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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-15829
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1355866
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10200 DAVID TAYLOR DRIVE, CHARLOTTE, NC 28262-2373
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (704) 688-4300
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[ ]
As of May 11, 2001 the Registrant had outstanding 31,715,061 shares of
Common Stock, no par value.
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FIRST CHARTER CORPORATION
MARCH 31, 2001 FORM 10-Q
INDEX
Page
----
PART I Item 1. Financial Statements:
FINANCIAL Consolidated Balance Sheets at March 31, 2001 2
INFORMATION and December 31, 2000
Consolidated Statements of Income for the Three 3
Months Ended March 31, 2001 and 2000
Consolidated Statements of Shareholders' 4
Equity for the Three Months Ended
March 31, 2001 and 2000
Consolidated Statements of Cash Flows for the 5
Three Months Ended March 31, 2001 and 2000
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about 17
Market Risk
PART II
OTHER INFORMATION Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 6. Exhibits and Reports on Form 8-K 18
Signature 19
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CHARTER CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
MARCH 31 December 31
2001 2000
----------- -----------
(Dollars in thousands, except share data) (UNAUDITED)
ASSETS:
Cash and due from banks $ 67,770 $ 71,196
Federal funds sold 1,233 1,015
Interest bearing bank deposits 6,298 122,461
----------- -----------
Cash and cash equivalents 75,301 194,672
----------- -----------
Securities available for sale (cost of $864,597 at March 31, 2001 and
$437,684 at December 31, 2000; carrying amount of pledged collateral
at March 31, 2001, $160,988) 876,421 441,031
Loans 1,986,766 2,157,622
Less: Unearned income (281) (215)
Allowance for loan losses (28,049) (28,447)
----------- -----------
Loans, net 1,958,436 2,128,960
----------- -----------
Premises and equipment, net 87,309 76,666
Other assets 83,796 90,870
----------- -----------
TOTAL ASSETS $ 3,081,263 $ 2,932,199
----------- -----------
LIABILITIES:
Deposits, domestic:
Noninterest bearing demand $ 248,212 $ 242,983
Interest bearing 1,763,875 1,755,251
----------- -----------
Total deposits 2,012,087 1,998,234
----------- -----------
Other borrowings 696,134 570,024
Other liabilities 54,063 54,654
----------- -----------
TOTAL LIABILITIES 2,762,284 2,622,912
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock - no par value; authorized 2,000,000 shares; no shares
issued and outstanding -- --
Common stock - no par value; authorized 100,000,000 shares;
issued and outstanding 31,710,318 and 31,601,263 shares 152,874 151,486
Retained earnings 158,895 155,762
Accumulated other comprehensive income:
Unrealized gains on securities available for sale, net 7,210 2,039
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 318,979 309,287
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,081,263 $ 2,932,199
=========== ===========
See accompanying notes to consolidated financial statements.
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FIRST CHARTER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
FOR THE THREE MONTHS
ENDED MARCH 31
--------------------------------
(Dollars in thousands, except share and per share data) 2001 2000
----------- -----------
INTEREST INCOME:
Loans $ 43,816 $ 43,403
Federal funds sold 31 83
Interest bearing bank deposits 156 44
Securities 10,067 8,108
----------- -----------
Total interest income 54,070 51,638
----------- -----------
INTEREST EXPENSE:
Deposits 21,129 16,852
Federal funds purchased and securities
sold under agreements to repurchase 1,520 1,555
Federal Home Loan Bank and other borrowings 6,042 6,192
----------- -----------
Total interest expense 28,691 24,599
----------- -----------
NET INTEREST INCOME 25,379 27,039
PROVISION FOR LOAN LOSSES 750 1,970
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,629 25,069
NONINTEREST INCOME:
Service charges on deposit accounts 2,918 2,551
Trust income 775 680
Insurance and other fee income 2,954 2,560
Gain on sale of securities 267 152
Other 1,506 1,332
----------- -----------
Total noninterest income 8,420 7,275
----------- -----------
NONINTEREST EXPENSE:
Salaries and employee benefits 10,353 10,628
Occupancy and equipment 3,570 3,082
Data processing 596 911
Advertising 643 487
Postage and supplies 1,189 921
Professional services 1,164 821
Telephone 291 332
Other 2,237 2,649
----------- -----------
Total noninterest expense 20,043 19,831
----------- -----------
INCOME BEFORE INCOME TAXES 13,006 12,513
INCOME TAXES 4,162 3,944
----------- -----------
NET INCOME $ 8,844 $ 8,569
----------- -----------
NET INCOME PER SHARE:
Basic $ 0.28 $ 0.27
Diluted $ 0.28 $ 0.27
WEIGHTED AVERAGE SHARES:
Basic 31,696,764 31,245,099
Diluted 31,833,564 31,399,895
See accompanying notes to consolidated financial statements.
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FIRST CHARTER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Unaudited)
ACCUMULATED
COMMON STOCK OTHER
-------------------------- RETAINED COMPREHENSIVE
(Dollars in thousands, except share data) SHARES AMOUNT EARNINGS INCOME (LOSS) TOTAL
---------- -------- --------- -------------- ---------
BALANCE, DECEMBER 31, 1999 31,100,310 146,438 151,215 (7,385) 290,268
Comprehensive income:
Net income -- -- 8,569 -- 8,569
Unrealized gain on securities available
for sale, net -- -- -- 32 32
---------
Total comprehensive income 8,601
Cash dividends -- -- (3,316) -- (3,316)
Stock options exercised and Dividend
Reinvestment Plan stock issued 92,411 399 -- -- 399
Shares issued in connection with
business acquisition 122,263 2,025 -- -- 2,025
---------- -------- --------- ------- ---------
BALANCE, MARCH 31, 2000 31,314,984 $148,862 $ 156,468 $(7,353) $ 297,977
---------- -------- --------- ------- ---------
BALANCE, DECEMBER 31, 2000 31,601,263 151,486 155,762 2,039 309,287
Comprehensive income:
Net income -- -- 8,844 -- 8,844
Unrealized gain on securities available
for sale, net -- -- -- 5,171 5,171
---------
Total comprehensive income 14,015
Cash dividends -- -- (5,711) -- (5,711)
Stock options exercised and Dividend
Reinvestment Plan stock issued 109,055 1,388 -- -- 1,388
---------- -------- --------- ------- ---------
BALANCE, MARCH 31, 2001 31,710,318 $152,874 $ 158,895 $ 7,210 $ 318,979
========== ======== ========= ======= =========
See accompanying notes to consolidated financial statements.
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FIRST CHARTER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
THREE MONTHS
Ended March 31
----------------------------
(Dollars in thousands) 2001 2000
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,844 $ 8,569
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 750 1,970
Depreciation 1,669 1,625
Premium amortization and discount accretion, net (66) 20
Net gain on securities available for sale transactions (267) (152)
Net gain on sale of other real estate (69) (49)
Net loss on sale of premises and equipment 18 4
Origination of mortgage loans held for sale (41,123) (15,821)
Proceeds from sale of mortgage loans held for sale 35,021 15,332
Decrease (increase) in other assets 2,987 (9,212)
Increase (decrease) in other liabilities (590) 957
--------- --------
Net cash provided by operating activities 7,174 3,243
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 40,031 37,391
Proceeds from maturities of securities available for sale 40,337 8,934
Purchase of securities available for sale (339,956) (35,580)
Proceeds from issuer calls and maturities of securities held to maturity -- 758
Net decrease (increase) in loans 8,859 (82,806)
Proceeds from sales of other real estate 876 593
Net purchases of premises and equipment (12,332) (7,776)
--------- --------
Net cash used in investing activities (262,185) (78,486)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand, money market and savings accounts 5,094 15,586
Net increase in certificates of deposit 8,759 24,103
Net increase in securities sold under repurchase
agreements and other borrowings 126,110 25,515
Proceeds from issuance of common stock 1,388 399
Dividends paid (5,711) (3,316)
--------- --------
Net cash provided by financing activities 135,640 62,287
--------- --------
Net decrease in cash and cash equivalents (119,371) (12,956)
Cash and cash equivalents at beginning of period 194,672 97,668
--------- --------
Cash and cash equivalents at end of period $ 75,301 $ 84,712
--------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 29,713 $ 24,019
Cash paid for income taxes -- 900
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Transfer of loans and premises and equipment to other real estate owned 25 397
Unrealized gain on securities available for sale
(net of tax effect of $3,306 and $20 for the three months ended
March 31, 2001 and 2000, respectively) 5,171 32
Issuance of common stock for business acquisitions -- 2,025
Loans securitized and retained in the available for sale portfolio 166,992 --
See accompanying notes to consolidated financial statements.
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FIRST CHARTER CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
First Charter Corporation (the "Corporation") is a bank holding company
established as a North Carolina Corporation in 1983. Its principal asset is the
stock of its subsidiary, First Charter National Bank ("FCNB" or the "Bank").
FCNB is a full service national bank which operates 52 financial centers, five
insurance offices and 99 ATMs (automated teller machines). These facilities are
located in Ashe, Alleghany, Avery, Buncombe, Cabarrus, Cleveland, Guilford,
Iredell, Jackson, Lincoln, McDowell, Mecklenburg, Rowan, Rutherford, Swain,
Transylvania and Union counties of North Carolina. Through its subsidiary First
Charter Brokerage Services, the Bank offers full service and discount brokerage
services, insurance and annuity sales and financial planning services pursuant
to a third party arrangement with UVEST Investment Services. The Bank also
operates four other subsidiaries: First Charter Insurance Services, Inc., First
Charter Realty Investment, Inc., FCNB Real Estate, Inc., and First Charter
Leasing, Inc. First Charter Insurance Services, Inc. is a North Carolina
corporation formed to meet the insurance needs of businesses and individuals
throughout the Charlotte metropolitan area. First Charter Realty Investment,
Inc. is a Delaware corporation organized as a holding company for FCNB Real
Estate, Inc. a real estate investment trust organized in North Carolina. First
Charter Leasing, Inc is a North Carolina corporation, which leases commercial
equipment. The Bank also has a majority ownership in Lincoln Center through the
Bank's investment in Mallard Creek, LLC. Lincoln Center is a three-story office
building occupied in part by a branch of FCNB.
NOTE ONE - ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the
Corporation and its wholly owned subsidiary, FCNB. In consolidation, all
intercompany accounts and transactions have been eliminated.
The information contained in the consolidated financial statements is
unaudited. The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements, as well as the amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
The information furnished in this report reflects all adjustments which
are, in the opinion of management, necessary to present a fair statement of the
financial condition and the results of operations for interim periods. All such
adjustments were of a normal recurring nature. Certain amounts reported in prior
periods have been reclassified to conform with the current period presentation.
Such reclassifications have no effect on net income or shareholders' equity as
previously reported.
Accounting policies followed in the presentation of interim financial
results are presented on pages 37 to 41 of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 2000.
Statement of Financial Accounting Standards No. 133 (SFAS No. 133),
"Accounting for Derivative Instruments and Hedging Activities," establishes
accounting and reporting standards for derivatives and hedging activities. It
requires that all derivatives be recognized as assets or liabilities on the
balance sheet and that such instruments be carried at fair market value through
adjustments to either other comprehensive income or current earnings or both, as
appropriate. SFAS No. 133 was originally effective for financial statements
issued for all fiscal quarters of fiscal years beginning after June 15, 1999.
The implementation date of SFAS No. 133 was delayed by Statement of Financial
Accounting Standards No. 137 "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133" to the
first fiscal quarters of fiscal years beginning after June 15, 2000.
Accordingly, the Corporation adopted SFAS No. 133 on January 1, 2001. The impact
to the Corporation upon adoption was immaterial.
NOTE TWO - NET INCOME PER SHARE
Basic net income per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding for the quarter.
Diluted net income per share reflects the potential dilution that could occur if
all of the currently outstanding stock options on the Corporation's common stock
are fully exercised. The numerators of the basic net income per share
computations are the same as the numerators of the diluted net
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income per share computations for all periods presented. A reconciliation of the
denominator of the basic net income per share computations to the denominator of
the diluted net income per share computations is as follows:
THREE MONTHS
ENDED MARCH 31
------------------------------
2001 2000
---------- ----------
Basic net income per share denominator:
Weighted average number of
common shares outstanding 31,696,764 31,245,099
Dilutive effect arising from
assumed exercise of stock options 136,800 154,796
---------- ----------
Diluted net income per share denominator 31,833,564 31,399,895
========== ==========
The Corporation paid cash dividends of $0.18 and $0.17 per share during
the quarters ended March 31, 2001 and 2000, respectively.
NOTE THREE - MERGERS AND ACQUISITIONS
(a) Business Insurers of Guilford County. On September 1, 2000,
Business Insurers of Guilford County ("Business Insurers") was merged into First
Charter Insurance Services. As a result of this merger, approximately 283,000
shares of the Corporation's common stock were issued. This merger was accounted
for as a pooling of interests, and accordingly all financial results for prior
periods have been restated to include the financial results of both entities. In
connection with the Business Insurers merger, the Corporation recorded pre-tax
restructuring charges and merger-related expenses of approximately $575,000
($425,000 after-tax), substantially all of which had been incurred at March 31,
2001.
(b) Carolina First BancShares, Inc. On April 4, 2000, Carolina First
BancShares, Inc. ("Carolina First" or "CFBI") was merged into the Corporation
(the "Merger"). In accordance with the terms of the Merger Agreement, each share
of the $2.50 par value common stock of Carolina First was converted into 2.267
shares of the no par value common stock of the Corporation, resulting in the net
issuance of approximately 13.3 million common shares to the former Carolina
First shareholders. The Merger was accounted for as a pooling of interests, and
accordingly all financial results for prior periods have been restated to
include the financial results of both entities. In connection with this
transaction, the Corporation recorded pre-tax restructuring charges and
merger-related expenses of approximately $15.7 million ($11.9 million
after-tax).
Carolina First was a bank holding company operating 31 branch offices
principally in the greater Charlotte, North Carolina area. At April 4, 2000,
Carolina First had total consolidated assets of approximately $791.7 million,
total consolidated loans of approximately $545.9 million, total consolidated
deposits of approximately $674.8 million and total consolidated shareholders'
equity of approximately $67.5 million.
The following table indicates the primary components of the Carolina
First and Business Insurers restructuring charges and merger-related expenses,
including the amounts incurred through March 31, 2001, and the amounts remaining
as accrued expenses in other liabilities at March 31, 2001. Substantially all
of the remaining accrual at March 31, 2001 relates to the Carolina First merger.
Total Restructuring Incurred Remaining
Charges and Merger- through accrual at
(Dollars in thousands) Related Expenses March 31, 2001 March 31, 2001
------------------- -------------- --------------
Professional costs $ 3,907 $ 3,857 $ 50
Employee related costs 5,336 3,851 1,485
Equipment writedowns 4,125 4,125 --
Conversion costs 1,114 1,114 --
Lease buyouts 909 536 373
Printing and filing fees 187 187 --
Other 672 672 --
------- ------- ------
Total $16,250 $14,342 $1,908
======= ======= ======
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The employee-related costs include accruals for payments to be made in
connection with the involuntary termination of approximately 130 employees who
had been notified that their positions were redundant within the combined
organizations and therefore no longer needed. These personnel were terminated
from various areas of the Corporation. Other restructuring activities included
closing and consolidating 14 branch facilities that were redundant,
consolidating back-office functions and converting all of Carolina First's
systems to the Corporation systems. The remaining restructuring charge accrual
consists of lease contract payments on closed facilities to be paid through 2010
and employee contract payments to be paid through 2007. The Corporation does not
currently anticipate any additional material merger-related expenses, or any
material changes to the restructuring charge accrual, in 2001 related to the
Merger.
NOTE FOUR - IMPAIRED LOANS
The recorded investment in impaired loans was $18.5 million (all of
which was on nonaccrual status) and $17.7 million (all of which was on
nonaccrual status) at March 31, 2001 and December 31, 2000, respectively. The
related allowance for loan losses on impaired loans was $4.4 million and $4.7
million at March 31, 2001 and December 31, 2000, respectively. The average
recorded investment in impaired loans for the three months ended March 31, 2001
and 2000 was $18.6 million and $9.2 million, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction
with the consolidated financial statements of the Corporation and the notes
thereto, as restated to reflect the Corporation's various mergers.
The following discussion contains certain forward-looking statements
about the Corporation's financial condition and results of operations, which are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's judgment only as of the date hereof. The
Corporation undertakes no obligation to publicly revise these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
Factors that may cause actual results to differ materially from these
forward-looking statements include, but are not limited to, the passage of state
or federal legislation or regulation applicable to the Corporation's operations,
the Corporation's ability to accurately predict the adequacy of the loan loss
allowance needs using its present risk grading system, the ability to generate
liquidity if necessary to meet loan demand or other cash needs, and the ability
to manage unforeseen domestic and global rapid changes in interest rates.
OVERVIEW
The Corporation is a regional financial services company with assets of
$3.08 billion and is the holding company for First Charter National Bank
("FCNB"). FCNB operates 52 financial centers, five insurance offices and 99 ATMs
located in 17 counties throughout the western half of North Carolina. FCNB
provides businesses and individuals with a broad range of financial services,
including banking, comprehensive financial planning, funds management,
investments, insurance, mortgages and a full array of employee benefit programs.
The Corporation's results of operations and financial position are
described in the following sections.
Refer to TABLE ONE for quarterly selected financial data.
EARNINGS SUMMARY
Net income amounted to $8.8 million, or $0.28 per diluted common share
for the three months ended March 31, 2001, compared to $8.6 million, or $0.27
per diluted common share for the three months ended March 31, 2000, representing
an increase in net income of $0.2 million. The increase in net income is
primarily attributable to a $1.2 million decrease in the provision for loan
losses and a $1.1 million increase in noninterest income, offset by a $1.7
million decrease in net interest income, a $0.2 million increase in noninterest
expense and a $0.2 million increase in income taxes. The items affecting net
income are discussed further in the following sections.
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TABLE ONE
SELECTED FINANCIAL DATA
FOR THE THREE MONTHS
ENDED MARCH 31
---------------------------------
(Dollars in thousands, except amounts) 2001 2000
----------- -----------
INCOME STATEMENT
Interest income $ 54,070 $ 51,638
Interest expense 28,691 24,599
----------- -----------
Net interest income 25,379 27,039
Provision for loan losses 750 1,970
Noninterest income 8,420 7,275
Noninterest expense 20,043 19,831
----------- -----------
Income before income taxes 13,006 12,513
Income taxes 4,162 3,944
----------- -----------
Net income $ 8,844 $ 8,569
=========== ===========
PER COMMON SHARE
Basic net income $ 0.28 $ 0.27
Diluted net income 0.28 0.27
Cash dividends declared (1) 0.18 0.17
Period-end book value 10.06 9.52
Average shares outstanding - basic 31,696,764 31,245,099
Average shares outstanding - diluted 31,833,564 31,399,895
RATIOS
Return on average shareholders' equity (2) 11.46% 11.70%
Return on average assets (2) 1.24 1.28
Net interest margin (2) 3.90 4.39
Average loans to average deposits 103.56 109.69
Average equity to average assets 10.85 10.97
Efficiency ratio (3) 58.90 57.31
SELECTED PERIOD END BALANCES
Securities available for sale $ 876,421 $ 476,017
Securities held to maturity -- 35,324
Loans, net 1,958,436 2,051,820
Allowance for loan losses 28,049 25,979
Total assets 3,081,263 2,754,178
Deposits 2,012,087 1,856,180
Borrowings 696,134 567,536
Total liabilities 2,762,284 2,456,201
Total shareholders' equity 318,979 297,977
=========== ===========
(1) First Charter Corporation historical cash dividends declared.
(2) Annualized
(3) Noninterest expense divided by the sum of taxable equivalent net interest
income plus noninterest income less gain on sale of securities.
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NET INTEREST INCOME
An analysis of the Corporation's net interest income on a
taxable-equivalent basis and average balance sheets for the three months ended
March 31, 2001 and 2000 are presented in TABLE TWO. The changes in net interest
income from March 31, 2000 to March 31, 2001 are analyzed in TABLE THREE.
Net interest income, the difference between total interest income and total
interest expense, is the Corporation's principal source of earnings. For the
three months ended March 31, 2001, net interest income amounted to $25.4
million, a decrease of approximately 6.1 percent from net interest income of
$27.0 million for the same period in 2000. The decrease was driven by the
slowing economy, which effectively decreased loan demand and compressed the net
interest margin.
Average interest earning assets increased approximately $157.4 million to
$2.68 billion for the three months ended March 31, 2001, compared to $2.52
billion for the three months ended March 31, 2000. This increase is primarily
due to the $107.0 million increase in the Corporation's average securities
available for sale portfolio from $513.5 million for the three months ended
March 31, 2000 to $620.5 million for the three months ended March 31, 2001. The
increase was primarily due to the purchase of approximately $268 million in
securities available for sale, net of sales, maturities, calls and paydowns,
principally in the form of mortgage backed securities, as well as the
securitization of $167.0 million of mortgage loans during the first quarter of
2001. Average interest earning assets also increased due to growth in the
Corporation's average loan portfolio, which increased $45.4 million. The
increase in average loans was offset by the securitization of $167.0 million of
mortgage loans during the first quarter of 2001. The decrease in average yield
on interest earning assets to 8.25 percent for the three months ended March 31,
2001, compared to 8.32 percent for the same 2000 period, resulted principally
from the decrease in the average prime rate during 2001 from 8.68 percent for
the three months ended March 31, 2000 to 8.32 percent for the three months ended
March 31, 2001. The decrease in the average prime rate is attributable to the
Federal Reserve 150 basis point decrease in the prime rate during the first
quarter of 2001. The average yield earned on loans was 8.72 percent for the
three months ended March 31, 2001, compared to 8.75 percent for the same 2000
period.
In addition to the increase in average interest earning assets, the
Corporation experienced an increase in average interest-bearing liabilities of
$146.9 million, to $2.29 billion for the three months ended March 31, 2001, due
to the use of Federal Home Loan Bank ("FHLB") advances and increases in deposits
to fund securities purchases. The average rate paid on interest bearing
liabilities increased during the period to 5.09 percent for the three months
ended March 31, 2001, compared to 4.62 percent in the same 2000 period,
primarily due to a shift in the deposit mix. The average rate paid on
interest-bearing deposits was 4.94 percent for the three months ended March 31,
2001, up from 4.27 percent in the same 2000 period. The rate paid on other
borrowed funds decreased to 5.57 percent for the three months ended March 31,
2001 compared to 5.64 percent in the same 2000 period.
The net interest yield (tax adjusted net interest income divided by average
interest-earning assets) decreased 49 basis points to 3.90 percent for the three
months ended March 31, 2001, compared to 4.39 percent in the same 2000 period.
This reflects the impact of higher levels of borrowings and competitive forces
related to loan and deposit pricing. Management believes that further
compression of the net interest margin will continue at least into the second
quarter of 2001.
Management assesses interest rate risk based on an earnings simulation
model. The Corporation's balance sheet is liability sensitive, meaning that in a
given period there will be more liabilities than assets subject to immediate
repricing as market rates change. Assuming a 300 basis point pro-rata increase
in interest rates over a twelve-month period, the Corporation's sensitivity to
interest rate risk would negatively impact net interest income by approximately
1.4 percent of net interest income at March 31, 2001. Assuming a 300 basis point
pro-rata decrease in interest rates over a twelve-month period, the
Corporation's sensitivity to interest rate risk would positively impact net
interest income by approximately 1.7 percent of net interest income at March 31,
2001. Both scenarios are within Management's acceptable range. The
Corporation's balance sheet is structured in such a way that in the long term a
decrease in interest rates should have a positive effect on net income.
However, the short term impact should have a negative effect on net income as
variable rate assets reprice frequently and are therefore immediately impacted
by decreases in interest rates while maturing liabilities take longer to
reprice. In an increasing interest rate environment the long term impact on
net income should be negative. However, the short term impact should have a
positive effect on net income as variable rate assets reprice frequently and
are therefore immediately impacted by increases in interest rates while
maturing liabilities take longer to reprice. In the future, the Corporation is
considering the limited use of interest rate swaps, caps, floors or other
derivative products to assist in interest rate risk management.
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The following table includes for the three months ended March 31, 2001 and
2000 interest income on interest earning assets and related average yields, as
well as interest expense on interest bearing liabilities and related average
rates paid. In addition, the table includes the net yield on average earning
assets. Average balances were calculated based on daily averages.
TABLE TWO
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS
FIRST QUARTER 2001 First Quarter 2000
INTEREST AVERAGE Interest Average
AVERAGE INCOME/ YIELD/RATE Average Income/ Yield/Rate
(Dollars in thousands) BALANCE EXPENSE PAID (5) Balance Expense Paid (5)
---------- -------- ---------- ---------- -------- ----------
INTEREST EARNING ASSETS:
Loans(1)(2)(3) $2,043,217 $43,931 8.72% $1,997,860 $43,478 8.75%
Securities - taxable 528,309 8,976 6.80 418,263 7,058 6.79
Securities - nontaxable 92,213 1,473 6.39 95,238 1,416 5.98
Federal funds sold 1,881 31 6.74 4,628 83 7.24
Interest bearing bank deposits 10,816 156 5.86 3,064 44 5.82
---------- ------- ---- ---------- ------- ----
Total earning assets (4) 2,676,436 54,567 8.25 2,519,053 52,079 8.32
---------- ------- ---- ---------- ------- ----
Cash and due from banks 67,668 69,204
Other assets 140,599 96,825
---------- ------- ---- ---------- ------- ----
Total assets $2,884,703 $2,685,082
========== ======= ==== ========== ======= ====
INTEREST BEARING LIABILITIES:
Demand deposits 488,981 3,122 2.59 502,721 3,270 2.62
Savings deposits 118,862 590 2.01 167,503 1,182 2.84
Other time deposits 1,127,523 17,417 6.26 916,199 12,400 5.44
Other borrowings 550,797 7,562 5.57 552,831 7,747 5.64
---------- ------- ---- ---------- ------- ----
Total interest bearing liabilities 2,286,163 28,691 5.09 2,139,254 24,599 4.62
---------- ------- ---- ---------- ------- ----
NONINTEREST BEARING SOURCES:
Noninterest bearing deposits 237,636 234,868
Other liabilities 47,823 16,518
Shareholders' equity 313,081 294,442
---------- ------- ---- ---------- ------- ----
Total liabilities and
shareholders' equity $2,884,703 $2,685,082
========== ======= ==== ========== ======= ====
Net interest spread 3.16 3.70
Impact of noninterest bearing sources 0.74 0.69
---------- ------- ---- ---------- ------- ----
Net interest income/
yield on earnings assets $25,876 3.90% $27,480 4.39%
========== ======= ==== ========== ======= ====
(1) The preceding analysis takes into consideration the principal amount of
nonaccruing loans and only income actually collected on such loans.
(2) Average loan balances are shown net of unearned income.
(3) Includes amortization of deferred loan fees of approximately $679 and $878
for the first quarter of 2001 and 2000, respectively.
(4) Yields on nontaxable securities and loans are stated on a
taxable-equivalent basis, assuming a Federal tax rate of 35 percent, applicable
state taxes and TEFRA disallowances for the first quarter of 2001 and 2000. The
adjustments made to convert to a taxable-equivalent basis were $497 and $441
for the first quarter of 2001 and 2000, respectively.
(5) Annualized
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13
TABLE THREE
VOLUME AND RATE VARIANCE ANALYSIS
FROM MARCH 31, 2000 TO MARCH 31, 2001
---------------------------------------------------------
INCREASE (DECREASE)
DUE TO CHANGE IN (1)
---------------------------------------------------------
2000 2001
INCOME/ INCOME/
(DOLLARS IN THOUSANDS) EXPENSE RATE VOLUME EXPENSE
------- ------- ------- -------
INTEREST INCOME:
Loans $43,478 $ (528) $ 981 $43,931
Securities - taxable 7,058 55 1,863 8,976
Securities - nontaxable 1,416 104 (47) 1,473
Federal funds sold 83 (4) (48) 31
Interest bearing bank deposits 44 -- 112 156
------- ------- ------- -------
TOTAL INTEREST INCOME $52,079 $ (373) $ 2,861 $54,567
======= ======= ======= =======
INTEREST EXPENSE:
Demand deposits $ 3,270 $ (59) $ (89) $ 3,122
Savings deposits 1,182 (300) (292) 590
Other time deposits 12,400 1,955 3,062 17,417
Other borrowings 7,747 (157) (28) 7,562
------- ------- ------- -------
TOTAL INTEREST EXPENSE 24,599 1,439 2,653 28,691
------- ------- ------- -------
NET INTEREST INCOME $27,480 $(1,812) $ 208 $25,876
======= ======= ======= =======
(1) The changes for each category of income and expense are divided between the
portion of change attributable to the variance in rate or volume for that
category. The amount of change that cannot be separated is allocated to each
variance proportionately.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three months ended March 31, 2001
amounted to $0.8 million, compared to $2.0 million for the same period in 2000.
The decrease in the provision for the three months ended March 31, 2001 as
compared to the same period in 2000 was due to lower loan growth and lower net
charge-offs. Gross loans decreased $3.9 million during the first quarter of
2001, excluding the $167.0 million loan securitization, compared to an increase
in gross loans of $83.8 million during the same 2000 period.
Net charge-offs for the three months ended March 31, 2001 were $0.7 million
or 0.15 percent of average loans compared to $1.0 million or 0.20 percent of
average loans for the same period in 2000. The decrease in net charge-offs in
2001 was primarily due to one large commercial loan charge-off during the first
quarter of 2000.
NONINTEREST INCOME
Noninterest income for the first quarter of 2001 increased 16 percent to
$8.4 million compared to $7.3 million for the same period in 2000. This increase
was driven primarily by a 14 percent increase in service charge income on
deposit accounts due to re-pricing opportunities resulting from the Carolina
First acquisition. In addition, the declining rate environment has increased
mortgage origination volume. This has resulted in additional loan sales to the
secondary market and correspondingly greater fee income. Growth of First Charter
Insurance Services and financial management income also increased noninterest
income.
NONINTEREST EXPENSE
Noninterest expense for the first quarter of 2001 totaled $20.0 million
compared to $19.8 million for the same period in 2000. This increase was
primarily attributable to operating costs associated with the four financial
centers acquired during the fourth quarter of 2000 and to an increase in
occupancy and equipment expense related to beginning the move into the new First
Charter Center headquarters facility. These increases were partially offset by
lower salaries and employee benefits expenses due to synergies realized as part
of the Carolina First acquisition.
INCOME TAXES
Total income tax expense for the three months ended March 31, 2001 was $4.2
million for an effective tax rate of 32.0 percent compared to $3.9 million for
an effective tax rate of 31.5 percent for the same period in 2000.
12
14
FINANCIAL CONDITION
SUMMARY
Total assets at March 31, 2001 amounted to $3.08 billion, compared to $2.93
billion at December 31, 2000 and $2.75 billion at March 31, 2000. Net loans at
March 31, 2001 amounted to $1.96 billion, compared to $2.13 billion at December
31, 2000 and $2.03 billion at March 31, 2000. This decrease from prior periods
was due to the securitization of $167.0 million of mortgage loans in February
2001. These loans were securitized because of a decrease in interest rates and
the resulting impact of that condition of the Corporation's interest rate risk.
The securitized mortgage loans are now classified as mortgage backed securities
in our available for sale portfolio.
The securities available for sale portfolio increased to $876.4 million at
March 31, 2001, compared to $441.0 million at December 31, 2000, and $476.0
million at March 31, 2000. The increase in securities available for sale was due
to the $167.0 million mortgage loan securitization, as well as purchases of
securities available for sale made to increase our interest earning assets. The
carrying value of securities available for sale was approximately $11.8 million
above their amortized cost at March 31, 2001, which represents gross unrealized
gains of $12.9 million and gross unrealized losses of $1.1 million. In
conjunction with the Merger, the Corporation transferred $35.3 million of
Carolina First's securities classified as held to maturity to available for sale
due to the significance of the impact on the Corporation's interest rate
forecast as compared to corporate policy.
Total deposits at March 31, 2001 amounted to $2.01 billion, compared to
$2.00 billion at December 31, 2000 and $1.86 billion at March 31, 2000.
Shareholders' equity at March 31, 2001 was $319.0 million, which represented a
book value per share of $10.06 and an equity-to-assets percentage of 10.35
percent. The securities available for sale portfolio's unrealized net gain has
increased from $2.4 million (net of tax) at December 31, 2000 to an unrealized
net gain of $7.2 million (net of tax) at March 31, 2001.
NONPERFORMING ASSETS
The total of nonperforming assets at March 31, 2001 increased to $30.6
million compared to $29.6 million and $11.6 million at December 31, 2000 and
March 31, 2000, respectively. As a percentage of total assets, nonperforming
assets have decreased to 0.99 percent at March 31, 2001 compared to 1.01 percent
at December 31, 2000 and increased compared to 0.42 percent at March 31, 2000,
respectively. The increase over March 31, 2000 was primarily due to the effect
slower economic growth on some customers.
Total nonperforming assets and loans 90 days or more past due and still
accruing interest at March 31, 2001 were $30.7 million or 1.54 percent of total
loans and other real estate, compared to $30.0 million or 1.37 percent of total
loans and other real estate at December 31, 2000. These ratios were impacted by
the first quarter 2001 securitization of $167.0 million of mortgage loans. In
addition, total nonperforming assets and loans 90 days or more past due and
still accruing have increased during the period due to an increase in nonaccrual
loans of $1.8 million mitigated by a $0.8 million decrease in other real estate
owned and a $0.3 million decrease in loans 90 days or more past due and still
accruing. The increase in nonaccrual loans was not concentrated in any one
industry and was primarily due to the effect of slower economic growth on some
customers. The components of nonperforming and loans 90 days or more past due
and still accruing are presented in the table below:
TABLE FOUR
NONPERFORMING AND PROBLEM ASSETS
MARCH 31 December 31
(Dollars in thousands) 2001 2000
-------- -----------
Nonaccrual loans $28,384 $26,587
Other real estate 2,207 2,989
------- -------
Total nonperforming assets 30,591 29,576
------- -------
Loans 90 days or more past due
and still accruing interest 154 430
------- -------
Total nonperforming assets and loans 90 days or
more past due and still accruing interest $30,745 $30,006
======= =======
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15
ALLOWANCE FOR LOAN LOSSES
All estimates of the loan portfolio risk, including the adequacy of the
allowance for loan losses, are subject to general and local economic conditions,
among other factors, which are unpredictable and beyond the Corporation's
control. Since a significant portion of the loan portfolio is comprised of real
estate loans and loans to area businesses, the Corporation is subject to
continued risk that the real estate market and economic conditions could
continue to change and could result in future losses and require increases in
the provision for loan losses.
Management currently uses several measures to assess and control the loan
portfolio risk. For example, all loans over a certain dollar amount must receive
an in-depth review by an analyst in the Bank's Credit Department. Any issues
regarding risk assessments of those credits are addressed by the Bank's Senior
Risk Managers and factored into management's decision to originate or renew the
loan. Furthermore, large commitments are reviewed by both a Board of Directors
Loan Committee and an Executive Loan Committee comprised of executive
management, the chief credit officer and senior lending officers of the Bank.
The Corporation also continues to employ an independent third party risk
assessment group to review the underwriting, documentation and risk grading
analysis. This third party group reviews all loan relationships above a certain
dollar amount and a sampling of all other credits. The third party's evaluation
and report is shared with Executive Management, the Loan and Audit Committee of
the Bank and, ultimately, is reported to the Board of Directors of the Bank and
the Corporation.
Management uses the information developed from the procedures described
above in evaluating and grading the loan portfolio. This continual grading
process is used to monitor the credit quality of the loan portfolio and to
assist management in determining the appropriate levels of the allowance for
loan losses.
As part of the continual grading process, individual commercial loans are
assigned a credit risk grade based on their credit quality, which is subject to
change as conditions warrant. Any changes in those risk assessments as
determined by the outside risk assessment group, regulatory examiners or the
Corporation's Risk Management Division are also considered in the allowance for
loan losses analysis. Management considers certain commercial loans within
weaker credit risk grades to be individually impaired and measures such
impairment based upon the value of the collateral. An estimate of an allowance
is made for all other graded loans in the portfolio based on their assigned
credit risk grade, type of loan and other matters related to credit risk. In the
allowance for loan loss analysis process, the Bank also aggregates non-graded
loans into pools of similar credits and reviews the historical loss experience
associated with these pools as additional criteria to allocate the allowance to
each category.
At March 31, 2001 the allowance for loan losses was $28.0 million or 1.41
percent of gross loans compared to $26.0 million or 1.27 percent at March 31,
2000. The increase in the allowance for loan losses as a percentage of gross
loans is primarily attributable to the mortgage loan securitization, which
removed $417,000 of allowance for loan losses when the loans were securitized
and reclassified from loans into securities available for sale. Securitized
loans consisted of residential mortgage loans, which generally have a lower
percentage of allocated allowance for loan losses. TABLE FIVE provides the
changes in the allowance for loan losses for the three months ended March 31,
2001 and 2000.
Management considers the allowance for loan losses adequate to cover
inherent losses in the Bank's loan portfolio as of the date of the financial
statements. Management believes it has established the allowance in
consideration of the current economic environment. While management uses the
best information available to make evaluations, future additions to the
allowance may be necessary based on changes in economic and other conditions.
Additionally, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowances for loan losses.
Such agencies may require the recognition of adjustments to the allowances based
on their judgments of information available to them at the time of their
examinations.
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16
TABLE FIVE
ALLOWANCE FOR LOAN LOSSES
THREE MONTHS
ENDED MARCH 31
--------------------------------
(Dollars in thousands) 2001 2000
----------- ----------
BALANCE, JANUARY 1 $ 28,447 $ 25,002
----------- ----------
LOAN CHARGE-OFFS:
Commercial, financial and agricultural 454 792
Real estate - construction -- --
Real estate - mortgage -- 87
Installment 496 396
----------- ----------
Total loans charged-off 950 1,275
----------- ----------
RECOVERIES OF LOANS PREVIOUSLY CHARGED-OFF:
Commercial, financial and agricultural 80 175
Real estate - construction -- --
Real estate - mortgage 54 12
Installment 85 95
----------- ----------
Total recoveries of loans previously charged-off 219 282
----------- ----------
Net charge-offs 731 993
----------- ----------
Provision for loan losses 750 1,970
Adjustment for loan securitization (417) --
----------- ----------
BALANCE, MARCH 31 $ 28,049 $ 25,979
=========== ==========
Average loans, net of unearned
income $ 2,043,217 $1,997,860
Net charge-offs to average loans (annualized) 0.15% 0.20%
Allowance for loan losses to
gross loans at year-end 1.41 1.27
=========== ==========
LIQUIDITY
The Bank derives a major source of its liquidity from its core deposit
base. Liquidity is further provided by loan repayments, brokered deposits,
maturities in the securities available for sale portfolio, the ability to secure
public deposits, the availability of federal fund lines and repurchase
agreements at correspondent banks and the ability to borrow from the Federal
Reserve Bank ("FRB") discount window. In addition to these sources, the Bank is
a member of the Federal Home Loan Bank ("FHLB") System, which provides access to
FHLB lending sources. At March 31, 2001, the Bank had a line of credit with the
FHLB of $566.6 million, with $544.8 million advanced to the Bank and $21.8
million remaining available. Another source of liquidity is the securities in
the available for sale portfolio, which may be sold in response to liquidity
needs. The Bank's loan-to-deposit ratio at March 31, 2001 was 0.99 percent
compared to 1.08 percent at December 31, 2000. Management believes the Bank's
sources of liquidity are adequate to meet operating needs and deposit withdrawal
requirements.
CAPITAL RESOURCES
At March 31, 2001, total shareholders' equity was $319.0 million,
representing a book value of $10.06 per share, compared to $309.3 million, or a
book value of $9.79 per share at December 31, 2000. The increase was primarily
due to net earnings (net income less dividends) of $3.1 million combined with
the recognition of $5.2 million after-tax unrealized gains on available for sale
securities and the receipt of $1.4 million from the sale of approximately
109,000 shares of common stock issued for stock options and Dividend
Reinvestment Plans.
At March 31 2001, the Corporation and the Bank were in compliance with all
existing capital requirements. The most recent notifications from the
Corporation's and the Bank's various regulators categorized the Corporation and
the Bank as well capitalized under the regulatory framework for prompt
corrective action. There are no events or conditions since those notifications
that management believes have changed either of the entities' categories. The
Corporation's capital requirements are summarized in the table below:
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17
RISK-BASED CAPITAL
--------------------------------------------------------------
LEVERAGE CAPITAL TIER 1 CAPITAL TOTAL CAPITAL
---------------------------- ---------------------------- ----------------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENTAGE (1) AMOUNT PERCENTAGE (2) AMOUNT PERCENTAGE (2)
-------- -------------- -------- -------------- -------- --------------
Actual $292,984 10.22% $292,984 13.52% $320,510 14.79%
Required 114,635 4.00 86,678 4.00 173,355 8.00
Excess 178,349 6.22 206,306 9.52 147,155 6.79
(1) Percentage of total adjusted average assets. The FRB minimum leverage ratio
requirement is 3 percent to 5 percent, depending on the institution's
composite rating as determined by its regulators. The FRB has not advised
the Corporation of any specific requirements applicable to it.
(2) Percentage of risk-weighted assets.
REGULATORY RECOMMENDATIONS
Management is not presently aware of any current recommendations to the
Corporation or to the Bank by regulatory authorities which, if they were to be
implemented, would have a material adverse effect on the Corporation's or the
Bank's liquidity, capital resources, or operations.
ACCOUNTING AND REGULATORY MATTERS
Statement of Financial Accounting Standards No. 133 (SFAS No. 133),
"Accounting for Derivative Instruments and Hedging Activities," establishes
accounting and reporting standards for derivatives and hedging activities. It
requires that all derivatives be recognized as assets or liabilities on the
balance sheet and that such instruments be carried at fair market value through
adjustments to either other comprehensive income or current earnings or both, as
appropriate. SFAS No. 133 was originally effective for financial statements
issued for all fiscal quarters of fiscal years beginning after June 15, 1999.
The implementation date of SFAS No. 133 was delayed by Statement of Financial
Accounting Standards No. 137 "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133" to the
first fiscal quarters of fiscal years beginning after June 15, 2000.
Accordingly, the Corporation adopted SFAS No. 133 on January 1, 2001. The impact
to the Corporation upon adoption was immaterial.
In September 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 140 (SFAS No. 140), "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities- a replacement of FASB Statement 125", which revises the criteria
for accounting for securitizations and other transfers of financial assets and
collateral, and introduces new disclosures. The enhanced disclosure requirements
are effective for year-end 2000. The other provisions of SFAS No. 140 apply
prospectively to transfers of financial assets and extinguishments of
liabilities occurring after March 31, 2001. Accordingly, the Corporation adopted
SFAS No. 140 on April 1, 2001. The impact to the Corporation upon adoption was
immaterial.
From time to time, the FASB issues exposure drafts for proposed statements
of financial accounting standards. Such exposure drafts are subject to comment
from the public, to revisions by the FASB and to final issuance by the FASB as
statements of financial accounting standards. Management considers the effect of
the proposed statements on the consolidated financial statements of the
Corporation and monitors the status of changes to and proposed effective dates
of exposure drafts.
16
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table presents the scheduled maturity of market risk
sensitive instruments at March 31, 2001:
MARKET RISK
(Dollars in thousands)
MATURING IN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS THEREAFTER TOTAL
---------- -------- -------- -------- -------- ---------- ----------
ASSETS:
Debt securities $ 245,396 $167,295 $116,320 $ 99,219 $ 81,137 $124,895 $ 834,262
Loans 684,961 221,114 244,330 236,333 210,277 361,421 1,958,436
---------- -------- -------- -------- -------- -------- ----------
TOTAL $ 930,357 $388,409 $360,650 $335,552 $291,414 $486,316 $2,792,698
========== ======== ======== ======== ======== ======== ==========
LIABILITIES:
Savings, NOW and IMMA's $ 608,598 $ 11,747 $ 268 $ 652 $ -- $ -- $ 621,265
CD's 985,748 118,921 26,582 5,579 5,036 744 1,142,610
Short-term borrowings 322,774 -- -- -- -- -- 322,774
Long-term borrowings -- 50,040 25,040 40 40 288,200 363,360
---------- -------- -------- -------- -------- -------- ----------
TOTAL $1,917,120 $180,708 $ 51,890 $ 6,271 $ 5,076 $288,944 $2,450,009
========== ======== ======== ======== ======== ======== ==========
The following table presents the average interest rate and estimated fair
value of market risk sensitive instruments at March 31, 2001:
Carrying Average Estimated
Value Interest Rate Fair Value
---------- ------------- ----------
ASSETS:
Debt securities $ 834,262 6.74% $ 834,262
Loans 1,958,436 8.39 2,000,757
---------- ---- ----------
TOTAL $2,792,698 7.90% $2,835,019
========== ==== ==========
LIABILITIES:
Savings, NOW and IMMA's $ 621,265 2.36% $ 621,516
CDs 1,142,610 6.02 1,151,653
Short-term borrowings 322,774 5.34 339,497
Long-term borrowings 363,360 5.25 370,701
---------- ---- ----------
TOTAL $2,450,009 4.89% $2,483,367
========== ==== ==========
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Corporation and the Bank are defendants in certain claims and legal
actions arising in the ordinary course of business. In the opinion of
management, after consultation with legal counsel, the ultimate disposition of
these matters is not expected to have a material adverse effect on the
consolidated operations, liquidity or financial position of the Corporation or
the Bank.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
17
19
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
(per Exhibit Table
in item 601 of
Regulation S-K) Description of Exhibits
------------------ -----------------------
3.1 Amended and Restated Articles of Incorporation
of the Corporation, incorporated herein by
reference to Exhibit 3.1 of the Corporation's
Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 (Commission File No.
0-15829).
3.2 By-laws of the Corporation, as amended, incorporated
herein by reference to Exhibit 3.2 of the Corporation's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (Commission File No. 0-15829).
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by the
Corporation during the quarter ended March 31, 2001:
Current Report on Form 8-K dated January 16, 2001 and filed
January 16, 2001, Items 5 and 7.
Current Report on Form 8-K dated January 18, 2001 and filed
January 18, 2001, Items 7 and 9.
18
20
SIGNATURES
Pursuant to the requirements 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.
FIRST CHARTER CORPORATION
(Registrant)
Date: May 11, 2001 By: /s/ Robert O. Bratton
-------------------------------
Robert O. Bratton
Executive Vice President &
Chief Financial Officer
19