Exhibit 99.1
NEWS RELEASE DATED 1-13-2004
For Additional Information,
Contact Robert O. Bratton,
Chief Financial Officer
(704) 688-4473
or
Gregory S. Barton,
Vice President
(704) 688-4817
FOR IMMEDIATE RELEASE
January 13, 2004
First Charter Announces 2003 Earnings and
Fourth Quarter Results
Charlotte, North Carolina – First Charter Corporation (NASDAQ: FCTR) today reported 2003 earnings of $14.1 million, or $0.47 per diluted share, a decrease from earnings of $39.8 million or $1.30 per diluted share for the same period in 2002. As previously reported, the decrease in earnings for 2003 was primarily due to $19.1 million of costs associated with the prepayment of selected borrowings and a $19.2 million increase in the provision for loan losses primarily attributable to the sale of $60.9 million of nonaccruing and accruing higher risk loans, adverse business conditions, and increases in the loan portfolio. While the Corporation continued to make increases in noninterest income, earnings were negatively impacted by historically low interest rates which compressed the net interest margin during 2003 compared to 2002.
For the fourth quarter, First Charter reported a net loss of $0.5 million or $0.02 per diluted share, a decrease from earnings of $10.5 million or $0.35 per diluted share for the same period in 2002. As previously reported, the decrease in earnings for the fourth quarter was primarily due to $11.7 million of costs associated with the prepayment of selected borrowings and an increase in the provision for loan losses primarily due to increases in the loan portfolio. The Corporation continued to make gains in revenue from brokerage services, insurance services, financial management and service charges.
“2003 was a challenging year for First Charter, but we never lost our focus,” said Lawrence M. Kimbrough, President and Chief Executive Officer. “Our experience in 2003 was a unique mixture of improved sales performance and strategic decision-making, both of which have made us a stronger company. In 2003, we produced strong growth in core deposits, loans, non-interest income and core retail checking households. We also decided to sell $60.9 million in nonaccruing and accruing problem loans and to significantly reduce our interest expense by refinancing selected borrowings. On balance, First Charter is better-equipped for growth now than we were at the beginning of 2003.”
Highlights
Fourth Quarter 2003 compared to Third Quarter 2003
| | • | | Gross loans increased $143.3 million or 7 percent. |
| | • | | Average earning assets increased $61.7 million or 2 percent. |
| | • | | Average noninterest-bearing deposits increased $44.2 million or 13 percent. |
| | • | | Net interest margin increased 24 basis points to 3.10 percent. |
Fourth Quarter 2003 compared to Fourth Quarter 2002
| | • | | Net interest income increased $0.9 million or 3 percent. |
| | • | | Provision for loan losses increased $1.4 million or 64 percent. |
| | • | | Noninterest income decreased $2.8 million or 17 percent. |
| | • | | Noninterest expense increased $13.8 million or 50 percent, primarily due to the previously mentioned prepayment on borrowings. |
Full Year 2003 compared to Full Year 2002
| | • | | Gross loans increased $180.1 million or 9 percent. |
| | • | | Average earning assets increased $400.6 million or 12 percent. |
| | • | | Average deposits increased $234.5 million or 10 percent. |
| | • | | Net interest income decreased $5.4 million or 5 percent. |
| | • | | Provision for loan losses increased $19.2 million primarily due to the previously mentioned loan sale, adverse business conditions and loan growth. |
| | • | | Noninterest income increased $16.5 million or 35 percent. |
| | • | | Noninterest expense increased $29.3 million or 30 percent, primarily due to the previously mentioned prepayment on borrowings. |
| | • | | $60.9 million in nonaccruing and accruing higher risk loans were sold during 2003. |
| | • | | Prepaid $131 million in Federal Home Loan Bank advances, incurring charges of $19.1 million during 2003. |
| | • | | 40,636 new checking accounts were opened during 2003 as a result of the CHecking Account Marketing Program (“CHAMP”). |
| | • | | Dividends paid per share increased for the 12th consecutive year during 2003. |
| | • | | Customer satisfaction scores remained above 80 percent “Very Satisfied”. |
| | • | | Core retail households increased 24 percent to 79,985. |
Financial Highlights
| | | | | | | | | | | | | | | | | |
| | | For the Three Months | | For the Twelve Months |
| | | Ended December 31 | | Ended December 31 |
| Earnings(Dollars in thousands, except per share data) | | 2003 | | 2002 | | 2003 | | 2002 |
| Total revenues | | $ | 42,497 | | | $ | 44,317 | | | $ | 171,982 | | | $ | 160,792 | |
| Net (loss) income | | | (490 | ) | | | 10,549 | | | | 14,146 | | | | 39,803 | |
| Diluted (loss) earnings per share | | | (0.02 | ) | | | 0.35 | | | | 0.47 | | | | 1.30 | |
| Return on average assets | | | (0.05 | )% | | | 1.14 | % | | | 0.35 | % | | | 1.13 | % |
| Return on average equity | | | (0.62 | ) | | | 12.57 | | | | 4.56 | | | | 12.13 | |
| Efficiency-taxable equivalent ratio (*) | | | 97.41 | | | | 69.76 | | | | 77.49 | | | | 64.34 | |
| | | |
| * - | | Noninterest expense divided by the sum of taxable equivalent net interest income plus noninterest income less gain on sale of securities. |
| | | | | | | | | | | | | | | | | |
| | | December 31 | | December 31 | | Increase (Decrease) |
| Balance Sheet (Dallars in thousands) | | 2003 | | 2002 | | Amount | | Percentage |
| Loans held for sale | | $ | 5,137 | | | $ | 158,404 | | | $ | (153,267 | ) | | | (96.76 | )% |
| Loans, net | | | 2,227,030 | | | | 2,045,266 | | | | 181,764 | | | | 8.89 | |
| Investments | | | 1,601,900 | | | | 1,129,212 | | | | 472,688 | | | | 41.86 | |
| Total assets | | | 4,206,693 | | | | 3,745,949 | | | | 460,744 | | | | 12.30 | |
| Demand, savings and money market deposits | | | 1,237,726 | | | | 1,027,459 | | | | 210,267 | | | | 20.46 | |
| Total deposits | | | 2,427,897 | | | | 2,322,647 | | | | 105,250 | | | | 4.53 | |
| Other borrowings | | | 1,432,200 | | | | 1,042,440 | | | | 389,760 | | | | 37.39 | |
| Shareholders’ equity | | | 299,439 | | | | 324,686 | | | | (25,247 | ) | | | (7.78 | ) |
| | | | | | | | | | | | | | | | | |
| | | December 31 | | December 31 | | Increase (Decrease) |
| Average Balances | | 2003 | | 2002 | | Amount | | Percentage |
| Loans held for sale | | $ | 25,927 | | | $ | 10,035 | | | $ | 15,892 | | | | 158.37 | % |
| Loans, net | | | 2,126,821 | | | | 2,112,855 | | | | 13,966 | | | | 0.66 | |
| Investments | | | 1,464,704 | | | | 1,126,495 | | | | 338,209 | | | | 30.02 | |
| Total assets | | | 4,006,488 | | | | 3,535,180 | | | | 471,307 | | | | 13.33 | |
| Total deposits | | | 2,485,711 | | | | 2,251,256 | | | | 234,454 | | | | 10.41 | |
| Other borrowings | | | 1,159,889 | | | | 906,263 | | | | 253,626 | | | | 27.99 | |
| Shareholders’ equity | | | 310,535 | | | | 328,036 | | | | (17,500 | ) | | | (5.33 | ) |
Net Interest Income/Margin
Fourth Quarter
Net interest income increased $0.9 million, or 3 percent, to $29.0 million compared to the fourth quarter of 2002. The increase was primarily due to a $4.5 million decrease in interest expense due to (a) a decline in interest rates across the yield curve, (b) a planned shift in funding sources from higher cost retail certificates of deposit to lower-cost transaction based accounts and (c) the benefits from the refinancing of $100 million of fixed-term advances late in the fourth quarter of 2002 and the refinancing of $50 million and $81 million of fixed-term advances in the second quarter and fourth quarter of 2003, respectively. The increase in net interest income was partially offset by a $3.7 million decrease in interest income due mainly to lower yields on earning assets resulting from the continued effects of the declining interest rate environment. As previously discussed, the Corporation sold $60.9 million in nonaccruing and accruing higher risk loans in the second quarter of 2003 and $11.7 million in credit card loans in the first quarter of 2003. The reinvestment of these proceeds was made in lower yielding securities. In addition, the Corporation sold $70 million in bonds in the fourth quarter of 2002 and reinvested the proceeds into Bank Owned Life Insurance (“BOLI”). This investment is classified as an other asset on the balance sheet, and the income is recognized as other noninterest income rather than being recognized as interest income. For the fourth quarter of 2003, income earned on BOLI amounted to approximately $1.0 million, which is nontaxable. Also, during the first nine months of 2003, the mortgage-backed securities portfolio produced lower effective yields due to increased amortization of premiums resulting from increased prepayment speeds of underlying mortgages. During the first half of 2003, the Corporation sold approximately $372 million of these mortgage-backed securities in order to stabilize cash flows and to improve effective yields in this portfolio. These proceeds were reinvested in fixed term agency securities and mortgage-backed securities of a shorter average life and at a lower current coupon. Using standard rate shock analysis, the extension risk in the reinvested portfolio is less
than that of the securities sold. The BOLI transaction, loan sales and the investment portfolio restructuring resulted in a change in the mix of earning assets from higher yielding loans to lower yielding securities.
The net interest margin decreased to 3.10 percent in the fourth quarter of 2003 from 3.34 percent for the same period in 2002. This decrease reflects the impact of the declining interest rate environment, as assets repriced faster than liabilities due to the asset sensitive nature of the Corporation’s balance sheet. In addition, reinvestment rates were lower than rates earned by assets previously held on the balance sheet.
Year-to-Date
Net interest income decreased $5.4 million to $107.8 million compared to the same period in 2002. Net interest income decreased primarily due to (a) lower interest income on earning assets resulting from the continued effects of a declining interest rate environment, (b) lower effective yields from the mortgage-backed securities portfolio due to the acceleration of amortization of premiums resulting from increased prepayment speeds, (c) lower reinvestment yields on increased cash flows, (d) the effects of the sale of $70 million of bonds to purchase BOLI, the income from which is recognized as noninterest income and (e) a change in the mix of earning assets from higher yielding loans to lower yielding securities. The decrease in net interest income was partially offset by a $12.7 million decrease in interest expense due to (a) a decline in interest rates across the yield curve, (b) a planned shift in funding sources from higher cost retail certificates of deposit to lower cost transaction based accounts and (c) the benefits from the refinancing of fixed-term advances.
The net interest margin for 2003 decreased to 3.00 percent from 3.55 percent for the same period in 2002. This decrease reflects the impact of the declining interest rate environment, which had a negative impact on the net interest margin as assets repriced faster than liabilities due to the asset sensitive nature of the Corporation’s balance sheet. In addition, reinvestment rates were lower than rates earned by assets previously held on the balance sheet.
Noninterest Income
Fourth Quarter
Noninterest income decreased $2.8 million to $13.5 million compared to $16.3 million for the fourth quarter of 2002. The decrease was due to a $4.9 million reduction in gains on sales of securities and a $1.0 million decrease in trading gains. In addition, mortgage loan income decreased $0.6 million as mortgage loan volume has slowed as a result of an increase in long-term interest rates. The decreases were partially offset by $1.0 million of income recognized from the Corporation’s investment in BOLI, a $0.8 million increase in service charges on deposit accounts, a $0.8 million increase in financial management income primarily due to the purchase of a third party benefits administrator, a $0.3 million increase in brokerage services income, a $0.3 million increase in insurance services income primarily due to the acquisition of two insurance agencies, and a $0.2 million increase in other income. In addition, fourth quarter 2002 included net losses of $0.3 million from equity method investments and a loss of $0.1 million on the sale of bank property, which did not recur in the fourth quarter of 2003.
Year-to-Date
Noninterest income increased $16.5 million, or 35 percent, to $64.2 million compared to the same period in 2002. The increase includes a $2.3 million gain on the sale of the credit card portfolio in the first quarter of 2003. The remaining components of this increase were $3.9 million of income recognized from the Corporation’s investment in BOLI, a $3.0 million increase in service charges on deposit
accounts, a $1.3 million increase in financial management income primarily due to the purchase of a third party benefits administrator, a $0.7 million increase in mortgage loan income, a $0.7 million increase in brokerage revenues, a $0.6 million increase in insurance service income partly due to the acquisition of two insurance agencies, and a $0.6 million increase in other noninterest income due to increased ATM fees, merchant income and mortgage servicing income. In addition, net losses from equity method investments amounted to $0.3 million in 2003 versus net losses of $5.8 million for 2002. These improvements were partially offset by a $1.3 million reduction in gains on sales of securities and a $0.3 million decrease in trading gains. In addition, gains on the sale of bank property amounted to $0.4 million and $0.9 million for 2003 and 2002, respectively.
Noninterest Expense
Fourth Quarter
Noninterest expense increased $13.8 million compared to the fourth quarter of 2002. The variance includes an $11.7 million cost associated with prepaying $81 million in longer-term, fixed rate Federal Home Loan Bank advances in the fourth quarter of 2003 versus a $3.3 million cost associated with prepaying $100 million in longer-term, fixed rate Federal Home Loan Bank advances in the fourth quarter of 2002. Noninterest expense was also impacted by a $3.2 million increase in salaries and employee benefits due to additional personnel, including the acquisition of a third party benefits administrator and two insurance agencies, increased medical expenses and increased commission-based compensation in our mortgage, brokerage and insurance services areas. In addition, noninterest expense was affected by a $1.6 million increase in professional fees primarily due to consulting services related to the review and revision of our procedures to comply with the Bank Secrecy Act, consulting services to ensure compliance with Section 404 of the Sarbanes-Oxley Act, and fees related to the investigation and collection of questionable residential rental property loans. Other items negatively impacting noninterest expense were a $0.6 million increase in occupancy and equipment expense, a $0.3 million increase in marketing expense, a $0.2 million increase in telephone expense and a $0.2 million increase in postage and supplies expense. The increases were partially offset by a $0.8 million decrease in other noninterest expense primarily due to a reserve for a contingent liability established in the fourth quarter of 2002.
Year-to-Date
Noninterest expense increased $29.3 million compared to 2002. The variance includes a $19.1 million cost associated with prepaying $131 million in longer-term, fixed rate Federal Home Loan Bank advances in 2003 versus a $3.3 million cost associated with prepaying $100 million in longer-term, fixed rate Federal Home Loan Bank advances in 2002. In addition, noninterest expense was affected by a $5.0 million increase in professional fees primarily due to the previously mentioned loan sale, consulting services related to the review and revision of our procedures to comply with the Bank Secrecy Act, consulting services to ensure compliance with Section 404 of the Sarbanes-Oxley Act, and fees related to the investigation and collection of questionable residential rental property loans. Noninterest expense was also impacted by a $4.7 million increase in salaries and employee benefits due to additional personnel, including the acquisition of a third party benefits administrator and two insurance agencies, increased medical expenses and increased commission-based compensation in our mortgage, brokerage and insurance services areas. These increases were partially offset by lower incentive compensation and employee benefit accruals. Other items impacting noninterest expense were a $1.9 million increase in marketing expense primarily associated with the implementation of CHAMP and a $1.0 million increase in other operating expense primarily due to increased mortgage servicing fees, non-credit losses and other miscellaneous expenses.
The efficiency ratio increased to 77.49 percent compared to 64.34 percent for the year-ended December 31, 2002. A significant portion of the increase in the efficiency ratio relates to the costs associated with the prepayment of Federal Home Loan Bank advances of $19.1 million and the previously discussed $5.0 million increase in professional fees. In addition, the calculation of the efficiency ratio excludes gains on sale of securities of $10.3 million and $11.5 million for the years ended December 31, 2003 and 2002, respectively.
Income Tax Expense
An income tax benefit of $2.0 million was recognized in the fourth quarter of 2003 compared to an income tax expense of $4.0 million for the fourth quarter of 2002. The income tax benefit for the fourth quarter was due to a decrease in the estimated 2003 effective tax rate resulting from a decrease in income. The income tax expense for the year ended December 31, 2003 amounted to $3.3 million for an effective tax rate of 18.9 percent, compared to $14.9 million for an effective tax rate of 27.3 percent for the year ended December 31, 2002. The decrease in the income tax expense and the effective tax rate for 2003 was attributable to the decrease in income relative to nontaxable adjustments.
Loans Held for Sale
Loans held for sale consist primarily of 15 and 30 year residential mortgage loans which the Corporation intends to sell as whole loans. Loans held for sale decreased to $5.1 million at December 31, 2003 as compared to $158.4 million at December 31, 2002. The decrease was due to the securitization and sale of mortgage loans during the year.
Loans
Gross loans increased $180.1 million, or 9 percent, to $2.25 billion at December 31, 2003 as compared to $2.07 billion at December 31, 2002. The growth in loans was primarily due to a $142.4 million increase in construction loans, which includes approximately $76 million of 1-4 family construction loans purchased in the third and fourth quarters of 2003 through a correspondent relationship, a $75.3 million increase in home equity loans, a $43.7 million increase in primarily adjustable rate mortgage loans and a $4.2 million increase in consumer loans. These increases were partially offset by the sale of $60.9 million in nonaccruing and accruing higher risk loans to investors during the second quarter of 2003 and the sale of the Corporation’s $11.7 million credit card portfolio during the first quarter of 2003.
Securities
The securities available for sale portfolio increased to $1.60 billion at December 31, 2003 as compared to $1.13 billion at December 31, 2002. The increase in securities available for sale was primarily due to the securitization of $286.9 million of mortgage loans held for sale during 2003, as well as the net purchase of $185.8 million of securities used to increase earning assets. The Corporation increased its securities available for sale portfolio early in the first quarter of 2003 to offset the effects of weak loan demand. In addition, the Corporation mitigated interest rate risk by restructuring the investment portfolio to reduce extension risk.
Equity Method Investments
The Corporation’s equity method investments represent investments in venture capital limited partnerships, and gains or losses are recognized based upon changes in its share of the fair market value of the limited partnership’s investee companies. At December 31, 2003, the total book value in equity method investments was $2.8 million. Of the $2.8 million, $1.1 million represents investments in venture capital partnerships which invest primarily in equity securities. The remaining $1.7 million is
invested in Small Business Investment Companies (SBICs), which make debt investments that qualify for the investment test under the Community Reinvestment Act. At December 31, 2003, the Corporation’s remaining commitment to fund the equity method investments was $2.4 million and represented commitments to venture funds that are SBICs.
Deposits
The ability to generate deposits has been enhanced by the introduction of CHAMP for individuals during the fourth quarter of 2002 and Business CHAMP during the first quarter of 2003. As a result, the Corporation opened 40,636 new checking accounts in 2003, more than 2 times the number in 2002. In addition, during the first quarter of 2003 the Corporation introduced a new money market account, the Money Market Max Account. This product has been very successful with total balances at December 31, 2003 of $279.6 million. The emphasis of these programs is to develop new customer relationships to generate additional fee income opportunities and to shift our funding mix towards lower-cost funding sources.
Total deposits increased $105.3 million, or 5 percent, to $2.43 billion at December 31, 2003 as compared to $2.32 billion at December 31, 2002. The increase in deposits was due to a $165.0 million increase in money market accounts, a $45.2 million increase in low-cost interest checking, savings and noninterest bearing deposits and a $36.2 million increase in brokered certificates of deposit. These increases were partially offset by a $141.4 million planned decrease in retail certificates of deposit.
Other Borrowings
Other borrowings increased to $1.43 billion at December 31, 2003 as compared to $1.04 billion at December 31, 2002. The increase was primarily due to increases in Federal Home Loan Bank borrowings, which were at lower rates than comparable retail funding rates. The proceeds of these borrowings were used to fund the growth in earning assets.
Shareholders’ Equity
Shareholders’ equity at December 31, 2003 decreased to $299.4 million, representing 7.12 percent of period-end assets compared to $324.7 million or 8.67 percent of period-end assets at December 31, 2002. The decrease was due mainly to the payment of $10.6 million for the purchase and retirement of common stock and a $9.8 million decrease in the after-tax unrealized gain on available for sale securities resulting from an increase in rates across the yield curve and the previously mentioned restructuring of the securities portfolio. During 2003, 565,000 shares of First Charter Corporation common stock were repurchased and retired under the January 24, 2002 authorization to repurchase 1.5 million shares. A total of 1.4 million shares have been repurchased and retired under this authorization. On October 24, 2003, the Corporation’s Board of Directors authorized the repurchase of up to 1.5 million additional shares of the Corporation’s common stock. At December 31, 2003, the book value per share was $10.08. Based on the $19.55 closing price of First Charter Corporation common stock at December 31, 2003, the Corporation had a market capitalization of $581.0 million.
Provision for Loan Losses
Fourth Quarter
The provision for loan losses increased to $3.6 million for the three months ended December 31, 2003 compared to $2.2 million for the same year ago period. The increase was primarily due to increases in the loan portfolio and the impact of the previously mentioned loan sale on the historical loss ratios and allocation factors used in the allowance model.
Year-to-Date
The provision for loan losses for the year ended December 31, 2003 amounted to $27.5 million compared to $8.3 million a year ago. The increase in the provision for loan losses was primarily attributable to an additional provision of $4.0 million related to the discount taken in the previously mentioned loan sale, the addition of $3.5 million to the provision for loan losses as a result of the impact of the previously mentioned loan sale on the historical loss ratios used in the allowance model and management’s continuous evaluation of the current economic environment and operational risks, and the addition of $7.5 million to the provision for loan losses as a result of deteriorating financial performance of several large commercial relationships and independent appraisals of collateral. These relationships were subsequently sold as a part of the previously mentioned loan sale.
In addition, during the second quarter of 2003, the Corporation identified up to 165 residential rental property loans totaling approximately $12.8 million, some of which appeared to have questionable appraisals and collateral value. These loans were made by one loan officer who is no longer employed by the Corporation. The appraisals received by the Corporation were completed by appraisers who were not employees of the Corporation. This matter was reported by management to authorities and is under continuing investigation by management and by those authorities. As a result of management’s investigation, the Corporation increased the provision for loan losses in the second quarter of 2003 by approximately $2.4 million. In the third and fourth quarters of 2003, $1.1 million of these loans were charged-off. In addition, loans totaling $0.8 million were foreclosed and moved to OREO and $0.5 million of loans were paid down or paid-off. At December 31, 2003, there were 135 loans remaining in this portfolio totaling approximately $10.4 million with an allocated allowance of $1.9 million. As management’s investigation continues, it is possible that an additional provision for loan losses may be required with respect to these loans.
The provision for loan losses was also impacted by an increase in net charge-offs of $2.1 million compared to 2002 and increases in the loan portfolio in 2003 compared to 2002.
Net Charge-Offs
Fourth Quarter
Net charge-offs for the three months ended December 31, 2003 amounted to $1.9 million, or 0.35 percent of average loans, compared to $2.1 million, or 0.37 percent of average loans for the same 2002 period.
Year-to-Date
Net charge-offs for the year ended December 31, 2003 amounted to $8.3 million, or 0.39 percent of average loans compared to $6.3 million, or 0.30 percent of average loans for the same 2002 period. These increases in net charge-offs were due to higher commercial and consumer loan charge-offs due to the impact of the continued weak economic environment and the previously discussed $1.1 million of residential rental property loan charge-offs.
In accordance with generally accepted accounting principles, the impact on the allowance for loan losses of the previously mentioned loan sale is not included in net charge-offs but rather is reflected as a reduction in the allowance for sale of loans. The inherent losses incurred in the loan sale were used to determine the commercial loan allowance allocation factors, which are driven by actual loss experience in our model, to assess the adequacy of the allowance for loan losses.
Nonperforming Assets
Nonaccrual loans at December 31, 2003 increased to $14.9 million as compared to $13.4 million at September 30, 2003 primarily due to the addition of several commercial loans to nonaccrual status as some of our customers continue to experience financial difficulties in the current economic environment. Management is taking steps to remediate these loans. OREO increased to $6.8 million at December 31, 2003 from $6.7 million at September 30, 2003.
Nonaccrual loans at December 31, 2003 decreased to $14.9 million as compared to $26.5 million at December 31, 2002, primarily due to the previously mentioned loan sale. OREO decreased to $6.8 million at December 31, 2003 from $10.3 million at December 31, 2002. This decrease is due to the sale of the two largest properties in the OREO portfolio during the second quarter of 2003.
Asset Quality Ratios
As a result of the initiatives taken in the second quarter of 2003, our asset quality ratios improved significantly, but the third and fourth quarter of 2003 asset quality ratios were impacted by an increase in nonaccrual loans as previously discussed. The increase in the past due ratio was mainly attributable to one commercial relationship which is now current and is not reflective of a trend in the overall portfolio.
Asset Quality(1)
| | | | | | | | | | | | | | | | | | | | | |
| | | December 31 | | September 30 | | June 30 | | March 31 | | December 31 |
| | | 2003 | | 2003 | | 2003 | | 2003 | | 2002 |
Past Due Ratio | | | | | | | | | | | | | | | | | | | | |
| Past due loans over 30 days as a percentage of loans | | | 1.04 | % | | | 0.71 | % | | | 0.67 | % | | | 1.03 | % | | | 1.20 | % |
| | | | | | | | | | | | | | | | | | | | | |
Problem Assets | | | | | | | | | | | | | | | | | | | | |
| Classified assets as a percentage of loans | | | 1.92 | % | | | 1.86 | % | | | 1.99 | % | | | 4.71 | % | | | 4.32 | % |
| | | | | | | | | | | | | | | | | | | | | |
Nonaccrual Loans | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans as a percentage of loans | | | 0.66 | % | | | 0.64 | % | | | 0.54 | % | | | 1.44 | % | | | 1.28 | % |
| | | | | | | | | | | | | | | | | | | | | |
Nonperforming Assets | | | | | | | | | | | | | | | | | | | | |
| Nonperforming assets as a percentage of loans and other real estate owned | | | 0.96 | % | | | 0.95 | % | | | 0.87 | % | | | 1.97 | % | | | 1.76 | % |
| | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs as a percentage of average loans-annualized | | | 0.35 | % | | | 0.40 | % | | | 0.39 | % | | | 0.43 | % | | | 0.37 | % |
| | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses as a percentage of loans | | | 1.14 | % | | | 1.14 | % | | | 1.15 | % | | | 1.28 | % | | | 1.31 | % |
| Allowance for loan losses as a percentage of nonaccrual loans | | | 172 | % | | | 179 | % | | | 212 | % | | | 88 | % | | | 103 | % |
| | | | | | | | | | | | | | | | | | | | | |
| (1) Excludes loans held for sale | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses
The allowance for loan losses as a percentage of total loans remained flat at 1.14 percent at December 31, 2003 compared to September 30, 2003 and decreased from 1.31 percent at December 31, 2002. The allowance for loan losses decreased primarily due to the sale of $60.9 million in nonaccruing and accruing higher risk loans. These loans had a higher percentage of allocated allowance for loan losses due to their higher probable rate of loss. In addition, during the first quarter of 2003, the allowance for loan losses was reduced by the sale of the Corporation’s $11.7 million credit card portfolio. These loans also had a higher percentage of allocated allowance for loan losses due to their unsecured nature and higher historical loss experience. As a result of the previously mentioned transactions, the Corporation’s ratio of the allowance for loan losses to loans was reduced largely due to the significant improvement in our asset quality profile as noted in the table above. First Charter monitors the adequacy of the allowance for loan losses to cover inherent losses in the loan portfolio through the use of a loan loss migration model. Management believes the Corporation is adequately reserved based on its assessment of its credit risk profile.
Subsequent Event
In early January 2004, the Corporation entered into a series of interest rate swap agreements totaling $100 million. The interest rate swap agreements allow the Corporation to swap higher fixed rate interest payments on long-term FHLB advances for lower variable rate payments. The Company expects the transactions to result in lower interest expense during 2004, assuming interest rates remain stable.
The Corporation intends to account for these interest rate swaps as a hedge of the related FHLB advances. Accordingly, in future periods the Corporation will record, in earnings, the net change in the fair value of the interest rate swap and the related FHLB advances, provided the criteria for hedge accounting continue to be met. In the event such criteria are not met in a future period, the Corporation will only record changes in the fair value on the interest rate swap.
As a result of swapping $100 million of fixed rate debt payments for variable rate payments, the Corporation’s balance sheet would become liability sensitive. Therefore, as part of the Corporation’s asset/liability management strategy of preserving the asset sensitive nature of the Corporation’s balance sheet, the Corporation replaced approximately $120 million of existing FHLB floating rate overnight borrowings with fixed rate FHLB advances with maturities of one to three years.
The Corporation expects to enter into additional interest rate swap transactions during early 2004 to the extent business conditions warrant. It is anticipated that the magnitude of any future interest rate swap transactions would be comparable to the transactions described above. To the extent the Corporation enters into additional interest rate swap transactions, it is anticipated that the Corporation would also replace additional FHLB floating rate overnight borrowings with fixed rate FHLB advances to preserve the asset sensitive nature of the Corporation’s balance sheet.
Conference Call
First Charter executive management will be available via telephone conference to discuss the contents of this press release, present growth and earnings estimates for 2004 as well as strategic plans for 2004 on Tuesday, January 13, 2004 at 11:00 a.m. The following table outlines access information for the conference call and internet/audio replay:
| | | | | | | | | |
| | | | | US/Canada Participants | | | International Participants | |
| | Live Conference Call | | | 800-379-3953
ID # 4787066 | | | 706-679-5254
ID # 4787066 | |
| | Internet Live and Replay | | | www.FirstCharter.com
“Investor Relations” section
SHOW # 148394 | | | www.FirstCharter.com
“Investor Relations” section
SHOW # 148394 | |
| | Audio Replay | | | 800-642-1687
ID # 4787066 | | | 706-645-9291
ID # 4787066 | |
| |
Corporate Profile
First Charter Corporation is a regional financial services company with assets of $4.2 billion and is the holding company for First Charter Bank. First Charter operates 54 financial centers, five insurance offices and 93 ATMs located in 17 counties throughout the piedmont and western half of North Carolina. First Charter also operates one mortgage origination office in Virginia. First Charter provides businesses and individuals with a broad range of financial services, including banking, financial planning, funds management, investments, insurance, mortgages and a full array of employee benefit programs. Additional information about First Charter can be found by visitingwww.FirstCharter.com or
by calling 1-800-601-8471. First Charter’s common stock is traded under the symbol “FCTR” on the NASDAQ National Market.
Forward Looking Statements
This news release contains forward looking statements with respect to the financial conditions and results of operations of First Charter Corporation. These forward looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) projected results in connection with the implementation of our business plan are lower than expected; (2) competitive pressure among financial services companies increases significantly; (3) costs or difficulties related to the integration of acquisitions or expenses in general are greater than expected; (4) general economic conditions, in the markets in which the company does business, are less favorable than expected; (5) risks inherent in making loans, including repayment risks and risks associated with collateral values, are greater than expected; (6) changes in the interest rate environment reduce interest margins and affect funding sources; (7) changes in market rates and prices may adversely affect the value of financial products; (8) legislation or regulatory requirements or changes thereto adversely affect the businesses in which the company is engaged; (9) regulatory compliance cost increases are greater than expected; (10) decisions to change the business mix of the company; and (11) strategic initiatives to increase revenues are not successfully implemented. For further information and other factors which could affect the accuracy of forward looking statements, please see First Charter’s reports filed with the SEC pursuant to the Securities Exchange Act of 1934 which are available at the SEC’s website (www.sec.gov) or at First Charter’s website (www.FirstCharter.com). Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management’s judgments only as of the date hereof. The company undertakes no obligation to publicly revise those forward looking statements to reflect events and circumstances that arise after the date hereof.
(Selected financial information is attached)
| | |
First Charter Corporation and Subsidiaries
Quarterly Earnings Release | | (NASDAQ: FCTR) |
| | | |
| | | | | | | | | | | | | | | | | |
| | | As of / For the Twelve Months Ended | | Increase (Decrease) |
| (Dollars in thousands, except per share data) | | 12/31/2003 | | 12/31/2002 | | Amount | | Percentage |
BALANCE SHEET | | | | | | | | | | | | | | | | |
| ASSETS: | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 88,564 | | | $ | 162,087 | | | $ | (73,523 | ) | | | (45.4 | )% |
| Federal funds sold | | | 1,311 | | | | 1,154 | | | | 157 | | | | 13.6 | |
| Interest earning bank deposits | | | 23,631 | | | | 6,609 | | | | 17,022 | | | | 257.6 | |
| Securities available for sale | | | 1,601,900 | | | | 1,129,212 | | | | 472,688 | | | | 41.9 | |
| Loans held for sale | | | 5,137 | | | | 158,404 | | | | (153,267 | ) | | | (96.8 | ) |
| Loans | | | | | | | | | | | | | | | | |
| Commercial Real Estate | | | 724,340 | | | | 798,664 | | | | (74,324 | ) | | | (9.3 | ) |
| Commercial Non Real Estate | | | 212,010 | | | | 223,178 | | | | (11,168 | ) | | | (5.0 | ) |
| Construction | | | 358,217 | | | | 215,859 | | | | 142,358 | | | | 65.9 | |
| Mortgage | | | 280,748 | | | | 237,085 | | | | 43,663 | | | | 18.4 | |
| Consumer | | | 284,448 | | | | 280,201 | | | | 4,247 | | | | 1.5 | |
| Home equity | | | 393,041 | | | | 317,730 | | | | 75,311 | | | | 23.7 | |
| | | | | | | | | | | | | | | | | |
| Total loans | | | 2,252,804 | | | | 2,072,717 | | | | 180,087 | | | | 8.7 | |
| Less: Unearned income | | | (167 | ) | | | (247 | ) | | | 80 | | | | (32.4 | ) |
| Allowance for loan losses | | | (25,607 | ) | | | (27,204 | ) | | | 1,597 | | | | (5.9 | ) |
| | | | | | | | | | | | | | | | | |
| Loans, net | | | 2,227,030 | | | | 2,045,266 | | | | 181,764 | | | | 8.9 | |
| | | | | | | | | | | | | | | | | |
| Other assets | | | 259,120 | | | | 243,217 | | | | 15,903 | | | | 6.5 | |
| | | | | | | | | | | | | | | | | |
| Total assets | | $ | 4,206,693 | | | $ | 3,745,949 | | | $ | 460,744 | | | | 12.3 | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | | | | |
| Deposits | | | | | | | | | | | | | | | | |
| Noninterest-bearing deposits | | $ | 326,679 | | | $ | 305,924 | | | $ | 20,755 | | | | 6.8 | % |
| Interest checking and savings | | | 440,496 | | | | 416,005 | | | | 24,491 | | | | 5.9 | |
| Money market deposits | | | 470,551 | | | | 305,530 | | | | 165,021 | | | | 54.0 | |
| Time deposits | | | 1,190,171 | | | | 1,295,188 | | | | (105,017 | ) | | | (8.1 | ) |
| | | | | | | | | | | | | | | | | |
| Total deposits | | | 2,427,897 | | | | 2,322,647 | | | | 105,250 | | | | 4.5 | |
| Other borrowings | | | 1,432,200 | | | | 1,042,440 | | | | 389,760 | | | | 37.4 | |
| Other liabilities | | | 47,157 | | | | 56,176 | | | | (9,019 | ) | | | (16.1 | ) |
| | | | | | | | | | | | | | | | | |
| Total liabilities | | | 3,907,254 | | | | 3,421,263 | | | | 485,991 | | | | 14.2 | |
| | | | | | | | | | | | | | | | | |
| Total shareholders’ equity | | | 299,439 | | | | 324,686 | | | | (25,247 | ) | | | (7.8 | ) |
| | | | | | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 4,206,693 | | | $ | 3,745,949 | | | $ | 460,744 | | | | 12.3 | % |
| | | | | | | | | | | | | | | | | |
| |
SELECTED AVERAGE BALANCES | | | | | | | | | | | | | | | | |
| Loans and loans held for sale | | $ | 2,152,748 | | | $ | 2,122,890 | | | $ | 29,858 | | | | 1.4 | % |
| Securities | | | 1,464,704 | | | | 1,126,495 | | | | 338,209 | | | | 30.0 | |
| Interest earning assets | | | 3,662,460 | | | | 3,261,844 | | | | 400,616 | | | | 12.3 | |
| Assets | | | 4,006,488 | | | | 3,535,180 | | | | 471,308 | | | | 13.3 | |
| Deposits | | | 2,485,711 | | | | 2,251,256 | | | | 234,455 | | | | 10.4 | |
| Interest bearing liabilities | | | 3,310,485 | | | | 2,883,151 | | | | 427,334 | | | | 14.8 | |
| Shareholders’ equity | | | 310,535 | | | | 328,036 | | | | (17,501 | ) | | | (5.3 | ) |
| |
| | | | | | | | | | | | | | | | | | | | | |
| | | As of / For the Quarter Ended |
| | | 12/31/2003 | | 9/30/2003 | | 6/30/2003 | | 3/31/2003 | | 12/31/2002 |
MISCELLANEOUS INFORMATION | | | | | | | | | | | | | | | | | | | | |
| Common stock prices (daily close) | | | | | | | | | | | | | | | | | | | | |
| High | | $ | 21.2000 | | | $ | 20.4000 | | | $ | 19.5600 | | | $ | 19.4000 | | | $ | 19.1900 | |
| Low | | | 19.2700 | | | | 17.0400 | | | | 16.6900 | | | | 17.2500 | | | | 16.0500 | |
| End of period | | | 19.5500 | | | | 19.6000 | | | | 17.5900 | | | | 17.3200 | | | | 18.0100 | |
| Book Value | | | 10.08 | | | | 10.20 | | | | 10.55 | | | | 10.87 | | | | 10.80 | |
| Market Capitalization | | | 581,029,187 | | | | 581,005,034 | | | | 523,475,726 | | | | 519,442,197 | | | | 541,545,337 | |
| Weighted average shares — basic | | | 29,685,088 | | | | 29,672,137 | | | | 29,801,059 | | | | 30,006,417 | | | | 30,081,995 | |
| Weighted average shares — diluted | | | 29,685,088 | | | | 29,904,440 | | | | 29,801,059 | | | | 30,188,853 | | | | 30,220,294 | |
| End of period shares outstanding | | | 29,720,163 | | | | 29,643,114 | | | | 29,759,848 | | | | 29,990,889 | | | | 30,069,147 | |
| |
12
| | |
First Charter Corporation and Subsidiaries
Quarterly Earnings Release | | (NASDAQ: FCTR) |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | As of / For the Quarter Ended |
| (Dollars in thousands, except per share data) | | 12/31/2003 | | 9/30/2003 | | 6/30/2003 | | 3/31/2003 | | 12/31/2003 |
BALANCE SHEET | | | | | | | | | | | | | | | | | | | | |
| ASSETS: | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 88,564 | | | $ | 84,468 | | | $ | 103,199 | | | $ | 97,713 | | | $ | 162,087 | |
| Federal funds sold | | | 1,311 | | | | 2,004 | | | | 1,233 | | | | 1,121 | | | | 1,154 | |
| Interest earning bank deposits | | | 23,631 | | | | 42,560 | | | | 38,308 | | | | 72,431 | | | | 6,609 | |
| Securities available for sale | | | 1,601,900 | | | | 1,603,262 | | | | 1,518,918 | | | | 1,453,827 | | | | 1,129,212 | |
| Loans held for sale | | | 5,137 | | | | 14,784 | | | | 45,311 | | | | 69,894 | | | | 158,404 | |
| Loans | |
| Commercial Real Estate | | | 724,340 | | | | 732,434 | | | | 765,303 | | | | 800,593 | | | | 798,664 | |
| Commercial Non Real Estate | | | 212,010 | | | | 199,412 | | | | 212,753 | | | | 227,159 | | | | 223,178 | |
| Construction | | | 358,217 | | | | 275,005 | | | | 209,926 | | | | 216,784 | | | | 215,859 | |
| Mortgage | | | 280,748 | | | | 258,927 | | | | 257,236 | | | | 240,115 | | | | 237,085 | |
| Consumer | | | 284,448 | | | | 279,512 | | | | 271,734 | | | | 260,594 | | | | 280,201 | |
| Home equity | | | 393,041 | | | | 364,191 | | | | 347,716 | | | | 332,392 | | | | 317,730 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total loans | | | 2,252,804 | | | | 2,109,481 | | | | 2,064,668 | | | | 2,077,637 | | | | 2,072,717 | |
| Less: Unearned income | | | (167 | ) | | | (190 | ) | | | (209 | ) | | | (199 | ) | | | (247 | ) |
| Allowance for loan losses | | | (25,607 | ) | | | (23,953 | ) | | | (23,644 | ) | | | (26,495 | ) | | | (27,204 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Loans, net | | | 2,227,030 | | | | 2,085,338 | | | | 2,040,815 | | | | 2,050,943 | | | | 2,045,266 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other assets | | | 259,120 | | | | 255,551 | | | | 240,750 | | | | 245,338 | | | | 243,217 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 4,206,693 | | | $ | 4,087,967 | | | $ | 3,988,534 | | | $ | 3,991,267 | | | $ | 3,745,949 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | | | | | | | | | | | | | | | | | |
| Noninterest-bearing deposits | | $ | 326,679 | | | $ | 337,409 | | | $ | 341,176 | | | $ | 308,664 | | | $ | 305,924 | |
| Interest checking and savings | | | 440,496 | | | | 425,219 | | | | 409,415 | | | | 415,895 | | | | 416,005 | |
| Money market deposits | | | 470,551 | | | | 534,148 | | | | 535,021 | | | | 451,021 | | | | 305,530 | |
| Time deposits | | | 1,190,171 | | | | 1,184,806 | | | | 1,272,937 | | | | 1,317,349 | | | | 1,295,188 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 2,427,897 | | | | 2,481,582 | | | | 2,558,549 | | | | 2,492,929 | | | | 2,322,647 | |
| Other borrowings | | | 1,432,200 | | | | 1,261,412 | | | | 1,076,595 | | | | 1,116,223 | | | | 1,042,440 | |
| Other liabilities | | | 47,157 | | | | 42,710 | | | | 39,474 | | | | 56,044 | | | | 56,176 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 3,907,254 | | | | 3,785,704 | | | | 3,674,618 | | | | 3,665,196 | | | | 3,421,263 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total shareholders’ equity | | | 299,439 | | | | 302,263 | | | | 313,916 | | | | 326,071 | | | | 324,686 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 4,206,693 | | | $ | 4,087,967 | | | $ | 3,988,534 | | | $ | 3,991,267 | | | $ | 3,745,949 | |
| | | | | | | | | | | | | | | | | | | | | |
| |
SELECTED AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | |
| Loans and loans held for sale | | $ | 2,188,643 | | | $ | 2,130,236 | | | $ | 2,179,291 | | | $ | 2,112,226 | | | $ | 2,253,317 | |
| Securities | | | 1,585,679 | | | | 1,560,430 | | | | 1,412,491 | | | | 1,295,982 | | | | 1,144,045 | |
| Interest earning assets | | | 3,792,383 | | | | 3,730,688 | | | | 3,648,447 | | | | 3,474,071 | | | | 3,418,176 | |
| Assets | | | 4,192,064 | | | | 4,071,214 | | | | 3,990,872 | | | | 3,814,209 | | | | 3,678,945 | |
| Deposits | | | 2,496,810 | | | | 2,543,301 | | | | 2,519,240 | | | | 2,379,454 | | | | 2,309,971 | |
| Interest bearing liabilities | | | 3,431,144 | | | | 3,381,916 | | | | 3,286,646 | | | | 3,138,232 | | | | 2,999,871 | |
| Shareholders’ equity | | | 312,773 | | | | 311,962 | | | | 334,537 | | | | 334,431 | | | | 332,998 | |
| |
13
| | |
First Charter Corporation and Subsidiaries
Quarterly Earnings Release | | (NASDAQ: FCTR) |
| | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended | | Increase (Decrease) |
| (Dollars in thousands, except per share data) | | 12/31/2003 | | 12/31/2002 | | Amount | | Percentage |
INCOME STATEMENT | | | | | | | | | | | | | | | | |
| Interest income — taxable equivalent | | $ | 45,063 | | | $ | 48,794 | | | $ | (3,731 | ) | | | (7.6 | )% |
| Interest expense | | | 15,570 | | | | 20,095 | | | | (4,525 | ) | | | (22.5 | ) |
| | | | | | | | | | | | | | | | | |
| Net interest income — taxable equivalent | | | 29,493 | | | | 28,699 | | | | 794 | | | | 2.8 | |
| Less: taxable equivalent adjustment | | | 513 | | | | 661 | | | | (148 | ) | | | (22.4 | ) |
| | | | | | | | | | | | | | | | | |
| Net interest income | | | 28,980 | | | | 28,038 | | | | 942 | | | | 3.4 | |
| Provision for loan losses | | | 3,575 | | | | 2,175 | | | | 1,400 | | | | 64.4 | |
| | | | | | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 25,405 | | | | 25,863 | | | | (458 | ) | | | (1.8 | ) |
| Noninterest income | | | 13,517 | | | | 16,279 | | | | (2,762 | ) | | | (17.0 | ) |
| Noninterest expense | | | 41,403 | | | | 27,631 | | | | 13,772 | | | | 49.8 | |
| | | | | | | | | | | | | | | | | |
| (Loss) income before income taxes | | | (2,481 | ) | | | 14,511 | | | | (16,992 | ) | | | (117.1 | ) |
| Income tax (benefit) expense | | | (1,991 | ) | | | 3,962 | | | | (5,953 | ) | | | (150.3 | ) |
| | | | | | | | | | | | | | | | | |
| Net (loss) income | | $ | (490 | ) | | $ | 10,549 | | | $ | (11,039 | ) | | | (104.6 | )% |
| | | | | | | | | | | | | | | | | |
| (LOSS) EARNINGS PER SHARE DATA |
| Basic | | $ | (0.02 | ) | | $ | 0.35 | | | $ | (0.37 | ) | | | (105.7 | )% |
| Diluted | | | (0.02 | ) | | | 0.35 | | | | (0.37 | ) | | | (105.7 | ) |
| Weighted average shares — basic | | | 29,685,088 | | | | 30,081,995 | |
| Weighted average shares — diluted | | | 29,685,088 | | | | 30,220,294 | |
| Dividends paid on common shares | | | $0.185 | | | $ | 0.185 | | | $ | — | | | | — | % |
| PERFORMANCE RATIOS |
| Return on average assets | | | (0.05) | % | | | 1.14 | % | |
| Return on average equity | | | (0.62 | ) | | | 12.57 | |
| Efficiency — taxable equivalent (*) | | | 97.41 | | | | 69.76 | |
| |
| | | | | | | | | | |
| | | For the Twelve Months Ended |
| SCHEDULE OF SELECTED ITEMS INCLUDED IN EARNINGS | | 12/31/2003 | | 12/31/2002 |
| Noninterest income |
| Gain on sale of securities | | $ | 505 | | | $ | 5,371 | |
| Equity method investment income (loss) | | | 13 | | | | (340 | ) |
| Trading gains | | | 47 | | | | 1,038 | |
| Loss on sale of properties | | | — | | | | (109 | ) |
| Noninterest expense |
| Prepayment costs on borrowings | | | (11,723 | ) | | | (3,284 | ) |
| Reserve for contigent liability | | | — | | | | (840 | ) |
| | | | | |
| Notes: | | Applicable ratios are annualized |
| | | * - | | Noninterest expense divided by the sum of taxable equivalent net interest income plus noninterest income less gain on sale of securities. |
14
| | |
First Charter Corporation and Subsidiaries
Quarterly Earnings Release | | (NASDAQ: FCTR) |
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Twelve Months Ended | | Increase (Decrease) | | | |
| (Dollars in thousands, except per share data) | | 12/31/2003 | | 12/31/2002 | | Amount | Percentage | | |
INCOME STATEMENT | | | | | | | | | | | | | | | | | | | | |
| Interest income — taxable equivalent | | $ | 180,533 | | | $ | 199,102 | | | $ | (18,569 | ) | | | (9.3 | )% | | | | |
| Interest expense | | | 70,490 | | | | 83,227 | | | | (12,737 | ) | | | (15.3 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income — taxable equivalent | | | 110,043 | | | | 115,875 | | | | (5,832 | ) | | | (5.0 | ) | | | | |
| Less: taxable equivalent adjustment | | | 2,241 | | | | 2,714 | | | | (473 | ) | | | (17.4 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income | | | 107,802 | | | | 113,161 | | | | (5,359 | ) | | | (4.7 | ) | | | | |
| Provision for loan losses | | | 27,518 | | | | 8,270 | | | | 19,248 | | | | 232.7 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 80,284 | | | | 104,891 | | | | (24,607 | ) | | | (23.5 | ) | | | | |
| Noninterest income | | | 64,180 | | | | 47,631 | | | | 16,549 | | | | 34.7 | | | | | |
| Noninterest expense | | | 127,032 | | | | 97,772 | | | | 29,260 | | | | 29.9 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 17,432 | | | | 54,750 | | | | (37,318 | ) | | | (68.2 | ) | | | | |
| Income taxes | | | 3,286 | | | | 14,947 | | | | (11,661 | ) | | | (78.0 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 14,146 | | | $ | 39,803 | | | $ | (25,657 | ) | | | (64.5 | )% | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | |
EARNINGS PER SHARE DATA | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.47 | | | $ | 1.30 | | | $ | (0.83 | ) | | | (63.8 | )% | | | | |
| Diluted | | | 0.47 | | | | 1.30 | | | | (0.83 | ) | | | (63.8 | ) | | | | |
| Weighted average shares — basic | | | 29,789,969 | | | | 30,520,125 | | | | | | | | | | | | | |
| Weighted average shares — diluted | | | 30,007,435 | | | | 30,702,107 | | | | | | | | | | | | | |
| Dividends paid on common shares | | $ | 0.74 | | | $ | 0.73 | | | $ | 0.01 | | | | 1.4 | % | | | | |
| | | | | |
PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.35 | % | | | 1.13 | % | | | | | | | | | | | | |
| Return on average equity | | | 4.56 | | | | 12.13 | | | | | | | | | | | | | |
| Efficiency — taxable equivalent (*) | | | 77.49 | | | | 64.34 | | | | | | | | | | | | | |
| |
| | | | | | | | | | |
| | | For the Twelve Months Ended |
| SCHEDULE OF SELECTED ITEMS INCLUDED IN EARNINGS | | 12/31/2003 | | 12/31/2002 |
| Noninterest income | | | | | | | | |
| Gain on sale of securities | | $ | 10,287 | | | $ | 11,539 | |
| Gain on sale of credit card loans | | | 2,262 | | | | — | |
| Equity investment write down | | | — | | | | (20 | ) |
| Equity method investment loss | | | (285 | ) | | | (5,801 | ) |
| Trading gains | | | 1,801 | | | | 2,078 | |
| Gain on sale of properties | | | 382 | | | | 904 | |
| Noninterest expense | | | | | | | | |
| Prepayment costs on borrowings | | | (19,089 | ) | | | (3,284 | ) |
| Reserve for contingent liability | | | — | | | | (840 | ) |
| | | | | |
| Notes: | | Applicable ratios are annualized |
| | | * - | | Noninterest expense divided by the sum of taxable equivalent net interest income plus noninterest income less gain on sale of securities. |
15
| | |
First Charter Corporation and Subsidiaries
Quarterly Earnings Release | | (NASDAQ: FCTR) |
| | | | | | | | | | | | | | | | | | | | | |
| | | As of / For the Quarter Ended |
| (Dollars in thousands, except per share data) | | 12/31/2003 | | 9/30/2003 | | 6/30/2003 | | 3/31/2003 | | 12/31/2002 |
INCOME STATEMENT | | | | | | | | | | | | | | | | | | | | |
Interest income — taxable equivalent | | | | | | | | | | | | | | | | | | | | |
| Interest and fees on loans | | $ | 29,282 | | | $ | 29,042 | | | $ | 30,593 | | | $ | 30,458 | | | $ | 34,225 | |
| Interest on securities | | | 15,743 | | | | 14,625 | | | | 14,931 | | | | 15,374 | | | | 14,500 | |
| Other interest income | | | 38 | | | | 97 | | | | 165 | | | | 185 | | | | 69 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total interest income — taxable equivalent | | | 45,063 | | | | 43,764 | | | | 45,689 | | | | 46,017 | | | | 48,794 | |
| | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | | | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 8,449 | | | | 9,963 | | | | 11,667 | | | | 11,465 | | | | 12,016 | |
| Other interest expense | | | 7,121 | | | | 7,070 | | | | 7,435 | | | | 7,320 | | | | 8,079 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total interest expense | | | 15,570 | | | | 17,033 | | | | 19,102 | | | | 18,785 | | | | 20,095 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income — taxable equivalent | | | 29,493 | | | | 26,731 | | | | 26,587 | | | | 27,232 | | | | 28,699 | |
| Less: Taxable equivalent adjustment | | | 513 | | | | 531 | | | | 548 | | | | 649 | | | | 661 | |
| | | | | | | | | | | | | | | | | | | | | |
Net interest income | | | 28,980 | | | | 26,200 | | | | 26,039 | | | | 26,583 | | | | 28,038 | |
| Provision for loan losses | | | 3,575 | | | | 2,400 | | | | 19,492 | | | | 2,051 | | | | 2,175 | |
| | | | | | | | | | | | | | | | | | | | | |
Net interest income after provision for loan losses | | | 25,405 | | | | 23,800 | | | | 6,547 | | | | 24,532 | | | | 25,863 | |
| | | | | | | | | | | | | | | | | | | | | |
Noninterest income | | | | | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 5,768 | | | | 5,674 | | | | 5,571 | | | | 5,130 | | | | 4,998 | |
| Financial management income | | | 1,239 | | | | 1,400 | | | | 488 | | | | 578 | | | | 483 | |
| Gain on sale of securities | | | 505 | | | | 270 | | | | 8,286 | | | | 1,226 | | | | 5,371 | |
| Gain on sale of credit card loan portfolio | | | — | | | | 49 | | | | — | | | | 2,213 | | | | — | |
| Income (loss) from equity method investments | | | 13 | | | | 78 | | | | (276 | ) | | | (100 | ) | | | (340 | ) |
| Mortgage loan fees | | | 546 | | | | 1,329 | | | | 612 | | | | 672 | | | | 1,137 | |
| Brokerage services income | | | 857 | | | | 861 | | | | 812 | | | | 486 | | | | 591 | |
| Insurance services income | | | 2,415 | | | | 2,327 | | | | 2,229 | | | | 2,437 | | | | 2,112 | |
| Trading gains | | | 47 | | | | 158 | | | | 432 | | | | 1,164 | | | | 1,038 | |
| Bank owned life insurance | | | 983 | | | | 992 | | | | 967 | | | | 946 | | | | 16 | |
| Gain (loss) on sale of properties | | | — | | | | 382 | | | | — | | | | — | | | | (109 | ) |
| Other noninterest income | | | 1,144 | | | | 1,324 | | | | 1,128 | | | | 818 | | | | 982 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total noninterest income | | | 13,517 | | | | 14,844 | | | | 20,249 | | | | 15,570 | | | | 16,279 | |
| | | | | | | | | | | | | | | | | | | | | |
Noninterest expense | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 15,410 | | | | 13,277 | | | | 12,554 | | | | 13,757 | | | | 12,213 | |
| Occupancy and equipment | | | 4,346 | | | | 4,079 | | | | 3,913 | | | | 4,166 | | | | 3,768 | |
| Data processing | | | 792 | | | | 712 | | | | 634 | | | | 678 | | | | 760 | |
| Marketing | | | 948 | | | | 1,173 | | | | 1,161 | | | | 1,153 | | | | 658 | |
| Postage and supplies | | | 1,251 | | | | 982 | | | | 1,152 | | | | 1,136 | | | | 1,099 | |
| Professional services | | | 3,422 | | | | 3,158 | | | | 3,230 | | | | 1,772 | | | | 1,841 | |
| Telephone | | | 567 | | | | 584 | | | | 513 | | | | 603 | | | | 376 | |
| Amortization of intangibles | | | 152 | | | | 127 | | | | 77 | | | | 85 | | | | 89 | |
| Prepayment costs on borrowings | | | 11,723 | | | | — | | | | 7,366 | | | | — | | | | 3,284 | |
| Other noninterest expense | | | 2,792 | | | | 2,451 | | | | 2,422 | | | | 2,714 | | | | 3,543 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total noninterest expense | | | 41,403 | | | | 26,543 | | | | 33,022 | | | | 26,064 | | | | 27,631 | |
| | | | | | | | | | | | | | | | | | | | | |
| (Loss) income before taxes | | | (2,481 | ) | | | 12,101 | | | | (6,226 | ) | | | 14,038 | | | | 14,511 | |
| Income tax (benefit) expense | | | (1,991 | ) | | | 3,207 | | | | (2,022 | ) | | | 4,092 | | | | 3,962 | |
| | | | | | | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (490 | ) | | $ | 8,894 | | | $ | (4,204 | ) | | $ | 9,946 | | | $ | 10,549 | |
| | | | | | | | | | | | | | | | | | | | | |
| |
(LOSS) EARNINGS PER SHARE DATA |
| Basic | | $ | (0.02 | ) | | $ | 0.30 | | | $ | (0.14 | ) | | $ | 0.33 | | | $ | 0.35 | |
| Diluted | | | (0.02 | ) | | | 0.30 | | | | (0.14 | ) | | | 0.33 | | | | 0.35 | |
| Dividends paid on common shares | | | 0.185 | | | | 0.185 | | | | 0.185 | | | | 0.185 | | | | 0.185 | |
| |
PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | (0.05 | )% | | | 0.87 | % | | | (0.42 | )% | | | 1.06 | % | | | 1.14 | % |
| Return on average equity | | | (0.62 | ) | | | 11.31 | | | | (5.04 | ) | | | 12.06 | | | | 12.57 | |
| Efficiency — taxable equivalent (*) | | | 97.41 | | | | 64.26 | | | | 85.66 | | | | 62.69 | | | | 69.76 | |
| Noninterest income as a percentage of total income | | | 31.81 | | | | 36.17 | | | | 43.75 | | | | 36.94 | | | | 36.73 | |
| Equity as a percentage of total assets | | | 7.12 | | | | 7.39 | | | | 7.87 | | | | 8.17 | | | | 8.67 | |
| Average earning assets as a percentage of average assets | | | 90.47 | | | | 91.64 | | | | 91.42 | | | | 91.08 | | | | 92.91 | |
| Average loans as a percentage of average deposits | | | 87.66 | | | | 83.76 | | | | 86.51 | | | | 88.77 | | | | 97.55 | |
| |
| | | | | | | | | | | | | | | | | | | | | |
| | | As of / For the Quarter Ended |
| SCHEDULE OF SELECTED ITEMS INCLUDED IN EARNINGS | | 12/31/2003 | | 9/30/2003 | | 6/30/2003 | | 3/31/2003 | | 12/31/2002 |
| Noninterest income | | | | | | | | | | | | | | | | | | | | |
| Gain on sale of securities | | $ | 505 | | | $ | 270 | | | $ | 8,286 | | | $ | 1,226 | | | $ | 5,371 | |
| Gain on sale of credit card loans | | | — | | | | 49 | | | | — | | | | 2,213 | | | | — | |
| Equity method investment income (loss) | | | 13 | | | | 78 | | | | (276 | ) | | | (100 | ) | | | (340 | ) |
| Trading gains | | | 47 | | | | 158 | | | | 432 | | | | 1,164 | | | | 1,038 | |
| Gain (loss) on sale of properties | | | — | | | | 382 | | | | — | | | | — | | | | (109 | ) |
| Noninterest expense | | | | | | | | | | | | | | | | | | | | |
| Prepayment costs on borrowings | | | (11,723 | ) | | | — | | | | (7,366 | ) | | | — | | | | (3,284 | ) |
| Reserve for contingent liability | | | — | | | | — | | | | — | | | | — | | | | (840 | ) |
| | | | | |
| Notes: | | Applicable ratios are annualized |
| | | * - | | Noninterest expense divided by the sum of taxable equivalent net interest income plus noninterest income less gain on sale of securities. |
16
| | |
First Charter Corporation and Subsidiaries
Quarterly Earnings Release | | (NASDAQ: FCTR) |
| | | | | | | | | | | | | | | | | | | | | |
| | | As of / For the Quarter Ended |
| (Dollars in thousands, except per share data) | | 12/31/2003 | | 9/30/2003 | | 6/30/2003 | | 3/31/2003 | | 12/31/2002 |
ASSET QUALITY ANALYSIS | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses | | | | | | | | | | | | | | | | | | | | |
| Beginning balance | | $ | 23,953 | | | $ | 23,644 | | | $ | 26,495 | | | $ | 27,204 | | | $ | 27,411 | |
| Provision for loan losses | | | 3,575 | | | | 2,400 | | | | 19,492 | | | | 2,051 | | | | 2,175 | |
| Allowance related to loans sold or transferred to held for sale | | | — | | | | — | | | | (20,236 | ) | | | (547 | ) | | | (325 | ) |
| Charge-offs | | | (2,304 | ) | | | (2,238 | ) | | | (2,448 | ) | | | (2,466 | ) | | | (2,138 | ) |
| Recoveries | | | 383 | | | | 147 | | | | 341 | | | | 253 | | | | 81 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | | (1,921 | ) | | | (2,091 | ) | | | (2,107 | ) | | | (2,213 | ) | | | (2,057 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Ending balance | | $ | 25,607 | | | $ | 23,953 | | | $ | 23,644 | | | $ | 26,495 | | | $ | 27,204 | |
| | | | | | | | | | | | | | | | | | | | | |
Nonperforming Assets and Loans 90 days or more past due accruing interest | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 14,910 | | | $ | 13,398 | | | $ | 11,144 | | | $ | 30,021 | | | $ | 26,467 | |
| Other real estate | | | 6,836 | | | | 6,709 | | | | 6,866 | | | | 11,200 | | | | 10,278 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming assets | | | 21,746 | | | | 20,107 | | | | 18,010 | | | | 41,221 | | | | 36,745 | |
| | | | | | | | | | | | | | | | | | | | | |
| Loans 90 days or more past due accruing interest | | | 21 | | | | 21 | | | | 312 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 21,767 | | | $ | 20,128 | | | $ | 18,322 | | | $ | 41,221 | | | $ | 36,745 | |
| | | | | | | | | | | | | | | | | | | | | |
Asset Quality Ratios (*) | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans as a percentage of total loans | | | 0.66 | % | | | 0.64 | % | | | 0.54 | % | | | 1.44 | % | | | 1.28 | % |
| Nonperforming assets as a percentage of total assets | | | 0.52 | | | | 0.49 | | | | 0.45 | | | | 1.03 | | | | 0.98 | |
| Nonperforming assets as a percentage of total loans and other real estate | | | 0.96 | | | | 0.95 | | | | 0.87 | | | | 1.97 | | | | 1.76 | |
| Net charge-offs as a percentage of average loans (annualized) | | | 0.35 | | | | 0.40 | | | | 0.39 | | | | 0.43 | | | | 0.37 | |
| Allowance for loan losses as a percentage of loans | | | 1.14 | | | | 1.14 | | | | 1.15 | | | | 1.28 | | | | 1.31 | |
| Ratio of allowance for loan losses to: | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | | 3.36x | | | | 2.89x | | | | 2.80x | | | | 2.95x | | | | 3.33x | |
| Nonaccrual loans | | | 1.72 | | | | 1.79 | | | | 2.12 | | | | 0.88 | | | | 1.03 | |
| |
| | | | | | | | | | | | | | | | | |
| | | As of / For the Twelve Months Ended | | Increase (Decrease) |
| | | 12/31/2003 | | 12/31/2002 | | Amount | | Percentage |
Allowance for Loan Losses | | | | | | | | | | | | | | | | |
| Beginning balance | | $ | 27,204 | | | $ | 25,843 | | | $ | 1,361 | | | | 5.3 | % |
| Provision for loan losses | | | 27,518 | | | | 8,270 | | | | 19,248 | | | | 232.7 | |
| Allowance related to loans sold | | | (20,783 | ) | | | (647 | ) | | | (20,136 | ) | | | N/A | |
| Charge-offs | | | (9,456 | ) | | | (6,990 | ) | | | 2,466 | | | | 35.3 | |
| Recoveries | | | 1,124 | | | | 728 | | | | 396 | | | | 54.4 | |
| | | | | | | | | | | | | | | | | |
| Net charge-offs | | | (8,332 | ) | | | (6,262 | ) | | | 2,070 | | | | 33.1 | |
| | | �� | | | | | | | | | | | | | | |
| Ending balance | | $ | 25,607 | | | $ | 27,204 | | | $ | (1,597 | ) | | | (5.9) | % |
| | | | | | | | | | | | | | | | | |
Asset Quality Ratios (*) | | | | | | | | | | | | | | | | |
| Net charge-offs as a percentage of average loans (annualized) | | | 0.39 | % | | | 0.30 | % | | | | | | | | |
| Ratio of allowance for loan losses to net charge-offs (annualized) | | | 3.07x | | | | 4.34x | | | | | | | | | |
| |
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Quarter Ended |
| | | 12/31/2003 | | 9/30/2003 | | 6/30/2003 | | 3/31/2003 | | 12/31/2002 |
ANNUALIZED INTEREST YIELDS / RATES (**) | | | | | | | | | | | | | | | | | | | | |
Interest income: | | | | | | | | | | | | | | | | | | | | |
| Yield on loans and loans held for sale | | | 5.31 | % | | | 5.41 | % | | | 5.63 | % | | | 5.85 | % | | | 6.03 | % |
| Yield on securities | | | 3.97 | | | | 3.75 | | | | 4.23 | | | | 4.75 | | | | 5.07 | |
| | | | | | | | | | | | | | | | | | | | | |
| Yield on interest earning assets | | | 4.73 | | | | 4.67 | | | | 5.02 | | | | 5.35 | | | | 5.68 | |
| | | | | | | | | | | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | | | | | | | | | |
| Cost of interest bearing deposits | | | 1.59 | | | | 1.80 | | | | 2.12 | | | | 2.23 | | | | 2.37 | |
| Cost of borrowings | | | 2.14 | | | | 2.38 | | | | 2.75 | | | | 2.83 | | | | 3.26 | |
| | | | | | | | | | | | | | | | | | | | | |
| Cost of interest bearing liabilities | | | 1.80 | | | | 2.00 | | | | 2.33 | | | | 2.43 | | | | 2.66 | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest rate spread | | | 2.93 | | | | 2.67 | | | | 2.69 | | | | 2.92 | | | | 3.02 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net yield on earning assets | | | 3.10 | % | | | 2.86 | % | | | 2.92 | % | | | 3.15 | % | | | 3.34 | % |
| | | | | | | | | | | | | | | | | | | | | |
| |
| | | |
| Notes: | | Applicable ratios are annualized.
(*) — Excludes loans held for sale.
(**) — Fully taxable equivalent yields. |
