UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-KSB


                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2006                File Number 000-50257

                          CAROLINA NATIONAL CORPORATION
                 (Name of Small Business Issuer in its Charter)

             South Carolina                              57-1101005
    (State or Other Jurisdiction of         (IRS Employer Identification Number)
     Incorporation or Organization)

                1350 Main Street, Columbia, South Carolina 29201
                (Address of Principal Executive Office, Zip Code)

         Issuer's Telephone Number: (803) 779-0411

      Securities Registered Pursuant to Section Section 12(b) of the Act:

     Title of each of class:         Name of each exchange on which registered:

     Common Stock, No Par Value                NASDAQ Capital Market

        Securities Registered Pursuant to Section 12(g) of the Act: None

         Check whether the issuer (1) has filed all reports required to be filed
by  Section  13 or 15(d) of the  Exchange  Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),  and
(2) has been subject to such filing  requirements  for the past 90 days.
 Yes [X]  No [ ]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will 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-KSB
or any amendment to this Form 10-KSB. [ ]

         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act).    Yes  [ ]  No  [X]

         The issuer's revenues for its most recent fiscal year were $13,961,404.

         The aggregate  market value of the Common Stock held by  non-affiliates
of the  registrant  based on the closing price on the Nasdaq  Capital  Market on
March 1, 2007 was  approximately  $37,743,090.  For  purposes  of the  foregoing
calculation  only, all directors and executive  officers of the Registrant  have
been deemed affiliates.

         As of March 1, 2007,  there were 2,578,503  shares of the  Registrant's
Common Stock, no par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to  Shareholders  for the year ended  December 31,
2006 - Parts I and II

Portions of the  Registrant's  Proxy  Statement  for the 2007 Annual  Meeting of
Shareholders - Part III

Transitional Small Business Disclosure Format (check one): Yes [  ]  No [X]


<PAGE>



                          10-KSB CROSS REFERENCE INDEX

                                     Part I                                 Page
Item 1   Description of Business ........................................      2
Item 2   Description of Property ........................................      7
Item 3   Legal Proceedings ..............................................      7
Item 4   Submission of Matters to a Vote of Security Holders ............      7
                                     Part II
Item 5   Market for Common Equity, Related Stockholder Matters
            and Small Business Issuer Purchases of Securities ...........      8
Item 6   Management's Discussion and Analysis or Plan of Operation ......      *
Item 7   Financial Statements ...........................................      *
Item 8   Changes In and Disagreements with Accountants
           on Accounting and Financial Disclosure .......................      9
Item 8A  Controls and Procedures ........................................      9
Item 8B  Other Information ..............................................      9

                                    Part III
Item 9   Directors, Executive Officers, Promoters and Control
         Persons; Compliance With Section 16(a) of the Exchange Act .....      9
Item 10  Executive Compensation .........................................     **
Item 11  Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters ................................     10
Item 12  Certain Relationships and Related Transactions .................     **
                                     Part IV
Item 13  Exhibits .......................................................     11
Item 14  Principal Accountant Fees and Services..........................     **

*Incorporated by reference to Registrant's 2006 Annual Report to Shareholders

**  Incorporated by reference to the  Registrant's  Proxy Statement for the 2007
Annual Meeting of Shareholders


<PAGE>


                           FORWARD LOOKING STATEMENTS

         This report contains "forward-looking statements" within the meaning of
the  securities   laws.  All  statements  that  are  not  historical  facts  are
"forward-looking  statements." You can identify these forward-looking statements
through  our  use of  words  such  as  "may,"  "will,"  "expect,"  "anticipate,"
"believe," "intend," "estimate," "project, " "continue," or other similar words.
Forward-looking statements include, but are not limited to, statements regarding
our future business prospects,  revenues,  working capital,  liquidity,  capital
needs, interest costs, income, business operations and proposed services.

         These  forward-looking  statements  are based on current  expectations,
estimates  and  projections  about  our  industry,   management's  beliefs,  and
assumptions made by management.  Such information includes,  without limitation,
discussions  as to estimates,  expectations,  beliefs,  plans,  strategies,  and
objectives  concerning  our future  financial and operating  performance.  These
statements  are not guarantees of future  performance  and are subject to risks,
uncertainties  and  assumptions  that are difficult to predict,  particularly in
light  of the  fact  that  we  are a new  company  with  no  operating  history.
Therefore,  actual  results  may  differ  materially  from  those  expressed  or
forecasted  in such  forward-looking  statements.  The risks  and  uncertainties
include, but are not limited to:

     o    our growth and our ability to maintain growth;

     o    governmental  monetary and fiscal policies, as well as legislative and
          regulatory changes;

     o    the effect of interest  rate changes on our level and  composition  of
          deposits,  loan  demand  and the  value  of our  loan  collateral  and
          securities;

     o    the effects of competition from other financial institutions operating
          in our market area and  elsewhere,  including  institutions  operating
          locally,  regionally,  nationally and  internationally,  together with
          competitors   that  offer  banking  products  and  services  by  mail,
          telephone and computer and/or the Internet;

     o    failure of assumptions  underlying the  establishment of our allowance
          for loan losses, including the value of collateral securing loans; and

     o    loss of consumer  confidence and economic  disruptions  resulting from
          terrorist activities.

         We  undertake  no   obligation   to  publicly   update  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.  In light of these risks,  uncertainties,  and assumptions,
the forward-looking events discussed in this report might not occur.




<PAGE>


                                     PART I

Item 1.  Description of Business.

General

         Carolina  National  Corporation,  (the  "Company")  is a  bank  holding
company  with no  operations  other  than those  carried on by its  wholly-owned
subsidiary,  Carolina National Bank and Trust Company (the "Bank").  The Company
was  organized  in 2000  under the laws of South  Carolina  for the  purpose  of
becoming a holding  company for the Bank.  The Bank  conducts a general  banking
business  under a  charter  granted  by the  Office  of the  Comptroller  of the
Currency.  The Bank opened on July 15, 2002.  The Bank  conducts its  activities
from its main  office,  three  branch  offices and a loan  production  office in
Columbia,  South Carolina and a loan  production  office in Myrtle Beach,  South
Carolina.

         The Bank's business primarily consists of accepting deposits and making
loans.  The Bank seeks deposit  accounts from  households  and businesses in its
primary  market areas by offering a full range of savings  accounts,  retirement
accounts (including Individual Retirement  Accounts),  checking accounts,  money
market  accounts,  and time  certificates  of deposit.  It also makes  primarily
commercial,  real estate and installment loans, primarily on a secured basis, to
borrowers in and around Richland County,  South Carolina and Horry County, South
Carolina and makes other  authorized  investments.  Mortgage loans are primarily
made for resale in the  secondary  market.  As of December  31,  2006,  the Bank
employed 41 persons on a full time equivalent basis.

Competition

         South Carolina law permits statewide branching by banks and savings and
loan  associations.  Consequently,  many  financial  institutions  have branches
located in several  communities.  As of June 30, 2006 the City of  Columbia  was
served by 16 banks and  savings  banks with  approximately  91  branches.  Since
interstate  banking was first  permitted,  an overwhelming  number of Columbia's
locally based  commercial  banks have been  acquired,  mostly by large  regional
out-of-state  banks.  Of the 16  commercial  banks and savings banks with branch
offices in Columbia,  six were owned and controlled out of state,  and only five
of the remaining ten (one of which is Carolina  National Bank and Trust Company)
were headquartered in Columbia.

         Carolina National Bank and Trust Company  encounters strong competition
from most of these  financial  institutions.  In the conduct of certain areas of
its business,  Carolina  National Bank & Trust Company also competes with credit
unions,  insurance  companies,  money market  mutual  funds and other  financial
institutions, some of which are not subject to the same degree of regulation and
restrictions as the Bank. Most of these competitors have  substantially  greater
resources and lending  abilities than Carolina National Bank & Trust Company has
and offer certain services,  such as international banking,  investment banking,
and trust services, that the Bank does not currently provide.

         The principal areas and methods of competition in the banking  industry
are the  services  offered,  pricing  of those  services,  the  convenience  and
availability  of the services,  and the degree of expertise and personal  manner
with which those services are offered.  The directors believe that the Bank will
be able to exploit opportunities available for a locally-owned community bank so
that the Bank can compete  effectively  in those areas,  but no assurance can be
given that it will be able to do so.

                        EFFECT OF GOVERNMENT REGULATION

         Bank  holding  companies  and banks  are  extensively  regulated  under
federal and state law. To the extent that the  following  information  describes
statutory  and  regulatory  provisions,  it is  qualified  in  its  entirety  by
reference to such  statutes and  regulations.  Any change in  applicable  law or
regulation  may have a material  effect on the  business  of the Company and the
Bank.



                                       2
<PAGE>

General

         As a bank holding  company under the Bank Holding Company Act ("BHCA"),
the  Company  obtained  the  approval of the Board of  Governors  of the Federal
Reserve System (the "Federal Reserve") to acquire the Bank and is subject to the
regulations of 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  which the Federal  Reserve  determines  to be so closely
related to banking or managing or controlling  banks as to be a proper  incident
thereto. The Company may engage in a broader range of activities if it becomes a
"financial  holding company"  pursuant to the  Gramm-Leach-Bliley  Act, which is
described below under the caption  "Gramm-Leach-Bliley  Act." The BHCA prohibits
the Company  from  acquiring  direct or indirect  control of more than 5% of the
outstanding  voting stock or substantially all of the assets of any bank or from
merging or  consolidating  with  another  bank  holding  company  without  prior
approval of the Federal  Reserve.  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 non-banking business unless
such business is determined by the Federal  Reserve to be so closely  related to
banking as to be properly  incident  thereto.  The BHCA generally does not place
territorial   restrictions  on  the  activities  of  such  non-banking   related
activities.

         The Company is also subject to limited  regulation  and  supervision by
the South Carolina State Board of Financial  Institutions (the "State Board"). A
South  Carolina bank holding  company may be required to provide the State Board
with information with respect to the financial condition, operations, management
and inter-company relationships of the holding company and its subsidiaries. The
State Board also may require  such other  information  as is  necessary  to keep
itself  informed  about  whether the  provisions  of South  Carolina law and the
regulations  and orders issued  thereunder by the State Board have been complied
with,  and the  State  Board  may  examine  any  bank  holding  company  and its
subsidiaries.

Obligations of the Company to its Subsidiary Bank

         A number of obligations  and  restrictions  are imposed on bank holding
companies  and their  depository  institution  subsidiaries  by Federal  law and
regulatory  policy that are designed to reduce  potential  loss  exposure to the
depositors of such  depository  institutions  and to the FDIC insurance funds in
the event the depository  institution  is in danger of becoming  insolvent or is
insolvent.  For example, under the policy of the Federal Reserve, 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.  In  addition,  the
"cross-guarantee"  provisions of the Federal  Deposit  Insurance Act, as amended
("FDIA"),  require  insured  depository  institutions  under  common  control to
reimburse  the FDIC for any  loss  suffered  or  reasonably  anticipated  by the
Deposit  Insurance  Fund of the FDIC 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 Deposit  Insurance Fund.
The  FDIC's  claim for  damages is  superior  to claims of  shareholders  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 FDIA also provides that amounts  received from the  liquidation  or
other resolution of any insured  depository  institution by any receiver must be
distributed (after payment of secured claims) to pay the deposit  liabilities of
the  institution  prior to payment  of any other  general  or  unsecured  senior
liability,   subordinated  liability,  general  creditor  or  shareholder.  This
provision gives depositors a preference over general and subordinated  creditors
and  shareholders  in the event a receiver is appointed to distribute the assets
of the Bank.

         Any capital  loans by a bank holding  company to any of its  subsidiary
banks are  subordinate  in right of payment  to  deposits  and to certain  other
indebtedness of such subsidiary  bank. In the event of a bank holding  company's
bankruptcy,  any  commitment  by the bank  holding  company  to a  federal  bank
regulatory  agency to maintain the capital of a subsidiary  bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.



                                       3
<PAGE>

         Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the OCC is authorized to require payment of the
deficiency by assessment  upon the bank's  shareholders',  pro rata,  and to the
extent  necessary,  if any such assessment is not paid by any shareholder  after
three  months  notice,  to sell the stock of such  shareholder  to make good the
deficiency.

Capital Adequacy Guidelines for Bank Holding Companies and National Banks

         The various federal bank regulators,  including the Federal Reserve and
the FDIC have adopted  risk-based and leverage capital  adequacy  guidelines for
assessing bank holding company and bank capital adequacy. These standards define
what qualifies as capital and establish minimum capital standards in relation to
assets and off-balance sheet exposures, as adjusted for credit risks.

         Failure to meet capital  guidelines could subject the Bank to a variety
of enforcement  remedies,  including the termination of deposit insurance by the
FDIC and a prohibition on the taking of brokered deposits.

         The risk-based  capital standards of both the Federal Reserve Board and
the FDIC explicitly identify  concentrations of credit risk and the risk arising
from non-traditional  activities,  as well as an institution's ability to manage
these risks,  as  important  factors to be taken into account by the agencies in
assessing an institution's overall capital adequacy. The capital guidelines also
provide that an institution's exposure to a decline in the economic value of its
capital  due to changes in interest  rates be  considered  by the  agencies as a
factor in evaluating a bank's capital  adequacy.  The Federal Reserve Board also
has recently issued  additional  capital  guidelines for bank holding  companies
that engage in certain trading activities.

         The Company and the Bank exceeded all applicable  capital  requirements
at December 31, 2006.

Payment of Dividends

         The  Company is a legal  entity  separate  and  distinct  from its bank
subsidiary.  Most of the  revenues of the  Company  are  expected to result from
dividends  paid to the Company by the Bank.  There are statutory and  regulatory
requirements  applicable to the payment of dividends by subsidiary banks as well
as by the Company to its  shareholders.  It is not anticipated  that the Company
will pay cash dividends in the near future.

Certain Transactions by the Company with its Affiliates

         Federal  law   regulates   transactions   among  the  Company  and  its
affiliates,  including  the  amount of the  Bank's  loans to or  investments  in
non-bank  affiliates and the amount of advances to third parties  collateralized
by  securities  of an  affiliate.  Further,  a  bank  holding  company  and  its
affiliates  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.

FDIC Insurance Assessments

         The FDIC merged the Bank  Insurance  Fund and the  Savings  Association
Insurance  Fund to form the Deposit  Insurance Fund ("DIF") on March 31, 2006 in
accordance  with the  Federal  Deposit  Insurance  Reform Act of 2005.  The FDIC
maintains the DIF by assessing depository institutions an insurance premium. The
amount each institution is assessed is based upon statutory factors that include
the balance of insured  deposits  as well as the degree of risk the  institution
poses to the  insurance  fund.  The FDIC uses a risk-based  premium  system that
assesses higher rates on those  institutions that pose greater risks to the DIF.
Under the rule adopted by the FDIC in November 2006,  beginning January 1, 2007,
the FDIC will  place each  institution  in one of four risk  categories  using a
two-step  process based first on capital  ratios (the capital group  assignment)
and then on other  relevant  information  (the  supervisory  group  assignment).
Beginning  January 1, 2007,  rates will range between 5 and 43 cents per $100 in
assessable deposits.




                                       4
<PAGE>

Regulation of the Bank

         The Bank is  subject  to  regulation  and  examination  by the OCC.  In
addition,  the Bank is subject  to  various  other  state and  federal  laws and
regulations,  including state usury laws, laws relating to fiduciaries, consumer
credit laws and laws relating to branch banking.  The Bank's loan operations are
also subject to certain federal consumer credit laws and regulations promulgated
thereunder,  including,  but not limited to: the federal  Truth-In-Lending  Act,
governing  disclosures of credit terms to consumer borrowers;  the Home Mortgage
Disclosure Act, requiring financial  institutions to provide certain information
concerning their mortgage lending; the Equal Credit Opportunity Act and the Fair
Housing  Act,  prohibiting  discrimination  on the basis of  certain  prohibited
factors in extending  credit;  and the Fair Debt Collection  Act,  governing the
manner in which  consumer  debts may be collected by  collection  agencies.  The
deposit  operations  of the Bank are also  subject to the Truth in Savings  Act,
requiring  certain  disclosures  about  rates  paid  on  savings  accounts;  the
Expedited   Funds   Availability   Act,  which  deals  with  disclosure  of  the
availability  of funds  deposited in accounts and the  collection  and return of
checks by banks;  the Right to Financial  Privacy Act,  which  imposes a duty to
maintain  certain   confidentiality   of  consumer  financial  records  and  the
Electronic  Funds Transfer Act and  regulations  promulgated  thereunder,  which
govern  automatic   deposits  to  and  withdrawals  from  deposit  accounts  and
customers'  rights and  liabilities  arising  from the use of  automated  teller
machines and other electronic banking services.  The Bank is also subject to the
Fair Credit  Reporting  Act,  governing the use and provision of  information to
credit  reporting  agencies;  the Bank Secrecy Act,  dealing  with,  among other
things, the reporting of certain currency transactions; and the USA Patriot Act,
dealing with,  among other things,  requiring  the  establishment  of anti-money
laundering  programs including  standards for verifying customer  information at
account opening.

         The  Bank  is  also  subject  to  the  requirements  of  the  Community
Reinvestment  Act (the  "CRA").  The CRA imposes on  financial  institutions  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
actual performance in meeting community credit needs is evaluated as part of the
examination process, and also is considered in evaluating mergers,  acquisitions
and applications to open a branch or facility.

Other Safety and Soundness Regulations

         Prompt  Corrective  Action.  The federal  banking  agencies  have broad
powers under  current  federal law to take prompt  corrective  action to resolve
problems of insured depository institutions.  The extent of these powers depends
upon whether the  institutions in question are "well  capitalized,"  "adequately
capitalized,"    "undercapitalized,"    "significantly    undercapitalized"   or
"critically undercapitalized."

         A bank that is "undercapitalized"  becomes subject to provisions of the
FDIA:   restricting  payment  of  capital  distributions  and  management  fees;
requiring the FDIC to monitor the condition of the bank; requiring submission by
the bank of a capital  restoration plan;  prohibiting the acceptance of employee
benefit plan deposits; restricting the growth of the bank's assets and requiring
prior approval of certain  expansion  proposals.  A bank that is  "significantly
undercapitalized" is also subject to restrictions on compensation paid to senior
management  of the bank,  and a bank that is  "critically  undercapitalized"  is
further subject to  restrictions on the activities of the bank and  restrictions
on payments of subordinated debt of the bank. The purpose of these provisions is
to require banks with less than adequate capital to act quickly to restore their
capital and to have the FDIC move promptly to take over banks that are unwilling
or unable to take such steps.

         Brokered Deposits.  Under current FDIC regulations,  "well capitalized"
banks may accept brokered deposits without restriction, "adequately capitalized"
banks may accept  brokered  deposits  with a waiver  from the FDIC  (subject  to
certain  restrictions on payment of rates), while  "undercapitalized"  banks may
not accept brokered  deposits.  The regulations  provide that the definitions of
"well capitalized", "adequately capitalized" and "undercapitalized" are the same
as the  definitions  adopted by the agencies to implement the prompt  corrective
action  provisions  described in the  previous  paragraph.  Management  does not
believe  that  these  regulations  will have a  material  adverse  effect on the
operations of the Bank.

Interstate Banking

         Under the Riegle-Neal  Interstate Banking and Branching  Efficiency Act
of 1994 the Company and any other  adequately  capitalized  bank holding company

                                       5
<PAGE>

located in South  Carolina can acquire a bank located in any other state,  and a
bank  holding  company  located  outside  South  Carolina  can acquire any South
Carolina-based  bank, in either case subject to certain  deposit  percentage and
other restrictions.  Unless prohibited by state law, adequately  capitalized and
managed bank holding  companies are permitted 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 is permitted only if the
laws of the host state expressly permit it. The authority of a bank to establish
and operate  branches within a state continue to be subject to applicable  state
branching  laws.  South  Carolina law was amended,  effective  July 1, 1996,  to
permit such  interstate  branching but not de novo branching by an  out-of-state
bank.

         The  Riegle-Neal  Act,  together  with  legislation  adopted  in  South
Carolina,  resulted in a number of South  Carolina banks being acquired by large
out-of-state  bank  holding  companies.  Size  gives the  larger  banks  certain
advantages  in competing for business from larger  customers.  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 Bank 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.

Gramm-Leach-Bliley Act

         The  Gramm-Leach-Bliley  Act,  which  makes it easier for  affiliations
between banks,  securities firms and insurance  companies to take place,  became
effective  in March  2000.  The Act  removes  Depression-era  barriers  that had
separated  banks and  securities  firms,  and seeks to  protect  the  privacy of
consumers' financial information.

         Under provisions of the new legislation and regulations  adopted by the
appropriate regulators, banks, securities firms and insurance companies are able
to structure new affiliations  through a holding company  structure or through a
financial subsidiary. The legislation creates a new type of bank holding company
called a "financial  holding  company" which has powers much more extensive than
those of standard holding companies.  These expanded powers include authority to
engage in "financial activities," which are activities that are (1) financial in
nature;  (2)  incidental  to  activities  that are  financial in nature;  or (3)
complimentary  to a  financial  activity  and that do not  impose  a safety  and
soundness risk. Significantly,  the permitted financial activities for financial
holding  companies include authority to engage in merchant banking and insurance
activities,  including insurance portfolio investing. A bank holding company can
qualify as a financial holding company and expand the services it offers only if
all of its subsidiary depository institutions are well-managed, well-capitalized
and  have  received  a  rating  of   "satisfactory"   on  their  last  Community
Reinvestment Act examination.

         The  legislation  also  creates  another  new type of  entity  called a
"financial subsidiary." A financial subsidiary may be used by a national bank or
a group of national banks to engage in many of the same activities permitted for
a financial holding company, though several of these activities,  including real
estate development or investment,  insurance or annuity underwriting,  insurance
portfolio  investing and merchant  banking,  are reserved for financial  holding
companies.  A bank's  investment  in a financial  subsidiary  affects the way in
which the bank calculates its regulatory capital, and the assets and liabilities
of financial  subsidiaries  may not be consolidated  with those of the bank. The
bank must also be certain that its risk  management  procedures  are adequate to
protect it from  financial and  operational  risks created both by itself and by
any financial subsidiary.  Further, the bank must establish policies to maintain
the separate corporate  identities of the bank and its financial  subsidiary and
to prevent each from becoming liable for the obligations of the other.

         The Act also  establishes  the  concept  of  "functional  supervision,"
meaning that  similar  activities  should be  regulated  by the same  regulator.
Accordingly,  the Act spells out the regulatory authority of the bank regulatory
agencies,  the Securities and Exchange Commission and state insurance regulators
so that each type of activity is  supervised by a regulator  with  corresponding
expertise.  The Federal  Reserve Board is intended to be an umbrella  supervisor
with the  authority  to  require a bank  holding  company or  financial  holding
company  or any  subsidiary  of  either  to  file  reports  as to its  financial
condition,  risk management  systems,  transactions with depository  institution
subsidiaries  and  affiliates,  and compliance  with any federal law that it has
authority to enforce.

         Although the Act reaffirms that states are the regulators for insurance
activities  of  all  persons,  including   federally-chartered  banks,  the  Act
prohibits  states from preventing  depository  institutions and their affiliates
from conducting insurance activities.

                                       6
<PAGE>

         The Act also  establishes  a minimum  federal  standard  of  privacy to
protect the confidentiality of a consumer's  personal financial  information and
gives the consumer the power to choose how personal financial information may be
used by  financial  institutions.  The privacy  provisions  of the Act have been
implemented by adoption of regulations by various federal agencies.

         The Act and the  regulations  adopted  pursuant  to the Act  create new
opportunities  for the Company to offer  expanded  services to  customers in the
future,  though  the  Company  has not yet  determined  what the  nature  of the
expanded  services  might be or when the Company might find it feasible to offer
them. The Act has increased competition from larger financial  institutions that
are  currently  more  capable  than  the  Company  of  taking  advantage  of the
opportunity  to  provide a  broader  range of  services.  However,  the  Company
continues to believe that its commitment to providing high quality, personalized
service to customers will permit it to remain competitive in its market area.

Sarbanes-Oxley Act of 2002

         The Sarbanes-Oxley Act became effective in 2002, and mandated extensive
reforms and requirements for public companies. The SEC has adopted extensive new
regulations  pursuant  to  the  requirements  of  the  Sarbanes-Oxley  Act.  The
Sarbanes-Oxley  Act and the SEC's new  regulations  have increased the Company's
cost of doing  business,  particularly  its fees for internal and external audit
services  and  legal  services,  and the law and  regulations  are  expected  to
continue  to do so.  However,  the  Company  does  not  believe  that it will be
affected  by  Sarbanes-Oxley  and the  new SEC  regulations  in  ways  that  are
materially  different or more  onerous  than those of other public  companies of
similar size and in similar businesses.

Legislative Proposals

         Proposed  legislation which could significantly  affect the business of
banking is  introduced  in Congress  from time to time.  Management  of the Bank
cannot predict the future course of such  legislative  proposals or their impact
on the Company and the Bank should they be adopted.

Fiscal and Monetary Policy

         Banking is a business  which depends to a large extent on interest rate
differentials. In general, the difference between the interest paid by a bank on
its deposits and its other  borrowings,  and the interest  received by a bank on
its loans and  securities  holdings,  constitutes  the major portion of a bank's
earnings.  Thus, the earnings and growth of the Company and the Bank are subject
to the influence of economic  conditions  generally,  both domestic and foreign,
and also to the  monetary  and  fiscal  policies  of the  United  States and its
agencies,  particularly the Federal Reserve.  The Federal Reserve  regulates the
supply of money through various means,  including open market dealings in United
States government  securities,  the discount rate at which banks may borrow from
the Federal Reserve,  and the reserve  requirements on deposits.  The nature and
timing of any changes in such  policies  and their impact on the Company and the
Bank cannot be predicted.

Further Information

         Further  information  about the business of the Company and the Bank is
set  forth in this  Form  10-KSB  under  Item 6  -"Management's  Discussion  and
Analysis or Plan of Operation."


                                       7
<PAGE>

Item 2.  Description of Property.

         The main  offices  of  Carolina  National  Bank and Trust  Company  and
Carolina National  Corporation are located at 1350 Main Street, on the corner of
Main and Washington  Streets, in downtown Columbia,  South Carolina.  The space,
which comprises  approximately 9,718 square feet on three floors, was previously
used as a bank.  The Bank has branch  offices at 4840 Forest Drive in the Forest
Acres  area  and at the  corner  of Two  Notch  Road  and  Sparkleberry  Land in
Northeast Columbia,  both of which were previously used as bank branches,  and a
branch at 6041 Garner's  Ferry Road in East Columbia which was renovated for use
as a bank branch.  These branch  facilities have ample parking and drive-through
teller  stations.  The Bank also leases a parcel of land one block from its main
office on which it  operates a drive-up  facility,  and office  space in the St.
Andrews area of western Richland County and in Myrtle Beach, South Carolina from
which it operates loan  production  offices.  All of these  properties have been
leased  under long term  leases  except the loan  production  offices  which are
leased on a month-to-month basis.

Item 3.  Legal Proceedings.

         The Bank may from time to time be a party to various legal  proceedings
arising in the ordinary  course of business,  but management is not aware of any
pending or threatened  litigation or unasserted  claims or assessments  that are
expected to result in losses,  if any,  that would be material to the  Company's
business and operations.

Item 4.  Submission of Matters to Vote of Security Holders.

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of 2006.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.


         The information  required by Item 201(a), (b) and (c) of Regulation S-B
is  incorporated  herein by  reference  to the  information  set forth under the
caption  "Stock   Information"  in  the  registrant's   2006  Annual  Report  to
Shareholders.

Securities Authorized for Issuance Under Equity Compensation Plans

         See Item 11 of this Form  10-KSB for the  information  required by Item
201(d) of Regulation S-B.

Recent Sales of Unregistered Securities

         The Company did not sell any  unregistered  securities  during the year
ended December 31, 2006.

Purchases of Equity Securities by the Company and Affiliated Purchasers

         Neither  the Company nor any  "affiliated  purchaser"  as defined in 17
C.F.R.  240.10b-18(a)(3)  repurchased  any  shares  or units of any class of the
Company's  equity  securities  that is registered  pursuant to Section 12 of the
Exchange Act during the fourth  quarter of 2006.  Accordingly,  no disclosure is
required pursuant to 17 C.F.R. Section 228.703.

Item 6.  Management's Discussion and Analysis or Plan of Operation.

         The  information set forth under the caption  "Management's  Discussion
and Analysis or Plan of  Operation"  in the  Registrant's  2006 Annual Report to
Shareholders is incorporated herein by reference.




                                       8
<PAGE>

Item 7.  Financial Statements.

         The Consolidated  Financial  Statements,  including Notes thereto,  set
forth in the  Registrant's  2006 Annual Report to Shareholders  are incorporated
herein by reference.


Item 8.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure.

         Not Applicable.

Item 8A. Controls and Procedures.

         Based on the evaluation required by 17 C.F.R. Section  240.13a-15(b) or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17 C.F.R.  Sections  240.13a-15(e) or  240.15d-15(e)),  the Company's  principal
executive  officer and principal  financial officer concluded that such controls
and procedures,  as of the end of the period covered by this annual report, were
effective.

         No disclosure is required under 17 C.F.R.  Section  228.308 (a) or (b).
There  has been no change  in the  Company's  internal  control  over  financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially  affect,  the Company's internal control over
financial reporting.

Item 8B.  Other Information.

         No  information  was  required to be disclosed in a Form 8-K during the
fourth quarter of 2006 that was not so disclosed.

                                    PART III

Item 9. Directors,  Executive Officers, Promoters, Control Persons and Corporate
        Governance; Compliance With Section 16(a) of the Exchange Act.

         The information set forth under the captions  "Management -- Directors"
and "--  Commitees of the Board of Directors  -- Audit  Committee,"  "Governance
Matters -- Executive Officers" and "Section 16(a) Beneficial Ownership Reporting
Compliance"  in  registrant's  definitive  proxy  statement  for the 2007 Annual
Meeting of Shareholders (the "2007 Proxy  Statement") is incorporated  herein by
reference.

         Audit Committee Financial Expert

         The Company's board of directors has determined that the Company has at
least one "audit  committee  financial  expert," as that term is defined by Item
407(d)(5)  of  Regulation  S-B   promulgated  by  the  Securities  and  Exchange
Commission,  serving on its audit committee. Joel A. Smith, III, meets the terms
of the  definition.  Our board of  directors  has  determined  that Mr. Smith is
independent under the Nasdaq Stock Market, Inc.  Marketplace Rules.  Pursuant to
the terms of Item  407(d)(5)(iv) of Regulation S-B a person who is determined to
be an "audit  committee  financial  expert" will not be deemed an expert for any
purpose as a result of being  designated or  identified  as an "audit  committee
financial  expert" pursuant to Item 407, and such designation or  identification
does not impose on such person any duties,  obligations  or  liability  that are
greater than the duties,  obligations and liability  imposed on such person as a
member of the audit  committee  and board of  directors  in the  absence of such
designation or identification.  Further,  the designation or identification of a
person as an "audit  committee  financial  expert" pursuant to Item 407 does not
affect the duties,  obligations  or  liability  of any other member of the audit
committee or board of directors.

         Code of Ethics

         The  Company  has  adopted a code of ethics  (as  defined  by 17 C.F.R.
228.406) that applies to its principal executive officer and principal financial
officer.  The Company will provide a copy of the code of ethics, free of charge,
to any person upon written request to William J. McElveen,  Corporate Secretary,
Carolina National Corporation, 1350 Main Street, Columbia, South Carolina 29201.



                                       9
<PAGE>

Item 10. Executive Compensation.

         The information set forth under the captions "Management  Compensation"
and "2003 Stock Option Plan" in the 2007 Proxy Statement is incorporated  herein
by reference.

Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
          Related Stockholder Matters.

         The  information  set forth under the caption  "Security  Ownership  of
Management" in the 2007 Proxy Statement is incorporated herein by reference.

Equity Compensation Plan Information

         The following  table sets forth  aggregated  information as of December
31, 2006 about all of the Company's  compensation  plans  (including  individual
compensation  arrangements)  under which  equity  securities  of the Company are
authorized for issuance.

<TABLE>
<CAPTION>
Plan category                   Number of securities         Weighted-average             Number of securities
                                to be issued upon            exercise price of            remaining available
                                exercise of                  outstanding options,         for future issuance
                                outstanding options,         warrants and rights          under equity
                                warrants and rights                                       compensation plans
                                                                                          (excluding securities
                                                                                          reflected in column(a))
                                (a)                          (b)                          (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                             <C>                            <C>                         <C>
Equity compensation
plans approved by
security holders                 94,301                        $10.55                      35,101

Equity compensation
plans not approved
by security holders(1)          200,555                         10.00                         -0-
----------------------          -------                        ------                      ------
                                294,856                        $10.18                      35,101
Total

</TABLE>

         (1) Represents  warrants issued to directors of the holding company and
organizers of the Bank.  The Company  granted stock warrants to the directors to
compensate them for: (a) their time and efforts as organizers and directors; (b)
their  purchase of and  subscription  to purchase the Company's  common stock to
fund the operating expenses during the organizational  period of the Bank and to
provide  capital for the Bank;  and (c) their  continued  service as  directors.
Directors  received two stock  warrants  for every three  shares they  purchased
prior to the opening of the Bank.  One-third of the  warrants  vested and became
exercisable on each of the first three  anniversaries of the opening of the Bank
(July  15,  2002).  Vested  warrants  expire  on the  earlier  of 90 days  after
termination  of the  director's  status as a director  (one year after  death or
disability) or ten years after opening of the Bank and have an exercise price of
$10.00  per share.

Item 12.  Certain   Relationships   and  Related   Transactions,   and  Director
          Independence.

         The information set forth under the captions "Certain Relationships and
Related  Transactions" and "Governance Matters -- Director  Independence" in the
2007 Proxy  Statement is  incorporated  by reference.  All members of the Audit,
Compensation and Nominating  Committees are independent as defined by the Nasdaq
Global Market Marketplace Rules.


                                       10
<PAGE>

Item 13. Exhibits

         Exhibit No. in
         Item 601 of
         Regulation S-B)                    Description

          3.1                 Articles of  Incorporation  of  Carolina  National
                              Corporation(1)

          3.2                 Bylaws of Carolina National Corporation(1)

          4                   Form of stock certificate(1)

          10.1                Form of Stock Warrant Agreement (revised)(2)

          10.2                Employment  Agreement  between  Carolina  National
                              Corporation and Roger B. Whaley(1)

          10.3                Carolina National Corporation 2003 Stock Option
                              Plan (3)

          10.4                Change  of  Control   Agreement   between Carolina
                              National Corporation and Harry R. Brown (4)

          10.5                Amended deferred fee plan for members of the board
                              of directors of the  Registrant and its subsidiary
                              Carolina National Bank and Trust Company,  who are
                              not employees of the Registrant, or Subsidiary (5)

          13                  Portions of the Annual Report to  Shareholders for
                              the Year Ended December 31, 2006

          21                  Subsidiaries of Carolina National Corporation (3)

          23                  Consent of Elliott Davis LLP

          31.1                13a-14(a)/15d-14(a)    Certifications   of   Chief
                              Executive Office

          31.2                13a-14(a)/15d-14(a)    Certifications   of   Chief
                              Financial Office

          32                  18 U.S.C. Section 1350 Certifications

(1)  Incorporated  by  reference  to  exhibits  to   Registrant's   Registration
     Statement on Form SB-2 (File No. 333-76512)

(2)  Incorporated  by  reference  to  exhibits  to   Registrant's   Registration
     statement on Form SB-2 (File No. 333-97397).

(3)  Incorporated by reference to exhibits to Registrant's Annual Report on Form
     10-KSB for the year ended December 31, 2003

(4)  Incorporated by reference to exhibits to Registrant's  Quarterly  Report an
     Form 10-QSB for the quarter ended March 31, 2006

(5)  Incorporated by reference to Registrant's  Current Report on Form 8-K filed
     July 5, 2006

                                       11
<PAGE>

Item 14.  Principal Accountant Fees and Services

         The  information  set  forth  under  the  caption  "Independent  Public
Accountants  -  Fees  Paid  to  Independent  Auditors"  and  "--Audit  Committee
Pre-Approval  of  Audit  and  Permissible   Non-Audit  Services  of  Independent
Auditors" in the 2006 Proxy Statement is incorporated herein by reference.







                                       12
<PAGE>
                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                               Carolina National Corporation


                               By: s/Roger B. Whaley
                                  --------------------------------------------
                                   Roger B. Whaley
                                   President and Chief Executive Officer


                               By: s/Harry R. Brown
                                  --------------------------------------------
                                   Harry R. Brown
                                   Executive Vice President and Chief Financial
                                   Officer (Principal Financial and Principal
                                   Accounting Officer)
March 23, 2007

         In accordance  with the Exchange Act, this Report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>

Signature                                Title                                              Date

<S>                                      <C>                                                <C>

s/Charlotte J. Berry
--------------------------               Director                                           March 29, 2007
Charlotte J. Berry

s/Harry R. Brown
--------------------------               Executive Vice President and                       March 23, 2007
Harry R. Brown                           Chief Financial Officer


--------------------------               Director                                           March __, 2007
William P. Cate


--------------------------               Director                                           March __, 2007
Kirkman Finlay, III

s/I. S. Leevy Johnson
--------------------------               Director                                           March 27, 2007
I. S. Leevy Johnson


--------------------------               Director                                           March __, 2007
Angus B. Lafaye

s/R. C. McEntire, Jr.
--------------------------               Director                                           March 28, 2007
R. C. McEntire, Jr.

s/C. Whitaker Moore
--------------------------               Director                                           March 28, 2007
C. Whitaker Moore

s/Leon Joseph Pinner, Jr.
--------------------------               Director                                           March 27, 2007
Leon Joseph Pinner, Jr.


--------------------------               Director                                           March __, 2007
Joel A. Smith, III


--------------------------               Director                                           March __, 2007
Robert E. Staton, Sr.


--------------------------               Director                                           March __, 2007
William H. Stern

s/Joe E. Taylor, Jr.
--------------------------               Director                                           March 28, 2007
Joe E. Taylor, Jr.

s/Roger B. Whaley
--------------------------               President, Chief Executive Officer, Director       March 23, 2007
Roger B. Whaley
</TABLE>
                                       13
<PAGE>


                                  EXHIBIT INDEX

         Exhibit No. in
         Item 601 of
         Regulation S-B)                    Description

          3.1                 Articles of  Incorporation  of  Carolina  National
                              Corporation(1)

          3.2                 Bylaws of Carolina National Corporation(1)

          4                   Form of stock certificate(1)

          10.1                Form of Stock Warrant Agreement (revised)(2)

          10.2                Employment  Agreement  between  Carolina  National
                              Corporation and Roger B. Whaley(1)

          10.3                Carolina National Corporation 2003 Stock Option
                              Plan (3)

          10.4                Change  of  Control   Agreement   between Carolina
                              National Corporation and Harry R. Brown (4)

          10.5                Amended deferred fee plan for members of the board
                              of directors of the  Registrant and its subsidiary
                              Carolina National Bank and Trust Company,  who are
                              not employees of the Registrant, or Subsidiary (5)

          13                  Portions of the Annual Report to  Shareholders for
                              the Year Ended December 31, 2006

          21                  Subsidiaries of Carolina National Corporation (3)

          23                  Consent of Elliott Davis LLP

          31.1                13a-14(a)/15d-14(a)    Certifications   of   Chief
                              Executive Office

          31.2                13a-14(a)/15d-14(a)    Certifications   of   Chief
                              Financial Office

          32                  18 U.S.C. Section 1350 Certifications

(1)  Incorporated  by  reference  to  exhibits  to   Registrant's   Registration
     Statement on Form SB-2 (File No. 333-76512)

(2)  Incorporated  by  reference  to  exhibits  to   Registrant's   Registration
     statement on Form SB-2 (File No. 333-97397).

(3)  Incorporated by reference to exhibits to Registrant's Annual Report on Form
     10-KSB for the year ended December 31, 2003

(4)  Incorporated by reference to exhibits to Registrant's  Quarterly  Report an
     Form 10-QSB for the quarter ended March 31, 2006

(5)  Incorporated by reference to Registrant's  Current Report on Form 8-K filed
     July 5, 2006


                                       14