SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
DECEMBER 22, 1997
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 0-15829 56-1355866
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
22 UNION STREET, NORTH, CONCORD, NORTH CAROLINA 28026-0228
(Addresses, including zip codes, of principal executive offices)
(704)786-3300
(Registrant's telephone number, including area code)
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS.
Effective December 22, 1997 (the "Effective Time"), Carolina
State Bank ("CSB"), a North Carolina commercial banking
organization, merged into First Charter National Bank ("FCNB"), a
national banking association and the wholly-owned subsidiary of
First Charter Corporation (the "Registrant"), pursuant to that
certain Agreement and Plan of Merger dated August 15, 1997 by and
between the Registrant and CSB (the "Merger Agreement") and that
certain Agreement and Plan of Merger dated September 17, 1997 by
and between FCNB and CSB (the "Merger"). In connection with the
Merger and as of the Effective Time, each outstanding share of
common stock of CSB was converted into 1.023 shares (the
"Exchange Ratio") of the Registrant's common stock (the "First
Charter Common Stock"), with cash paid in lieu of the issuance of
fractional shares. Also at the Effective Time, all rights with
respect to CSB common stock pursuant to stock options previously
granted by CSB under CSB's stock option plan and outstanding at
the Effective Time were converted into and became rights with
respect to First Charter Common Stock based on the Exchange
Ratio. In the Merger, 1,701,745 shares of First Charter Common
Stock were issued. Based on the number of shares of First
Charter Common Stock outstanding immediately prior to the
Effective Time, following the Merger there were approximately
9,268,069 shares of First Charter Common Stock outstanding.
The Registrant's Registration Statement on Form S-4
(Registration No. 333-35905), as amended, which was declared
effective by the Securities and Exchange Commission on October
30, 1997 (the "Registration Statement"), sets forth certain
information regarding the Merger, the Registrant and CSB,
including but not limited to, the manner of the Merger; a
description of the assets involved; the nature and amount of
consideration paid by the Registrant therefor; the method used
for determining the amount of such consideration; the nature of
any material relationship between CSB and the Registrant, any
officer or director of the Registrant, or any associate of any
such officer or director; the nature of CSB's business; and the
Registrant's intended use of the assets acquired in the Merger.
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS.
(a)(i) The following financial statements of CSB have
been reported previously by the Registrant as Exhibit 99.11 of
the Registration Statement:
* Report of Independent Accountants
* Consolidated Balance Sheet as of December 31, 1996
* Consolidated Statement of Income for the year ended
December 31, 1996
* Consolidated Statement of Cash Flows for the year ended
December 31, 1996
* Notes to Consolidated Financial Statements for the year
ended December 31, 1996
2
(a)(ii) The following financial statements of CSB are
filed herewith:
* Consolidated Balance Sheet as of September 30, 1997
(unaudited)
* Consolidated Statements of Income for the nine months
ended September 30, 1997 and 1996 (unaudited)
* Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 (unaudited)
* Notes to Consolidated Financial Statements (unaudited)
(b)(i) The unaudited Pro Forma Condensed Statements of Income for
each of the years ended December 31, 1994, December 31, 1995 and
December 31, 1996 have been previously reported by the Registrant in
the Registration Statement.
(b)(ii) The following pro forma condensed financial information
is filed herewith:
* Introductory Statement
* Pro Forma Balance Sheet as of September 30, 1997
(unaudited)
* Pro Forma Condensed Statements of Income for the nine
months ended September 30, 1997 and 1996 (unaudited)
* Notes to the unaudited Pro Forma Condensed Financial
Information
(c) The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Merger dated August 15, 1997
between the Registrant and Carolina State Bank,
incorporated herein by reference to Appendix A of
the Registrant's Registration Statement on Form S-4
(Registration No. 333-35905)
99.1 News release disseminated on December 22, 1997 by
First Charter Corporation
3
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
By: /s/ LAWRENCE M. KIMBROUGH
Lawrence M. Kimbrough
President and Chief Executive
Officer
Dated: January 6, 1998
4
CAROLINA STATE BANK
UNAUDITED INTERIM FINANCIAL INFORMATION
Set forth on the following pages are the following unaudited
interim financial statements of Carolina State Bank: (i)
Consolidated Balance Sheet as of September 30, 1997; (ii)
Consolidated Statements of Income for the nine months ended
September 30, 1997 and 1996; (iii) Consolidated Statements of
Cash Flows for the nine months ended September 30, 1997 and 1996;
and (iv) Notes to Consolidated Financial Statements.
5
CAROLINA STATE BANK
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
UNAUDITED
------------------
ASSETS
Cash and due from banks................... $ 2,626,026
Federal funds sold........................ 2,715,000
Interest bearing deposits in banks........ 13,240
Securities available for sale............. 14,057,612
Securities held to maturity,
estimated market value of
$14,327,000 ............................ 14,280,567
Loans..................................... 104,682,155
Allowance for loan losses................. 1,900,000
-----------------
Net Loans........................... 102,782,155
-----------------
Bank premises and equipment, net ......... 2,607,662
Other assets ............................. 3,840,916
-----------------
TOTAL ASSETS ....................... $ 142,923,178
=================
LIABILITIES
Deposits:
Demand ................................. $ 9,386,597
Interest bearing demand................. 26,769,692
Savings................................. 6,052,997
Time, $100,000 and over ................. 19,832,695
Other time .............................. 60,504,605
-----------------
Total deposits ..................... 122,546,586
Repurchase agreements .................... 1,781,470
Other borrowings ......................... 4,000,000
Other liabilities ........................ 1,091,958
-----------------
Total Liabilities .................. 129,420,014
-----------------
SHAREHOLDERS' EQUITY
Common stock, $4.50 par value,
authorized 10,000,000 shares,
issued and outstanding 1,662,792
shares.................................. 7,482,564
Surplus................................... 4,005,486
Retained earnings......................... 1,994,114
Unrealized gain on securities
available for sale, net of taxes ....... 21,000
-----------------
Total Shareholders' Equity ......... 13,503,164
-----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ............. $ 142,923,178
================
See accompanying notes to consolidated financial statements.
6
CAROLINA STATE BANK
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30 SEPTEMBER 30
1997 1996
------------ ------------
UNAUDITED
INTEREST INCOME
Interest and fees on loans ........ $ 7,415,264 $ 6,463,343
Interest on securities:
U.S. Treasury.................... 1,213,508 1,153,248
States and political subdivisions 35,204 0
Other............................ 28,771 19,885
Interest on federal funds sold .... 103,881 59,399
Interest on interest bearing
deposits in banks................ 1,503 773
----------- -----------
Total interest income.............. 8,798,131 7,696,648
----------- -----------
INTEREST EXPENSE
Interest on certificates of
deposit over $100,000............ 926,970 645,972
Interest on other deposits ........ 3,514,468 3,199,385
Other interest .................... 287,898 229,894
----------- -----------
Total interest expense ............ 4,729,336 4,075,251
----------- -----------
Net interest income................ 4,068,795 3,621,397
Provision for loan losses.......... 927,324 396,500
Net interest income after
provision for loan losses........ 3,141,471 3,224,897
OTHER OPERATING INCOME
Service charge on deposit accounts. 487,774 442,004
Other service charges.............. 195,961 149,916
Other income ...................... 180,717 170,643
---------- ---------
Total other operating income ...... 864,452 762,563
---------- ---------
OTHER OPERATING EXPENSES
Salaries and employee benefits .... 1,350,063 1,210,118
Net occupancy expenses ............ 220,251 171,142
Equipment expenses ................ 200,541 168,887
Other expenses .................... 1,119,840 934,468
----------- ----------
Total other operating expenses .... 2,890,695 2,484,615
Income before taxes................ 1,115,228 1,502,845
Income taxes ...................... 398,000 541,358
----------- -----------
Net Income ........................$ 717,228 $ 961,487
=========== ===========
7
PRIMARY INCOME PER SHARE DATA:
Net income ........................$ .44 $ .60
=========== ===========
Average common equivalent shares .. 1,620,797 1,598,733
INCOME PER SHARE ASSUMING FULL DILUTION:
Net income ........................$ .44 $ .60
=========== ===========
Average common equivalent shares .. 1,637,369 1,603,650
See accompanying notes to consolidated financial statements.
8
CAROLINA STATE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
-----------------------------------
SEPTEMBER 30 SEPTEMBER 30
1997 1996
---------------- ----------------
UNAUDITED
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................... $ 717,228 $ 961,487
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization.... 220,179 171,098
Provision for possible loan losses 927,324 396,500
Increase in other assets ........ (934,415) (216,539)
Increase (Decrease) in other liabilities 278,110 (211,678)
----------- --------------
Net cash provided by operating activities 1,208,426 1,100,868
----------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in interest bearing
deposits in banks .................. (8,703) 100,903
Proceeds from maturities of securities,
Available for sale ................. 5,000,000 8,500,000
Purchase of securities, Available for sale (7,511,067) (533,236)
Proceeds from maturities of securities,
Held to maturity ................... 1,500,000 0
Purchase of securities, Held to maturity (1,840,204) (4,971,380)
Net increase in loans................. (9,073,195) (13,881,525)
Purchases of premises and equipment... (185,009) (289,556)
-------------- --------------
Net cash used in investing activities.. (12,118,178) (11,074,794)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit................ 7,905,878 9,370,658
Proceeds from exercise of management warrants 220,000 0
Proceeds from exercise of options...... 251,467 0
Payment of fractional shares related to
stock split.......................... (718) 0
Increase (Decrease) in repurchase agreements 1,147,003 (734,361)
Increase (Decrease) in other borrowings (1,000,000) 2,000,000
------------ -------------
Net cash provided by financing ........ 8,523,630 10,636,297
------------ -------------
Net change in cash and cash equivalents (2,386,122) 662,371
Cash and cash equivalents, beginning
of period............................ 7,727,148 3,160,955
------------ -------------
Cash and cash equivalents, end of period $ 5,341,026 $ 3,823,326
============ =============
9
Supplemental disclosures of cash
flow information:
Interest paid............................ $ 4,453,378 $ 3,929,322
============ ===========
Income taxes paid........................ $ 509,500 $ 296,000
============ ===========
Disclosure of accounting policy:
For purpose of reporting cash flows, cash and cash
equivalents include cash on hand and due from banks and
federal funds sold.
See accompanying notes to consolidated financial statements.
10
CAROLINA STATE BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Primary earnings per share and income per share assuming
full dilution are computed based on the weighted average
number of shares outstanding during the period, including
common stock equivalent shares applicable to stock options,
assuming the exercise of outstanding stock options at market
value per share.
2. In certain instances, amounts reported in the 1996 financial
statements have been reclassified to present them in the
format selected for 1997. Such reclassifications have no
effect on net income or shareholders' equity as previously
reported.
3. 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 the interim
periods. All such adjustments were of a normal recurring
nature.
4. On June 30, 1997 First Charter Corporation and Carolina
State Bank executed a letter of intent whereby First Charter
Corporation would acquire all the common stock of Carolina
State Bank as set forth below. In the transaction Carolina
State Bank shareholders would receive 1.023 shares of First
Charter Corporation common stock for each share of Carolina
State Bank common stock. Based on a First Charter stock
price of $21.75 per share on June 27, 1997, the total
transaction value equals $38.3 million or $22.25 for each
share of Carolina State Bank. The transaction will be
structured to qualify as a tax-free reorganization and is
anticipated to be accounted for as a pooling of interests.
In addition, in connection with the signing of the letter of
intent, Carolina State Bank has granted First Charter the
option to purchase up to 19.9 percent of its outstanding
common stock, under certain circumstances.
On August 15, 1997, Carolina State Bank ("CSB") and First
Charter Corporation ("FCC") entered into a definitive
agreement (the "Agreement") providing for the acquisition of
CSB by FCC through the merger of CSB with and into First
Charter National Bank, a wholly-owned subsidiary of FCC (the
"Merger"). Pursuant to the Agreement, at the effective time
of the Merger ("Effective Time"), each share of common stock
of CSB, other than shares as to which dissenters' rights
have been perfected, shall be converted into 1.023 shares of
FCC common stock, with cash (without interest) to be paid in
lieu of the issuance of fractional shares. The transaction
is structured to qualify as a tax-free reorganization and is
anticipated to be accounted for as a pooling of interests.
Consummation of the Merger, which is expected to occur by
the end of the fourth quarter of 1997, is subject to certain
conditions, including but not limited to, (i) the approval
by the shareholders of CSB and FCC; (ii) the approvals of
the Office of the Comptroller of the Currency and any other
applicable federal and state regulatory authorities; and
(iii) the continued effectiveness of a registration
statement related to the common stock of FCC to be issued in
the Merger.
5. The per share information has been restated to account for
the effect of a 3 for 2 stock split paid on May 12, 1997.
11
PRO FORMA
CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited Pro Forma Condensed Financial
Information and explanatory notes are presented to show the
impact on the historical financial position and results of
operations of the Registrant of the Merger. The Merger is
reflected in the Pro Forma Condensed Financial Information under
the pooling-of-interests method of accounting. The Pro Forma
Condensed Balance Sheet is based on the assumption that the
Merger was consummated on September 30, 1997, and the Pro Forma
Condensed Statements of Income are based on the assumption that
the Merger was consummated at the beginning of each period
presented. The unaudited Pro Forma Condensed Financial
Information should be read in conjunction with the historical
financial statements and notes thereto of each of the Registrant
and CSB. The pro forma information is not necessarily indicative
of the results of operations or combined financial position that
would have resulted had the Merger been consummated at the
beginning of the periods indicated, nor is it necessarily
indicative of the results of operations of future periods or
future combined financial position. The following information
contains forward-looking statements regarding the Registrant's
proposed Merger-related expenses in connection with the Merger.
The proposed expenses are subject to certain risks and
uncertainties that could cause actual expenses to differ
materially from those indicated, such as the inability of the
Registrant to consolidate the operations of CSB with the
Registrant or to achieve technological efficiencies as soon as
anticipated. Readers are cautioned not to place undue reliance
on this information, which reflects management's judgment only as
of the date hereof. The Registrant undertakes no obligation to
publicly revise this information to reflect events and circumstances
that arise after the date hereof.
12
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
AT SEPTEMBER 30, 1997
PRO FORMA
FIRST CHARTER
PRO FORMA AND CSB
FIRST CHARTER CSB ADJUSTMENTS COMBINED
--------------- --------- ------------ --------------
(DOLLARS IN THOUSANDS)
ASSETS
Cash and due from
banks............... $ 27,974 $ 2,626 $ $ 30,600
Federal funds sold... 0 2,715 2,715
Interest-bearing bank
deposits............ 12,351 13 12,364
Securities available
for sale:
U.S. Government
obligations...... 22,850 13,510 36,360
U.S. Government agency
obligations...... 14,705 0 14,705
Mortgage-backed
securities....... 12,197 0 12,197
State and municipal
obligations, nontaxable 75,140 0 75,140
Other.............. 10,548 548 11,096
-------- ------- --------- -----------
Total securities available
for sale.... 135,440 14,058 0 149,498
-------- ------- --------- -----------
Investment securities:
U.S. Government
obligations..... 0 12,469 12,469
U.S. Government agency
obligations..... 0 0 0
Mortgage-backed
securities...... 0 0 0
State and municipal
obligations, nontaxable 0 1,812 1,812
-------- -------- ---------- -----------
Total investment
securities ... 0 14,281 0 14,281
-------- -------- ---------- -----------
Loans................. 397,863 104,682 502,545
Less: Unearned Income (306) 0 (306)
Allowance for loan
losses (5,583) (1,900) (7,483)
-------- -------- ---------- ------------
Loans, net ..... 391,974 102,782 0 494,756
-------- -------- ---------- ------------
Premises and equipment,
net................. 12,730 2,608 15,338
Other assets ......... 5,475 3,840 9,315
--------- -------- ---------- ------------
Total assets ... $585,944 $ 142,923 $ 0 $ 728,867
========= ========= ========== ============
13
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Noninterest-bearing $ 77,616 $ 9,387 $ $ 87,003
Interest-bearing:
NOW accounts ...... 77,042 26,770 103,812
Time .............. 267,826 66,557 334,383
Certificates of deposit
greater than $100,000 64,444 19,833 84,277
-------- -------- --------- -----------
Total deposits .. 486,928 122,547 0 609,475
Other borrowings ...... 29,720 5,781 35,501
Other liabilities...... 4,466 1,092 5,558
-------- -------- --------- ----------
Total liabilities 521,114 129,420 0 650,534
-------- -------- --------- ----------
SHAREHOLDERS' EQUITY
First Charter Common Stock--
$5 par value; authorized,
10,000,000 shares; issued
and outstanding, 7,555,927
shares .............. 37,780 0 37,780
CSB Common Stock --
$4.50 par value; authorized,
10,000,000 shares; issued
and outstanding, 1,662,792
shares .............. 0 7,483 (7,483) (1) 0
Additional paid-in capital 4 4,005 7,483 (1) 11,492
Unrealized gain on securities
available for sale, net of
taxes................ 2,923 21 2,944
Retained earnings...... 24,123 1,994 0 26,117
--------- --------- ---------- ----------
Total shareholders'
equity ........ 64,830 13,503 0 78,333
--------- --------- ---------- ----------
Total liabilities and
shareholders'
equity......... $ 585,944 $ 142,923 $ 0 $ 728,867
========= ========= ========== =========
See Notes to Pro Forma Condensed Financial Information.
14
PRO FORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE AND PER SHARE AMOUNTS)
Interest and fees on loans ..... $ 34,214 $ 30,579
Interest on investments and
securities.................... 6,669 6,777
Other interest ................. 370 479
---------- ----------
Total interest income..... 41,253 37,835
---------- ----------
Interest on deposits ........... 16,869 15,763
Interest on borrowings ......... 1,424 1,226
---------- ----------
Total interest expense ... 18,293 16,989
---------- ----------
Net interest income....... 22,960 20,846
Provision for loan losses....... 1,812 1,217
---------- ----------
Net interest income after
provision for loan losses 21,148 19,629
Noninterest income ............. 6,589 5,336
Noninterest expense............. 16,118 14,173
---------- ----------
Income before income taxes 11,619 10,792
Income taxes ................... 3,501 3,290
---------- ----------
Net income ............... $ 8,118 $ 7,502
PRIMARY INCOME PER SHARE:
Net income
First Charter- historical... $ 0.97 $ 0.87
CSB - historical ........... 0.44 0.60
First Charter/CSB - pro
forma combined............. 0.87 0.81
Average common equivalent shares
First Charter-historical ... 7,632,789 7,585,273
CSB - historical ........... 1,620,797 1,598,733
First Charter/CSB-pro
forma combined............. 9,290,864 9,220,777
INCOME PER SHARE ASSUMING FULL DILUTION:
Net income
First Charter-historical ... $ 0.97 $ 0.87
CSB - historical ........... 0.44 0.60
First Charter/CSB-pro
forma combined............. 0.87 0.81
Average common equivalent shares
First Charter-historical ... 7,656,479 7,585,273
CSB - historical ........... 1,637,369 1,603,650
First Charter/CSB-pro
forma combined............. 9,331,507 9,225,807
See Notes to Pro Forma Condensed Financial Information
15
NOTES TO UNAUDITED
PRO FORMA CONDENSED FINANCIAL INFORMATION
The unaudited Pro Forma Condensed Financial Information is
based upon the following adjustments, reflecting the consummation
of the Merger using the pooling-of-interests method of
accounting. Actual amounts may differ from those reflected in
the unaudited Pro Forma Condensed Financial Information
NOTE 1
The Registrant will exchange 1.023 shares of First Charter
Common Stock for each share of CSB common stock outstanding
immediately prior to the Effective Time (except for shares of CSB
common stock held by the Registrant, FCNB or CSB other than in a
fiduciary capacity or as a result of debts previously contracted,
which shall be cancelled, and shares as to which dissenters'
rights of appraisal have been perfected). The pro forma issued
number of shares of First Charter Common Stock does not reflect
the exercise of options to acquire shares of CSB common stock.
Options to acquire 58,000 shares of CSB common stock were
outstanding at September 30, 1997.
Shares of CSB common stock ............ 1,662,792
Exchange Ratio ........................ 1.023
--------------
Shares of First Charter Common
Stock issued......................... 1,701,036
==============
NOTE 2
The unaudited Pro Forma Condensed Financial Information does
not include any expenses or charges related to the Merger. First
Charter anticipates one-time merger and related charges of $2.0
million to $2.9 million ($1.6 million to $2.2 million, net of tax
effects) in connection with the Merger. Professional fees
associated with the transaction (including fixed financial
advisor fees as well as attorneys' and accountants' fees) are
expected to represent the largest portion of the expenses and
charges, as well as estimated expenses associated with various
severance-related obligations.
Additionally, during the fourth quarter of 1997, the Registrant
anticipates recording a total provision for loan losses for CSB of
approximately $505,000, in recognition of higher than anticipated
charge-offs at CSB.
16