premiums to intangible assets.
Risk-based capital guidelines for financial institutions
adopted by the regulatory authorities went into effect after
December 31, 1990. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), signed into law on December
19, 1991, provides authority for special assessments against
insured deposits and for development of a general risk-based
deposit insurance assessment system, which the Federal Deposit
Insurance Corporation ("FDIC") implemented on a transitional
basis effective January 1, 1993.
At December 31, 1994, the Company and the Savings Bank were
in compliance with each of the applicable regulatory capital
requirements and exceeded the "adequately capitalized" regulatory
guidelines. The Bank exceeded the "adequately capitalized"
regulatory guidelines for the Tier 1 risk-based capital and
leverage ratios, but was "undercapitalized" for the total risk-
based capital ratio. In February 1995, the Company received a
letter from the FDIC which indicated that, based on its analysis
of the Bank's Report of Condition and income as of December 31,
1994, that the Bank was undercapitalized with respect to its
total risk-based capital ratio. Specifically, the FDIC
determined that the Bank's total risk-based capital ratio was
6.70%, as compared to the minimum 8%.
As a result of the capital deficiency, the Bank committed to
(1) combine the Savings Bank and the Bank; (2) consummate the
credit card securitization; (3) have the Company contribute
capital of $3.5 million to the Bank; and (4) sell certain
purchase mortgage servicing rights. All of these steps were
taken except for the sale of the purchase mortgage servicing
rights, which is expected to be consummated by March 31, 1995.
At the end of February, and as a result of the January and
February operating results (and without the consummation of the
sale of the purchase mortgage servicing rights), the Bank's total
risk-based capital ratio was 8.10%. The Bank expects that its
total risk-based capital ratio will continue to increase as a
result of monthly operating results and the consummation of the
acquisitions of Aiken County National Bank and Midlands National
Bank (which the Bank expects to consummate in April and May of
1995).
As a result of its total risk-based capital ratio declining
below 8%, the Company, the Bank and the FDIC entered into a
Capital Maintenance Commitment and Guaranty Agreement (the
"Guaranty Agreement") pursuant to which the Company guaranteed
that the Bank will comply with the restoration plan described
above until the Bank has been adequately capitalized on average
during each of four consecutive quarters. The Guaranty Agreement
provides that in the event the Bank fails to comply with the
applicable capital requirements, the Company will pay to the Bank
or its successors or assigns an amount equal to the lesser of (a)
5% of the Bank's total assets at the time the Bank was notified
or deemed to have notice that the Bank was undercapitalized, or
(b) the amount which is necessary to bring the Bank into
compliance with all capital standards applicable to the Bank at
the time the Bank failed to so comply.
Management does not believe that it will be required to make
payments under the Guaranty Agreement or that the Bank will not
be at least adequately capitalized in the foreseeable future.
37
The following table sets forth certain capital ratios and
the amount of capital of the Company and the Bank at December 31,
1994 and 1993, giving full effect to the exclusion of intangible
assets.
Capital Ratios
Total Tier 1
Risk-based Risk-based
Capital Ratio Capital Ratio Leverage Ratio
12/31/94 12/31/93 12/31/94 12/31/93 12/31/94 12/31/93
The Company 8.35% 9.43% 7.65% 8.43% 5.44% 6.02%
The Bank 6.70 8.86 6.14 7.89 5.27 5.81
Adequately Capitalized
Minimum Requirement 8.00 8.00 4.00 4.00 4.00 4.00
The Company and its subsidiaries are subject to certain
regulatory restrictions on the amount of dividends they are
permitted to pay. The Company has paid all scheduled cash
dividends on the Series 1993 Preferred Stock, the Series 1993B
Preferred Stock and the Series 1994 Preferred Stock since their
respective issuances. During each of the last six years, the
Company issued 5% common stock dividends to common stockholders.
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 beginning in the
first quarter of 1995. 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.
In the future, the Company may engage in offerings of equity
or debt to raise capital.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Asset/liability management is the process by which the
Company monitors and controls the mix and maturities of its
assets and liabilities. The essential purposes of
asset/liability management are to ensure adequate liquidity and
to maintain an appropriate balance between interest sensitive
assets and liabilities. Liquidity management involves meeting
the cash flow requirements of the Company. These cash flow
requirements primarily involve withdrawals of deposits,
extensions of credit, payment of operating expenses and repayment
of purchased funds. The Company's principal sources of funds for
liquidity purposes are customer deposits, principal and interest
payments on loans, maturities and sales of debt securities,
temporary investments and earnings. Temporary investments
averaged 1.18% and 2.31% of earning assets in 1994 and 1993,
respectively. Management believes that the Company maintains an
adequate level of liquidity by retaining liquid assets and other
assets that can easily be converted into cash and by maintaining
access to alternate sources of funds, including federal funds
purchased from correspondent banks and borrowing from the Federal
Home Loan Bank.
38
The liquidity ratio is an indication of a company's ability
to meet its short-term funding obligations. FDIC examiners
suggest that a commercial bank maintain a liquidity ratio of
between 20% and 25%. At December 31, 1994, the Bank's liquidity
ratio was approximately 13%. At December 31, 1994, the Bank had
unused short-term lines of credit with correspondent banks of
$17.8 million. All of the lenders have reserved the right to
withdraw these lines of credit at their option. In addition, the
Company, through its subsidiaries, has access to borrowing from
the Federal Home Loan Bank. At December 31, 1994, unused
borrowing capacity from the Federal Home Loan Bank totaled $33
million. Management believes that these sources are adequate to
meet its liquidity needs. On January 24, 1995, the Company
completed the securitization of the majority of its credit card
loans. In connection with this securitization, the Company
received approximately $70 million which provided additional
liquidity.
As reported in the Consolidated Statements of Cash Flows,
changes in deposits, borrowed funds, investments and equity
provided cash in 1994 of $157.4 million, $89.2 million, $51.4
million and $21.9 million, respectively. The Company used this
cash to increase loans by $265.4 million, capital expenditures by
$10.4 million, cash balances by $27.7 million, operating
activities by $13.5 million and dividends by $2.9 million.
The Company plans to meet its future cash needs through the
proceeds of stock offerings, liquidation of temporary
investments, maturities or sales of loans and investment
securities and generation of deposits. By increasing the rates
paid on deposits, the Company would be able to raise deposits.
The interest sensitivity gap is the difference between total
interest sensitive assets and liabilities in a given time period.
The objective of interest sensitivity management is to maintain
reasonably stable growth in net interest income despite changes
in market interest rates by maintaining the proper mix of
interest sensitive assets and liabilities. Management seeks to
maintain a general equilibrium between interest sensitive assets
and liabilities in order to insulate net interest income from
significant adverse changes in market rates. The Asset/Liability
Management Committee uses an asset/liability simulation model
which quantifies balance sheet and earnings variations under
different interest rate environments to measure and manage
interest rate risk.
ASSET QUALITY
Prudent risk management involves assessing risk and managing
it effectively. Certain credit risks are inherent in making
loans, particularly commercial, real estate and consumer loans.
The Company attempts to manage credit risks by adhering to
internal credit policies and procedures. These policies and
procedures include a multi-layered loan approval process, officer
and customer limits, periodic documentation examination and
follow-up procedures for any exceptions to credit policies.
Loans are assigned a grade and those that are determined to
involve more than normal credit risk are placed in a special
review status. Loans that are placed in special review status
are required to have a plan under which they will be either
repaid or restructured in a way that reduces credit risk. Loans
in this special review status are reviewed monthly by the loan
committee of the Board of Directors.
As demonstrated by the following key analytical measures of
asset quality, management believes the Company has effectively
managed its credit risk. Net loan charge-offs, excluding credit
card loans, decreased to $779,000 in 1994, from $1.3 million in
1993 and $1.2 million in 1992. During 1994, net loan charge-offs
as a percentage of average loans have remained low at 0.11%,
compared with 0.26% for 1993 and and 0.31% in 1992.
Nonperforming assets as a percentage of loans and foreclosed
property were 0.25% and 0.28% at December 31, 1994 and 1993,
respectively. At December 31, 1994, the allowance for loan
losses was 312%
39
of nonperforming loans. At December 31, 1994,
the Company had $1.0 million in non-accruing loans, $675,000 in
restructured loans and $1.3 million in loans greater than ninety
days past due on which interest was still being accrued. These
asset quality measures compare favorably to the Company's bank
holding company peer group.
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, interest rates have a
more significant effect on the Company's performance than do 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. See "--
Liquidity and Interest Rate Sensitivity."
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. See "Business--
Supervision and Regulation."
ACCOUNTING ISSUES
The Financial Accounting Standards Board ("FASB") has issued
Standards No. 114, "Accounting by Creditors for Impairment of a
Loan, " which proposes that all creditors value all loans for
which it is probable that the creditor will be unable to collect
all amounts due according to the terms of the loan agreement at
the present value of the expected future cash flows. This
discounting would be done at the loan's effective interest rate.
The periodic effect on net income has not been fully determined,
but is not expected to have a material impact on the Company's
financial position or results of operations. This proposed
standard would apply for fiscal years beginning after December
15, 1994. In October 1994, the FASB issued SFAS 118, "Accounting
by Creditors for Impairment of a Loan -- Income Recognition and
Disclosures." SFAS 118 amends SFAS 114 in the areas of
disclosure requirements and methods for recognizing interest
income on an impaired loan. The Statement is effective
concurrent with the effective date of SFAS 114.
The FASB has also issued an exposure draft, "Accounting for
the Impairment of Long Lived Assets," which proposes standards
for the identification of long-lived assets, identifiable
intangibles and goodwill that may need to be written down because
of an entity's inability to recover the assets' carrying values.
The periodic effect of the adoption of this standard on net
income has not been fully determined. This proposed standard
would apply for fiscal years beginning after December 15, 1994
with earlier application encouraged.
The FASB has issued an exposure draft, "Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables for Securitization
of Mortgage Loans," that proposes that an entity recognize, as
separate assets, rights to service mortgage loans for others
irrespective of how those servicing rights are acquired (i.e.,
whether purchased or originated). If adopted, this statement would
also require that gains on sales of loans be recorded as income
in the period of sale (i.e., such gain would not reduce capitalized
servicing rights). Under this proposed statement, impairment of
capitalized mortgage servicing rights would
40
be measured by type of mortgage servicing right, based on fair
value using a reserve methodology. This proposed statement would
be applied prospectively in fiscal years beginning after December
15, 1995, to transactions in which an entity acquires mortgage
servicing rights and to impairment evaluations of all
capitalized mortgage servicing rights and capitalized excess
servicing receivables whenever acquired. Retroactive application
would be prohibited. The effect of this proposed statement on
the Company's results of operations has not yet been fully determined.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth on pages
24 through 42 in the Company's 1994 Annual Report to
Shareholders, which information is incorporated herein by
reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
At its Board meeting on March 15, 1995, the Company's Board
of Directors determined to dismiss Elliott Davis & Company, LLP
("ED&C") and to engage KPMG Peat Marwick LLP ("KPMG") as the
Company's auditors for the 1995 fiscal year. ED&C has served as
the Company's principal accountants since its inception in 1986.
The change in auditors resulted from the Board's decision that it
was in the Company's best interest to utilize a national
accounting firm, with its attendant size, experience and
expertise.
ED&C's report on the financial statements for the past two
years has not contained an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to uncertainty,
audit scope, or accounting principles.
The determination to change the Company's principal
accounting firm was recommended to the Board of Directors by the
Company's Audit Committee.
The Company has filed a current report on Form 8-K dated
March 15, 1995 regarding the change in the Company's auditors.
The information in such report is incorporated herein by
reference.
41
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth on pages
2 through 4, page 8, pages 19 and 20 of the Company's definitive
Proxy Statement for the 1995 Annual Meeting of Stockholders and is
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item may be found on pages
9 through 14 of the Company's definitive Proxy Statement for the
1995 Annual Meeting of Stockholders 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 pages
15 through 18 of the Company's definitive Proxy Statement for the
1995 Annual Meeting of the Stockholders and is incorporated
herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth on pages
18 through 19 of the Company's definitive Proxy Statement for the
1995 Annual Meeting of the Stockholders and is incorporated
herein by reference.
42
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
24 through 42 in the Company's 1994 Annual Report to
Shareholders, which information is incorporated herein by
reference. The Report of Independent Public Accountants,
dated February 3, 1995 of Elliott, Davis & Company, L.L.P.
is included on page 24 of the Company's 1994 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 -- Bylaws: Incorporated by reference to Exhibit 4.2 of
Carolina First Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993,
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 -- Specimen Noncumulative Convertible Preferred Stock
Series 1993 certificate: Incorporated by reference to
Exhibit 4.3 from Carolina First Corporation's
Registration Statement on Form S-2, Commission File No.
33-57110.
4.3 -- Specimen Convertible Preferred Stock Series 1993B
certificate: Incorporated by reference to Exhibit 4.3
from Carolina First Corporation's Registration
Statement on Form S-2, Commission File No. 33-75458.
4.4 -- Specimen Noncumulative Convertible Preferred Stock
Series 1994 certificate: Incorporated by reference to
Exhibit 4.12 from Carolina First Corporation's
Registration Statement on Form S-2, Commission File No.
33-75458.
4.5 -- Articles of Incorporation: Included as Exhibit 3.1.
4.6 -- Bylaws: Included as Exhibit 3.2.
4.7 -- Series 1993 Preferred Stock Dividend Reinvestment Plan:
Incorporated by reference to the Prospectus in Carolina
First Corporation's Registration Statement on Form S-3,
Commission File No. 33-72868.
4.8 -- 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. 33-73280.
4.9 -- Series 1994 Preferred Stock Dividend Reinvestment Plan:
Incorporated by reference to the Prospectus in Carolina
First Corporation's Registration Statement on Form S-3,
Commission File No. 33-79774.
4.10 -- Shareholders' Rights Agreement: Incorporated by
reference to Exhibit 2 of Carolina First Corporation's
Current Report on Form 8-K dated November 9, 1993,
Commission File No. 0-15083.
43
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.
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 -- Noncompetition and Severance Agreement dated November
9, 1993, between Carolina First Corporation and Mack I.
Whittle, Jr.: Incorporated by reference to Exhibit 10.1
of Carolina First Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993,
Commission File No. 0-15083.
10.6 -- Noncompetition and Severance Agreement dated November
9, 1993, between Carolina First Corporation and William
S. Hummers III: Incorporated by reference to Exhibit
10.2 of Carolina First Corporation's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1993,
Commission File No. 0-15083.
10.7 -- Noncompetition and Severance Agreement dated November
9, 1993, between Carolina First Corporation and James
W. Terry, Jr.: 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.
10.8 -- Reorganization Agreement entered into as of October 13,
1994 by and among Carolina First Bank, Carolina First
Corporation and Aiken County National Bank.
Incorporated by referenced to Exhibit 2.1 of Carolina
First Corporation's Registration Statement on Form S-4,
Commission File No. 33-57389.
10.9 -- Reorganization Agreement dated as of November 14,1994
between and among Carolina First Corporation, Carolina
First Bank and Midlands National Bank: Incorporated by
reference to Exhibit 10.8 of Carolina First
Corporation's Registration Statement on Form S-4,
Commission File No. 33-57389.
10.10 -- 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.
10.11 -- Carolina First Corporation Long-Term Management
Performance Plan.
10.12 -- 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.
10.13 -- 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.
10.14 -- 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.
10.15 -- 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.
10.16 -- Capital Maintenance Commitment and Guaranty between
Carolina First Corporation, Carolina First Bank and the
Federal Deposit Insurance Corporation.
44
10.17 -- Servicing Rights Purchase Agreement between Bank of
America, F.S.B. and Carolina First Bank dated as of
March 31, 1995: To be filed by amendment when
available.
11.1 -- Computation of Per Share Earnings.
13.1 -- 1994 Annual Report to Shareholders of the Company.
21.1 -- Subsidiaries of the Registrant: Carolina First Bank and
Carolina First Mortgage Company.
23.1 -- Consent of Elliott, Davis & Company, L.L.P.
27.1 -- Financial Data Schedules.
(b) Certain reports on Form 8-K dated January 24, 1995, Commission
File No. 0-15083 and March 15, 1995, Commission File No. 0-
15083.
(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
45
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 27, 1995
Mack I. Whittle, Jr. Executive Officer and Director
/s/ William S. Hummers III Executive Vice President and March 27, 1995
William S. Hummers, III Secretary
(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 27, 1995
William R. Timmons, Jr.
/s/ Mack I. Whittle, Jr. Director March 27, 1995
Mack I. Whittle, Jr.
/s/ William S. Hummers III Director March 27, 1995
William S. Hummers III
/s/ Judd B. Farr Director March 27, 1995
Judd B. Farr
Director March , 1995
C. Claymon Grimes, Jr.
/s/ Robert E. Hamby, Jr. Director March 27, 1995
Robert E. Hamby, Jr.
/s/ M. Dexter Hagy Director March 27, 1995
M. Dexter Hagy
Director March , 1995
R. Glenn Hilliard
/s/ Richard E. Ingram Director March 27, 1995
Richard E. Ingram
46
Director March , 1995
Charles B. Schooler
/s/ Elizabeth P. Stall Director March 27, 1995
Elizabeth P. Stall
/s/ William M. Webster III Director March 27, 1995
William M. Webster III
47
INDEX TO EXHIBITS
Exhibit
Number Description
10.11 Carolina First Corporation Long-Term Management
Performance Plan.
10.16 Capital Maintenance Commitment and Guaranty between
Carolina First Corporation, Carolina First Bank and the
Federal Deposit Insurance Corporation.
11.1 Computation of Per Share Earnings.
13.1 1994 Annual Report to Shareholders of the Company.
23.1 Consent of Elliott, Davis & Company, L.L.P.
48