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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (I.R.S. Employer
incorporation or organization) Identification Number)
22 Union Street, North, Concord, N.C. 28026 -0228
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (704) 786-3300.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
N/A N/A
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $5.00 par value
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 28, 1996 was $ 96,314,673 .
As of March 28, 1996 the Registrant had outstanding 6,270,436 Common Stock,
$5.00 par value.
Documents Incorporated by Reference
PARTS I and II: Annual Report to Shareholders for the fiscal year ended
December 31, 1994 (with the exception of those portions which are specifically
incorporated by reference in this Form 10-K, the Annual Report to Shareholders
is not deemed to be filed as part of this report).
PART III: Definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14 A promulgated pursuant to the
Securities Exchange Act of 1934 in connection with the 1995 Annual Meeting of
Shareholders (with the exception of those portions which are specifically
incorporated by reference in this Form 10-K, the Proxy Statement is not deemed
to be filed as part of this report).
FIRST CHARTER CORPORATION
AND SUBSIDIARIES
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
PART I
Page
Item 1. Business...................................... 1
Item 2. Properties.................................... 26
Item 3. Legal Proceedings............................. 28
Item 4. Submission of Matters to a Vote of Security
Holders.................................... 28
Item 4A. Executive Officers of the Registrant.......... 28
PART II
Item 5. Market For Registrant's Common Equity and
Related Shareholder Matters................ 30
Item 6. Selected Financial Data....................... 30
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 30
Item 8. Financial Statements and Supplementary Data... 30
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..... 30
PART III
Item 10. Directors and Executive Officers of the
Registrant................................. 31
Item 11. Executive Compensation........................ 31
Item 12. Security Ownership of Certain Beneficial
Owners and Management...................... 31
Item 13. Certain Relationships and Related
Transactions............................... 31
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K........................ 32
PART I
Item 1. Business
General
First Charter Corporation (hereinafter referred to as either
the "Registrant" or the "Company") is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). Its principal assets are the stock of its banking
subsidiaries, First Charter National Bank ("FCNB") and Bank of
Union ("Union," and together with FCNB, the "Banks"). The Banks
account for over 95% of the Registrant's consolidated assets and
consolidated revenues.
FCNB, a national banking association, is the successor entity
to The Concord National Bank, which was established in 1888 and
acquired by the Registrant in 1983. FCNB is a full service bank
and trust company with twelve branch offices, two limited service
facilities and fourteen ATMs (automatic teller machines) located in
Cabarrus, Rowan and northern Mecklenburg Counties, North Carolina.
The ATMs are part of the HONOR network.
Union is a state-chartered commercial bank organized under the
laws of North Carolina in 1985. It was acquired by the Registrant
effective December 21, 1995 pursuant to an Agreement and Plan of
Merger dated September 13, 1995, whereby a newly formed subsidiary
of the Registrant merged with Union and Union became a wholly owned
subsidiary of the Registrant. Union provides general banking
services through a network of five branch offices located in Union
and southern Mecklenburg Counties, North Carolina.
Through their branch locations, the Banks provide a wide range
of banking products, including checking accounts; NOW accounts;
"Money Market Rate" accounts; certificates of deposit; individual
retirement accounts; overdraft protection; commercial, consumer,
agriculture, real estate, residential mortgage and home equity
loans; personal and corporate trust services; safe deposit boxes;
and automated banking. In addition, through BOU Financial, Inc.
("BOU Financial"), a subsidiary of Union, the Registrant also
offers discount brokerage services, insurance and annuity sales and
financial planning services.
At December 31, 1995, the Registrant and its subsidiaries had
183 full-time employees and 46 part-time employees. The Registrant
had no employees who were not also employees of one of its
subsidiaries. The Registrant considers its relations with
employees to be good. The Registrant and its subsidiaries provide
employee benefits, including a 401(k) profit sharing retirement
plan, group life, health and long-term disability insurance, paid
vacations and sick leave.
The Registrant is not dependent upon a single customer or a
few customers whose loss would have a material adverse effect on
the Registrant.
The Registrant regularly evaluates the potential acquisition
of or merger with, and holds discussions with, various financial
institutions. The Registrant does not currently have any specific
plans or agreements in effect with respect to any such acquisition
or merger. In addition, the Registrant periodically enters new
markets and engages in new activities in which it competes with
established financial institutions. There can be no assurance as
to the success of any such new office or activity. Furthermore, as
the result of such expansions, the Registrant has incurred and may
continue to incur start-up costs that could affect the financial
results of the Registrant.
Competition
The banking laws of North Carolina allow banks located in
North Carolina to develop branches throughout the State. In
addition, as the result of recent federal and state legislation,
certain out-of-state banks may open de novo branches in North
Carolina as well as acquire or merge with banks located in North
Carolina. See "Government Regulation--General." As a result of
such laws, banking activities in North Carolina are highly
competitive.
The Banks' service delivery facilities are located in Union,
Cabarrus and southern Rowan Counties and the northern and southern
edges of Mecklenburg County. A large portion of the population
that resides in these market areas, however, commutes to Charlotte
and other locations within Mecklenburg County, and these locations
have numerous branches of super-regional, regional, statewide and
other Charlotte-based institutions. In its market area, the
Registrant faces competition from other banks, savings and loan
associations, savings banks, credit unions, finance companies and
major retail stores that offer competing financial services. Many
of these competitors have greater resources, broader geographic
coverage and higher lending limits than the Banks. The Banks'
primary method of competition is to provide quality service and
fairly priced products.
Government Regulation
General. The Registrant is registered under the BHCA with the
Board of Governors of the Federal Reserve System (the "Federal
Reserve") as a bank holding company and as such is subject to the
supervision of, and to regular inspection by, the Federal Reserve.
FCNB is organized as a national banking association and is subject
to regulation, supervision and examination primarily by the Office
of the Comptroller of the Currency (the "OCC"). Union is organized
as a state-chartered banking association and is subject to
regulation, supervision and examination primarily by the North
Carolina State Banking Commission (the "Banking Commission"). As
a federally insured non-member bank, Union also is subject to
regulation, supervision and examination by the Federal Deposit
Insurance Corporation (the "FDIC").
In addition to banking laws, regulations and regulatory
agencies, the Company and the Banks are subject to various other
laws and regulations and supervision and examination by other
regulatory agencies, all of which directly or indirectly affect the
Company's operations, management and ability to make distributions.
Restrictions on Bank Holding Companies. The Federal Reserve
is authorized to adopt regulations affecting various aspects of
bank holding companies. Under the BHCA, the Company's activities,
and those of companies which it controls or in which it holds more
than 5 of the voting stock, are limited to banking or managing or
controlling banks or furnishing services to or performing services
for its subsidiaries, or any other activity which the Federal
Reserve determines to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. In making
such determinations, the Federal Reserve is required to consider
whether the performance of such activities by a bank holding
company or its subsidiaries can reasonably be expected to produce
benefits to the public such as greater convenience, increased
competition or gains in efficiency that outweigh possible adverse
effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking
practices.
Generally, bank holding companies are required to obtain prior
approval of the Federal Reserve to engage in any new activity not
previously approved by the Federal Reserve or to acquire more than
5 of any class of voting stock of any company. The BHCA also
requires bank holding companies to obtain the prior approval of the
Federal Reserve before acquiring more than 5% of any class of
voting stock of any bank which is not already majority-owned by the
bank holding company.
The Company is also subject to the North Carolina Bank Holding
Company Act of 1984. As required by this state legislation, the
Company, by virtue of its ownership of the Banks, has registered as
a bank holding company with the Commissioner of Banks of the State
of North Carolina. The North Carolina Bank Holding Company Act
also prohibits the Company from acquiring or controlling certain
non-bank banking institutions which have offices in North Carolina.
Interstate Banking and Branching Legislation. Pursuant to the
Reigle--Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking and Branching Act"), which became
effective September 29, 1995, a bank holding company may acquire
banks in states other than its home state subject to any state
requirement that the bank has been organized and operating for a
minimum period of time, not to exceed five years, and the
requirement that the bank holding company, prior to, or following
the proposed acquisition, controls no more than 10 of the total
amount of deposits of insured depository institutions in the United
States and no more than 30% of such deposits in any state (or such
lesser or greater amount set by state law).
The Interstate Banking and Branching Act also authorizes banks
to merge across state lines, thereby creating interstate branches,
beginning June 1, 1997. Under such legislation, each state has the
opportunity either to "opt out" of this provision, thereby
prohibiting interstate merger transactions in such states, or to
"opt in" at an earlier time, thereby allowing interstate merger
transactions within that state prior to June 1, 1997. The State of
North Carolina has "opted in" to such legislation, effective
June 22, 1995. Furthermore, pursuant to the Interstate Banking and
Branching Act, a bank is now able to open new branches in a state
in which it does not already have banking operations, if the laws
of such state permit such de novo branching. As a result of North
Carolina's early opt-in law, North Carolina law permits interstate
de novo branching on a reciprocal basis until June 1, 1997, and
unrestricted interstate de novo branching thereafter.
Regulation of the Banks. As mentioned above, FCNB is
organized as a national banking association and is subject to
regulation, supervision and examination by the OCC. OCC rules and
requirements applicable to national banking associations such as
FCNB relate to required reserves, allowable investments, loans,
mergers, consolidations, issuance of securities, payment of
dividends, establishment of branches, limitations on credit to
subsidiaries and other aspects of the business of such
subsidiaries. The OCC has broad authority to prohibit national
banks from engaging in unsafe or unsound banking practices.
Union is a state-chartered non-member commercial bank. As
such, Union must file various reports with, and is subject to
periodic examinations by, the Banking Commission. North Carolina
law and the Banking Commission regulate (in conjunction with
applicable federal laws and regulations), among other things,
Union's capital, permissible activities, reserves, investments,
lending authority, branching, mergers and consolidations, payment
of dividends, and transactions with affiliated parties and
borrowings. As a federally-insured, non-member bank, Union is also
subject to regulation, supervision and examination by the FDIC.
Capital and Operational Requirements. The Federal Reserve,
the OCC and the FDIC have issued substantially similar risk-based
and leverage capital guidelines applicable to United States and
state-chartered banking organizations. Pursuant to these
standards, the Company and each of the Banks is required to
maintain a minimum ratio of Tier I Capital (as defined) to total
risk-weighted assets of 4.00% and a minimum ratio of Total Capital
(as defined) to risk-weighted assets of 8.00%. Tier I Capital is
comprised of total stockholders' equity calculated in accordance
with generally accepted accounting principles less certain
intangible assets, and Total Capital is comprised of Tier I Capital
plus certain adjustments, the largest of which for the Company is
the general allowance for loan losses. Risk-weighted assets refer
to the on- and off-balance sheet exposures of the Company adjusted
for their related risk levels using amounts set forth in Federal
Reserve, OCC and FDIC regulations .
In addition to the risk-based capital requirements described
above, the Company and each of the Banks are subject to a leverage
capital requirement, which calls for a minimum ratio of Tier
Capital (as previously defined) to total assets of 3% to 5%.
At December 31, 1995, the Company and the Banks were in
compliance with all existing capital requirements. The Company' s
compliance with existing capital requirements is summarized in the
table below.
RISK BASED CAPITAL
Leverage Capital Tier I Capital Total Capital
Amount Percentage (l) Amount Percentage (2) Amount Percentage (2)
(Dollars in thousands)
Actual $51,625 10.17% $51,625 14.28% $56,143 15.53%
Required 20,304 4.00 14,458 4 00 28,917 8.00
Excess 31,321 6.17 37,167 10.28 27,226 7.53
(1) Percentage of total adjusted assets. The Federal Reserve
minimum leverage ratio requirement is 3% to 5%, depending on
the institution' s composite rating as determined by its
regulators. The Federal Reserve Board has not advised the
Company of any specific requirement applicable to it .
( 2 ) Percentage of risk-weighted assets .
Prompt Corrective Action under FDICIA. The Federal Deposit
Insurance Corporation Improvement Act of 1991 ( "FDICIA" ) effected
a substantial revision of regulatory and funding provisions
applicable to insured depository institutions, including certain
capital and non-capital standards . Among other things, FDICIA
identifies the five capital categories for insured depository
institutions (well capitalized, adequately capitalized,
undercapitalized, significantly under capitalized and critically
undercapitalized) and requires the respective Federal regulatory
agencies to implement systems for "prompt corrective action" for
insured depository institutions that do not meet minimum capital
requirements within such categories. FDICIA imposes progressively
more restrictive constraints on operations, management and capital
distributions, depending on the category in which an institution is
classified. Failure to meet the capital guidelines could also
subject a banking institution to capital raising requirements . In
addition, pursuant to FDICIA, the various regulatory agencies have
prescribed certain non-capital standards for safety and soundness
relating generally to operations and management, asset quality and
executive compensation and permits regulatory action against a
financial institution that does not meet such standards .
The various regulatory agencies have adopted substantially
similar regulations that define the five capital categories
identified by FDICIA, using the total risk-based capital, Tier 1
risk-based capital and leverage capital ratios as the relevant
capital measures. Such regulations establish various degrees of
corrective action to be taken when an institution is considered
under-capitalized. Under the regulations, a "well capitalized"
institution must have a Tier 1 capital ratio of at least 6 percent,
a total capital ratio of at least 10 percent and a leverage ratio
of at least 5 percent and not be subject to a capital directive
order. An "adequately capitalized" institution must have a Tier 1
capital ratio of at least 4 percent, a total capital ratio of at
least 8 percent and a leverage ratio of at least 4 percent, or 3
percent in some cases. Under these guidelines, each of the Banks
is considered well capitalized.
Banking agencies have also adopted final regulations which
mandate that regulators take into consideration concentrations of
credit risk and risks from non-traditional activities, as well as
an institution's ability to manage those risks, when determining
the adequacy of an institution's capital. That evaluation will be
made as a part of the institution's regular safety and soundness
examination. Banking agencies also have proposed amendments to
existing risk-based capital regulations to provide for the
concentration of interest rate risk (when the interest rate
sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position)
in the determination of a bank's minimum capital requirements.
This proposal, while still under consideration, would require banks
with interest rate risk in excess of defined thresholds to maintain
additional capital beyond that generally required.
Distributions. The primary source of funds for distributions
paid by the Company to its shareholders is dividends received from
the Banks. The amount of dividends that FCNB may pay is subject to
regulation by the OCC. Under current regulations, the amount that
may be paid in any one year without approval of the OCC is the sum
of its net profits (as defined by statute) for that year and its
retained net profits for the preceding two years. In 1996, FCNB
can initiate dividend payments without the approval of the OCC of
an amount not exceeding its retained net profits for 1994 and 1995
(approximately $5,058,000) plus an additional amount equal to its
net profits for 1996 up to the date of any such dividend
declaration.
The payment of dividends by Union is subject to restrictions
of North Carolina law applicable to the declaration of
distributions by a commercial bank. In general, Union may declare
dividends in an amount that does not exceed its undivided profits
(determined as set forth in Chapter 53 of the North Carolina
General Statutes), as long as the surplus of Union equals at least
50% of Union's paid-in capital stock.
In addition to the foregoing, the ability of the Company and
its subsidiaries to pay dividends may be affected by the various
minimum capital requirements and the capital and non-capital
standards established under FDICIA as described above.
Furthermore, if, in the opinion of the federal regulatory agencies,
a bank under its jurisdiction is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial
condition of the bank, could include the payment of dividends),
such authority may require, after notice and hearing, that such
bank cease and desist from such practice. The right of the
Company, its shareholders and its creditors to participate in any
distribution of assets or earnings of the Banks is further subject
to the prior claims of creditors against the respective Banks.
Deposit Insurance. The deposits of the Banks are insured up
to applicable limits by the FDIC. Accordingly, the Banks are
subject to deposit premium assessments of the Bank Insurance Fund
("BIF") of the FDIC. As mandated by FDICIA, the FDIC has adopted
regulations for a risk-based insurance assessment system. Under
this system, the assessment rates for an insured depository
institution vary according to the level of risk incurred in its
activities. To arrive at a risk assessment for a bank, the FDIC
places it in one of nine risk categories using a process based on
capital ratios and on other relevant information from supervisory
evaluations of the bank by the bank's primary federal regulator
(the OCC for FCNB and the FDIC for Union), statistical analyses of
financial statements and other relevant information.
Under the FDIC's risk-based insurance system, BIF-assessed
deposits are currently subject to premiums of between $0.00 and
$0.27 per $100 of deposits, depending upon the institution's
capital position and other supervisory factors. The current
premiums reflect a reduction, effective January 1, 1996, from a
range of $0.04 to $0.31 per $100 of deposits. The rate applicable
to the BIF-assessed deposits of each of the Banks is currently
$0.00 per $100 of eligible deposits, with a minimum annual
assessment of $2,000.
Source of Strength. According to Federal Reserve Board
policy, bank holding companies are expected to act as a source of
financial strength to each subsidiary bank and to commit resources
to support each such subsidiary. This support may be required at
times when a bank holding company may not be able to provide such
support. Similarly, under the cross-guaranty provisions of the
Federal Deposit Insurance Act, in the event of a loss suffered or
anticipated by the FDIC--either as a result of default of a
banking or thrift subsidiary of the Company or related to FDIC
assistance provided to a subsidiary in danger of default--the
other banking subsidiaries of the Registrant may be assessed for
the FDIC's loss subject to certain exceptions.
Future Legislation. Proposals to change the laws and
regulations governing the banking industry are frequently
introduced in Congress, in the state legislatures and before the
various bank regulatory agencies. In 1995, several bills were
introduced in Congress that would have the effect of broadening the
securities underwriting powers of bank holding companies and
possibly permitting bank holding companies to engage in
nonfinancial activities. The likelihood and timing of any such
proposals or bills being enacted and the impact they might have on
the Company and its subsidiaries cannot be determined at this time.
Statistical Information
The following tables present certain statistical information relating
to the Registrant. The tables should be read in conjunction with the
Registrant's Consolidated Financial Statements and Notes thereto (pages
9 through 29) and Management's Discussion and Analysis of Financial
Condition and Results of Operations (pages 30 through 38), both of which
are incorporated herein by reference to the First Charter Corporation
1995 Annual Report to Shareholders. All financial data has been
adjusted to reflect the acquisition of Bank of Union in 1995 which was
accounted for as a pooling of interests.
The following table includes for the years ended December 31, 1995,
1994, and 1993 interest income on interest earning assets and related
average yields, as well as interest expense on interest bearing
liabilities and related average rates paid. In addition, the table
includes the average net yield on average earning assets. Average
balances were calculated based on daily averages.
Table 1
Average Balances and Net Interest Income Analysis
1995 1994 1993
Interest Average Interest Average Interest Average
Average Income/ Yield/Rate Average Income/ Yield/Rate Average Income/ Yield/Rate
Balance Expense Paid Balance Expense Paid Balance Expense Paid
(Dollars in thousands)
Interest earning assets:
Loans (1) (2) (3) $305,729 $29,356 9.60% $263,180 $22,941 8.72% $235,383 $19,295 8.20%
Securities Available for
sale - taxable 39,024 2,589 6.63 35,732 2,389 6.69 - - -
Securities available for
sale - nontaxable 6,421 484 7.54 - - - - - -
Investment securities -
taxable 31,829 1,963 6.17 32,567 1,762 5.41 65,660 4,255 6.42
Investment securities -
nontaxable (3) 39,807 3,347 8.41 44,414 3,848 8.66 36,685 3,476 9.47
Federal funds sold 5,455 326 5.98 5,266 219 4.16 4,139 127 3.07
Interest-bearing bank
deposits 7,298 432 5.92 3,017 132 4.38 1,497 49 3.27
Total $435,563 $38,497 8.84% $384,176 $31,291 8.15% $343,364 $27,202 7.92%
Interest bearing liabilities:
Demand deposits $ 64,430 1,285 2.00% $ 61,397 $ 1,213 1.98% $ 55,346 $ 1,191 2.15%
Money market accounts 42,364 1,208 2.85 48,080 1,129 2.35 51,648 1,296 2.51
Savings deposits 102,043 5,098 5.00 80,211 3,203 3.99 59,234 2,382 4.02
Other time deposits 117,620 6,494 5.52 105,770 4,337 4.10 106,092 4,255 4.01
Other borrowings 21,530 1,125 5.22 15,360 666 4.34 8,418 234 2.78
Total $347,987 $15,210 4.37% $310,818 $10,548 3.39% $ 280,738 $ 9,358 3.33%
Net interest income and
spread $23,287 4.47% $20,743 4.75% $17,844 4.59%
Net yield on interest
earning assets (4) 5.35% 5.40% 5.20%
(1) Includes loan fees of approximately $319,000 in 1995, $279,000 in
1994, $200,000 in 1993.
(2) The preceding analysis takes into consideration the principal
amount of nonaccruing loans and only income actually collected on
such loans.
(3) Yields on nontaxable securities are stated on a fully taxable
equivalent basis, assuming a Federal tax rate of 34% for 1995,
1994 and 1993. The adjustments made to convert to a fully taxable
equivalent basis were $1,303,000 for 1995, $1,308,000 for 1994 and
$1,181,000 for 1993.
(4) Represents net interest income as a percentage of total average
interest earning assets.
(5) Loans are shown net of unearned income.
Changes in Interest Income and Expense
The following table contains the dollar amount of change in interest
income and interest expense and segregates the dollar amount of change
due to rate and volume variances for the years ended December 31, 1995
and 1994. The change in interest income, stated on a tax equivalent
basis, or interest expense attributable to the combination of rate
variance and volume variance is included in the table, but such amount
has also been allocated between, and included in the amounts shown as,
changes due to rate and changes due to volume. The allocation of the
change due to rate/volume variance was made equally to rate variance and
to volume variance. Interest income related to tax exempt securities is
stated on a tax equivalent basis using a Federal income tax rate of 34%
in 1995, 1994 and 1993.
Table 2
Volume and Rate Variance Analysis
From Dec. 31, 1994 to Dec. 31, 1995 From Dec. 31, 1993 to Dec. 31, 1994
Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in
Rate/ Total Rate/ Total
Volume Rate Volume Change Volume Rate Volume Change
(Dollars in thousands)
Interest income:
Loans $ 377 $2,518 3,897 $6,415 $ 144 $ 1,295 2,351 $ 3,646
Securities Available for
Sale - Taxable (2) (19) 219 200 2,389 1,195 1,195 2,390
Securities Available for
Sale - Non-Taxable 484 242 242 484 - - - -
Securities
Taxable (6) 244 (43) 201 354 (525) (1,968) (2,493)
Nontaxable 12 (108) (393) (501) (63) (329) 701 372
Total securities 488 359 25 384 2,680 341 (72) 269
Federal funds sold 3 97 10 107 12 51 41 92
Interest bearing deposits 66 80 220 300 17 25 58 83
Total interest income 934 3,054 4,152 7,206 2,853 1,712 2,378 4,090
Interest expense:
Demand deposits 1 12 60 72 (11) (102) 125 23
Money market accounts (29) 228 (149) 79 6 (81) (87) (168)
Savings deposits 219 914 981 1,895 (6) (20) 841 821
Other time deposits 168 1,587 570 2,157 - 96 (13) 83
Other borrowings 55 163 295 458 108 185 247 432
Total interest expense 414 2,904 1,757 4,662 97 78 1,113 1,191
Net interest income $ 525 $ 150 $2,395 $ 2,545 $2,756 $1,634 $1,265 $2,899
The following table presents the Company's interest sensitivity
analysis for December 31, 1995 and sets forth at various maturity
periods the cumulative interest sensitivity gap, which is the
difference between rate sensitive assets and rate sensitive liabilities
for assets and liabilities that management considers rate sensitive.
Demand deposits, money market accounts and savings deposits are
presented in the earliest repricing window because the rates are
subject to immediate repricing.
Table 3
Interest Rate Sensitivity
As of December 31, 1995
Non-
Sensitive
and
Interest Sensitivity in Days Sensitive
(Dollars in thousands) Over 5
1 - 90 91 - 180 181 - 365 Total 1-2 Years 2-5 Years Years Total
Earning Assets
Interest-bearing due
from banks $ 7,695 $ - $ 500 $ 8,195 $ - $ - $ - $ 8,195
Securities available
for sale:
Taxable 6,842 3,298 7,587 17,727 16,936 24,405 14,237 73,305
Nontaxable 90 429 466 985 2,295 7,049 48,724 59,053
Loans, net of unearned
interest 174,091 7,490 13,338 194,919 35,647 61,115 41,062 332,743
Total earning assets 188,718 11,217 21,891 221,826 54,878 92,569 104,023 473,296
Interest-Bearing Liabilities
Interest-bearing deposits:
Demand deposits 66,814 - - 66,814 - - - 66,814
Money market accounts 41,633 - - 41,633 - - 41,633
Savings deposits 71,925 - - 71,925 37,157 - - 109,082
Other time deposits 55,503 25,494 25,422 106,419 14,347 4,439 37 125,242
Other borrowings 29,748 - - 29,748 3,000 - 2,514 35,262
Total interest-bearing
liabilities 265,623 25,494 25,422 316,539 54,504 4,439 $ 2,551 $378,033
Interest sensitivity
gap $(76,905) $(14,277) $ (3,531) $ (94,713) $ 374 $ 88,130
Cumulative gap $(76,905) $(91,182) $(94,713) $ (94,713) $(94,339) $ (6,209)
Ratio of earning assets
to interest-bearing
liabilities 71.05% 44.00% 86.11% 70.08% 100.69% 2085.36%
Distribution of Assets and Liabilities
The following table shows the distribution of the Company's assets,
liabilities and shareholders' equity at December 31, 1995, 1994, and
1993. Average balances were calculated based on daily averages.
Table 4
Average Balance Sheet
Years Ended December 31,
1995 1994 1993
Average Percentage Average Percentage Average Percentage
Balance Distribution Balance Distribution Balance Distribution
(Dollars in thousands)
Assets:
Cash and due from banks $ 26,134 5.6% $ 21,192 5.1% $ 18,068 4.9%
Investment securities - taxable 31,82 6.8 32,567 7.8 65,660 17.7
Investment securities - nontaxable 39,807 8.5 44,414 10.7 36,685 9.9
Securities available for sale
- taxable 39,024 8.4 35,732 8.6 - -
Securities available for sale
- nontaxable 6,421 1.4 - - - -
Loans, net (1) 301,291 64.6 259,333 62.6 231,522 62.3
Federal funds sold 5,455 1.2 5,266 1.3 4,139 1.1
Other assets 16,275 3.5 15,922 3.9 15,172 4.1
Total $466,236 100.0% $414,426 100.0% $371,246 100.0%
Liabilities and shareholders' equity
Deposits:
Demand (2) $129,269 27.7% $116,339 28.1% $101,441 27.3%
Savings 102,043 21.9 80,211 19.3 59,234 16.0
Insured money market 42,364 9.1 48,080 11.6 51,648 13.9
Time 117,620 25.2 105,770 25.5 106,092 28.5
Other borrowings 21,530 4.6 15,360 3.7 8,418 2.3
Other liabilities 3,129 0.7 2,886 0.7 2,548 0.7
Shareholders' equity 50,281 10.8 45,780 11.1 41,865 11.3
Total $466,236 100.0% $414,426 100.0% $371,246 100.0%
(1) Loans, net is net of unearned income and the allowance for loan losses.
(2) Demand includes non-interest bearing and interest bearing demand deposits.
Securities Available for Sale
The following table shows, as of December 31, 1995, 1994 and 1993,
the carrying value of (i) U.S. Government obligations, (ii) U.S.
Government agency obligations, (iii) mortgage-backed securities, (iv)
state and municipal obligations, and (v) equity securities.
Table 5
Securities Available for Sale
December 31,
(Dollars in thousands)
Securities Available for Sale:
1995 1994 1993
U.S. Government obligations $ 23,363 $18,042 $25,412
U.S. Government Agency obligations 26,524 10,895 3,435
Mortgage-backed securities 18,290 5,330 3,632
State and Municipal obligations 59,053 - -
Equity Securities 5,128 3,264 2,294
$132,358 $37,531 $34,773
Investment Portfolio
The following table shows, as of December 31, 1995, 1994 and 1993,
the amortized cost (face amount, plus unamortized premiums, less
unamortized discounts), of (i) U.S. Government obligations, (ii) U.S.
Government agency obligations, (iii) mortgage-backed securities, and
(iv) state and municipal obligations.
Table 6
Investment Portfolio
December 31,
(Dollars in thousands)
Investment Securities - Debt
1995 1994 1993
U.S. Government obligations $ - $ 5,968 $ 3,002
U.S. Government agency obligations - 15,582 1,000
Mortgage-backed securities - 16,592 22,613
State and municipal obligations - 43,973 45,136
$ - $82,115 $71,751
The following table indicates the carrying value of each significant
securities available for sale category due within one year, after one year
but within five years, after five years but within ten years and after ten
years, together with the weighted average yield for each range of
maturities, as of December 31, 1995. Yields are determined based on
amortized cost. Yields are stated on a tax equivalent basis assuming a
Federal income tax rate of 34% in 1995.
Table 7
Securities Available for Sale
As of December 31, 1995
After Five
Due Within One After One Year but Years But
Year Within Five Years Within Ten Years After Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
(Dollars in thousands)
U.S. Government
obligations $ 4,922 6.16% $18,441 6.98% $ - -% $ - -%
U.S. Government
Agency Obligations 5,034 6.28 21,490 6.30 - - - -
Mortgage-Backed
Securities - - 1,645 5.81 11,147 6.39 5,498 7.60
State & Municipal
Obligations 985 9.52 9,344 9.37 35,495 7.76 13,229 7.68
Equity securities - - - - - - 5,128 5.02
Total $10,941 6.52% $50,920 7.07% $46,642 7.43% $23,855 7.23%
As of December 31, 1995, there were no issues of securities available
for sale (excluding U.S. Government obligations and U.S. Government agency
obligations) which had carrying values that exceeded 10% of shareholders'
equity of the Company.
As of December 31, 1995, there were no investment securities.
Loan Portfolio
The table below summarizes loans in the classifications indicated
as of December 31, 1995, 1994, 1993, 1992, and 1991.
Table 8
Loan Portfolio Composition
December 31,
1995 1994 1993 1992 1991
(Dollars in thousands)
Commercial, financial and
agricultural $ 92,325 $ 87,034 $ 82,920 $ 78,708 $ 72,452
Real estate - construction
and development 33,750 29,646 20,777 23,157 21,165
Real estate - mortgage 171,281 138,997 117,903 106,632 98,695
Installment 35,683 32,186 27,683 23,228 24,089
Total loans 333,039 287,863 249,283 231,725 216,401
Less - allowance for loan
losses (4,856) (4,131) (3,900) (3,958) (3,165)
Unearned income (296) (201) (88) (73) (158)
Loans, net $327,887 $283,531 $245,295 $227,694 $213,078
Maturities and Sensitivities of Loans to Change in Interest Rates
Set forth in the table below are the amounts of each loan type,
except installment loans and real estate mortgage loans, due in one
year, after one year through five years, and after five years, at
December 31, 1995.
Table 9
Maturities and Sensitivity to
Change in Interest Rates
December 31, 1995
After l
l year Year through After
or less 5 Years 5 Years Total
(Dollars in thousands)
Commercial, financial
and agricultural $40,150 $45,394 $5,845 $ 91,389
Real estate
construction and
development 17,249 14,620 1,829 33,698
Total $57,399 $60,014 $7,674 $125,087
The amounts of the above loans with a maturity over one year
which have a predetermined interest rate or a floating or adjustable
interest rate are as follows:
December 31, 1995
(Dollars in thousands)
Predetermined interest rate $38,622
Floating or adjustable interest rate 29,066
Non-performing Loans
Non-performing loans includes non-accrual loans, re-structured
loans and accruing loans which are contractually past due 90 days
or more.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Balance Sheet Analysis - Asset Quality"
in the First Charter Corporation 1995 Annual Report to Shareholders,
incorporated herein by reference, for a complete discussion of non-
performing assets.
Accruing Loans 90 Days or More Past Due
The following table illustrates the dollar amount of loans
outstanding in each category and the amount and percentage of those
accruing loans which are 90 days or more past due as of December 31,
1995, 1994, 1993, 1992, and 1991.
Table 10
Accruing Loans 90 Days or More Past Due
Accruing Percentage of
Loans 90 Such Loans to
Days or Gross Gross Loans
More Loans Outstanding
Past Due Outstanding By Category
(Dollars in thousands)
December 31, 1995
Commercial, financial and
agricultural $ 27 $ 92,325 .03%
Real estate - construction
and development - 33,750 -
Real estate - mortgage 162 171,281 .09
Installment 52 35,683 .15
Total $ 241 $333,039 .27%
December 31, 1994
Commercial, financial and
agricultural $ 56 $ 87,034 .06%
Real estate - construction
and development - 29,646 -
Real estate - mortgage 969 138,997 .70
Installment 185 32,186 .57
Total $1,210 $287,863 .42%
December 31, 1993
Commercial, financial and
agricultural $ 9 $ 82,920 .01%
Real estate - construction
and development - 20,777 -
Real estate - mortgage 170 117,903 .14
Installment 38 27,683 .14
Total $ 217 $249,283 .09%
December 31, 1992
Commercial, financial and
agricultural $ 27 $ 78,708 .03%
Real estate - construction
and development - 23,157 -
Real Estate - mortgage 140 106,632 .13
Installment 49 23,228 .21
Total $ 216 $231,725 .09%
Table 10 is continued on page 19.
Table 10 (Continued)
Accruing Loans 90 Days or More Past Due
Accruing Percentage of
Loans 90 Such Loans to
Days or Gross Gross Loans
More Loans Outstanding
Past Due Outstanding By Category
(Dollars in thousands)
December 31, 1991
Commercial, financial and
agricultural $ 467 $ 72,452 .64%
Real estate - construction
and development - 21,165 -
Real estate - mortgage 149 98,695 .15
Installment 57 24,089 .24
Total $ 673 $216,401 .31%
Non-Accrual Loans and Restructured Loans
The determination to discontinue the accrual of interest is
based on a review of each loan. Interest is discontinued on loans
90 days past due as to principal or interest unless in management's
opinion collection of both principal and interest is assured by way
of collateralization, guarantees or other security and the loan is
in the process of collection. The table below summarizes the
Company's non-accrual loans and restructured loans as of the dates
indicated.
Table 11
Non-accrual and Restructured Loans
December 31,
1995 1994 1993 1992 1991
(Dollars in thousands)
Non-accrual loans
Principal balance outstandin $2,287 $2,521 $2,316 $2,316 $4,734
Interest income recorded during
the year $ 37 $ 143 $ 77 $ 77 $ 121
Interest income that would have
been recorded if the loans had
been current and accruing $ 280 $ 262 $ 209 $ 197 $ 479
Restructured loans
Principal balance outstanding $ 300 $ 325 $ 795 $3,266 $ -
Interest income recorded during
the year $ 45 $ - $ 50 $ 382 $ -
Interest income that would have
been recorded if the loans had
been current and accruing $ 27 $ 36 $ 59 $ 206 $ -
Interest income recorded on restructured loans during 1992
includes $176,000 of interest for a cash basis recovery of a
restructured loan which had been on nonaccrual in the prior year.
Summary of Loan Loss and Recovery Experience
The table below presents certain data for the years ended December
31, 1995, 1994, 1993, 1992, and 1991, including the following: (i) the
average amount of net loans outstanding during the year, (ii) the
allowance for loan losses at the beginning of the year, (iii) the
provision for loan losses, (iv) loans charged off and recoveries of
loans previously charged off presented by major loan categories, (v)
loan charge-offs, net, (vi) the allowance for loan losses at the end of
the year, (vii) the ratio of net charge-offs to average loans, (viii)
the ratio of the allowance for loan losses to average loans and (ix) the
ratio of the allowance for loan losses to loans at year-end, excluding
loans held for sale.
Table 12
Summary of Loan Loss and Recovery Experience
Years Ended December 31,
1995 1994 1993 1992 1991
(Dollars in thousands)
Average loans, net of unearned
income $305,729 $263,180 $235,383 $223,262 $213,328
Allowance for loan losses:
Beginning balance $ 4,131 $ 3,900 $ 3,958 $ 3,165 $ 2,872
Add provision for loan losses 1,465 839 835 942 1,679
5,596 4,739 4,793 4,107 4,551
Loan charge-offs:
Commercial, financial and
agricultural 472 625 713 224 475
Real estate - construction
and development - - - 15 154
Real estate - mortgage 82 73 84 99 461
Installment 387 193 221 129 399
941 891 1,018 467 1,489
Recoveries of loans previously
charged-off:
Commercial, financial and
agricultural 57 125 44 53 15
Real estate - construction
and development - - - 86 12
Real estate - mortgage 3 110 19 92 10
Installment 141 48 62 87 66
201 283 125 318 103
Loan charge-offs, net 740 608 893 149 1,386
Ending balance $ 4,856 $ 4,131 $ 3,900 $ 3,958 $ 3,165
Net charge-offs to average loans .24% .23% .38% .07% .65%
Allowance for loan losses to
average loans 1.59 1.57 1.66 1.77 1.48
Allowance for loan losses to
gross loans at year-end, excluding
loans held for sale 1.46 1.44 1.57 1.71 1.47
For a discussion of management's evaluation of the allowance for loan
losses, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Earnings Performance - Allowance and
Provision for Loan Losses" and "- Balance Sheet Analysis - Asset Quality"
in the First Charter Corporation 1995 Annual Report to Shareholders,
incorporated herein by reference.
The following table presents the dollar amount of the allowance for
loan losses applicable to major loan categories, the percentage of the
allowance amount in each category to the total allowance and the
percentage of the loans in each category to total loans as of December
31, 1995, 1994, 1993, 1992, and 1991. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Earnings
Performance - Allowance and Provision for Loan Losses" and "- Balance Sheet
Analysis - Asset Quality" in the First Charter Corporation 1995 Annual
Report to Shareholders, incorporated herein by reference.
Table 13
Allowance for Loan Losses
Percentage of
Percentage Gross Loans in
Allowance of Total Each Category
Amount Allowance to Total Loans
(Dollars in thousands)
December 31, 1995
Type of Loan:
Commercial, financial and
agricultural $1,462 30% 27%
Real estate - construction and
development 477 10 10
Real estate - mortgage 2,397 49 52
Installment 520 11 11
Total $4,856 100% 100%
December 31, 1994
Type of Loan:
Commercial, financial and
agricultural $2,025 49% 31%
Real estate - construction and
development 354 9 10
Real estate - mortgage 1,306 32 48
Installment 446 11 11
Total $4,131 100% 100%
December 31, 1993
Type of Loan:
Commercial, financial and
agricultural $2,370 61% 33%
Real estate - construction and
development 325 8 8
Real estate - mortgage 790 20 48
Installment 415 11 11
Total $3,900 100% 100%
Table 13 is continued on page 22.
Table 13
Allowance for Loan Losses (Continued)
Percentage of
Percentage Gross Loans in
Allowance of Total Each Category
Amount Allowance to Total Loans
(Dollars in thousands)
December 31, 1992
Type of Loan:
Commercial, financial and
agricultural $1,515 38% 34%
Real estate - construction and
development 610 15 10
Real estate - mortgage 1,412 36 46
Installment 421 11 10
Total $3,958 100% 100%
December 31, 1991
Type of Loan:
Commercial, financial and
agricultural $1,079 34% 33%
Real estate - construction and
development 303 10 10
Real estate - mortgage 1,494 47 46
Installment 289 9 11
Total $3,165 100% 100%
Deposits
The Banks primarily serve individuals and small- to medium-sized
businesses with a variety of deposit accounts, such as NOW accounts,
money market accounts, certificates of deposit and individual
retirement accounts. The following table presents average balances by
category and average rates paid for the years ended December 31, 1995,
1994, and 1993. Average balances were calculated based on daily
averages.
Table 14
Deposits
December 31,
1995 1994 1993
Avg. Avg. Avg.
Average Interest Rate Average Interest Rate Average Interest Rate
Balance Expense Paid Balance Expense Paid Balance Expense Paid
(Dollars in thousands)
Non-interest bearing demand
deposits $ 64,839 $ - - $ 54,942 $ - - $ 46,095 $ - -
Interest bearing deposits:
Demand deposits 64,430 1,285 2.00% 61,397 1,213 1.98% 55,346 1,191 2.15%
Insured money markets 42,364 1,208 2.85 48,080 1,129 2.35 51,648 1,296 2.51
Savings deposits 102,043 5,098 5.00 80,211 3,203 3.99 59,234 2,382 4.02
Time deposits 117,620 6,494 5.52 105,770 4,337 4.10 106,092 4,255 4.01
Total $326,457 $14,085 $295,458 $9,882 $272,320 $ 9,124
Total deposits $391,296 $14,085 $350,400 $9,882 $318,415 $ 9,124
As of December 31, 1995, domestic time deposits of $100,000 or more
totaled $28,471,324, with the following maturities: $12,740,980, three
months or less; $5,218,172, over three months through six months;
$5,583,530, over six months through twelve months and $4,928,642, over
one year through five years.
Other Borrowings
The following is a schedule of other borrowings which consists of the
following categories: securities sold under repurchase agreements, federal
funds purchased and Federal Home Loan Bank ("FHLB") borrowings for the
years ended December 31, 1995, 1994 and 1993.
Table 15
Other Borrowings
Interest Maximum
Balance Rate Avg. Outstanding
as of as of Average Int. at Any
Dec. 31 Dec. 31 Balance Rate Month-End
(Dollars in thousands)
1995
Federal funds purchased,
securities sold under
agreements to purchase
and FHLB borrowings $35,262 5.42% $21,530 5.22% $35,262
1994
Federal funds purchased,
securities sold
under agreements to
repurchase and
FHLB borrowings $22,441 5.20% $15,360 4.33% $22,441
1993
Federal funds purchased,
securities sold
under agreements to
repurchase, and
FHLB borrowings $ 7,450 2.98% $ 8,418 2.79% $17,013
At December 31, 1995, the Banks had three available lines of credit with
the FHLB totaling $66.5 million with $7,514,286 outstanding. The
outstanding amounts consist of $2,000,000 maturing in 1996, $3,000,000
maturing in 1997, $1,714,286 maturing in 2001 and $800,000 maturing in
2003. At December 31, 1995, such amounts were outstanding at market
interest rates for the specific advance program and maturity. In
addition, the Banks are required to pledge collateral to secure the
advances as described in the line of credit agreements. The collateral
consists of qualifying 1-4 family residential mortgage loans.
Return on Equity and Assets
The table below indicates the return on average assets (net income
divided by average total assets), return on average equity (net income
divided by average equity), dividend payout ratio (dividends declared
divided by net income), and average equity to average assets ratio
(average equity divided by average total assets) and other key operating
data for the years ended December 31, 1995, 1994, and 1993. Averages are
based on daily balances.
Table 16
Return on Equity and Assets
December 31,
1995 1994 1993
(Dollars in thousands
except per share amounts)
Net income $ 7,003 $ 6,570 $ 5,484
Average shareholders' equity 50,281 45,780 41,865
Average total assets 466,236 414,426 371,246
Dividends declared 2,618 1,893 1,438
Dividends per share .52 .41 .31
Primary and fully diluted
income per share excluding
cumulative effect of
accounting change 1.11 1.05 .82
Primary and fully diluted
income per share 1.11 1.05 .87
Return on average assets 1.50% 1.59% 1.48%
Return on average equity 13.93 14.34 13.10
Dividend payout ratio 37.38 28.81 26.22
Average equity to average assets
ratio 10.78 11.05 11.28
Item 2. Properties
The Company and FCNB -
The executive offices of the Company and FCNB, and the trust,
accounting, operations and data processing departments of FCNB, are
located in a facility at 22 Union Street, North, Concord, North Carolina
which was purchased in 1980 and contains approximately 19,500 square feet
of office space.
The main office of FCNB is located at 4 Union Street, North, Concord,
North Carolina and contains approximately 12,300 square feet of office
space, parking and a two lane drive-in teller facility. FCNB has full
service branches located in Concord (3), Cornelius, Davidson, Harrisburg,
Huntersville, Mt. Pleasant, Midland, Kannapolis, Landis and Oakdale, North
Carolina and drive-in facilities in the Branchview Shopping Center and
Highways 49/601 in Concord. All of these branches except Davidson and
Oakdale have drive-in teller facilities. FCNB maintains Automated Teller
Machines ("ATMs") at its branches in Concord, Cornelius, Harrisburg,
Huntersville, Kannapolis, Landis and Midland, along with three remote ATMs
located on Highway 29, South in Concord, in Cabarrus Memorial Hospital in
Concord and Jimmy's BP Convenience in Concord.
The Branchview Shopping Center branch, the Huntersville branch, the
Oakdale branch, the sites for all three remote ATMs and a small portion
of the main office which are leased from third parties. The rest of the
aforementioned FCNB properties and ATMs are owned free of any
encumbrances.
The Branchview Shopping Center lease is for an initial term of twenty
years effective May 30, 1977, with two renewal options of five years.
Monthly rent is $1,151.94. The Huntersville branch lease is for a term
expiring May l, 1999, with one remaining renewal option of five years.
Monthly rent is $3,500.00. The rental amount required under the
Huntersville branch lease is negotiable upon exercise of the renewal
option. The Oakdale branch is a leased modular unit. Monthly rent on the
unit as renewed on a month-to-month basis is $1,200.00. Monthly rent on
the land as renewed on a month-to-month basis is $600.00. Construction
is underway to build a permanent Oakdale branch site. Monthly rent under
the leased remote ATM site (Highway 29) as renewed for a five year period
beginning November 1990, is $2,250.00 per month. A second five year
renewal option would begin in November 1995. The lease for the remote ATM
(Cabarrus Memorial Hospital) was renewed for a three year period beginning
June 1, 1993 at a monthly rate of $125.00 per month. A second three year
renewal option begins June, 1996. The lease for the remote ATM (Jimmy's
BP) was executed November 1, 1995 at a rate of $200.00 per month for a
period of five years with the option of renewal for two additional five
year terms.
FCNB has purchased property in northeast Mecklenburg County for future
branch expansion.
Union -
The Main Office of Union is located at 201 North Charlotte Avenue,
Monroe, North Carolina in a two-story building containing approximately
6,850 square feet which was constructed by Union in 1985 and which Union
owns in fee simple. Union owns a vacant lot adjacent to its Main Office
which it holds for possible future expansion.
The Indian Trail branch of Union contains approximately 2,400 square
feet and was constructed by Union during 1986. The building and the land
are leased from a third party under an agreement providing for an original
term of fifteen years which expires on October 31, 2001. Union has
options to renew the lease for up to three consecutive, additional terms
of five years each. Lease payments under the agreement are $2,685 per
month.
The Skyway Drive branch of Union contains approximately 2,200 square
feet and was constructed by Union during 1988 on land leased from a third
party under an agreement which provides for an original term of fifteen
years which expires on February 1, 2003. Union has options to renew the
lease for up to five consecutive, additional terms of five years each.
Lease payments under the Agreement are $1,450 per month, and Union has an
option to purchase the property at the end of ten years at a price of
$200,000.
The Waxhaw branch of Union opened during 1989 and is located in a
newly constructed building containing approximately 2,520 square feet
which is owned by Union in fee simple.
The Matthews branch of Union opened during 1992 and is located in a
building containing approximately 2,775 square feet. The facility is
leased from a third party under an agreement which provided for an
original term of one year which expired on March 31, 1993. Union has
options to renew the lease for up to three consecutive additional terms
of one year each. Union has exercised the third of its three options to
renew, and this final renewal period expires on March 31, 1996. Lease
payments under the agreement currently are $3,000 per month.
Union's operations and data processing departments are located in
Monroe, in an approximately 4,673 square foot portion of a building leased
from a third party. This is a month to month lease with payment of $3,831
per month.
Union's mortgage loan department and BOU are located in Monroe, in
an approximately 2,000 square foot building leased from a third party
under an agreement providing for an original term of three years which
expires on February 28, 1997. Union has options to renew the lease for
up to four consecutive, additional terms of three years each. Lease
payments under the agreement currently are $1,750.00 per month.
Item 3. Legal Proceedings
While the Company or the Banks may be from time to time parties to
various legal proceedings arising out of the ordinary course of business,
management of the Company believes there is no proceeding threatened or
pending against the Company or the Banks or any of their properties that
could result in a materially adverse change in the business or
consolidated financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of the shareholders of the Registrant was held on
December 14, 1995 (the "First Charter Special Meeting") to consider and
vote upon a proposal to approve the Agreement and Plan of Merger dated
September 13, 1995, by and between the Registrant and Union (the "Merger
Agreement"), and the transactions contemplated thereby, including (i) the
merger of an interim state banking subsidiary of the Registrant with and
into Union at the effective time of the merger and (ii) the issuance of
0.75 shares of common stock, $5 par value, of the Registrant for each
outstanding share of common stock, $1.25 par value, of Union upon
consummation of the Merger.
A motion to approve the Merger Agreement and the transactions
contemplated thereby was adopted by a vote of the majority of the shares
of the Registrant represented in person or by proxy, as follows:
For: 3,549,529.310
Against: 11,781.494
Abstained: 5,259.595
Broker Non Votes: 0.000
Item 4A. Executive Officers of the Registrant
The following list sets forth with respect to each of the current
executive officers of the registrant his or her name, age, positions and
offices held with the Registrant and the Banks, the period served in such
positions or offices and, if such person has served in such position and
office for less than five years, the prior employment of such person.
Name Age Office and Position - Year Elected
Lawrence M. Kimbrough 55 President and Chief Executive Officer 1986
of the Registrant and FCNB
Robert O. Bratton 47 Executive Vice President, Chief 1983
Operating Officer and Chief
Financial Officer of the
Registrant and FCNB
Robert G. Fox, Jr. 46 Executive Vice President 1993
of the Registrant and FCNB and
Credit Administrator of FCNB
Senior Vice President and 1989 - 1993
Senior Credit Officer
Barclays Bank of NC
Phillip M. Floyd 46 Executive Vice President of the 1995
Registrant and FCNB
Trust and Investment Division
Executive of FCNB
Trust Group Executive 1982 - 1995
Southern National Bank, NC
H. Clark Goodwin 61 Executive Vice President of the 1995
Registrant and Union and
President and Chief Executive 1985
Officer of Union
PART II
Item 5. Market For Registrant's Common Equity and Related Shareholder
Matters
The information called for by Item 5 is set forth on the inside front
cover of the First Charter Corporation 1995 Annual Report to Shareholders
(included herewith as Exhibit 13.1) under the caption "Stock Information
and Dividends" and is hereby incorporated by reference.
Item 6. Selected Financial Data
The information called for by Item 6 is set forth on page 1 of the
First Charter Corporation 1995 Annual Report to Shareholders (included
herewith as Exhibit 13.l) under the caption "Selected Consolidated
Financial Data" and is hereby incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information called for by Item 7 is set forth on pages 30 through
38 in the First Charter Corporation 1995 Annual Report to Shareholders
(included herein as Exhibit 13.1) under the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and is hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data
The information called for by Item 8 is set forth on pages 9 through
29 of the First Charter Corporation 1995 Annual Report to Shareholders
(included herein as Exhibit 13.1) and is hereby incorporated by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information called for by Item 10 with respect to directors and
Section 16 matters is set forth in the Registrant's Proxy Statement for
its 1996 Annual Meeting of Shareholders under the captions "Election of
Directors" and "Management Ownership of Common Stock," respectively, and
is hereby incorporated by reference. The information called for by Item
10 with respect to executive officers is set forth in Part I, Item 4A
hereof.
Item 11. Executive Compensation
The information called for by Item 11 is set forth in the
Registrant's Proxy Statement for its 1996 Annual Meeting of Shareholders
under the captions "Election of Directors - Compensation of Directors",
"Executive Compensation" and "Compensation Committee Interlocks and
Insider Participation in Compensation Decisions," respectively, and is
hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 is set forth in the
Registrant's Proxy Statement for its 1996 Annual Meeting of Shareholders
under the captions "Principal Shareholders" and "Management Ownership of
Common Stock," respectively, and is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
The information called for by Item 13 is set forth in the
Registrant's Proxy Statement for its 1996 Annual Meeting of Shareholders
under the caption "Certain Relationships and Related Transactions" and is
hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (l) Financial Statements.
The following financial statements, together with report thereon of
independent certified public accountants, are included in this report
by incorporation by reference to the First Charter Corporation 1995
Annual Report to Shareholders (included herewith as Exhibit 13.1) as
set forth in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1995 and 1994
Consolidated Statements of Income for the years ended December 31, 1995,
1994 and 1993
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
Financial statement schedules for which provision for filing is made
in the applicable accounting regulations of the Securities and
Exchange Commission for bank holding companies are omitted because
the required information is not applicable or is included elsewhere
herein.
(3) 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.
Exhibit No.
(per Exhibit
Table in
Item 601 of
Regulation S-K) Description of Exhibits
*10.1 Comprehensive Stock Option Plan, incorporated
herein by referenced to Exhibit 10.1 of the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 (Commission
File No. 0-15829).
10.2 Dividend Reinvestment and Stock Purchase Plan,
incorporated herein by reference to Exhibit 28.1
of the Registrant's Registration Statement No. 33-52004.
*10.3 Executive Incentive Bonus Plan, incorporated
herein by reference to Exhibit 10.9 of the
Registrant's Registration Statement No. 33-13915.
10.4 1996 Employee Stock Purchase Plan, incorporated
herein by reference to Exhibit 99.1 of the
Registrant's Registration Statement No. 333-00321.
*10.5 Change in Control Agreement dated November 16,
1994 for Lawrence M. Kimbrough, incorporated
herein by reference to Exhibit 10.5 of the
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 (Commission File No.
0-15829.)
*10.6 Change in Control Agreement dated November 16,
1994 for Robert O. Bratton incorporated herein by
reference to Exhibit 10.6 of the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1994 (Commission File No. 0-15829.)
*10.7 Change in Control Agreement dated November 16,
1994 for Robert G. Fox, Jr incorporated herein by
reference to Exhibit 10.7 of the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1994 (Commission File No. 0-15829.)
*10.8 Change in Control Agreement dated March 15, 1995
for Phillip M. Floyd.
*10.9 Restricted Stock Award Program, incorporated
herein by reference to Exhibit 99.1 of the
Registrant's Registration Statement No. 33-60949.
Exhibit No.
(per Exhibit
Table in
Item 601 of
Regulation S-K) Description of Exhibits
10.10 Agreement and Plan of Merger between the
Registrant and Union dated as of September 13,
1995, incorporated herein by reference to Exhibit
2.1 of the Registrant's Registration Statement No.
33-63157.
10.11 Stock Option Agreement between the Registrant and
Union dated September 13, 1995, incorporated
herein by reference to Exhibit 99.2 of the
Registrant's Current Report on Form 8-K filed
September 22, 1995.
*10.12 Employment Agreement dated as of January 20, 1993,
as amended as of August 31, 1995, between Union
and H. Clark Goodwin, President, and Chief
Executive Officer of Union.
11.1 Statement regarding computation of per share
earnings.
13.1 First Charter Corporation Annual Report to its
shareholders for the year ended December 31, 1995.
Such Annual Report to its shareholders, except for
those portions which are expressly incorporated by
reference in this Form 10-K, is furnished for the
information of the Commission and is not to be
deemed "filed" as part of the Form 10-K.
21.1 List of subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule.
* Indicates a management contract or compensatory plan required to be
filed herein.
(b) Reports on Form 8-K.
The Registrant filed a current report on Form 8-K under Item 5 on
November 9, 1995 which included an updated Description of Common Stock
of the Registrant to reflect various changes in the provisions of the
North Carolina Business Corporation Act, as well as changes in other
regulatory restrictions and guidelines.
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) 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)
By: /s/ Lawrence M. Kimbrough
Lawrence M. Kimbrough, President
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Lawrence M. Kimbrough President and Director March 28, 1996
(Lawrence M. Kimbrough) (Principal Executive
Officer)
/s/ J. Roy Davis, Jr. Chairman of the Board March 28, 1996
(J. Roy Davis, Jr.) and Director
/s/ Duard C. Linn, Jr. Vice Chairman of the March 28, 1996
(Duard C. Linn, Jr.) Board and Director
/s/ Robert O. Bratton Executive Vice President March 28, 1996
(Robert O. Bratton) (Principal Financial and
Principal Accounting
Officer)
/s/ William R. Black Director March 28, 1996
(William R. Black)
/s/ Jane B. Brown Director March 28, 1996
(Jane B. Brown)
/s/ Grady S. Carpenter Director March 28, 1996
(Grady S. Carpenter)
Director March 28, 1996
(Michael R. Coltrane)
/s/ James B. Fincher Director March 28, 1996
(James B. Fincher)
/s/ H. Clark Goodwin Director March 28, 1996
(H. Clark Goodwin)
Signature Title Date
/s/ Frank H. Hawfield Director March 28, 1996
(Frank H. Hawfield)
/s/ J. Knox Hillman, Jr. Director March 28, 1996
(J. Knox Hillman, Jr.)
/s/ Branson C. Jones Director March 28, 1996
(Branson C. Jones)
/s/ Robert F. Lowrance Director March 28, 1996
(Robert F. Lowrance)
/s/ Jerry E. McGee Director March 28, 1996
(Jerry E. McGee)
/s/ Hugh H. Morrison Director March 28, 1996
(Hugh H. Morrison)
/s/ T. David Propst Director March 28, 1996
(T. David Propst)
/s/ Robert L. Wall Director March 28, 1996
(Robert L. Wall)
/s/ James B. Widenhouse Director March 28, 1996
(James B. Widenhouse)
Exhibit Index
Exhibit No.
(per Exhibit
Table in
Item 601 of Sequential
Regulation S-K) Description of Exhibits Page No
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.
*10.1 Comprehensive Stock Option Plan,
incorporated herein by referenced to
Exhibit 10.1 of the Registrant's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1992
(Commission File No. 0-15829).
10.2 Dividend Reinvestment and Stock
Purchase Plan, incorporated herein by
reference to Exhibit 28.1 of the
Registrant's Registration Statement
No. 33-52004.
*10.3 Executive Incentive Bonus Plan,
incorporated herein by reference to
Exhibit 10.9 of the Registrant's
Registration Statement No. 33-13915.
10.4 1996 Employee Stock Purchase Plan,
incorporated herein by reference to
Exhibit 99.1 of the Registrant's
Registration Statement No. 333-00321.
*10.5 Change in Control Agreement dated
November 16, 1994 for Lawrence M.
Kimbrough, incorporated herein by
reference to Exhibit 10.5 of the
Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994
(Commission File No. 0-15829.)
Exhibit No.
(per Exhibit
Table in
Item 601 of Sequential
Regulation S-K) Description of Exhibits Page No
*10.6 Change in Control Agreement dated
November 16, 1994 for Robert O.
Bratton incorporated herein by
reference to Exhibit 10.6 of the
Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994
(Commission File No. 0-15829.)
*10.7 Change in Control Agreement dated
November 16, 1994 for Robert G. Fox,
Jr incorporated herein by reference to
Exhibit 10.7 of the Registrant's
Annual Report on Form 10-K for the
year ended December 31, 1994
(Commission File No. 0-15829.)
*10.8 Change in Control Agreement dated
March 15, 1995 for Phillip M. Floyd.
*10.9 Restricted Stock Award Program,
incorporated herein by reference to
Exhibit 99.1 of the Registrant's
Registration Statement No. 33-60949.
10.10 Agreement and Plan of Merger between
the Registrant and Union dated as of
September 13, 1995, incorporated
herein by reference to Exhibit 2.1 of
the Registrant's Registration
Statement No. 33-63157.
10.11 Stock Option Agreement between the
Registrant and Union dated September
13, 1995, incorporated herein by
reference to Exhibit 99.2 of the
Registrant's Current Report on Form 8-K
filed September 22, 1995.
*10.12 Employment Agreement, amended and
assumed by the Registrant as of
December 21, 1995 between the
Registrant and H. Clark Goodwin,
President and Chief Executive Officer
of Union.
11.1 Statement regarding computation of per
share earnings.
Exhibit No.
(per Exhibit
Table in
Item 601 of Sequential
Regulation S-K) Description of Exhibits Page No
13.1 First Charter Corporation Annual
Report to its shareholders for the
year ended December 31, 1995. Such
Annual Report to its shareholders,
except for those portions which are
expressly incorporated by reference
in this Form 10-K, is furnished for
the information of the Commission and
is not to be deemed "filed" as part
of the Form 10-K.
21.1 List of subsidiaries of the
Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule.
* Indicates a management contract or compensatory plan
required to be filed herein.