FIRST CHARTER CORP /NC/ - 10-Q Quarterly Report

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

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

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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No o

As of August 7, 2003 the Registrant had outstanding 29,638,789 shares of Common Stock, no par value.


			Page

Part I	Item 1.	Financial Statements:
Financial Information		Consolidated Balance Sheets at June 30, 2003 and December 31, 2002	2
		Consolidated Statements of Income (Loss) for the Three and Six Months Ended June 30, 2003 and 2002	3
		Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2003 and 2002	4
		Consolidated Statements of Cash Flows for the Six months Ended June 30, 2003 and 2002	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
	Item 4.	Controls and Procedures	42
Part II
Other
Information	Item 1.	Legal Proceedings	42
	Item 2.	Changes in Securities and Use of Proceeds	42
	Item 3.	Defaults Upon Senior Securities	42
	Item 4.	Submission of Matters to a Vote of Security Holders	42
	Item 5.	Other Information	43
	Item 6.	Exhibits and Reports on Form 8-K	43
	Signature		45
	Certifications		46

June 30

December 31

2003

2002

(Dollars in thousands, except share data)

(Unaudited)

Assets:

Cash and due from banks

103,199

162,087

Federal funds sold

1,233

1,154

Interest bearing bank deposits

38,308

6,609

Cash and cash equivalents

142,740

169,850

Securities available for sale (cost of $1,491,959 and $1,103,107; carrying amount of pledged collateral $1,170,387 and $735,208)

1,518,918

1,129,212

Loans held for sale

45,311

158,404

Loans

2,064,668

2,072,717

Less: Unearned income

(209

)

(247

)

Allowance for loan losses

(23,644

)

(27,204

)

Loans, net

2,040,815

2,045,266

Premises and equipment, net

95,803

94,647

Other assets

144,947

148,570

Total assets

3,988,534

3,745,949

Liabilities:

Deposits, domestic:

Noninterest bearing demand

341,176

305,924

Interest bearing

2,217,373

2,016,723

Total deposits

2,558,549

2,322,647

Other borrowings

1,076,595

1,042,440

Other liabilities

39,474

56,176

Total liabilities

3,674,618

3,421,263

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 29,759,848 and 30,069,147 shares

116,883

122,870

Common stock held in Rabbi Trust for deferred compensation

(575

)

(476

)

Deferred compensation payable in common stock

575

476

Retained earnings

180,588

185,900

Accumulated other comprehensive income:

Unrealized aain on securities available for sale, net

16,445

15,916

Total shareholders’ equity

313,916

324,686

Total liabilities and shareholders’ equity

3,988,534

3,745,949

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


		For the Three Months					For the Six Months
		Ended June 30					Ended June 30

(Dollars in thousands, except share and per share data)		2003			2002		2003			2002

Interest income:
Loans		$	30,504		$	33,497	$	60,795		$	66,312
Federal funds sold			6			6		11			9
Interest bearing bank deposits			159			32		339			61
Securities			14,472			15,898		29,364			32,091

	Total interest income		45,141			49,433		90,509			98,473

Interest expense:
Deposits			11,667			12,694		23,132			26,443
Federal funds purchased and securities sold under agreements to repurchase			713			594		1,326			1,191
Federal Home Loan Bank and other borrowings			6,722			7,537		13,429			14,681

	Total interest expense		19,102			20,825		37,887			42,315

Net interest income			26,039			28,608		52,622			56,158
Provision for loan losses			19,492			2,240		21,543			4,345

Net interest income after provision for loan losses			6,547			26,368		31,079			51,813
Noninterest income:
Service charges on deposit accounts			5,571			4,781		10,701			9,446
Financial management income			488			679		1,066			1,347
Gain on sale of securities			8,286			989		9,512			4,752
Gain on sale of credit card loan portfolio			—			—		2,213			—
(Loss) income from equity method investments			(276	)		23		(376	)		(2,936	)
Mortgage loan fees			612			409		1,284			816
Brokerage services income			812			420		1,298			1,057
Insurance services income			2,229			2,114		4,666			4,345
Trading gains			432			322		1,596			742
Bank owned life insurance			967			—		1,913			—
Gain on sale of properties			—			1,013		—			1,013
Other			1,128			944		1,946			2,040

	Total noninterest income		20,249			11,694		35,819			22,622

Noninterest expense:
Salaries and employee benefits			12,554			13,208		26,311			26,105
Occupancy and equipment			3,913			4,184		8,079			8,425
Data processing			634			828		1,312			1,450
Marketing			1,161			634		2,314			1,274
Postage and supplies			1,152			1,078		2,288			2,267
Professional services			3,230			1,719		5,002			3,381
Telephone			513			568		1,116			1,114
Amortization of intangibles			77			90		162			190
Prepayment costs on borrowings			7,366			—		7,366			—
Other			2,422			1,775		5,136			4,195

	Total noninterest expense		33,022			24,084		59,086			48,401

(Loss) income before income taxes			(6,226	)		13,978		7,812			26,034
Income tax (benefit) expense			(2,022	)		3,816		2,070			7,107

Net (loss) income		$	(4,204	)	$	10,162	$	5,742		$	18,927

Net (loss) income per share:
	Basic	$	(0.14	)	$	0.33	$	0.19		$	0.61
	Diluted	$	(0.14	)	$	0.33	$	0.19		$	0.61
Weighted average shares:
	Basic		29,801,059			30,829,356		29,903,170			30,814,127
	Diluted		29,801,059			31,098,379		30,079,806			31,046,469

FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)


							Common Stock
							held in			Deferred
		Common Stock					Rabbi Trust for			Compensation					Accumulated Other
							Deferred			Payable in		Retained			Comprehensive
(Dollars in thousands, except per share data)		Shares		Amount			Compensation			Common Stock		Earnings			Income		Total

Balance, December 31, 2001			30,742,532	$	135,167		$	(388	)	$	388	$	168,334		$	5,840	$	309,341
Comprehensive income:
	Net income		—		—			—			—		18,927			—		18,927
	Unrealized gain on securities available for sale, net		—		—			—			—		—			6,517		6,517

	Total comprehensive income																	25,444
Common stock purchased by Rabbi Trust for deferred compensation			—		—			(41	)		—		—			—		(41	)
Deferred compensation payable in common stock			—		—			—			41		—			—		41
Cash dividends			—		—			—			—		(11,096	)		—		(11,096	)
Stock options exercised			87,363		953			—			—		—			—		953
Purchase and retirement of common stock			—		(244	)		—			—		—			—		(244	)

Balance, June 30, 2002			30,829,895	$	135,876		$	(429	)	$	429	$	176,165		$	12,357	$	324,398

Balance, December 31, 2002			30,069,147	$	122,870		$	(476	)	$	476	$	185,900		$	15,916	$	324,686


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)