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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-15829

FIRST CHARTER CORPORATION

(Exact name of registrant as specified in its charter)
     
North Carolina   56-1355866
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)
     
10200 David Taylor Drive, Charlotte, NC   28262-2373
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code (704) 688-4300

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X    No

     As of August 12, 2002 the Registrant had outstanding 30,260,494 shares of Common Stock, no par value.

 

 

First Charter Corporation

June 30, 2002 Form 10-Q

INDEX

             
            Page
           
Part I   Item 1.   Financial Statements:    
Financial       Consolidated Balance Sheets at June 30, 2002   2
Information       and December 31, 2001    
             
        Consolidated Statements of Income for the Three   3
        and Six Months Ended June 30, 2002 and 2001    
             
        Consolidated Statements of Shareholders’   4
        Equity for the Six Months Ended    
        June 30, 2002 and 2001    
             
        Consolidated Statements of Cash Flows for the   5
        Six Months Ended June 30, 2002 and 2001    
             
        Notes to Consolidated Financial Statements   6
             
    Item 2.   Management’s Discussion and Analysis of Financial   12
        Condition and Results of Operations    
             
    Item 3.   Quantitative and Qualitative Disclosures about   29
        Market Risk    
 
 
Part II            
Other Information   Item 1.   Legal Proceedings   30
             
    Item 2.   Changes in Securities and Use of Proceeds   30
             
    Item 3.   Defaults Upon Senior Securities   30
             
    Item 4.   Submission of Matters to a Vote of Security Holders   30
             
    Item 6.   Exhibits and Reports on Form 8-K   30
             
    Signature       32

 

 

PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS

First Charter Corporation and Subsidiaries
Consolidated Balance Sheets

                       
          June 30   December 31
          2002   2001
(Dollars in thousands, except share data)   (Unaudited)        
Assets:
                
Cash and due from banks
   $ 93,287     $ 134,084  
Federal funds sold
     948       1,161  
Interest bearing bank deposits
     16,513       6,220  
 
Cash and cash equivalents
     110,748       141,465  
Securities available for sale (cost of $1,084,725 at June 30, 2002 and $1,066,743 at December 31, 2001; carrying amount of pledged collateral at June 30, 2002, $144,117)
     1,104,995       1,076,324  
Loans
     2,125,819       1,955,086  
 
Less: Unearned income
     (254 )     (191 )
     
Allowance for loan losses
     (27,213 )     (25,843 )
 
Loans, net
     2,098,352       1,929,052  
Premises and equipment, net
     95,070       96,976  
Other assets
     81,090       88,920  
   
Total assets
   $ 3,490,255     $ 3,332,737  
Liabilities:
                
Deposits, domestic:
                
 
Noninterest bearing demand
   $ 282,324     $ 276,699  
 
Interest bearing
     1,980,635       1,886,246  
   
Total deposits
     2,262,959       2,162,945  
Other borrowings
     847,752       808,512  
Other liabilities
     55,493       51,939  
   
Total liabilities
     3,166,204       3,023,396  
Shareholders’ equity:
                
Preferred stock — no par value; authorized 2,000,000 shares; no shares issued and outstanding
     —       —  
Common stock — no par value; authorized 100,000,000 shares; issued and outstanding 30,829,895 and 30,742,532 shares
     135,876       135,167  
Common stock held in Rabbi Trust for deferred compensation
     (429 )     (388 )
Deferred compensation payable in common stock
     429       388  
Retained earnings
     175,818       168,334  
Accumulated other comprehensive income:
                
 
Unrealized gain on securities available for sale, net
     12,357       5,840  
   
Total shareholders’ equity
     324,051       309,341  
     
Total liabilities and shareholders’ equity
   $ 3,490,255     $ 3,332,737  

See accompanying notes to consolidated financial statements.

2

 

First Charter Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

                                   
      For the Three Months   For the Six Months
      Ended June 30   Ended June 30
     
 
(Dollars in thousands, except share and per share data)   2002   2001   2002   2001
Interest income:
                                
Loans
   $ 33,497     $ 40,496     $ 66,312     $ 84,312  
Federal funds sold
     6       15       9       46  
Interest bearing bank deposits
     32       81       61       237  
Securities
     15,898       14,799       32,091       24,866  
 
Total interest income
     49,433       55,391       98,473       109,461  
Interest expense:
                                
Deposits
     12,694       20,638       26,443       41,767  
Federal funds purchased and securities sold under agreements to repurchase
     594       1,509       1,191       3,029  
Federal Home Loan Bank and other borrowings
     7,537       6,896       14,681       12,938  
 
Total interest expense
     20,825       29,043       42,315       57,734  
Net interest income
     28,608       26,348       56,158       51,727  
Provision for loan losses
     2,240       1,190       4,345       1,940  
Net interest income after provision for loan losses
     26,368       25,158       51,813       49,787  
 
Noninterest income:
                                
Service charges on deposit accounts
     4,781       3,568       9,446       6,792  
Financial management income
     679       640       1,347       1,415  
Gain on sale of securities
     989       282       4,752       549  
Income (loss) from equity method investments
     23       (102 )     (2,936 )     9  
Mortgage loan fees
     409       749       816       1,258  
Brokerage services income
     420       520       1,057       914  
Insurance services income
     2,114       1,865       4,345       3,856  
Trading gains
     322       233       742       233  
Gain on sale of property
     1,013       —       1,013       —  
Other
     944       1,059       2,040       2,208  
 
Total noninterest income
     11,694       8,814       22,622       17,234  
Noninterest expense:
                                
Salaries and employee benefits
     13,208       10,659       26,105       21,012  
Occupancy and equipment
     4,184       3,799       8,425       7,369  
Data processing
     828       494       1,450       904  
Advertising
     634       552       1,274       1,195  
Postage and supplies
     1,078       1,136       2,267       2,325  
Professional services
     1,719       1,418       3,381       2,582  
Telephone
     568       553       1,114       971  
Amortization of intangibles
     328       447       667       937  
Other
     1,775       1,820       4,195       3,626  
 
Total noninterest expense
     24,322       20,878       48,878       40,921  
Income before income taxes
     13,740       13,094       25,557       26,100  
Income taxes
     3,751       4,223       6,977       8,385  
Net income
   $ 9,989     $ 8,871     $ 18,580     $ 17,715  
Net income per share:
                                
 
Basic
   $ 0.32     $ 0.28     $ 0.60     $ 0.56  
 
Diluted
   $ 0.32     $ 0.28     $ 0.60     $ 0.56  
Weighted average shares:
                                
 
Basic
     30,829,356       31,719,241       30,814,127       31,708,003  
 
Diluted
     31,098,379       31,906,705       31,046,469       31,870,134  

See accompanying notes to consolidated financial statements.

3

 

First Charter Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(Unaudited)

                                                             
                        Common Stock                                
                        held in Rabbi   Deferred           Accumulated        
        Common Stock   Trust for   Compensation           Other        
       
  Deferred   Payable in   Retained   Comprehensive        
(Dollars in thousands, except share data)   Shares   Amount   Compensation   Common Stock   Earnings   Income   Total
Balance, December 31, 2000
     31,601,263     $ 151,486     $ —     $ —     $ 155,762     $ 2,039     $ 309,287  
Comprehensive income:
                                                        
 
Net income
     —       —       —       —       17,715       —       17,715  
 
Unrealized gain on securities available for sale, net
     —       —       —       —       —       7,139       7,139  
 
                                                    
 
   
Total comprehensive income
                                                     24,854  
Cash dividends
     —       —       —       —       (11,420 )     —       (11,420 )
Stock options exercised and Dividend Reinvestment Plan stock issued
     127,111       1,495       —       —       —       —       1,495  
Purchase and retirement of common stock
     (7,000 )     (112 )     —       —       —       —       (112 )
Balance, June 30, 2001
     31,721,374     $ 152,869     $ —     $ —     $ 162,057     $ 9,178     $ 324,051  
Balance, December 31, 2001
     30,742,532     $ 135,167     $ (388 )   $ 388     $ 168,334     $ 5,840     $ 309,341  
Comprehensive income:
                                                        
 
Net income
     —       —       —       —       18,580       —       18,580  
 
Unrealized gain on securities available for sale, net
     —       —       —       —       —       6,517       6,517  
 
                                                    
 
   
Total comprehensive income
                                                     25,097