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, 1996
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.
6,303,230 shares of Common Stock, $5.00 par value, outstanding as of August
13, 1996.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
Unaudited
<S> <C> <C>
Cash and due from banks . . . . . . . . . . . $ 28,446,793 $ 30,642,072
Federal funds sold . . . . . . . . . . . . . 3,895,368 --
Interest bearing time deposits . . . . . . . 500,000 3,000,000
Securities available for sale:
U.S. Government obligations . . . . . . . . 24,846,390 23,363,185
U.S. Government agency obligations . . . . 17,320,345 26,523,683
Mortgage-backed securities . . . . . . . . 15,851,210 18,289,995
State and municipal obligations, nontaxable 65,492,845 59,052,874
Other . . . . . . . . . . . . . . . . . . . 4,705,071 5,128,031
Total securities available for sale . . . 128,215,861 132,357,768
Loans . . . . . . . . . . . . . . . . . . . . 350,065,175 333,038,730
Less: Unearned income . . . . . . . . . . . (220,868) (295,701)
Allowance for loan losses . . . . . . (5,098,832) (4,855,540)
Loans, net . . . . . . . . . . . . . . . 344,745,475 327,887,489
Premises and equipment, net . . . . . . . . . 10,304,826 9,833,489
Other assets . . . . . . . . . . . . . . . . 7,321,950 5,674,487
Total assets . . . . . . . . . . . . . . $ 523,430,273 $ 509,395,305
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits, domestic:
Demand . . . . . . . . . . . . . . . . . . $ 74,606,913 $ 72,285,910
NOW accounts . . . . . . . . . . . . . . . 66,578,877 66,813,791
Time . . . . . . . . . . . . . . . . . . . 297,291,217 275,956,530
Total deposits . . . . . . . . . . . . . 438,477,007 415,056,231
Other borrowings . . . . . . . . . . . . . . 25,439,495 35,262,202
Other liabilities . . . . . . . . . . . . . . 4,584,171 5,652,799
Total liabilities . . . . . . . . . . . . 468,500,673 455,971,232
Shareholders' equity:
Common stock - $5 par value; authorized
10,000,000 shares; issued and outstanding
6,286,778 shares at 6/30/96 and 6,236,014
shares at 12/31/95 . . . . . . . . . . . . 31,433,890 31,180,070
Additional paid-in capital . . . . . . . . . 438,014 --
Unrealized gain on securities available
for sale . . . . . . . . . . . . . . . . . 10,790 1,666,036
Retained earnings . . . . . . . . . . . . . . 23,046,906 20,577,967
Total shareholders' equity . . . . . . . 54,929,600 53,424,073
Total liabilities and shareholders' equity $523,430,273 $ 509,395,305<PAGE>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<CAPTION>
For Six Months Ended
June 30, June 30,
Interest Income: 1996 1995
<S> <C> <C>
Interest and fees on loans . . . . . . . . . . . . . . . $ 15,925,205 $14,038,252
Federal funds sold . . . . . . . . . . . . . . . . . . . 75,708 180,871
Securities available for sale:
U.S. Government obligations . . . . . . . . . . . . . . 797,174 526,505
U.S. Government agency obligations . . . . . . . . . . 791,066 395,087
Mortgage-backed securities . . . . . . . . . . . . . . 441,878 164,835
State and municipal obligations, nontaxable . . . . . . 1,608,657 1,019
Other . . . . . . . . . . . . . . . . . . . . . . . . . 124,128 83,562
Investment securities:
U.S. Government obligations . . . . . . . . . . . . . . -- 177,923
U.S. Government agency obligations . . . . . . . . . . -- 307,883
Mortgage-backed securities . . . . . . . . . . . . . . -- 498,328
State and municipal obligations, nontaxable . . . . . . -- 1,218,311
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 179,397 168,513
Total interest income . . . . . . . . . . . . . . . . 19,943,213 17,761,089
Interest Expense:
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . 651,669 635,399
Money Market . . . . . . . . . . . . . . . . . . . . . 566,998 612,496
Savings and Time . . . . . . . . . . . . . . . . . . . 6,681,677 5,297,828
Other borrowings . . . . . . . . . . . . . . . . . . . . 656,158 512,824
Total interest expense . . . . . . . . . . . . . . . 8,556,502 7,058,547
Net interest income . . . . . . . . . . . . . . . . . 11,386,711 10,702,542
Provision for loan losses . . . . . . . . . . . . . . . . 620,000 480,000
Net interest income after provision for loan losses . 10,766,711 10,222,542
Noninterest income:
Trust income . . . . . . . . . . . . . . . . . . . . . . 714,290 662,280
Service charges on deposit accounts . . . . . . . . . . . 1,316,505 1,174,744
Credit card income . . . . . . . . . . . . . . . . . . . 207,722 15,380
Insurance and other commissions . . . . . . . . . . . . . 93,856 108,630
Securities available for sale transactions, net . . . . . 144,893 (4,991)
Investment securities transactions, net . . . . . . . . . -- 4,298
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 591,334 401,808
Total noninterest income . . . . . . . . . . . . . . 3,068,600 2,362,149
Noninterest expense:
Salaries and fringe benefits . . . . . . . . . . . . . . 4,209,226 3,817,750
Occupancy and equipment . . . . . . . . . . . . . . . . . 1,123,675 980,815
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 2,237,967 2,402,800
Total noninterest expense . . . . . . . . . . . . . . 7,570,868 7,201,365
Income before income taxes . . . . . . . . . . . . . 6,264,443 5,383,326
Income taxes . . . . . . . . . . . . . . . . . . . . . . 1,912,000 1,604,000
Net Income . . . . . . . . . . . . . . . . . . . . . $ 4,352,443 $3,779,326
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES<PAGE>
EARNINGS PER SHARE DATA (Unaudited)
<CAPTION>
For Six Months Ended
June 30, June 30,
1996 1995
Primary income per share data:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $0.69 $0.60
Average common equivalent shares . . . . . . . . . . . 6,315,744 6,273,206
Income per share data assuming full dilution:
Net income . . . . . . . . . . . . . . . . . . . . . . $0.69 $0.60
Average common equivalent shares . . . . . . . . . . . 6,315,744 6,286,804
Cash dividends declared . . . . . . . . . . . . . . . . . $0.30 $0.26
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<CAPTION>
For Three Months Ended
June 30, June 30,
Interest Income: 1996 1995
<S> <C> <C>
Interest and fees on loans . . . . . . . . . . . . . . . $8,012,418 $7,170,327
Federal funds sold . . . . . . . . . . . . . . . . . . . 62,933 145,283
Securities available for sale:
U.S. Government obligations . . . . . . . . . . . . . . 412,621 240,387
U.S. Government agency obligations . . . . . . . . . . 345,914 219,280
Mortgage-backed securities . . . . . . . . . . . . . . 209,555 83,660
State and municipal obligations, nontaxable . . . . . . 826,366 1,019
Other . . . . . . . . . . . . . . . . . . . . . . . . . 56,135 37,045
Investment securities:
U.S. Government obligations . . . . . . . . . . . . . . -- 96,473
U.S. Government agency obligations . . . . . . . . . . -- 164,606
Mortgage-backed securities . . . . . . . . . . . . . . -- 236,739
State and municipal obligations, nontaxable . . . . . . -- 608,337
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 99,874 105,812
Total interest income . . . . . . . . . . . . . . . . 10,025,816 9,108,968
Interest Expense:
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . 330,995 324,256
Money Market . . . . . . . . . . . . . . . . . . . . . 284,186 306,662
Savings and Time . . . . . . . . . . . . . . . . . . . 3,361,183 2,899,786
Other borrowings . . . . . . . . . . . . . . . . . . . . 319,499 263,821
Total interest expense . . . . . . . . . . . . . . . 4,295,863 3,794,525
Net interest income . . . . . . . . . . . . . . . . . 5,729,953 5,314,443
Provision for loan losses . . . . . . . . . . . . . . . . 300,000 215,000
Net interest income after provision for loan losses . 5,429,953 5,099,443
Noninterest income:
Trust income . . . . . . . . . . . . . . . . . . . . . . 369,720 344,510
Service charges on deposit accounts . . . . . . . . . . . 686,896 591,968
Credit card income . . . . . . . . . . . . . . . . . . . 128,046 10,413
Insurance and other commissions . . . . . . . . . . . . . 45,912 54,087
Securities available for sale transactions, net . . . . . 141,302 (33,602)
Investment securities transactions, net . . . . . . . . . -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 320,981 233,218
Total noninterest income . . . . . . . . . . . . . . 1,692,857 1,200,594
Noninterest expense:
Salaries and fringe benefits . . . . . . . . . . . . . . 2,158,053 1,855,220
Occupancy and equipment . . . . . . . . . . . . . . . . . 596,152 477,707
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 1,199,946 1,292,694
Total noninterest expense . . . . . . . . . . . . . . 3,954,151 3,625,621
Income before income taxes . . . . . . . . . . . . . 3,168,659 2,674,416
Income taxes . . . . . . . . . . . . . . . . . . . . . . 981,500 796,900
Net Income . . . . . . . . . . . . . . . . . . . . . $2,187,159 $1,877,516 <PAGE>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES
EARNINGS PER SHARE DATA (Unaudited)
<CAPTION>
For Three Months Ended
June 30, June 30,
1996 1995
Primary income per share data:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $0.35 $0.30
Average common equivalent shares . . . . . . . . . . . 6,321,777 6,276,312
Income per share data assuming full dilution:
Net income . . . . . . . . . . . . . . . . . . . . . . $0.35 $0.30
Average common equivalent shares . . . . . . . . . . . 6,321,777 6,285,297
Cash dividends declared . . . . . . . . . . . . . . . . . $0.15 $0.13
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)
For The Six Months Ended June 30, 1996
<CAPTION>
Unrealized
Gains
(Losses)
on
Add'l Securities
Common Paid-in Retained Available
Stock Capital Earnings for Sale Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995... $31,180,070 $ -- $20,577,967 $ 1,666,036 $53,424,073
Net income for the
six months ended
June 30, 1996............... -- -- 4,352,443 -- 4,352,443
Cash dividends of $.30
per share................... -- -- (1,883,303) -- (1,883,303)
Purchase and retirement
of 3,140 shares of
common stock................ (15,700) (45,866) -- -- (61,566)
Stock options exercised
and Dividend Reinvestment
Plan stock issued totaling
53,904 shares............... 269,520 483,880 (201) -- 753,199
Unrealized loss on
securities available
for sale.................... -- -- -- (1,655,246) (1,655,246)
Balance, June 30, 1996....... $31,433,890 $438,014 $23,046,906 $ 10,790 $54,929,600
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
For Six Months Ended
June 30,1996 June 30,1995
Cash flows from operating activities:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 4,352,443 $ 3,779,326
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . 620,000 480,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . 523,864 426,377
Premium amortization and discount accretion, net . . . . 17,884 (132,828)
Net gain on investment securities transactions . . . . . -- 7,523
Net gain on securities available for sale transactions . (141,302) (5,563)
Net loss on sale of premises and equipment . . . . . . . -- 2,477
Origination of mortgage loans held for sale . . . . . . (10,409,200) (9,694,438)
Proceeds from sale of mortgage loans available for sale . 10,150,693 8,468,088
Decrease in other assets . . . . . . . . . . . . . . . . 8,242 711,782
Decrease in other liabilities . . . . . . . . . . . . . (1,027,916) (1,375,869)
Net cash provided by operating activities . . . . . . 4,094,708 2,666,875
Cash flows from investing activities:
Proceeds from maturities of interest bearing time deposits 2,500,000 1,000,000
Proceeds from sales of investment securities . . . . . . . -- 1,725,292
Proceeds from sales of securities available for sale . . . 5,925,894 12,801,568
Proceeds from maturities and issuer calls of
investment securities, net . . . . . . . . . . . . . . . -- 23,315,528
Proceeds from maturities of securities available for sale . 14,566,283 6,331,333
Purchase of interest bearing time deposits . . . . . . . . -- (2,000,000)
Purchase of investment securities . . . . . . . . . . . . -- (18,304,100)
Purchase of securities available for sale . . . . . . . . (18,939,243) (21,260,177)
Net increase in loans . . . . . . . . . . . . . . . . . . (17,343,179) (16,921,483)
Proceeds from sales of premises and equipment . . . . . . -- 8,125
Purchase of premises and equipment . . . . . . . . . . . . (1,450,193) (1,015,413)
Net cash used in investing activities . . . . . . . . . (14,740,438) (14,319,327)
Cash flows from financing activities:
Net increase in demand, NOW, money market and
savings accounts . . . . . . . . . . . . . . . . . . . . 4,896,584 9,238,452
Net increase in certificates of deposit . . . . . . . . . 18,524,192 14,365,371
Net decrease in other borrowings . . . . . . . . . . . . . (9,822,707) (1,925,366)
Net increase (decrease) in advances for taxes and insurance (60,580) 48,239
Purchase of common stock . . . . . . . . . . . . . . . . . (61,566) (367,525)
Proceeds from issuance of common stock . . . . . . . . . . 753,199 301,168
Pre-merger transactions of pooled bank . . . . . . . . . . -- 31,543
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (1,883,303) (1,203,625)
Net cash provided by financing activities . . . . . . 12,345,819 20,488,257
Net increase in cash and cash equivalents . . . . . . . . 1,700,089 8,835,805
Cash and cash equivalents at beginning of period . . . . . 30,642,072 26,500,086
Cash and cash equivalents at end of period . . . . . . . . $ 32,342,161 $ 35,335,891
(Continued)<PAGE>
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
<CAPTION>
For Six Months Ended
June 30,1996 June 30, 1995
Supplemental disclosures of cash flow information:
Cash paid during the year for:
<S> <C> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,242,500 $ 6,839,272
Income taxes . . . . . . . . . . . . . . . . . . . . . . . $ 1,726,500 $ 1,877,771
Supplemental disclosure of non-cash transactions:
Transfer of loans, premises and equipment to other
real estate owned . . . . . . . . . . . . . . . . . . . . $ 582,076 $ --
Unrealized gains (loss) in value of securities available
for sale (net of tax effect of ($1,057,145) and $495,311
for 6/30/96 and 6/30/95, respectively) . . . . . . . . . . $ (1,655,246) $ 923,762
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FIRST CHARTER CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS (Unaudited)
1. All financial data has been adjusted to reflect the
acquisition of Bank of Union in December 1995 which was
accounted for as a pooling of interests.
2 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.
3. In certain instances, amounts reported in the 1995
financial statements have been reclassified to present
them in the format selected for 1996. Such
reclassifications have no effect on net income or
shareholders' equity as previously reported.
4. The information furnished in this report reflects all
adjustments which are, in the opinion of management,
necessary to present a fair statement of the financial
condition and the results of operations for the interim
periods. All such adjustments were of a normal recurring
nature.
<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 subsidiaries, First
Charter National Bank (the "FCNB") and Bank of Union ("Union").
LIQUIDITY
FCNB and Union (the "Banks") derive the major source of
their liquidity from their core deposit base. Liquidity is
further provided by maturities in the investment portfolios, 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 Banks are members 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
portfolios which may be sold in response to liquidity needs.
Management believes the Banks' sources of liquidity are adequate
to meet operating needs and deposit withdrawal requirements.
CAPITAL RESOURCES
At June 30, 1996, total shareholders' equity was
$54,929,600, or $8.74 per share compared to $53,424,073, or $8.57
per share at December 31, 1995.
At June 30, 1996, the Corporation and the Banks were in
compliance with all existing capital requirements. The
Corporation's capital requirements are summarized in the table
below:
Risk-Based Capital
Leverage Capital Tier 1 Capital Total Capital
Amount %(1) Amount %(2) Amount %(2)
(Dollars in thousands)
Actual $ 54,299 10.38% $54,299 14.22% $59,072 15.47%
Required 20,932 4.00 15,273 4.00 30,547 8.00
Excess 33,367 6.38 39,026 10.22 28,525 7.47
(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 Banks 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, 1996
was $2,187,159, or $0.35 share versus $1,877,516, or $0.30 per
share for the comparable period in 1995 which represents a 16.5%
increase. Net income for the six month period ended June 30,
1996 was $4,352,443, or $0.69 share versus $3,779,326, or $0.60
per share for the comparable period in 1995 which represents a
15.2% increase. The increases are primarily attributable to
increases in net interest income and noninterest income. On an
annualized basis, year to date results represent a return on
average assets of 1.70% versus 1.69% and a return on average
equity of 15.82% versus 15.42%, for the periods ended June 30,
1996 and June 30, 1995, respectively.
Total assets at June 30, 1996 were $523,430,273 compared
to $509,395,305 at December 31, 1995. Loan demand was strong
during the first six months of 1996. As a result, gross loans
increased 5.1% to $350,065,175 from $333,038,730 at December 31,
1995. Total deposits increased 5.6% to $438,477,007 from
$415,056,231 at December 31, 1995. During the first six months
of 1996, certificates of deposits increased primarily due to an
addition of $12.0 million public deposits with various maturities
occurring in the third and fourth quarters of 1996. Additionally,
Management does not anticipate that these certificates will be
renewed upon maturity.
Securities available for sale totaled $128,215,861 at June
30, 1996 for a decrease of approximately $4.1 million from
December 31, 1995. The decrease was primarily due to a pre-tax
reduction of unrealized gains of approximately $2.7 million,
resulting from an overall upward shift in the treasury yield
curve during the latter part of the first quarter of 1996.
Proceeds from sales, maturities and paydowns in the securities
available for sale portfolio were used to fund increased loan
demand and to reinvest in additional securities. The carrying
value of securities available for sale was $19,327 above their
amortized cost at June 30, 1996 which represents gross unrealized
gains of $2,541,593 and gross unrealized losses of $2,522,266.
For the three and six month periods ended June 30, 1996,
net interest income before provision for loan losses increased
$415,510 and $684,169, respectively, over the comparable periods
in 1995. The increase is primarily attributable to an increase
in the level of interest earning assets, which was partially
offset by escalating interest expense (both volume and rate.)
The net interest margin declined to 5.09% year to date at June
<PAGE>
30, 1996 from 5.47% for the same period in 1995. The average
yield on earning assets decreased to 8.66% at June 30, 1996
compared from 8.89% at June 30, 1995, and the average rate paid
on interest-bearing liabilities increased to 4.44% at June 30,
1996 compared to 4.28% at June 30, 1995.
Management continues to assess interest rate risk based on
an earnings simulation model. The Corporation'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 immediately 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.
The provision for loan losses for the three and six months
ended June 30, 1996 was $300,000 and $620,000, respectively,
compared to $215,000 and $480,000, for the three and six months
ended June 30, 1995, respectively. The increases in the
provision for the three and six months ended June 30, 1996 were
attributable to the increase in gross loans outstanding and net
charge-offs of approximately $186,000 and $377,000, respectively,
compared to charge-offs of approximately $108,000 and $158,000
for the same periods of 1995. At June 30, 1996 and December 31,
1995, the allowance for loan losses as a percentage of gross
loans remained unchanged at 1.46%. 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. However, if credit
quality deteriorates, additional provisions will be made to
allowance for loan losses.
The following table presents changes in the allowance for loan
losses at June 30, 1996:
Beginning Balance $4,855,540
Add:
Provision charged to operations 620,000
5,475,540
Less:
Loan charge-offs 577,780
Less loan recoveries 201,072
Net loan charge-offs 376,708
Ending Balance $5,098,832
At June 30, 1996, the recorded investment in loans that
were considered to be impaired under the Financial Accounting
Standards Board (FASB) Standard No. 114 and No. 118 was
$1,866,334 (of which $1,511,596 was on nonaccrual). The related
allowance for loan losses on these loans was $821,243. There is
a specific allocation of the allowance for loan loss for each
<PAGE>
impaired loan. The average recorded investment in impaired loans
for the six months ended June 30, 1996 was $2,135,863. For the
six months ended June 30, 1996, the Corporation recognized
interest income on impaired loans of $17,128, none of which was
recognized using the cash method of income recognition.
Nonperforming assets at June 30, 1996 were $2,289,303 or
0.7% of gross loans, foreclosed properties and other real estate
owned compared to $2,890,461 or 0.9% at December 31, 1995. The
level of nonperforming assets is presented in the following
table.
June 30, December 31,
1996 1995
Loans:
Nonaccrual loans $1,577,791 $2,287,210
Restructured loan -- 300,000
Loans 90 days or more past
due and still accruing 205,312 242,001
Foreclosed Property 71,700 61,250
Other Real Estate Owned 434,500 --
During the second quarter of 1996, other real estate owned
increased due to the reclassification of land originally
purchased for a branch location. Nonaccrual loans and
restructured loans decreased during this period primarily due to
loan payoffs.
Interest income that would have been recorded on
nonaccrual loans for the six months ended June 30, 1996, had they
performed in accordance with their original terms, amounted to
approximately $94,000. Interest income on nonaccrual loans
included in the results of operations for the six months ended
June 30, 1996 amounted to approximately $1,000.
Noninterest income for the three and six month periods
increased approximately $492,000 or 41.0% and $706,000 or 29.9%,
respectively, over the comparable periods in 1995. The major
components of this increase were higher credit card income due to
increased volumes and the conversion of FCNB merchant card
holders from a third party card provider, higher securities gains
due to the sale of equity securities held by the Corporation and
higher mortgage loan income due to increased loan originations.
Noninterest expense for the three and six month periods
increased approximately $329,000 or 9.1% and $370,000 or 5.1%,
respectively, over the comparable periods in 1995. The increase
is primarily attributable to higher salaries and fringe benefits
due to normal salary adjustments and a greater number of full-
time equivalents. Occupancy and equipment increased due to
additional technology added and the opening of a full service
branch. Additional increases were incurred in advertising, data
processing, postage, supplies and telephone expenses. These
increases were offset by a reduction of FDIC insurance premiums
to the current level of $500 per quarter for each Bank, effective
January 1, 1996.
<PAGE>
Total income tax expense for the three and six month
periods ended June 30, 1996 increased $184,600 and $308,000,
respectively over the comparable periods in 1996. The increase
is attributable to an increase in taxable income and a slight
increase in the effective tax rate.
ACCOUNTING MATTERS
On June 28, 1996, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
125, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities (Statement). This Statement
provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial-components
approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured
borrowings.
Statement No. 125 is effective for transfers and servicing
of financial assets and extinguishments of liabilities occurring
after December 31, 1996, and is to be applied prospectively.
Earlier or retroactive application is not permitted.
The periodic effect on net income of the Corporation, if
any, has not been determined.
<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 May 7, 1996.
(b) The following directors were elected for three-
year terms expiring in 1999.
Broker
For Withholding Non-Votes
William R. Black 4,482,352.457 8,825.000 86,022.000
Grady S. Carpenter 4,482,594.873 8,582.584 86,022.000
H. Clark Goodwin 4,491,152.457 25.000 86,022.000
Frank H. Hawfield 4,488,333.457 2,844.000 86,022.000
T. David Propst 4,490,288.457 889.000 86,022.000
For a two year term expiring in 1998:
Broker
For Withholding Non-Votes
James B. Fincher 4,482,958.873 8,218.584 86,022.000
For a one year term expiring in 1997:
Broker
For Withholding Non-Votes
Jerry E. McGee 4,490,892.873 284.584 86,022.000
The following directors' terms of office continued after the
annual meeting:
Jane B. Brown
Michael R. Coltrane
J. Roy Davis, Jr.
J. Knox Hillman
Branson C. Jones
Lawrence M. Kimbrough
Robert F. Lowrance
Hugh H. Morrison
Robert L. Wall
James B. Widenhouse
A brief description of the other matters (exclusive of
procedural matters) voted upon at the meeting is set forth below.
A motion to approve the amendment of the First Charter
Comprehensive Stock Option Plan to increase the aggregate number
of shares authorized for issuance thereunder from 240,000 to
400,000 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:
<PAGE>
For: 4,572,041.011
Against: 490,197.037
Abstained: 41,106.014
Broker Non Votes: 86,022.000
A motion to ratify the action of the Board of Directors in
selection of KPMG Peat Marwick LLP as independent public
accountants for 1996 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: 5,064,623.227
Against: 13,853.748
Abstained: 24,867.087
Broker Non Votes: 86,022.000
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,
1995 (Commission File No.
0-15829).
11 Statements regarding
computation of per share
earnings.
27 Financial Data Schedules<PAGE>
(b) Reports on Form 8-K
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 13, 1996 By: \s\ Robert O. Bratton
Robert O. Bratton
Executive Vice President &
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
<TABLE>
FIRST CHARTER CORPORATION Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (Unaudited)
<CAPTION>
Six Months Ended
June 30, June 30,
1996 1995
NET INCOME PER SHARE COMPUTED AS FOLLOWS:
PRIMARY:
<S> <C> <C>
1. Net income . . . . . . . . . . . . . . . . . . . . $ 4,352,443 $ 3,779,326
2. Weighted average common shares outstanding . . . . 6,274,469 6,220,747
3. Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
stock during the periods . . . . . . . . . . . . 41,276 52,459
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 6,315,744 6,273,206
5. Net income per share . . . . . . . . . . . . . . . $ 0.69 $ 0.60
(Item 1 Divided by Item 4)
FULLY DILUTED:
1. Net income . . . . . . . . . . . . . . . . . . . . $ 4,352,443 $ 3,779,326
2. Weighted average common shares outstanding . . . . 6,274,469 6,220,700
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 . . . . . . . . . . . . . . . . . 41,276 66,104
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 6,315,744 6,286,804
5. Net income per share . . . . . . . . . . . . . . . $ 0.69 $ 0.60
(Item 1 Divided by Item 4)
</TABLE>
<PAGE>
<TABLE>
FIRST CHARTER CORPORATION Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (Unaudited)
<CAPTION>
Three Months Ended
June 30, June 30,
1996 1995
NET INCOME PER SHARE COMPUTED AS FOLLOWS:
PRIMARY:
<S> <C> <C>
1. Net income . . . . . . . . . . . . . . . . . . . . $ 2,187,159 $ 1,877,516
2. Weighted average common shares outstanding . . . . 6,282,928 6,220,717
3. Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
stock during the periods . . . . . . . . . . . . 38,849 55,595
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 6,321,777 6,276,312
5. Net income per share . . . . . . . . . . . . . . . $ 0.35 $ 0.30
(Item 1 Divided by Item 4)
FULLY DILUTED:
1. Net income . . . . . . . . . . . . . . . . . . . . $ 2,187,159 $ 1,877,516
2. Weighted average common shares outstanding . . . . 6,282,928 6,220,831
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 . . . . . . . . . . . . . . . . . 38,849 64,466
4. Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . 6,321,777 6,285,297
5. Net income per share . . . . . . . . . . . . . . . $ 0.35 $ 0.30
(Item 1 Divided by Item 4)
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 28447
<INT-BEARING-DEPOSITS> 500
<FED-FUNDS-SOLD> 3895
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 128216
<INVESTMENTS-CARRYING> 128216
<INVESTMENTS-MARKET> 128216
<LOANS> 349844
<ALLOWANCE> 5099
<TOTAL-ASSETS> 523430
<DEPOSITS> 438477
<SHORT-TERM> 21905
<LIABILITIES-OTHER> 4584
<LONG-TERM> 3534
<COMMON> 31434
0
0
<OTHER-SE> 23496
<TOTAL-LIABILITIES-AND-EQUITY> 523430
<INTEREST-LOAN> 15925
<INTEREST-INVEST> 3839
<INTEREST-OTHER> 179
<INTEREST-TOTAL> 19943
<INTEREST-DEPOSIT> 7900
<INTEREST-EXPENSE> 656
<INTEREST-INCOME-NET> 11387
<LOAN-LOSSES> 620
<SECURITIES-GAINS> 145
<EXPENSE-OTHER> 7571
<INCOME-PRETAX> 6264
<INCOME-PRE-EXTRAORDINARY> 6264
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4352
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
<YIELD-ACTUAL> 5.08
<LOANS-NON> 1578
<LOANS-PAST> 205
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4856
<CHARGE-OFFS> 578
<RECOVERIES> 201
<ALLOWANCE-CLOSE> 5099
<ALLOWANCE-DOMESTIC> 5099
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
