First Charter Announces 2003 Earnings and Fourth Quarter Results.Business Editors CHARLOTTE, N.C.--(BUSINESS WIRE)--Jan. 13, 2004 First Charter Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : FCTR FCTR First Charter Corporation (stock symbol) FCTR Federal Cash Transactions Report FCTR Forced Call Termination Rate ) today reported 2003 earnings of $14.1 million, or $0.47 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, a decrease from earnings of $39.8 million or $1.30 per diluted share for the same period in 2002. As previously reported, the decrease in earnings for 2003 was primarily due to $19.1 million of costs associated with the prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. of selected borrowings and a $19.2 million increase in the provision for loan losses primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the sale of $60.9 million of nonaccruing and accruing higher risk loans, adverse business conditions, and increases in the loan portfolio. While the Corporation continued to make increases in noninterest income, earnings were negatively impacted by historically low interest rates which compressed the net interest margin during 2003 compared to 2002. For the fourth quarter, First Charter reported a net loss of $0.5 million or $0.02 per diluted share, a decrease from earnings of $10.5 million or $0.35 per diluted share for the same period in 2002. As previously reported, the decrease in earnings for the fourth quarter was primarily due to $11.7 million of costs associated with the prepayment of selected borrowings and an increase in the provision for loan losses primarily due to increases in the loan portfolio. The Corporation continued to make gains in revenue from brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. services, insurance services, financial management and service charges. "2003 was a challenging year for First Charter, but we never lost our focus," said Lawrence Lawrence. 1 City (1990 pop. 26,763), Marion co., central Ind., a residential suburb of Indianapolis, on the West Fork of the White River. It has light manufacturing. 2 City (1990 pop. 65,608), seat of Douglas co., NE Kans. M. Kimbrough Kimbrough may refer to: People
n the process of coming to a conclusion or making a judgment. decision-making, evidence-based, n a type of informal decision-making that combines clinical expertise, patient concerns, and evidence gathered from , both of which have made us a stronger company. In 2003, we produced strong growth in core deposits, loans, non-interest income and core retail checking households. We also decided to sell $60.9 million in nonaccruing and accruing problem loans and to significantly reduce our interest expense by refinancing Refinancing An extension and/or increase in amount of existing debt. selected borrowings. On balance, First Charter is better-equipped for growth now than we were at the beginning of 2003." Highlights Fourth Quarter 2003 compared to Third Quarter 2003 -- Gross loans increased $143.3 million or 7 percent. -- Average earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin increased $61.7 million or 2 percent. -- Average noninterest-bearing deposits increased $44.2 million or 13 percent. -- Net interest margin increased 24 basis points to 3.10 percent. Fourth Quarter 2003 compared to Fourth Quarter 2002 -- Net interest income increased $0.9 million or 3 percent. -- Provision for loan losses increased $1.4 million or 64 percent. -- Noninterest income decreased $2.8 million or 17 percent. -- Noninterest expense increased $13.8 million or 50 percent, primarily due to the previously mentioned prepayment on borrowings. Full Year 2003 compared to Full Year 2002 -- Gross loans increased $180.1 million or 9 percent. -- Average earning assets increased $400.6 million or 12 percent. -- Average deposits increased $234.5 million or 10 percent. -- Net interest income decreased $5.4 million or 5 percent. -- Provision for loan losses increased $19.2 million primarily due to the previously mentioned loan sale, adverse business conditions and loan growth. -- Noninterest income increased $16.5 million or 35 percent. -- Noninterest expense increased $29.3 million or 30 percent, primarily due to the previously mentioned prepayment on borrowings. -- $60.9 million in nonaccruing and accruing higher risk loans were sold during 2003. -- Prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. $131 million in Federal Home Loan Bank advances,
incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. charges of $19.1 million during 2003. -- 40,636 new checking accounts were opened during 2003 as a result of the Checking Account Marketing Program ("CHAMP"). -- Dividends paid per share increased for the 12th consecutive year during 2003. -- Customer satisfaction scores remained above 80 percent "Very Satisfied". -- Core retail households increased 24 percent to 79,985.
Financial Highlights
Earnings (Dollars in thousands, except per share data)
For the Three Months For the Twelve Months
Ended December 31 Ended December 31
--------------------------- ---------------------
2003 2002 2003 2002
---------------------------------- ------------- ---------- ----------
Total revenues $42,497 $44,317 $171,982 $160,792
Net (loss) income (490) 10,549 14,146 39,803
Diluted (loss)
earnings per share (0.02) 0.35 0.47 1.30
Return on average
assets (0.05)% 1.14 % 0.35 % 1.13 %
Return on average
equity (0.62) 12.57 4.56 12.13
Efficiency-taxable
equivalent ratio(a) 97.41 69.76 77.49 64.34
(a)- Noninterest expense divided by the sum of taxable equivalent
net interest income plus noninterest income less gain on sale
of securities.
December 31 December 31 Increase (Decrease)
-----------------------
Balance Sheet
(Dollars in thousands) 2003 2002 Amount Percentage
--------------------------------- ------------ ----------- -----------
Loans held for sale $ 5,137 $ 158,404 $(153,267) (96.76)%
Loans, net 2,227,030 2,045,266 181,764 8.89
Investments 1,601,900 1,129,212 472,688 41.86
Total assets 4,206,693 3,745,949 460,744 12.30
Demand, savings and
money market
deposits 1,237,726 1,027,459 210,267 20.46
Total deposits 2,427,897 2,322,647 105,250 4.53
Other borrowings 1,432,200 1,042,440 389,760 37.39
Shareholders' equity 299,439 324,686 (25,247) (7.78)
December 31 December 31 Increase (Decrease)
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Average Balances 2003 2002 Amount Percentage
------------------ ------------ ------------ ---------- ------------
Loans held for
sale $ 25,927 $ 10,035 $ 15,892 158.37 %
Loans, net 2,126,821 2,112,855 13,966 0.66
Investments 1,464,704 1,126,495 338,209 30.02
Total assets 4,006,488 3,535,180 471,307 13.33
Total deposits 2,485,711 2,251,256 234,454 10.41
Other borrowings 1,159,889 906,263 253,626 27.99
Shareholders'
equity 310,535 328,036 (17,500) (5.33)
Net Interest Income/Margin Fourth Quarter Net interest income increased $0.9 million, or 3 percent, to $29.0 million compared to the fourth quarter of 2002. The increase was primarily due to a $4.5 million decrease in interest expense due to (a) a decline in interest rates across the yield curve, (b) a planned shift in funding sources from higher cost retail certificates of deposit to lower-cost transaction based accounts and (c) the benefits from the refinancing of $100 million of fixed-term advances late in the fourth quarter of 2002 and the refinancing of $50 million and $81 million of fixed-term advances in the second quarter and fourth quarter of 2003, respectively. The increase in net interest income was partially offset by a $3.7 million decrease in interest income due mainly to lower yields on earning assets resulting from the continued effects of the declining interest rate environment. As previously discussed, the Corporation sold $60.9 million in nonaccruing and accruing higher risk loans in the second quarter of 2003 and $11.7 million in credit card loans in the first quarter of 2003. The reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. of these proceeds was made in lower yielding securities. In addition, the Corporation sold $70 million in bonds in the fourth quarter of 2002 and reinvested the proceeds into Bank Owned Life Insurance ("BOLI BOLI Bank-Owned Life Insurance BOLI Bureau of Labor and Industries "). This investment is classified as an other asset on the balance sheet, and the income is recognized as other noninterest income rather than being recognized as interest income. For the fourth quarter of 2003, income earned on BOLI amounted to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.0 million, which is nontaxable adj. 1. Not subject to taxation; - of goods imported into a country or sold at retail outlets; as, most laws imposing sales taxes make food nontaxable s>. Opposite of taxable nt>. Adj. 1. . Also, during the first nine months of 2003, the mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. portfolio produced lower effective yields due to increased amortization of premiums resulting from increased prepayment speeds Prepayment speed Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. of underlying mortgages. During the first half of 2003, the Corporation sold approximately $372 million of these mortgage-backed securities in order to stabilize stabilize See peg. cash flows and to improve effective yields in this portfolio. These proceeds were reinvested in fixed term agency securities and mortgage-backed securities of a shorter average life and at a lower current coupon Current coupon A bond selling at or close to par, that is, a bond with a coupon close to the yields currently offered on new bonds of a similar maturity and credit risk. current coupon . Using standard rate shock analysis, the extension risk in the reinvested portfolio is less than that of the securities sold. The BOLI transaction, loan sales and the investment portfolio restructuring Portfolio restructuring Applies to derivative products. Recomposition of a portfolio's asset mix by selling off undesired asset types (equities, debt, or cash) or specific securities within that class, while simultaneously buying desired types or securities. resulted in a change in the mix of earning assets from higher yielding loans to lower yielding securities. The net interest margin decreased to 3.10 percent in the fourth quarter of 2003 from 3.34 percent for the same period in 2002. This decrease reflects the impact of the declining interest rate environment, as assets repriced faster than liabilities due to the asset sensitive nature of the Corporation's balance sheet. In addition, reinvestment rates Reinvestment Rate The rate at which cash flows from fixed-income securities may be reinvested. Notes: Because of the additional interest income, bondholders can make larger investment returns if they reinvest received coupon payments. were lower than rates earned by assets previously held on the balance sheet. Year-to-Date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. Net interest income decreased $5.4 million to $107.8 million compared to the same period in 2002. Net interest income decreased primarily due to (a) lower interest income on earning assets resulting from the continued effects of a declining interest rate environment, (b) lower effective yields from the mortgage-backed securities portfolio due to the acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of amortization of premiums resulting from increased prepayment speeds, (c) lower reinvestment yields on increased cash flows, (d) the effects of the sale of $70 million of bonds to purchase BOLI, the income from which is recognized as noninterest income and (e) a change in the mix of earning assets from higher yielding loans to lower yielding securities. The decrease in net interest income was partially offset by a $12.7 million decrease in interest expense due to (a) a decline in interest rates across the yield curve, (b) a planned shift in funding sources from higher cost retail certificates of deposit to lower cost transaction based accounts and (c) the benefits from the refinancing of fixed-term advances. The net interest margin for 2003 decreased to 3.00 percent from 3.55 percent for the same period in 2002. This decrease reflects the impact of the declining interest rate environment, which had a negative impact on the net interest margin as assets repriced faster than liabilities due to the asset sensitive nature of the Corporation's balance sheet. In addition, reinvestment rates were lower than rates earned by assets previously held on the balance sheet. Noninterest Income Fourth Quarter Noninterest income decreased $2.8 million to $13.5 million compared to $16.3 million for the fourth quarter of 2002. The decrease was due to a $4.9 million reduction in gains on sales of securities and a $1.0 million decrease in trading gains. In addition, mortgage loan income decreased $0.6 million as mortgage loan volume has slowed as a result of an increase in long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. interest rates. The decreases were partially offset by $1.0 million of income recognized from the Corporation's investment in BOLI, a $0.8 million increase in service charges on deposit accounts, a $0.8 million increase in financial management income primarily due to the purchase of a third party benefits administrator, a $0.3 million increase in brokerage services income, a $0.3 million increase in insurance services income primarily due to the acquisition of two insurance agencies, and a $0.2 million increase in other income. In addition, fourth quarter 2002 included net losses of $0.3 million from equity method investments and a loss of $0.1 million on the sale of bank property, which did not recur in the fourth quarter of 2003. Year-to-Date Noninterest income increased $16.5 million, or 35 percent, to $64.2 million compared to the same period in 2002. The increase includes a $2.3 million gain on the sale of the credit card portfolio in the first quarter of 2003. The remaining components of this increase were $3.9 million of income recognized from the Corporation's investment in BOLI, a $3.0 million increase in service charges on deposit accounts, a $1.3 million increase in financial management income primarily due to the purchase of a third party benefits administrator, a $0.7 million increase in mortgage loan income, a $0.7 million increase in brokerage revenues, a $0.6 million increase in insurance service income partly due to the acquisition of two insurance agencies, and a $0.6 million increase in other noninterest income due to increased ATM fees, merchant income and mortgage servicing Mortgage servicing The collection of monthly payments and penalties, record keeping, payment of insurance and taxes, and possible settlement of default , involved with a mortgage loan. income. In addition, net losses from equity method investments amounted to $0.3 million in 2003 versus net losses of $5.8 million for 2002. These improvements were partially offset by a $1.3 million reduction in gains on sales of securities and a $0.3 million decrease in trading gains. In addition, gains on the sale of bank property amounted to $0.4 million and $0.9 million for 2003 and 2002, respectively. Noninterest Expense Fourth Quarter Noninterest expense increased $13.8 million compared to the fourth quarter of 2002. The variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality includes an $11.7 million cost associated with prepaying $81 million in longer-term, fixed rate Federal Home Loan Bank advances in the fourth quarter of 2003 versus a $3.3 million cost associated with prepaying $100 million in longer-term, fixed rate Federal Home Loan Bank advances in the fourth quarter of 2002. Noninterest expense was also impacted by a $3.2 million increase in salaries and employee benefits due to additional personnel, including the acquisition of a third party benefits administrator and two insurance agencies, increased medical expenses and increased commission-based compensation in our mortgage, brokerage and insurance services areas. In addition, noninterest expense was affected by a $1.6 million increase in professional fees primarily due to consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" related to the review and revision (programming) revision - A release of a piece of software which is not a major release or a bugfix, but only introduces small changes or new features. of our procedures to comply with the Bank Secrecy Act The Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires U.S.A. financial institutions to assist U.S. government agencies to detect and prevent money laundering. , consulting services to ensure compliance with Section 404 of the Sarbanes-Oxley Act See SOX. , and fees related to the investigation and collection of questionable residential rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. property loans. Other items negatively impacting noninterest expense were a $0.6 million increase in occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy and equipment expense, a $0.3 million increase in marketing expense, a $0.2 million increase in telephone expense and a $0.2 million increase in postage POSTAGE. The money charged by law for carrying letters, packets and documents by mail. By act of congress of March 3, 1851, Minot's Statute at Large, U. S. 587, it is enacted as follows: 2.-Sec. 1. and supplies expense. The increases were partially offset by a $0.8 million decrease in other noninterest expense primarily due to a reserve for a contingent liability Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. established in the fourth quarter of 2002. Year-to-Date Noninterest expense increased $29.3 million compared to 2002. The variance includes a $19.1 million cost associated with prepaying $131 million in longer-term, fixed rate Federal Home Loan Bank advances in 2003 versus a $3.3 million cost associated with prepaying $100 million in longer-term, fixed rate Federal Home Loan Bank advances in 2002. In addition, noninterest expense was affected by a $5.0 million increase in professional fees primarily due to the previously mentioned loan sale, consulting services related to the review and revision of our procedures to comply with the Bank Secrecy Act, consulting services to ensure compliance with Section 404 of the Sarbanes-Oxley Act, and fees related to the investigation and collection of questionable residential rental property loans. Noninterest expense was also impacted by a $4.7 million increase in salaries and employee benefits due to additional personnel, including the acquisition of a third party benefits administrator and two insurance agencies, increased medical expenses and increased commission-based compensation in our mortgage, brokerage and insurance services areas. These increases were partially offset by lower incentive compensation and employee benefit accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. . Other items impacting noninterest expense were a $1.9 million increase in marketing expense primarily associated with the implementation of CHAMP and a $1.0 million increase in other operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. primarily due to increased mortgage servicing fees, non-credit losses and other miscellaneous expenses. The efficiency ratio increased to 77.49 percent compared to 64.34 percent for the year-ended December December: see month. 31, 2002. A significant portion of the increase in the efficiency ratio relates to the costs associated with the prepayment of Federal Home Loan Bank advances of $19.1 million and the previously discussed $5.0 million increase in professional fees. In addition, the calculation of the efficiency ratio excludes gains on sale of securities of $10.3 million and $11.5 million for the years ended December 31, 2003 and 2002, respectively. Income Tax Expense An income tax benefit of $2.0 million was recognized in the fourth quarter of 2003 compared to an income tax expense of $4.0 million for the fourth quarter of 2002. The income tax benefit for the fourth quarter was due to a decrease in the estimated 2003 effective tax rate resulting from a decrease in income. The income tax expense for the year ended December 31, 2003 amounted to $3.3 million for an effective tax rate of 18.9 percent, compared to $14.9 million for an effective tax rate of 27.3 percent for the year ended December 31, 2002. The decrease in the income tax expense and the effective tax rate for 2003 was attributable to the decrease in income relative to nontaxable adjustments. Loans Held for Sale Loans held for sale consist primarily of 15 and 30 year residential mortgage loans which the Corporation intends to sell as whole loans. Loans held for sale decreased to $5.1 million at December 31, 2003 as compared to $158.4 million at December 31, 2002. The decrease was due to the securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. and sale of mortgage loans during the year. Loans Gross loans increased $180.1 million, or 9 percent, to $2.25 billion at December 31, 2003 as compared to $2.07 billion at December 31, 2002. The growth in loans was primarily due to a $142.4 million increase in construction loans, which includes approximately $76 million of 1-4 family construction loans purchased in the third and fourth quarters of 2003 through a correspondent A bank, Securities firm, or other financial institution that regularly renders services for another in an area or market to which the other party lacks direct access. A bank that functions as an agent for another bank and carries a deposit balance for a bank in another city. relationship, a $75.3 million increase in home equity loans, a $43.7 million increase in primarily adjustable rate mortgage This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. loans and a $4.2 million increase in consumer loans. These increases were partially offset by the sale of $60.9 million in nonaccruing and accruing higher risk loans to investors during the second quarter of 2003 and the sale of the Corporation's $11.7 million credit card portfolio during the first quarter of 2003. Securities The securities available for sale portfolio increased to $1.60 billion at December 31, 2003 as compared to $1.13 billion at December 31, 2002. The increase in securities available for sale was primarily due to the securitization of $286.9 million of mortgage loans held for sale during 2003, as well as the net purchase of $185.8 million of securities used to increase earning assets. The Corporation increased its securities available for sale portfolio early in the first quarter of 2003 to offset the effects of weak loan demand. In addition, the Corporation mitigated mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. interest rate risk by restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). the investment portfolio to reduce extension risk. Equity Method Investments The Corporation's equity method investments represent investments in venture capital limited partnerships, and gains or losses are recognized based upon changes in its share of the fair market value of the limited partnership's investee companies. At December 31, 2003, the total book value in equity method investments was $2.8 million. Of the $2.8 million, $1.1 million represents investments in venture capital partnerships which invest primarily in equity securities. The remaining $1.7 million is invested in Small Business Investment Companies (SBICs), which make debt investments that qualify for the investment test under the Community Reinvestment Act Community Reinvestment Act (CRA) Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations. . At December 31, 2003, the Corporation's remaining commitment to fund the equity method investments was $2.4 million and represented commitments to venture funds that are SBICs. Deposits The ability to generate deposits has been enhanced by the introduction of CHAMP for individuals during the fourth quarter of 2002 and Business CHAMP during the first quarter of 2003. As a result, the Corporation opened 40,636 new checking accounts in 2003, more than 2 times the number in 2002. In addition, during the first quarter of 2003 the Corporation introduced a new money market account, the Money Market Max Account. This product has been very successful with total balances at December 31, 2003 of $279.6 million. The emphasis of these programs is to develop new customer relationships to generate additional fee income opportunities and to shift our funding mix towards lower-cost funding sources. Total deposits increased $105.3 million, or 5 percent, to $2.43 billion at December 31, 2003 as compared to $2.32 billion at December 31, 2002. The increase in deposits was due to a $165.0 million increase in money market accounts, a $45.2 million increase in low-cost interest checking, savings and noninterest bearing deposits and a $36.2 million increase in brokered certificates of deposit. These increases were partially offset by a $141.4 million planned decrease in retail certificates of deposit. Other Borrowings Other borrowings increased to $1.43 billion at December 31, 2003 as compared to $1.04 billion at December 31, 2002. The increase was primarily due to increases in Federal Home Loan Bank borrowings, which were at lower rates than comparable retail funding rates. The proceeds of these borrowings were used to fund the growth in earning assets. Shareholders' Equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. Shareholders' equity at December 31, 2003 decreased to $299.4 million, representing 7.12 percent of period-end assets compared to $324.7 million or 8.67 percent of period-end assets at December 31, 2002. The decrease was due mainly to the payment of $10.6 million for the purchase and retirement of common stock and a $9.8 million decrease in the after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on available for sale securities resulting from an increase in rates across the yield curve and the previously mentioned restructuring of the securities portfolio. During 2003, 565,000 shares of First Charter Corporation common stock were repurchased and retired under the January January: see month. 24, 2002 authorization The right or permission to use a system resource; the process of granting access. See access control. to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. 1.5 million shares. A total of 1.4 million shares have been repurchased and retired under this authorization. On October October: see month. 24, 2003, the Corporation's Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase of up to 1.5 million additional shares of the Corporation's common stock. At December 31, 2003, the book value per share was $10.08. Based on the $19.55 closing price of First Charter Corporation common stock at December 31, 2003, the Corporation had a market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. of $581.0 million. Provision for Loan Losses Fourth Quarter The provision for loan losses increased to $3.6 million for the three months ended December 31, 2003 compared to $2.2 million for the same year ago period. The increase was primarily due to increases in the loan portfolio and the impact of the previously mentioned loan sale on the historical loss ratios and allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as factors used in the allowance model. Year-to-Date The provision for loan losses for the year ended December 31, 2003 amounted to $27.5 million compared to $8.3 million a year ago. The increase in the provision for loan losses was primarily attributable to an additional provision of $4.0 million related to the discount taken in the previously mentioned loan sale, the addition of $3.5 million to the provision for loan losses as a result of the impact of the previously mentioned loan sale on the historical loss ratios used in the allowance model and management's continuous evaluation of the current economic environment and operational risks, and the addition of $7.5 million to the provision for loan losses as a result of deteriorating de·te·ri·o·rate v. de·te·ri·o·rat·ed, de·te·ri·o·rat·ing, de·te·ri·o·rates v.tr. To diminish or impair in quality, character, or value: financial performance of several large commercial relationships and independent appraisals of collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although . These relationships were subsequently sold as a part of the previously mentioned loan sale. In addition, during the second quarter of 2003, the Corporation identified up to 165 residential rental property loans totaling approximately $12.8 million, some of which appeared to have questionable appraisals and collateral value. These loans were made by one loan officer who is no longer employed by the Corporation. The appraisals received by the Corporation were completed by appraisers who were not employees of the Corporation. This matter was reported by management to authorities and is under continuing investigation by management and by those authorities. As a result of management's investigation, the Corporation increased the provision for loan losses in the second quarter of 2003 by approximately $2.4 million. In the third and fourth quarters of 2003, $1.1 million of these loans were charged-off. In addition, loans totaling $0.8 million were foreclosed and moved to OREO and $0.5 million of loans were paid down or paid-off. At December 31, 2003, there were 135 loans remaining in this portfolio totaling approximately $10.4 million with an allocated allowance of $1.9 million. As management's investigation continues, it is possible that an additional provision for loan losses may be required with respect to these loans. The provision for loan losses was also impacted by an increase in net charge-offs of $2.1 million compared to 2002 and increases in the loan portfolio in 2003 compared to 2002. Net Charge-Offs Fourth Quarter Net charge-offs for the three months ended December 31, 2003 amounted to $1.9 million, or 0.35 percent of average loans, compared to $2.1 million, or 0.37 percent of average loans for the same 2002 period. Year-to-Date Net charge-offs for the year ended December 31, 2003 amounted to $8.3 million, or 0.39 percent of average loans compared to $6.3 million, or 0.30 percent of average loans for the same 2002 period. These increases in net charge-offs were due to higher commercial and consumer loan charge-offs due to the impact of the continued weak economic environment and the previously discussed $1.1 million of residential rental property loan charge-offs. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , the impact on the allowance for loan losses of the previously mentioned loan sale is not included in net charge-offs but rather is reflected as a reduction in the allowance for sale of loans. The inherent losses incurred in the loan sale were used to determine the commercial loan allowance allocation factors, which are driven by actual loss experience in our model, to assess the adequacy of the allowance for loan losses. Nonperforming Assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. Nonaccrual loans at December 31, 2003 increased to $14.9 million as compared to $13.4 million at September September: see month. 30, 2003 primarily due to the addition of several commercial loans to nonaccrual status as some of our customers continue to experience financial difficulties in the current economic environment. Management is taking steps to remediate re·me·di·a·tion n. The act or process of correcting a fault or deficiency: remediation of a learning disability. re·me these loans. OREO increased to $6.8 million at December 31, 2003 from $6.7 million at September 30, 2003. Nonaccrual loans at December 31, 2003 decreased to $14.9 million as compared to $26.5 million at December 31, 2002, primarily due to the previously mentioned loan sale. OREO decreased to $6.8 million at December 31, 2003 from $10.3 million at December 31, 2002. This decrease is due to the sale of the two largest properties in the OREO portfolio during the second quarter of 2003. Asset Quality Ratios As a result of the initiatives taken in the second quarter of 2003, our asset quality ratios improved significantly, but the third and fourth quarter of 2003 asset quality ratios were impacted by an increase in nonaccrual loans as previously discussed. The increase in the past due ratio was mainly attributable to one commercial relationship which is now current and is not reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of a trend in the overall portfolio.
Asset Quality (1)
Dec. 31 Sept. 30 June 30 March 31 Dec. 31
2003 2003 2003 2003 2002
-------- ------- ------- --------- --------
Past Due Ratio
--------------------------
Past due loans over 30 days
as a percentage of loans 1.04% 0.71% 0.67% 1.03% 1.20%
Problem Assets
--------------------------
Classified assets as a
percentage of loans 1.92% 1.86% 1.99% 4.71% 4.32%
Nonaccrual Loans
--------------------------
Nonaccrual loans as a
percentage of loans 0.66% 0.64% 0.54% 1.44% 1.28%
Nonperforming Assets
--------------------------
Nonperforming assets as a
percentage of loans and
other real estate owned 0.96% 0.95% 0.87% 1.97% 1.76%
Charge-offs
--------------------------
Net charge-offs as a
percentage of average
loans-annualized 0.35% 0.40% 0.39% 0.43% 0.37%
Allowance for Loan Losses
--------------------------
Allowance for loan losses
as a percentage of loans 1.14% 1.14% 1.15% 1.28% 1.31%
Allowance for loan losses
as a percentage of
nonaccrual loans 172% 179% 212% 88% 103%
(1) Excludes loans held for sale.
Allowance for Loan Losses The allowance for loan losses as a percentage of total loans remained flat at 1.14 percent at December 31, 2003 compared to September 30, 2003 and decreased from 1.31 percent at December 31, 2002. The allowance for loan losses decreased primarily due to the sale of $60.9 million in nonaccruing and accruing higher risk loans. These loans had a higher percentage of allocated allowance for loan losses due to their higher probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. rate of loss. In addition, during the first quarter of 2003, the allowance for loan losses was reduced by the sale of the Corporation's $11.7 million credit card portfolio. These loans also had a higher percentage of allocated allowance for loan losses due to their unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. nature and higher historical loss experience. As a result of the previously mentioned transactions, the Corporation's ratio of the allowance for loan losses to loans was reduced largely due to the significant improvement in our asset quality profile as noted in the table above. First Charter monitors the adequacy of the allowance for loan losses to cover inherent losses in the loan portfolio through the use of a loan loss migration model. Management believes the Corporation is adequately reserved based on its assessment of its credit risk profile. Subsequent Events In early January 2004, the Corporation entered into a series of interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. agreements totaling $100 million. The interest rate swap agreements allow the Corporation to swap higher fixed rate interest payments on long-term FHLB FHLB Federal Home Loan Bank advances for lower variable rate payments. The Company expects the transactions to result in lower interest expense during 2004, assuming interest rates remain stable. The Corporation intends to account for these interest rate swaps as a hedge of the related FHLB advances. Accordingly, in future periods the Corporation will record, in earnings, the net change in the fair value of the interest rate swap and the related FHLB advances, provided the criteria criteria (krītēr´ē  ),n. for hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). continue to be met. In the event such criteria are not met in a future period, the Corporation will only record changes in the fair value on the interest rate swap. As a result of swapping Replacing one segment of a program in memory with another and restoring it back to the original when required. In virtual memory systems, it is called "paging." swapping - swap $100 million of fixed rate debt payments for variable rate payments, the Corporation's balance sheet would become liability sensitive. Therefore, as part of the Corporation's asset/liability management Asset/Liability Management A technique companies employ in coordinating the management of assets and liabilities so that an adequate return may be earned. Also known as "surplus management. strategy of preserving the asset sensitive nature of the Corporation's balance sheet, the Corporation replaced approximately $120 million of existing FHLB floating rate overnight borrowings with fixed rate FHLB advances with maturities of one to three years. The Corporation expects to enter into additional interest rate swap transactions during early 2004 to the extent business conditions warrant. It is anticipated that the magnitude magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the of any future interest rate swap transactions would be comparable to the transactions described above. To the extent the Corporation enters into additional interest rate swap transactions, it is anticipated that the Corporation would also replace additional FHLB floating rate overnight borrowings with fixed rate FHLB advances to preserve the asset sensitive nature of the Corporation's balance sheet. Conference Call First Charter executive management will be available via telephone conference to discuss the contents of this press release, present growth and earnings estimates for 2004 as well as strategic plans for 2004 on Tuesday Tuesday: see week. , January 13, 2004 at 11:00 a.m. The following table outlines access information for the conference call and internet/audio replay:
US/Canada International
Participants Participants
----------------------------------------------------------------------
Live Conference Call 800-379-3953 706-679-5254
ID # 4787066 ID # 4787066
----------------------------------------------------------------------
Internet Live and Replay www.FirstCharter.comwww.FirstCharter.com
"Investor Relations""Investor Relations"
section section
SHOW # 148394 SHOW # 148394
----------------------------------------------------------------------
Audio Replay 800-642-1687 706-645-9291
ID # 4787066 ID # 4787066
Corporate Profile First Charter Corporation is a regional financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. company with assets of $4.2 billion and is the holding company for First Charter Bank. First Charter operates 54 financial centers, five insurance offices and 93 ATMs located in 17 counties throughout the piedmont Piedmont, region, Italy Piedmont (pēd`mŏnt), Ital. Piemonte, region (1991 pop. 4,302,565), 9,807 sq mi (25,400 sq km), NW Italy, bordering on France in the west and on Switzerland in the north. and western half of North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. . First Charter also operates one mortgage origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real office in Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). . First Charter provides businesses and individuals with a broad range of financial services, including banking, financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against , funds management, investments, insurance, mortgages and a full array of employee benefit programs. Additional information about First Charter can be found by visiting www.FirstCharter.com or by calling 1-800-601-8471. First Charter's common stock is traded under the symbol "FCTR" on the NASDAQ National Market. Forward Looking Statements This news release contains forward looking statements with respect to the financial conditions and results of operations of First Charter Corporation. These forward looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) projected results in connection with the implementation of our business plan are lower than expected; (2) competitive pressure among financial services companies increases significantly; (3) costs or difficulties related to the integration of acquisitions or expenses in general are greater than expected; (4) general economic conditions, in the markets in which the company does business, are less favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. than expected; (5) risks inherent in making loans, including repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan risks and risks associated with collateral values, are greater than expected; (6) changes in the interest rate environment reduce interest margins and affect funding sources; (7) changes in market rates and prices may adversely affect the value of financial products; (8) legislation or regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. or changes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. adversely affect the businesses in which the company is engaged; (9) regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. compliance cost increases are greater than expected; (10) decisions to change the business mix of the company; and (11) strategic initiatives to increase revenues are not successfully implemented. For further information and other factors which could affect the accuracy of forward looking statements, please see First Charter's reports filed with the SEC pursuant to the Securities Exchange Act of 1934 which are available at the SEC's website (www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. ) or at First Charter's website (www.FirstCharter.com). Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management's judgments only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . The company undertakes no obligation to publicly revise those forward looking statements to reflect events and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or that arise after the date hereof. (Selected financial information is attached)
First Charter Corporation and Subsidiaries
Quarterly Earnings Release
(Dollars in thousands, except per share data)
As of / For the Twelve Months Ended Increase (Decrease)
-------------------------------------------------------
12/31/2003 12/31/2002 Amount Percentage
----------------------------------------------------------------------
BALANCE SHEET
ASSETS:
Cash and due from banks $ 88,564 $ 162,087 $ (73,523) (45.4)%
Federal funds sold 1,311 1,154 157 13.6
Interest earning bank
deposits 23,631 6,609 17,022 257.6
Securities available for
sale 1,601,900 1,129,212 472,688 41.9
Loans held for sale 5,137 158,404 (153,267) (96.8)
Loans
Commercial Real Estate 724,340 798,664 (74,324) (9.3)
Commercial Non Real
Estate 212,010 223,178 (11,168) (5.0)
Construction 358,217 215,859 142,358 65.9
Mortgage 280,748 237,085 43,663 18.4
Consumer 284,448 280,201 4,247 1.5
Home equity 393,041 317,730 75,311 23.7
-----------------------------------------
Total loans 2,252,804 2,072,717 180,087 8.7
Less: Unearned income (167) (247) 80 (32.4)
Allowance for loan
losses (25,607) (27,204) 1,597 (5.9)
-----------------------------------------
Loans, net 2,227,030 2,045,266 181,764 8.9
-----------------------------------------
Other assets 259,120 243,217 15,903 6.5
-----------------------------------------
Total assets $ 4,206,693 $ 3,745,949 $ 460,744 12.3 %
-----------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Deposits
Noninterest-bearing
deposits $ 326,679 $ 305,924 $ 20,755 6.8 %
Interest checking and
savings 440,496 416,005 24,491 5.9
Money market deposits 470,551 305,530 165,021 54.0
Time deposits 1,190,171 1,295,188 (105,017) (8.1)
-----------------------------------------
Total deposits 2,427,897 2,322,647 105,250 4.5
Other borrowings 1,432,200 1,042,440 389,760 37.4
Other liabilities 47,157 56,176 (9,019) (16.1)
-----------------------------------------
Total liabilities 3,907,254 3,421,263 485,991 14.2
-----------------------------------------
Total shareholders'
equity 299,439 324,686 (25,247) (7.8)
-----------------------------------------
Total liabilities and
shareholders' equity $ 4,206,693 $ 3,745,949 $ 460,744 12.3 %
-----------------------------------------
---------------------------------------------------------------------
SELECTED AVERAGE BALANCES
Loans and loans held for
sale $ 2,152,748 $ 2,122,890 $ 29,858 1.4 %
Securities 1,464,704 1,126,495 338,209 30.0
Interest earning assets 3,662,460 3,261,844 400,616 12.3
Assets 4,006,488 3,535,180 471,308 13.3
Deposits 2,485,711 2,251,256 234,455 10.4
Interest bearing
liabilities 3,310,485 2,883,151 427,334 14.8
Shareholders' equity 310,535 328,036 (17,501) (5.3)
---------------------------------------------------------------------
As of / For the Quarter Ended
-------------------------------------------------------
12/31/2003 9/30/2003 6/30/2003
-------------------------------------------------------
MISCELLANEOUS
INFORMATION
Common stock prices(daily close)
High $ 21.2000 $ 20.4000 $ 19.5600
Low 19.2700 17.0400 16.6900
End of period 19.5500 19.6000 17.5900
Book Value 10.08 10.20 10.55
Market
Capitalization 581,029,187 581,005,034 523,475,726
Weighted average
shares - basic 29,685,088 29,672,137 29,801,059
Weighted average
shares - diluted 29,685,088 29,904,440 29,801,059
End of period shares
outstanding 29,720,163 29,643,114 29,759,848
----------------------------------------------------------------------
As of / For the Quarter Ended
-------------------------------------------------------
3/31/2003 12/31/2002
-------------------------------------------------------
MISCELLANEOUS INFORMATION
Common stock prices
(daily close)
High $ 19.4000 $ 19.1900
Low 17.2500 16.0500
End of period 17.3200 18.0100
Book Value 10.87 10.80
Market
Capitalization 519,442,197 541,545,337
Weighted average
shares - basic 30,006,417 30,081,995
Weighted average
shares - diluted 30,188,853 30,220,294
End of period shares
outstanding 29,990,889 30,069,147
---------------------------------------------------------------------
First Charter Corporation and Subsidiaries
Quarterly Earnings Release
(Dollars in thousands, except per share data)
As of / For the Quarter Ended
----------------------------------------------------------------------
12/31/2003 9/30/2003 6/30/2003 3/31/2003 12/31/2002
----------------------------------------------------------------------
BALANCE SHEET
ASSETS:
Cash and due
from banks $ 88,564 $ 84,468 $ 103,199 $ 97,713 $ 162,087
Federal funds
sold 1,311 2,004 1,233 1,121 1,154
Interest
earning bank
deposits 23,631 42,560 38,308 72,431 6,609
Securities
available for
sale 1,601,900 1,603,262 1,518,918 1,453,827 1,129,212
Loans held for
sale 5,137 14,784 45,311 69,894 158,404
Loans
Commercial
Real Estate 724,340 732,434 765,303 800,593 798,664
Commercial Non
Real Estate 212,010 199,412 212,753 227,159 223,178
Construction 358,217 275,005 209,926 216,784 215,859
Mortgage 280,748 258,927 257,236 240,115 237,085
Consumer 284,448 279,512 271,734 260,594 280,201
Home equity 393,041 364,191 347,716 332,392 317,730
----------------------------------------------------------
Total loans 2,252,804 2,109,481 2,064,668 2,077,637 2,072,717
Less: Unearned
income (167) (190) (209) (199) (247)
Allowance for
loan losses (25,607) (23,953) (23,644) (26,495) (27,204)
----------------------------------------------------------
Loans, net 2,227,030 2,085,338 2,040,815 2,050,943 2,045,266
----------------------------------------------------------
Other assets 259,120 255,551 240,750 245,338 243,217
----------------------------------------------------------
Total
assets $4,206,693 $4,087,967 $3,988,534 $3,991,267 $3,745,949
----------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits
Noninterest-
bearing
deposits $ 326,679 $ 337,409 $ 341,176 $ 308,664 $ 305,924
Interest
checking and
savings 440,496 425,219 409,415 415,895 416,005
Money market
deposits 470,551 534,148 535,021 451,021 305,530
Time
deposits 1,190,171 1,184,806 1,272,937 1,317,349 1,295,188
----------------------------------------------------------
Total
deposits 2,427,897 2,481,582 2,558,549 2,492,929 2,322,647
Other
borrowings 1,432,200 1,261,412 1,076,595 1,116,223 1,042,440
Other
liabilities 47,157 42,710 39,474 56,044 56,176
----------------------------------------------------------
Total
liabilities 3,907,254 3,785,704 3,674,618 3,665,196 3,421,263
----------------------------------------------------------
Total
shareholders'
equity 299,439 302,263 313,916 326,071 324,686
----------------------------------------------------------
Total liabilities
and shareholders'
equity $4,206,693 $4,087,967 $3,988,534 $3,991,267 $3,745,949
----------------------------------------------------------
----------------------------------------------------------------------
SELECTED AVERAGE BALANCES
Loans and
loans held
for sale $2,188,643 $2,130,236 $2,179,291 $2,112,226 $2,253,317
Securities 1,585,679 1,560,430 1,412,491 1,295,982 1,144,045
Interest
earning
assets 3,792,383 3,730,688 3,648,447 3,474,071 3,418,176
Assets 4,192,064 4,071,214 3,990,872 3,814,209 3,678,945
Deposits 2,496,810 2,543,301 2,519,240 2,379,454 2,309,971
Interest
bearing
liabilities 3,431,144 3,381,916 3,286,646 3,138,232 2,999,871
Shareholders'
equity 312,773 311,962 334,537 334,431 332,998
----------------------------------------------------------------------
First Charter Corporation and Subsidiaries
Quarterly Earnings Release
(Dollars in thousands, except per share data)
For the Three Months Ended Increase (Decrease)
------------------------------------------------
12/31/03 12/31/02 Amount Percentage
---------------------------------------------------------------------
INCOME STATEMENT
Interest income -
taxable equivalent$ 45,063 $ 48,794 $ (3,731) (7.6)%
Interest expense 15,570 20,095 (4,525) (22.5)
------------------------------------------------
Net interest income
- taxable equivalent 29,493 28,699 794 2.8
Less: taxable
equivalent adjustment 513 661 (148) (22.4)
------------------------------------------------
Net interest income 28,980 28,038 942 3.4
Provision for loan
losses 3,575 2,175 1,400 64.4
------------------------------------------------
Net interest
income after
provision for
loan losses 25,405 25,863 (458) (1.8)
Noninterest income 13,517 16,279 (2,762) (17.0)
Noninterest expense 41,403 27,631 13,772 49.8
------------------------------------------------
(Loss) income
before income taxes (2,481) 14,511 (16,992) (117.1)
Income tax
(benefit) expense (1,991) 3,962 (5,953) (150.3)
------------------------------------------------
Net (loss) income $ (490) $ 10,549 $(11,039) (104.6)%
------------------------------------------------
---------------------------------------------------------------------
(LOSS) EARNINGS PER SHARE DATA
Basic $ (0.02) $ 0.35 $ (0.37) (105.7)%
Diluted (0.02) 0.35 (0.37) (105.7)
Weighted average
shares - basic 29,685,088 30,081,995
Weighted average
shares - diluted 29,685,088 30,220,294
Dividends paid on
common shares $ 0.185 $ 0.185 $ - - %
---------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average assets (0.05) % 1.14 %
Return on average equity (0.62) 12.57
Efficiency -
taxable equivalent(a) 97.41 69.76
---------------------------------------------------------------------
For the Three Months Ended
-------------------------------
SCHEDULE OF SELECTED ITEMS INCLUDED
IN EARNINGS 12/31/2003 12/31/2002
-------------------------------
Noninterest income
Gain on sale of securities $ 505 $ 5,371
Equity method investment
income (loss) 13 (340)
Trading gains 47 1,038
Loss on sale of properties - (109)
Noninterest expense
Prepayment costs on
borrowings (11,723) (3,284)
Reserve for contigent
liability - (840)
Notes:Applicable ratios are annualized.
(a)- Noninterest expense divided by the sum of taxable equivalent net
interest income plus noninterest income less gain on sale of
securities.
First Charter Corporation and Subsidiaries
Quarterly Earnings Release
(Dollars in thousands, except per share data)
For the Twelve Months Ended Increase (Decrease)
------------------------------------------------
12/31/03 12/31/02 Amount Percentage
----------------------------------------------------------------------
INCOME STATEMENT
Interest income -
taxable equivalent $ 180,533 $ 199,102 $(18,569) (9.3)%
Interest expense 70,490 83,227 (12,737) (15.3)
--------------------------------------------
Net interest income -
taxable equivalent 110,043 115,875 (5,832) (5.0)
Less: taxable
equivalent adjustment 2,241 2,714 (473) (17.4)
--------------------------------------------
Net interest income 107,802 113,161 (5,359) (4.7)
Provision for loan
losses 27,518 8,270 19,248 232.7
--------------------------------------------
Net interest income
after provision for
loan losses 80,284 104,891 (24,607) (23.5)
Noninterest income 64,180 47,631 16,549 34.7
Noninterest expense 127,032 97,772 29,260 29.9
--------------------------------------------
Income before income taxes 17,432 54,750 (37,318) (68.2)
Income taxes 3,286 14,947 (11,661) (78.0)
--------------------------------------------
Net income $ 14,146 $ 39,803 $(25,657) (64.5)%
--------------------------------------------
----------------------------------------------------------------------
EARNINGS PER SHARE DATA
Basic $ 0.47 $ 1.30 $ (0.83) (63.8)%
Diluted 0.47 1.30 (0.83) (63.8)
Weighted average shares
- basic 29,789,969 30,520,125
Weighted average shares
- diluted 30,007,435 30,702,107
Dividends paid on
common shares $ 0.74 $ 0.73 $ 0.01 1.4 %
----------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average assets 0.35 % 1.13 %
Return on average equity 4.56 12.13
Efficiency - taxable
equivalent (a) 77.49 64.34
----------------------------------------------------------------------
For the Twelve Months
Ended
-------------------------
SCHEDULE OF SELECTED
ITEMS INCLUDED IN
EARNINGS 12/31/03 12/31/02
-------------------------
Noninterest income
Gain on sale of
securities $10,287 $11,539
Gain on sale of
credit card loans 2,262 -
Equity investment
write down - (20)
Equity method
investment loss (285) (5,801)
Trading gains 1,801 2,078
Gain on sale of
properties 382 904
Noninterest expense
Prepayment costs on
borrowings (19,089) (3,284)
Reserve for
contingent liability - (840)
Notes: Applicable ratios are annualized.
(a)- Noninterest expense divided by the sum of taxable equivalent
net interest income plus noninterest income less gain on sale
of securities.
First Charter Corporation and Subsidiaries
Quarterly Earnings Release
(Dollars in thousands, except per share data)
As of / For the Quarter Ended
----------------------------------------------------------------------
12/31/03 9/30/03 6/30/03 3/31/03 12/31/02
----------------------------------------------------------------------
INCOME STATEMENT
Interest income - taxable equivalent
Interest and fees on
loans $29,282 $29,042 $30,593 $30,458 $34,225
Interest on securities 15,743 14,625 14,931 15,374 14,500
Other interest income 38 97 165 185 69
-------------------------------------------
Total interest income
- taxable equivalent 45,063 43,764 45,689 46,017 48,794
-------------------------------------------
Interest expense
Interest on deposits 8,449 9,963 11,667 11,465 12,016
Other interest expense 7,121 7,070 7,435 7,320 8,079
-------------------------------------------
Total interest expense 15,570 17,033 19,102 18,785 20,095
-------------------------------------------
Net interest income -
taxable equivalent 29,493 26,731 26,587 27,232 28,699
Less: Taxable
equivalent adjustment 513 531 548 649 661
-------------------------------------------
Net interest income 28,980 26,200 26,039 26,583 28,038
Provision for loan
losses 3,575 2,400 19,492 2,051 2,175
-------------------------------------------
Net interest income
after provision for
loan losses 25,405 23,800 6,547 24,532 25,863
-------------------------------------------
Noninterest income
Service charges on
deposit accounts 5,768 5,674 5,571 5,130 4,998
Financial management
income 1,239 1,400 488 578 483
Gain on sale of
securities 505 270 8,286 1,226 5,371
Gain on sale of credit
card loan portfolio - 49 - 2,213 -
Income (loss) from
equity method
investments 13 78 (276) (100) (340)
Mortgage loan fees 546 1,329 612 672 1,137
Brokerage services
income 857 861 812 486 591
Insurance services
income 2,415 2,327 2,229 2,437 2,112
Trading gains 47 158 432 1,164 1,038
Bank owned life
insurance 983 992 967 946 16
Gain (loss) on sale of
properties - 382 - - (109)
Other noninterest income 1,144 1,324 1,128 818 982
-------------------------------------------
Total noninterest
income 13,517 14,844 20,249 15,570 16,279
-------------------------------------------
Noninterest expense
Salaries and employee
benefits 15,410 13,277 12,554 13,757 12,213
Occupancy and equipment 4,346 4,079 3,913 4,166 3,768
Data processing 792 712 634 678 760
Marketing 948 1,173 1,161 1,153 658
Postage and supplies 1,251 982 1,152 1,136 1,099
Professional services 3,422 3,158 3,230 1,772 1,841
Telephone 567 584 513 603 376
Amortization of
intangibles 152 127 77 85 89
Prepayment costs on
borrowings 11,723 - 7,366 - 3,284
Other noninterest
expense 2,792 2,451 2,422 2,714 3,543
-------------------------------------------
Total noninterest
expense 41,403 26,543 33,022 26,064 27,631
-------------------------------------------
(Loss) income before
taxes (2,481) 12,101 (6,226) 14,038 14,511
Income tax (benefit)
expense (1,991) 3,207 (2,022) 4,092 3,962
-------------------------------------------
Net (loss) income $ (490) $ 8,894 $(4,204) $ 9,946 $10,549
-------------------------------------------
----------------------------------------------------------------------
(LOSS) EARNINGS PER SHARE DATA
Basic $ (0.02) $ 0.30 $ (0.14) $ 0.33 $ 0.35
Diluted (0.02) 0.30 (0.14) 0.33 0.35
Dividends paid on common
shares 0.185 0.185 0.185 0.185 0.185
----------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average assets (0.05) % 0.87 % (0.42) % 1.06 % 1.14
Return on average equity (0.62) 11.31 (5.04) 12.06 12.57
Efficiency - taxable
equivalent (a) 97.41 64.26 85.66 62.69 69.76
Noninterest income as a
percentage of total
income 31.81 36.17 43.75 36.94 36.73
Equity as a percentage
of total assets 7.12 7.39 7.87 8.17 8.67
Average earning assets
as a percentage of
average assets 90.47 91.64 91.42 91.08 92.91
Average loans as a
percentage of average
deposits 87.66 83.76 86.51 88.77 97.55
----------------------------------------------------------------------
SCHEDULE OF SELECTED ITEMS INCLUDED IN EARNINGS
As of / For the Quarter Ended
------------------------------------------
12/31/03 9/30/03 6/30/03 3/31/03 12/31/02
------------------------------------------
Noninterest income
Gain on sale of
securities $505 $270 $8,286 $1,226 $5,371
Gain on sale of credit
card loans - 49 - 2,213 -
Equity method
investment income
(loss) 13 78 (276) (100) (340)
Trading gains 47 158 432 1,164 1,038
Gain (loss) on sale of
properties - 382 - - (109)
Noninterest expense
Prepayment costs on
borrowings (11,723) - (7,366) - (3,284)
Reserve for contingent
liability - - - - (840)
Notes: Applicable ratios are annualized.
(a) - Noninterest expense divided by the sum of taxable equivalent
net interest income plus noninterest income less gain on sale
of securities
First Charter Corporation and Subsidiaries
Quarterly Earnings Release
(Dollars in thousands, except per share data)
As of / For the Quarter Ended
--------------------------------------------------
12/31/03 9/30/03 6/30/03 3/31/03 12/31/02
---------------------------------------------------------------------
ASSET QUALITY ANALYSIS
Allowance for Loan Losses
Beginning balance $23,953 $23,644 $ 26,495 $27,204 $27,411
Provision for loan
losses 3,575 2,400 19,492 2,051 2,175
Allowance related to
loans sold or
transferred to held
for sale - - (20,236) (547) (325)
Charge-offs (2,304) (2,238) (2,448) (2,466) (2,138)
Recoveries 383 147 341 253 81
---------------------------------------------
Net charge-offs (1,921) (2,091) (2,107) (2,213) (2,057)
---------------------------------------------
Ending balance $25,607 $23,953 $ 23,644 $26,495 $27,204
---------------------------------------------
Nonperforming Assets and
Loans 90 days or more past due
accruing interest
Nonaccrual loans $14,910 $13,398 $ 11,144 $30,021 $26,467
Other real estate 6,836 6,709 6,866 11,200 10,278
---------------------------------------------
Total
nonperforming
assets 21,746 20,107 18,010 41,221 36,745
---------------------------------------------
Loans 90 days or
more past due
accruing interest 21 21 312 - -
---------------------------------------------
Total $21,767 $20,128 $ 18,322 $41,221 $36,745
---------------------------------------------
Asset Quality Ratios(b)
Nonaccrual loans as
a percentage of
total loans 0.66 % 0.64 % 0.54 % 1.44 % 1.28 %
Nonperforming assets
as a percentage of
total assets 0.52 0.49 0.45 1.03 0.98
Nonperforming assets
as a percentage of
total loans and
other real estate 0.96 0.95 0.87 1.97 1.76
Net charge-offs as
a percentage of
average loans
(annualized) 0.35 0.40 0.39 0.43 0.37
Allowance for loan
losses as a percentage
of loans 1.14 1.14 1.15 1.28 1.31
Ratio of allowance
for loan losses
to:
Net charge-offs 3.36 x 2.89 x 2.80 x 2.95 x 3.33 x
Nonaccrual loans 1.72 1.79 2.12 0.88 1.03
---------------------------------------------------------------------
As of / For the Twelve Increase
Months Ended (Decrease)
-------------------------------------------
12/31/2003 12/31/2002 Amount Percentage
---------------------------------------------------------------------
Allowance for Loan Losses
Beginning balance $ 27,204 $25,843 $ 1,361 5.3 %
Provision for
loan losses 27,518 8,270 19,248 232.7
Allowance related
to loans sold (20,783) (647) (20,136) N/A
Charge-offs (9,456) (6,990) 2,466 35.3
Recoveries 1,124 728 396 54.4
------------------------------------
Net charge-offs (8,332) (6,262) 2,070 33.1
------------------------------------
Ending balance $ 25,607 $27,204 $ (1,597) (5.9)%
------------------------------------
Asset Quality Ratios(b)
Net charge-offs
as a percentage of
average loans
(annualized) 0.39 % 0.30 %
Ratio of allowance for
loan losses to
net charge-offs
(annualized) 3.07x 4.34x
---------------------------------------------------------------------
For the Quarter Ended
------------------------------------------------------------------
12/31/03 9/30/03 6/30/03 3/31/03 12/31/02
----------------------------------------------------------------------
ANNUALIZED INTEREST YIELDS / RATES (bb)
Interest income:
Yield on loans and
loans held for sale 5.31% 5.41% 5.63% 5.85% 6.03%
Yield on securities 3.97 3.75 4.23 4.75 5.07
----------------------------------------------
Yield on interest
earning assets 4.73 4.67 5.02 5.35 5.68
----------------------------------------------
Interest expense:
Cost of interest
bearing deposits 1.59 1.80 2.12 2.23 2.37
Cost of borrowings 2.14 2.38 2.75 2.83 3.26
----------------------------------------------
Cost of interest
bearing liabilities 1.80 2.00 2.33 2.43 2.66
----------------------------------------------
Interest rate spread 2.93 2.67 2.69 2.92 3.02
----------------------------------------------
Net yield on earning
assets 3.10% 2.86% 2.92% 3.15% 3.34%
----------------------------------------------
----------------------------------------------------------------------
Notes: Applicable ratios are annualized.
(b) - Excludes loans held for sale.
(bb) - Fully taxable equivalent yields.
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