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EXHIBIT 99.1
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Scripts
Slide 1 - Title
Welcome to the First Charter conference call to discuss issues related to the
January 16, 2001 earnings release and analyst presentation. I am Bob Bratton the
Chief Financial Officer and with me today are members of our executive
management team. The slides referred to during this call are available by
visiting our website, www.FirstCharter.com and following the link provided
under our "Shareholder Information" section.
Slide 2 - Forward-looking Statement
While I am not going to read this disclosure, I remind you all that this call is
being conducted in accordance with the requirements under Regulation FD-"Fair
Disclosure".
Slide 3 - Outline
This presentation will be in two phases. We will review the results of operation
for the fourth quarter of 2000 and the full year. In addition, we will discuss
the major initiatives for 2001 and discuss earnings expectations.
Slide 4 - Summary of Results
First, let's focus on the fourth quarter results.
Slide 5 - Improved Core Operating Results
The slowing economic environment continued during the fourth quarter of the
year, however, First Charter posted record core operating earnings of $0.29 per
share, an increase of 16% over fourth quarter of 1999. Furthermore, these
results were on target with expectations management provided in October of 2000.
Slide 6 - Balance Sheet Growth
During the quarter, loans grew by $47 million due primarily to growth of
commercial and consumer loans. Also included in this total, were approximately
$12 million in consumer loans acquired as part of the four branches purchased
during the fourth quarter. Concurrently, deposits increased $77 million,
primarily as a result of the acquisition of these four banking branches.
Slide 7 - Minimized Margin Erosion
The slowing economic environment continued during the fourth quarter of the
year. While the margin did decrease, this decrease was less than previously
forecast. Several actions minimized the margin erosion. First, management
continued its diligent efforts to price properly both sides of the balance
sheet. Second, the impact of the fixed income portfolio restructuring, which
began in the third quarter was realized. Additional restructuring, of the fixed
income portfolio, was
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accomplished during the period. Finally, a portion of other borrowings were
restructured to a more favorable rate. These key actions helped to minimize the
impact of the margin compression.
Slide 8 - Maintained Asset Quality
First Charter Corporation maintained a stable asset quality position when
comparing the fourth quarter to the third quarter. Non performing assets
increased slightly to $29.6 million. Furthermore, other key asset quality
ratios, including non accrual loans to total loans, non performing assets to
total assets, and allowance for loan losses were flat quarter to quarter.
Annualized quarterly net charge-offs did increase to 28 basis points of average
loans, which represents the logical progression of classified assets throughout
the workout process.
Management believes the allowance is adequate to cover the current risk of loss
in the loan portfolio. First Charter will continue its vigilant management of
asset quality and as conditions change, management will continue to take
appropriate action.
Slide 9 - Non-Core Events
Several non core events occurred in the fourth Quarter. We recognized a gain on
the sale of excess property. This gain was offset by our continued bond
portfolio restructuring. In addition, there was a minimal write down in certain
equity investments in which First Charter has a position. First Charter also
established a charitable trust. Income from the trust will be used to make
contributions to charitable causes in the communities we serve.
Slide 10 - Full Year 2000 Results
Now, I would like to discuss the full year 2000 results.
Slide 11 - GAAP Net Income
Generally Accepted Accounting Principles, or GAAP, net income includes all
income recognized and all expenses incurred. First Charter's GAAP net income was
$0.79 per share in 2000 compared to $1.11 per share in 1999. The 2000 results
include after tax charges of $11.8 million or $0.35 per share taken in
conjunction with our acquisitions of Carolina First Bancshares, Inc. and
Business Insurers Group. The 1999 results include after tax gains of $2.3
million or $0.07 per share related primarily to the sale of loans and excess
property.
Slide 12 - Improved Core Operating Results
First Charter posted record core earnings for 2000 of $1.16 per share, or an
11.5% increase over the $1.04 per share in 1999.
Slide 13 - Continued Balance Sheet Growth
During 2000, First Charter's net loans increased by nearly 10% to $2.2 billion.
The loan growth was characterized by increased loan originations in commercial
and consumer loans. By the end of the year, First Charter's deposits increased
10% to $2.0 billion with the majority of this
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increase coming in time deposits. This increase was aided by the four branch
acquisition completed in the fourth quarter.
Slide 14 - Minimized Margin Erosion
The year 2000 began with strong consumer confidence and continued brisk economic
activity. The Federal Reserve, concerned with rising commodity prices, a tight
labor market and the wealth effect brought on by a euphoric stock market, raised
interest rates three times or 100 basis points during the first half of 2000.
This was in addition to the 75 basis point increase during the second half of
1999.
The impact of the Federal Reserve's actions put significant pressure on the
margin. Asset growth and variable loan repricing maintained First Charter's
margin in the first part of the year. As asset growth slowed and funding sources
repriced to market rates during the third and fourth quarters, First Charter
experienced net interest margin erosion, like many other financial institutions.
As previously mentioned, First Charter took several actions to minimize the
margin erosion.
Slide 15 - Management of Asset Quality
Rising interest rates added pressure to the operating margin of some clients
causing them to experience cash flow problems. As a result, First Charter's
non-performing assets increased to $29.6 million or 1.01% of total assets. For
the year, net charge-offs increased to 20 basis points of average loans.
Based on our analysis of the loan portfolio, the allowance for loan losses was
increased to 1.32% of loans at December 31, 2000 from 1.27% at December 31,
1999.
Management believes the allowance for loan losses is adequate to cover the
current risk of loss in the portfolio. First Charter will continue its vigilant
management of asset quality and as conditions change, management will continue
to take appropriate action.
Slide 16 - Noninterest Income
Non interest income for 2000 increased 14% over 1999. This is the result of
First Charter's continued emphasis on this portion of our revenue stream. In
particular, we focused on service charge re-pricing opportunities and increased
our emphasis on non traditional banking services including insurance, asset
management and brokerage.
Slide 17 - Achievements
During 2000, First Charter devoted a significant amount of resources toward
integrating several acquisitions. The most prominent acquisition was Carolina
First, an $800 million multi-bank holding company, with three separate banking
subsidiaries. In addition, we acquired four branch locations in western North
Carolina and two insurance agencies, one in Shelby and one in Greensboro. These
acquisitions continue to enhance the First Charter brand and improve our
operating earnings.
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Slide 18 - Achievements (continued)
The previously mentioned acquisitions were integrated into our recently
organized Community Bank and Corporate/Real Estate Divisions. Through six
Regional Executives, our Community Bank Division is better positioned to
leverage our community bank image and enhance service in each of our markets.
Our Corporate/Real Estate Division allows for better management and improved
cross sales efforts with our largest commercial and real estate clients.
We also implemented a proactive, "needs based" sales and service process for our
entire company. This process provides our sales force with the tools to identify
our clients' financial needs and to offer the appropriate First Charter product
to satisfy their needs. Our sales force is poised to capitalize on this strategy
in the year 2001.
We also continued to invest in the human resources necessary to compete in our
market. As an example, we have added several key specialists to assist us in the
management of our on-going operations. And, as if these initiatives were not
enough to keep us busy, we allocated the resources necessary to plan for our new
corporate center and evaluate a new core processing system. We will discuss
these in more detail in the next phase of this presentation.
Slide 19 - Noninterest Expense
We were able to accomplish all of the initiatives, and still reduce our
efficiency ratio by 5% to approximately 55%.
Slide 20 - 2001 Forecast
Now that we have reviewed the record results for both the fourth quarter and for
the full year 2000, let's discuss the initiatives and projected results for
First Charter in 2001.
Slide 21 - Summary of 2001 Forecast
The end of 2000 was characterized by slowing growth and waning consumer
confidence. As we enter 2001, First Charter sees a very similar environment.
Even in our dynamic markets, we believe growth will continue to slow. In
addition, our assumptions include additional rate reductions, as the Federal
Reserve attempts to ensure a "soft landing" of the economy. As First Charter
moves in tandem with the surrounding market, our balance sheet growth will
moderate. Our earnings for 2001 will be characterized by a consistent net
interest margin, stable asset quality and several key initiatives which will
unfold throughout the year. These factors will result in continued improvement
in operating results.
Slide 22 - Moderate Balance Sheet Growth
For the year 2001, we anticipate the growth rate of loans and deposits to be
between 7 and 8 percent. Our challenge will be growing core deposits through our
expanded retail base and our recent "needs based" sales training.
Slide 23 - Consistent Margin
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We anticipate the net interest margin to remain in the 4.15% to 4.20% range for
year 2001. Assuming a declining rate environment, our variable rate loans
reprice with each rate decrease, compressing our margin. Therefore, as rates
fall, our ability to maintain our margin will be dependent on the speed at which
we can reprice our funding sources.
Slide 24 - Stable Asset Quality
The recent reduction of interest rates and the forecast for future rate
decreases should begin to ease the pressure on our borrowing clients. Over time,
First Charter should begin to see a stabilization in non performing assets,
however, some increase in non performing assets is possible in the near term.
First Charter will continue its vigilant management of asset quality and as
economic conditions change, management will continue to take appropriate action.
First Charter will continue to maintain an adequate reserve for loan losses
which may create a modest increase in the loan loss provision.
Slide 25 - Key Initiatives
First Charter will continue its focus on non interest income growth with several
key initiatives during 2001. While our Community Bank Division is poised to
capitalize on our sales and service strategy, as mentioned earlier, we intend to
place increased emphasis on our non traditional banking services.
First, we will greatly expand our brokerage sales force. In addition to
expanding our full service brokers from 9 to 12, we will be adding a platform
sales program in our financial centers. These existing financial center
employees will obtain a Series 6, 63 and insurance license, enabling them to
sell mutual funds and annuities. Our goal is to have one of these licensed
professionals in every financial center by the end of the year.
Secondly, in our Insurance Division we will be expanding our product offerings
and delivery channels. We will use direct marketing to offer several new
insurance products to our clients. In addition, we will add new insurance sales
associates to our telephone call center.
Our Financial Management Group will leverage the human resources added in 2000
to increase assets under management.
Finally, we intend to maintain a competitive fee structure to ensure First
Charter is receiving the market value for the services we provide. We have an
initiative currently underway to identify and collect new fee income sources. As
these key initiatives unfold throughout the year, we anticipate non interest
income will continue to become a larger part of our revenue stream.
Slide 26 - Key Initiatives (continued)
During the first quarter of 2001, First Charter will begin to occupy our new
corporate center. This 235,000 square foot facility will enable us to
consolidate all of our staff functions, currently spread among six different
locations.
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In addition, as a growth oriented financial institution, we have found our needs
surpass the capabilities of our current core processing system. We anticipate
converting to a new system during the second half of 2001.
The economic impact of these initiatives should be between $0.09 to $0.11 per
share during 2001.
Slide 27 - Improved Operating Results
Based on the issues and initiatives outlined, we anticipate core diluted
earnings per share growth to be between 3% and 6% or $1.20 to $1.23 per share.
This would generate between $38 and $39 million of net income.
We expect our first quarter core diluted earnings per share to be between $0.28
and $0.30 per share.
Slide 28 - Summary
First Charter continues to improve our operating results by prudent balance
sheet growth and active margin management. We will be vigilant in our management
of asset quality, taking appropriate actions as economic conditions change. We
will continue to increase non interest income and control non interest expense.
We are looking forward to another year of growth in earnings as we continue to
deliver our clients the key services they need.
Slide 29 - Logo
At this time, we will entertain questions, but we remind you of the disclosure
limitations under Regulation FD.
