Category Template – Show Last Entry as Featured

Use WP_Query’s built in current_post counter in your loop:

while( have_posts() ):
    the_post();
    if( $wp_query->current_post == 0 ):
        // this is the first post in the loop
    else:
        // this is > first post
    endif;
endwhile;

EDIT w/html:

<?php
while( have_posts() ):
    the_post();
    if( $wp_query->current_post == 0 ):
        ?>
        featured post

        category description

        <ul>
        <?php
    else:
        ?>
        <li>post</li>
        <?php
    endif;
endwhile;
?>
</ul>