Carolina First Corp.'s president, its finance chief, and a lower- ranking employee were rewarded handsomely for steering the bank to a lucrative stake in a new bank technology company.
According to its most recent securities filing, the Greenville, S.C., company this year gave president Mack I. Whittle and the two others a portion of its stake in a company that makes automated loan machines.
The gift is now worth more than $13 million because the technology company's stock soared after it went public in April.
The investment was in Affinity Technology Group Inc., Columbia, S.C., which went public in April at $13 a share. Its stock traded recently at just over $20 a share.
"I think the reason why this has caught so many people's attention is because of the size" of the award, said Vernon Plack, an analyst at Scott & Stringfellow Inc., Richmond, Va. "It's an award that you don't see often. But you can argue both sides. You can say if there wasn't a foresight in making this investment there wouldn't have been this windfall for Carolina First."
Carolina First's remaining 20% stake in Affinity is worth about $120 million. The bank originally acquired about 23% of the firm - before the IPO - in exchange for providing loan financing and business consultation.
Chief financial officer William S. Hummers, one of the stock recipients, said that the executives' reward was not out of proportion. "The benefit to the company far outweighs any benefit to the executives," he said.
Carolina First, which has $1.4 billion of assets, would not disclose the identity of the third person rewarded, who is not a senior officer.
The three got a total of 666,634 shares of Affinity. Mr. Hummers would not say how the stock was split among the three. He added that the award's ultimate value had been uncertain at the time it was given because Affinity had not yet gone public.
Carolina First, founded in 1986, was one of the first banks to use the automated loan machines, which are similar to those used to grant consumer loans on the spot.
Large banks like Banc One Corp. and Mellon Bank Corp. are using the product, as are several community banks.
After it began using automated loan machines, Carolina First began financing Affinity's business.
After acquiring the 23% stake last year, Carolina First's board in January awarded 10% of its shares to the three individuals, whom it "deemed most responsible for the company's investment," according to the bank's first-quarter filing with the Securities and Exchange Commission.
After the initial public offering, Carolina First agreed not to sell Affinity shares for 180 days unless the firm gave permission.
Affinity's future value remains to be seen, but investors hope its automated loan machine will take off.
"This is a concept story, more than anything else," said Mr. Plack, the analyst. Investors expect Affinity "will become very profitable and experience substantial growth," he adds.