<PAGE> 1
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 March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-15829
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FIRST CHARTER CORPORATION
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(Exact name of registrant as specified in its charter)
North Carolina 56-1355866
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
22 Union Street North, Concord, North Carolina 28025
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(Address of principal executive offices) (Zip Code)
(704) 786-3300
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(Registrant's telephone number, including area code)
N/A
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(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.
31,101,668 shares of Common Stock, no par value, outstanding as of May
12, 2000.
<PAGE> 2
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
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(Dollars in thousands) (Unaudited)
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<S> <C> <C>
ASSETS:
Cash and due from banks .................................................. $ 45,024 $ 59,967
Federal funds sold ....................................................... 624 665
Interest bearing bank deposits ........................................... 2,842 1,995
-----------------------------
Cash and cash equivalents ........................................... 48,490 62,627
Securities available for sale (cost of $348,137 at March 31, 2000 and
$349,124 at December 31, 1999) ...................................... 341,405 342,136
Loans .................................................................... 1,497,996 1,426,495
Less: Unearned income ............................................... (164) (203)
Allowance for loan losses ..................................... (18,114) (17,339)
-----------------------------
Loans, net .......................................................... 1,479,718 1,408,953
-----------------------------
Premises and equipment, net .............................................. 49,054 43,592
Other assets ............................................................. 44,331 37,009
-----------------------------
Total assets .................................................... $ 1,962,998 $ 1,894,317
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits, domestic:
Noninterest bearing demand ...................................... $ 141,829 $ 130,613
Interest bearing ................................................ 1,039,566 1,018,899
-----------------------------
Total deposits ......................................... 1,181,395 1,149,512
Other borrowings ......................................................... 522,348 491,976
Other liabilities ........................................................ 25,917 25,117
-----------------------------
Total liabilities ............................................... 1,729,660 1,666,605
-----------------------------
Shareholders' equity:
Common stock - no par value; authorized 50,000,000 shares,
issued and outstanding 17,704,811 shares at 3/31/00 and
17,571,729 shares at 12/31/99 ..................................... 102,092 99,905
Retained earnings ........................................................ 135,335 132,053
Accumulated other comprehensive income (loss):
Unrealized loss on securities available for sale, net ............. (4,089) (4,246)
-----------------------------
Total shareholders' equity ...................................... 233,338 227,712
-----------------------------
Total liabilities and shareholders' equity ...................... $ 1,962,998 $ 1,894,317
=============================
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 3
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
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MARCH 31, March 31,
(Dollars in thousands, except share and per share data) 2000 1999
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<S> <C> <C>
Interest income:
Loans ............................................................ $ 30,781 $ 29,795
Federal funds sold ............................................... 12 102
Interest bearing bank deposits ................................... 36 137
Securities available for sale .................................... 5,331 4,733
-----------------------------
Total interest income ...................................... 36,160 34,767
-----------------------------
Interest expense:
Deposits ......................................................... 11,423 11,289
Federal funds purchased and securities
sold under agreements to repurchase ........................ 852 1,219
Federal Home Loan Bank and other borrowings ...................... 6,192 5,029
-----------------------------
Total interest expense ................................... 18,467 17,537
-----------------------------
Net interest income .......................... 17,693 17,230
Provision for loan losses ................................................ 1,075 975
-----------------------------
Net interest income after provision for loan losses .............. 16,618 16,255
Noninterest income:
Trust income ..................................................... 615 535
Service charges on deposit accounts .............................. 1,512 1,038
Insurance and other commissions .................................. 1,391 1,057
Securities available for sale transactions, net .................. 174 344
Other ............................................................ 875 807
-----------------------------
Total noninterest income ................................. 4,567 3,781
-----------------------------
Noninterest expense:
Salaries and fringe benefits ..................................... 6,570 5,720
Occupancy and equipment .......................................... 2,046 1,729
Other ............................................................ 3,356 3,450
-----------------------------
Total noninterest expense ................................ 11,972 10,899
-----------------------------
Income before income taxes ................... 9,213 9,137
Income taxes ............................................................. 2,921 2,964
-----------------------------
Net income ............................................................... $ 6,292 $ 6,173
=============================
Net income per share:
Basic .................................................... $ 0.36 $ 0.33
Diluted .................................................. $ 0.36 $ 0.33
Weighted average shares:
Basic .................................................... 17,687,753 18,488,751
Diluted .................................................. 17,706,150 18,532,657
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 4
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Accumulated
Common Stock Other
-------------------- Retained Comprehensive
(Dollars in thousands) Shares Amount Earnings Income (Loss) Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 ................ 18,442,202 $121,416 $ 118,078 $ 6,478 $ 245,972
Comprehensive income:
Net income through March 31, 1999 ..... -- -- 6,173 -- 6,173
Unrealized loss on securities available
for sale, net ..................... -- -- -- (1,984) (1,984)
---------
Total comprehensive income... 4,189
Cash dividends ............................ -- -- (3,117) -- (3,117)
Stock options exercised ................... 45,582 438 -- -- 438
Shares issued in connection with business
acquisition ....................... 68,551 1,273 -- -- 1,273
-------------------------------------------------------------
Balance, March 31, 1999 ................... 18,556,335 $123,127 $ 121,134 $ 4,494 $ 248,755
=============================================================
Balance, December 31, 1999 ................ 17,571,729 $ 99,905 $ 132,053 $ (4,246) $ 227,712
Comprehensive income:
Net income through March 31, 2000 ..... -- -- 6,292 -- 6,292
Unrealized gain on securities
available for sale, net ........... -- -- -- 157 157
---------
Total comprehensive income... 6,449
Cash dividends ............................ -- -- (3,010) -- (3,010)
Stock options exercised ................... 10,819 162 -- -- 162
Shares issued in connection with
business acquisition ................ 122,263 2,025 -- -- 2,025
-------------------------------------------------------------
Balance, March 31, 2000 ................... 17,704,811 $102,092 $ 135,335 $ (4,089) $ 233,338
=============================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
FIRST CHARTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
- ------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................. $ 6,292 $ 6,173
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses ............................................. 1,075 975
Depreciation .......................................................... 1,216 919
Premium amortization and discount accretion, net ...................... 8 64
Net gain on securities available for sale transactions ................ (174) (344)
Net gain on sale of other real estate ................................. (49) (12)
Net loss on sale of premises and equipment ............................ 4 18
Origination of mortgage loans held for sale ........................... (15,821) (15,172)
Proceeds from sale of mortgage loans available for sale ............... 15,332 16,381
Decrease (increase) in other assets ................................... (4,476) 6,531
Increase in other liabilities ......................................... 800 1,402
-----------------------------
Net cash provided by operating activities ..................... 4,207 16,935
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale .................. 27,799 1,699
Proceeds from maturities of securities available for sale ............. 8,934 17,592
Purchase of securities available for sale ............................. (35,580) (13,075)
Net increase in loans ................................................. (71,749) (54,803)
Proceeds from sales of other real estate .............................. 593 2,063
Proceeds from sales of premises and equipment ......................... 19 534
Purchase of premises and equipment .................................... (7,768) (1,944)
-----------------------------
Net cash used by investing activities ......................... (77,752) (47,934)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, money market and savings accounts .. 2,685 (5,532)
Net increase in certificates of deposit ............................... 29,199 2,118
Net increase in securities sold under repurchase
agreements and other borrowings ................................. 30,372 26,818
Proceeds from issuance of common stock ................................ 162 438
Dividends paid ........................................................ (3,010) (3,117)
-----------------------------
Net cash provided by financing activities ..................... 59,408 20,725
-----------------------------
Net decrease in cash and cash equivalents ..................... (14,137) (10,274)
Cash and cash equivalents at beginning of period .............. 62,627 59,999
-----------------------------
Cash and cash equivalents at end of period .................... $ 48,490 $ 49,725
=============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ............................................................ $ 18,407 $ 17,567
=============================
Income taxes ........................................................ $ 806 $ 2,154
=============================
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Transfer of loans and premises and equipment
to other real estate owned .......................................... $ 397 $ 498
=============================
Unrealized gain (loss) in value of securities available for sale
(net of tax effect of $99 and ($1,185) for March 31, 2000 and
March 31, 1999, respectively) ....................................... $ 157 $ (1,984)
=============================
Issuance of common stock for business acquisition ........................... $ 2,025 $ 1,273
=============================
</TABLE>
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<PAGE> 6
FIRST CHARTER CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999 (UNAUDITED)
1. BUSINESS/CONSOLIDATION
The accompanying consolidated financial statements present the
consolidated financial condition and results of operations of First
Charter Corporation (the "Corporation") and its wholly owned
subsidiary, First Charter National Bank (the "Bank"), a commercial bank
operating in Mecklenburg, Cabarrus, Union, Rowan, Rutherford and
Cleveland counties of North Carolina. In addition, through its
subsidiary First Charter Brokerage Services, the Bank offers discount
brokerage services, insurance and annuity sales and financial planning
services pursuant to a third party arrangement with UVEST Investment
Services. The Bank also operates three other subsidiaries: First
Charter Insurance Services, Inc., First Charter Realty Investment,
Inc., and FCNB Real Estate, Inc. 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. In consolidation, all
significant intercompany accounts and transactions have been
eliminated. Certain amounts reported in the prior period have been
reclassified to conform with current period presentation. Such
reclassifications have no effect on net income or shareholders' equity
as previously reported.
2. FINANCIAL STATEMENT PRESENTATION
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of assets
and liabilities and disclosure of contingent liabilities at the date of
the financial statements, as well as the amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
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.
3. NET INCOME PER SHARE
Basic net income per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding for the
year. Diluted net income per share reflects the potential dilution that
could occur if the Corporation's potential common stock, which consists
of stock options, are issued. The numerators of the basic net income
per share computations are the same as the numerators of the diluted
net income per share computations for all the periods presented. A
reconciliation of the denominator of the basic net income per share
computations to the denominator of the diluted net income per share
computations is as follows:
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<PAGE> 7
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 31, March 31,
2000 1999
-------------------------
<S> <C> <C>
Basic net income per share denominator:
Weighted average number of
common shares outstanding................. 17,687,753 18,488,751
Dilutive effect arising from
assumed exercise of stock
options................................... 18,397 43,906
-------------------------
Diluted net income per share denominator....... 17,706,150 18,532,657
=========================
</TABLE>
The Corporation paid cash dividends of $0.17 per share during the
quarters ended March 31, 2000 and 1999.
4. SUBSEQUENT EVENT - MERGER
On April 4, 2000, the Corporation and Carolina First BancShares, Inc.
("Carolina First") announced the consummation of their merger (the
"Merger") in which Carolina First was merged into the Corporation. The
shareholders of each company approved the Merger at separate meetings
held on March 21, 2000. In accordance with the terms of the Merger
Agreement, (i) each share of the $2.50 par value common stock of
Carolina First (excluding shares held by Carolina First or the
Corporation or their respective companies, in each case other than in a
fiduciary capacity or as a result of debts previously contracted) was
converted into 2.267 shares of the no par value common stock of the
Corporation on April 4, 2000. The Merger was accounted for as a
pooling-of-interests. Since the Merger was consummated after March 31,
2000, the financial statements included herein do not reflect the
Merger. In future periods, the Corporation's consolidated financial
statements will be restated for all periods presented to reflect the
combined results of operations and financial condition of both
companies.
See additional disclosure under Item 5. OTHER INFORMATION - Pro Forma
Financial Results of the Corporation and Carolina First for the quarter
ended March 31, 2000.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The consolidated balance sheets of the Corporation represent account
balances for the Corporation and the Bank, its wholly owned banking subsidiary.
The following discussion and analysis should be read in conjunction with the
consolidated financial statements of the Corporation and the notes thereto
included in this report. In addition, the following discussion contains certain
forward-looking statements. See "Factors that May Affect Future Results".
LIQUIDITY
The Bank derives the major source of its liquidity from its core
deposit base. Liquidity is further provided by loan repayments, maturities in
the investment portfolio, the ability to secure
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<PAGE> 8
public deposits, the availability of federal fund lines and repurchase
agreements at correspondent banks and the ability to borrow from the Federal
Reserve Bank ("FRB") 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. At March 31, 2000, the Bank had a line of credit with the
FHLB of $467.9 million, with $29.6 million available. Another source of
liquidity is the securities in the 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 March 31, 2000, total shareholders' equity was $233.3 million,
representing a book value of $13.18 per share, compared to $227.7 million, or a
book value of $12.96 per share at December 31, 1999; see further discussion at
"RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- FINANCIAL CONDITION".
At March 31, 2000, the Corporation and the Bank were in compliance with
all existing capital requirements and the most recent notifications from the
Corporation's and Bank's various regulators categorized the Corporation and the
Bank as well capitalized under the regulatory framework for prompt corrective
action. There are no events or conditions since those notifications that
management believes have changed either of the entities' categories.
The Corporation's capital requirements are summarized in the table below:
<TABLE>
<CAPTION>
Risk-Based Capital
-----------------------------------------------
Leverage Capital Tier 1 Capital Total Capital
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(Dollars in thousands) Amount Percentage (1) Amount Percentage (2) Amount Percentage (2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Actual..................... $232,211 12.20% $232,211 16.27% $250,057 17.52%
Required................... 76,109 4.00 57,097 4.00 114,194 8.00
Excess..................... 156,102 8.20 175,114 12.27 135,863 9.52
</TABLE>
(1) Percentage of total adjusted average 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.
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 adverse effect on the Corporation's or the
Bank's liquidity, capital resources, or operations.
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<PAGE> 9
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION
Total assets at March 31, 2000 amounted to $1.96 billion, compared to
$1.89 billion at December 31, 1999. Gross loans at March 31, 2000 amounted to
$1.50 billion, up from $1.43 billion at December 31, 1999, with most of the
increase representing continued strong commercial loan growth during the
quarter.
Securities available for sale totaled $341.4 million at March 31, 2000,
representing a slight decrease of $0.7 million, or 0.2%, from December 31, 1999.
The carrying value of securities available for sale was approximately $6.7
million below their amortized cost at March 31, 2000, which represents gross
unrealized gains of $3.2 million and gross unrealized losses of $9.9 million.
Total deposits increased slightly to $1.18 billion at March 31, 2000,
compared to $1.15 billion at December 31, 1999. Other borrowings increased $30.3
million, or 6.2%, to $522.3 million at March 31, 2000 from $492.0 million at
December 31, 1999. Shareholders' equity increased to $233.3 million from $227.7
million at December 31, 1999. The securities available for sale portfolio's
unrealized loss has declined slightly from an unrealized net loss of $4.2
million at December 31, 1999 (net of tax) to an unrealized net loss at March 31,
2000 of $4.1 million (net of tax).
RESULTS OF OPERATIONS
Summary
Net income for the three month period ended March 31, 2000 was $6.3
million, or $0.36 diluted income per share, compared to $6.2 million, or $0.33
diluted income per share for the comparable period in 1999. Components of the
change in net income between the two quarterly periods included a $463,000
increase in net interest income, and a $787,000 increase in noninterest income,
mitigated to a certain extent by a $100,000 increase in the provision for loan
losses and by an increase in noninterest expense of $1.1 million. On an
annualized basis, year to date results represent a return on average assets of
1.33% for the three month periods ended March 31, 2000 and 1999, and a return on
average equity of 10.89% and 10.32%, for the three month periods ended March 31,
2000 and 1999, respectively.
Net Interest Income
For the three month period ended March 31, 2000, net interest income
increased $463,000 over the comparable period in 1999 due to an increase in
interest income on loans of $986,000 and an increase in interest income on
securities available for sale of $598,000, offset by an increase in total
interest expense of $930,000. The increase in total interest expense was driven
by increased levels of borrowings. Average loan balances during the 2000 quarter
increased slightly to $1.46 billion from $1.44 billion in the prior year
quarter. Average loan yields during the quarter also increased somewhat to 8.53%
during the 2000 quarter from 8.43% in the prior year quarter. While average
deposits increased 4.6% over the 1999 quarter, to $1.16 billion for the quarter
ended March 31, 2000, the average cost of deposits declined to 4.52% from 4.59%
in the prior year quarter as a result of deposit repricing strategies.
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<PAGE> 10
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. Assuming a 300 basis
point gradual change in interest rates over a twelve-month period, the
Corporation's sensitivity to interest rate risk has increased from approximately
3.87% of net interest income at December 31, 1999 to approximately 5.59% at
March 31, 2000. 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. In the
future, the Corporation is considering the limited use of interest rate swaps,
caps, or floors to assist in interest rate risk management.
Provision for Loan Losses / Asset Quality
The provision for loan losses for the quarter ended March 31, 2000 was
$1.1 million, compared to $1.0 million for the quarter ended March 31, 1999. The
increase in the provision for the three months ended March 31, 2000 was due to
the continued loan growth primarily in the commercial loan portfolio, during the
first quarter of 2000. Total nonperforming assets at March 31, 2000 have
decreased 5.4% from the December 31, 1999 level. Net loan charge-offs have
increased slightly during 2000 compared to the first quarter of 1999. Annualized
net loan charge-offs as a percentage of gross loans remained at 0.08% for the
first quarter of 2000 as compared to actual net loan charge-offs as a percentage
of gross loans for the year ended December 31, 1999. At March 31, 2000 and
December 31, 1999, the allowance for loan losses as a percentage of gross loans
(the "allowance percentage") was 1.21% and 1.22%, respectively.
As part of the continual grading process used to monitor the credit
quality of the loan portfolio, an analysis is performed monthly that is
independent from any analysis performed in conjunction with the origination of
loans. Based on this review, management believes the allowance to be adequate;
however, future adjustments may be necessary if economic and other conditions
differ substantially from management's assumptions.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance based
on their judgments about information available to them at the time of their
examination.
The following table presents changes in the allowance for loan losses
for the three months ended March 31, 2000, and 1999, respectively.
<TABLE>
<CAPTION>
March 31, March 31,
(Dollars in thousands) 2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance............................... $ 17,339 $ 15,554
Provision charged to operations................. 1,075 975
Loan charge-offs................................ (406) (316)
Less loan recoveries............................ 106 181
-------- --------
Net loan charge-offs...................... (300) (135)
-------- --------
Ending balance ................................ $ 18,114 $ 16,394
======== ========
</TABLE>
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<PAGE> 11
At March 31, 2000, the recorded investment in loans that were
considered to be impaired was $7.8 million (of which $7.0 million has been
placed on nonaccrual status) compared to the recorded investment in impaired
loans of $8.2 million (of which $7.7 million was on nonaccrual status) at
December 31, 1999. The related allowance for loan losses on impaired loans was
$2.9 million and $3.0 million at March 31, 2000 and December 31, 1999,
respectively. The average recorded investment in impaired loans for the three
months ended March 31, 2000, and 1999 was $8.0 million and $2.7 million,
respectively.
Total problem assets at March 31, 2000 were $12.6 million or 0.84% of
gross loans, compared to $13.3 million or 0.93% at December 31, 1999. Total
problem assets have decreased slightly during the period, due to a decrease in
other real estate of $147,000 and a decrease in nonaccrual loans of $344,000.
The components of nonperforming and problem assets are presented in the table
below:
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans................................................ $ 7,394 $ 7,738
Restructured loans.............................................. - 37
Other real estate .............................................. 1,894 2,041
----------- ------------
Total non-performing assets................................. 9,288 9,816
Loans 90 days or more
past due and still accruing................................... 3,345 3,460
----------- ------------
Total problem assets............................................ $ 12,633 $ 13,276
=========== ============
</TABLE>
Interest income that would have been recorded on nonaccrual loans for
the three months ended March 31, 2000, and 1999, had they performed in
accordance with their original terms, amounted to approximately $192,000 and
$37,000, respectively. Interest income actually recorded on nonaccrual loans
during the three months ended March 31, 2000 and 1999 amounted to $60,000 and
$0, respectively.
Noninterest Income
Noninterest income increased approximately $787,000, for the three
month period ended March 31, 2000 over the comparable period in 1999. The
increase of the 2000 quarter over the prior year quarter is largely due to
increased deposit account service charges of $474,000, due to changes
implemented in deposit account service charges during 1999, as well as
increased income from insurance services of $334,000, due to the impact of
insurance agency acquisitions during 1999 which were accounted for using the
purchase method of accounting.
Noninterest Expense
Noninterest expense during the quarter ended March 31, 2000 amounted to
$12.0 million, compared to the 1999 quarter of $10.9 million. The primary
increase over the 1999 quarter was a 14.9% increase in salaries and fringe
benefits resulting from additional human resources. In addition, occupancy
expense increased 18.3% as compared to the 1999 quarter as a result of the
leasing of additional office space to accommodate growth.
Income Tax Expense
Total income tax expense amounted to $2.9 million and $3.0 million for
the quarters ended March 31, 2000 and March 31, 1999, respectively. The
effective tax rate for the 2000 quarter is approximately 31.7% compared to 32.4%
for the comparable 1999 quarter, due to strategies implemented to reduce state
income tax expense.
ACCOUNTING AND REGULATORY MATTERS
Statement of Financial Accounting Standards No. 133 (SFAS No. 133),
"Accounting for Derivative Instruments and Hedging
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<PAGE> 12
Activities," establishes accounting and reporting standards for derivatives and
hedging activities. It requires that all derivatives be included as assets or
liabilities in the balance sheet and that such instruments be carried at fair
market value through adjustments to either other comprehensive income or current
earnings or both, as appropriate. The Standard was originally effective for
financial statements issued for all fiscal quarters of fiscal years beginning
after June 15, 1999. The implementation date of SFAS No. 133 was delayed by
Statement of Financial Accounting Standards No. 137 "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133" to the first fiscal quarters of fiscal years beginning after
June 15, 2000. Accordingly, the Corporation will adopt SFAS No. 133 on January
1, 2001. The Corporation is in the process of assessing the impact of this
standard.
From time to time, the FASB issues exposure drafts for proposed
statements of financial accounting standards. Such exposure drafts are subject
to comment from the public, to revisions by the FASB and to final issuance by
the FASB as statements of financial accounting standards. Management considers
the effect of the proposed statements on the consolidated financial statements
of the Corporation and monitors the status of changes to and proposed effective
dates of exposure drafts.
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 non-banking activities than was permissible 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. The Modernization Act becomes effective in
various stages and this part of the Act became effective during March 2000.
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.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The foregoing discussion contains certain forward-looking statements
about the Corporation's financial condition and results of operations, which are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's judgment only as of the date hereof. The
Corporation undertakes no obligation to publicly revise these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
Factors that may cause actual results to differ materially from these
forward-looking statements include, but are not limited to, the passage of
unforeseen state or federal legislation or regulation applicable to the
Corporation's operations, the Corporation's ability to accurately predict the
adequacy of the loan loss allowance needs using its present risk grading system,
the ability to generate liquidity if necessary to meet loan demand, and the
ability to manage unforeseen domestic and global rapid changes in interest
rates.
- 12 -
<PAGE> 13
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The following table presents the scheduled maturity of market risk
sensitive instruments at March 31, 2000:
<TABLE>
<CAPTION>
(Dollars in thousands)
MATURING IN: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS THEREAFTER TOTAL
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Debt securities ........ $ 11,819 $ 11,819 $ 36,994 $ 24,886 $ 52,759 $163,314 $ 301,591
Loans .................. 250,188 111,070 87,184 110,044 126,056 795,176 1,479,718
------------------------------------------------------------------------------------------
Total ............... $ 262,007 $122,889 $124,178 $134,930 $178,815 $958,490 $1,781,309
==========================================================================================
LIABILITIES
Savings, NOW, Demand
and IMMA's .......... $ 551,083 $ 9,111 $ 1,998 $ -- $ -- $ 572 $ 562,764
CD's ................... 530,211 57,838 22,314 5,967 1,393 908 618,631
Short-term
borrowings .......... 370,811 -- -- -- -- -- 370,811
Long-term
borrowings .......... -- 76,183 25,040 40 40 50,234 151,537
------------------------------------------------------------------------------------------
Total ............. $1,452,105 $143,132 $ 49,352 $ 6,007 $ 1,433 $ 51,714 $1,703,743
==========================================================================================
</TABLE>
The following table presents the average interest rate and estimated
fair value of market risk sensitive instruments at March 31, 2000:
<TABLE>
<CAPTION>
CARRYING AVERAGE ESTIMATED
(DOLLARS IN THOUSANDS) VALUE INTEREST RATE FAIR VALUE
======================================================================================
<S> <C> <C> <C>
ASSETS
Debt Securities ......... $ 301,591 6.08% $ 301,591
Loans ................... 1,479,718 8.36 1,455,039
---------- 7.97 ----------
Total .............. $1,781,309 $1,756,630
========== ==========
LIABILITIES
Savings, NOW, Demand
and IMMA's ............ $ 562,764 2.23 $ 562,648
CD's .................... 618,631 5.66 615,151
Short-term
borrowings ............ 370,811 5.84 366,266
Long-term
borrowings ............ 151,537 5.54 149,679
---------- ----------
Total .............. $1,703,743 4.56 $1,693,744
========== ==========
</TABLE>
-13-
<PAGE> 14
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In June 1995, a lawsuit was initiated against Home Federal (a former
subsidiary of the Corporation that was merged into the Bank in March 1999) 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 favor of Home Federal. The Fourth Circuit Court of
Appeals, on June 8, 1999 affirmed the grant of summary judgment and dismissal of
the matter.
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, the Corporation moved for summary
judgement to dismiss the counterclaims. At a hearing in May 1999, the Bankruptcy
Judge granted part and denied part of the Corporation'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. A trial date has been set for
August 21, 2000. The Corporation 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
-14-
<PAGE> 15
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 the Corporation 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 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
-15-
<PAGE> 16
Item 5. OTHER INFORMATION
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited pro forma condensed consolidated
financial information including a balance sheet as of March 31, 2000 and
statements of earnings for the three months ended March 31, 2000 and 1999, and
the years ended December 31, 1999, 1998, and 1997. These statements present on a
pro forma basis historical results for First Charter and Carolina First as
though the merger had been consummated as of the dates or at the beginning of
the periods indicated.
The merger will be accounted for using the pooling of interests method
of accounting. Pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the results of operations or
combined financial position that would have resulted had the merger been
consummated as of the dates or at the beginning of the periods indicated, nor is
it necessarily indicative of future results of operations or combined financial
position.
The unaudited pro forma condensed consolidated financial information
should be read in conjunction with the consolidated historical financial
statements of First Charter and Carolina First.
-16-
<PAGE> 17
FIRST CHARTER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
FIRST CHARTER
PRO FORMA AND
(DOLLARS IN THOUSANDS) FIRST CHARTER CAROLINA FIRST ADJUSTMENTS CAROLINA FIRST
-----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 45,024 38,829 83,853
Federal funds sold 624 -- 624
Interest-bearing bank deposits 2,842 443 3,285
Securities held to maturity -- 35,324 (35,324) --
Securities available for sale 341,405 140,956 29,456 511,817
Loans 1,497,996 553,783 2,051,779
Less: Unearned income (164) -- (164)
Allowance for loan losses (18,114) (7,865) (25,979)
---------------------------------------------------------
Loans, net 1,479,718 545,918 -- 2,025,636
---------------------------------------------------------
Other assets 93,385 30,187 4,829 128,401
---------------------------------------------------------
Total Assets $ 1,962,998 791,657 (1,039) 2,753,616
=========================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits $ 1,181,395 674,784 1,856,179
Other borrowings 522,348 45,188 567,536
Other liabilities 25,917 4,217 15,078 45,212
---------------------------------------------------------
Total Liabilities 1,729,660 724,189 15,078 2,468,927
---------------------------------------------------------
SHAREHOLDERS' EQUITY
FCC - Common Stock - no par value: authorized 50,000,000
shares, issued and outstanding 17,704,811, on a
combined basis 31,032,284 shares 102,092 46,769 148,861
CFBI - Preferred Stock, $1.00 par value; authorized 5,000,000
shares; none issued and outstanding -- --
CFBI - Common Stock $2.50 par value; authorized 20,000,000
shares; issued and outstanding 6,036,352 15,091 (15,091) --
Additional paid-in capital -- 34,076 (34,076) --
Retained earnings 135,335 20,761 (11,463) 144,633
Accumulated other comprehensive income (loss):
Unrealized loss on securities available for sale (4,089) (2,460) (2,256) (8,805)
---------------------------------------------------------
Total Shareholders' Equity 233,338 67,468 (16,117) 284,689
---------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 1,962,998 791,657 (1,039) 2,753,616
=========================================================
</TABLE>
-17-
<PAGE> 18
FIRST CHARTER CORPORATION AND SUBSIDIARIES & CAROLINA FIRST BANCSHARES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
-------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 2000 1999 1999 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest and fees on loans $ 43,404 40,557 162,490 157,224 137,473
Interest on investments and securities 8,107 7,377 30,966 28,791 28,213
Other interest 127 490 815 2,546 2,681
-------------------------------------------------------------------
Total interest income 51,638 48,424 194,271 188,561 168,367
-------------------------------------------------------------------
Interest on deposits 16,852 16,856 66,101 67,713 65,554
Interest on borrowings 7,747 6,396 24,198 24,981 16,846
-------------------------------------------------------------------
Total interest expense 24,599 23,252 90,299 92,694 82,400
-------------------------------------------------------------------
Net interest income 27,039 25,172 103,972 95,867 85,967
Provision for loan losses 1,970 1,358 5,005 3,741 3,681
-------------------------------------------------------------------
Net interest income after provision for loan losses 25,069 23,814 98,967 92,126 82,286
-------------------------------------------------------------------
Noninterest income 6,586 5,735 26,237 21,698 21,845
Noninterest expense 19,244 17,319 73,856 85,021 63,984
-------------------------------------------------------------------
Net income before income taxes 12,411 12,230 51,348 28,803 40,147
Income taxes 3,945 3,957 16,480 12,858 14,255
-------------------------------------------------------------------
Income from continuing operations before nonrecurring
charges directly attributable to the transaction $ 8,466 8,273 34,868 15,945 25,892
===================================================================
BASIC INCOME PER SHARE:
Income from continuing operations before nonrecurring
charges directly attributable to the transaction
FCC - historical $ 0.36 $ 0.33 $ 1.45 $ 0.51 $ 1.06
CFBI - historical $ 0.36 $ 0.35 $ 1.47 $ 1.14 $ 1.20
FCC/CFBI - pro forma combined $ 0.27 $ 0.26 $ 1.11 $ 0.52 $ 0.84
Average common equivalent shares
FCC - historical 17,687,753 18,488,751 17,985,960 18,273,281 18,154,131
CFBI - historical 6,013,050 5,972,918 5,988,692 5,908,855 5,613,139
FCC/CFBI - pro forma combined 30,962,400 31,672,419 31,205,388 31,497,768 30,754,475
DILUTED INCOME PER SHARE:
Income from continuing operations before nonrecurring
charges directly attributable to the transaction
FCC - historical $ 0.36 $ 0.33 $ 1.45 $ 0.50 $ 1.03
CFBI - historical $ 0.36 $ 0.35 $ 1.44 $ 1.11 $ 1.18
FCC/CFBI - pro forma combined $ 0.27 $ 0.26 $ 1.08 $ 0.51 $ 0.83
Average common equivalent shares
FCC - historical 17,706,150 18,532,657 18,053,064 18,571,805 18,697,448
CFBI - historical 6,073,217 6,066,867 6,081,239 6,059,788 5,681,819
FCC/CFBI - pro forma combined 31,117,196 31,929,308 31,482,296 32,138,458 31,453,489
</TABLE>
-18-
<PAGE> 19
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited First Charter and Carolina First pro forma condensed
consolidated financial information is based upon the following adjustments,
reflecting the consummation of the merger using the pooling of interests method
of accounting. Actual amounts may differ from those reflected in the unaudited
pro forma condensed financial information.
NOTE 1
First Charter exchanged 2.267 shares of First Charter common stock for
each share of Carolina First common stock outstanding immediately prior to the
effective date of the merger (except for shares of Carolina First common stock
held by Carolina First or First Charter or their respective subsidiaries, in
each case other than in a fiduciary capacity or as a result of debts previously
contracted, which shall be canceled). The pro forma issued number of shares of
First Charter common stock does not reflect the exercise of options to acquire
shares of Carolina First common stock. Options to acquire 166,460 shares of
Carolina First common stock, the equivalent of 377,364 shares of First Charter
common stock, were outstanding at March 31, 2000.
At March 31, 2000, First Charter owned 157,449 shares of Carolina First
common stock with a book value of $2.4 million and a fair market value of $4.4
million. An entry was made to the unaudited pro forma condensed consolidated
balance sheet to eliminate the Carolina First common stock and the related
unrealized gain on such stock owned by First Charter at March 31, 2000:
<TABLE>
<S> <C> <C>
Common stock - Carolina First................................................... 394,000
Unrealized gain on securities available for sale................................ 1,333,000
Additional paid-in capital...................................................... 2,004,000
Other assets (deferred taxes)................................................... 717,000
Securities available for sale.......................................... 4,448,000
</TABLE>
The actual adjustment for the fair value of this common stock and the
related unrealized gain will be different and will be based on the fair market
value of Carolina First's common stock as of approximately the date of the
consummation of the merger.
Shares issued in connection with the merger were as follows:
<TABLE>
<S> <C>
Shares of Carolina First common stock, excluding Carolina First
shares owned by First Charter.......................................... 5,878,903
Exchange Ratio.................................................................. 2.267
----------
Shares of First Charter common stock to be issued............................... 13,327,473
==========
</TABLE>
The following entry was made to the unaudited pro forma condensed
consolidated balance sheet to reflect this transaction:
<TABLE>
<S> <C> <C>
Common Stock - Carolina First................................................... 14,697,000
Additional paid-in capital...................................................... 32,072,000
Common Stock - First Charter........................................... 46,769,000
</TABLE>
-19-
<PAGE> 20
Note 2
In connection with the merger, First Charter intends to reclassify
Carolina First's securities held to maturity to securities available for sale.
This reclassification will enable First Charter to maintain its existing
interest rate risk position. The following adjusting entry was made to the
unaudited pro forma condensed consolidated balance sheet to reflect this
transaction:
<TABLE>
<S> <C> <C>
Securities available for sale................................................... 33,904,000
Other assets (deferred taxes)................................................... 497,000
Unrealized loss on securities available for sale................................ 923,000
Securities held to maturity............................................ 35,324,000
</TABLE>
Note 3
First Charter anticipates one-time merger-related charges of $15.1
million ($11.5 million, net of tax effects) in connection with the merger.
Employee-related and professional fees associated with the transaction
(including fixed financial advisor fees as well as attorneys' and accountants'
fees) are expected to represent the largest portion of the expenses and charges.
The impact of these adjustments, net of tax effects, has been reflected in the
unaudited pro forma condensed consolidated balance sheet as of March 31, 2000,
but has not been reflected in the unaudited pro forma condensed consolidated
statements of earnings. The following adjusting entry was made to the unaudited
pro forma condensed consolidated balance sheet to reflect this transaction:
<TABLE>
<S> <C> <C>
Retained earnings............................................................... 11,463,000
Other assets (deferred taxes)................................................... 3,615,000
Other liabilities...................................................... 15,078,000
</TABLE>
-20-
<PAGE> 21
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO.
(PER EXHIBIT TABLE
IN ITEM 601 OF
REGULATION S-K) DESCRIPTION OF EXHIBITS
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the
Corporation, incorporated herein by reference to
Exhibit 3.1 of the Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998
(Commission File No. 0-15829).
3.2 By-laws of the Corporation, as amended, incorporated herein by
reference to Exhibit 3.2 of the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-15829).
27 Financial Data Schedules (for SEC use only)
</TABLE>
(b) Reports on Form 8-K
(i) On January 18, 2000, the Corporation filed a
Current Report on Form 8-K, reporting
pursuant to Item 5 thereof its earnings for
the fiscal quarter and year ended December
31, 1999.
(ii) On March 22, 2000, the Corporation filed a
Current Report on Form 8-K, reporting
pursuant to Item 5 thereof the favorable
shareholder vote for the merger of Carolina
First BancShares, Inc. into First Charter
Corporation.
-21-
<PAGE> 22
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: May 15, 2000 By: /s/ Robert O. Bratton
----------------------------------------
Robert O. Bratton
Executive Vice President &
Chief Operating Officer and
Chief Financial Officer
-22-
<PAGE> 23
EXHIBIT INDEX
EXHIBIT NO.
(PER EXHIBIT TABLE
IN ITEM 601 OF SEQUENTIAL
REGULATION S-K) DESCRIPTION OF EXHIBITS PAGE NUMBER
- --------------- ----------------------- -----------
27 Financial Data Schedule
(for SEC use only)
-23-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST CHARTER CORPORATION FOR THE QUARTER ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 45,024
<INT-BEARING-DEPOSITS> 2,842
<FED-FUNDS-SOLD> 624
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 341,405
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,497,996
<ALLOWANCE> 18,114
<TOTAL-ASSETS> 1,962,998
<DEPOSITS> 1,181,395
<SHORT-TERM> 370,811
<LIABILITIES-OTHER> 25,917
<LONG-TERM> 151,537
0
0
<COMMON> 102,092
<OTHER-SE> 131,246
<TOTAL-LIABILITIES-AND-EQUITY> 1,962,998
<INTEREST-LOAN> 30,781
<INTEREST-INVEST> 5,331
<INTEREST-OTHER> 48
<INTEREST-TOTAL> 36,160
<INTEREST-DEPOSIT> 11,423
<INTEREST-EXPENSE> 7,044
<INTEREST-INCOME-NET> 17,693
<LOAN-LOSSES> 1,075
<SECURITIES-GAINS> 174
<EXPENSE-OTHER> 11,972
<INCOME-PRETAX> 9,213
<INCOME-PRE-EXTRAORDINARY> 9,213
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,292
<EPS-BASIC> 0.36
<EPS-DILUTED> 0.36
<YIELD-ACTUAL> 4.11
<LOANS-NON> 7,394
<LOANS-PAST> 3,345
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 17,339
<CHARGE-OFFS> 406
<RECOVERIES> 106
<ALLOWANCE-CLOSE> 18,114
<ALLOWANCE-DOMESTIC> 18,114
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
