FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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 (IRS Employer Identification No.
incorporation or organization)
22 Union Street, North, Concord, North Carolina 28025
(Address of principal executive offices) (Zip Code)
(704) 786-3300
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
4,642,873 shares of Common Stock, $5.00 par value, outstanding as of August
11, 1995.<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<CAPTION>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks . . . . . . . . . . . $ 17,342,232 $ 18,110,298
Federal Funds sold . . . . . . . . . . . . . 7,146,991 --
Securities available for sale:
U.S. Government obligations . . . . . . . . 11,702,054 16,083,594
U.S. Government agency obligations . . . . 15,995,765 8,911,518
Mortgage-backed securities . . . . . . . . 2,617,207 2,519,763
State and municipal obligations, nontaxable 305,580 --
Other . . . . . . . . . . . . . . . . . . . 4,349,867 3,288,447
Total securities available for sale . . . 34,970,473 30,803,322
Investment securities:
(Market value of $49,695,331, and $58,602,959
at 6/30/95 and 12/31/94, respectively)
U.S. Government agency obligations . . . . -- 7,985,901
Mortgage-backed securities . . . . . . . . 13,402,671 16,260,021
State and municipal obligations, nontaxable 36,038,295 36,792,641
Total investment securities . . . . . . . 49,440,966 61,038,563
Loans . . . . . . . . . . . . . . . . . . . . 219,600,798 203,935,504
Less: Unearned income . . . . . . . . . . . (303,646) (201,331)
Allowance for loan losses . . . . . . (2,905,988) (2,816,172)
Loans, net . . . . . . . . . . . . . . . 216,391,164 200,918,001
Premises and equipment, net . . . . . . . . . 7,864,892 7,247,098
Other assets . . . . . . . . . . . . . . . . 4,439,962 5,931,370
Total assets . . . . . . . . . . . . . . $ 337,596,680 $ 324,048,652
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Noninterest-bearing . . . . . . . . . . . . $ 48,543,007 $ 48,037,213
Interest-bearing . . . . . . . . . . . . . 231,023,589 218,315,321
Total deposits . . . . . . . . . . . . . 279,566,596 266,352,534
Short-term borrowings . . . . . . . . . . . . 15,941,592 17,734,069
Other liabilities . . . . . . . . . . . . . . 2,286,338 2,498,467
Total liabilities . . . . . . . . . . . . 297,794,526 286,585,070
Shareholders' equity:
Common stock - $5 par value; authorized
10,000,000 shares, issued and outstanding,
4,633,641 shares at 6/30/95 and 4,632,250
shares at 12/31/94 . . . . . . . . . . . . 23,168,205 23,161,250
Additional paid-in capital . . . . . . . . . 42,110 672
Unrealized gain on securities available
for sale . . . . . . . . . . . . . . . . . 701,582 96,150
Retained earnings . . . . . . . . . . . . . . 15,890,257 14,205,510
Total shareholders' equity . . . . . . . 39,802,154 37,463,582
Total liabilities and shareholders' equity $337,596,680 $ 324,048,652
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For the Six Months Ended
June 30, June 30,
Interest Income: 1995 1994
<S> <C> <C>
Interest and fees on loans . . . . . . . . . . . . . . . $10,093,403 $ 7,466,719
Federal funds sold . . . . . . . . . . . . . . . . . . . 129,049 78,698
Securities available for sale:
U.S. Government obligations . . . . . . . . . . . . . . 477,721 618,763
U.S. Government agency obligations . . . . . . . . . . 325,874 34,791
Mortgage-backed securities . . . . . . . . . . . . . . 75,913 47,337
State and municipal obligations, nontaxable . . . . . . 1,019 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 69,750 55,089
Investment securities:
U.S. Government obligations . . . . . . . . . . . . . . -- 10,882
U.S. Government agency obligations . . . . . . . . . . 65,406 58,136
Mortgage-backed securities . . . . . . . . . . . . . . 494,555 642,777
State and municipal obligations, nontaxable . . . . . . 997,793 1,121,048
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 15,850 --
Total interest income . . . . . . . . . . . . . . . . 12,746,333 10,134,240
Interest Expense:
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . 520,756 485,247
Money Market . . . . . . . . . . . . . . . . . . . . . 443,145 370,559
Savings and time . . . . . . . . . . . . . . . . . . . 3,522,901 2,350,370
Short-term borrowings . . . . . . . . . . . . . . . . . . 362,491 168,781
Total interest expense . . . . . . . . . . . . . . . 4,849,293 3,374,957
Net interest income . . . . . . . . . . . . . . . . . 7,897,040 6,759,283
Provision for loan losses . . . . . . . . . . . . . . . . 225,000 200,000
Net interest income after provision for loan losses . 7,672,040 6,559,283
Noninterest income:
Trust income . . . . . . . . . . . . . . . . . . . . . . 662,280 718,682
Service charges on deposit accounts . . . . . . . . . . . 737,991 754,673
Insurance and other commissions . . . . . . . . . . . . . 91,352 101,521
Securities available for sale transactions, net . . . . . 6,830 57,698
Investment securities transactions, net . . . . . . . . . 4,298 10,571
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 167,366 178,522
Total noninterest income . . . . . . . . . . . . . . 1,670,117 1,821,667
Noninterest expense:
Salaries and fringe benefits . . . . . . . . . . . . . . 2,688,018 2,648,150
Occupancy and equipment . . . . . . . . . . . . . . . . . 702,220 664,609
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 1,667,797 1,725,763
Total noninterest expense . . . . . . . . . . . . . . 5,058,035 5,038,522
Income before income taxes . . . . . . . . . . . . . 4,284,122 3,342,428
Income taxes . . . . . . . . . . . . . . . . . . . . . . 1,281,000 867,000
Net Income . . . . . . . . . . . . . . . . . . . . . $ 3,003,122 $ 2,475,428
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
EARNINGS PER SHARE DATA
<CAPTION>
For the Six Months Ended
June 30, June 30,
1995 1994
Primary income per share data:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $0.64 $0.53
Average common equivalent shares . . . . . . . . . . . 4,683,834 4,704,980
Income per share data assuming full dilution:
Net income . . . . . . . . . . . . . . . . . . . . . . $0.64 $0.53
Average common equivalent shares . . . . . . . . . . . 4,697,432 4,714,997
Cash dividends declared . . . . . . . . . . . . . . . . . $0.26 $0.18
All per share data has been retroactively adjusted to reflect a stock split
effected in the form of a 33 1/3% stock dividend declared in the fourth quarter of
1994.
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For The Three Months Ended
June 30, June 30,
Interest Income: 1995 1994
<S> <C> <C>
Interest and fees on loans . . . . . . . . . . . . . . . $ 5,154,593 $ 3,945,810
Federal funds sold . . . . . . . . . . . . . . . . . . . 108,601 45,476
Securities available for sale:
U.S. Government obligations . . . . . . . . . . . . . . 221,383 311,318
U.S. Government agency obligations . . . . . . . . . . 186,766 24,384
Mortgage-backed securities . . . . . . . . . . . . . . 40,714 29,905
State and municipal obligations, nontaxable . . . . . . 1,019 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 29,787 23,309
Investment securities:
U.S. Government obligations . . . . . . . . . . . . . . -- --
U.S. Government agency obligations . . . . . . . . . . 21,049 31,916
Mortgage-backed securities . . . . . . . . . . . . . . 232,966 310,016
State and municipal obligations, nontaxable . . . . . . 498,154 556,345
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 15,850 --
Total interest income . . . . . . . . . . . . . . . . 6,510,882 5,278,479
Interest Expense:
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . 265,620 250,181
Money Market . . . . . . . . . . . . . . . . . . . . . 222,483 183,366
Savings and time . . . . . . . . . . . . . . . . . . . 1,934,786 1,196,674
Short-term borrowings . . . . . . . . . . . . . . . . . . 190,424 97,408
Total interest expense . . . . . . . . . . . . . . . 2,613,313 1,727,629
Net interest income . . . . . . . . . . . . . . . . . 3,897,569 3,550,850
Provision for loan losses . . . . . . . . . . . . . . . . 100,000 125,000
Net interest income after provision for loan losses . 3,797,569 3,425,850
Noninterest income:
Trust income . . . . . . . . . . . . . . . . . . . . . . 344,510 329,110
Service charges on deposit accounts . . . . . . . . . . . 371,249 379,188
Insurance and other commissions . . . . . . . . . . . . . 46,410 50,880
Securities available for sale transactions, net . . . . . (19,064) 340,969
Investment securities transactions, net . . . . . . . . . -- 1,360
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 87,999 88,880
Total noninterest income . . . . . . . . . . . . . . 831,104 890,387
Noninterest expense:
Salaries and fringe benefits . . . . . . . . . . . . . . 1,298,281 1,260,128
Occupancy and equipment . . . . . . . . . . . . . . . . . 338,837 331,664
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 906,504 918,766
Total noninterest expense . . . . . . . . . . . . . . 2,543,622 2,510,558
Income before income taxes . . . . . . . . . . . . . 2,085,051 1,805,679
Income taxes . . . . . . . . . . . . . . . . . . . . . . 625,000 491,000
Net Income . . . . . . . . . . . . . . . . . . . . . $ 1,460,051 $ 1,314,679
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
EARNINGS PER SHARE DATA
<CAPTION>
For the Three Months Ended
June 30, June 30,
1995 1994
Primary income per share data:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $0.31 $0.28
Average common equivalent shares . . . . . . . . . . . 4,684,889 4,695,161
Income per share data assuming full dilution:
Net income . . . . . . . . . . . . . . . . . . . . . . $0.31 $0.28
Average common equivalent shares . . . . . . . . . . . 4,693,715 4,702,019
Cash dividends declared . . . . . . . . . . . . . . . . . $0.13 $0.09
All per share data has been retroactively adjusted to reflect a stock split
effected in the form of a 33 1/3% stock dividend declared in the fourth quarter of
1994
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the six months ended June 30, 1995
<CAPTION>
Unrealized
Add'l Gain in
Common Paid-in Retained value of
Stock Capital Earnings securities Total
Balance,
<C> <C> <C> <C> <C> <C>
December 31, 1994 . . . . $ 23,161,250 $ 672 $ 14,205,510 $ 96,150 $ 37,463,582
Net income for the
six months ended
June 30, 1995 . . . . . . -- -- 3,003,122 -- 3,003,122
Cash dividends of $.26
per share . . . . . . . . -- -- (1,203,625) -- (1,203,625)
Purchase and retirement
of common stock . . . . . (120,500) (132,275) (114,750) -- (367,525)
Stock options exercised
and Dividend Reinvestment
Plan stock issued . . . . 127,455 173,713 -- -- 301,168
Unrealized gain on
securities available
for sale . . . . . . . . . -- -- -- 605,432 605,432
Balance,
June 30, 1995 . . . . . . $ 23,168,205 $ 42,110 $ 15,890,257 $ 701,582 $ 39,802,154
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months Ended
June 30, June 30,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 3,003,122 $ 2,475,428
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . 225,000 200,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . 323,245 282,817
Premium amortization and discount accretion, net . . . . (70,067) 57,891
Net gain on investment securities transactions . . . . . (4,298) (10,571)
Net gain on securities available for sale transactions . (6,830) (57,698)
Net loss (gain) on sale of premises and equipment . . . 2,477 (2,843)
Decrease in other assets . . . . . . . . . . . . . . . . 1,104,329 55,180
Decrease in other liabilities . . . . . . . . . . . . . (275,368) (351,586)
Net cash provided by operating activities . . . . . . 4,301,610 2,648,618
Cash flows from investing activities:
Proceeds from sales of investment securities . . . . . . . 1,725,292 3,010,937
Proceeds from sales of securities available for sale . . . 11,033,420 106,188
Proceeds from maturities and issuer calls of
investment securities, net . . . . . . . . . . . . . . . 18,763,888 15,275,100
Proceeds from maturities of securities available for sale 6,111,558 102,433
Purchase of investment securities . . . . . . . . . . . . (8,848,558) (10,923,181)
Purchase of securities available for sale . . . . . . . . (20,281,583) (6,504,211)
Net increase in loans . . . . . . . . . . . . . . . . . . (15,698,163) (10,055,979)
Proceeds from sale of premises and equipment . . . . . . . 8,125 2,843
Purchase of premises and equipment . . . . . . . . . . . . (936,640) (375,564)
Net cash used in investing activities . . . . . . . . (8,122,527) (9,361,434)
Cash flows from financing activities:
Net increase in demand, NOW, Money Market and
savings accounts . . . . . . . . . . . . . . . . . . . . 7,024,686 9,013,547
Net increase (decrease) in certificates of deposit . . . . 6,189,376 (2,412,248)
Net increase (decrease) in securities sold under
repurchase agreements and other short-term borrowings . (1,792,477) 6,108,983
Net increase in advances for taxes and insurance . . . . . 48,239 35,623
Purchase of common stock . . . . . . . . . . . . . . . . . (367,525) (625,788)
Proceeds from issuance of common stock . . . . . . . . . . 301,168 336,339
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (1,203,625) (838,173)
Net cash provided (used) by financing activities . . 10,199,842 11,618,283
Net increase in cash and cash equivalents . . . . . . . . 6,378,925 4,905,467
Cash and cash equivalents at beginning of period . . . . . 18,110,298 12,857,677
Cash and cash equivalents at end of period . . . . . . . . $ 24,489,223 $ 17,763,144
(Continued)<PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<CAPTION>
For the Six Months Ended
June 30, June 30,
1995 1994
Supplemental disclosures of cash flow information:
Cash paid during the year for:
<S> <C> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,636,179 $ 3,382,622
Income taxes . . . . . . . . . . . . . . . . . . . . . . . $ 1,479,771 $ 805,443
Supplemental disclosure of non-cash transactions:
Transfer of loans and premises and equipment to other
real estate owned . . . . . . . . . . . . . . . . . . . -- $ 29,901
Unrealized gains (loss) in value of securities available
for sale (net of tax effect of $387,079 and $(227,997)
for 1995 and 1994, respectively) . . . . . . . . . . . . $ 605,432 $ (356,612)
See accompanying notes to consolidated financial statements.
<PAGE>
</TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARY
NOTES TO INTERIM FINANCIAL STATEMENTS
1. Primary earnings per share and income per share assuming
full dilution are computed based on the weighted average
number of shares outstanding during the period, including
Common Stock equivalent shares applicable to stock
options, assuming the exercise of outstanding stock
options at market value per share.
2. In certain instances, amounts reported in the 1994
financial statements have been reclassified to present
them in the format selected for 1995. Such
reclassifications have no effect on net income or
shareholders' equity as previously reported.
3. The information furnished in this report reflects all
adjustments which are, in the opinion of management,
necessary to present a fair statement of the financial
condition and the results of operations for the interim
period. All such adjustments were of a normal recurring
nature.
4. Effective January 1, 1995 the Corporation adopted
Financial Accounting Standards Board ("Statement 114") No.
114 "Accounting by Creditors for Impairment of a Loan".
This Statement requires that all creditors value all
specifically reviewed loans for which it is probable that
the creditor will be unable to collect all amounts due
(principal and interest) according to the terms of the
loan agreement at either the present value of expected
cash flows discounted at the loan's effective interest
rate, or the fair value of the collateral for certain
collateral dependent loans. At June 30, 1995 the
allowance for loan losses related to loans that were
identified for evaluation in accordance with Statement 114
was determined based on one of the methods discussed
above.
The following table presents changes in the allowance for
loan losses at June 30, 1995:
Beginning Balance $2,816,172
Add:
Provision charged to operations 225,000
3,041,172
Less:
Loan charge-offs 198,985
Less loan recoveries 63,801
Net loan charge-offs 135,184
Ending Balance $2,905,988<PAGE>
At June 30, 1995, the recorded investment in loans that
were considered to be impaired under Statement 114 was $2,613,005
(of which $2,216,906 was on nonaccrual). The related allowance
for loan losses on these loans was $1,056,377. The average
recorded investment in impaired loans for the six months ended
June 30 1995 was $2,634,825. For the six months ended June 30,
1994, the Corporation recognized interest income on impaired
loans of $20,274, none of which was recognized using the cash
method of income recognition.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The consolidated balance sheets of First Charter
Corporation (the "Corporation") represent account balances for
the Corporation and its wholly owned banking subsidiary, First
Charter National Bank (the "Bank").
LIQUIDITY
The Bank's major source of liquidity is its core deposit
base. Liquidity is further provided by maturities in the
investment portfolio, the ability to secure public deposits, the
availability of Federal fund lines at correspondent banks and the
ability to borrow from the Federal Reserve Bank discount window.
In addition to these sources, the Bank is a member of the Federal
Home Loan Bank ("FHLB") System which provides access to FHLB
lending sources. Another source of liquidity is the securities
available for sale portfolio which may be sold in response to
liquidity needs. Management believes the Bank's sources of
liquidity are adequate to meet operating needs and deposit
withdrawal requirements.
CAPITAL RESOURCES
At June 30, 1995, total shareholders' equity was
$39,802,154, or $8.59 per share compared to $37,463,582, or $8.09
per share at December 31, 1994.
The following table represents the required capital
guidelines as issued by the Federal Reserve Bank ("FRB") and the
Corporation's compliance with the standards as of June 30, 1995.
Risk-Based Capital
Leverage Capital Tier 1 Capital Total Capital
Amount % (1) Amount % (2) Amount % (2)
Actual 39,100 11.61 39,100 16.13 42,006 17.33
Required 13,476 4.00 9,698 4.00 19,396 8.00
Excess 25,624 7.61 29,402 12.13 22,610 9.33
(1) Percentage of total adjusted assets. The FRB minimum
leverage ratio requirement is 3% to 5%, depending on the
institution's composite rating as determined by its regulators.
The FRB has not advised the Corporation of any specific
requirements applicable to it.
(2) Percentage of risk-weighted assets.<PAGE>
REGULATORY RECOMMENDATIONS
Management is not presently aware of any current
recommendations to the Corporation or to the Bank by regulatory
authorities which, if they were to be implemented, would have a
material effect on the Corporation's liquidity, capital
resources, or operations.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Net income for the three month period ended June 30, 1995
was $1,460,051, or $0.31 share versus $1,314,679, or $0.28 per
share for the comparable period in 1994 which represents a 11.1%
increase. Net income for the six month period ended June 30,
1995 was $3,003,122, or $0.64 share versus $2,475,428, or $0.53
per share for the comparable period in 1994 which represents a
21.3% increase. The increases are primarily attributable to
increases in net interest income. On an annualized basis, these
results represent a return on average assets of 1.87% versus
1.69% at June 30, 1994 and a return on average equity of 15.38%
versus 13.76%.
Loan demand was strong during the first six months of
1995. As a result, gross loans increased 7.7% to $219,600,798
from $203,935,504 at December 31, 1994. Total deposits increased
5.0% to $279,566,596 from $266,352,534 at December 31, 1994.
Investment securities totaled $49,440,966 at June 30, 1995
for a decrease of approximately $11.6 million from December 31,
1994. The decrease was primarily due to the sale of seasoned
mortgage-backed securities with a greater than 85% paydown,
paydowns in the mortgage backed portfolio, maturities of short-
term U. S. government agency obligations and maturities of
municipal securities. Investment securities had gross
unrealized gains of $1,318,930 and gross unrealized losses of
$1,064,565 at June 30, 1995. Securities available for sale
totaled $34,970,473 at June 30, 1995 for an increase of
approximately $4.2 million. The increase was primarily due to
purchases of U. S. government agency obligations. Proceeds from
sales and maturities in the investment and securities available
for sale portfolios were used to fund the increased loan demand
and to reinvest in additional securities. The carrying value of
securities available for sale was $1,150,132 above their
amortized cost at June 30, 1995 which represents gross unrealized
gains of $1,215,294 and gross unrealized losses of $65,162.
Total assets at June 30, 1995 were $337,596,680 compared
to $324,048,652 at December 31, 1994. Asset growth is
attributable to increases in loan balances.
For the three and six month periods ended June 30, 1995
net interest income before provision for loan losses increased
$346,000 and $1,138,000, respectively, over the comparable
periods in 1994. The increases are attributable to an increase<PAGE>
in the level of interest earning assets, as well as an
improvement in the net interest margin to 5.67% at June 30, 1995
compared to 5.42% at June 30, 1994. The average yield on earning
assets was 8.94% at June 30, 1995 compared to 7.92% at June 30,
1994. The average interest-bearing liabilities increased, and
the average rate paid on interest-bearing liabilities increased
to 4.14% at June 30, 1995 compared to 3.14% at June 30, 1994.
Management continues to assess interest rate risk based on
an earnings simulation model. The Bank's balance sheet is
liability sensitive, meaning that in a given period there will be
more liabilities than assets subject to immediate repricing as
market rates change. Because immediately rate sensitive
interest-bearing liabilities exceed rate sensitive assets, the
earnings position could improve in a declining rate environment
and could deteriorate in a rising rate environment, depending on
the correlation of rate changes in these two categories.
Although rates increased during the periods analyzed, the
earnings position improved because interest income was positively
impacted by the increases in the prime rate of interest from June
30, 1994 to June 30, 1995. Funding costs increased, but not as
quickly or in the same magnitude as the repricing of prime-based
loans. As liabilities are repriced in response to rising rates,
net interest income could decline.
The provision for loan losses for the six months ended
June 30, 1995 was $225,000 compared to $200,000 for the six
months ended June 30, 1994. The increase in the provision was
primarily attributable to the increase in gross loans
outstanding. The allowance as a percentage of gross loans was
1.33% at June 30, 1995 compared to 1.38% at December 31, 1994.
Management continues to perform a monthly analysis of the
allowance utilizing a system for risk grading the portfolio.
Based on this review, management believes the allowance to be
adequate.
Nonperforming assets at June 30, 1995 were $4,058,671 or
1.84% of gross loans and foreclosed properties compared to
$5,062,343 or 2.46% at December 31, 1994. The level of
nonperforming assets is presented in the following table.
June 30, December 31,
1995 1994
Loans:
Nonaccrual loans $2,308,449 $2,033,122
Loans 90 days or more past
due and still accruing 539,268 1,187,593
Foreclosed Property 896,992 1,527,666
Other Real Estate 313,962 313,962
The decrease in foreclosed properties is primarily
attributable to a sale of a commercial real estate property
during the second quarter of 1995. This sale resulted in a
realized gain of approximately $46,000.<PAGE>
Net charge-offs for the six month period ended June 30,
1995 were $135,000 compared to $270,000 for the same period in
1994.
Interest income that would have been recorded on
nonaccrual loans for the six months ended June 30, 1995, had they
performed in accordance with their original terms, amounted to
approximately $118,000. Interest income on nonaccrual loans
included in the results of operations for the six months ended
June 30, 1995 amounted to approximately $12,500.
Noninterest income decreased approximately $59,000 or 6.7%
for the three month period ended June 30, 1995 over the
comparable period in 1994. The major component of this decrease
was lower gains on securities available for sale.
Noninterest income decreased approximately $152,000 or
8.3% for the six month period ended June 30, 1995 over the
comparable period in 1994. The major components of this decrease
were lower trust income due to the absence of one-time estate
fees earned in 1994, lower service charges due to lower
commercial account service charges and lower gains on securities
available for sale.
Noninterest expense increased approximately $33,000 or
1.3% and $20,000 or 0.4% for the three and six month periods
ended June 30, 1995, respectively, over the comparable period in
1994. Salaries and fringe benefits increased primarily due to a
higher level of full-time equivalents in 1995 over the comparable
periods in 1994. Occupancy and equipment increased due to the
initial cost of check imaging software and hardware.
Efficiencies from this new process are expected to be realized in
the latter part of 1995. Decreases have occurred in other
professional fees, advertising, other insurance, foreclosed
properties and other expenses.
Total income tax expense for the three and six month
periods ended June 30, 1995 increased $134,000 and $414,000,
respectively, over the comparable periods in 1994. The increase
is attributable to an increase in income before taxes and an
increase in the effective tax rate. <PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of matters to a Vote of Security Holders.
(a) First Charter Corporation's Annual Meeting of
Shareholders was held on April 25, 1995.
(b) The following directors were elected for three-year
terms expiring in 1997.
Broker
For Withholding Non Votes
J. Knox Hillman, Jr. 3,225,509.455 9,492.000 0.0000
Lawrence M. Kimbrough 3,234,682.455 319.000 0.0000
Robert F. Lowrance 3,225,509.455 9,492.000 0.0000
Robert L. Wall 3,223,934.450 11,067.005 0.0000
James B. Widenhouse 3,225,509.455 9,492.000 0.0000
The following directors' terms of office continued after
the annual meeting:
William R. Black
Jane B. Brown
Grady S. Carpenter
Michael R. Coltrane
J. Roy Davis, Jr.
Branson C. Jones
Duard C. Linn, Jr.
Hugh H. Morrison
T. David Propst
(c) A brief description of the other matters (exclusive of
procedural matters) voted upon at the meeting is set forth
below.
A motion to ratify the adoption of the 1996 First Charter
Corporation Employee Stock Purchase Plan was adopted by a
vote of the majority of the shares of the Corporation's
Common Stock present or represented by proxy and entitled
to vote, as follows:
For: 3,637,551.569
Against: 42,400.372
Abstained: 27,633.727
Broker Non Votes 137,555.000
A motion to ratify the adoption of the First Charter
Corporation Restricted Stock Award Plan was adopted by a
vote of the majority of the shares of the Corporation's
Common Stock present or represented by proxy and entitled
to vote, as follows:
For: 3,546,431.303
Against: 86,119.789
Abstained: 72,115.576
Broker Non Votes 140,155.000<PAGE>
A motion to ratify the action of the Board of Directors
in selection of KPMG Peat Marwick LLP as independent
public accountants for 1995 was adopted by a vote of
the majority of the votes cast with respect to shares
of the Corporation's Common Stock as follows:
For: 3,833,116.642
Against: 466.618
Abstained: 11,557.400
Broker Non Votes 0.000
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
(per Exhibit Table
in item 601 of
Regulation S-K) Description of Exhibits
3.1 Restated Charter of the
Registrant, incorporated
herein by reference to
Exhibit 3.1 of the
Registrant's Annual Report
on Form 10-K for the fiscal
year ended December 31,
1994 (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 fiscal
year ended December 31,
1992 (Commission File No.
0-15829).
11 Statements regarding
computation of per share
earnings.
27 Financial Data Schedules
(b) No reports on Form 8-K were filed this quarter.<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FIRST CHARTER CORPORATION
(Registrant)
Date: August 11, 1995 By \s\ Robert O. Bratton
Robert O. Bratton
Executive Vice President and
Principal Financial and
Accounting Officer<PAGE>
EXHIBIT INDEX
Exhibit No.
(per Exhibit Table
in item 601 of Sequential
Regulation S-K) Description of Exhibits Page Number
11 Statements regarding
computation of per share
earnings.
27 Financial Data Schedules <PAGE>
<TABLE>
FIRST CHARTER CORPORATION Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
For the Six Months Ended
June 30, June 30,
1995 1994
NET INCOME PER SHARE COMPUTED AS FOLLOWS:
PRIMARY:
<S> <C> <C>
1. Net income . . . . . . . . . . . . . . . . . . . . $ 3,003,122 $ 2,475,428
2. Weighted average common shares outstanding . . . . 4,633,094 4,667,808
3. Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
stock during the periods . . . . . . . . . . . . 50,740 37,172
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 4,683,834 4,704,980
5. Net income per share . . . . . . . . . . . . . . . $ 0.64 $ 0.53
(Item 1 Divided by Item 4)
FULLY DILUTED:
1. Net income . . . . . . . . . . . . . . . . . . . . $ 3,003,122 $ 2,475,428
2. Weighted average common shares outstanding . . . . 4,633,094 4,667,808
3. Incremental shares under stock options
computed under the treasury stock method
using the higher of the average or ending
market price of issuer's stock at the end
of the periods . . . . . . . . . . . . . . . . . 64,338 47,189
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 4,697,432 4,714,997
5. Net income per share . . . . . . . . . . . . . . . $ 0.64 $ 0.53
(Item 1 Divided by Item 4)
All per share data has been retroactively adjusted to reflect a stock split effected
in the form of a 33 1/3% stock dividend declared in the fourth quarter of 1994. <PAGE>
</TABLE>
<TABLE>
FIRST CHARTER CORPORATION Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (Continued)
<CAPTION>
For the Three Months Ended
June 30, June 30,
1995 1994
NET INCOME PER SHARE COMPUTED AS FOLLOWS:
PRIMARY:
<S> <C> <C>
1. Net income . . . . . . . . . . . . . . . . . . . . $ 1,460,051 $ 1,314,679
2. Weighted average common shares outstanding . . . . 4,631,764 4,655,232
3. Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
stock during the periods . . . . . . . . . . . . 53,125 39,929
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 4,684,889 4,695,161
5. Net income per share . . . . . . . . . . . . . . . $ 0.31 $ 0.28
(Item 1 Divided by Item 4)
FULLY DILUTED:
1. Net income . . . . . . . . . . . . . . . . . . . . $ 1,460,051 $ 1,314,679
2. Weighted average common shares outstanding . . . . 4,631,764 4,655,232
3. Incremental shares under stock options
computed under the treasury stock method
using the higher of the average or ending
market price of issuer's stock at the end
of the periods . . . . . . . . . . . . . . . . . 61,951 46,787
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 4,693,715 4,702,019
5. Net income per share . . . . . . . . . . . . . . . $ 0.31 $ 0.28
(Item 1 Divided by Item 4)
All per share data has been retroactively adjusted to reflect a stock split effected
in the form of a 33 1/3% stock dividend declared in the fourth quarter of 1994. <PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 17342
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7147
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34970
<INVESTMENTS-CARRYING> 49441
<INVESTMENTS-MARKET> 49695
<LOANS> 219297
<ALLOWANCE> 2906
<TOTAL-ASSETS> 337597
<DEPOSITS> 279567
<SHORT-TERM> 15942
<LIABILITIES-OTHER> 2286
<LONG-TERM> 0
<COMMON> 23168
0
0
<OTHER-SE> 16634
<TOTAL-LIABILITIES-AND-EQUITY> 337597
<INTEREST-LOAN> 10093
<INTEREST-INVEST> 2637
<INTEREST-OTHER> 16
<INTEREST-TOTAL> 12746
<INTEREST-DEPOSIT> 4487
<INTEREST-EXPENSE> 362
<INTEREST-INCOME-NET> 7897
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 5058
<INCOME-PRETAX> 4284
<INCOME-PRE-EXTRAORDINARY> 4284
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3003
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
<YIELD-ACTUAL> 5.67
<LOANS-NON> 2308
<LOANS-PAST> 539
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2816
<CHARGE-OFFS> 199
<RECOVERIES> 64
<ALLOWANCE-CLOSE> 2906
<ALLOWANCE-DOMESTIC> 2906
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
