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FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER: 0-15829
FIRST CHARTER CORPORATION
(Exact name of registrant as specified in its Charter)
NORTH CAROLINA 56-1355866
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22 UNION STREET NORTH, CONCORD, NC 28026-0228
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (704) 786-3300
Securities registered pursuant to Section 12(b) of Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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NA NA
Securities registered pursuant to Section 12(g) of Act:
Common stock, no par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 29, 2000 was $187,462,317.
As of March 29, 2000 the Registrant had outstanding 17,704,811 shares of
Common Stock, no par value.
DOCUMENTS INCORPORATED BY REFERENCE:
PARTS I and II: Annual Report to Shareholders for the fiscal year ended
December 31, 1998 (with the exception of those portions which are specifically
incorporated by reference in this Form 10-K, the Annual Report to Shareholders
is not deemed to be filed as part of this report).
PART III: Definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A promulgated pursuant to the
Securities Exchange Act of 1934 in connection with the 1999 Annual Meeting of
Shareholders (with the exception of those portions which are specifically
incorporated by reference in this Form 10-K, the Proxy Statement is not deemed
to be filed as part of this report).
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FIRST CHARTER CORPORATION
AND SUBSIDIARIES
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
PAGE
----
PART I
Item 1: Business.................................................... 1
Item 2: Properties.................................................. 19
Item 3: Legal Proceedings........................................... 19
Item 4: Submission of Matters to a Vote of Security Holders......... 21
Item 4A: Executive Officers of the Registrant........................ 22
PART II
Item 5: Market for the Registrant's Common Stock and Related
Shareholder Matters....................................... 23
Item 6: Selected Financial Data..................................... 23
Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Item 7A: Quantitative and Qualitative Disclosures about Market
Risk...................................................... 23
Item 8: Financial Statements and Supplementary Data................. 23
Item 9: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 23
PART III
Item 10: Directors and Executive Officers of the Registrant.......... 24
Item 11: Executive Compensation...................................... 24
Item 12: Security Ownership of Certain Beneficial Owners and
Management................................................ 24
Item 13: Certain Relationships and Related Transactions.............. 24
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 24
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PART I
ITEM 1. BUSINESS
GENERAL
First Charter Corporation (hereinafter referred to as either the
"Registrant" or the "Corporation") is a bank holding company established as a
North Carolina Corporation in 1983 and is registered under the Bank Holding
Company Act of 1956, as amended (the "BHCA"). Its principal asset is the stock
of its subsidiary, First Charter National Bank ("FCNB" or the "Bank"). The Bank
accounts for over 95% of the Registrant's consolidated assets and consolidated
revenues. The principal executive offices of the Corporation are located at 22
Union Street North, Concord, North Carolina 28025. Its telephone number is (800)
422-4650.
FCNB, a national banking association, is the successor entity to The
Concord National Bank, which was established in 1888 and acquired by the
Registrant in 1983. On December 21, 1995, the Corporation purchased Bank of
Union ("Union"), a state-chartered commercial bank organized under the laws of
North Carolina in 1985. Union, a full-service bank with five offices located in
Union and southern Mecklenburg Counties, North Carolina, was merged into FCNB
effective September 10, 1998. On December 22, 1997, the Corporation acquired
Carolina State Bank ("CSB") which was also merged into FCNB. CSB was a state-
chartered commercial bank with four banking offices in Cleveland and Rutherford
Counties, North Carolina. On September 30, 1998, the Corporation acquired HFNC
Financial Corp. ("HFNC"), which merged into the Corporation. The merger was
accounted for as a pooling of interests, and accordingly all financial
information presented herein has been restated for all periods presented to
reflect this merger. HFNC was the unitary holding company of Home Federal
Savings and Loan Association ("Home Federal"). Home Federal, which dates back to
1883, was based in Charlotte, North Carolina, and operated nine full service
branch offices and a loan origination office, all located in Mecklenburg County,
North Carolina. These offices operated under the Home Federal name until its
merger into FCNB in March 1999. FCNB is a full service bank and trust company
which now operates thirty-three branch offices and two limited service
facilities in addition to its main office, one loan production office located in
Guilford county, as well as 71 ATMs (automated teller machines) located in
Mecklenburg, Cabarrus, Cleveland, Rutherford, Rowan, Stanley and Union Counties
in North Carolina.
Through its branch locations, the Bank provides a wide range of banking
products, including interest bearing and non-interest bearing checking accounts;
"Money Market Rate" accounts; certificates of deposit; individual retirement
accounts; overdraft protection; commercial, consumer, agriculture, real estate,
residential mortgage and home equity loans; personal and corporate trust
services; safe deposit boxes; and automated banking. In addition, through First
Charter Brokerage Services, a subsidiary of FCNB, the Registrant offers discount
brokerage services, annuity sales and financial planning services pursuant to a
third party arrangement with UVEST Investment Services. FCNB also operates three
other subsidiaries. First Charter Insurance Services, Inc. is a North Carolina
corporation formed to meet the insurance needs of businesses and individuals
throughout the Charlotte metropolitan area. First Charter Realty Investment,
Inc. is a Delaware corporation organized as a holding company for FCNB Real
Estate, Inc., a real estate investment trust organized in North Carolina.
At December 31, 1999, the Registrant and its subsidiary had 504 full-time
employees and 113 part-time employees. The Registrant had no employees who were
not also employees of FCNB. The Registrant considers its relations with its
employees to be good.
As part of its operations, the Registrant is not dependent upon a single
customer or a few customers whose loss would have a material adverse effect on
the Registrant.
As part of its operations, the Registrant regularly holds discussions and
evaluates the potential acquisition of, or merger with, various financial
institutions. The Registrant currently has an agreement in effect with respect
to such a merger. The Registrant and Carolina First BancShares, Inc., ("CFBI")
entered into a definitive agreement and plan of merger (the "Merger Agreement")
dated as of November 7, 1999. Shareholder approval of this merger was obtained
on March 21, 2000. As of December 31, 1999, the
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Corporation held 157,215 shares of CFBI representing 2.62% of CFBI outstanding
stock. This investment has a market value of $4.9 million which represents a
$2.5 million increase over cost. In addition, the Registrant periodically enters
new markets and engages in new activities in which it competes with established
financial institutions. There can be no assurance as to the success of any such
new office or activity. Furthermore, as the result of such expansions, the
Registrant may from time to time incur start-up costs that could affect the
financial results of the Registrant.
COMPETITION
The banking laws of North Carolina allow banks located in North Carolina to
develop branches throughout the state. In addition, as the result of recent
federal and state legislation, out-of-state institutions may open de novo
branches in North Carolina as well as acquire or merge with institutions located
in North Carolina. As a result of such laws, banking activities in North
Carolina are highly competitive.
FCNB's service delivery facilities are located in Mecklenburg, Cabarrus,
Union, Rowan, Cleveland, and Rutherford counties. These locations also have
numerous branches of money-center, super-regional, regional, and statewide
institutions, many of them based in Charlotte. In its market area, the
Registrant faces competition from other banks, savings and loan associations,
savings banks, credit unions, finance companies and major retail stores that
offer competing financial services. Many of these competitors have greater
resources, broader geographic coverage and higher lending limits than the Bank.
The Bank's primary method of competition is to provide quality service and
fairly priced products.
GOVERNMENT SUPERVISION AND REGULATION
General. As a registered bank holding company, the Registrant is subject
to the supervision of, and to regular inspection by, the Board of Governors of
the Federal Reserve System (the "Federal Reserve"). The Federal Deposit
Insurance Corporation ("FDIC") insures FCNB's deposits through the Bank
Insurance Fund ("BIF") to the maximum extent permitted by law.
In addition to banking laws, regulations and regulatory agencies, the
Corporation and FCNB are subject to various other laws and regulations and
supervision and examination by other regulatory agencies, all of which directly
or indirectly affect the Corporation's operations, management and ability to
make distributions. The following discussion summarizes certain aspects of those
laws and regulations that affect the Corporation.
Restrictions on Bank Holding Companies. The Federal Reserve is authorized
to adopt regulations affecting various aspects of bank holding companies. Under
the BHCA, the Corporation's activities, and those of companies which it controls
or in which it holds more than 5% of the voting stock, are limited to banking or
managing or controlling banks or furnishing services to or performing services
for its subsidiaries, or any other activity which the Federal Reserve determines
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. In making such determinations, the Federal Reserve is
required to consider whether the performance of such activities by a bank
holding company or its subsidiaries can reasonably be expected to produce
benefits to the public such as greater convenience, increased competition or
gains in efficiency that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices.
Generally, bank holding companies are required to obtain prior approval of
the Federal Reserve to engage in any new activity not previously approved by the
Federal Reserve or to acquire more than 5% of any class of voting stock of any
company. The BHCA also requires bank holding companies to obtain the prior
approval of the Federal Reserve before acquiring more than 5% of any class of
voting stock of any bank which is not already majority-owned by the bank holding
company.
The Corporation is also subject to the North Carolina Bank Holding Company
Act of 1984. As required by this state legislation, the Corporation, by virtue
of its ownership of FCNB, has registered as a bank holding company with the
Commissioner of Banks of the State of North Carolina. The North Carolina Bank
Holding Company Act also prohibits the Corporation from acquiring or controlling
certain non-bank banking institutions which have offices in North Carolina.
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Interstate Banking and Branching Legislation. Pursuant to the Reigle--Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking
and Branching Act"), which became effective September 29, 1995, a bank holding
company may now acquire banks in states other than its home state, without
regard to the permissibility of such acquisition under state law, but subject to
any state requirement that the bank has been organized and operating for a
minimum period of time, not to exceed five years, and the requirement that the
bank holding company, prior to or following the proposed acquisition, controls
no more than 10% of the total amount of deposits of insured depository
institutions in the United States and no more than 30% of such deposits in that
state (or such lesser or greater amount set by state law).
The Interstate Banking and Branching Act also authorized banks to merge
across state lines, thereby creating interstate branches beginning June 1, 1997.
Under such legislation, each state had the opportunity either to "opt out" of
this provision, thereby prohibiting interstate branching in such states, or to
"opt in" at an earlier time, thereby allowing interstate branching within that
state prior to June 1, 1997. The State of North Carolina elected to "opt in" to
such legislation, effective June 22, 1995. Furthermore, pursuant to the
Interstate Banking and Branching Act, a bank is now able to open new branches in
a state in which it does not already have banking operations, if the laws of
such state permit such de novo branching.
Gramm-Leach Bliley Financial Modernization Act of 1999. In 1999, the
President of the United States signed into law the Gramm-Leach-Bliley Financial
Modernization Act of 1999 ("Modernization Act"). The Modernization Act allows
bank holding companies meeting management, capital and Community Reinvestment
Act standards to engage in substantially broader range of traditionally
nonbanking activities than was permissable before enactment, including insurance
underwriting and making merchant banking investments in commercial and financial
companies. It also allows insurers and other financial services companies to
acquire banks; removes various restrictions that currently apply to bank holding
company ownership of securities firms and mutual fund advisory companies; and
establishes the overall regulatory structure applicable to bank holding
companies that also engage in insurance and securities operations. This part of
the Modernization Act will become effective 120 days after enactment. The
Corporation currently believes it meets the requirements for the broader range
of activities that will be permitted by the Modernization Act.
In addition, the Modernization Act also modifies current law related to
financial privacy and community reinvestment. The new privacy provisions
generally will prohibit financial institutions from disclosing nonpublic
personal financial information to nonaffiliated third parties unless the
customer has the opportunity to decline disclosure.
Regulation of FCNB. FCNB is organized as a national banking association
and is subject to regulation, supervision and examination by the Office of the
Comptroller of the Currency (the "OCC") and to regulation by the FDIC. OCC rules
and requirements applicable to national banking associations such as FCNB relate
to required reserves, allowable investments, loans, mergers, consolidations,
issuance of securities, payment of dividends, establishment of branches,
limitations on credit to subsidiaries and other aspects of the business of such
subsidiaries. The OCC has broad authority to prohibit national banks from
engaging in unsafe or unsound banking practices. The Bank is also subject to
certain reserve requirements established by the Federal Reserve Board and is a
member of the Federal Home Loan Bank ("FHLB") of Atlanta, which is one of the 12
regional banks comprising the FHLB System.
CAPITAL AND OPERATIONAL REQUIREMENTS
The Federal Reserve, the OCC and the FDIC have issued substantially similar
risk-based and leverage capital guidelines applicable to federally chartered
banking organizations. The risk-based guidelines define a two-tier capital
framework, under which the Corporation and the Bank are required to maintain a
minimum ratio of Tier 1 Capital (as defined) to total risk-weighted assets of
4.00% and a minimum ratio of Total Capital (as defined) to risk weighted assets
of 8.00%. With respect to the Corporation, Tier 1 Capital generally consists of
total shareholders' equity calculated in accordance with generally accepted
accounting principles less certain intangibles, and Total Capital generally
consists of Tier 1 Capital plus certain adjustments, the largest of which for
the Corporation is the general allowance for loan losses (up to 1.25% of
risk-weighted assets). Tier 1 Capital must comprise at least 50% of the Total
Capital. Risk-weighted assets refer to the on-
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and off-balance sheet exposures of the Corporation, as adjusted for one of four
categories of risk-weights established in Federal Reserve, OCC and FDIC
regulations, based primarily on relative credit risk. At December 31, 1999, the
Corporation and the Bank were in compliance with the risk-based capital
requirements.
The leverage ratio is determined by dividing Tier 1 Capital by adjusted
total assets. Although the stated minimum ratio is 3.00%, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3.00%. Management believes that the Corporation and the Bank meet
their leverage ratio requirement.
The Corporation's compliance with existing capital requirements is
summarized in the table below.
LEVERAGE CAPITAL TIER 1 CAPITAL TOTAL CAPITAL
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AMOUNT PERCENTAGE (1) AMOUNT PERCENTAGE (2) AMOUNT PERCENTAGE (2)
(DOLLARS IN THOUSANDS) -------- -------------- -------- -------------- -------- --------------
Actual.................... $228,449 12.40% $228,449 16.95% $245,306 18.20%
Required.................. 73,707 4.00 53,922 4.00 107,844 8.00
Excess.................... 154,742 8.40 174,527 12.95 137,462 10.20
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(1) Percentage of total adjusted average assets. The Federal Reserve minimum
leverage ratio requirement is 3.00% to 5.00%, depending on the institution's
composite rating as determined by its regulators. The Federal Reserve Board
has not advised the Corporation of any specific requirement applicable to
it.
(2) Percentage of risk-weighted assets.
In addition to the above described capital requirements, the federal
regulatory agencies may from time to time require that a banking organization
maintain capital above the minimum levels whether because of its financial
condition or actual or anticipated growth.
Prompt Corrective Action under FDICIA. The Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), among other things, identifies
five capital categories for insured depository institutions (well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized) and requires the respective federal regulatory
agencies to implement systems for "prompt corrective action" for insured
depository institutions that do not meet minimum capital requirements within
such categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines could
also subject a banking institution to capital raising requirements. In addition,
pursuant to FDICIA, the various regulatory agencies have prescribed certain
non-capital standards for safety and soundness relating generally to operations
and management, asset quality and executive compensation, and such agencies may
take action against a financial institution that does not meet the applicable
standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 Capital ratio of at least 6.00%, a Total Capital ratio of at least
10.00% and a leverage ratio of at least 5.00% and not be subject to a capital
directive order. An "adequately capitalized" institution must have a Tier 1
Capital ratio of at least 4.00%, a Total Capital ratio of at least 8.00% and a
leverage ratio of at least 4.00%, or 3.00% in some cases. Under these
guidelines, FCNB is considered well capitalized.
Banking agencies have also adopted final regulations which mandate that
regulators take into consideration (i) concentrations of credit risk, (ii)
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its off-balance
sheet position) and (iii) risks from non-traditional activities, as well as an
institution's ability to manage those risks, when determining the adequacy of an
institution's capital. This evaluation is made as a part of the institution's
regular safety and soundness examination. In addition, the banking agencies have
amended their regulatory capital guidelines to incorporate a measure for market
risk. In accordance with amended guidelines, a Corporation or Bank with
significant
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trading activity (as defined) must incorporate a measure for market risk in its
regulatory capital calculations effective for reporting periods after January 1,
1998. The revised guidelines do not materially impact the Corporation's or
FCNB's regulatory capital ratios or their well-capitalized status.
Distributions. The primary source of funds for distributions paid by the
Corporation to its shareholders is dividends received from FCNB. Certain
regulatory and other requirements restrict the amount of dividends that FCNB can
pay to the Corporation. The OCC regulates the amount of FCNB dividends payable
to the Corporation based on undivided profits for the last two years, less
dividends already paid. As of December 31, 1999, FCNB had paid the full
allowable amount of dividends to the Corporation. FCNB obtains regulatory
approval prior to payment of dividends to the Corporation.
In addition to the foregoing, the ability of the Corporation and FCNB to
pay dividends may be affected by the various minimum capital requirements and
the capital and non-capital standards established under FDICIA, as described
above. Furthermore, if, in the opinion of a federal regulatory agency, a bank
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the bank, could
include the payment of dividends), such agency may require, after notice and
hearing, that such bank cease and desist from such practice. The right of the
Corporation, its shareholders and its creditors to participate in any
distribution of assets or earnings of FCNB is further subject to the prior
claims of creditors against the Bank.
Deposit Insurance. The deposits of FCNB are insured up to applicable
limits by the FDIC, and are backed by the full faith and credit of the U.S.
government. As insurer, the FDIC is authorized to conduct examinations of, and
to require reporting by, FDIC-insured institutions. It also may prohibit any
FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious threat to the FDIC. The FDIC also has the
authority to initiate enforcement actions against banking institutions, after
giving the institution's primary regulator an opportunity to take such action.
In addition, the Bank is subject to deposit premium assessments by the FDIC. As
mandated by FDICIA, the FDIC has adopted regulations for a risk-based insurance
assessment system. Under this system, the assessment rates for an insured
depository institution vary according to the level of risk incurred in its
activities. To arrive at a risk assessment for a banking institution, the FDIC
places it in one of nine risk categories using a process based on capital ratios
and on other relevant information from supervisory evaluations of the bank by
the bank's primary federal regulator, the OCC, statistical analyses of financial
statements and other relevant information.
The deposits of FCNB are insured by the BIF, administered by the FDIC.
Under the FDIC's risk-based insurance system, assessments currently can range
from no assessment to 0.27% of a participating bank's average deposits base,
with the exact assessment determined by the bank's capital and the applicable
regulatory agency's opinion of the bank's operations. The range of deposit
insurance assessment rates can change from time to time, in the discretion of
the FDIC, subject to certain limits.
The former Home Federal deposits are insured by the SAIF, also administered
by the FDIC. Unlike the BIF, which met its target reserve level in September
1995, the Savings Association Insurance Fund ("SAIF") was not expected to meet
its target reserve level until at least 2002. Consequently, while insurance
premiums for BIF insured deposits were reduced beginning in 1996, premiums for
SAIF members were maintained at their existing levels, creating a significant
premium disparity. On September 30, 1996, legislation was passed to eventually
eliminate this premium differential between SAIF-insured institutions and
BIF-insured institutions by recapitalizing the SAIF's reserves by way of a
one-time special assessment equal to 65.7 basis points for all SAIF-assessable
deposits as of March 31, 1995. This special assessment was accrued by Home
Federal at September 30, 1996 and paid on November 27, 1996. As a result of this
recapitalization, during the period from 1997 through 1999, FDIC-insured
institutions in the lowest risk category will pay approximately 1.2 basis points
of their BIF-assessable deposits and 6.1 basis points of their SAIF-assessable
deposits to fund the insurance fund. FCNB continued to pay the SAIF assessment
rate on former Home Federal deposits through the end of 1999.
Source of Strength. According to Federal Reserve policy, bank holding
companies are expected to act as a source of financial strength to subsidiary
banks and to commit resources to support each such subsidiary. This support may
be required at times when a bank holding company may not be able to provide such
support.
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Similarly, under the cross-guaranty provisions of the Federal Deposit Insurance
Act, in the event of a loss suffered or anticipated by the FDIC, either as a
result of default of a banking or thrift subsidiary of the Corporation or
related to FDIC assistance provided to a subsidiary in danger of default, the
other banking subsidiaries of the Registrant may be assessed for the FDIC's
loss, subject to certain exceptions.
Future Legislation. Proposals to change the laws and regulations governing
the banking industry are frequently introduced in Congress, in the state
legislatures and before the various bank regulatory agencies. The likelihood and
timing of any such proposals or bills being enacted and the impact they might
have on the Corporation and FCNB cannot be determined at this time.
OTHER CONSIDERATIONS
There are particular risks and uncertainties that are applicable to an
investment in our common stock. Specifically, there are risks and uncertainties
that bear on our future financial results that may cause our future earnings and
financial condition to be less than our expectations. Some of the risks and
uncertainties relate to economic conditions generally, and would affect other
financial institutions in similar ways. These aspects are discussed under the
heading "Factors that May Affect Future Results" in the accompanying
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the First Charter Corporation 1999 Annual Report to
Shareholders, incorporated herein by reference. This section addresses
particular risks and uncertainties that are specific to our business.
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STATISTICAL INFORMATION
The following tables present certain statistical information relating to
the Corporation. The tables should be read in conjunction with the
Corporations's Consolidated Financial Statements and Notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, both of which are incorporated by reference herein.
The following table includes for the years ended December 31, 1999,
1998,and 1997 interest income on interest earning assets and related average
yields, as well as interest expense on interest bearing liabilities and related
average rates paid. In addition, the table includes the average net yield on
average earning assets. Average balances were calculated based on daily
averages.
TABLE 1
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS
1999 1998 1997
---------------------------------- ---------------------------------- ----------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/RATE AVERAGE INCOME/ YIELD/RATE AVERAGE INCOME/ YIELD/RATE
BALANCE EXPENSE PAID BALANCE EXPENSE PAID BALANCE EXPENSE PAID
(DOLLARS IN THOUSANDS) ---------- -------- ---------- ---------- -------- ---------- ---------- -------- ----------
Interest earning
assets:
Loans (1) (2) (3)..... $1,381,753 $117,403 8.50% $1,358,949 $116,777 8.59% $1,143,448 $100,921 8.83%
Securities available
for
sale -- taxable..... 238,399 15,003 6.29 221,860 14,591 6.58 246,937 15,717 6.36
Securities available
for
sale -- nontaxable
(4)................. 92,980 6,949 7.47 84,673 6,640 7.84 72,468 5,754 7.94
Investment securities
held to maturity --
taxable............. -- -- -- -- -- -- 13,375 766 5.73
Investment securities
held to maturity --
nontaxable(4)....... -- -- -- -- -- -- 1,251 83 6.63
Federal funds sold.... 2,024 129 6.37 18,450 1,026 5.56 18,238 1,012 5.55
Interest-bearing bank
deposits............ 4,694 274 5.84 3,902 201 5.15 13,835 795 5.75
---------- -------- ---------- -------- ---------- --------
Total......... $1,719,850 $139,758 8.13% $1,687,834 $139,235 8.25% $1,509,552 $125,048 8.28%
========== ======== ========== ======== ========== ========
Interest bearing
liabilities:
Demand deposits..... $ 146,343 $ 1,195 0.82% $ 135,492 $ 3,794 2.80% $ 128,703 $ 2,054 1.60%
Money market
accounts.......... 152,785 7,351 4.81 75,558 3,439 4.55 70,496 3,290 4.67
Savings deposits.... 125,418 4,556 3.63 135,309 5,387 3.98 132,615 5,520 4.16
Other time
deposits.......... 580,714 31,269 5.38 587,261 33,521 5.71 611,038 35,468 5.80
Other borrowings.... 422,644 22,898 5.42 434,260 24,482 5.64 283,167 16,495 5.83
---------- -------- ---------- -------- ---------- --------
Total......... $1,427,904 $ 67,269 4.71% $1,367,880 $ 70,623 5.16% $1,226,019 $ 62,827 5.12%
========== ======== ========== ======== ========== ========
Net interest income
and spread.......... $ 72,489 3.42% $ 68,612 3.09% $ 62,221 3.16%
======== ======== ========
Net yield on interest
earning assets
(5)................. 4.21% 4.07% 4.12%
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(1) Includes amortization of deferred loan fees of approximately $2,471,000 in
1999, $3,482,000 in 1998 and $2,375,000 in 1997.
(2) The preceding analysis takes into consideration the principal amount of
nonaccruing loans and only income actually collected.
(3) Average loan balances are shown net of unearned income.
(4) Yields on nontaxable securities are stated on a fully taxable equivalent
basis, assuming a Federal tax rate of 35%, applicable state taxes and TEFRA
disallowances for 1999, 1998 and 1997. The adjustments made to convert to a
fully taxable equivalent basis were $3,041,000 for 1999, $2,726,000 for
1998, and $1,918,000 for 1997.
(5) Represents net interest income as a percentage of total average interest
earning assets.
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CHANGES IN INTEREST INCOME AND EXPENSE
The following table contains the dollar amount of change in interest income
and interest expense and segregates the dollar amount of change due to rate and
volume variances for the years ended December 31, 1999 and 1998. The change in
interest income, stated on a tax equivalent basis, or interest expense
attributable to the combination of rate variance and volume variance is included
in the table, but such amount has also been allocated between, and included in
the amounts shown as, changes due to rate and changes due to volume. Interest
income related to tax exempt securities is stated on a tax equivalent basis
using a Federal income tax rate of 35%, applicable state taxes and TEFRA
disallowances in 1999, 1998 and 1997.
TABLE 2
VOLUME AND RATE VARIANCE ANALYSIS
FROM DEC. 31, 1998 TO DEC. 31, 1999 FROM DEC. 31, 1997 TO DEC. 31, 1998
----------------------------------- ------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN DUE TO CHANGE IN
----------------------------------- ------------------------------------
RATE/ TOTAL RATE/ TOTAL
VOLUME RATE VOLUME CHANGE VOLUME RATE VOLUME CHANGE
(DOLLARS IN THOUSANDS) ------ ------- ------ ------- ------ ------- ------- -------
Interest income:
Loans................................... $ (22) $(1,323) $1,949 $ 626 $(502) $(2,913) $18,769 $15,856
Securities available for
sale -- taxable....................... (47) (652) 1,064 412 (53) 497 (1,623) (1,126)
Securities available for
sale -- non-taxable................... (31) (327) 636 309 (12) (77) 963 886
Investment securities held to
maturity -- taxable................... -- -- -- -- 766 (383) (383) (766)
Investment securities held to
maturity -- nontaxable................ -- -- -- -- 83 (41) (42) (83)
----- ------- ------ ------- ----- ------- ------- -------
Total securities........................ (78) (979) 1,700 721 784 (4) (1,085) (1,089)
Federal funds sold...................... (133) 83 (980) (897) -- 2 12 14
Interest bearing bank deposits.......... 5 30 43 73 59 (53) (541) (594)
----- ------- ------ ------- ----- ------- ------- -------
Total interest income................... (228) (2,189) 2,712 523 341 (2,968) 17,155 14,187
----- ------- ------ ------- ----- ------- ------- -------
Interest expense:
Demand deposits......................... (215) (2,795) 196 (2,599) 82 1,591 149 1,740
Money market accounts................... 201 297 3,615 3,912 (6) (84) 233 149
Savings deposits........................ 34 (454) (377) (831) (5) (243) 110 (133)
Other time deposits..................... 21 (1,889) (363) (2,252) 23 (578) (1,369) (1,947)
Other borrowings........................ 26 (942) (642) (1,584) (265) (673) 8,660 7,987
----- ------- ------ ------- ----- ------- ------- -------
Total interest expense.................. 67 (5,783) 2,429 (3,354) (171) (13) 7,783 7,796
----- ------- ------ ------- ----- ------- ------- -------
Net interest income..................... $(295) $ 3,594 $ 283 $ 3,877 $ 512 $(2,981) $ 9,372 $ 6,391
===== ======= ====== ======= ===== ======= ======= =======
8
11
INTEREST RATE SENSITIVITY
The following table presents the Corporation's interest sensitivity
analysis for December 31, 1999 and sets forth at various maturity periods the
cumulative interest sensitivity gap, which is the difference between rate
sensitive assets and rate sensitive liabilities for assets and liabilities that
management considers rate sensitive. The mortgage-backed securities are shown at
their weighted average expected life obtained from an outside evaluation of the
average remaining life of each security based on historic prepayment speeds of
the underlying mortgages at December 31, 1999. Demand deposits, money market
accounts and certain savings deposits are presented in the earliest repricing
window because the rates are subject to immediate repricing.
TABLE 3
INTEREST RATE SENSITIVITY
AS OF DECEMBER 31, 1999
NON-
SENSITIVE
AND
INTEREST SENSITIVITY IN DAYS SENSITIVE
---------------------------------------------- OVER 5
1-90 91-180 181-365 TOTAL 1-2 YEARS 2-5 YEARS YEARS TOTAL
(DOLLARS IN THOUSANDS) --------- --------- --------- ---------- --------- --------- --------- ----------
Interest-Earning Assets:
Interest-bearing due from
banks................... $ 1,995 $ -- $ -- $ 1,995 $ -- $ -- $ -- $ 1,995
Fed funds sold............ 665 -- -- 665 -- -- -- 665
Securities available for
sale, at amortized cost:
Taxable............... 32,026 862 28,714 61,602 7,560 106,231 83,861 259,254
Nontaxable............ 3,809 2,424 -- 6,233 5,898 20,582 57,157 89,870
Loans..................... 429,984 35,041 55,244 520,269 121,043 378,730 403,715 1,423,757
--------- --------- --------- ---------- --------- --------- -------- ----------
Total earning
assets.............. 468,479 38,327 83,958 590,764 134,501 505,543 544,733 1,775,541
--------- --------- --------- ---------- --------- --------- -------- ----------
Interest-Bearing Liabilities:
Interest-bearing deposits:
Demand deposits........... 124,481 -- -- 124,481 -- -- -- 124,481
Money market accounts..... 199,344 -- -- 199,344 -- -- -- 199,344
Savings deposits.......... 53,596 8,403 17,245 79,244 25,794 602 -- 105,640
Other time deposits....... 178,653 75,939 266,942 521,534 54,148 13,156 596 589,434
Other borrowings.......... 316,107 10 57,163 373,280 55,326 63,120 250 491,976
--------- --------- --------- ---------- --------- --------- -------- ----------
Total interest-bearing
liabilities......... 872,181 84,352 341,350 1,297,883 135,268 76,878 846 1,510,875
--------- --------- --------- ---------- --------- --------- -------- ----------
Interest sensitivity
gap..................... $(403,702) $ (46,025) $(257,392) $ (707,119) $ (767) $ 428,665 $543,887 $ 264,666
========= ========= ========= ========== ========= ========= ======== ==========
Cumulative gap........ $(403,702) $(449,727) $(707,119) $ (707,119) $(707,886) $(279,221) $264,666 $ 264,666
========= ========= ========= ========== ========= ========= ======== ==========
Ratio of earning assets to
interest-bearing
liabilities................. 53.71% 45.44% 24.60% 45.52% 99.43% 657.60%
9
12
DISTRIBUTION OF ASSETS AND LIABILITIES
The following table shows the distribution of the Corporation's assets,
liabilities and shareholders' equity at December 31, 1999, 1998, and 1997.
Average balances were calculated based on daily averages.
TABLE 4
AVERAGE BALANCE SHEET
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1999 1998 1997
------------------------- ------------------------- -------------------------
AVERAGE PERCENTAGE AVERAGE PERCENTAGE AVERAGE PERCENTAGE
BALANCE DISTRIBUTION BALANCE DISTRIBUTION BALANCE DISTRIBUTION
(DOLLARS IN THOUSANDS) ---------- ------------ ---------- ------------ ---------- ------------
Assets:
Cash and due from banks..... $ 36,739 2.0% $ 34,609 1.9% $ 28,373 1.8%
Interest bearing bank
deposits.................. 4,694 0.3 3,902 0.2 13,835 0.9
Investment securities --
taxable................... -- -- -- -- 13,375 0.8
Investment securities --
nontaxable................ -- -- -- -- 1,251 0.1
Securities available for
sale -- taxable........... 238,399 13.0 221,860 12.5 246,937 15.6
Securities available for
sale -- nontaxable........ 92,980 5.1 84,673 4.8 72,468 4.6
Loans, net (1).............. 1,381,753 75.7 1,358,949 76.3 1,143,448 72.1
Federal funds sold.......... 2,024 0.1 18,450 1.0 18,238 1.1
Other assets................ 69,832 3.8 58,102 3.3 47,506 3.0
---------- ----- ---------- ----- ---------- -----
Total............. $1,826,421 100.0% $1,780,545 100.0% $1,585,431 100.0%
========== ===== ========== ===== ========== =====
Liabilities and
Shareholders' Equity:
Deposits:
Demand (2)................ $ 271,115 14.9% $ 260,670 14.6% $ 189,807 12.0%
Savings................... 125,418 6.9 135,309 7.6 132,615 8.4
Money market accounts..... 152,785 8.4 75,558 4.2 70,496 4.4
Time...................... 580,714 32.0 587,261 33.0 611,038 38.5
Other borrowings............ 422,644 23.4 434,260 24.4 283,167 17.9
Other liabilities........... 31,379 1.7 36,592 2.1 41,593 2.6
Shareholders' equity........ 230,149 12.7 250,895 14.1 256,715 16.2
---------- ----- ---------- ----- ---------- -----
Total............. $1,814,204 100.0% $1,780,545 100.0% $1,585,431 100.0%
========== ===== ========== ===== ========== =====
- ---------------
(1) Loans, net is net of unearned income and the allowance for loan losses.
(2) Demand includes non-interest bearing and interest bearing demand deposits.
10
13
SECURITIES AVAILABLE FOR SALE
The following table shows, as of December 31, 1999, 1998 and 1997, the
carrying value of (i) U.S. government obligations, (ii) U.S. government agency
obligations, (iii) mortgage-backed securities, (iv) state and municipal
obligations, and (v) equity securities.
TABLE 5
SECURITIES AVAILABLE FOR SALE
DECEMBER 31,
----------------------------------
1999 1998 1997
(DOLLARS IN THOUSANDS) -------- ------------ --------
U.S. government obligations................................. $ 6,016 $ 10,205 $ 22,333
U.S. government agency obligations.......................... 168,757 154,653 120,739
Mortgage-backed securities.................................. 38,817 36,200 59,548
State and municipal obligations............................. 88,450 97,435 85,532
Equity securities........................................... 40,096 33,306 27,413
-------- -------- --------
$342,136 $331,799 $315,565
======== ======== ========
SECURITIES AVAILABLE FOR SALE -- MATURITIES
The following table indicates the carrying value of each significant
securities available for sale category due within one year, after one year but
within five years, after five years but within ten years, and after ten years,
together with the weighted average yield for each range of maturities, as of
December 31, 1999. Mortgage-backed securities are presented at their contractual
maturity date. Actual maturities will differ from contractual maturities because
borrowers have the right to pre-pay these obligations without pre-payment
penalties. Yields are determined based on amortized cost. Yields are stated on a
tax equivalent basis assuming a Federal tax rate of 35%, applicable state taxes
and TEFRA disallowances in 1999.
TABLE 6
SECURITIES AVAILABLE FOR SALE
AS OF DECEMBER 31, 1999
AFTER ONE YEAR AFTER FIVE YEARS
DUE WITHIN BUT WITHIN BUT WITHIN
ONE YEAR FIVE YEARS TEN YEARS AFTER TEN YEARS
----------------- ------------------ ---------------------- -----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
(DOLLARS IN THOUSANDS) ------- ----- -------- ----- ------- ---------- ------- -----
U.S. government obligations....... $ 6,016 6.98% $ -- --% $ -- --% $ -- --%
U.S. government agency
obligations..................... 20,664 6.05 104,920 6.13 12,458 6.43 30,715 6.88
Mortgage-backed securities........ -- -- 23,409 6.69 15,408 7.14 -- --
State and municipal obligations... 5,396 9.62 28,523 6.97 39,276 6.83 15,255 6.81
Equity securities................. -- -- -- -- -- -- 40,096 5.64
------- -------- ------- -------
Total..................... $32,076 6.83% $156,852 6.37% $67,142 6.83% $86,066 6.29%
======= ======== ======= =======
As of December 31, 1999, there were no issues of securities available for
sale (excluding U.S. government obligations and U.S. government agency
obligations) which had carrying values that exceeded 10% of shareholders' equity
of the Corporation.
As of December 31, 1999, there were no investment securities classified as
held to maturity.
11
14
LOAN PORTFOLIO
The table below summarizes loans in the classifications indicated as of
December 31, 1999, 1998, 1997, 1996, and 1995.
TABLE 7
LOAN PORTFOLIO COMPOSITION
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
(DOLLARS IN THOUSANDS) ---------- ---------- ---------- ---------- --------
Commercial, financial and
agricultural........................ $ 136,276 $ 94,425 $ 80,675 $ 63,686 $ 66,944
Real estate -- construction........... 253,272 180,475 132,758 102,460 84,591
Real estate -- residential............ 992,780 1,077,044 959,785 863,931 696,317
Installment........................... 44,167 70,732 88,546 92,567 79,888
---------- ---------- ---------- ---------- --------
Total loans................. 1,426,495 1,422,676 1,261,764 1,122,644 927,740
---------- ---------- ---------- ---------- --------
Less -- allowance for loan losses..... (17,339) (15,554) (15,263) (14,140) (13,552)
Unearned income....................... (203) (155) (273) (193) (296)
---------- ---------- ---------- ---------- --------
Loans, net.................. $1,408,953 $1,406,967 $1,246,228 $1,108,311 $913,892
========== ========== ========== ========== ========
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGE IN INTEREST RATES
Set forth in the table below are the amounts of each loan type, except
installment loans and real estate mortgage loans, due in one year, after one
year through five years, and after five years, at December 31, 1999. This table
excludes non-accrual loans.
TABLE 8
MATURITIES AND SENSITIVITY TO
CHANGE IN INTEREST RATES
DECEMBER 31, 1999
-----------------------------------------------
AFTER ONE
ONE YEAR YEAR THROUGH AFTER
OR LESS FIVE YEARS FIVE YEARS TOTAL
(DOLLARS IN THOUSANDS) -------- ------------ ---------- --------
Commercial, financial and agricultural.............. $ 72,802 $ 50,907 $ 9,662 $133,371
Real estate -- construction......................... 173,185 66,447 11,276 250,908
-------- -------- ------- --------
Total..................................... $245,987 $117,354 $20,938 $384,279
======== ======== ======= ========
Commercial, financial and agricultural and real estate - construction loans
that have maturity over one year which have a predetermined interest rate or a
floating or adjustable interest rate:
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS) -----------------
Predetermined interest rate................................. $ 81,766
Floating or adjustable interest rate........................ 56,526
--------
$138,292
========
NON-PERFORMING LOANS
Non-performing loans include non-accrual loans, restructured loans and
accruing loans that are contractually 90 days or more past due.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Balance Sheet Analysis -- Asset Quality" in the
Corporation's 1999 Annual Report to Shareholders, incorporated herein by
reference, for additional information.
12
15
ACCRUING LOANS 90 DAYS OR MORE PAST DUE
The following table reflects the dollar amount of loans outstanding in each
category and the amount and percentage of those accruing loans that are 90 days
or more past due as of December 31, 1999, 1998, 1997, 1996, and 1995.
TABLE 9
ACCRUING LOANS 90 DAYS OR MORE PAST DUE
PERCENTAGE OF
SUCH LOANS TO
ACCRUING LOANS GROSS GROSS LOANS
90 DAYS OR LOANS OUTSTANDING
MORE PAST DUE OUTSTANDING BY CATEGORY
(DOLLARS IN THOUSANDS) -------------- ----------- -------------
December 31, 1999
Commercial, financial and agricultural............. $ 242 $ 136,276 .18%
Real estate -- construction........................ 82 253,272 .03
Real estate -- residential......................... 2,943 992,780 .30
Installment........................................ 193 44,167 .44
------ ----------
Total......................................... $3,460 $1,426,495 .24%
====== ==========
December 31, 1998
Commercial, financial and agricultural............. $ 10 $ 94,425 .01%
Real estate -- construction........................ 215 180,475 .12
Real estate -- residential......................... 1,916 1,077,044 .18
Installment........................................ 129 70,732 .18
------ ----------
Total......................................... $2,270 $1,422,676 .16%
====== ==========
December 31, 1997
Commercial, financial and agricultural............. $ 999 $ 80,675 1.24%
Real estate -- construction........................ 33 132,758 .02
Real estate -- residential......................... 858 959,785 .09
Installment........................................ 219 88,546 .25
------ ----------
Total......................................... $2,109 $1,261,764 .17%
====== ==========
December 31, 1996
Commercial, financial and agricultural............. $ 34 $ 63,686 .05%
Real estate -- construction........................ 49 102,460 .05
Real Estate -- residential......................... 469 863,931 .05
Installment........................................ 133 92,567 .14
------ ----------
Total......................................... $ 685 $1,122,644 .06%
====== ==========
December 31, 1995
Commercial, financial and agricultural............. $ 27 $ 66,944 .04%
Real estate -- construction........................ 47 84,591 .06
Real estate -- residential......................... 163 696,317 .02
Installment........................................ 164 79,888 .21
------ ----------
Total......................................... $ 401 $ 927,740 .04%
====== ==========
13
16
NON-ACCRUAL LOANS AND RESTRUCTURED LOANS
The determination to discontinue the accrual of interest is based on a
review of each loan. Interest is discontinued on loans 90 days past due as to
principal or interest unless in management's opinion collection of both
principal and interest is assured by way of collateralization, guarantees or
other security and the loan is in the process of collection. The table below
summarizes the Corporation's non-accrual loans and restructured loans as of the
dates indicated.
TABLE 10
NON-ACCRUAL AND RESTRUCTURED LOANS
DECEMBER 31,
-------------------------------------------
1999 1998 1997 1996 1995
(DOLLARS IN THOUSANDS) ------ ------ ------ ------ -------
NON-ACCRUAL LOANS
Principal balance outstanding........................ $7,738 $5,758 $6,119 $7,949 $10,497
====== ====== ====== ====== =======
Interest income recorded during the year............. $ 381 $ 103 $ 317 $ 94 $ 267
Interest income that would have been recorded if the
loans had been current and accruing................ $ 703 $ 436 $ 701 $1,057 $ 1,120
RESTRUCTURED LOANS
Principal balance outstanding........................ $ 37 $ 577 $ 587 $ 643 $ 825
====== ====== ====== ====== =======
Interest income recorded during the year............. $ 3 $ 21 $ 66 $ 61 $ 95
Interest income that would have been recorded if the
loans had been current and accruing................ $ 3 $ 21 $ 66 $ 61 $ 77
SUMMARY OF LOAN LOSS AND RECOVERY EXPERIENCE
The table below presents certain data for the years ended December 31,
1999, 1998, 1997, 1996, and 1995, including the following: (i) the average
amount of net loans outstanding during the year, (ii) the allowance for loan
losses at the beginning of the year, (iii) the provision for loan losses, (iv)
loans charged off (v) loan charge-offs, net, (vi) the allowance for loan losses
at the end of the year, (vii) the ratio of net charge-offs to average loans,
(viii) the ratio of the allowance for loan losses to average loans and (ix) the
ratio of the allowance for loan losses to loans at year-end.
14
17
TABLE 11
SUMMARY OF LOAN LOSS AND RECOVERY EXPERIENCE
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
(DOLLARS IN THOUSANDS) ---------- ---------- ---------- ---------- --------
Average loans, net of unearned
income...................... $1,381,753 $1,358,949 $1,143,448 $1,022,119 $841,560
========== ========== ========== ========== ========
Allowance for loan losses:
Beginning balance........... $ 15,554 $ 15,263 $ 14,140 $ 13,552 $ 13,144
Add provision for loan
losses................. 3,350 2,376 2,684 1,481 2,328
---------- ---------- ---------- ---------- --------
Loan charge-offs:
Commercial, financial and
agricultural........... 561 751 712 600 1,599
Real
estate -- construction
and development........ 36 390 -- -- 349
Real
estate -- residential... 69 101 251 111 212
Installment.............. 1,249 1,495 1,298 1,099 539
---------- ---------- ---------- ---------- --------
1,915 2,737 2,261 1,810 2,699
---------- ---------- ---------- ---------- --------
Recoveries of loans
previously Charged-off:
Commercial, financial and
agricultural........... 260 285 135 654 58
Real estate -
construction and
development............ -- 76 -- 3 25
Real
estate -- residential... 36 -- 44 27 3
Installment.............. 423 291 252 233 693
---------- ---------- ---------- ---------- --------
719 652 431 917 779
---------- ---------- ---------- ---------- --------
Loan charge-offs, net....... 1,196 2,085 1,830 893 1,920
---------- ---------- ---------- ---------- --------
Adjustment for merged
banks.................... -- -- 269 -- --
---------- ---------- ---------- ---------- --------
Adjustment for loan sale.... (369) -- -- -- --
---------- ---------- ---------- ---------- --------
Ending balance.............. $ 17,339 $ 15,554 $ 15,263 $ 14,140 $ 13,552
========== ========== ========== ========== ========
Net charge-offs to average
loans....................... .09% .15% .16% .09% .23%
Allowance for loan losses to
gross loans at year-end..... 1.22 1.09 1.21 1.26 1.46
For a discussion of management's evaluation of the allowance for loan loss,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Earnings Performance -- Provision for Loan Losses" and "-- Balance
Sheet Analysis -- Asset Quality" in the First Charter Corporation 1999 Annual
Report to Shareholders, incorporated herein by reference.
15
18
ALLOWANCE FOR LOAN LOSSES
The following table presents the dollar amount of the allowance for loan
losses applicable to major loan categories, the percentage of the allowance
amount in each category to the total allowance and the percentage of the loans
in each category to total loans as of December 31, 1999, 1998, 1997, 1996, and
1995. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Earnings Performance -- Provision for Loan Losses" and
"- Balance Sheet Analysis -- Asset Quality" in the First Charter Corporation
1999 Annual Report to Shareholders, incorporated herein by reference.
TABLE 12
ALLOWANCE FOR LOAN LOSSES
PERCENTAGE OF
PERCENTAGE GROSS LOANS IN
ALLOWANCE OF TOTAL EACH CATEGORY
AMOUNT ALLOWANCE TO TOTAL LOANS
(DOLLARS IN THOUSANDS) --------- ---------- --------------
December 31, 1999
Type of Loan:
Commercial, financial and agricultural.................... $ 2,618 21 10%
Real estate -- construction............................... 1,213 19 18
Real estate -- residential................................ 12,747 57 70
Installment............................................... 761 3 2
------- --- ---
Total............................................. $17,339 100% 100%
======= === ===
December 31, 1998
Type of Loan:
Commercial, financial and agricultural.................... $ 2,085 13% 7%
Real estate -- construction............................... 2,567 17 13
Real estate -- residential................................ 10,122 65 75
Installment............................................... 780 5 5
------- --- ---
Total............................................. $15,554 100% 100%
======= === ===
December 31, 1997
Type of Loan:
Commercial, financial and agricultural.................... $ 1,664 11% 6%
Real estate -- construction............................... 2,421 16 11
Real estate -- residential................................ 10,023 66 76
Installment............................................... 1,155 7 7
------- --- ---
Total............................................. $15,263 100% 100%
======= === ===
December 31, 1996
Type of Loan:
Commercial, financial and agricultural.................... $ 1,329 9% 6%
Real estate -- construction............................... 3,117 22 9
Real estate -- residential................................ 8,869 63 77
Installment............................................... 825 6 8
------- --- ---
Total............................................. $14,140 100% 100%
======= === ===
December 31, 1995
Type of Loan:
Commercial, financial and agricultural.................... $ 936 7% 7%
Real estate -- construction............................... 3,839 28 9
Real estate -- residential................................ 7,851 58 75
Installment............................................... 926 7 9
------- --- ---
Total............................................. $13,552 100% 100%
======= === ===
16
19
DEPOSITS
The Bank primarily serves individuals and small- to medium-sized businesses
with a variety of deposit accounts, such as NOW accounts, money market accounts,
certificates of deposit and individual retirement accounts. The following table
presents average balances by category and average rates paid for the years ended
December 31, 1999, 1998, and 1997. Average balances were calculated based on
daily averages.
TABLE 13
DEPOSITS
AS OF DECEMBER 31,
------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------- ---------------------------- ----------------------------
AVG. AVG. AVG.
AVERAGE INTEREST RATE AVERAGE INTEREST RATE AVERAGE INTEREST RATE
BALANCE EXPENSE PAID BALANCE EXPENSE PAID BALANCE EXPENSE PAID
(DOLLARS IN THOUSANDS) ---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Non-interest bearing demand
deposits........................... $ 124,772 $ -- -- $ 125,178 $ -- -- $ 116,990 $ -- --
Interest bearing deposits:
Demand deposits.................... 146,343 1,195 0.82% 135,492 3,794 2.80% 128,703 2,054 1.60%
Money markets accounts............. 152,785 7,351 4.81 75,558 3,439 4.55 70,496 3,290 4.67
Savings deposits................... 125,418 4,556 3.63 135,309 5,387 3.98 132,615 5,520 4.16
Time deposits...................... 580,714 31,269 5.38 587,261 33,521 5.71 611,038 35,468 5.80
---------- ------- ---------- ------- ---------- -------
Total........................ 1,005,260 44,371 933,620 46,141 942,852 $46,332
---------- ------- ---------- ------- ---------- -------
Total deposits............... $1,130,032 $44,371 $1,058,798 $46,141 $1,059,842 $46,332
========== ======= ========== ======= ========== =======
As of December 31, 1999, domestic time deposits of $100,000 or more totaled
$239,839,000, with the following maturities: $88,049,000, three months or less;
$130,223,000, over three months through twelve months; $20,393,000, over one
year through three years and $1,174,000 over three years.
OTHER BORROWINGS
The following is a schedule of other borrowings which consists of the
following categories: securities sold under repurchase agreements, federal funds
purchased and Federal Home Loan Bank ("FHLB") borrowings for the years ended
December 31, 1999, 1998 and 1997.
TABLE 14
OTHER BORROWINGS
MAXIMUM
BALANCE INTEREST RATE AVG. OUTSTANDING
AS OF AS OF AVERAGE INT. AT ANY
DEC. 31 DEC. 31 BALANCE RATE MONTH-END
(DOLLARS IN THOUSANDS) -------- ------------- -------- ---- -----------
1999
Federal funds purchased, securities sold under
agreements to purchase and FHLB borrowings... $491,976 5.14% $422,644 5.42% $553,202
======== ======== ========
1998
Federal funds purchased, securities sold under
agreements to purchase and FHLB borrowings... $469,944 5.51% $434,260 5.64% $484,927
======== ======== ========
1997
Federal funds purchased, securities sold under
agreements to repurchase and FHLB
borrowings................................... $350,079 5.59% $283,167 5.83% $413,789
======== ======== ========
At December 31, 1999, FCNB had one available line of credit with the FHLB
totaling $468,750,000 with approximately $434,826,000 outstanding. The
outstanding amounts consisted of $156,805,000 maturing in 2000, $571,000
maturing in 2001, $76,000,000 maturing in 2002, $13,000,000 maturing in 2003,
$86,000,000 in 2004, $26,000,000 maturing in 2008, $76,000,000 in 2009, and
$450,000 maturing in 2011. At December 31, 1999, such amounts were outstanding
at market interest rates for the specific advance program and maturity. In
addition, the FHLB requires bank to pledge collateral to secure the advances as
described in the line of credit agreement. The collateral consists of FHLB stock
and qualifying 1-4 family residential mortgage loans.
See also note 9 to Consolidated Financial Statements.
17
20
RETURN ON EQUITY AND ASSETS
The table below indicates the return on average assets (net income divided
by average total assets), return on average equity (net income divided by
average equity), dividend payout ratio (dividends per share divided by basic net
income per share), and average equity to average assets ratio (average equity
divided by average total assets) and other key operating data for the years
ended December 31, 1999, 1998, and 1997. Averages are based on daily balances.
TABLE 15
RETURN ON EQUITY AND ASSETS
DECEMBER 31,
--------------------------------------
(DOLLARS IN THOUSANDS 1999 1998 1997
EXCEPT PER SHARE AMOUNTS) ---------- ------------ ----------
Net income................................................ $ 26,092 $ 9,236 $ 19,171
Average shareholders' equity.............................. 230,149 250,895 256,715
Average total assets...................................... 1,826,421 1,780,545 1,585,431
Dividends per share (1)................................... 0.68 0.61 0.53
Basic net income per share................................ 1.45 0.51 1.06
Diluted net income per share.............................. 1.45 0.50 1.03
Return on average assets.................................. 1.43% 0.52% 1.21%
Return on average equity.................................. 11.34 3.68 7.47
Dividend payout ratio (1)................................. 46.90 119.61* 50.00*
Average equity to average assets ratio.................... 12.60 14.09 16.19
- ---------------
* Excludes HFNC Financial information for comparison purposes.
(1) Computed using the Corporation's historical dividends declared per share.
Dividends declared per share were $0.68, $0.61, and $0.53 per share for the
years ended December 31, 1999, 1998 and 1997, respectively. Dividends
declared per share by HFNC were $0.24 and $5.28 per share for the years
ended December 31, 1998 and 1997, as adjusted to conform to the
Corporation's December 31 fiscal year. Dividends declared per share by HFNC
in the year ended December 31, 1997 includes a special distribution of $5.00
per share to HFNC shareholders, substantially all of which was deemed to be
a return of capital to shareholders.
18
21
ITEM 2. PROPERTIES
The corporate and accounting offices of the Corporation are located in
various leased facilities in Concord, North Carolina.
The main office of FCNB is located in a facility the bank owns in Concord,
North Carolina, while the operations and data processing departments of FCNB are
currently located in another fully-owned facility in Concord, North Carolina.
In addition to its main office, FCNB has thirty-one full service branches
and two limited service facilities in the following North Carolina locations:
Boiling Springs Concord -- Wilmar(1)
Cornelius(1) Concord -- Hwy. 29(1)
Forest City(1) Concord -- Branchview(1)(2)(3)
Huntersville(1)(2) Concord -- Southbranch(1)(3)
Harrisburg(1) Kannapolis(1)
Midland(1) Landis(1)
Indian Trail(1)(2) Mt. Pleasant
Waxhaw(1) Monroe -- Skyway Drive(2)
Monroe -- Downtown(1) Matthews(1)
Shelby(1) Mint Hill(1)
Kings Mountain(1) Davidson
Charlotte -- Uptown(1) The Pines(2)
Charlotte -- Cotswold(1) Cornelius(1)
Charlotte -- Park Road(1)(2) Charlotte -- Carmel(1)
Charlotte -- University(1) Charlotte -- Eastland(1)
Charlotte -- Oakdale(1) Charlotte -- Southpark(1)(2)
Charlotte -- Fairview(1)
- -----------------------
(1) Branch maintains an ATM on site
(2) Facility is leased.
(3) Limited service facility
In addition to the above-noted ATMs, FCNB owns fourteen remote ATMs in
various convenience-style locations in Cabarrus, northeast Mecklenburg and
Cleveland counties of North Carolina.
FCNB also operates a loan production office located in Greensboro, North
Carolina.
FCNB is in the process of constructing a new Corporate Center located in
University Research Park that should be complete and operational in the first
quarter of 2001.
The Corporation's mortgage loan department is located in a fully-owned
building in the SouthPark area of Charlotte, North Carolina.
ITEM 3. LEGAL PROCEEDINGS
In June 1995, a lawsuit was initiated against Home Federal by a borrower's
affiliated companies in which the plaintiffs alleged that Home Federal
wrongfully set-off certain funds in an account being held and maintained by Home
Federal. In addition, the plaintiffs alleged that as a result of the wrongful
set-off, Home Federal wrongfully dishonored a check in the amount of $270,000.
Plaintiffs further alleged that the actions on behalf of Home Federal
constituted unfair and deceptive trade practices, thereby entitling plaintiffs
to recover treble damages and attorneys' fees. Home Federal denied any
wrongdoing and filed a motion for summary judgment. Upon consideration of the
motion, the United States Bankruptcy Judge entered a Recommended Order Granting
Summary Judgement, recommending the dismissal of all claims asserted against
Home Federal. In October 1997, the United States District Court entered an order
granting summary judgment in
19
22
favor of Home Federal. The plaintiff has appealed the order of summary judgment
and the case is presently pending in the Fourth Circuit Court of Appeals.
In December 1996, Home Federal filed a suit against the borrower and his
company and against the borrower's wife, daughters, and a company owned by his
wife and daughter, alleging transfers of assets to the wife, daughter, and their
company in fraud of creditors, and asking that the fraudulent transfers be set
aside. The objective of the lawsuit is to recover assets which may be used to
satisfy a portion of the judgments obtained in favor of Home Federal in prior
litigation. In April 1997, the borrower's wife filed a counterclaim against Home
Federal alleging that she borrowed $750,000 from another financial institution,
secured by a deed of trust on her principal residence, the proceeds of which
were paid to Home Federal for application on a debt owed by one of her husband's
corporations, claiming that officers of Home Federal promised to resume making
loans to her husband's corporation after the payment. Home Federal and its
officers vigorously denied all of her allegations. Home Federal filed a motion
for summary judgment and dismissal of the counterclaim. The motion for summary
judgment was heard in the Superior Court division of the Mecklenburg County
General Court of Justice in April 1998. In June 1998, Home Federal removed this
case to the United States Bankruptcy Court for the Western District of North
Carolina, Charlotte Division, due to the fact that the defendant was the debtor
in a pending bankruptcy case. In April 1999, Home Federal moved for summary
judgement to dismiss the counterclaims. At a hearing in May 1999, the Bankruptcy
Judge granted part and denied part of Home Federal's Motion for Summary
Judgement. The Judge dismissed the wife's counterclaim for breach of fiduciary
duty, but allowed her claim for fraud to continue. The borrower, his wife and
daughter filed a motion for jury trial. The request was not filed within the
time allowed; however, the Judge may, in his discretion, order a jury trial. We
have filed an objection to the request and a hearing on the motion is scheduled
for April 4, 2000. A trial date has not been set; however, we anticipate a trial
within 90 days. Home Federal believes it has strong defenses to the defendant's
counterclaim.
In February 1997, two companies affiliated with those referred to in the
first paragraph above filed an additional action against two executive officers
of Home Federal and against an officer of another financial institution. The
action was removed from the state court to the United States Bankruptcy Court
for the Western District of North Carolina. At the same time, the borrower, who
is affiliated with all of these companies, also filed an action in the Superior
Court of Mecklenburg County, North Carolina against the two executive officers
of Home Federal and against an officer of another financial institution. The
Complaints in both actions assert virtually identical claims. The plaintiffs in
both lawsuits allege that the officers of both financial institutions engaged in
a conspiracy to wrongfully declare loans to be in default so as to eliminate
those companies as borrowers of Home Federal. Plaintiffs claim actual damages,
treble damages, and punitive damages together with interest, attorneys' fees,
and other costs. Plaintiffs allege misrepresentation, breach of fiduciary duty,
constructive fraud, interference with business expectancy, wrongful bank account
set-off, and unfair and deceptive acts and practices. The action pending in the
bankruptcy court has been stayed. All defendants filed motions for summary
judgment in the state court action which were granted, and that lawsuit was
dismissed in January 1998 by the Superior Court of Mecklenburg County. The
plaintiff appealed the order granting summary judgment to the North Carolina
Court of Appeals. In July 1998, the defendants removed the state court case to
the United States Bankruptcy Court for the Western District of North Carolina,
Charlotte Division, due to the fact that the plaintiff was a debtor in a pending
bankruptcy case. As a result of the removal, the North Carolina Court of Appeals
entered an order staying further proceedings in the North Carolina Court of
Appeals in August 1998. In early June 1999, the United States Bankruptcy court
entered its Memorandum Decision and Order adopting the State Court dismissal of
the lawsuit. In late June 1999, the plaintiff gave notice of appeal which Home
Federal is opposing. The appeal is pending. On February 12, 2000, the borrower
filed a motion to close his bankruptcy case and remand the action to State
Court. We filed an objection to the motion. At a hearing on March 7, 2000, the
Judge denied the borrower's request to close the case and denied the borrower's
motion to remand to State Court. The Corporation is bound by Home Federal's
agreement to indemnify both of its officers with respect to costs, expense, and
liability which might arise in connection with both of these cases.
In July 1997, the above borrower and affiliated companies filed an
additional action against HFNC, Home Federal, and the other financial
institution referred to in the paragraph above, alleging that previous
20
23
judgments in favor of Home Federal and the other financial institution obtained
in prior litigation were obtained by the perpetration of fraud on the Bankruptcy
Court, U.S. District Court, and the Fourth Circuit Court of Appeals. The
plaintiffs are seeking to have the judgments set aside on that basis. All
defendants filed motions for summary judgment and dismissal which were granted,
and the lawsuit was dismissed on September 24, 1998. The borrower, individually,
has appealed the Order dismissing the lawsuit to the Fourth Circuit Court of
Appeals. In February 1999, the United States District Court entered an Order
sanctioning the attorneys for the plaintiffs and ordering that the plaintiff be
prohibited from filing any further action or proceeding in the United States
District Court for the Western District of North Carolina arising from facts
involved in this matter. The Plaintiff appealed the entry of that order. On
March 6, 2000, the United States Court of Appeals for the 4th Circuit ruled
against the borrower on both appeals and affirmed the District Court's opinion.
Management continues to deny any liability in the above-described cases and
continues to vigorously defend against the claims. However, there can be no
assurance of the ultimate outcome of the litigation, or the range of potential
loss, if any.
The Corporation and the Bank are defendants in certain other claims and
legal actions arising in the ordinary course of business. In the opinion of
management, after consultation with legal counsel, the ultimate disposition of
these other matters is not expected to have a material adverse effect on the
consolidated operations, liquidity or financial position of the Corporation or
the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the shareholders of the Registrant was held on March
21, 2000. The purpose of the meeting was to consider and vote upon a proposal to
approve the Agreement and Plan of Merger, dated as of November 7, 1999, by and
between the Corporation and Carolina First BancShares, Inc. ("Carolina First"),
pursuant to which Carolina First would merge with and into the Corporation. This
motion was adopted by a vote of the majority of the Corporation's issued and
outstanding common stock entitled to vote at the meeting, as follows:
For: 11,561,666
Against: 1,288,371
Abstained: 87,639
21
24
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following list sets forth with respect to each of the current executive
officers of the registrant his or her name, age, positions and offices held with
the Registrant and the Banks, the period served in such positions or offices
and, if such person has served in such position and office for less than five
years, the prior employment of such person.
NAME AGE OFFICE AND POSITION YEAR ELECTED
- ---- --- ------------------- --------------
Lawrence M. Kimbrough.......... 59 President and Chief Executive Officer of the 1986 - Present
Registrant and FCNB
Robert O. Bratton.............. 51 Executive Vice President, Chief Operating 1983 - Present
Officer and Chief Financial Officer of the
Registrant and FCNB
Vice President of Union 1996 - 1998
Robert E. James, Jr. .......... 49 Group Executive Vice President -- Sales of FCNB 1999 - Present
Executive Vice President of the Registrant 1999 - Present
Group Executive: Market Planning & Customer 1996 - 1998
Development, Centura Bank
Executive Vice President for Metro Markets, 1994 - 1998
Centura Bank
Carl T. McFarland.............. 42 Executive Vice President of the Registrant and 1999 - Present
FCNB
Executive Vice President and Alternative 1996 - 1999
Delivery Systems Manager, BB&T
Senior Vice President and Loan Services Manager 1988 - 1996
Robert G. Fox, Jr. ............ 50 Executive Vice President of the Registrant and 1993 - Present
FCNB and Chief Lending Officer of FCNB
Vice President of Union 1996 - 1998
Senior Vice President and Senior Credit Officer 1989 - 1993
Barclays Bank of NC
Stephen M. Rownd............... 41 Executive Vice President of the Registrant and 2000 - Present
FCNB and Chief Credit Officer of FCNB
Director of Risk Management, SunTrust Banks, 1999 - 2000
Inc.
Executive Vice President and Chief Credit 1996 - 1999
Officer, SunTrust Bank of Gulf Coast
Senior Vice President, Regions Bank 1991 - 1996
22
25
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information called for by Item 5 with respect to the market price of
and dividends on the Registrant's Common Stock is set forth on the inside back
cover of the Corporation's 1999 Annual Report to Shareholders (included herewith
as Exhibit 13.1) under the caption "Stock Information and Dividends" and is
hereby incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by Item 6 is set forth on page 1 of the
Corporation's 1999 Annual Report to Shareholders (included herein as Exhibit
13.l) under the caption "Selected Consolidated Financial Data" and is hereby
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information called for by Item 7 is set forth on pages 45 through 61 of
the Corporation's 1999 Annual Report to Shareholders (included herein as Exhibit
13.1) under the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and is hereby incorporated by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by Item 7A is set forth on pages 48 and 49 of
the Corporation's 1999 Annual Report to Shareholders (included herein as Exhibit
13.1) under the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations and
Financial Condition" and is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Item 8 are set forth on pages 17 through 44
of the Corporation's 1999 Annual Report to Shareholders (included herein as
Exhibit 13.1) and is hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
23
26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by Item 10 with respect to directors and Section
16 matters is set forth in the Registrant's Proxy Statement for its 2000 Annual
Meeting of Shareholders under the captions "Election of Directors", and "Section
16(a) Beneficial Ownership Reporting Compliance," respectively, and is hereby
incorporated by reference. The information called for by Item 10 with respect to
executive officers is set forth in Part I, Item 4A hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Item 11 is set forth in the Registrant's
Proxy Statement for its 2000 Annual Meeting of Shareholders under the captions
"Election of Directors -- Compensation of Directors", "Executive Compensation"
and "Compensation Committee Interlocks and Insider Participation in Compensation
Decisions," respectively, and is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by Item 12 is set forth in the Registrant's
Proxy Statement for its 2000 Annual Meeting of Shareholders under the captions
"Principal Shareholders" and "Management Ownership of Common Stock,"
respectively, and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Item 13 is set forth in the Registrant's
Proxy Statement for its 2000 Annual Meeting of Shareholders under the caption
"Certain Relationships and Related Transactions" and is hereby incorporated by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
The following financial statements, together with a report thereon of
independent certified public accountants, are included in this report by
incorporation by reference to the Corporation's 1999 Annual Report to
Shareholders (included herein as Exhibit 13.1) as set forth in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1999 and 1998
Consolidated Statements of Income for the years ended December 31, 1999,
1998 and 1997
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
Financial statement schedules, for which provision for filing is made in
the applicable accounting regulations of the Securities and Exchange
Commission for bank holding companies, are omitted because the required
information is not applicable or is included elsewhere herein.
24
27
(3) Exhibits.
EXHIBIT NO.
(PER EXHIBIT
TABLE IN
ITEM 601 OF
REGULATION S-K) DESCRIPTION OF EXHIBITS
- --------------- -----------------------
3.1 Amended and Restated Articles of Incorporation of the
Registrant, incorporated herein by reference to Exhibit 3.1
of the Registrant's 10Q for the quarter ended September 30,
1998 (Commission File No. 0-15829)
3.2 By-laws of the Registrant, as amended, incorporated herein
by reference to Exhibit 3.2 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995
(Commission File No. 0-15829)
*10.1 Comprehensive Stock Option Plan, incorporated herein by
reference to Exhibit 10.1 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992
(Commission File No. 0-15829)
10.2 Dividend Reinvestment and Stock Purchase Plan, incorporated
herein by reference to Exhibit 28.1 of the Registrant's
Registration Statement No. 333-60641, dated August 8, 1998.
*10.3 Executive Incentive Bonus Plan, incorporated herein by
reference to Exhibit 10.7 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998
(Commission File No. 0-15829.)
*10.4 Employment Agreement dated July 21, 1999 for Lawrence M.
Kimbrough
*10.5 Employment Agreement dated July 21, 1999 for Robert O.
Bratton
*10.6 Employment Agreement dated July 21, 1999 for Robert E. James
*10.7 Employment Agreement dated December 15, 1999 for Carl T.
McFarland
*10.8 Supplemental Agreement dated July 21, 1999 for Lawrence M.
Kimbrough
*10.9 Supplemental Agreement dated July 21, 1999 for Robert O.
Bratton
*10.10 Supplemental Agreement dated July 21, 1999 for Robert E.
James
*10.11 Change in Control Agreement dated November 16, 1994 for
Robert G. Fox, Jr. incorporated herein by reference to
Exhibit 10.7 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 (Commission File No.
0-15829.)
*10.12 Amended and Restated Employment Agreement between First
Charter National Bank and John J. Godbold, Jr. dated as of
December 22, 1997, incorporated herein by reference to
Exhibit 10.8 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997 (Commission File No.
0-15829.)
*10.13 Restricted Stock Award Program, incorporated herein by
reference to Exhibit 99.1 of the Registrant's Registration
Statement No. 333-60949, dated July 10, 1995.
10.14 The 1999 Employee Stock Purchase Plan, incorporated herein
by reference to the Registrant's Registration Statement No.
333-54019, dated May 29, 1998.
*10.15 The First Charter Corporation Comprehensive Stock Option
Plan, incorporated herein by reference to the Registrant's
Registration Statement No. 333-54021, dated May 29, 1998.
*10.16 The Stock Option Plan for Non-employee Directors,
incorporated herein by reference to the Registrant's
Registration Statement No. 333-54023, dated May 29, 1998.
*10.17 The Home Federal Savings and Loan Employee Stock Ownership
Plan, incorporated herein by reference to the Registrant's
Registration Statement No. 333-71495, dated January 29,
1999.
*10.18 The HFNC Financial Corp. Stock Option Plan, incorporated
herein by reference to the Registrant's Registration
Statement No. 333-71497, dated February 1, 1999.
25
28
EXHIBIT NO.
(PER EXHIBIT
TABLE IN
ITEM 601 OF
REGULATION S-K) DESCRIPTION OF EXHIBITS
- --------------- -----------------------
10.19 Agreement and Plan of Merger by and between the Registrant
and Carolina First Bancshares, Inc. dated as of November 7,
1999, incorporated herein by reference to Appendix A of the
Registrant's Registration Statement No. 333-95003 filed
January 20, 1999.
10.20 Stock Option Agreement between the Registrant and Carolina
State Bank dated June 30, 1997, incorporated herein by
reference to Exhibit 99.2 of the Registrant's Current Report
on Form 8-K filed July 2, 1997 (Commission File No. 0-15829)
*10.21 Employment Agreement dated as of January 20, 1993, as
amended as of August 31, 1995, between Bank of Union and H.
Clark Goodwin, incorporated herein by reference to Exhibit
10.12 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995 (Commission File No. 0-15829)
*10.22 Change in Control Agreement dated October 16, 1996 for
Edward B. McConnell, incorporated herein by reference to
Exhibit 10.13 of the Registrant's Annual Report on Form 10-K
for the year-ended December 31, 1996 (Commission File No.
0-15829)
10.23 1998 Employee Stock Purchase Plan, incorporated herein by
reference to Exhibit 99.1 of the Registrant's Registration
Statement No. 333-43617 filed December 31, 1997.
*10.24 Amended and Restated Salary Continuation Agreement between
First Charter National Bank and John J. Godbold, Jr. dated
as of December 22, 1997, incorporated herein by reference to
Exhibit 10.16 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997 (Commission File No.
0-15829.)
11.1 Statement regarding computation of per share earnings,
incorporated herein by reference to Footnote 1 of the
Consolidated Financial Statements included in the First
Charter Corporation Annual Report to its shareholders for
the year ended December 31, 1999.
13.1 First Charter Corporation Annual Report to its shareholders
for the year ended December 31, 1999. Such Annual Report to
its shareholders, except for those portions which are
expressly incorporated by reference in this Form 10-K, is
furnished for the information of the Commission and is not
to be deemed "filed" as part of the Form 10-K
21.1 List of subsidiaries of the Registrant
23.1 Consent of KPMG LLP
27.1 Financial Data Schedule
- ---------------
* Indicates a management contract or compensatory plan required to be filed
herein.
(b) Reports on Form 8-K
On October 13, 1999, the Corporation filed a Current Report on Form 8-K,
reporting pursuant to Item 5 thereof its earnings for the fiscal quarter ended
September 30, 1999.
On November 8, 1999, the Corporation filed a Current Report on Form 8-K,
reporting pursuant to Item 5 thereof its Agreement and Plan of Merger by and
between First Charter Corporation and Carolina First BancShares, Inc. entered
into on November 7, 1999. Included in this filing were exhibits filed under Item
7 consisting of the news release disseminated on November 8, 1999 and
information provided to analysts.
26
29
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FIRST CHARTER CORPORATION
(Registrant)
By: /s/ LAWRENCE M. KIMBROUGH
------------------------------------
Lawrence M. Kimbrough, President
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LAWRENCE M. KIMBROUGH President and Director March 30, 2000
- ----------------------------------------------------- (Principal Executive Officer)
(Lawrence M. Kimbrough)
/s/ J. ROY DAVIS, JR. Chairman of the Board and March 30, 2000
- ----------------------------------------------------- Director
(J. Roy Davis, Jr.)
/s/ MICHAEL R. COLTRANE Vice Chairman of the Board and March 30, 2000
- ----------------------------------------------------- Director
(Michael R. Coltrane)
/s/ ROBERT O. BRATTON Executive Vice President March 30, 2000
- ----------------------------------------------------- (Principal Financial and
(Robert O. Bratton) Principal Accounting Officer)
/s/ WILLIAM R. BLACK Director March 30, 2000
- -----------------------------------------------------
(William R. Black)
/s/ JOHN J. GODBOLD, JR. Director March 30, 2000
- -----------------------------------------------------
(John J. Godbold, Jr.)
/s/ CHARLES F. HARRY, III Director March 30, 2000
- -----------------------------------------------------
(Charles F. Harry, III)
/s/ FRANK H. HAWFIELD Director March 30, 2000
- -----------------------------------------------------
(Frank H. Hawfield)
Director
- -----------------------------------------------------
(Jerry E. McGee)
/s/ HUGH H. MORRISON Director March 30, 2000
- -----------------------------------------------------
(Hugh H. Morrison)
/s/ THOMAS R. REVELS Director March 30, 2000
- -----------------------------------------------------
(Thomas R. Revels)
27
30
EXHIBIT INDEX
EXHIBIT NO.
(PER EXHIBIT
TABLE IN
ITEM 601 OF
REGULATION S-K) DESCRIPTION OF EXHIBITS
- --------------- -----------------------
3.1 Amended and Restated Articles of Incorporation of the
Registrant, incorporated herein by reference to Exhibit 3.1
of the Registrant's 10Q for the quarter ended September 30,
1998 (Commission File No. 0-15829)
3.2 By-laws of the Registrant, as amended, incorporated herein
by reference to Exhibit 3.2 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995
(Commission File No. 0-15829)
*10.1 Comprehensive Stock Option Plan, incorporated herein by
reference to Exhibit 10.1 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992
(Commission File No. 0-15829)
10.2 Dividend Reinvestment and Stock Purchase Plan, incorporated
herein by reference to Exhibit 28.1 of the Registrant's
Registration Statement No. 333-60641, dated August 8, 1998.
*10.3 Executive Incentive Bonus Plan, incorporated herein by
reference to Exhibit 10.7 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998
(Commission File No. 0-15829.)
*10.4 Employment Agreement dated July 21, 1999 for Lawrence M.
Kimbrough
*10.5 Employment Agreement dated July 21, 1999 for Robert O.
Bratton
*10.6 Employment Agreement dated July 21, 1999 for Robert E. James
*10.7 Employment Agreement dated December 15, 1999 for Carl T.
McFarland
*10.8 Supplemental Agreement dated July 21, 1999 for Lawrence M.
Kimbrough
*10.9 Supplemental Agreement dated July 21, 1999 for Robert O.
Bratton
*10.10 Supplemental Agreement dated July 21, 1999 for Robert E.
James
*10.11 Change in Control Agreement dated November 16, 1994 for
Robert G. Fox, Jr. incorporated herein by reference to
Exhibit 10.7 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 (Commission File No.
0-15829.)
*10.12 Amended and Restated Employment Agreement between First
Charter National Bank and John J. Godbold, Jr. dated as of
December 22, 1997, incorporated herein by reference to
Exhibit 10.8 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997 (Commission File No.
0-15829.)
*10.13 Restricted Stock Award Program, incorporated herein by
reference to Exhibit 99.1 of the Registrant's Registration
Statement No. 333-60949, dated July 10, 1995.
10.14 The 1999 Employee Stock Purchase Plan, incorporated herein
by reference to the Registrant's Registration Statement No.
333-54019, dated May 29, 1998.
*10.15 The First Charter Corporation Comprehensive Stock Option
Plan, incorporated herein by reference to the Registrant's
Registration Statement No. 333-54021, dated May 29, 1998.
*10.16 The Stock Option Plan for Non-employee Directors,
incorporated herein by reference to the Registrant's
Registration Statement No. 333-54023, dated May 29, 1998.
*10.17 The Home Federal Savings and Loan Employee Stock Ownership
Plan, incorporated herein by reference to the Registrant's
Registration Statement No. 333-71495, dated January 29,
1999.
*10.18 The HFNC Financial Corp. Stock Option Plan, incorporated
herein by reference to the Registrant's Registration
Statement No. 333-71497, dated February 1, 1999.
28
31
EXHIBIT NO.
(PER EXHIBIT
TABLE IN
ITEM 601 OF
REGULATION S-K) DESCRIPTION OF EXHIBITS
- --------------- -----------------------
10.19 Agreement and Plan of Merger by and between the Registrant
and Carolina First Bancshares, Inc. dated as of November 7,
1999, incorporated herein by reference to Appendix A of the
Registrant's Registration Statement No. 333-95003 filed
January 20, 1999.
10.20 Stock Option Agreement between the Registrant and Carolina
State Bank dated June 30, 1997, incorporated herein by
reference to Exhibit 99.2 of the Registrant's Current Report
on Form 8-K filed July 2, 1997 (Commission File No. 0-15829)
*10.21 Employment Agreement dated as of January 20, 1993, as
amended as of August 31, 1995, between Bank of Union and H.
Clark Goodwin, incorporated herein by reference to Exhibit
10.12 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995 (Commission File No. 0-15829)
*10.22 Change in Control Agreement dated October 16, 1996 for
Edward B. McConnell, incorporated herein by reference to
Exhibit 10.13 of the Registrant's Annual Report on Form 10-K
for the year-ended December 31, 1996 (Commission File No.
0-15829)
10.23 1998 Employee Stock Purchase Plan, incorporated herein by
reference to Exhibit 99.1 of the Registrant's Registration
Statement No. 333-43617 filed December 31, 1997.
*10.24 Amended and Restated Salary Continuation Agreement between
First Charter National Bank and John J. Godbold, Jr. dated
as of December 22, 1997, incorporated herein by reference to
Exhibit 10.16 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997 (Commission File No.
0-15829.)
11.1 Statement regarding computation of per share earnings,
incorporated herein by reference to Footnote 1 of the
Consolidated Financial Statements included in the First
Charter Corporation Annual Report to its shareholders for
the year ended December 31, 1999.
13.1 First Charter Corporation Annual Report to its shareholders
for the year ended December 31, 1999. Such Annual Report to
its shareholders, except for those portions which are
expressly incorporated by reference in this Form 10-K, is
furnished for the information of the Commission and is not
to be deemed "filed" as part of the Form 10-K
21.1 List of subsidiaries of the Registrant
23.1 Consent of KPMG LLP
27.1 Financial Data Schedule
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* Indicates a management contract or compensatory plan required to be filed
herein.
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