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Ohio | 6711 | 31-0854434 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
Richard G. Schmalzl, Esq. Shaun B. Patsy, Esq. Graydon Head & Ritchey LLP 1900 Fifth Third Center 511 Walnut Street Cincinnati, Ohio 45202 (513) 621-6464 (513) 651-3836 (Fax) | Stephen J. Antal, Esq. First Charter Corporation 10200 David Taylor Drive Charlotte, North Carolina 28262-2373 (704) 688-4300 (704) 688-2282 (Fax) | Richard W. Viola, Esq. Helms Mulliss & Wicker, PLLC 201 North Tryon Street P.O. Box 31247 (28231) Charlotte, North Carolina 28202 (704) 343-2149 (704) 343-2300 (Fax) |
Proposed Maximum | Proposed Maximum | |||||||||||
Amount to be | Offering | Aggregate Offering | Amount of | |||||||||
Title of Each Class of Securities to be Registered | Registered(1) | Price per Unit | Price | Registration Fee | ||||||||
Common Stock, no par value | 33,000,000 shares | N/A(2) | $752,449,586.00(2) | $23,100.21 | ||||||||
(1) | Represents the maximum number of shares of Registrant’s common stock estimated to be issuable upon the completion of the merger of First Charter Corporation (“First Charter”) with and into Fifth Third Financial Corporation (“Fifth Third Financial”), based on the number of shares of First Charter common stock outstanding, or reserved for issuance under various plans, immediately prior to the merger and the exchange of shares of First Charter Corporation for shares of Fifth Third Bancorp (“Fifth Third”) common stock pursuant to the formula set forth in the Amended and Restated Agreement and Plan of Merger, dated as of September 14, 2007, by and among First Charter, Fifth Third and Fifth Third Financial. | |
(2) | Estimated solely for the purpose of computing the registration fee, and calculated pursuant to Rule 457(f) of the General Rules and Regulations under the Securities Act of 1933 (the “Securities Act”). Pursuant to Rule 457(c), (f)(1) and (f)(3) under the Securities Act, based on the aggregate market value on November 5, 2007 of the 35,920,000 shares of First Charter Corporation expected to be exchanged in connection with the merger, the proposed maximum aggregate offering price is $752,449,586.00, which was determined by taking (i) the product of the average of the high and low prices of First Charter common stock on November 5, 2007 ($29.955) times the aggregate number of First Charter shares expected to be exchanged in connection with the merger, including shares issuable upon exercise of outstanding options or other securities to acquire First Charter common stock, less (ii) the amount of cash expected to be paid by Fifth Third Bancorp in exchange for shares of First Charter common stock. |
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F-1 | ||||||||
Exhibit 23.1 | ||||||||
Exhibit 23.2 | ||||||||
Exhibit 23.3 | ||||||||
Exhibit 99.2 | ||||||||
Exhibit 99.3 |
ANNEXES: | ||
Annex A: | Amended and Restated Agreement and Plan of Merger dated as of September 14, 2007 by and among First Charter Corporation, Fifth Third Bancorp and Fifth Third Financial Corporation (excluding exhibits) | |
Annex B: | Fairness Opinion of Keefe, Bruyette & Woods, Inc. |
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Q: | Why do First Charter and Fifth Third want to merge? | |
A: | The First Charter Board of Directors believes that you will benefit by either becoming a shareholder of Fifth Third, or receiving cash in return for your First Charter common stock. The benefit of receiving cash is that you will get a $10.75 premium over the $20.25 market price of First Charter common stock on the day before the announcement of the merger. The First Charter Board of Directors also believes that, if you receive Fifth Third common stock in the merger, you will benefit from the opportunity for potential future appreciation of Fifth Third common stock. Fifth Third wants to better serve its customers in First Charter’s service areas and to expand Fifth Third’s presence in those markets. | |
Q: | What will I receive for my First Charter shares? | |
A: | You will receive shares of Fifth Third common stock, cash or a combination of Fifth Third common stock and cash having a value of $31.00 for each share of First Charter common stock that you own. Subject to proration as described below, you will have the opportunity to elect (a) to receive shares of Fifth Third common stock for all of your First Charter shares, (b) to receive cash for all of your First Charter shares, (c) to receive shares of Fifth Third common stock for some of your First Charter shares and cash for the remainder of your First Charter shares or (d) to express no preference, in which case you could receive all shares of Fifth Third common stock, all cash or a combination of Fifth Third common stock and cash for your First Charter shares. If you fail to make any election, then you will be treated as if you had expressed no preference. If you are to receive all or part of your payment in Fifth Third common stock, the number of shares of stock that you will receive in the merger will fluctuate before the effective time of the merger based upon the market price of Fifth Third common stock. | |
Regardless of the elections made by individual First Charter shareholders, the aggregate amount of cash paid to First Charter shareholders is limited to approximately 30% of the total merger consideration paid by Fifth Third, but in no event more than 30% in cash. Furthermore, the aggregate value of Fifth Third common stock transferred to First Charter shareholders is limited to approximately 70% of the total merger consideration paid by Fifth Third, but in no event less than 70% in Fifth Third common stock. Therefore, it is possible that if you elect to be paid all or part in cash, you may receive a portion or all of your payment in Fifth Third common stock or that if you elect to be paid all or part in Fifth Third common stock, you may receive a portion or all of your payment in cash. | ||
Each issued and outstanding share of Fifth Third common stock will remain issued and outstanding and will not be converted or exchanged in the merger. | ||
Q: | If Fifth Third common stock or cash is oversubscribed, how will the allocation be determined? | |
A: | As indicated above, the merger consideration you receive will be subject to the following proration procedure. Elections for the oversubscribed form of merger consideration will be prorated so that an overall 70/30 split of the merger consideration between Fifth Third common stock and cash is achieved. | |
If, after all First Charter shareholders have submitted their elections, the amount of Fifth Third common stock is oversubscribed, all First Charter shareholders who elected to receive cash will receive cash. In addition, all First Charter shareholders who chose no preference or made no election will receive cash. The exchange agent then will select on a pro rata basis a sufficient number of shares to receive cash instead of Fifth Third common stock from any shares that elected to receive Fifth Third common stock. This selection will be determined such that the aggregate cash amount paid will equal as closely as possible, but in no event more than, 30% of the total merger consideration. All other shares that are not selected by the exchange agent will receive Fifth Third common stock. | ||
If, after all First Charter shareholders have submitted their elections, the amount of cash is oversubscribed, all First Charter shareholders who elected to receive Fifth Third common stock will receive such stock. In addition, all First Charter shareholders who chose no preference or made no election will receive Fifth Third common stock. The exchange agent then will select on a pro rata basis a sufficient number of shares to receive Fifth Third common stock instead of cash among any shares that elected to receive cash. |
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This selection will be determined such that the aggregate cash amount paid will equal as closely as possible, but in no event more than, 30% of the total merger consideration. All other shares that are not selected by the exchange agent will receive cash. | ||
Q: | When do you expect the merger to be completed? | |
A: | We anticipate completing the merger as soon as possible after the special meeting of First Charter’s shareholders, assuming the required shareholder approval is obtained. The merger is also subject to the approval of banking regulatory authorities and the satisfaction of other closing conditions. We anticipate that the closing will be in the first quarter of 2008, but there can be no assurances that the merger may not be delayed. | |
Q: | When and where will the special meeting of First Charter’s shareholders take place? | |
A: | The special meeting will be held at : .m., local time, , 2007, the First Charter Center, 10200 David Taylor Drive, Charlotte, North Carolina28262-2373. | |
Q: | What do I need to do now? | |
A: | After reviewing this document, submit your proxy by executing and returning the enclosed proxy card. By submitting your proxy, you authorize the individuals named in the proxy to represent you and vote your shares at the special meeting in accordance with your instructions. These persons will be authorized to vote your shares at any adjournments of the meeting.Your proxy vote is important. Whether or not you plan to attend the special meeting, please submit your proxy promptly in the enclosed envelope. You may also vote on the Internet or by telephone. Instructions for those voting methods are listed on your proxy card. | |
Q: | How will my shares be voted if I return a blank proxy card? | |
A: | If you sign, date and send in your proxy card and do not indicate how you want to vote, your proxies will be counted as a vote in favor of approval of the merger agreement. | |
Q: | What will be the effect if I do not vote and do not return a proxy card or attend the special meeting? | |
A: | Your failure to vote will have the same effect as if you voted against the merger agreement. | |
Q: | Can I vote my shares in person? | |
A: | Yes, if you own your shares in your own name. You may attend the special meeting and vote your shares in person rather than signing and mailing your proxy card. However, to expedite the voting and tabulation process, we recommend that you sign, date and promptly mail the enclosed proxy card. | |
Q: | Can I change my mind and revoke my proxy? | |
A: | Yes, you may revoke your proxy and change your vote at any time before the polls close at the special meeting by: | |
• signing another proxy with a later date; | ||
• giving written notice of the revocation of your proxy to the Corporate Secretary of First Charter before the meeting; or | ||
• voting in person at the special meeting. | ||
Your latest dated proxy or vote will be counted. | ||
Q: | If my shares are held in “street name” by my broker, will my broker vote my shares for me? | |
A: | No, you must instruct your broker on how to vote in order for your broker to vote your shares. Your broker will send you directions on how you can instruct your broker to vote. Your broker cannot vote your shares without instructions from you. Accordingly, if you do not instruct your broker how to vote your |
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shares, your shares will not be voted, which will have the same effect as voting against the merger agreement. | ||
Q: | Can I vote my shares I hold through the First Charter 401(k) plan? | |
A: | If you hold shares through First Charter’s Retirement Savings Plan, which we refer to in this document as the “First Charter 401(k) Plan,” you will receive a vote authorization card for that plan that reflects all shares you may vote under it. | |
Under the terms of the First Charter 401(k) Plan, a participant is entitled to direct the trustee how to vote the shares credited to his or her First Charter 401(k) Plan account. The trustee will not vote any shares for which no instructions are given. Any shares not voted will have the same effect as a vote against the merger. The deadline for returning your voting instructions to the plan’s trustee is . | ||
Q: | Should I send in my stock certificates now? | |
A: | No. We will send you written instructions for exchanging your stock certificates. | |
Q: | Who can answer my questions about the merger? | |
A: | If you have more questions about the merger, please contact Jane Vallaire, Investor Relations, First Charter Corporation, 10200 David Taylor Drive, Charlotte, North Carolina28262-2373,(704) 688-4300 or Morrow & Co., LLC, 470 West Avenue, Stamford, Connecticut, 06902, (800) 807-8896, firstcharter.info@morrowco.com. Brokers and banks please call (203) 658-9400. |
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• | approval of the merger agreement; | |
• | the adjournment or postponement of the special meeting, if necessary or appropriate; and | |
• | any other matters as are properly presented at the special meeting. |
• | approval of the merger agreement by First Charter’s shareholders; | |
• | authorization for listing on the NASDAQ Global Select Market System for the shares of Fifth Third common stock to be issued to the holders of First Charter common stock upon consummation of the merger; | |
• | effectiveness of the registration statement of which this document is a part, with no stop order suspending such effectiveness and no proceedings for that purpose shall have been initiated by the Securities and Exchange Commission; | |
• | the receipt of certain regulatory approvals that shall not have resulted in the imposition of any materially burdensome regulatory condition under banking laws and the expiration of any statutory waiting periods; |
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• | the receipt by Fifth Third of the opinion of its counsel that the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, which counsel has subsequently been designated by Fifth Third to be Alston & Bird LLP; | |
• | the receipt by First Charter of the opinion of Helms Mulliss & Wicker, PLLC that (1) the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and (2) except to the extent of any cash consideration received in the merger and except with respect to cash received in lieu of fractional share interests in Fifth Third common stock, no gain or loss will be recognized by any of the holders of First Charter common stock in the merger; | |
• | the lack of any order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the merger or any of the transactions contemplated by the merger agreement, or the lack of an enactment of a statute, rule, regulation, order, injunction or decree by any governmental entity that prohibits or makes illegal the consummation of the merger; | |
• | the representations and warranties of Fifth Third and First Charter shall be true and correct as of the date of the merger agreement and as of the effective time and First Charter and Fifth Third shall have received a certificate signed on behalf of the other party to such effect; and | |
• | First Charter and Fifth Third shall have performed in all material respects all obligations required to be performed by it under the merger agreement at or before the effective time and First Charter and Fifth Third shall have received a certificate signed on behalf of the other party to such effect. |
• | a governmental authority that must grant a regulatory approval denies approval of the merger; | |
• | a governmental entity of competent jurisdiction issues a final nonappealable order enjoining or otherwise prohibiting the merger; | |
• | the merger is not completed on or before August 15, 2008 (although this termination right is not available to a party whose failure to comply with the merger agreement resulted in the failure to complete the merger by that date); or | |
• | other conditions to closing the merger have not been satisfied. |
• | First Charter is in breach of its representations, warranties, covenants or agreements set forth in the merger agreement (although this termination right is not available to Fifth Third if it is then in material breach of any representation, warranty, covenant or other agreement contained in the merger agreement) and such breach is either incurable or is not cured within 45 days; | |
• | First Charter’s Board of Directors shall have failed to recommend the approval and adoption of the merger agreement in the proxy statement; or | |
• | First Charter’s Board of Directors authorizes, recommends, proposes or publicly announces in a manner adverse to Fifth Third, its intention to authorize, recommend or propose an acquisition proposal with any person other than Fifth Third. |
• | Fifth Third is in breach of its representations, warranties, covenants or agreements set forth in the merger agreement (although this termination right is not available to First Charter if it is then in |
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material breach of any representation, warranty, covenant or other agreement contained in the merger agreement) and such breach, either individually or in the aggregate results in the failure of the conditions to obligations of Fifth Third or First Charter and is either incurable or is not cured within 45 days of notice. |
• | by Fifth Third because First Charter breached any of its covenants, agreements, representations or warranties and, a competing acquisition proposal was received by First Charter prior to termination and within 12 months of termination First Charter shall have entered into a definitive written agreement with respect to the competing acquisition proposal or the acquisition proposal shall have been consummated; or | |
• | by Fifth Third after receipt by First Charter of a competing acquisition proposal if, prior to the First Charter shareholders meeting, First Charter’s Board of Directors withdrew its recommendation or refused to recommend to the shareholders that they vote to approve the merger while there was a competing acquisition proposal that had not been withdrawn or rejected by the First Charter directors and within 12 months of termination First Charter shall have entered into a definitive written agreement with respect to the competing acquisition proposal or the acquisition proposal shall have been consummated. |
• | the merger agreement is terminated by mutual agreement of the parties; | |
• | the merger agreement is terminated due the failure to obtain regulatory approval by the appropriate governmental entities or due to a final and nonappealable order by a governmental entity enjoining or prohibiting the consummation of the merger; or | |
• | the merger agreement is terminated by First Charter for the breach by Fifth Third of its representations, warranties, covenants or agreements set forth in the merger agreement which breach, either individually or in the aggregate results in the failure of the conditions to obligations of Fifth Third or First Charter and is either incurable or is not cured within 45 days following written notice. |
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August 15, 2007 | November , 2007 | |||||||
Fifth Third Common Stock | $ | 37.38 | $ | |||||
First Charter Common Stock | $ | 20.25 | $ | |||||
Equivalent Price Per Share of First Charter Common Stock | $ | 31.00 | $ | 31.00 |
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Fifth Third Common Stock | First Charter Common Stock | |||||||||||||||||||||||
Dividends | Dividends | |||||||||||||||||||||||
High | Low | Declared | High | Low | Declared | |||||||||||||||||||
2005: | ||||||||||||||||||||||||
First Quarter | $ | 48.12 | $ | 42.05 | $ | 0.350 | $ | 26.04 | $ | 21.91 | $ | 0.190 | ||||||||||||
Second Quarter | 44.67 | 40.24 | 0.350 | 23.34 | 20.43 | 0.190 | ||||||||||||||||||
Third Quarter | 43.99 | 36.38 | 0.380 | 25.84 | 21.75 | 0.190 | ||||||||||||||||||
Fourth Quarter | 42.50 | 35.04 | 0.380 | 26.95 | 22.04 | 0.190 | ||||||||||||||||||
2006: | ||||||||||||||||||||||||
First Quarter | $ | 41.43 | $ | 36.30 | $ | 0.380 | $ | 25.13 | $ | 23.11 | $ | 0.190 | ||||||||||||
Second Quarter | 41.02 | 35.86 | 0.400 | 25.50 | 23.02 | 0.195 | ||||||||||||||||||
Third Quarter | 40.18 | 35.95 | 0.400 | 24.82 | 22.93 | 0.195 | ||||||||||||||||||
Fourth Quarter | 41.57 | 37.75 | 0.400 | 25.15 | 23.05 | 0.195 | ||||||||||||||||||
2007: | ||||||||||||||||||||||||
First Quarter | $ | 41.41 | $ | 37.93 | $ | 0.420 | $ | 24.97 | $ | 21.29 | $ | 0.195 | ||||||||||||
Second Quarter | 43.32 | 37.88 | 0.420 | 22.83 | 19.09 | 0.195 | ||||||||||||||||||
Third Quarter | 41.17 | 33.60 | 0.420 | 30.58 | 17.78 | 0.195 | ||||||||||||||||||
Fourth Quarter (through November , 2007) |
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Equivalent Shares | ||||||||||||||||||||||||||||||||
Basis 0.7795 | ||||||||||||||||||||||||||||||||
of a Share of Fifth | ||||||||||||||||||||||||||||||||
Third Common | ||||||||||||||||||||||||||||||||
Fifth Third | First Charter | Stock (5) | ||||||||||||||||||||||||||||||
Historical | Pro Forma | Historical | Pro Forma(5) | |||||||||||||||||||||||||||||
Basic | Diluted | Basic(1) | Diluted(2) | Basic | Diluted | Basic | Diluted | |||||||||||||||||||||||||
EARNINGS PER SHARE FROM CONTINUING OPERATIONS | ||||||||||||||||||||||||||||||||
Twelve Months Ended December 31, 2006: | $ | 2.14 | $ | 2.13 | $ | 2.11 | $ | 2.10 | $ | 1 | .50 | $ | 1.49 | $ | 1.64 | $ | 1.64 | |||||||||||||||
Six Months Ended June 30, 2007 | $ | 1.35 | $ | 1.34 | $ | 1.32 | $ | 1.31 | $ | 0 | .61 | $ | 0.61 | $ | 1.03 | $ | 1.02 | |||||||||||||||
CASH DIVIDENDS | ||||||||||||||||||||||||||||||||
DECLARED PER SHARE(3) | ||||||||||||||||||||||||||||||||
Twelve Months Ended December 31, 2006: | $ | 1.58 | $ | 1.58 | $ | 0 | .775 | $ | 1.23 | |||||||||||||||||||||||
Six Months Ended June 30, 2007: | $ | 0.84 | $ | 0.84 | $ | 0 | .39 | $ | 0.65 | |||||||||||||||||||||||
BOOK VALUE PER SHARE(4) | ||||||||||||||||||||||||||||||||
At December 31, 2006: | $ | 18.02 | $ | 12 | .81 | |||||||||||||||||||||||||||
At June 30, 2007: | $ | 17.16 | $ | 17.63 | $ | 12 | .85 | $ | 13.74 |
(1) | The pro forma earnings per basic common share from continuing operations is computed by dividing pro forma income from continuing operations by the weighted average pro forma basic common shares of Fifth Third. | |
(2) | The pro forma earnings per diluted common share from continuing operations is computed by dividing the total of pro forma income from continuing operations and the net income effect from dilutive securities by the weighted average pro forma diluted common shares of Fifth Third. | |
(3) | Fifth Third pro forma cash dividends declared per share represent historical cash dividends declared per share by Fifth Third. | |
(4) | The pro forma book value per share is computed by dividing the pro forma total shareholders’ equity of Fifth Third by total pro forma common shares of Fifth Third. | |
(5) | First Charter equivalent pro forma per share amounts are computed by multiplying the Fifth Third pro forma amounts by the calculated conversion ratio of 0.7795 respectively. |
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• | By Mail. You may submit a proxy by signing, dating and returning your proxy card in the enclosed pre-addressed envelope. | |
• | By Telephone. You may submit a proxy by telephone (from U.S. and Canada only) using the toll-free number listed on the proxy card. Please have your proxy card in hand when you call. Telephone voting facilities will be available 24 hours a day and will close at a.m., eastern time, on , 2007. | |
• | By Internet. You may submit a proxy electronically on the Internet, using the web site listed on the proxy card. Please have your proxy card in hand when you log onto the web site. Internet voting facilities will be available 24 hours a day and will close at a.m., eastern time, on , 2007. | |
• | In Person. You may vote in person at the special meeting by completing a ballot (attending the meeting without completing a ballot will not count as a vote). |
• | By Mail. You may submit a proxy by signing, dating and returning your proxy card in the enclosed pre-addressed envelope. | |
• | By Methods Listed on Proxy Card. Please refer to your proxy card or other information forwarded by your bank, broker or other holder of record to determine whether you may submit a proxy by telephone |
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• | In Person with a Proxy from the Record Holder. A street-name stockholder who wishes to vote in person at the meeting will need to obtain a legal proxy from their bank, broker or other nominee. Please consult the voting form or other information sent to you by your bank, broker or other nominee to determine how to obtain a legal proxy in order to vote in person at the special meeting. |
• | timely delivery of a valid, later-dated executed proxy; | |
• | timely submitting a proxy with new voting instructions using the telephone or Internet voting system; | |
• | voting in person at the meeting by completing a ballot (attending the meeting without completing a ballot will not revoke any earlier proxy); or | |
• | filing an instrument of revocation received by the Corporate Secretary of First Charter, 10200 David Taylor Drive, Charlotte, North Carolina28262-2373, , by 6:00 p.m., eastern time, on . | |
• | If you are a street-name stockholder and you vote by proxy, you may later revoke your proxy instructions by informing the holder of record in accordance with that entity’s procedures. |
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• | the merits of other strategic options available to First Charter, including continuing as an independent entity by growing organically and growing through potential acquisitions; | |
• | the opinion delivered to First Charter by KBW to the effect that, as of August 15, 2007, and based upon and subject to the considerations set forth in the opinion, the merger consideration specified in the merger agreement was fair to the holders of First Charter common stock from a financial point of view; | |
• | detailed analyses of similar transactions, which demonstrated that the principal financial and business terms of the merger were comparable; | |
• | the low probability of receiving more favorable merger offers from other financial institutions in the near future due to the thorough market-testing process that the First Charter Board of Directors had completed; | |
• | the expected compatibility of cultures, management and similar business philosophies of Fifth Third and First Charter; | |
• | the compensation and employee benefits that current employees of First Charter would receive as employees of Fifth Third and the potential disruption to employees as compared to an in-market acquirer; | |
• | the improved career opportunities for employees of First Charter at a larger financial institution such as Fifth Third; | |
• | the potential benefits to be received by First Charter’s customers from the merger as a result of the increased product offerings available from a larger financial institution such as Fifth Third; | |
• | the benefits to the communities in which First Charter operates due to the expected effects on First Charter’s employees and customers; | |
• | the competitive and regulatory environment for financial institutions generally and the increased competition brought about by consolidation, deregulation and other factors, as well as the financial size and resources necessary to compete in this environment; | |
• | First Charter’s due diligence review of Fifth Third and Fifth Third’s proven track record of successfully consummating and integrating merger transactions in a timely manner; | |
• | the regulatory and other approvals required in connection with the merger and the significant likelihood that, once the definitive merger agreement had been entered into, the merger would be completed; | |
• | the expected treatment of the merger as a “reorganization” for United States federal income tax purposes, which would generally allow First Charter shareholders receiving Fifth Third common stock in exchange for their shares of First Charter common stock to avoid recognizing any gain or loss for federal income tax purposes (except with respect to cash received in lieu of fractional shares and cash received pursuant to a cash election); | |
• | the fact that the consideration payable in the transaction will be valued at $31.00 per share at the time of closing; | |
• | Fifth Third’s history of paying dividends on its common stock; | |
• | the fact that Fifth Third’s common stock has greater liquidity than First Charter’s common stock; | |
• | the challenges of combining the businesses, assets and workforces of the two companies and Fifth Third’s successful experience in this regard; and |
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• | the proposed employment arrangements with Robert E. James, Jr., Stephen M. Rownd and J. Scott Ensor, and the fact that some of First Charter’s directors and executive officers have other interests in the merger that are in addition to their interests as First Charter shareholders. |
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• | reviewed, among other things, |
• | the merger agreement, | |
• | Annual Reports to Shareholders and Annual Reports onForm 10-K of Fifth Third, | |
• | Quarterly Reports onForm 10-Q of Fifth Third, | |
• | Annual Reports to Shareholders and Annual Reports onForm 10-K of First Charter, and | |
• | Quarterly Reports onForm 10-Q of First Charter; |
• | held discussions with members of senior management of First Charter and Fifth Third regarding, |
• | past and current business operations, | |
• | financial condition, and | |
• | future prospects of the respective companies; |
• | reviewed the market prices, valuation multiples, publicly reported financial condition and results of operations for First Charter and Fifth Third and compared them with those of certain publicly traded companies that KBW deemed to be relevant; | |
• | compared the proposed financial terms of the merger with the financial terms of certain other transactions that KBW deemed to be relevant; | |
• | evaluated the potential pro forma impact of the merger on Fifth Third, including cost savings that could result from a combination of the businesses of First Charter and Fifth Third; and | |
• | performed other studies and analyses that it considered appropriate. |
• | the merger will be completed substantially in accordance with the terms set forth in the merger agreement; | |
• | the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement are true and correct; |
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• | each party to the merger agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents; | |
• | all conditions to the completion of the merger will be satisfied without any waivers; and | |
• | in the course of obtaining the necessary regulatory, contractual or other consents or approvals for the merger, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, that may be imposed will have a material adverse effect on the future results of operations or financial condition of the combined entity or the contemplated benefits of the merger, including the cost savings, revenue enhancements and related expenses expected to result from the merger. |
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South Financial Group, Inc. | Green Bankshares, Inc. | |
BancorpSouth, Inc. | Security Bank Corporation | |
Trustmark Corporation | Pinnacle Financial Partners, Inc. | |
United Community Banks, Inc. | SCBT Financial Corporation | |
Alabama National BanCorporation | First Bancorp | |
Provident Bankshares | First Community Bancshares, Inc. | |
Hancock Holding Company | Union Bankshares Corporation | |
Renasant Corporation | Virginia Commerce Bancorp, Inc. | |
Sandy Spring Bancorp, Inc. | Ameris Bancorp |
Wells Fargo & Company | BB&T Corporation | |
U.S. Bancorp | KeyCorp | |
SunTrust Banks, Inc. | M&T Bank Corporation | |
National City Corporation | Comerica Incorporated | |
Regions Financial Corporation | Marshall & Ilsley Corporation | |
PNC Financial Services Group, Inc. | UnionBanCal Corporation |
Fifth Third | First Charter | |||||||||||||||
Peer Group | Peer Group | |||||||||||||||
Fifth Third | Median | First Charter | Median | |||||||||||||
Financial Performance Measures: | ||||||||||||||||
Latest Twelve Months | 14.2 | % | 13.9 | % | 11.4 | % | 11.6 | % | ||||||||
Core Return on Average Equity(1) | ||||||||||||||||
Latest Twelve Months | 1.37 | % | 1.37 | % | 1.01 | % | 1.10 | % | ||||||||
Core Return on Average Assets(1) | ||||||||||||||||
Net Interest Margin | 3.37 | % | 3.56 | % | 3.42 | % | 3.92 | % | ||||||||
Latest Twelve Months | ||||||||||||||||
Efficiency Ratio | 56 | % | 59 | % | 60 | % | 59 | % |
(1) | Core income is defined as net income before extraordinary items, less the after-tax portion of investment securities and nonrecurring items |
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Fifth Third | First Charter | |||||||||||||||
Peer Group | Peer Group | |||||||||||||||
Fifth Third | Median | First Charter | Median | |||||||||||||
Financial Condition Measures: | ||||||||||||||||
Tangible Equity/Tangible Assets | 6.53 | % | 5.55 | % | 7.48 | % | 6.66 | % | ||||||||
Loans/Deposits | 112 | % | 117 | % | 110 | % | 95 | % | ||||||||
Latest Twelve Months Net Charge-offs/Average Loans | 0.46 | % | 0.25 | % | 0.07 | % | 0.14 | % | ||||||||
Loan Loss Reserves/Loans | 1.02 | % | 1.08 | % | 1.26 | % | 1.16 | % | ||||||||
Nonperforming Assets/Assets | 0.55 | % | 0.42 | % | 0.41 | % | 0.35 | % |
Fifth Third | First Charter | |||||||||||||||
Peer Group | Peer Group | |||||||||||||||
Fifth Third | Median | First Charter | Median | |||||||||||||
Market Performance Measures: | ||||||||||||||||
Price to Earnings Multiple, based on 2007 GAAP estimated earnings | 13.7 | x | 11.9 | x | 13.9 | x | 13.1 | x | ||||||||
Price to Earnings Multiple, based on 2008 GAAP estimated earnings | 12.7 | x | 10.8 | x | 11.6 | x | 11.8 | x | ||||||||
Price to Last Twelve Months earnings | 17.5 | x | 11.3 | x | 14.4 | x | 13.6 | x | ||||||||
Price to Book Multiple Value | 218 | % | 162 | % | 154 | % | 148 | % | ||||||||
Price to Tangible Book Multiple Value | 300 | % | 293 | % | 190 | % | 224 | % |
Acquirer | Acquiree | |
KeyCorp | U.S.B. Holding Co., Inc. | |
Marshall & Ilsley Corporation | First Indiana Corporation | |
Wells Fargo & Company | Greater Bay Bancorp | |
Susquehanna Bancshares, Inc. | Community Banks, Inc. | |
Wells Fargo & Company | Placer Sierra Bancshares | |
Rabobank Nederland | Mid-State Bancshares | |
Citizens Banking Corporation | Republic Bancorp Inc. | |
BB&T Corporation | Main Street Banks, Inc. | |
Marshall & Ilsley Corporation | Gold Banc Corporation, Inc. | |
Banco Bilbao Vizcaya Argentaria, S.A. | Laredo National Bancshares, Inc. | |
BNP Paribas Group | Community First Bankshares, Inc. | |
Huntington Bancshares Incorporated | Unizan Financial Corporation |
• | book value per share of the acquired company based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition. | |
• | tangible book value per share of the acquired company based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition. |
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• | the earnings per share of the acquired company for the latest 12 months of results publicly available prior to the time the transaction was announced. | |
• | the projected forward earnings per share of the acquired company publicly available prior to the time the transaction was announced. | |
• | tangible equity premium to core deposits based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition. | |
• | market premium based on the latest closing priceone-day prior to the announcement of the acquisition. |
Fifth Third/First | Comparable | Comparable | Comparable | |||||||||||||
Charter | Transactions | Transactions | Transactions | |||||||||||||
Transaction Price to: | Merger | Median | Maximum | Minimum | ||||||||||||
Book Value | 241 | % | 248 | % | 333 | % | 158 | % | ||||||||
Tangible Book Value | 297 | % | 327 | % | 450 | % | 247 | % | ||||||||
Last Twelve Months Earnings per Share | 22.6 | x | 20.0 | x | 25.1 | x | 15.0 | x | ||||||||
Projected Earnings per Share | 21.8 | x | 19.9 | x | 23.7 | x | 15.2 | x | ||||||||
Core Deposit Premium | 32.4 | % | 25.4 | % | 37.6 | % | 18.8 | % | ||||||||
Market Premium(1) | 56.6 | % | 23.4 | % | 53.2 | % | (3.5 | )% |
(1) | Based on First Charter’s closing price of $19.79 on August 14, 2007 |
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• | First Charter and Fifth Third will be parties to a reorganization within the meaning of Section 368(b) of the Internal Revenue Code, | |
• | No gain or loss will be recognized by holders of First Charter common stock who elect to exchange their First Charter common stock for Fifth Third common stock pursuant to the merger (except with respect to any cash received in lieu of a fractional share interest in Fifth Third common stock), | |
• | The tax basis of the Fifth Third common stock received (including fractional shares deemed received and redeemed) by holders of First Charter common stock who exchange their First Charter common stock for Fifth Third common stock in the merger will be the same as the tax basis of the First Charter common stock surrendered in exchange for the Fifth Third common stock (reduced by an amount allocable to a fractional share interest in Fifth Third common stock deemed received and redeemed), and | |
• | The holding period of the Fifth Third common stock received (including fractional shares deemed received and redeemed) by holders who exchange their First Charter common stock for Fifth Third common stock in the merger will be the same as the holding period of the First Charter common stock surrendered in exchange therefor, provided that such First Charter common stock is held as a capital asset at the effective time. |
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• | Fifth Third must have satisfied its reporting requirements under the Securities Exchange Act of 1934, as amended for the 12 months preceding the proposed sale; | |
• | the number of shares sold in any three-month period is limited to the greater of (1) one percent of Fifth Third’s shares outstanding or (2) the average weekly trading volume during the four calendar weeks preceding the first sale; and | |
• | the shares must be sold by a broker in a routine open market transaction that does not involve the solicitation of orders for purchase. |
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• | their incorporation, good standing, corporate power and similar corporate matters; | |
• | their capitalization; | |
• | their authorization, execution, delivery and performance and the enforceability of the merger agreement and the absence of violations; | |
• | governmental and third-party consents necessary to complete the merger; | |
• | their financial statements; | |
• | the absence of a broker’s or finder’s fee in connection with the merger; |
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• | the absence of material changes since December 31, 2006; | |
• | legal proceedings; | |
• | tax matters; | |
• | their SEC and other regulatory filings; | |
• | compliance with laws and regulations; | |
• | tax treatment of the merger; and | |
• | information in this document. |
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• | other than in the ordinary course of business consistent with past practice: (1) incur any indebtedness for borrowed money, (2) become responsible for the obligations of any other individual, corporation or other entity or (3) make any loan, advance, capital contributions to or investment in, any person; | |
• | adjust, split, combine or reclassify any of its capital stock; | |
• | make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, except |
• | for regular quarterly cash dividends per share of First Charter common stock consistent with past practice, subject to coordination with Fifth Third relating to the declaration of First Charter common stock dividends, | |
• | dividends paid by any of the subsidiaries of First Charter to First Charter or to any of its wholly owned subsidiaries, | |
• | the acceptance of shares of First Charter common stock in payment of the exercise price or withholding taxes incurred by any employee or director in connection with the exercise of stock options or the vesting of restricted shares of (or settlement of other equity-based awards in respect of First Charter common stock granted under a First Charter stock plan, in each case in accordance with past practice and the terms of the applicable First Charter stock plan and the related award agreements), and | |
• | open-market purchases pursuant to the First Charter Retirement Savings Plan, First Charter’s Amended and Restated Deferred Compensation Plan for Non-Employee Directors or First Charter’s 2007 Dividend Reinvestment and Stock Purchase Plan; |
• | grant any First Charter stock options, restricted shares or other equity-based award with respect to shares of First Charter common stock under any of the First Charter stock plans, or otherwise grant any individual, corporation or other entity any right to acquire any shares of its capital stock; | |
• | issue any additional shares of capital stock or other securities except pursuant to the exercise of stock options or the settlement of other equity-based awards granted under a First Charter stock plan that are outstanding as of the date of the merger agreement; |
• | except as required by the terms of any First Charter benefit plan and, solely with respect to employees that are not executive officers or directors of First Charter, except for normal increases made in the ordinary course of business consistent with past practice, or as required by applicable law or an existing agreement: |
• | increase the wages, salaries, incentive compensation or incentive compensation opportunities of any employee of First Charter or any of its subsidiaries, or, except for payments in the ordinary course of business consistent with past practice, pay or provide, or increase or accelerate the accrual rate, vesting or timing of payment or funding of, any compensation, benefits or other rights of any employee of First Charter or any of its subsidiaries; or | |
• | establish, adopt or become a party to any new employee benefit or compensation plan, program, commitment or agreement or amend any First Charter benefit plan (provided, however that First Charter may enter into retention agreements with a limited number of key employees whose retention |
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is deemed reasonably necessary by First Charter to facilitate the consummation of the transactions contemplated by the merger agreement); |
• | except for sales of those properties set forth in the First Charter disclosure schedules at market prices in arm’s-length transactions with unrelated parties, sell, transfer, mortgage, encumber or otherwise dispose of any material amount of its properties or assets to any person or other entity other than a First Charter subsidiary, or cancel, release or assign any material indebtedness other than in the ordinary course of business consistent with past practice or pursuant to contracts in force as of the date of the merger agreement; | |
• | enter into any new line of business or make any material change in its lending, investment, underwriting, risk and asset liability management or other banking, operating and servicing policies, except as required by applicable law, regulation or policies imposed by any governmental entity; | |
• | make any material investment either by purchase of stock or securities, contributions to capital, property transfers or purchase of any property or assets of any other person; | |
• | take any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to prevent the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code; | |
• | amend its articles of incorporation or bylaws, or otherwise take any action to exempt any person or entity (other than Fifth Third or its subsidiaries) or any action taken by any person from any takeover statute or similarly restrictive provisions of its organizational documents or terminate, amend or waive any provisions of any confidentiality or standstill agreements in place with any third parties; | |
• | other than in prior consultation with Fifth Third, restructure or materially change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported; |
• | commence or settle any claim, action or proceeding where the amount in dispute is in excess of $250,000 or subjecting First Charter or any of its subsidiaries to any material restrictions on its current or future business or operations (including the future business and operations of the surviving corporation); |
• | take any action or fail to take any action that is intended or may reasonably be expected to result in any of the closing conditions to the merger not being satisfied; | |
• | implement or adopt any material change in its tax accounting or financial accounting principles, practices or methods, other than as may be required by applicable, GAAP or regulatory guidelines; | |
• | file or amend any tax return other than in the ordinary course of business, make any significant change in any method of tax or accounting (other than as may be required by applicable law, GAAP or regulatory guidelines), make or change any tax election or settle or compromise any tax liability in excess of $250,000; | |
• | except for transactions in the ordinary course of business consistent with past practice, terminate or waive any material provision of any First Charter contract or make any change in any instrument or agreement governing the terms of any of its securities, or any material lease or contract, other than normal renewals of contracts and leases without material adverse changes of terms; | |
• | take any action that would materially impede or materially delay the ability of the parties to obtain any necessary approvals of any regulatory agency or governmental entity required for the transaction, contemplated by the merger agreement; or | |
• | agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors in support of, any of the actions prohibited by the preceding bullet points. |
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• | amend, repeal or otherwise modify any provision of the Fifth Third articles of incorporation, the code of regulations of Fifth Third, the Fifth Third Financial articles of incorporation or the code of regulations of Fifth Third Financial in a manner that would adversely affect you or the transactions contemplated by the merger agreement; | |
• | take any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to prevent the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code; | |
• | take any action that would be reasonably expected to prevent, materially impede, materially impact or materially delay the ability of the parties to obtain any necessary approvals of any regulatory agency or governmental entity required to consummate the transactions contemplated by the merger agreement; | |
• | take any action that is intended or may reasonably be expected to result in any of the closing conditions to the merger not being satisfied; or | |
• | agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors in support of, any of the actions prohibited by the preceding bullet points. |
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• | approval of the merger agreement by First Charter’s shareholders; | |
• | approval by NASDAQ of the listing of the shares of Fifth Third common stock to be issued in the merger on the NASDAQ Global Select Market System, subject to official notice of issuance; | |
• | absence of any judgment, order, injunction or decree of a court or agency of competent jurisdiction that prohibits completion of the merger or the transactions contemplated by the merger agreement; | |
• | absence of any statute, rule, regulation, order, injunction or decree that prohibits or makes illegal completion of the merger; and | |
• | the receipt by each party of an opinion of its counsel, dated the closing date of the merger, substantially to the effect that the merger will be treated as a reorganization under Section 368(a) of the Internal Revenue Code (see “Proposal — Merger of First Charter into Fifth Third Financial Corporation — Material Federal Income Tax Consequences”). |
• | accuracy of First Charter’s representations and warranties contained in the merger agreement, except, in the case of most representations and warranties, as to which the failure to be accurate would not be reasonably likely to have a material adverse effect on the party making the representations and warranties (See “Terms of the Agreement — Representations and Warranties”), and the performance by First Charter of its obligations contained in the merger agreement in all material respects; and | |
• | receipt of all required regulatory approvals and expiration of all related statutory waiting periods. |
• | accuracy of Fifth Third’s representations and warranties contained in the merger agreement, except, in the case of most representations and warranties, in which the failure to be accurate would not be reasonably likely to have a material adverse effect on the party making the representations and warranties (See “Terms of the Agreement — Representations and Warranties”), and the performance by Fifth Third of its obligations contained in the merger agreement in all material respects; and | |
• | receipt of all required regulatory approvals that shall not have resulted in the imposition of any materially burdensome regulatory condition under banking laws and the expiration of all related statutory waiting periods. |
• | by mutual consent of Fifth Third, First Charter and Fifth Third Financial; | |
• | by either Fifth Third or First Charter, if any governmental entity that must grant a Fifth Third requisite regulatory approval or a First Charter regulatory approval has denied approval of the merger and such denial has become final and nonappealable or if any governmental entity of competent jurisdiction shall have issued a final and nonappealable order permanently enjoining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement; |
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• | by either Fifth Third or First Charter, if the merger shall not have been consummated on or before August 15, 2008; provided, however, that no party may so terminate the merger agreement if the failure of such party to comply with any provision of the merger agreement has caused the merger not to be completed; | |
• | by either Fifth Third or First Charter (so long as that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained in the merger agreement), if there shall have been a breach of any of the covenants, agreements, representations or warranties set forth in the merger agreement on the part of First Charter, in the case of a termination by Fifth Third, or Fifth Third, in the case of a termination by First Charter, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the closing date, the failure of the closing conditions of either party, as the case may be, and which breach is not cured within 45 days following written notice to the party committing the breach, or which breach, by its nature, cannot be cured within such time period; and | |
• | by Fifth Third, if the Board of Directors of First Charter shall have failed to recommend in the proxy statement the approval and adoption of the merger agreement; or in a manner adverse to Fifth Third, (A) withdrawn, modified or qualified, or proposed to withdraw, modify or qualify, the recommendation by the First Charter Board of Directors of the merger agreementand/or the merger to First Charter’s shareholders, (B) taken any public action or made any public statement in connection with the meeting of First Charter shareholders inconsistent with such recommendation or (C) recommended any alternative proposal, whether or not permitted by the merger agreement. |
• | by Fifth Third because of a material breach of a representation, warranty or covenant by First Charter or because of a failure by the First Charter Board of Directors to recommend the merger agreement in the proxy statement, or in a manner adverse to Fifth Third, because of a (1) withdrawn, modified or qualified recommendation by the First Charter Board of Directors of the merger agreementand/or the merger to First Charter’s shareholders; (2) public action or public statement by First Charter’s Board of Directors in connection with the meeting of First Charter shareholders with such recommendation; or (3) a recommendation of any alternative proposal by First Charter’s Board of Directors; and prior to such termination, an alternative transaction with respect to First Charter was commenced, publicly proposed or publicly disclosed; and within 12 months after such termination, First Charter shall have entered into a definitive written agreement relating to an alternative transaction or any alternative transaction shall have been consummated; or | |
• | by Fifth Third, if, after receiving an alternative proposal, (1) the First Charter Board of Directors does not take action to convene the First Charter shareholders meeting or recommends that First Charter shareholders adopt the definitive written agreement relating to the alternative proposal and (2) within |
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12 months after such receipt (A) First Charter shall have entered into a definitive written agreement relating to such alternative transaction or (B) any alternative transaction shall have been consummated. |
• | the merger agreement is terminated by mutual agreement of the parties; | |
• | the merger agreement is terminated due to the failure to obtain regulatory approval by the appropriate governmental entities or due to a final and nonappealable order by a governmental entity enjoining or prohibiting the consummation of the merger; or | |
• | the merger agreement is terminated by First Charter for the breach by Fifth Third of its representations, warranties, covenants or agreements set forth in the merger agreement which breach, either individually or in the aggregate results in the failure of the conditions to obligations of Fifth Third or First Charter and is either incurable or is not cured within 45 days. |
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Performance Share | ||||||||
Awards Converted | ||||||||
to Performance | Cash Received as a | |||||||
Shares as a Result | Result of the | |||||||
Name | of the Merger | Conversion | ||||||
Stephen J. Antal | 8,000 | $ | 248,000 | |||||
J. Scott Ensor | 9,900 | $ | 306,900 | |||||
Robert E. James, Jr. | 31,500 | $ | 976,500 | |||||
Stephen M. Rownd | 14,300 | $ | 443,300 | |||||
Josephine P. Sawyer | 7,900 | $ | 244,900 | |||||
Cecil O. Smith, Jr. | 12,600 | $ | 390,600 | |||||
All executive officers | 84,200 | $ | 2,610,200 | |||||
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Shares of Previously Restricted Stock | ||||
Becoming Unrestricted After the Effective | ||||
Name | Date of the Merger | |||
Stephen J. Antal | 600 | |||
Sheila Stoke | 3,000 | |||
All executive officers | 3,600 | |||
Non-employee directors | 17,316 | |||
Total | 20,916 | |||
Options Exercisable | Options Vesting as a | |||||||||||
as of the Special | Result of the | |||||||||||
Name | Options Held | Meeting Date | Acceleration | |||||||||
Stephen J. Antal | 16,924 | 7,924 | 9,000 | |||||||||
J. Scott Ensor | 29,791 | 18,251 | 11,540 | |||||||||
Robert E. James, Jr. | 175,717 | 140,717 | 35,000 | |||||||||
Stephen M. Rownd | 38,785 | 22,785 | 16,000 | |||||||||
Josephine P. Sawyer | 14,800 | 5,940 | 8,860 | |||||||||
Cecil O. Smith, Jr. | 22,638 | 8,618 | 14,020 | |||||||||
All executive officers | 298,655 | 204,235 | 94,420 | |||||||||
Non-employee directors | 151,947 | 151,947 | 0 | |||||||||
Total | 450,602 | 356,182 | 94,420 | |||||||||
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For the Calendar Year | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||
Income statement | ||||||||||||||||||||
Interest income | $ | 264,929 | $ | 224,605 | $ | 187,303 | $ | 178,292 | $ | 196,388 | ||||||||||
Interest expense | 131,219 | 99,722 | 64,293 | 70,490 | 83,227 | |||||||||||||||
Net interest income | 133,710 | 124,883 | 123,010 | 107,802 | 113,161 | |||||||||||||||
Provision for loan losses | 5,290 | 9,343 | 8,425 | 27,518 | 8,270 | |||||||||||||||
Noninterest income | 67,678 | 46,738 | 57,038 | 62,282 | 47,410 | |||||||||||||||
Noninterest expense | 124,937 | 127,971 | 107,496 | 125,065 | 97,551 | |||||||||||||||
Income from continuing operations before income tax expense | 71,161 | 34,307 | 64,127 | 17,501 | 54,750 | |||||||||||||||
Income tax expense | 23,799 | 9,132 | 21,889 | 3,313 | 14,947 | |||||||||||||||
Income from continuing operations, net of tax | 47,362 | 25,175 | 42,238 | 14,188 | 39,803 | |||||||||||||||
Discontinued operations | ||||||||||||||||||||
Income (loss) from discontinued operations | 36 | 224 | 337 | (69 | ) | — | ||||||||||||||
Gain on sale | 962 | — | — | — | — | |||||||||||||||
Income tax expense (benefit) | 965 | 88 | 133 | (27 | ) | — | ||||||||||||||
Income (loss) from discontinued operations, net of tax | 33 | 136 | 204 | (42 | ) | — | ||||||||||||||
Net income | $ | 47,395 | $ | 25,311 | $ | 42,442 | $ | 14,146 | $ | 39,803 | ||||||||||
Per common share | ||||||||||||||||||||
Basic earnings per share | ||||||||||||||||||||
Income from continuing operations | $ | 1.50 | $ | 0.83 | $ | 1.41 | $ | 0.48 | $ | 1.30 | ||||||||||
Income from discontinued operations, net of tax | — | — | 0.01 | — | — | |||||||||||||||
Net income | 1.50 | 0.83 | 1.42 | 0.47 | 1.30 | |||||||||||||||
Diluted earnings per share | ||||||||||||||||||||
Income from continuing operations | 1.49 | 0.82 | 1.40 | 0.47 | 1.30 | |||||||||||||||
Income from discontinued operations, net of tax | — | — | 0.01 | — | — | |||||||||||||||
Net income | 1.49 | 0.82 | 1.40 | 0.47 | 1.30 | |||||||||||||||
Average shares | ||||||||||||||||||||
Basic | 31,525,366 | 30,457,573 | 29,859,683 | 29,789,969 | 30,520,125 | |||||||||||||||
Diluted | 31,838,292 | 30,784,406 | 30,277,063 | 30,007,435 | 30,702,107 | |||||||||||||||
Cash dividends declared | 0.775 | 0.76 | 0.75 | 0.74 | 0.73 | |||||||||||||||
Period-end book value | 12.81 | 10.53 | 10.47 | 10.08 | 10.80 | |||||||||||||||
Ratios | ||||||||||||||||||||
Return on average equity | 13.45 | % | 7.86 | % | 14.05 | % | 4.50 | % | 12.52 | % | ||||||||||
Return on average assets | 1.08 | 0.56 | 0.98 | 0.35 | 1.13 | |||||||||||||||
Net yield on earning assets | 3.37 | 3.05 | 3.14 | 3.00 | 3.52 | |||||||||||||||
Average portfolio loans to average deposits | 105.72 | 101.75 | 92.48 | 85.56 | 93.85 | |||||||||||||||
Average equity to average assets | 8.06 | 7.18 | 6.99 | 7.85 | 9.02 | |||||||||||||||
Efficiency ratio(1) | 59.6 | 59.4 | 59.8 | 65.4 | 64.3 | |||||||||||||||
Dividend payout | 52.0 | 92.7 | 53.6 | 157.4 | 56.2 | |||||||||||||||
Selected period-end balances | ||||||||||||||||||||
Portfolio loans, net | $ | 3,450,087 | $ | 2,917,020 | $ | 2,412,529 | $ | 2,227,030 | $ | 2,045,266 | ||||||||||
Loans held for sale | 12,292 | 6,447 | 5,326 | 5,137 | 158,404 | |||||||||||||||
Allowance for loan losses | 34,966 | 28,725 | 26,872 | 25,607 | 27,204 | |||||||||||||||
Securities available for sale | 906,415 | 899,111 | 1,652,732 | 1,601,900 | 1,129,212 | |||||||||||||||
Assets | 4,856,717 | 4,232,420 | 4,431,605 | 4,206,693 | 3,745,949 | |||||||||||||||
Deposits | 3,248,128 | 2,799,479 | 2,609,846 | 2,427,897 | 2,322,647 | |||||||||||||||
Other borrowings | 1,098,698 | 1,068,574 | 763,738 | 473,106 | 1,042,440 | |||||||||||||||
Total liabilities | 4,409,355 | 3,908,825 | 4,116,918 | 3,907,254 | 3,421,263 | |||||||||||||||
Shareholders’ equity | 447,362 | 323,595 | 314,687 | 299,439 | 324,686 | |||||||||||||||
Selected average balances | ||||||||||||||||||||
Portfolio loans | $ | 3,092,801 | $ | 2,788,755 | $ | 2,353,605 | $ | 2,126,821 | $ | 2,112,855 | ||||||||||
Loans held for sale | 9,019 | 6,956 | 9,502 | 25,927 | 10,035 | |||||||||||||||
Securities available for sale, at cost | 920,961 | 1,361,507 | 1,623,102 | 1,464,704 | 1,126,494 | |||||||||||||||
Earning assets | 4,033,031 | 4,164,969 | 4,004,678 | 3,662,460 | 3,261,842 | |||||||||||||||
Assets | 4,369,834 | 4,489,083 | 4,322,727 | 4,009,511 | 3,525,090 | |||||||||||||||
Deposits | 2,925,506 | 2,740,742 | 2,544,864 | 2,485,711 | 2,251,256 | |||||||||||||||
Other borrowings | 1,049,165 | 1,375,910 | 1,428,124 | 1,159,889 | 906,263 | |||||||||||||||
Shareholders’ equity | 352,253 | 322,226 | 302,101 | 314,562 | 317,952 |
(1) | Noninterest expense less debt extinguishment expense and derivative termination costs, divided by the sum of taxable-equivalent net interest income plus noninterest income less gain (loss) on sale of securities, net. Excludes the results of discontinued operations. |
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For the Calendar Year | ||||||||||||||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||||||
Daily | Interest | Average | Daily | Interest | Average | Daily | 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) | ||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Earning assets | ||||||||||||||||||||||||||||||||||||
Loans and loans held for sale(1)(2)(3)(4) | $ | 3,101,820 | $ | 225,195 | 7.26 | % | $ | 2,795,711 | $ | 172,961 | 6.19 | % | $ | 2,363,107 | $ | 124,496 | 5.27 | % | ||||||||||||||||||
Securities — taxable(4) | 819,791 | 35,613 | 4.34 | 1,251,477 | 47,657 | 3.81 | 1,538,133 | 59,520 | 3.87 | |||||||||||||||||||||||||||
Securities — tax-exempt | 101,170 | 6,012 | 5.94 | 110,030 | 6,100 | 5.54 | 84,969 | 5,224 | 6.15 | |||||||||||||||||||||||||||
Federal funds sold | 5,369 | 267 | 4.97 | 1,883 | 60 | 3.19 | 1,566 | 19 | 1.22 | |||||||||||||||||||||||||||
Interest-bearing bank deposits | 4,881 | 204 | 4.18 | 5,868 | 163 | 2.78 | 16,903 | 200 | 1.18 | |||||||||||||||||||||||||||
Total earning assets | 4,033,031 | $ | 267,291 | 6.63 | % | 4,164,969 | $ | 226,941 | 5.45 | % | 4,004,678 | $ | 189,459 | 4.73 | % | |||||||||||||||||||||
Cash and due from banks | 81,497 | 94,971 | 89,103 | |||||||||||||||||||||||||||||||||
Other assets | 255,306 | 229,143 | 228,946 | |||||||||||||||||||||||||||||||||
Total assets | $ | 4,369,834 | $ | 4,489,083 | $ | 4,322,727 | ||||||||||||||||||||||||||||||
Liabilities and shareholders’ equity | ||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||
Demand deposits | $ | 370,458 | $ | 2,949 | 0.80 | % | $ | 343,663 | $ | 1,111 | 0.32 | % | $ | 326,365 | $ | 666 | 0.20 | % | ||||||||||||||||||
Money market accounts | 589,887 | 18,718 | 3.17 | 496,982 | 9,220 | 1.86 | 522,232 | 5,977 | 1.14 | |||||||||||||||||||||||||||
Savings deposits | 117,862 | 259 | 0.22 | 123,305 | 277 | 0.22 | 122,339 | 321 | 0.26 | |||||||||||||||||||||||||||
Retail certificates of deposit | 993,631 | 41,066 | 4.13 | 968,752 | 29,358 | 3.03 | 904,907 | 22,038 | 2.44 | |||||||||||||||||||||||||||
Brokered certificates of deposit | 421,108 | 19,456 | 4.62 | 409,882 | 13,490 | 3.29 | 306,983 | 6,348 | 2.07 | |||||||||||||||||||||||||||
Retail other borrowings | 113,126 | 2,877 | 2.54 | 115,308 | 1,812 | 1.57 | 122,911 | 1,137 | 0.93 | |||||||||||||||||||||||||||
Wholesale other borrowings | 936,039 | 45,894 | 4.90 | 1,260,602 | 44,454 | 3.53 | 1,305,213 | 27,806 | 2.13 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 3,542,111 | 131,219 | 3.70 | % | 3,718,494 | 99,722 | 2.68 | % | 3,610,950 | 64,293 | 1.77 | % | ||||||||||||||||||||||||
Noninterest-bearing deposits | 432,560 | 398,158 | 362,038 | |||||||||||||||||||||||||||||||||
Other liabilities | 42,910 | 50,205 | 47,638 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 352,253 | 322,226 | 302,101 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 4,369,834 | $ | 4,489,083 | $ | 4,322,727 | ||||||||||||||||||||||||||||||
Net interest spread | 2.93 | % | 2.77 | % | 2.96 | % | ||||||||||||||||||||||||||||||
Contribution of noninterest bearing sources | 0.44 | 0.28 | 0.18 | |||||||||||||||||||||||||||||||||
Net interest income/ yield on earning assets | $ | 136,072 | 3.37 | % | $ | 127,219 | 3.05 | % | $ | 125,166 | 3.14 | % | ||||||||||||||||||||||||
(1) | The preceding analysis takes into consideration the principal amount of nonaccruing loans and only income actually collected and recognized on such loans. | |
(2) | Average loan balances are shown net of unearned income. | |
(3) | Includes amortization of deferred loan fees of $3,104, $2,343, and $2,616 for 2006, 2005, and 2004, respectively. | |
(4) | Yields on tax-exempt securities and loans are stated on a taxable-equivalent basis, assuming a Federal tax rate of 35 percent and applicable state taxes for 2006, 2005, and 2004. The adjustments made to convert to a taxable-equivalent basis were $2,362, $2,336 and $2,156 for 2006, 2005, and 2004, respectively. |
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2006 vs 2005 | 2005 vs 2004 | |||||||||||||||||||||||
Due to Change in | Net | Due to Change in | Net | |||||||||||||||||||||
Volume | Rate | Change | Volume | Rate | Change | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Increase (decrease) in tax-equivalent interest income | ||||||||||||||||||||||||
Loans and loans held for sale(1) | $ | 20,209 | $ | 32,025 | $ | 52,234 | $ | 24,826 | $ | 23,639 | $ | 48,465 | ||||||||||||
Securities — taxable(1) | (18,082 | ) | 6,038 | (12,044 | ) | (10,930 | ) | (933 | ) | (11,863 | ) | |||||||||||||
Securities — tax-exempt | (510 | ) | 422 | (88 | ) | 1,427 | (551 | ) | 876 | |||||||||||||||
Federal funds sold | 159 | 48 | 207 | 5 | 36 | 41 | ||||||||||||||||||
Interest-bearing bank deposits | (31 | ) | 72 | 41 | (188 | ) | 151 | (37 | ) | |||||||||||||||
Total | $ | 1,745 | $ | 38,605 | $ | 40,350 | $ | 15,140 | $ | 22,342 | $ | 37,482 | ||||||||||||
Increase (decrease) in interest expense | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Demand | $ | 93 | $ | 1,745 | $ | 1,838 | $ | 37 | $ | 408 | $ | 445 | ||||||||||||
Money market | 1,979 | 7,519 | 9,498 | (302 | ) | 3,545 | 3,243 | |||||||||||||||||
Savings | (12 | ) | (6 | ) | (18 | ) | 3 | (47 | ) | (44 | ) | |||||||||||||
Retail certificates of deposit | 772 | 10,936 | 11,708 | 1,640 | 5,680 | 7,320 | ||||||||||||||||||
Brokered certificates of deposit | 379 | 5,587 | 5,966 | 2,583 | 4,559 | 7,142 | ||||||||||||||||||
Retail other borrowings | (35 | ) | 1,100 | 1,065 | (74 | ) | 749 | 675 | ||||||||||||||||
Wholesale other borrowings | (13,221 | ) | 14,661 | 1,440 | (981 | ) | 17,629 | 16,648 | ||||||||||||||||
Total | $ | (10,045 | ) | $ | 41,542 | $ | 31,497 | $ | 2,906 | $ | 32,523 | $ | 35,429 | |||||||||||
Increase in tax-equivalent net interest income | $ | 8,853 | $ | 2,053 | ||||||||||||||||||||
(1) | Income on tax-exempt securities and loans are stated on a taxable-equivalent basis. Refer toTable Twofor further details. |
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Noninterest Income
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Service charges on deposits | $ | 28,962 | $ | 27,809 | $ | 25,564 | ||||||
Wealth management | 2,847 | 2,410 | 1,997 | |||||||||
Gain on sale of deposits and loans | 2,825 | — | — | |||||||||
Equity method investment gains (losses), net | 3,983 | (271 | ) | (349 | ) | |||||||
Mortgage services | 3,062 | 2,873 | 1,748 | |||||||||
Gain on sale of small business administration loans | 126 | — | — | |||||||||
Brokerage services | 3,182 | 3,119 | 3,112 | |||||||||
Insurance services | 13,366 | 12,546 | 11,514 | |||||||||
Bank owned life insurance | 3,522 | 4,311 | 3,413 | |||||||||
Property sale gains, net | 645 | 1,853 | 777 | |||||||||
ATM, debit, and merchant fees | 8,395 | 6,702 | 5,160 | |||||||||
Other | 2,591 | 2,076 | 1,719 | |||||||||
Total fees and other income from continuing operations | 73,506 | 63,428 | 54,655 | |||||||||
Securities gains (losses), net | (5,828 | ) | (16,690 | ) | 2,383 | |||||||
Noninterest income from continuing operations | 67,678 | 46,738 | 57,038 | |||||||||
Noninterest income from discontinued operations | 3,012 | 3,475 | 3,858 | |||||||||
Gain on sale from discontinued operations | 962 | — | — | |||||||||
Total noninterest income | $ | 71,652 | $ | 50,213 | $ | 60,896 | ||||||
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Selected Items Included in Noninterest Income
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Gains (losses) on sale of securities | $ | (5,828 | ) | $ | (16,690 | ) | $ | 2,383 | ||||
Gain on sale of deposits and loans | 2,825 | — | 339 | |||||||||
Equity method investments gains (losses), net | 3,983 | (271 | ) | (349 | ) | |||||||
Bank owned life insurance | (271 | ) | 925 | — | ||||||||
Gain on sale of property | 645 | 1,853 | 777 |
Noninterest Expense
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Salaries and employee benefits | $ | 69,237 | $ | 61,428 | $ | 56,103 | ||||||
Occupancy and equipment | 18,144 | 16,565 | 16,938 | |||||||||
Data processing | 5,768 | 5,171 | 3,830 | |||||||||
Marketing | 4,711 | 4,668 | 4,350 | |||||||||
Postage and supplies | 4,834 | 4,478 | 4,772 | |||||||||
Professional services | 8,811 | 8,072 | 9,389 | |||||||||
Telecommunications | 2,193 | 2,139 | 1,944 | |||||||||
Amortization of intangibles | 654 | 378 | 316 | |||||||||
Foreclosed properties | 755 | 386 | 161 | |||||||||
Debt extinguishment expense | — | 6,884 | — | |||||||||
Derivative termination costs | — | 7,770 | — | |||||||||
Other | 9,830 | 10,032 | 9,693 | |||||||||
Noninterest expense from continuing operations | 124,937 | 127,971 | 107,496 | |||||||||
Noninterest expense from discontinued operations | 2,976 | 3,251 | 3,521 | |||||||||
Total noninterest expense | $ | 127,913 | $ | 131,222 | $ | 111,017 | ||||||
Full-time equivalent employees at year-end(1) | 1,099 | 1,064 | 1,014 | |||||||||
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Selected Items Included in Noninterest Expense
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Employee benefit plan modification | $ | — | $ | 1,079 | $ | — | ||||||
Separation agreements | 675 | 1,010 | — | |||||||||
Accelerated vesting of stock options | 665 | — | — | |||||||||
Actuarial revision to medical reserve | (391 | ) | — | — | ||||||||
Medical claims IBNR reserve | (470 | ) | — | — | ||||||||
Fixed asset correction | — | (1,386 | ) | — | ||||||||
Merger-related costs | 302 | — | — | |||||||||
Debt extinguishment expense | — | 6,884 | — | |||||||||
Derivative termination costs | — | 7,770 | — |
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Selected Financial Data by Quarter
2006 Quarters | 2005 Quarters | |||||||||||||||||||||||||||||||
Fourth | Third | Second | First | Fourth | Third | Second | First | |||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
Income statement | ||||||||||||||||||||||||||||||||
Interest income | $ | 74,456 | $ | 67,085 | $ | 63,742 | $ | 59,646 | $ | 58,639 | $ | 59,080 | $ | 55,604 | $ | 51,282 | ||||||||||||||||
Interest expense | 38,441 | 34,127 | 31,095 | 27,556 | 26,710 | 27,990 | 24,314 | 20,708 | ||||||||||||||||||||||||
Net interest income | 36,015 | 32,958 | 32,647 | 32,090 | 31,929 | 31,090 | 31,290 | 30,574 | ||||||||||||||||||||||||
Provision for loan losses | 1,486 | 1,405 | 880 | 1,519 | 1,795 | 2,770 | 2,878 | 1,900 | ||||||||||||||||||||||||
Noninterest income (loss) | 17,388 | 17,007 | 16,292 | 16,991 | (675 | ) | 16,295 | 16,271 | 14,847 | |||||||||||||||||||||||
Noninterest expense | 33,853 | 29,655 | 30,688 | 30,741 | 43,249 | 28,142 | 28,532 | 28,048 | ||||||||||||||||||||||||
Income (loss) from continuing operations before income tax expense | 18,064 | 18,905 | 17,371 | 16,821 | (13,790 | ) | 16,473 | 16,151 | 15,473 | |||||||||||||||||||||||
Income tax expense (benefit) | 5,962 | 6,223 | 5,946 | 5,668 | (5,510 | ) | 4,389 | 5,000 | 5,253 | |||||||||||||||||||||||
Income (loss) from continuing operations, net of tax | 12,102 | 12,682 | 11,425 | 11,153 | (8,280 | ) | 12,084 | 11,151 | 10,220 | |||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||
Income (loss) from discontinued operations | (162 | ) | — | 50 | 148 | (83 | ) | (53 | ) | 214 | 146 | |||||||||||||||||||||
Gain on sale | 962 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Income tax expense (benefit) | 887 | — | 20 | 58 | (33 | ) | (21 | ) | 85 | 57 | ||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax | (87 | ) | — | 30 | 90 | (50 | ) | (32 | ) | 129 | 89 | |||||||||||||||||||||
Net income (loss) | $ | 12,015 | $ | 12,682 | $ | 11,455 | $ | 11,243 | $ | (8,330 | ) | $ | 12,052 | $ | 11,280 | $ | 10,309 | |||||||||||||||
Per common share | ||||||||||||||||||||||||||||||||
Basic earnings per share(2) | ||||||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of tax | $ | 0.36 | $ | 0.41 | $ | 0.37 | $ | 0.36 | $ | (0.27 | ) | $ | 0.40 | $ | 0.37 | $ | 0.34 | |||||||||||||||
Income (loss) from discontinued operations, net of tax | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Net income (loss) | 0.36 | 0.41 | 0.37 | 0.36 | (0.27 | ) | 0.39 | 0.37 | 0.34 | |||||||||||||||||||||||
Diluted earnings per share(2) | ||||||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of tax | 0.36 | 0.40 | 0.37 | 0.36 | (0.27 | ) | 0.39 | 0.36 | 0.33 | |||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Net income (loss) | 0.36 | 0.40 | 0.37 | 0.36 | (0.27 | ) | 0.39 | 0.37 | 0.34 | |||||||||||||||||||||||
Average shares | ||||||||||||||||||||||||||||||||
Basic | 33,268,542 | 31,056,059 | 31,058,858 | 30,859,461 | 30,678,743 | 30,575,440 | 30,409,307 | 30,234,683 | ||||||||||||||||||||||||
Diluted | 33,583,617 | 31,426,563 | 31,339,325 | 31,153,338 | 30,678,743 | 30,891,887 | 30,679,636 | 30,630,601 | ||||||||||||||||||||||||
Cash dividends declared | 0.195 | 0.195 | 0.195 | 0.190 | 0.190 | 0.190 | 0.190 | 0.190 | ||||||||||||||||||||||||
Period-end book value | 12.81 | 11.20 | 10.73 | 10.68 | 10.53 | 10.82 | 10.73 | 10.31 | ||||||||||||||||||||||||
Performance ratios | ||||||||||||||||||||||||||||||||
Return on average equity(1) | 11.69 | % | 14.76 | % | 13.80 | % | 13.99 | % | (10.21 | )% | 14.57 | % | 14.12 | % | 13.21 | % | ||||||||||||||||
Return on average assets(1) | 1.02 | 1.16 | 1.07 | 1.09 | (0.77 | ) | 1.02 | 1.00 | 0.94 | |||||||||||||||||||||||
Net yield on earning assets(1) | 3.40 | 3.33 | 3.36 | 3.40 | 3.27 | 2.92 | 3.03 | 3.06 | ||||||||||||||||||||||||
Average portfolio loans to average deposits | 105.88 | 103.37 | 108.27 | 105.51 | 103.01 | 103.01 | 103.43 | 96.86 | ||||||||||||||||||||||||
Average equity to average assets | 8.75 | 7.86 | 7.79 | 7.76 | 7.52 | 7.03 | 7.05 | 7.13 | ||||||||||||||||||||||||
Efficiency ratio(3) | 62.6 | 52.6 | 62.0 | 61.9 | 58.9 | 58.7 | 59.3 | 60.9 | ||||||||||||||||||||||||
Selected period-end balances | ||||||||||||||||||||||||||||||||
Portfolio loans, net | $ | 3,450,087 | $ | 3,061,864 | $ | 3,042,768 | $ | 2,981,458 | $ | 2,917,020 | $ | 2,900,357 | $ | 2,829,127 | $ | 2,676,707 | ||||||||||||||||
Loans held for sale | 12,292 | 10,923 | 8,382 | 8,719 | 6,447 | 7,309 | 8,159 | 6,006 | ||||||||||||||||||||||||
Allowance for loan losses | 34,966 | 29,919 | 29,520 | 29,505 | 28,725 | 29,788 | 29,032 | 27,483 | ||||||||||||||||||||||||
Securities available for sale | 906,415 | 899,120 | 884,370 | 900,424 | 899,111 | 1,374,163 | 1,412,885 | 1,440,494 | ||||||||||||||||||||||||
Assets | 4,856,717 | 4,382,507 | 4,361,231 | 4,281,417 | 4,232,420 | 4,699,722 | 4,633,236 | 4,513,053 | ||||||||||||||||||||||||
Deposits | 3,248,128 | 2,954,854 | 2,988,802 | 2,800,346 | 2,799,479 | 2,872,993 | 2,751,385 | 2,702,708 | ||||||||||||||||||||||||
Other borrowings | 1,098,698 | 1,031,798 | 995,707 | 1,103,784 | 1,068,573 | 1,438,388 | 1,503,322 | 1,451,756 | ||||||||||||||||||||||||
Total liabilities | 4,409,355 | 4,033,069 | 4,027,333 | 3,950,736 | 3,908,824 | 4,368,677 | 4,305,538 | 4,200,799 | ||||||||||||||||||||||||
Shareholders’ equity | 447,362 | 349,438 | 333,898 | 330,681 | 323,596 | 331,045 | 327,698 | 312,254 | ||||||||||||||||||||||||
Selected average balances | ||||||||||||||||||||||||||||||||
Portfolio loans | 3,336,563 | 3,070,286 | 3,021,005 | 2,939,233 | 2,924,064 | 2,896,794 | 2,781,606 | 2,547,225 | ||||||||||||||||||||||||
Loans held for sale | 10,757 | 8,792 | 9,810 | 6,675 | 8,131 | 8,160 | 6,832 | 4,651 | ||||||||||||||||||||||||
Securities available for sale, at cost | 924,773 | 923,293 | 921,026 | 914,760 | 1,028,477 | 1,420,033 | 1,441,853 | 1,560,874 | ||||||||||||||||||||||||
Earning assets | 4,284,735 | 4,013,745 | 3,960,835 | 3,868,519 | 3,969,620 | 4,331,780 | 4,236,232 | 4,122,175 | ||||||||||||||||||||||||
Assets | 4,664,431 | 4,336,270 | 4,274,345 | 4,201,477 | 4,303,821 | 4,665,301 | 4,543,846 | 4,439,768 | ||||||||||||||||||||||||
Deposits | 3,151,120 | 2,970,047 | 2,790,197 | 2,785,632 | 2,838,566 | 2,812,165 | 2,689,390 | 2,629,795 | ||||||||||||||||||||||||
Other borrowings | 1,054,550 | 984,504 | 1,108,734 | 1,049,529 | 1,099,350 | 1,471,482 | 1,491,636 | 1,443,909 | ||||||||||||||||||||||||
Shareholders’ equity | 407,929 | 340,986 | 332,987 | 325,917 | 323,753 | 328,115 | 320,412 | 316,476 |
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(1) | Annualized | |
(2) | Due to rounding, earnings per share on continuing and discontinued operations may not sum to earnings per share on net income. | |
(3) | Noninterest expense less debt extinguishment expense and derivative termination costs, divided by the sum of taxable-equivalent net interest income plus noninterest income less gain (loss) on sale of securities, net. Excludes the results of discontinued operations. |
Investment Portfolio
December 31 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
U.S. government obligations | $ | — | $ | 14,878 | $ | 54,374 | ||||||
U.S. government agency obligations | 275,394 | 320,407 | 691,970 | |||||||||
Mortgage-backed securities | 412,020 | 405,450 | 726,381 | |||||||||
State, county, and municipal obligations | 102,602 | 108,996 | 115,380 | |||||||||
Asset-backed securities | 65,115 | 4,994 | — | |||||||||
Equity securities | 51,284 | 44,386 | 64,627 | |||||||||
Total | $ | 906,415 | $ | 899,111 | $ | 1,652,732 | ||||||
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75
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Loan Portfolio Composition
For the Calendar Year | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Commercial real estate | $ | 1,034,330 | $ | 780,597 | $ | 776,474 | $ | 724,340 | $ | 798,664 | ||||||||||
Commercial non real estate | 301,958 | 233,409 | 212,031 | 212,010 | 223,178 | |||||||||||||||
Construction | 793,294 | 517,392 | 332,264 | 358,217 | 215,859 | |||||||||||||||
Mortgage | 618,142 | 660,720 | 449,206 | 391,641 | 322,775 | |||||||||||||||
Home equity | 447,849 | 495,181 | 474,295 | 400,792 | 325,132 | |||||||||||||||
Consumer | 289,493 | 258,619 | 195,422 | 165,804 | 187,109 | |||||||||||||||
Total portfolio loans | 3,485,066 | 2,945,918 | 2,439,692 | 2,252,804 | 2,072,717 | |||||||||||||||
Allowance for loan losses | (34,966 | ) | (28,725 | ) | (26,872 | ) | (25,607 | ) | (27,204 | ) | ||||||||||
Unearned income | (13 | ) | (173 | ) | (291 | ) | (167 | ) | (247 | ) | ||||||||||
Portfolio loans, net | $ | 3,450,087 | $ | 2,917,020 | $ | 2,412,529 | $ | 2,227,030 | $ | 2,045,266 | ||||||||||
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Deposits
December 31 | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Noninterest bearing demand | $ | 454,975 | $ | 429,758 | $ | 377,793 | $ | 326,679 | $ | 305,924 | ||||||||||
Interest bearing demand | 420,774 | 368,291 | 348,677 | 322,471 | 301,329 | |||||||||||||||
Money market accounts | 620,699 | 559,865 | 478,314 | 470,551 | 305,530 | |||||||||||||||
Savings deposits | 111,047 | 119,824 | 119,615 | 118,025 | 114,676 | |||||||||||||||
Certificates of deposit | 1,640,633 | 1,321,741 | 1,285,447 | 1,190,171 | 1,295,188 | |||||||||||||||
Total deposits | $ | 3,248,128 | $ | 2,799,479 | $ | 2,609,846 | $ | 2,427,897 | $ | 2,322,647 | ||||||||||
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Other Borrowings
December 31 | ||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
Balance | Rate | Balance | Rate | Balance | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase: | ||||||||||||||||||||||||
Balance as of | $ | 201,713 | 4.60 | % | $ | 312,283 | 3.01 | % | $ | 250,314 | 1.84 | % | ||||||||||||
Average balance for the year | 260,548 | 4.24 | 348,051 | 2.94 | 245,394 | 1.21 | ||||||||||||||||||
Maximum outstanding at any month-end | 323,775 | 494,566 | 297,818 | |||||||||||||||||||||
Commercial Paper: | ||||||||||||||||||||||||
Balance as of | 38,191 | 2.72 | 58,432 | 1.79 | 59,684 | 1.30 | ||||||||||||||||||
Average balance for the year | 26,239 | 2.41 | 40,786 | 1.62 | 32,658 | 1.38 | ||||||||||||||||||
Maximum outstanding at any month-end | 43,057 | 58,432 | 59,684 | |||||||||||||||||||||
Other short-term borrowings: | ||||||||||||||||||||||||
Balance as of | 371,000 | 5.35 | 140,000 | 4.39 | 266,000 | 2.49 | ||||||||||||||||||
Average balance for the year | 145,419 | 5.08 | 266,121 | 3.32 | 383,462 | 1.59 | ||||||||||||||||||
Maximum outstanding at any month-end | 371,000 | 716,000 | 477,000 |
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Nonperforming Assets
December 31 | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Nonaccrual loans | $ | 8,200 | $ | 10,811 | $ | 13,970 | $ | 14,910 | $ | 26,467 | ||||||||||
Loans 90 days or more past due accruing interest | — | — | — | 21 | — | |||||||||||||||
Total nonperforming loans | 8,200 | 10,811 | 13,970 | 14,931 | 26,467 | |||||||||||||||
Other real estate | 6,477 | 5,124 | 3,844 | 6,836 | 10,278 | |||||||||||||||
Nonperforming assets | $ | 14,677 | $ | 15,935 | $ | 17,814 | $ | 21,767 | $ | 36,745 | ||||||||||
Nonaccrual loans as a percentage of total portfolio loans | 0.24 | % | 0.37 | % | 0.57 | % | 0.66 | % | 1.28 | % | ||||||||||
Nonperforming assets as a percentage of: | ||||||||||||||||||||
Total assets | 0.30 | 0.38 | 0.40 | 0.52 | 0.98 | |||||||||||||||
Total portfolio loans and other real estate | 0.42 | 0.54 | 0.73 | 0.96 | 1.76 | |||||||||||||||
Net charge-offs to average portfolio loans | 0.11 | 0.27 | 0.28 | 0.39 | 0.30 | |||||||||||||||
Allowance for loan losses to portfolio loans | 1.00 | 0.98 | 1.10 | 1.14 | 1.31 | |||||||||||||||
Allowance for loan losses to net charge-offs | 10.73 | x | 3.84 | x | 4.09 | x | 3.07 | x | 4.34 | x | ||||||||||
Allowance for loan losses to nonperforming loans | 4.26 | 2.66 | 1.92 | 1.72 | 1.03 |
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Allowance For Loan Losses
For the Calendar Year | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance at beginning of period | $ | 28,725 | $ | 26,872 | $ | 25,607 | $ | 27,204 | $ | 25,843 | ||||||||||
Charge-offs | ||||||||||||||||||||
Commercial non real estate | 723 | 3,116 | 1,449 | 3,484 | 2,397 | |||||||||||||||
Commercial real estate | 762 | 1,967 | 2,791 | 1,898 | 659 | |||||||||||||||
Construction | — | 7 | — | — | 641 | |||||||||||||||
Mortgage | 148 | 167 | 29 | 31 | 111 | |||||||||||||||
Home equity | 1,108 | 857 | 1,008 | 685 | 193 | |||||||||||||||
Consumer | 1,837 | 2,538 | 3,275 | 3,382 | 2,989 | |||||||||||||||
Total charge-offs | 4,578 | 8,652 | 8,552 | 9,480 | 6,990 | |||||||||||||||
Recoveries | ||||||||||||||||||||
Commercial non real estate | 643 | 542 | 894 | 451 | 20 | |||||||||||||||
Commercial real estate | — | — | — | 4 | 228 | |||||||||||||||
Construction | — | — | — | 24 | — | |||||||||||||||
Mortgage | 35 | 36 | 29 | — | 11 | |||||||||||||||
Home equity | 1 | 39 | — | — | — | |||||||||||||||
Consumer | 639 | 545 | 1,053 | 635 | 337 | |||||||||||||||
Other | — | — | — | 34 | 132 | |||||||||||||||
Total recoveries | 1,318 | 1,162 | 1,976 | 1,148 | 728 | |||||||||||||||
Net charge-offs | 3,260 | 7,490 | 6,576 | 8,332 | 6,262 | |||||||||||||||
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For the Calendar Year | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Provision for loan losses | 5,290 | 9,343 | 8,425 | 27,518 | 8,270 | |||||||||||||||
Allowance of acquired company | 4,211 | — | — | — | — | |||||||||||||||
Allowance related to loans sold | — | — | (584 | ) | (20,783 | ) | (647 | ) | ||||||||||||
Balance at end of period | $ | 34,966 | $ | 28,725 | $ | 26,872 | $ | 25,607 | $ | 27,204 | ||||||||||
Average portfolio loans | $ | 3,092,801 | $ | 2,788,755 | $ | 2,353,605 | $ | 2,126,821 | $ | 2,112,855 | ||||||||||
Net charge-offs to average portfolio loans (annualized) | 0.11 | % | 0.27 | % | 0.28 | % | 0.39 | % | 0.30 | % | ||||||||||
Allowance for loan losses to portfolio loans | 1.00 | 0.98 | 1.10 | 1.14 | 1.31 |
Allocation of the Allowance for Loan Losses
December 31 | ||||||||||||||||||||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||||||||||||||||
Loan/ | Loan/ | Loan/ | Loan/ | Loan/ | ||||||||||||||||||||||||||||||||||||
Amount | Total Loans | Amount | Total Loans | Amount | Total Loans | Amount | Total Loans | Amount | Total Loans | |||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||||
Commercial real estate | $ | 15,638 | 45 | % | $ | 9,877 | 27 | % | $ | 11,317 | 32 | % | $ | 12,011 | 32 | % | $ | 12,166 | 39 | % | ||||||||||||||||||||
Commercial non real estate | 2,847 | 8 | 5,007 | 8 | 4,496 | 9 | 4,368 | 9 | 4,529 | 11 | ||||||||||||||||||||||||||||||
Construction | 8,059 | 23 | 4,559 | 18 | 4,842 | 14 | 3,584 | 16 | 3,384 | 10 | ||||||||||||||||||||||||||||||
Mortgage | 2,441 | 7 | 2,351 | 19 | 980 | 14 | 812 | 13 | 845 | 11 | ||||||||||||||||||||||||||||||
Home equity | 2,550 | 7 | 2,887 | 16 | 1,392 | 19 | 1,263 | 17 | 1,720 | 15 | ||||||||||||||||||||||||||||||
Consumer | 3,431 | 10 | 4,044 | 12 | 3,845 | 12 | 3,569 | 13 | 4,560 | 14 | ||||||||||||||||||||||||||||||
Total | $ | 34,966 | 100 | % | $ | 28,725 | 100 | % | $ | 26,872 | 100 | % | $ | 25,607 | 100 | % | $ | 27,204 | 100 | % | ||||||||||||||||||||
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Market Risk
Expected Maturity | ||||||||||||||||||||||||||||
Total | 1 Year | 2 Years | 3 Years | 4 Years | 5 Years | Thereafter | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||||||
Cost | $ | 740,773 | $ | 370,335 | $ | 207,627 | $ | 96,588 | $ | 28,446 | $ | 11,054 | $ | 26,723 | ||||||||||||||
Weighted-average effective yield | 4.58 | % | ||||||||||||||||||||||||||
Fair value | $ | 734,274 | ||||||||||||||||||||||||||
Variable rate | ||||||||||||||||||||||||||||
Cost | $ | 175,416 | 27,380 | 27,437 | 27,527 | 4,072 | 5,177 | 83,823 | ||||||||||||||||||||
Weighted-average effective yield | 4.97 | % | ||||||||||||||||||||||||||
Fair value | $ | 172,141 | ||||||||||||||||||||||||||
Loans and loans held for sale | ||||||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||||||
Book value | $ | 932,519 | 224,445 | 211,000 | 144,944 | 133,115 | 110,660 | 108,355 | ||||||||||||||||||||
Weighted-average effective yield | 6.76 | % | ||||||||||||||||||||||||||
Fair value | $ | 921,675 | ||||||||||||||||||||||||||
Variable rate | ||||||||||||||||||||||||||||
Book value | $ | 2,529,860 | 1,229,455 | 349,101 | 192,038 | 104,307 | 93,223 | 561,736 | ||||||||||||||||||||
Weighted-average effective yield | 7.47 | % | ||||||||||||||||||||||||||
Fair value | $ | 2,503,207 | ||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||||||
Book value | $ | 1,640,634 | 1,477,109 | 134,307 | 15,198 | 7,309 | 5,923 | 788 | ||||||||||||||||||||
Weighted-average effective yield | 4.77 | % | ||||||||||||||||||||||||||
Fair value | $ | 1,642,983 | ||||||||||||||||||||||||||
Variable rate | ||||||||||||||||||||||||||||
Book value | $ | 1,152,519 | 291,914 | 291,652 | 291,137 | 127,740 | 70,470 | 79,606 | ||||||||||||||||||||
Weighted-average effective yield | 2.12 | % | ||||||||||||||||||||||||||
Fair value | $ | 1,073,018 | ||||||||||||||||||||||||||
Long-term borrowings | ||||||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||||||
Book value | $ | 305,937 | 160,055 | 20,058 | 75,061 | 64 | 50,032 | 667 | ||||||||||||||||||||
Weighted-average effective yield | 5.62 | % | ||||||||||||||||||||||||||
Fair value | $ | 298,463 | ||||||||||||||||||||||||||
Variable rate | ||||||||||||||||||||||||||||
Book value | $ | 181,857 | — | — | 120,000 | — | — | 61,857 | ||||||||||||||||||||
Weighted-average effective yield | 5.70 | % | ||||||||||||||||||||||||||
Fair value | $ | 179,187 |
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Maturity and Sensitivity to Changes in Interest Rates
Commercial | ||||||||||||||||
Commercial | Non Real | |||||||||||||||
Real Estate | Estate | Construction | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Fixed rate: | ||||||||||||||||
1 year or less | $ | 45,893 | $ | 25,751 | $ | 54,358 | $ | 126,002 | ||||||||
1-5 years | 220,041 | 54,689 | 21,685 | 296,415 | ||||||||||||
After 5 years | 119,425 | 52,803 | 11,936 | 184,164 | ||||||||||||
Total fixed rate | 385,359 | 133,243 | 87,979 | 606,581 | ||||||||||||
Variable rate: | ||||||||||||||||
1 year or less | 246,208 | 107,695 | 567,279 | 921,182 | ||||||||||||
1-5 years | 351,645 | 52,031 | 126,306 | 529,982 | ||||||||||||
After 5 years | 49,401 | 8,574 | 11,251 | 69,226 | ||||||||||||
Total variable rate | 647,254 | 168,300 | 704,836 | 1,520,390 | ||||||||||||
Total commercial and construction loans | $ | 1,032,613 | $ | 301,543 | $ | 792,815 | $ | 2,126,971 | ||||||||
Commitments
Less Than | 1-3 | 3-5 | Over | |||||||||||||||||
1 Year | Years | Years | 5 Years | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Loan commitments | $ | 596,479 | $ | 216,184 | $ | 30,914 | $ | 57,404 | $ | 900,981 | ||||||||||
Lines of credit | 56,250 | 2,811 | 1,571 | 447,247 | 507,879 | |||||||||||||||
Standby letters of credit | 20,567 | 6,100 | 4 | — | 26,671 | |||||||||||||||
Total commitments | $ | 673,296 | $ | 225,095 | $ | 32,489 | $ | 504,651 | $ | 1,435,531 | ||||||||||
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Contractual Obligations
Payments Due by Period | ||||||||||||||||||||
Less Than | 1-3 | 4-5 | Over | |||||||||||||||||
1 Year | Years | Years | 5 Years | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Other borrowings — long-term debt | $ | 160,000 | $ | 215,000 | $ | — | $ | 112,794 | $ | 487,794 | ||||||||||
Operating lease obligations | 3,371 | 6,586 | 5,484 | 31,674 | 47,115 | |||||||||||||||
Purchase obligations(1) | 8,995 | 4,000 | 792 | — | 13,787 | |||||||||||||||
Equity method investees funding | 1,845 | — | — | — | 1,845 | |||||||||||||||
Deposits(2) | 3,085,395 | 149,468 | 13,232 | 33 | 3,248,128 | |||||||||||||||
Other obligations(3) | 3,359 | 3,115 | 1,427 | 6,893 | 14,794 | |||||||||||||||
Total contractual obligations | $ | 3,262,965 | $ | 378,169 | $ | 20,935 | $ | 151,394 | $ | 3,813,463 | ||||||||||
(1) | Represents obligations under existing executory contracts. | |
(2) | Deposits with no stated maturity (demand, money market, and savings deposits) are presented in the less than one year category. | |
(3) | Represents obligations under employment, severance and retirement contracts and commitments to fund affordable housing investments. |
Capital Measures
December 31 | ||||||||||||||||
2006 | 2005 | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Total equity/total assets | ||||||||||||||||
First Charter Corporation | $ | 447,362 | 9.21 | % | $ | 323,595 | 7.64 | % | ||||||||
First Charter Bank | 371,459 | 8.45 | 365,379 | 8.64 | ||||||||||||
Gwinnett Banking Company | 102,189 | 22.02 | — | — | ||||||||||||
Tangible equity/tangible assets(1) | ||||||||||||||||
First Charter Corporation | $ | 362,294 | 7.59 | % | $ | 301,698 | 7.17 | % | ||||||||
First Charter Bank | 351,246 | 8.03 | 343,482 | 8.17 | ||||||||||||
Gwinnett Banking Company | 37,334 | 9.35 | — | — |
(1) | The tangible equity ratio excludes goodwill and other intangible assets from both the numerator and the denominator. |
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Capital Ratios
For Capital | ||||||||||||||||||||||||
Adequacy Purposes | To be Well Capitalized | |||||||||||||||||||||||
Actual | Minimum | Minimum | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Leverage | ||||||||||||||||||||||||
First Charter Corporation | $ | 428,136 | 9.32 | % | $ | 183,678 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 362,970 | 8.36 | 173,591 | 4.00 | $ | 216,988 | 5.00 | % | ||||||||||||||||
Gwinnett Banking Company | 37,049 | 9.75 | 15,192 | 4.00 | 18,991 | 5.00 | ||||||||||||||||||
Tier I Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 428,136 | 10.49 | % | $ | 163,299 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 362,970 | 9.99 | 145,275 | 4.00 | $ | 217,913 | 6.00 | % | ||||||||||||||||
Gwinnett Banking Company | 37,049 | 10.38 | 14,280 | 4.00 | 21,420 | 6.00 | ||||||||||||||||||
Total Risk-Based Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 463,268 | 11.35 | % | $ | 326,598 | 8.00 | % | None | None | ||||||||||||||
First Charter Bank | 393,664 | 10.84 | 290,550 | 8.00 | $ | 363,188 | 10.00 | % | ||||||||||||||||
Gwinnett Banking Company | 41,321 | 11.57 | 28,560 | 8.00 | 35,700 | 10.00 |
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Selected Financial Data by Quarter
Three Months Ended | ||||||||||||||||||||
June 30 | March 31 | December 31 | September 30 | June 30 | ||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2006 | ||||||||||||||||
(Dollars in thousands, except share and per share amounts) | ||||||||||||||||||||
Income statement | ||||||||||||||||||||
Interest income | $ | 78,291 | $ | 77,214 | $ | 74,456 | $ | 67,085 | $ | 63,742 | ||||||||||
Interest expense | 40,747 | 40,479 | 38,441 | 34,127 | 31,095 | |||||||||||||||
Net interest income | 37,544 | 36,735 | 36,015 | 32,958 | 32,647 | |||||||||||||||
Provision for loan losses | 9,124 | 1,366 | 1,486 | 1,405 | 880 | |||||||||||||||
Noninterest income | 20,141 | 19,566 | 17,388 | 17,007 | 16,292 | |||||||||||||||
Noninterest expense | 35,207 | 35,920 | 33,853 | 29,655 | 30,688 | |||||||||||||||
Income from continuing operations before income tax expense | 13,354 | 19,015 | 18,064 | 18,905 | 17,371 | |||||||||||||||
Income tax expense | 4,404 | 6,659 | 5,962 | 6,223 | 5,946 | |||||||||||||||
Income from continuing operations, net of tax | 8,950 | 12,356 | 12,102 | 12,682 | 11,425 | |||||||||||||||
Discontinued operations: | ||||||||||||||||||||
Income (loss) from discontinued operations | — | — | (162 | ) | — | 50 | ||||||||||||||
Gain on sale | — | — | 962 | — | — | |||||||||||||||
Income tax expense | — | — | 887 | — | 20 | |||||||||||||||
Income (loss) from discontinued operations, net of tax | — | — | (87 | ) | — | 30 | ||||||||||||||
Net income | $ | 8,950 | $ | 12,356 | $ | 12,015 | $ | 12,682 | $ | 11,455 | ||||||||||
Per common share | ||||||||||||||||||||
Basic earnings per share | ||||||||||||||||||||
Income from continuing operations, net of tax | $ | 0.26 | $ | 0.36 | $ | 0.36 | $ | 0.41 | $ | 0.37 | ||||||||||
Net income | 0.26 | 0.36 | 0.36 | 0.41 | 0.37 | |||||||||||||||
Diluted earnings per share | ||||||||||||||||||||
Income from continuing operations, net of tax | 0.26 | 0.35 | 0.36 | 0.40 | 0.37 | |||||||||||||||
Net income | 0.26 | 0.35 | 0.36 | 0.40 | 0.37 | |||||||||||||||
Average shares | ||||||||||||||||||||
Basic | 34,697,944 | 34,770,106 | 33,268,542 | 31,056,059 | 31,058,858 | |||||||||||||||
Diluted | 34,986,662 | 35,084,640 | 33,583,617 | 31,426,563 | 31,339,325 | |||||||||||||||
Dividends declared | 0.195 | 0.195 | 0.195 | 0.195 | 0.195 | |||||||||||||||
Period-end book value | 12.85 | 12.97 | 12.81 | 11.20 | 10.73 | |||||||||||||||
Performance ratios | ||||||||||||||||||||
Return on average equity(1) | 7.86 | % | 11.09 | % | 11.69 | % | 14.76 | % | 13.80 | % | ||||||||||
Return on average assets(1) | 0.74 | 1.03 | 1.02 | 1.16 | 1.07 | |||||||||||||||
Net yield on earning assets(1) | 3.42 | 3.38 | 3.40 | 3.33 | 3.36 | |||||||||||||||
Average portfolio loans to average deposits | 109.50 | 107.98 | 105.88 | 103.37 | 108.27 | |||||||||||||||
Average equity to average assets | 9.37 | 9.28 | 8.75 | 7.86 | 7.79 | |||||||||||||||
Efficiency ratio(2) | 60.4 | 63.1 | 62.6 | 52.6 | 62.0 | |||||||||||||||
Selected period-end balances | ||||||||||||||||||||
Portfolio loans, net | $ | 3,509,047 | $ | 3,494,015 | $ | 3,450,087 | $ | 3,061,864 | $ | 3,042,768 | ||||||||||
Loans held for sale | 11,471 | 13,691 | 12,292 | 10,923 | 8,382 | |||||||||||||||
Allowance for loan losses | 44,790 | 35,854 | 34,966 | 29,919 | 29,520 | |||||||||||||||
Securities available for sale | 898,528 | 897,762 | 906,415 | 899,120 | 884,370 | |||||||||||||||
Assets | 4,916,721 | 4,884,495 | 4,856,717 | 4,382,507 | 4,361,231 | |||||||||||||||
Deposits | 3,230,346 | 3,321,366 | 3,248,128 | 2,954,854 | 2,988,802 | |||||||||||||||
Other borrowings | 1,176,758 | 1,044,229 | 1,098,698 | 1,031,798 | 995,707 | |||||||||||||||
Total liabilities | 4,470,893 | 4,429,123 | 4,409,355 | 4,033,069 | 4,027,333 | |||||||||||||||
Shareholders’ equity | 445,828 | 455,372 | 447,362 | 349,438 | 333,898 | |||||||||||||||
Selected average balances | ||||||||||||||||||||
Portfolio loans | 3,532,713 | 3,510,437 | 3,336,563 | 3,070,286 | 3,021,005 | |||||||||||||||
Loans held for sale | 11,127 | 11,431 | 10,757 | 8,792 | 9,810 | |||||||||||||||
Securities available for sale, at cost | 914,606 | 926,970 | 924,773 | 923,293 | 921,026 | |||||||||||||||
Earning assets | 4,467,031 | 4,463,161 | 4,284,735 | 4,013,745 | 3,960,835 | |||||||||||||||
Assets | 4,874,742 | 4,871,083 | 4,664,431 | 4,336,270 | 4,274,345 | |||||||||||||||
Deposits | 3,226,308 | 3,251,137 | 3,151,120 | 2,970,047 | 2,790,197 | |||||||||||||||
Other borrowings | 1,131,599 | 1,113,191 | 1,054,550 | 984,504 | 1,108,734 | |||||||||||||||
Shareholders’ equity | 456,634 | 451,835 | 407,929 | 340,986 | 332,987 |
(1) | Annualized. | |
(2) | Noninterest expense divided by the sum of taxable-equivalent net interest income plus noninterest income less gain (loss) on sale of securities, net. Excludes the results of discontinued operations. |
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Average Balances and Net Interest Income Analysis
Three Months Ended June 30 | ||||||||||||||||||||||||
2007 | 2006 | |||||||||||||||||||||||
Daily | Interest | Average | Daily | Interest | Average | |||||||||||||||||||
Average | Income/ | Yield/Rate | Average | Income/ | Yield/Rate | |||||||||||||||||||
Balance | Expense | Paid(5) | Balance | Expense | Paid(5) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Earning assets | ||||||||||||||||||||||||
Loans and loans held for sale(1)(2)(3)(4) | $ | 3,543,825 | $ | 67,243 | 7.61 | % | $ | 3,030,815 | $ | 54,167 | 7.17 | % | ||||||||||||
Securities — taxable(4) | 819,097 | 10,130 | 4.96 | 819,886 | 8,534 | 4.16 | ||||||||||||||||||
Securities — tax-exempt | 95,509 | 1,428 | 6.00 | 101,140 | 1,520 | 6.01 | ||||||||||||||||||
Federal funds sold | 3,777 | 48 | 5.31 | 3,011 | 37 | 4.93 | ||||||||||||||||||
Interest-bearing bank deposits | 4,808 | 61 | 5.01 | 5,983 | 60 | 4.02 | ||||||||||||||||||
Total earning assets | 4,467,016 | $ | 78,910 | 7.08 | % | $ | 3,960,835 | $ | 64,318 | 6.51 | % | |||||||||||||
Cash and due from banks | 80,864 | 77,115 | ||||||||||||||||||||||
Other assets | 326,862 | 236,395 | ||||||||||||||||||||||
Total assets | $ | 4,874,742 | $ | 4,274,345 | ||||||||||||||||||||
Liabilities and shareholders’ equity | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Demand deposits | $ | 413,534 | $ | 1,167 | 1.13 | % | $ | 367,146 | $ | 647 | 0.71 | % | ||||||||||||
Money market accounts | 608,489 | 5,287 | 3.48 | 561,005 | 4,454 | 3.18 | ||||||||||||||||||
Savings deposits | 114,656 | 62 | 0.22 | 121,130 | 65 | 0.22 | ||||||||||||||||||
Certificates of deposit | 1,631,616 | 19,848 | 4.88 | 1,312,993 | 13,175 | 4.02 | ||||||||||||||||||
Retail other borrowings | 94,784 | 774 | 3.58 | 142,645 | 999 | 2.81 | ||||||||||||||||||
Wholesale other borrowings | 1,036,815 | 13,609 | 5.26 | 966,089 | 11,755 | 4.88 | ||||||||||||||||||
Total interest-bearing liabilities | 3,899,894 | 40,747 | 4.19 | % | 3,471,008 | 31,095 | 3.59 | % | ||||||||||||||||
Noninterest-bearing deposits | 458,013 | 427,923 | ||||||||||||||||||||||
Other liabilities | 60,201 | 42,427 | ||||||||||||||||||||||
Shareholders’ equity | 456,634 | 332,987 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 4,874,742 | $ | 4,274,345 | ||||||||||||||||||||
Net interest spread | 2.89 | % | 2.92 | % | ||||||||||||||||||||
Contribution of noninterest bearing sources | 0.53 | 0.44 | ||||||||||||||||||||||
Net interest income/ yield on earning assets | $ | 38,163 | 3.42 | % | $ | 33,223 | 3.36 | % | ||||||||||||||||
(1) | The preceding analysis takes into consideration the principal amount of nonaccruing loans and only income actually collected and recognized on such loans. | |
(2) | Average loan balances are shown net of unearned income. | |
(3) | Includes amortization of deferred loan fees of $1,031 and $701 for the three months ended June 30, 2007 and 2006, respectively. | |
(4) | Yields on tax-exempt securities and loans are stated on a taxable-equivalent basis, assuming a Federal tax rate of 35 percent and applicable state taxes for 2007 and 2006. The adjustments made to convert to a taxable-equivalent basis were $619 and $576 for the three months ended June 30, 2007 and 2006, respectively. | |
(5) | Annualized. |
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Average Balances and Net Interest Income Analysis
Six Months Ended June 30 | ||||||||||||||||||||||||
2007 | 2006 | |||||||||||||||||||||||
Daily | Interest | Average | Daily | Interest | Average | |||||||||||||||||||
Average | Income/ | Yield/Rate | Average | Income/ | Yield/Rate | |||||||||||||||||||
Balance | Expense | Paid(5) | Balance | Expense | Paid(5) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Earning assets | ||||||||||||||||||||||||
Loans and loans held for sale(1)(2)(3)(4) | $ | 3,532,900 | $ | 133,482 | 7.61 | % | $ | 2,988,596 | $ | 104,473 | 7.04 | % | ||||||||||||
Securities — taxable(4) | 822,696 | 20,079 | 4.89 | 814,175 | 16,842 | 4.14 | ||||||||||||||||||
Securities — tax-exempt | 98,057 | 2,919 | 5.95 | 103,735 | 3,063 | 5.91 | ||||||||||||||||||
Federal funds sold | 6,410 | 176 | 5.59 | 3,115 | 73 | 4.70 | ||||||||||||||||||
Interest-bearing bank deposits | 5,028 | 111 | 4.44 | 5,348 | 99 | 3.75 | ||||||||||||||||||
Total earning assets | 4,465,091 | $ | 156,767 | 7.07 | % | $ | 3,914,969 | $ | 124,550 | 6.40 | % | |||||||||||||
Cash and due from banks | 80,116 | 87,409 | ||||||||||||||||||||||
Other assets | 327,715 | 237,628 | ||||||||||||||||||||||
Total assets | $ | 4,872,922 | $ | 4,240,006 | ||||||||||||||||||||
Liabilities and shareholders’ equity | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Demand deposits | $ | 406,584 | $ | 2,225 | 1.10 | % | $ | 361,693 | $ | 1,093 | 0.61 | % | ||||||||||||
Money market accounts | 625,342 | 10,838 | 3.49 | 568,263 | 8,306 | 2.95 | ||||||||||||||||||
Savings deposits | 113,826 | 129 | 0.23 | 120,616 | 130 | 0.22 | ||||||||||||||||||
Certificates of deposit | 1,640,463 | 39,712 | 4.88 | 1,316,992 | 25,376 | 3.89 | ||||||||||||||||||
Retail other borrowings | 93,445 | 1,437 | 3.10 | 135,903 | 1,777 | 2.64 | ||||||||||||||||||
Wholesale other borrowings | 1,029,001 | 26,885 | 5.27 | 943,392 | 21,969 | 4.70 | ||||||||||||||||||
Total interest-bearing liabilities | 3,908,661 | 81,226 | 4.19 | % | 3,446,859 | 58,651 | 3.43 | % | ||||||||||||||||
Noninterest-bearing deposits | 452,438 | 420,364 | ||||||||||||||||||||||
Other liabilities | 57,576 | 40,392 | ||||||||||||||||||||||
Shareholders’ equity | 454,247 | 332,391 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 4,872,922 | $ | 4,240,006 | ||||||||||||||||||||
Net interest spread | 2.88 | % | 2.97 | % | ||||||||||||||||||||
Contribution of noninterest bearing sources | 0.52 | 0.41 | ||||||||||||||||||||||
Net interest income/ yield on earning assets | $ | 75,541 | 3.40 | % | $ | 65,899 | 3.38 | % | ||||||||||||||||
(1) | The preceding analysis takes into consideration the principal amount of nonaccruing loans and only income actually collected and recognized on such loans. |
(2) | Average loan balances are shown net of unearned income. |
(3) | Includes amortization of deferred loan fees of $1,859 and $1,446 for the three months ended June 30, 2007 and 2006, respectively. |
(4) | Yields on tax-exempt securities and loans are stated on a taxable-equivalent basis, assuming a Federal tax rate of 35 percent and applicable state taxes for 2007 and 2006. The adjustments made to convert to a taxable-equivalent basis were $1,262 and $1,162 for the six months ended June 30, 2007 and 2006, respectively. |
(5) | Annualized. |
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Volume and Rate Variance Analysis
Three Months Ended June 30 | ||||||||||||
2007 vs 2006 | ||||||||||||
Due to Change in | Net | |||||||||||
Volume | Rate | Change | ||||||||||
(In thousands) | ||||||||||||
Increase (decrease) in tax-equivalent interest income | ||||||||||||
Loans and loans held for sale(1) | $ | 9,583 | $ | 3,493 | $ | 13,076 | ||||||
Securities — taxable(1) | (8 | ) | 1,604 | 1,596 | ||||||||
Securities — tax-exempt | (84 | ) | (8 | ) | (92 | ) | ||||||
Federal funds sold | 10 | 3 | 13 | |||||||||
Interest-bearing bank deposits | (13 | ) | 13 | — | ||||||||
Total | $ | 9,488 | $ | 5,105 | $ | 14,593 | ||||||
Increase (decrease) in interest expense | ||||||||||||
Deposits: | ||||||||||||
Demand | $ | 90 | $ | 430 | $ | 520 | ||||||
Money market | 394 | 439 | 833 | |||||||||
Savings | (3 | ) | — | (3 | ) | |||||||
Certificates of deposit | 3,559 | 3,114 | 6,673 | |||||||||
Retail other borrowings | (373 | ) | 149 | (224 | ) | |||||||
Wholesale other borrowings | 893 | 961 | 1,854 | |||||||||
Total | $ | 4,560 | $ | 5,093 | $ | 9,653 | ||||||
Increase in tax-equivalent net interest income | $ | 4,940 | ||||||||||
(1) | Income on tax-exempt securities and loans are stated on a taxable-equivalent basis. Refer toTable Twenty-Threefor further details. |
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Volume and Rate Variance Analysis
Six Months Ended | ||||||||||||
June 30 | ||||||||||||
2007 vs 2006 | ||||||||||||
Due to Change in | ||||||||||||
Volume | Rate | Change | ||||||||||
(In thousands) | ||||||||||||
Increase (decrease) in tax-equivalent interest income | ||||||||||||
Loans and loans held for sale(1) | $ | 20,093 | $ | 8,916 | $ | 29,009 | ||||||
Securities — taxable(1) | 178 | 3,059 | 3,237 | |||||||||
Securities — tax-exempt | (169 | ) | 25 | (144 | ) | |||||||
Federal funds sold | 89 | 16 | 105 | |||||||||
Interest-bearing bank deposits | (6 | ) | 18 | 12 | ||||||||
Total | $ | 20,185 | $ | 12,034 | $ | 32,219 | ||||||
Increase (decrease) in interest expense | ||||||||||||
Deposits: | ||||||||||||
Demand | $ | 150 | $ | 982 | $ | 1,132 | ||||||
Money market | 889 | 1,643 | 2,532 | |||||||||
Savings | (8 | ) | 7 | (1 | ) | |||||||
Certificates of deposit | 7,015 | 7,322 | 14,337 | |||||||||
Retail other borrowings | (618 | ) | 278 | (340 | ) | |||||||
Wholesale other borrowings | 2,097 | 2,819 | 4,916 | |||||||||
Total | $ | 9,525 | $ | 13,051 | $ | 22,576 | ||||||
Increase in tax-equivalent net interest income | $ | 9,643 | ||||||||||
(1) | Income on tax-exempt securities and loans are stated on a taxable-equivalent basis. Refer toTable Twenty-Fourfor further details. |
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Noninterest Income
Three Months Ended June 30 | Increase/(Decrease) | |||||||||||||||
2007 | 2006 | Amount | Percent | |||||||||||||
(In thousands) | ||||||||||||||||
Service charges on deposits | $ | 7,942 | $ | 7,469 | $ | 473 | 6.3 | % | ||||||||
ATM, debit, and merchant fees | 2,636 | 2,117 | 519 | 24.5 | ||||||||||||
Wealth management | �� | 944 | 693 | 251 | 36.2 | |||||||||||
Equity method investment gains, net | 678 | 11 | 667 | 6,063.6 | ||||||||||||
Mortgage services | 1,056 | 812 | 244 | 30.0 | ||||||||||||
Gain on sale of Small Business Administration loans | 132 | — | 132 | — | ||||||||||||
Brokerage services | 1,007 | 692 | 315 | 45.5 | ||||||||||||
Insurance services | 3,422 | 2,898 | 524 | 18.1 | ||||||||||||
Bank owned life insurance | 1,162 | 850 | 312 | 36.7 | ||||||||||||
Property sale gains, net | 152 | 107 | 45 | 42.1 | ||||||||||||
Securities gains, net | — | 32 | (32 | ) | (100.0 | ) | ||||||||||
Other | 1,010 | 611 | 399 | 65.3 | ||||||||||||
Noninterest income from continuing operations | 20,141 | 16,292 | 3,849 | 23.6 | ||||||||||||
Noninterest income from discontinued operations | — | 844 | (844 | ) | (100.0 | ) | ||||||||||
Total noninterest income | $ | 20,141 | $ | 17,136 | $ | 3,005 | 17.5 | % | ||||||||
Selected Items Included in Noninterest Income
Three Months Ended | ||||||||
June 30 | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Securities gains, net | $ | — | $ | 32 | ||||
Equity method investment gains , net | 678 | 11 | ||||||
Property sale gains, net | 152 | 107 | ||||||
Gains related to reinsurance arrangement | 288 | — |
• | Revenue from deposit service charges was $0.5 million higher, principally reflecting a larger number of checking accounts. | |
• | ATM, debit, and merchant card revenue was $0.5 million higher, reflecting both a larger number of accounts and transactions. | |
• | Of the total $0.3 million increase in wealth management income, $0.2 million was related to transaction fees for a single estate. | |
• | Equity method investment gains were $0.7 million higher in the 2007 second quarter. The returns on the equity method investments vary from period to period and income is recorded when earned. |
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• | Mortgage services revenue increased $0.2 million, due to a rise in originations and sales. | |
• | Although First Charter originated SBA loans prior to the GBC acquisition, First Charter retained these loans. Therefore, gains on SBA loan sales were $0.1 million in the 2007 second quarter, compared to no sales in the same 2006 period. | |
• | Brokerage services revenue was $0.3 million higher in 2007 due to increased production from the addition of several financial consultants in the latter half of 2006. | |
• | Insurance revenues increased $0.5 million in the second quarter of 2007, compared to the second quarter of 2006 as a result of the majority of contingency income being received in the first quarter of 2006, versus a more even distribution between the first and second quarters of 2007. | |
• | The restructuring of $21.5 million of BOLI in mid-2006, the purchase of $10.0 million in new coverage, and the addition of $5.9 million of BOLI from GBC led to the $0.3 million increase in revenue between periods. |
Six Months | ||||||||||||||||
Ended | ||||||||||||||||
June 30 | Increase/(Decrease) | |||||||||||||||
2007 | 2006 | Amount | Percent | |||||||||||||
(In thousands) | ||||||||||||||||
Service charges on deposits | $ | 15,332 | $ | 14,167 | $ | 1,165 | 8.2 | % | ||||||||
ATM, debit, and merchant fees | 5,080 | 4,015 | 1,065 | 26.5 | ||||||||||||
Wealth management | 1,660 | 1,393 | 267 | 19.2 | ||||||||||||
Equity method investment gains, net | 1,805 | 556 | 1,249 | 224.6 | ||||||||||||
Mortgage services | 1,957 | 1,335 | 622 | 46.6 | ||||||||||||
Gain on sale of Small Business Administration loans | 509 | — | 509 | — | ||||||||||||
Brokerage services | 2,088 | 1,403 | 685 | 48.8 | ||||||||||||
Insurance services | 7,056 | 7,232 | (176 | ) | (2.4 | ) | ||||||||||
Bank owned life insurance | 2,301 | 1,677 | 624 | 37.2 | ||||||||||||
Property sale gains, net | 215 | 188 | 27 | 14.4 | ||||||||||||
Securities gains/(losses), net | (11 | ) | 32 | (43 | ) | (134.4 | ) | |||||||||
Other | 1,715 | 1,285 | 430 | 33.5 | ||||||||||||
Noninterest income from continuing operations | 39,707 | 33,283 | 6,424 | 19.3 | ||||||||||||
Noninterest income from discontinued operations | — | 1,809 | (1,809 | ) | (100.0 | ) | ||||||||||
Total noninterest income | $ | 39,707 | $ | 35,092 | $ | 4,615 | 13.2 | % | ||||||||
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Six Months | ||||||||
Ended | ||||||||
June 30 | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Securities gains (losses), net | $ | (11 | ) | $ | 32 | |||
Equity method investment gains, net | 1,805 | 556 | ||||||
Property sale gains, net | 215 | 188 | ||||||
Gains related to reinsurance arrangement | 288 | 99 |
• | Revenue from deposit service charges increased $1.2 million, principally reflecting a larger number of checking accounts. | |
• | ATM, debit and merchant card services revenue was $1.1 million higher due to both a larger number of accounts and transactions. | |
• | Equity method investment gains were $1.2 million higher in the six months ended June 30, 2007, versus the same period of 2006. The returns on the equity method investments vary from period to period and income is recorded when earned. | |
• | Mortgage services revenue increased $0.6 million due to increased originations and sales. | |
• | Although First Charter originated SBA loans prior to the GBC acquisition, First Charter retained these loans. Therefore, gains on SBA loan sales were $0.5 million in the first half of 2007, compared to no sales in the same 2006 period. | |
• | Brokerage service revenue increased $0.7 million due to increased production from the addition of several financial consultants in the latter half of 2006. | |
• | The previously mentioned restructuring of bank owned life insurance led to an increase of $0.6 million in revenue between the periods. | |
• | These revenue increases and gains were partially offset by $0.2 million lower insurance services revenue, primarily due to less contingency income recognized in the first six months of 2007, compared with the first six months of 2006. |
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Three Months | ||||||||||||||||
Ended | ||||||||||||||||
June 30 | Increase/(Decrease) | |||||||||||||||
2007 | 2006 | Amount | Percent | |||||||||||||
(In thousands) | ||||||||||||||||
Salaries and employee benefits | $ | 19,576 | $ | 16,343 | $ | 3,233 | 19.8 | % | ||||||||
Occupancy and equipment | 4,759 | 4,826 | (67 | ) | (1.4 | ) | ||||||||||
Data processing | 1,492 | 1,448 | 44 | 3.0 | ||||||||||||
Marketing | 1,055 | 1,196 | (141 | ) | (11.8 | ) | ||||||||||
Postage and supplies | 1,164 | 1,282 | (118 | ) | (9.2 | ) | ||||||||||
Professional services | 3,181 | 2,258 | 923 | 40.9 | ||||||||||||
Telecommunications | 519 | 513 | 6 | 1.2 | ||||||||||||
Amortization of intangibles | 314 | 107 | 207 | 193.5 | ||||||||||||
Foreclosed properties | 226 | 418 | (192 | ) | (45.9 | ) | ||||||||||
Other | 2,921 | 2,297 | 624 | 27.2 | ||||||||||||
Noninterest expense from continuing operations | 35,207 | 30,688 | 4,519 | 14.7 | ||||||||||||
Noninterest expense from discontinued operations | — | 794 | (794 | ) | (100.0 | ) | ||||||||||
Total noninterest expense | $ | 35,207 | $ | 31,482 | $ | 3,725 | 11.8 | % | ||||||||
Full-time equivalent employees at June 30 | 1,109 | 1,098 | 11 | 1.0 | % | |||||||||||
Efficiency ratio(1) | 60.4 | % | 62.0 | % | (1.6 | )% | (2.6 | )% | ||||||||
(1) | Noninterest expense divided by the sum of taxable-equivalent net interest income plus noninterest income less securities gains (losses), net. Excludes the results of discontinued operations. |
Selected Items Included in Noninterest Expense
Three Months Ended | ||||||||
June 30 | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Separation agreements | $ | 183 | $ | — | ||||
GBC related executive retirement expense | 245 | — | ||||||
Reduction of incentive compensation | (518 | ) | — | |||||
Merger-related costs | — | — |
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Noninterest Expense
Six Months Ended | ||||||||||||||||
June 30 | Increase / (Decrease) | |||||||||||||||
2007 | 2006 | Amount | Percent | |||||||||||||
(In thousands) | ||||||||||||||||
Salaries and employee benefits | $ | 39,163 | $ | 33,543 | $ | 5,620 | 16.8 | % | ||||||||
Occupancy and equipment | 9,371 | 9,531 | (160 | ) | (1.7 | ) | ||||||||||
Data processing | 3,282 | 2,858 | 424 | 14.8 | ||||||||||||
Marketing | 2,406 | 2,484 | (78 | ) | (3.1 | ) | ||||||||||
Postage and supplies | 2,336 | 2,464 | (128 | ) | (5.2 | ) | ||||||||||
Professional services | 6,767 | 4,161 | 2,606 | 62.6 | ||||||||||||
Telecommunications | 1,190 | 1,076 | 114 | 10.6 | ||||||||||||
Amortization of intangibles | 537 | 209 | 328 | 156.9 | ||||||||||||
Foreclosed properties | 379 | 472 | (93 | ) | (19.7 | ) | ||||||||||
Other | 5,696 | 4,631 | 1,065 | 23.0 | ||||||||||||
Noninterest expense from continuing operations | 71,127 | 61,429 | 9,698 | 15.8 | ||||||||||||
Noninterest expense from discontinued operations | — | 1,611 | (1,611 | ) | (100.0 | ) | ||||||||||
Total noninterest expense | $ | 71,127 | $ | 63,040 | $ | 8,087 | 12.8 | % | ||||||||
Full-time equivalent employees at June 30 | 1,109 | 1,098 | 11 | 1.0 | % | |||||||||||
Efficiency ratio(1) | 61.7 | % | 62.0 | % | (0.3 | )% | (0.5 | )% | ||||||||
(1) | Noninterest expense divided by the sum of taxable-equivalent net interest income plus noninterest income less securities gains (losses), net. Excludes the results of discontinued operations. |
Selected Items Included in Noninterest Expense
Six Months Ended | ||||||||
June 30 | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Separation agreements | $ | 241 | $ | 105 | ||||
GBC related executive retirement expense | 245 | — | ||||||
Reduction of incentive compensation | (518 | ) | — | |||||
Merger-related costs | 237 | — |
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June 30 | December 31 | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
U.S. government agency obligations | $ | 236,702 | $ | 275,394 | ||||
Mortgage-backed securities | 458,504 | 412,020 | ||||||
State, county, and municipal obligations | 92,189 | 102,602 | ||||||
Asset-backed securities | 56,057 | 65,115 | ||||||
Equity securities | 55,076 | 51,284 | ||||||
Total securities | $ | 898,528 | $ | 906,415 | ||||
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Loan Portfolio Composition
June 30 | Percent of | December 31 | Percent of | |||||||||||||
2007 | Total Loans | 2006 | Total Loans | |||||||||||||
(In thousands) | ||||||||||||||||
Commercial real estate | $ | 1,094,866 | 30.8 | % | $ | 1,034,317 | 29.7 | % | ||||||||
Commercial non real estate | 317,984 | 8.9 | 301,958 | 8.7 | ||||||||||||
Construction | 859,301 | 24.2 | 793,294 | 22.8 | ||||||||||||
Mortgage | 589,976 | 16.6 | 618,142 | 17.7 | ||||||||||||
Consumer | 276,005 | 7.8 | 289,493 | 8.3 | ||||||||||||
Home equity | 415,705 | 11.7 | 447,849 | 12.8 | ||||||||||||
Total portfolio loans | 3,553,837 | 100.0 | % | 3,485,053 | 100.0 | % | ||||||||||
Allowance for loan losses | (44,790 | ) | (34,966 | ) | ||||||||||||
Portfolio loans, net | $ | 3,509,047 | $ | 3,450,087 | ||||||||||||
Deposits
June 30 | December 31 | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Noninterest bearing demand | $ | 480,078 | $ | 454,975 | ||||
Interest bearing demand | 427,899 | 420,774 | ||||||
Money market accounts | 587,691 | 620,699 | ||||||
Savings deposits | 114,245 | 111,047 | ||||||
Certificates of deposit | 1,620,433 | 1,640,633 | ||||||
Total deposits | $ | 3,230,346 | $ | 3,248,128 | ||||
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June 30 | March 31 | December 31 | September 30 | June 30 | ||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2006 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Nonaccrual loans | $ | 17,387 | $ | 10,943 | $ | 8,200 | $ | 7,090 | $ | 7,763 | ||||||||||
Loans 90 days or more past due accruing interest | — | — | — | — | — | |||||||||||||||
Total nonperforming loans | 17,387 | 10,943 | 8,200 | 7,090 | 7,763 | |||||||||||||||
Other real estate | 2,726 | 6,330 | 6,477 | 5,601 | 5,902 | |||||||||||||||
Nonperforming assets | $ | 20,113 | $ | 17,273 | $ | 14,677 | $ | 12,691 | $ | 13,665 | ||||||||||
Nonaccrual loans as a percentage of total portfolio loans | 0.49 | % | 0.31 | % | 0.24 | % | 0.23 | % | 0.25 | % | ||||||||||
Nonperforming assets as a percentage of: | ||||||||||||||||||||
Total assets | 0.41 | 0.35 | 0.30 | 0.29 | 0.31 | |||||||||||||||
Total portfolio loans and other real estate owned | 0.57 | 0.49 | 0.42 | 0.41 | 0.44 | |||||||||||||||
Net charge-offs to average portfolio loans | 0.02 | 0.06 | 0.08 | 0.13 | 0.11 | |||||||||||||||
Allowance for loan losses to portfolio loans | 1.26 | 1.02 | 1.00 | 0.97 | 0.96 | |||||||||||||||
Allowance for loan losses to net charge-offs | 59.40 | x | 18.50 | x | 13.56 | x | 7.50 | x | 8.51 | x | ||||||||||
Allowance for loan losses to nonperforming loans | 2.58 | x | 3.28 | x | 4.26 | x | 4.22 | x | 3.80 | x |
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In thousands) | ||||||||||||||||
Balance at beginning of period | $ | 35,854 | $ | 29,505 | $ | 34,966 | $ | 28,725 | ||||||||
Charge-offs | ||||||||||||||||
Commercial non real estate | 113 | 108 | 359 | 359 | ||||||||||||
Commercial real estate | 127 | 260 | 140 | 335 | ||||||||||||
Mortgage | 35 | 10 | 68 | 21 | ||||||||||||
Home equity | 64 | 447 | 194 | 948 | ||||||||||||
Consumer | 208 | 310 | 572 | 701 | ||||||||||||
Total charge-offs | 547 | 1,135 | 1,333 | 2,364 | ||||||||||||
Recoveries | ||||||||||||||||
Commercial non real estate | 229 | 111 | 317 | 439 | ||||||||||||
Mortgage | 27 | — | 52 | — | ||||||||||||
Consumer | 103 | 159 | 298 | 321 | ||||||||||||
Total recoveries | 359 | 270 | 667 | 760 | ||||||||||||
Net charge-offs | 188 | 865 | 666 | 1,604 | ||||||||||||
Provision for loan losses | 9,124 | 880 | 10,490 | 2,399 | ||||||||||||
Balance at end of period | $ | 44,790 | $ | 29,520 | $ | 44,790 | $ | 29,520 | ||||||||
Average portfolio loans | $ | 3,532,713 | $ | 3,021,004 | $ | 3,521,637 | $ | 2,980,344 | ||||||||
Net charge-offs to average portfolio loans (annualized) | 0.02 | 0.11 | % | 0.04 | 0.11 | % | ||||||||||
Allowance for loan losses to portfolio loans | 1.26 | 0.96 | 1.26 | 0.96 |
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Market Risk
Expected Maturity | ||||||||||||||||||||||||||||
Total | 1 Year | 2 Years | 3 Years | 4 Years | 5 Years | Thereafter | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||||||
Cost | $ | 735,571 | $ | 342,550 | $ | 217,796 | $ | 102,183 | $ | 41,777 | $ | 8,730 | $ | 22,535 | ||||||||||||||
Weighted-average effective yield | 4.81 | % | ||||||||||||||||||||||||||
Fair value | $ | 725,881 | ||||||||||||||||||||||||||
Variable rate | ||||||||||||||||||||||||||||
Cost | $ | 177,313 | 26,562 | 26,393 | 26,586 | 9,626 | 5,038 | 83,108 | ||||||||||||||||||||
Weighted-average effective yield | 4.39 | % | ||||||||||||||||||||||||||
Fair value | $ | 172,647 | ||||||||||||||||||||||||||
Loans and loans held for sale | ||||||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||||||
Book value | $ | 990,947 | 232,169 | 213,689 | 171,377 | 120,030 | 121,088 | 132,594 | ||||||||||||||||||||
Weighted-average effective yield | 7.15 | % | ||||||||||||||||||||||||||
Fair value | $ | 976,903 | ||||||||||||||||||||||||||
Variable rate | ||||||||||||||||||||||||||||
Book value | $ | 2,529,571 | 1,287,254 | 333,563 | 194,519 | 98,979 | 72,320 | 542,936 | ||||||||||||||||||||
Weighted-average effective yield | 7.83 | % | ||||||||||||||||||||||||||
Fair value | $ | 2,527,403 | ||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||||||
Book value | $ | 1,620,433 | 1,443,986 | 152,169 | 11,061 | 6,742 | 5,353 | 1,122 | ||||||||||||||||||||
Weighted-average effective yield | 4.79 | % | ||||||||||||||||||||||||||
Fair value | $ | 1,624,318 | ||||||||||||||||||||||||||
Variable rate | ||||||||||||||||||||||||||||
Book value | $ | 1,129,834 | 354,624 | 250,258 | 249,746 | 122,553 | 71,700 | 80,953 | ||||||||||||||||||||
Weighted-average effective yield | 2.23 | % | ||||||||||||||||||||||||||
Fair value | $ | 1,049,275 | ||||||||||||||||||||||||||
Long-term borrowings | ||||||||||||||||||||||||||||
Fixed rate | ||||||||||||||||||||||||||||
Book value | $ | 345,905 | 200,056 | 70,058 | 25,062 | 50,054 | 22 | 653 | ||||||||||||||||||||
Weighted-average effective yield | 4.65 | % | ||||||||||||||||||||||||||
Fair value | $ | 339,224 | ||||||||||||||||||||||||||
Variable rate | ||||||||||||||||||||||||||||
Book value | $ | 271,857 | 185,000 | 25,000 | — | — | — | 61,857 | ||||||||||||||||||||
Weighted-average effective yield | 5.32 | % | ||||||||||||||||||||||||||
Fair value | $ | 271,486 |
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Commitments
Less Than | Timing not | |||||||||||||||||||||||
1 Year | 1-3 Years | 4-5 Years | Over 5 Years | Determinable | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Loan commitments | $ | 703,813 | $ | 118,172 | $ | 42,662 | $ | 59,637 | $ | — | $ | 924,284 | ||||||||||||
Lines of credit | 31,390 | 1,639 | 2,921 | 455,613 | — | 491,563 | ||||||||||||||||||
Standby letters of credit | 22,920 | 3,548 | — | — | — | 26,468 | ||||||||||||||||||
Anticipated tax settlements | 584 | — | — | — | 10,551 | 11,135 | ||||||||||||||||||
Total commitments | $ | 758,707 | $ | 123,359 | $ | 45,583 | $ | 515,250 | $ | 10,551 | $ | 1,453,450 | ||||||||||||
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June 30 2007 | December 31 2006 | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Total equity/total assets | ||||||||||||||||
First Charter Corporation | $ | 445,828 | 9.07 | % | $ | 447,362 | 9.21 | % | ||||||||
First Charter Bank | 481,001 | 9.82 | 371,459 | 8.45 | ||||||||||||
Tangible equity/tangible assets(1) | ||||||||||||||||
First Charter Corporation | $ | 361,721 | 7.48 | % | $ | 362,294 | 7.59 | % | ||||||||
First Charter Bank | 396,894 | 8.24 | 351,246 | 8.03 |
(1) | The tangible equity ratio excludes goodwill and other intangible assets from both the numerator and the denominator. |
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Capital Ratios
For Capital | ||||||||||||||||||||||||
Adequacy Purposes | To Be Well Capitalized | |||||||||||||||||||||||
Actual | Minimum | Minimum | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Leverage | ||||||||||||||||||||||||
First Charter Corporation | $ | 430,373 | 8.97 | % | $ | 192,023 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 411,177 | 8.57 | 191,914 | 4.00 | $ | 239,893 | 5.00 | % | ||||||||||||||||
Tier I Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 430,373 | 10.57 | % | $ | 162,932 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 411,177 | 10.10 | 162,782 | 4.00 | $ | 244,174 | 6.00 | % | ||||||||||||||||
Total Risk-Based Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 475,358 | 11.67 | % | $ | 325,863 | 8.00 | % | None | None | ||||||||||||||
First Charter Bank | 455,967 | 11.20 | 325,565 | 8.00 | $ | 406,956 | 10.00 | % |
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Shares Beneficially Owned(1) | ||||||||
Name | Number | Percent of Class | ||||||
William R. Black | 128,705 | (2) | * | |||||
James E. Burt, III | 161,895 | (3) | * | |||||
Charles A. Caswell | 17,280 | (4) | * | |||||
Michael R. Coltrane | 102,245 | (5) | * | |||||
Richard F. Combs | 128,849 | (6) | * | |||||
J. Scott Ensor | 20,523 | (7) | * | |||||
John J. Godbold, Jr. | 179,769 | (8) | * | |||||
Jewell D. Hoover | 3,844 | (9) | * | |||||
Charles A. James | 186,933 | (10) | * | |||||
Robert E. James, Jr. | 162,445 | (11) | * | |||||
Walter H. Jones, Jr. | 66,268 | (12) | * | |||||
Samuel C. King, Jr. | 81,053 | (13) | * | |||||
Richard A. Manley | 9,676 | (14) | * | |||||
Jerry E. McGee | 43,688 | (15) | * | |||||
Ellen L. Messinger | 29,079 | (16) | * | |||||
Hugh H. Morrison | 57,881 | (17) | * | |||||
John S. Poelker | 5,000 | (18) | * | |||||
Stephen M. Rownd | 25,468 | (19) | * | |||||
Cecil O. Smith, Jr. | 10,155 | (20) | * | |||||
L. D. Warlick, Jr. | 182,754 | (21) | * | |||||
William W. Waters | 78,449 | (22) | * | |||||
All directors and executive officers of First Charter as a group (24 persons) | 1,705,841 | (23) | 4.8 | % |
* | Less than 1%. | |
(1) | Except as otherwise noted, the persons named in the table have sole voting and investment power with respect to the shares listed. | |
(2) | Includes 19,200 shares that may be acquired by Dr. Black upon the exercise of stock options that are currently exercisable. Also includes (i) 3,743 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition and (ii) 1,000 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | |
(3) | Includes 10,808 shares owned by Mr. Burt’s spouse, as to which she has sole voting and investment power. Also includes (i) 12,100 shares that may be acquired by him upon the exercise of stock options |
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that are currently exercisable, (ii) 8,637 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition and (iii) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | ||
(4) | Includes 11,780 shares that may be acquired by Mr. Caswell upon the exercise of stock options that are currently exercisable or become exercisable within 60 days of September 30, 2007. Mr. Caswell ceased working with First Charter, effective August 17, 2007. | |
(5) | Includes 19,200 shares that may be acquired by Mr. Coltrane upon the exercise of stock options that are currently exercisable. Also includes (i) 10,439 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition, (ii) 8,925 shares held in the Anne Collins Coltrane Trust as to which he may be deemed to be the beneficial owner, as to which he has sole voting and investment power and (iii) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | |
(6) | Includes 13,688 shares owned by Mr. Comb’s spouse, as to which she has sole voting and investment power. Also includes (i) 1,264 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition and (ii) 1,000 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | |
(7) | Includes 18,251 shares that may be acquired by Mr. Ensor upon the exercise of stock options that are currently exercisable or become exercisable within 60 days of September 30, 2007. | |
(8) | Includes 1,789 shares owned by Mr. Godbold’s spouse, as to which she has sole voting and investing power. Also includes (i) 20,200 shares that may be acquired by Mr. Godbold upon the exercise of stock options that are currently exercisable and (ii) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | |
(9) | Includes 2,424 shares as to which Ms. Hoover may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which she would have sole voting and investment power upon acquisition and 1,000 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which she has sole voting power, but not investment power. | |
(10) | Includes 19,200 shares owned jointly by Mr. Charles A. James and his children, as to which he has shared voting and investment power. Also includes (i) 3,580 shares that may be acquired by him upon the exercise of stock options that are currently exercisable and (ii) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | |
(11) | Includes 140,717 shares that may be acquired by Mr. Robert E. James, Jr. upon the exercise of stock options that are currently exercisable or become exercisable within 60 days of September 30, 2007 and 456 shares owned jointly by Mr. James’ children, as to which they have shared voting and investment power. | |
(12) | Includes 529 shares owned jointly by Mr. Jones and his spouse, as to which he has shared voting and investment power. Also includes (i) 33,101 shares owned by his spouse, as to which she has sole voting and investment power, (ii) 2,500 shares that may be acquired by him upon the exercise of stock options that are currently exercisable, (iii) 17,167 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition and (iv) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | |
(13) | Includes 6,515 shares owned jointly by Mr. King and his spouse, as to which they have shared voting and investment power. Also includes (i) 4,782 shares owned by his spouse, as to which she has sole voting and investment power, (ii)13,240 shares that may be acquired by him upon the exercise of stock options that are currently exercisable, (iii) 933 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and |
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investment power upon acquisition and (iv) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | ||
(14) | Mr. Manley ceased working with First Charter effective October 6, 2006. | |
(15) | Includes 10,300 shares that may be acquired by Dr. McGee upon the exercise of stock options that are currently exercisable. Also includes (i) 10,114 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition and (ii) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power. | |
(16) | Includes 440 shares owned by Ms. Messinger’s spouse, as to which he has sole voting and investment power. Also includes (i) 18,200 shares that may be acquired by her upon the exercise of stock options that are currently exercisable, (ii) 1,500 shares held by Ms. Messinger as custodian for her children, as to which they have shared voting and investment power and (iii) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which she has sole voting power, but not investment power. | |
(17) | Includes 1,451 shares owned by Mr. Morrison’s spouse, as to which she has sole voting and investment power. Also includes (i) 7,307 shares that may be acquired by him upon the exercise of stock options that are currently exercisable, (ii) 13,358 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition, (iii) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power and (iv) 28,000 shares pledged as collateral. | |
(18) | Includes 1,000 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which Mr. Poelker has sole voting power, but not investment power. | |
(19) | Includes 22,785 shares that may be acquired by Mr. Rownd upon the exercise of stock options that are currently exercisable or become exercisable within 60 days of September 30, 2007. | |
(20) | Includes 8,618 shares that may be acquired by Mr. Smith upon the exercise of stock options that are currently exercisable or become exercisable within 60 days of September 30, 2007. | |
(21) | Includes 3,063 shares held by Mr. Warlick’s spouse as custodian for their children, as to which she has sole voting and investment power. Also includes (i) 31,270 shares owned by his spouse, as to which she has sole voting and investment power, (ii) 12,520 shares that may be acquired by him upon the exercise of stock options that are currently exercisable, (iii) 634 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition and (iv) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power | |
(22) | Includes 13,600 shares that may be acquired by Mr. Waters upon the exercise of stock options that are currently exercisable. Also includes (i) 1,630 shares as to which he may be deemed to be the beneficial owner that are held pursuant to the Deferred Compensation Plan, as to which he would have sole voting and investment power upon acquisition, and (ii) 1,666 unvested restricted shares granted under First Charter’s Restricted Stock Award Program as to which he has sole voting power, but not investment power | |
(23) | Includes 13,864 shares that may be acquired by two other unnamed executive officers upon the exercise of stock options that are currently exercisable or become exercisable within 60 days of September 30, 2007. Also includes 3,900 unvested restricted shares granted under First Charter’s Restricted Stock Award Program, as to which they have sole voting power, but not investment power. |
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June 30, | December 31, | |||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Summary of Operations: | ||||||||||||||||||||||||||||
Interest income | 2,948,822 | 2,875,594 | 5,954,848 | 4,995,250 | 4,113,804 | 3,991,068 | 4,129,412 | |||||||||||||||||||||
Interest expense | 1,473,663 | 1,454,790 | 3,082,069 | 2,029,805 | 1,101,652 | 1,085,642 | 1,430,360 | |||||||||||||||||||||
Net interest income | 1,475,159 | 1,420,804 | 2,872,779 | 2,965,445 | 3,012,152 | 2,905,426 | 2,699,052 | |||||||||||||||||||||
Provision for loan and lease losses | 205,236 | 149,258 | 343,344 | 330,680 | 267,804 | 399,429 | 246,611 | |||||||||||||||||||||
Net interest income after provision for loan and lease losses | 1,269,923 | 1,271,546 | 2,529,435 | 2,634,765 | 2,744,348 | 2,505,997 | 2,452,441 | |||||||||||||||||||||
Noninterest income | 1,355,137 | 1,271,575 | 2,152,693 | 2,500,042 | 2,465,290 | 2,482,828 | 2,183,042 | |||||||||||||||||||||
Noninterest expenses | 1,595,457 | 1,489,369 | 3,055,625 | 2,926,311 | 2,972,678 | 2,550,224 | 2,337,054 | |||||||||||||||||||||
Income from continuing operations before income taxes, minority interest and cumulative effect | 1,029,603 | 1,053,752 | 1,626,503 | 2,208,496 | 2,236,960 | 2,438,601 | 2,298,429 | |||||||||||||||||||||
Applicable income taxes | 295,047 | 311,532 | 441,531 | 659,527 | 711,756 | 786,691 | 733,976 | |||||||||||||||||||||
Income from continuing operations before minority interest and cumulative effect | 734,556 | 742,220 | 1,184,972 | 1,548,969 | 1,525,204 | 1,651,910 | 1,564,453 | |||||||||||||||||||||
Minority interest, net of tax | — | — | — | — | — | (20,458 | ) | (37,680 | ) | |||||||||||||||||||
Income from continuing operations before cumulative effect | 734,556 | 742,220 | 1,184,972 | 1,548,969 | 1,525,204 | 1,631,452 | 1,526,773 | |||||||||||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | — | 43,896 | 3,979 | |||||||||||||||||||||
Income before cumulative effect | 734,556 | 742,220 | 1,184,972 | 1,548,969 | 1,525,204 | 1,675,348 | 1,530,752 | |||||||||||||||||||||
Cumulative effect of a change in accounting principle, net of tax | — | 3,526 | 3,526 | — | — | (10,762 | ) | — | ||||||||||||||||||||
Net income | 734,556 | 745,746 | 1,188,498 | 1,548,969 | 1,525,204 | 1,664,586 | 1,530,752 | |||||||||||||||||||||
Dividends on preferred stock | 370 | 370 | 740 | 740 | 740 | 740 | 740 | |||||||||||||||||||||
Net income available to common shareholders | 734,186 | 745,376 | 1,187,758 | 1,548,229 | 1,524,464 | 1,663,846 | 1,530,012 | |||||||||||||||||||||
Common Share Data: | ||||||||||||||||||||||||||||
Earnings per share | 1.35 | 1.34 | 2.14 | 2.79 | 2.72 | 2.91 | 2.64 | |||||||||||||||||||||
Earnings per diluted share | 1.34 | 1.34 | 2.13 | 2.77 | 2.68 | 2.87 | 2.59 | |||||||||||||||||||||
Cash dividends declared per share | 0.84 | 0.78 | 1.58 | 1.46 | 1.31 | 1.13 | 0.98 | |||||||||||||||||||||
Book value at period end | 17.16 | 17.13 | 18.02 | 17.00 | 16.00 | 15.29 | 14.98 | |||||||||||||||||||||
Average shares outstanding | 545,851 | 554,689 | 554,983 | 554,411 | 561,259 | 571,590 | 580,327 | |||||||||||||||||||||
Average diluted shares outstanding | 548,671 | 557,181 | 557,494 | 558,443 | 568,234 | 580,003 | 592,020 |
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June 30, | December 31, | |||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Financial Condition at Period End: | ||||||||||||||||||||||||||||
Securities | 11,509,293 | 20,874,962 | 11,595,720 | 22,430,697 | 25,019,759 | 29,189,776 | 25,534,110 | |||||||||||||||||||||
Loans and leases | 77,417,034 | 73,507,959 | 75,502,315 | 71,228,926 | 60,366,961 | 54,188,980 | 48,603,120 | |||||||||||||||||||||
Assets | 101,389,721 | 106,110,514 | 100,669,263 | 105,225,054 | 94,455,731 | 91,254,837 | 80,894,096 | |||||||||||||||||||||
Deposits | 69,193,441 | 70,522,903 | 69,380,046 | 67,434,150 | 58,226,347 | 57,095,331 | 52,208,427 | |||||||||||||||||||||
Short-term borrowings | 7,154,237 | 7,767,570 | 4,216,891 | 9,568,445 | 10,025,554 | 13,170,707 | 8,823,276 | |||||||||||||||||||||
Long-term debt and convertible subordinated notes | 11,956,704 | 14,501,752 | 12,558,082 | 15,227,385 | 13,982,708 | 9,062,830 | 8,178,704 | |||||||||||||||||||||
Shareholders’ equity | 9,190,775 | 9,555,790 | 10,021,971 | 9,446,411 | 8,923,832 | 8,667,003 | 8,475,311 | |||||||||||||||||||||
Profitability Ratios: | ||||||||||||||||||||||||||||
Return on average assets | 1.48 | % | 1.43 | % | 1.13 | % | 1.50 | % | 1.61 | % | 1.90 | % | 2.04 | % | ||||||||||||||
Return on average shareholders’ equity | 15.13 | % | 15.65 | % | 12.11 | % | 16.62 | % | 17.21 | % | 19.00 | % | 18.40 | % | ||||||||||||||
Net interest margin | 3.40 | % | 3.04 | % | 3.06 | % | 3.23 | % | 3.48 | % | 3.62 | % | 3.96 | % | ||||||||||||||
Efficiency ratio | 56.1 | % | 55.0 | % | 60.5 | % | 53.2 | % | 53.9 | % | 47.0 | % | 47.5 | % | ||||||||||||||
Noninterest income to total income | 47.9 | % | 47.2 | % | 42.8 | % | 45.7 | % | 45.0 | % | 46.1 | % | 44.7 | % | ||||||||||||||
Dividend payout | 62.0 | % | 58.2 | % | 74.2 | % | 52.7 | % | 48.9 | % | 39.4 | % | 37.8 | % | ||||||||||||||
Capital Ratios: | ||||||||||||||||||||||||||||
Average shareholders’ equity to average assets | 9.78 | % | 9.13 | % | 9.32 | % | 9.06 | % | 9.34 | % | 10.01 | % | 11.08 | % | ||||||||||||||
Tier 1 risk-adjusted capital | 8.13 | % | 8.56 | % | 8.39 | % | 8.35 | % | 10.31 | % | 10.97 | % | 11.70 | % | ||||||||||||||
Total risk-adjusted capital | 10.54 | % | 10.50 | % | 11.07 | % | 10.42 | % | 12.31 | % | 13.42 | % | 13.51 | % | ||||||||||||||
Tier 1 leverage | 8.76 | % | 8.38 | % | 8.44 | % | 8.08 | % | 8.89 | % | 9.11 | % | 9.73 | % | ||||||||||||||
Ratio of Earnings to Fixed Charges: | ||||||||||||||||||||||||||||
Including deposit interest | 1.69 | x | 1.72 | x | 1.52 | x | 2.08 | x | 3.00 | x | 3.22 | x | 2.60 | x | ||||||||||||||
Excluding deposit interest | 3.13 | x | 2.81 | x | 2.36 | x | 3.45 | x | 4.87 | x | 5.76 | x | 5.48 | x | ||||||||||||||
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends: | ||||||||||||||||||||||||||||
Including deposit interest | 1.69 | x | 1.72 | x | 1.52 | x | 2.08 | x | 3.00 | x | 3.21 | x | 2.59 | x | ||||||||||||||
Excluding deposit interest | 3.13 | x | 2.81 | x | 2.36 | x | 3.45 | x | 4.86 | x | 5.75 | x | 5.47 | x | ||||||||||||||
Credit Quality Ratios: | ||||||||||||||||||||||||||||
Allowance for loan and lease losses to nonperforming assets | 152.21 | % | 210.37 | % | 169.62 | % | 206.03 | % | 235.32 | % | 242.01 | % | 250.62 | % | ||||||||||||||
Allowance for credit losses to loans and leases outstanding | 1.16 | % | 1.14 | % | 1.14 | % | 1.16 | % | 1.31 | % | 1.47 | % | 1.49 | % | ||||||||||||||
Net charge-offs to average loans and leases outstanding | 0.47 | % | 0.40 | % | 0.44 | % | 0.45 | % | 0.45 | % | 0.63 | % | 0.43 | % | ||||||||||||||
Nonperforming assets to loans, leases and other real estate owned | 0.70 | % | 0.49 | % | 0.61 | % | 0.52 | % | 0.51 | % | 0.61 | % | 0.59 | % |
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For the Six Months June 30, | For the Calendar Year | |||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||
Income statement | ||||||||||||||||||||||||||||
Interest income | $ | 155,505 | $ | 123,388 | $ | 264,929 | $ | 224,605 | $ | 187,303 | $ | 178,292 | $ | 196,388 | ||||||||||||||
Interest expense | 81,226 | 58,651 | 131,219 | 99,722 | 64,293 | 70,490 | 83,227 | |||||||||||||||||||||
Net interest income | 74,279 | 64,737 | 133,710 | 124,883 | 123,010 | 107,802 | 113,161 | |||||||||||||||||||||
Provision for loan losses | 10,490 | 2,399 | 5,290 | 9,343 | 8,425 | 27,518 | 8,270 | |||||||||||||||||||||
Noninterest income | 39,707 | 33,283 | 67,678 | 46,738 | 57,038 | 62,282 | 47,410 | |||||||||||||||||||||
Noninterest expense | 71,127 | 61,429 | 124,937 | 127,971 | 107,496 | 125,065 | 97,551 | |||||||||||||||||||||
Income from continuing operations before income tax expense | 32,369 | 34,192 | 71,161 | 34,307 | 64,127 | 17,501 | 54,750 | |||||||||||||||||||||
Income tax expense | 11,063 | 11,614 | 23,799 | 9,132 | 21,889 | 3,313 | 14,947 | |||||||||||||||||||||
Income from continuing operations, net of tax | 21,306 | 22,578 | 47,362 | 25,175 | 42,238 | 14,188 | 39,803 | |||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||
Income (loss) from discontinued operations | — | 198 | 36 | 224 | 337 | (69 | ) | — | ||||||||||||||||||||
Gain on sale | — | — | 962 | — | — | — | — | |||||||||||||||||||||
Income tax expense (benefit) | — | 78 | 965 | 88 | 133 | (27 | ) | — | ||||||||||||||||||||
Income (loss) from discontinued operations, net of tax | — | 120 | 33 | 136 | 204 | (42 | ) | — | ||||||||||||||||||||
Net income | $ | 21,306 | $ | 22,698 | $ | 47,395 | $ | 25,311 | $ | 42,442 | $ | 14,146 | $ | 39,803 | ||||||||||||||
Per common share | ||||||||||||||||||||||||||||
Basic earnings per share | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 0.61 | $ | 0.73 | $ | 1.50 | $ | 0.83 | $ | 1.41 | $ | 0.48 | $ | 1.30 | ||||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | 0.01 | — | — | |||||||||||||||||||||
Net income | 0.61 | 0.73 | 1.50 | 0.83 | 1.42 | 0.47 | 1.30 | |||||||||||||||||||||
Diluted earnings per share | ||||||||||||||||||||||||||||
Income from continuing operations | 0.61 | 0.72 | 1.49 | 0.82 | 1.40 | 0.47 | 1.30 | |||||||||||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | 0.01 | — | — | |||||||||||||||||||||
Net income | 0.61 | 0.73 | 1.49 | 0.82 | 1.40 | 0.47 | 1.30 | |||||||||||||||||||||
Cash dividends declared | 0.39 | 0.39 | 0.775 | 0.76 | 0.75 | 0.74 | 0.73 | |||||||||||||||||||||
Period-end book value | 12.85 | 10.73 | 12.81 | 10.53 | 10.47 | 10.08 | 10.80 | |||||||||||||||||||||
Average shares | ||||||||||||||||||||||||||||
Basic | 34,733,825 | 30,959,711 | 31,525,366 | 30,457,573 | 29,859,683 | 29,789,969 | 30,520,125 | |||||||||||||||||||||
Diluted | 35,036,015 | 31,249,049 | 31,838,292 | 30,784,406 | 30,277,063 | 30,007,435 | 30,702,107 |
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For the Six Months June 30, | For the Calendar Year | |||||||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
Ratios | ||||||||||||||||||||||||||||||||
Return on average equity | 9.46 | % | 13.89 | % | 13.45 | % | 7.86 | % | 14.05 | % | 4.50 | % | 12.52 | % | ||||||||||||||||||
Return on average assets | 0.88 | 1.08 | 1.08 | 0.56 | 0.98 | 0.35 | 1.13 | |||||||||||||||||||||||||
Net yield on earning assets | 3.40 | 3.38 | 3.37 | 3.05 | 3.14 | 3.00 | 3.52 | |||||||||||||||||||||||||
Average portfolio loans to average deposits | 108.7 | 106.9 | 105.72 | 101.75 | 92.48 | 85.56 | 93.85 | |||||||||||||||||||||||||
Average equity to average assets | 9.32 | 7.77 | 8.06 | 7.18 | 6.99 | 7.85 | 9.02 | |||||||||||||||||||||||||
Efficiency ratio(1) | 61.7 | 61.9 | 59.6 | 59.4 | 59.8 | 65.4 | 64.3 | |||||||||||||||||||||||||
Dividend payout | 64.1 | 53.0 | 52.0 | 92.7 | 53.6 | 157.4 | 56.2 | |||||||||||||||||||||||||
Selected period-end balances | ||||||||||||||||||||||||||||||||
Portfolio loans, net | $ | 3,509,047 | $ | 3,042,768 | $ | 3,450,087 | $ | 2,917,020 | $ | 2,412,529 | $ | 2,227,030 | $ | 2,045,266 | ||||||||||||||||||
Loans held for sale | 11,471 | 8,382 | 12,292 | 6,447 | 5,326 | 5,137 | 158,404 | |||||||||||||||||||||||||
Allowance for loan losses | 44,790 | 29,520 | 34,966 | 28,725 | 26,872 | 25,607 | 27,204 | |||||||||||||||||||||||||
Securities available for sale | 898,528 | 884,370 | 906,415 | 899,111 | 1,652,732 | 1,601,900 | 1,129,212 | |||||||||||||||||||||||||
Assets | 4,916,721 | 4,361,231 | 4,856,717 | 4,232,420 | 4,431,605 | 4,206,693 | 3,745,949 | |||||||||||||||||||||||||
Deposits | 3,230,346 | 2,988,802 | 3,248,128 | 2,799,479 | 2,609,846 | 2,427,897 | 2,322,647 | |||||||||||||||||||||||||
Other borrowings | 1,176,758 | 995,707 | 1,098,698 | 1,068,574 | 763,738 | 473,106 | 1,042,440 | |||||||||||||||||||||||||
Total liabilities | 4,470,893 | 4,027,333 | 4,409,355 | 3,908,825 | 4,116,918 | 3,907,254 | 3,421,263 | |||||||||||||||||||||||||
Shareholders’ equity | 445,828 | 333,898 | 447,362 | 323,595 | 314,687 | 299,439 | 324,686 | |||||||||||||||||||||||||
Selected average balances | ||||||||||||||||||||||||||||||||
Portfolio loans | $ | 3,521,637 | $ | 2,980,344 | $ | 3,092,801 | $ | 2,788,755 | $ | 2,353,605 | $ | 2,126,821 | $ | 2,112,855 | ||||||||||||||||||
Loans held for sale | 11,278 | 8,252 | 9,019 | 6,956 | 9,502 | 25,927 | 10,035 | |||||||||||||||||||||||||
Securities available for sale, at cost | 920,753 | 918,668 | 920,961 | 1,361,507 | 1,623,102 | 1,464,704 | 1,126,494 | |||||||||||||||||||||||||
Earning assets | 4,465,091 | 3,914,229 | 4,033,031 | 4,164,969 | 4,004,678 | 3,662,460 | 3,261,842 | |||||||||||||||||||||||||
Assets | 4,872,922 | 4,238,128 | 4,369,834 | 4,489,083 | 4,322,727 | 4,009,511 | 3,525,090 | |||||||||||||||||||||||||
Deposits | 3,238,653 | 2,787,928 | 2,925,506 | 2,740,742 | 2,544,864 | 2,485,711 | 2,251,256 | |||||||||||||||||||||||||
Other borrowings | 1,122,446 | 1,079,295 | 1,049,165 | 1,375,910 | 1,428,124 | 1,159,889 | 906,263 | |||||||||||||||||||||||||
Shareholders’ equity | 454,247 | 329,482 | 352,253 | 322,226 | 302,101 | 314,562 | 317,952 |
(1) | Noninterest expense less debt extinguishment expense and derivative termination costs, divided by the sum of taxable-equivalent net interest income plus noninterest income less gain (loss) on sale of securities, net. Excludes the results of discontinued operations. |
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• | any merger, consolidation, combination or majority share acquisition between or involving an issuing public corporation and an interested shareholder or an affiliate or associate of an interested shareholder; | |
• | certain transfers of property, dividends and issuance or transfers of shares from or by an issuing public corporation or a subsidiary of an issuing public corporation to, with or for the benefit of an interested shareholder or an affiliate or associate of an interested shareholder unless such transaction is in the ordinary course of business of the issuing public corporation on terms no more favorable to the interested shareholder than those acceptable to third parties as demonstrated by contemporaneous transactions; and | |
• | certain transactions that (1) increase the proportionate share ownership of an interested shareholder, (2) result in the adoption of a plan or proposal for the dissolution, winding up of the affairs or liquidation of the issuing public corporation if such plan is proposed by or on behalf of the interested shareholder or (3) pledge or extend the credit or financial resources of the issuing public corporation to or for the benefit of the interested shareholder. |
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• | shareholders of an Ohio corporation dissenting from certain amendments to the corporation’s articles of incorporation; | |
• | shareholders of an Ohio corporation that is being merged or consolidated into a surviving or new entity; | |
• | shareholders of a surviving Ohio corporation to a merger who are entitled to vote on the adoption of an agreement of merger (but only as to the shares so entitling them to vote); | |
• | shareholders, other than the parent corporation, of an Ohio subsidiary corporation that is being merged into its parent corporation; | |
• | shareholders of an acquiring corporation in a combination or a majority share acquisition who are entitled to vote on such transaction (but only as to the shares so entitling them to vote); | |
• | shareholders of a domestic subsidiary corporation into which one or more domestic or foreign corporations are being merged; and | |
• | shareholders of a domestic corporation that is being converted. |
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• | The cash, or fair market value of other consideration, to be received per share by the holders of the corporation’s common stock in such business combination bears the same or a greater percentage relationship to the market price of the corporation’s common stock immediately prior to the announcement of such business combination by the corporation as the highest per share price (including brokerage commissionsand/or soliciting dealers’ fees) that such other entity has theretofore paid for any of the shares of the corporation’s common stock already owned by it bears to the market price of the corporation’s common stock immediately prior to the commencement of acquisition of the corporation’s common stock by such other entity, directly or indirectly; | |
• | The cash, or fair market value of other consideration, to be received per share by holders of the corporation’s common stock in such business combination (i) is not less than the highest per share price (including brokerage commissionsand/or soliciting dealers’ fees) paid by such other entity in acquiring any of its holdings of the shares of the corporation’s common stock and (ii) is not less than the earnings per share of the corporation’s common stock for the four full consecutive fiscal quarters immediately preceding the record date for the solicitation of votes on such business combination, multiplied by the then price/earnings multiple, if any, of such other entity as customarily computed and reported in the financial community; | |
• | After the other entity has acquired a twenty percent (20%) interest and prior to the consummation of such business combination: (1) the other entity shall have taken steps to ensure that the corporation’s board of directors included at all times representation by continuing directors proportionate to the outstanding shares of the corporation’s common stock held by persons not affiliated with the other entity (with a continuing director to occupy any resulting fractional board position); (2) there shall have been no reduction in the rate of dividends payable on the corporation’s common stock, except as may have been approved by a unanimous vote of its directors; (3) the other entity shall have not acquired any newly issued shares of the corporation’s capital stock, directly or indirectly, from the corporation, except upon conversion of any convertible securities acquired by the other entity prior to obtaining a twenty percent (20%) interest or as a result of a pro rata stock dividend or stock split; and (4) the other entity shall not have acquired any additional shares of the corporation’s outstanding common stock, or securities convertible into common stock, except as part of the transaction that resulted in the other entity acquiring its twenty percent (20%) interest; | |
• | The other entity shall not have (1) received the benefit, directly or indirectly, except proportionately with other shareholders, of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the corporation or (2) made any major change in the corporation’s business or equity capital structure unless by a unanimous vote of the directors, in either case prior to the consummation of the business combination; and | |
• | A proxy statement responsive to the requirements of the Exchange Act shall be mailed to the public shareholders of the corporation for the purpose of soliciting shareholder approval of the business combination and shall contain prominently in the forepart thereof any recommendations as to the advisability or inadvisability of the business combination that the continuing directors, or any of them, may choose to state and, if deemed advisable by a majority of the continuing directors, an opinion of a |
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reputable investment banking firm as to the fairness (or not) of the terms of the business combination to the remaining public shareholders of the corporation, which investment banking firm shall be selected by a majority of the continuing directors and shall be paid by the corporation a reasonable fee for its services upon receipt of such opinion. |
• | The consummation of a plan of merger to which the corporation (other than a parent corporation in a merger whose shares are not affected under North Carolina law) is a party unless (1) approval by the shareholders of that corporation is not required by North Carolina law or (2) such shares are then redeemable by the corporation at a price not greater than the cash to be received in exchange for such shares; | |
• | The consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, unless such shares are then redeemable by the corporation at a price not greater than the cash to be received in exchange for such shares; | |
• | The consummation of a plan of conversion of a corporation; | |
• | The consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than as permitted by North Carolina law, including a sale in dissolution, but not including a sale pursuant to court order or a sale pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed in cash to the shareholders within one year after the date of sale; | |
• | An amendment to the articles of incorporation that materially and adversely affects rights in respect of a dissenter’s shares because it (1) alters or abolishes a preferential right of the shares; (2) creates, alters or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares; (3) alters or abolishes a preemptive right of the holder of the shares to acquire shares or other securities; (4) excludes or limits the right of the shares to vote on any matter, or to cumulate votes, other than an amendment of the articles of incorporation permitting action without a meeting to be taken by less than all shareholders entitled to vote, without advance notice, or both, as provided by North Carolina law; (5) reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under North Carolina law; or (6) changes the corporation into a nonprofit corporation or cooperative organization; or | |
• | Any corporate action taken pursuant to a shareholder vote to the extent the articles of incorporation, bylaws or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares. |
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• | Shares, or shares and cash in lieu of fractional shares of the surviving or acquiring corporation, or of any other corporation that, at the record date fixed to determine the shareholders entitled to receive notice of and vote at the meeting at which the plan of merger or share exchange is to be acted on, were either listed subject to notice of issuance on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or held by at least 2,000 record shareholders; or | |
• | A combination of cash and shares as set forth in clauses a. and b. above. |
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• | Fifth Third’s Annual Report onForm 10-K/A for the year ended December 31, 2006; | |
• | Fifth Third’s Quarterly Reports onForm 10-Q for the quarters ended March 31 and June 30, 2007; and |
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• | Fifth Third’s Current Reports onForm 8-K filed with the SEC on January 16, January 22, March 30, May 10, July 27, July 30, August 7, August 8, August 16, August 17, September 27, October 29 and October 31, 2007. |
Paul L. Reynolds
Executive Vice President, General Counsel and Secretary
Fifth Third Bancorp
Fifth Third Center
38 Fountain Square Plaza
MD10AT76
Cincinnati, Ohio 45263
(513) 579-5300
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• | A sufficient complement of skilled finance, tax and accounting resources did not exist to perform supervisory reviews and monitoring activities over certain financial reporting matters and controls. | |
• | An adequate tone and control consciousness did not exist to support effective application of policies and the execution of procedures within the daily operating of financial reporting controls. |
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• | First Charter is evaluating its personnel resources. The finance department is in the process of being reorganized in order to ensure a sufficient complement of skilled finance, tax and accounting resources performing supervisory review and monitoring activities are secured. If permanent staff is not secured in a timely manner, First Charter plans to use external resources to supplement the finance, tax and accounting functions in order to support the timely and accurate preparation of the consolidated financial statements and related information. This structure is designed to demonstrate segregation of duties and adequate independent review of all functions including the review of accounting policies and procedures. | |
• | First Charter plans to enhance its control environment to promote the adherence to appropriate internal control policies and procedures. First Charter intends to reassess current policies and procedures and they will be revised as necessary in order to develop and deploy effective policies and procedures and reinforce compliance in an effort to constantly improve First Charter’s internal control environment. | |
• | First Charter intends to augment its mechanism of regular education, and communicate to management and employees the importance of internal control and raise their level of understanding of internal control. | |
• | First Charter plans to enhance the internal governance and compliance function. It is intended that internal control weaknesses will be identified and remediated in a timely manner in order to strengthen the internal control structure. It is intended that, on an ongoing basis, this governance and compliance function will evaluate the effectiveness of the strengthened internal control, procedures and practices, |
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taking corrective action as appropriate, and that the results of the evaluation will be communicated to First Charter’s Audit Committee. |
• | First Charter intends to augment its mechanism of regular education, and communicate to management and employees the importance of internal control and raise their level of understanding of internal control. | |
• | First Charter intends to improve strategic planning to assess the accounting implications of non- routine transactions. Consideration will be given to staffing needs including consultations with external legal and accounting experts. | |
• | In advance of the effective dates of new accounting pronouncements, First Charter plans to evaluate the potential impact of these pronouncements and assess the staffing requirements to effectively implement and report these new accounting pronouncements in a timely manner. Consideration will also be given to the establishment of new policies, procedures and internal controls relative to these new pronouncements. | |
• | First Charter intends to improve the process for an effective evaluation of significant estimates. The appropriate level of management is expected to be involved in the decision-making process. It is intended that the evaluation process will be documented and adequately supported. | |
• | First Charter plans to perform a thorough assessment of the design of the reconciliation process and suspense monitoring functions, including a review of each balance sheet account in order to understand the manner in which the account is currently recorded, reconciled, monitored and managed. It is expected that procedures will be implemented to ensure accurate and timely general ledger account reconciliations are performed with a level of precision to detect misstatements, and that duties will be appropriately segregated to mitigate the risk of financial misstatements. |
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• | First Charter has reassessed, reviewed, and approved the charters that govern the internal governance and compliance functions which include, but are not limited to, the Disclosure Committee, Compliance Risk Committee, Asset and Liability Committee, Technology Steering Committee, Sarbanes Oxley Review Committee. Where deemed necessary, various amendments to these documents have also been adopted. First Charter’s Management has communicated the charters to the respective internal governance and compliance functions. | |
• | These functions also have reassessed their reporting practices and have enhanced their evaluation processes. |
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• | A sufficient complement of skilled finance, tax and accounting resources did not exist to perform supervisory reviews and monitoring activities over certain financial reporting matters and controls. | |
• | An adequate tone and control consciousness did not exist to support effective application of policies and the execution of procedures within the daily operation of financial reporting controls. |
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December 31 | ||||||||
2006 | 2005 | |||||||
(Dollars in thousands, | ||||||||
except share data) | ||||||||
ASSETS | ||||||||
Cash and due from banks | $ | 87,771 | $ | 119,080 | ||||
Federal funds sold | 10,515 | 2,474 | ||||||
Interest-bearing bank deposits | 4,541 | 3,998 | ||||||
Cash and cash equivalents | 102,827 | 125,552 | ||||||
Securities available for sale (cost of $916,189 and $917,710; carrying amount of pledged collateral $632,918 and $557,132 at December 31, 2006 and 2005, respectively) | 906,415 | 899,111 | ||||||
Loans held for sale | 12,292 | 6,447 | ||||||
Portfolio loans: | ||||||||
Commercial and construction | 2,129,582 | 1,531,398 | ||||||
Mortgage | 618,142 | 660,720 | ||||||
Consumer | 737,342 | 753,800 | ||||||
Total portfolio loans | 3,485,066 | 2,945,918 | ||||||
Allowance for loan losses | (34,966 | ) | (28,725 | ) | ||||
Unearned income | (13 | ) | (173 | ) | ||||
Portfolio loans, net | 3,450,087 | 2,917,020 | ||||||
Premises and equipment, net | 111,588 | 106,773 | ||||||
Goodwill and other intangible assets | 85,068 | 21,897 | ||||||
Other assets | 188,440 | 155,620 | ||||||
Total Assets | $ | 4,856,717 | $ | 4,232,420 | ||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 454,975 | $ | 429,758 | ||||
Demand | 420,774 | 368,291 | ||||||
Money market | 620,699 | 559,865 | ||||||
Savings | 111,047 | 119,824 | ||||||
Certificates of deposit | 1,223,252 | 916,569 | ||||||
Brokered certificates of deposit | 417,381 | 405,172 | ||||||
Total deposits | 3,248,128 | 2,799,479 | ||||||
Federal funds purchased and securities sold under agreements to repurchase | 201,713 | 312,283 | ||||||
Commercial paper and other short-term borrowings | 409,191 | 198,432 | ||||||
Long-term debt | 487,794 | 557,859 | ||||||
Accrued expenses and other liabilities | 62,529 | 40,772 | ||||||
Total Liabilities | 4,409,355 | 3,908,825 | ||||||
Shareholders’ Equity | ||||||||
Preferred stock — no par value; authorized 2,000,000 shares; no shares issued and outstanding | — | — | ||||||
Common stock — no par value; authorized 100,000,000 shares; issued and outstanding 34,922,222 and 30,736,936 shares at December 31, 2006 and 2005, respectively | 231,602 | 133,408 | ||||||
Common stock held in Rabbi Trust for deferred compensation | (1,226 | ) | (893 | ) | ||||
Deferred compensation payable in common stock | 1,226 | 893 | ||||||
Retained earnings | 221,678 | 201,442 | ||||||
Accumulated other comprehensive loss | (5,918 | ) | (11,255 | ) | ||||
Total Shareholders’ Equity | 447,362 | 323,595 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 4,856,717 | $ | 4,232,420 | ||||
F-9
Table of Contents
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(Dollars in thousands, | ||||||||||||
except per share amounts | ||||||||||||
Interest income | ||||||||||||
Loans | $ | 224,937 | $ | 172,760 | $ | 124,169 | ||||||
Securities | 39,522 | 51,622 | 62,914 | |||||||||
Federal funds sold | 267 | 60 | 19 | |||||||||
Interest-bearing bank deposits | 203 | 163 | 201 | |||||||||
Total interest income | 264,929 | 224,605 | 187,303 | |||||||||
Interest expense | ||||||||||||
Deposits | 82,448 | 53,456 | 35,350 | |||||||||
Short-term borrowings | 19,055 | 19,740 | 9,517 | |||||||||
Long-term debt | 29,716 | 26,526 | 19,426 | |||||||||
Total interest expense | 131,219 | 99,722 | 64,293 | |||||||||
Net interest income | 133,710 | 124,883 | 123,010 | |||||||||
Provision for loan losses | 5,290 | 9,343 | 8,425 | |||||||||
Net interest income after provision for loan losses | 128,420 | 115,540 | 114,585 | |||||||||
Noninterest income | ||||||||||||
Service charges on deposits | 28,962 | 27,809 | 25,564 | |||||||||
Wealth management | 2,847 | 2,410 | 1,997 | |||||||||
Gain on sale of deposits and loans | 2,825 | — | 339 | |||||||||
Equity method investments gains (losses), net | 3,983 | (271 | ) | (349 | ) | |||||||
Mortgage services | 3,062 | 2,873 | 1,748 | |||||||||
Gain on sale of Small Business Administration loans | 126 | — | — | |||||||||
Brokerage services | 3,182 | 3,119 | 3,112 | |||||||||
Insurance services | 13,366 | 12,546 | 11,514 | |||||||||
Bank owned life insurance | 3,522 | 4,311 | 3,413 | |||||||||
Property sale gains, net | 645 | 1,853 | 777 | |||||||||
ATM, debit, and merchant fees | 8,395 | 6,702 | 5,160 | |||||||||
Other | 2,591 | 2,076 | 1,380 | |||||||||
Total fees and other income | 73,506 | 63,428 | 54,655 | |||||||||
Securities gains (losses), net | (5,828 | ) | (16,690 | ) | 2,383 | |||||||
Total noninterest income | 67,678 | 46,738 | 57,038 | |||||||||
Noninterest expense | ||||||||||||
Salaries and employee benefits | 69,237 | 61,428 | 56,103 | |||||||||
Occupancy and equipment | 18,144 | 16,565 | 16,938 | |||||||||
Data processing | 5,768 | 5,171 | 3,830 | |||||||||
Marketing | 4,711 | 4,668 | 4,350 | |||||||||
Postage and supplies | 4,834 | 4,478 | 4,772 | |||||||||
Professional services | 8,811 | 8,072 | 9,389 | |||||||||
Telecommunications | 2,193 | 2,139 | 1,944 | |||||||||
Amortization of intangibles | 654 | 378 | 316 | |||||||||
Foreclosed properties | 755 | 386 | 161 | |||||||||
Debt extinguishment expense | — | 6,884 | — | |||||||||
Derivative termination costs | — | 7,770 | — | |||||||||
Other | 9,830 | 10,032 | 9,693 | |||||||||
Total noninterest expense | 124,937 | 127,971 | 107,496 | |||||||||
Income from continuing operations before income tax expense | 71,161 | 34,307 | 64,127 | |||||||||
Income tax expense | 23,799 | 9,132 | 21,889 | |||||||||
Income from continuing operations, net of tax | 47,362 | 25,175 | 42,238 | |||||||||
Discontinued operations | ||||||||||||
Income from discontinued operations before gain on sale and income tax expense | 36 | 224 | 337 | |||||||||
Gain on sale | 962 | — | — | |||||||||
Income tax expense | 965 | 88 | 133 | |||||||||
Income from discontinued operations, net of tax | 33 | 136 | 204 | |||||||||
Net income | $ | 47,395 | $ | 25,311 | $ | 42,442 | ||||||
Net income per common share | ||||||||||||
Basic | ||||||||||||
Income from continuing operations, net of tax | $ | 1.50 | $ | 0.83 | $ | 1.41 | ||||||
Income from discontinued operations, net of tax | — | — | 0.01 | |||||||||
Net income | 1.50 | 0.83 | 1.42 | |||||||||
Diluted | ||||||||||||
Income from continuing operations, net of tax | $ | 1.49 | $ | 0.82 | $ | 1.40 | ||||||
Income from discontinued operations, net of tax | — | — | 0.01 | |||||||||
Net income | 1.49 | 0.82 | 1.40 | |||||||||
Average common shares outstanding | ||||||||||||
Basic | 31,525,366 | 30,457,573 | 29,859,683 | |||||||||
Diluted | 31,838,292 | 30,784,406 | 30,277,063 | |||||||||
Dividends declared per common share | $ | 0.775 | $ | 0.76 | $ | 0.75 |
F-10
Table of Contents
Common Stock | Deferred | |||||||||||||||||||||||||||
in Rabbi | Compensation | Accumulated | ||||||||||||||||||||||||||
Trust for | Payable in | Other | ||||||||||||||||||||||||||
Common Stock | Deferred | Common | Retained | Comprehensive | ||||||||||||||||||||||||
Shares | Amount | Compensation | Stock | Earnings | Income (Loss) | Total | ||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||
Balance, December 31, 2003 | 29,720,163 | $ | 115,270 | $ | (636 | ) | $ | 636 | $ | 178,008 | $ | 6,161 | $ | 299,439 | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 42,442 | — | 42,442 | |||||||||||||||||||||
Change in unrealized gains and losses on securities, net of reclassification adjustment for net losses included in net income | (11,023 | ) | (11,023 | ) | ||||||||||||||||||||||||
Total comprehensive income | 31,419 | |||||||||||||||||||||||||||
Common stock purchased by Rabbi Trust for deferred compensation | — | — | (172 | ) | — | — | — | (172 | ) | |||||||||||||||||||
Deferred compensation payable in common stock | — | — | — | 172 | — | — | 172 | |||||||||||||||||||||
Cash dividends declared, $.75 per share | — | — | — | — | (22,365 | ) | — | (22,365 | ) | |||||||||||||||||||
Issuance of shares under stock-based compensation plans, including related tax effects | 286,123 | 5,019 | — | — | — | — | 5,019 | |||||||||||||||||||||
Issuance of shares pursuant to acquisition | 47,970 | 1,175 | — | — | — | — | 1,175 | |||||||||||||||||||||
Balance, December 31, 2004 | 30,054,256 | $ | 121,464 | $ | (808 | ) | $ | 808 | $ | 198,085 | $ | (4,862 | ) | $ | 314,687 | |||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 25,311 | — | 25,311 | |||||||||||||||||||||
Change in unrealized gains and losses on securities, net of reclassification adjustment for net losses included in net income | — | — | — | — | — | (6,393 | ) | (6,393 | ) | |||||||||||||||||||
Total comprehensive income | 18,918 | |||||||||||||||||||||||||||
Common stock purchased by Rabbi Trust for deferred compensation | — | — | (85 | ) | — | — | — | (85 | ) | |||||||||||||||||||
Deferred compensation payable in common stock | — | — | — | 85 | — | — | 85 | |||||||||||||||||||||
Cash dividends declared, $.76 per share | — | — | — | — | (21,954 | ) | — | (21,954 | ) | |||||||||||||||||||
Issuance of shares under stock-based compensation plans, including related tax effects | 661,403 | 11,443 | — | — | — | — | 11,443 | |||||||||||||||||||||
Issuance of shares pursuant to acquisition | 21,277 | 501 | — | — | — | — | 501 | |||||||||||||||||||||
Balance, December 31, 2005 | 30,736,936 | $ | 133,408 | $ | (893 | ) | $ | 893 | $ | 201,442 | $ | (11,255 | ) | $ | 323,595 | |||||||||||||
Cumulative adjustment to retained earnings for adoption of SAB 108 (Note 3) | — | — | — | — | (2,745 | ) | — | (2,745 | ) | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 47,395 | — | 47,395 | |||||||||||||||||||||
Change in unrealized gains and losses on securities, net of reclassification adjustment for net losses included in net income | — | — | — | — | — | 5,337 | 5,337 | |||||||||||||||||||||
Total comprehensive income | 52,732 | |||||||||||||||||||||||||||
Common stock purchased by Rabbi Trust for deferred compensation | — | — | (333 | ) | — | — | — | (333 | ) | |||||||||||||||||||
Deferred compensation payable in common stock | — | — | — | 333 | — | — | 333 | |||||||||||||||||||||
Cash dividends declared, $.775 per share | — | — | — | (24,414 | ) | — | (24,414 | ) | ||||||||||||||||||||
Issuance of shares under stock-based compensation plans, including related tax effects | 1,196,025 | 25,217 | — | — | — | — | 25,217 | |||||||||||||||||||||
Issuance of shares pursuant to acquisition | 2,989,261 | 72,977 | — | — | — | — | 72,977 | |||||||||||||||||||||
Balance, December 31, 2006 | 34,922,222 | $ | 231,602 | $ | (1,226 | ) | $ | 1,226 | $ | 221,678 | $ | (5,918 | ) | $ | 447,362 | |||||||||||||
F-11
Table of Contents
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Operating activities | ||||||||||||
Net income | $ | 47,395 | $ | 25,311 | $ | 42,442 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Provision for loan losses | 5,290 | 9,343 | 8,425 | |||||||||
Depreciation | 8,443 | 7,876 | 9,064 | |||||||||
Amortization of intangibles | 823 | 538 | 461 | |||||||||
Amortization of servicing rights | 426 | 514 | 903 | |||||||||
Debt extinguishment and derivative termination costs | — | 14,580 | — | |||||||||
Stock-based compensation expense | 2,791 | 196 | 71 | |||||||||
Tax benefits from stock-based compensation plans | (1,568 | ) | — | — | ||||||||
Premium amortization and discount accretion, net | 959 | 2,395 | 3,296 | |||||||||
Securities (gains) losses, net | 5,828 | 16,690 | (2,383 | ) | ||||||||
Net (gains) losses on sales of other real estate owned | 87 | 50 | (172 | ) | ||||||||
Write-downs on other real estate owned | 668 | 154 | 116 | |||||||||
Equipment sale (gains) losses, net | (15 | ) | (15 | ) | 62 | |||||||
Equity method investment (gains) losses, net | (3,983 | ) | 271 | 349 | ||||||||
Gains on sales of loans held for sale | (1,121 | ) | (1,465 | ) | (1,035 | ) | ||||||
Gains on sales deposits and loans | (2,825 | ) | — | (339 | ) | |||||||
Gains on sale of small business administration loans | (126 | ) | — | — | ||||||||
Property sale gains, net | (645 | ) | (1,853 | ) | (777 | ) | ||||||
Bank-owned life insurance claims | — | (935 | ) | — | ||||||||
Origination of loans held for sale | (204,320 | ) | (154,303 | ) | (95,635 | ) | ||||||
Proceeds from sale of loans held for sale | 199,596 | 154,647 | 55,739 | |||||||||
Change in cash surrender value of life insurance | (3,604 | ) | (2,685 | ) | (3,413 | ) | ||||||
Change in other assets | 1,662 | (1,739 | ) | 5,489 | ||||||||
Change in other liabilities | 20,870 | (16,564 | ) | 9,425 | ||||||||
Net cash provided by operating activities | 76,631 | 53,006 | 32,088 | |||||||||
Investing activities | ||||||||||||
Proceeds from sales of securities available for sale | 201,354 | 652,583 | 139,261 | |||||||||
Proceeds from maturities, calls and paydowns of securities available for sale | 122,691 | 166,191 | 419,251 | |||||||||
Purchases of securities available for sale | (329,458 | ) | (94,866 | ) | (587,582 | ) | ||||||
Net change in loans | (554,207 | ) | (520,366 | ) | (200,489 | ) | ||||||
Loans sold in branch sale | 8,078 | — | 2,209 | |||||||||
Proceeds from sales of other real estate owned | 5,840 | 5,048 | 5,433 | |||||||||
Purchase of bank-owned life insurance | (15,876 | ) | — | — | ||||||||
Proceeds from equity method distributions | 4,060 | — | — | |||||||||
Net purchases of premises and equipment | (13,243 | ) | (17,069 | ) | (10,136 | ) | ||||||
Cash paid in business acquisitions, net of cash acquired | (9,535 | ) | — | (6,755 | ) | |||||||
Net cash provided by (used in) investing activities | (580,296 | ) | 191,521 | (238,808 | ) | |||||||
Financing activities | ||||||||||||
Net increase in deposits | 486,691 | 189,633 | 200,395 | |||||||||
Deposits sold in branch sale | (38,042 | ) | — | (8,947 | ) | |||||||
Net change in federal funds purchased and securities sold under repurchase agreements | (110,570 | ) | 61,968 | (68,703 | ) | |||||||
Net change in commercial paper and other short-term borrowings | 210,759 | (127,252 | ) | (264,392 | ) | |||||||
Proceeds from issuance of long-term debt and trust preferred securities | 265,000 | 186,857 | 580,000 | |||||||||
Retirement of long-term debt | (335,065 | ) | (502,736 | ) | (229,368 | ) | ||||||
Proceeds from issuance of common stock | 23,649 | 11,078 | 4,605 | |||||||||
Tax benefits from stock-based compensation plans | 1,568 | — | — | |||||||||
Debt extinguishment and derivative termination costs | — | (14,580 | ) | — | ||||||||
Cash dividends paid | (23,050 | ) | (21,954 | ) | (22,365 | ) | ||||||
Net cash provided by (used in) financing activities | 480,940 | (216,986 | ) | 191,225 | ||||||||
Net increase (decrease) in cash and cash equivalents | (22,725 | ) | 27,541 | (15,495 | ) | |||||||
Cash and cash equivalents at beginning of period | 125,552 | 98,011 | 113,506 | |||||||||
Cash and cash equivalents at end of period | $ | 102,827 | $ | 125,552 | $ | 98,011 | ||||||
Supplemental information for continuing operations | ||||||||||||
Cash paid for: | ||||||||||||
Interest | $ | 124,152 | $ | 96,857 | 62,977 | |||||||
Income taxes | 19,816 | 21,520 | 18,548 | |||||||||
Non-cash items: | ||||||||||||
Transfer of loans to other real estate owned | 7,772 | 6,532 | 2,385 | |||||||||
Unrealized gains (losses) on securities available for sale (net of tax expense (benefit) of $3,488, ($4,235), and ($7,045), respectively) | 5,337 | (6,393 | ) | (11,023 | ) | |||||||
Issuance of common stock in business acquisitions | 72,977 | 501 | 1,175 | |||||||||
1035 exchange of bank-owned life insurance | 21,541 | — | — |
F-12
Table of Contents
1. | Summary of Significant Accounting Policies |
F-13
Table of Contents
F-14
Table of Contents
F-15
Table of Contents
F-16
Table of Contents
F-17
Table of Contents
F-18
Table of Contents
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Basic weighted-average number of common shares outstanding | 31,525,366 | 30,457,573 | 29,859,683 | |||||||||
Dilutive effect arising from potential common stock issuances | 312,926 | 326,833 | 417,380 | |||||||||
Diluted weighted-average number of common shares outstanding | 31,838,292 | 30,784,406 | 30,277,063 | |||||||||
F-19
Table of Contents
For the Calendar Year | ||||||||
2005 | 2004 | |||||||
(Dollars in thousands, except per share data) | ||||||||
Net income, as reported | $ | 25,311 | $ | 42,442 | ||||
Add: Stock-based employee compensation expense included in reported net income | 118 | 43 | ||||||
Add: Effect of change in prior-period forfeiture assumptions | 932 | — | ||||||
Less: Stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects | (1,733 | ) | (1,821 | ) | ||||
Pro forma net income | $ | 24,628 | $ | 40,664 | ||||
Net income per share | ||||||||
Basic — as reported | $ | 0.83 | $ | 1.42 | ||||
Basic — pro forma | 0.81 | 1.36 | ||||||
Diluted — as reported | 0.82 | 1.40 | ||||||
Diluted — pro forma | 0.80 | 1.34 | ||||||
Average shares | ||||||||
Basic | 30,457,573 | 29,859,683 | ||||||
Diluted | 30,784,406 | 30,277,063 | ||||||
F-20
Table of Contents
2. | Recently Adopted Accounting Pronouncements |
F-21
Table of Contents
3. | Staff Accounting Bulletin 108 |
F-22
Table of Contents
F-23
Table of Contents
Salaries & | ||||||||||||||||
Mortgage | Employee | Accounts | ||||||||||||||
Services | Benefits | Payable | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Cumulative effect on shareholders’ equity as of December 31, 2005 | $ | (1,000 | ) | $ | (729 | ) | $ | (1,016 | ) | $ | (2,745 | ) | ||||
Effect on: | ||||||||||||||||
Net income for the first quarter of 2006 | (173 | ) | (28 | ) | — | (201 | ) | |||||||||
Net income for the second quarter of 2006 | (63 | ) | (28 | ) | — | (91 | ) | |||||||||
Net income for the third quarter of 2006 | (71 | ) | (28 | ) | — | (99 | ) | |||||||||
Net income for the fourth quarter of 2006 | (44 | ) | (75 | ) | — | (119 | ) | |||||||||
Net income for the six months ended June 30, 2006 | (236 | ) | (56 | ) | — | (292 | ) | |||||||||
Net income for the nine months ended September 30, 2006 | (307 | ) | (84 | ) | — | (391 | ) | |||||||||
Net income for the year ended December 31, 2006 | (351 | ) | (159 | ) | — | (510 | ) |
As of and for the Three Months Ended | ||||||||||||
March 31, 2006 | ||||||||||||
Before | As | |||||||||||
Adjustment | Adjustment | Adjusted | ||||||||||
Other assets | $ | 161,878 | $ | (1,939 | ) | $ | 159,939 | |||||
Other liabilities | 45,599 | 1,007 | 46,606 | |||||||||
Shareholders’ equity | 333,627 | (2,946 | ) | 330,681 | ||||||||
Mortgage services revenue | 808 | (285 | ) | 523 | ||||||||
Total noninterest income | 17,276 | (285 | ) | 16,991 | ||||||||
Salaries and employee benefits expense | 17,154 | 46 | 17,200 | |||||||||
Total noninterest expense | 30,695 | 46 | 30,741 | |||||||||
Total income tax expense | 5,856 | (130 | ) | 5,726 | ||||||||
Net income | 11,444 | (201 | ) | 11,243 | ||||||||
Diluted earnings per share | 0.37 | (0.01 | ) | 0.36 |
As of and for the Three Months Ended | ||||||||||||
June 30, 2006 | ||||||||||||
Before | As | |||||||||||
Adjustment | Adjustment | Adjusted | ||||||||||
Other assets | $ | 167,149 | $ | (2,043 | ) | $ | 165,106 | |||||
Other liabilities | 41,830 | 994 | 42,824 | |||||||||
Shareholders’ equity | 336,935 | (3,037 | ) | 333,898 | ||||||||
Mortgage services revenue | 916 | (104 | ) | 812 | ||||||||
Total noninterest income | 16,396 | (104 | ) | 16,292 | ||||||||
Salaries and employee benefits expense | 16,297 | 46 | 16,343 | |||||||||
Total noninterest expense | 30,642 | 46 | 30,688 | |||||||||
Total income tax expense | 6,025 | (59 | ) | 5,966 | ||||||||
Net income | 11,546 | (91 | ) | 11,455 | ||||||||
Diluted earnings per share | 0.37 | — | 0.37 |
F-24
Table of Contents
As of and for the Three Months Ended | ||||||||||||
September 30, 2006 | ||||||||||||
Before | As | |||||||||||
Adjustment | Adjustment | Adjusted | ||||||||||
Other assets | $ | 170,851 | $ | (2,161 | ) | $ | 168,690 | |||||
Other liabilities | 45,442 | 975 | 46,417 | |||||||||
Shareholders’ equity | 352,574 | (3,136 | ) | 349,438 | ||||||||
Mortgage services revenue | 902 | (118 | ) | 784 | ||||||||
Total noninterest income | 17,125 | (118 | ) | 17,007 | ||||||||
Salaries and employee benefits expense | 16,020 | 46 | 16,066 | |||||||||
Total noninterest expense | 29,609 | 46 | 29,655 | |||||||||
Total income tax expense | 6,288 | (65 | ) | 6,223 | ||||||||
Net income | 12,781 | (99 | ) | 12,682 | ||||||||
Diluted earnings per share | 0.41 | (0.01 | ) | 0.40 |
As of and for the Three Months Ended | ||||||||||||
December 31, 2006 | ||||||||||||
Before | As | |||||||||||
Adjustment | Adjustment | Adjusted | ||||||||||
Other assets | $ | 190,674 | $ | (2,234 | ) | $ | 188,440 | |||||
Other liabilities | 61,508 | 1,021 | 62,529 | |||||||||
Shareholders’ equity | 450,617 | (3,255 | ) | 447,362 | ||||||||
Mortgage services revenue | 1,016 | (73 | ) | 943 | ||||||||
Total noninterest income | 17,461 | (73 | ) | 17,388 | ||||||||
Salaries and employee benefits expense | 19,504 | 124 | 19,628 | |||||||||
Total noninterest expense | 33,729 | 124 | 33,853 | |||||||||
Total income tax expense | 6,927 | (78 | ) | 6,849 | ||||||||
Net income | 12,134 | (119 | ) | 12,015 | ||||||||
Diluted earnings per share | 0.36 | — | 0.36 |
4. | Consolidated Statements of Cash Flows Correction of Errors |
F-25
Table of Contents
For the Calendar Year | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Net cash provided by operating activities, as presented inForm 10-K | $ | 94,428 | $ | 38,426 | ||||
Adjustment for debt extinguishment and derivative termination costs | — | 14,580 | ||||||
Adjustment for cash acquired in acquisition | (17,797 | ) | — | |||||
Net cash provided by operating activities, as presented herein | 76,631 | 53,006 | ||||||
Net cash provided by (used in) investing activities, as presented inForm 10-K | (598,093 | ) | 191,521 | |||||
Adjustment for cash acquired in acquisition | 17,797 | — | ||||||
Net cash provided by (used in) investing activities, as presented herein | (580,296 | ) | 191,521 | |||||
Net cash provided by (used in) financing activities, as presented inForm 10-K | 480,940 | (202,406 | ) | |||||
Adjustment for debt extinguishment and derivative termination costs | — | (14,580 | ) | |||||
Net cash provided by (used in) financing activities, as presented herein | 480,940 | (216,986 | ) | |||||
Net increase (decrease) in cash and cash equivalents | (22,725 | ) | 27,541 | |||||
Cash and cash equivalents at beginning of period | 125,552 | 98,011 | ||||||
Cash and cash equivalents at end of period | $ | 102,827 | $ | 125,552 | ||||
5. | Acquisitions and Divestitures |
F-26
Table of Contents
November 1 | ||||
2006 | ||||
(In thousands) | ||||
Purchase price | $ | 103,221 | ||
Capitalized merger costs | 1,211 | |||
Carrying value of net assets acquired | 39,869 | |||
Excess of purchase price over capitalized merger costs and carrying value of net assets acquired | 64,563 | |||
Purchase accounting adjustments: | ||||
Securities | 241 | |||
Loans | 643 | |||
Deferred taxes | 794 | |||
Subtotal | 1,678 | |||
Core deposit intangibles | (3,091 | ) | ||
Servicing rights | (1,186 | ) | ||
Goodwill | $ | 61,964 | ||
November 1 | ||||
2006 | ||||
(In thousands) | ||||
Assets | ||||
Cash and cash equivalents | $ | 21,428 | ||
Securities | 32,543 | |||
Loans, net of allowance for loan losses of $4,211 | 331,806 | |||
Premises and other equipment | 3,371 | |||
Goodwill and other intangibles | 66,241 | |||
Other assets | 15,641 | |||
Total assets | 471,030 | |||
Liabilities | ||||
Deposits | 357,287 | |||
Other liabilities | 9,311 | |||
Total liabilities | 366,598 | |||
Fair value of net assets acquired | $ | 104,432 | ||
F-27
Table of Contents
For the Calendar Year 2006 | ||||||||||||||||
First Charter | GBC | Pro Forma | Pro Forma | |||||||||||||
Corporation (1) | Bancorp. Inc. (2) | Adjustments | Combined | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income | $ | 264,929 | $ | 26,549 | $ | 759 | $ | 292,237 | ||||||||
Interest expense | 131,219 | 12,495 | 1,420 | 145,134 | ||||||||||||
Net interest income | 133,710 | 14,054 | (661 | ) | 147,103 | |||||||||||
Provision for loan losses | 5,290 | 573 | — | 5,863 | ||||||||||||
Net interest income after provision for loan losses | 128,420 | 13,481 | (661 | ) | 141,240 | |||||||||||
Noninterest income | 67,678 | 4,405 | (247 | ) | 71,836 | |||||||||||
Noninterest expense | 124,937 | 13,265 | 1,001 | 139,203 | ||||||||||||
Income from continuing operations before income tax expense | 71,161 | 4,621 | (1,909 | ) | 73,873 | |||||||||||
Income tax expense | 23,799 | 2,387 | (754 | ) | 25,432 | |||||||||||
Income from continuing operations, net of tax | 47,362 | 2,234 | (1,155 | ) | 48,441 | |||||||||||
Income (loss) from discontinued operations, net of tax | 33 | — | — | 33 | ||||||||||||
Net income | $ | 47,395 | $ | 2,234 | $ | (1,155 | ) | $ | 48,474 | |||||||
Net income per common share | ||||||||||||||||
Basic | $ | 1.50 | $ | 1.14 | $ | — | $ | 1.43 | ||||||||
Diluted | $ | 1.49 | $ | 1.09 | $ | — | $ | 1.42 | ||||||||
Average common shares outstanding | ||||||||||||||||
Basic | 31,525,366 | 1,964,084 | 314,744 | 33,804,194 | ||||||||||||
Diluted | 31,838,292 | 2,055,672 | 223,156 | 34,117,120 |
(1) | Includes First Charter Corporation for the full-year 2006 and GBC Bancorp, Inc. for the two months ended December 31, 2006. |
(2) | Includes GBC Bancorp, Inc. for the ten months ended October 31, 2006. |
F-28
Table of Contents
For the Calendar Year 2005 | ||||||||||||||||
First Charter | GBC | Pro Forma | Pro Forma | |||||||||||||
Corporation | Bancorp, Inc. | Adjustments | Combined | |||||||||||||
(In thousands) | ||||||||||||||||
Net interest income | $ | 224,605 | $ | 25,192 | $ | 910 | $ | 250,707 | ||||||||
Interest expense | 99,722 | 9,324 | 1,704 | 110,750 | ||||||||||||
Net interest income | 124,883 | 15,868 | (794 | ) | 139,957 | |||||||||||
Provision for loan losses | 9,343 | 853 | — | 10,196 | ||||||||||||
Net interest income after provision for loan losses | 115,540 | 15,015 | (794 | ) | 129,761 | |||||||||||
Noninterest income | 46,738 | 2,983 | (296 | ) | 49,425 | |||||||||||
Noninterest expense | 127,971 | 8,356 | 1,202 | 137,529 | ||||||||||||
Income from continuing operations before income tax expense | 34,307 | 9,642 | (2,292 | ) | 41,657 | |||||||||||
Income tax expense | 9,132 | 3,441 | (905 | ) | 11,668 | |||||||||||
Income from continuing operations, net of tax | 25,175 | 6,201 | (1,387 | ) | 29,989 | |||||||||||
Income (loss) from discontinued operations, net of tax | 136 | — | — | 136 | ||||||||||||
Net income | $ | 25,311 | $ | 6,201 | $ | (1,387 | ) | $ | 30,125 | |||||||
Net income per common share | ||||||||||||||||
Basic | $ | 0.83 | $ | 3.54 | $ | — | $ | .90 | ||||||||
Diluted | $ | 0.82 | $ | 3.17 | $ | — | $ | .89 | ||||||||
Average common shares outstanding | ||||||||||||||||
Basic | 30,457,573 | 1,753,453 | 1,194,538 | 33,405,564 | ||||||||||||
Diluted | 30,784,406 | 1,953,677 | 994,314 | 33,732,397 |
F-29
Table of Contents
November 30 | ||||
2006 | ||||
Goodwill and other intangible assets | $ | 1,849 | ||
Other assets | 325 | |||
Total assets of discontinued operations | $ | 2,174 | ||
Other operating liabilities | $ | 409 | ||
Liabilities incurred in connection with sale | 373 | |||
Total liabilities of discontinued operations | $ | 782 | ||
For the Calendar Year | ||||||||||||
2006(1) | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Noninterest income | $ | 3,012 | $ | 3,475 | $ | 3,858 | ||||||
Noninterest expense | 2,976 | 3,251 | 3,521 | |||||||||
Income from discontinued operations before tax | 36 | 224 | 337 | |||||||||
Gain on sale | 962 | — | — | |||||||||
Income tax expense | 965 | 88 | 133 | |||||||||
Income from discontinued operations, after tax | $ | 33 | $ | 136 | $ | 204 | ||||||
(1) | Includes the results of SEBS for the eleven months ended November 30, 2006. |
F-30
Table of Contents
6. | Goodwill and Other Intangible Assets |
December 31 | ||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||||||||
Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Amortized intangible assets from continuing operations: | ||||||||||||||||||||||||
Core deposits | $ | 3,091 | $ | 200 | $ | 2,891 | $ | — | $ | — | $ | — | ||||||||||||
Noncompete agreements | 90 | 63 | 27 | 90 | 33 | 57 | ||||||||||||||||||
Customer lists | 2,359 | 1,177 | 1,182 | 1,940 | 752 | 1,188 | ||||||||||||||||||
Total from continuing operations | 5,540 | 1,440 | 4,100 | 2,030 | 785 | 1,245 | ||||||||||||||||||
Amortized intangible assets from discontinued operations | — | — | — | 1,114 | 372 | 742 | ||||||||||||||||||
Total | $ | 5,540 | $ | 1,440 | $ | 4,100 | $ | 3,144 | $ | 1,157 | $ | 1,987 | ||||||||||||
Unamortized intangible assets: | ||||||||||||||||||||||||
Goodwill from continuing operations | 80,968 | — | 80,968 | 18,635 | — | 18,635 | ||||||||||||||||||
Goodwill of discontinued operations | — | — | — | 1,275 | — | 1,275 | ||||||||||||||||||
Total | $ | 80,968 | $ | — | $ | 80,968 | $ | 19,910 | $ | — | $ | 19,910 | ||||||||||||
F-31
Table of Contents
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Continuing operations | $ | 654 | $ | 378 | $ | 316 | ||||||
Discontinued operations | 169 | 160 | 145 | |||||||||
Total intangibles amortization expense | $ | 823 | $ | 538 | $ | 461 | ||||||
Core | Noncompete | Customer | ||||||||||||||
Deposits | Agreements | Lists | Total | |||||||||||||
(In thousands) | ||||||||||||||||
2007 | $ | 1,120 | $ | 27 | $ | 421 | $ | 1,568 | ||||||||
2008 | 691 | — | 313 | 1,004 | ||||||||||||
2009 | 567 | — | 204 | 771 | ||||||||||||
2010 | 393 | — | 100 | 493 | ||||||||||||
2011 | 120 | — | 58 | 178 | ||||||||||||
2012 and after | — | — | 86 | 86 | ||||||||||||
Total intangibles amortization | $ | 2,891 | $ | 27 | $ | 1,182 | $ | 4,100 | ||||||||
7. | Comprehensive Income |
F-32
Table of Contents
Pre-Tax | Tax Expense | After-Tax | ||||||||||
Amount | (Benefit) | Amount | ||||||||||
(In thousands) | ||||||||||||
2006 | ||||||||||||
Comprehensive income | ||||||||||||
Net income | $ | 72,159 | $ | 24,764 | $ | 47,395 | ||||||
Other comprehensive income: | ||||||||||||
Unrealized losses onavailable-for-sale securities: | ||||||||||||
Net unrealized gains | 2,997 | 1,187 | 1,810 | |||||||||
Reclassification adjustment for losses included in net income | (5,828 | ) | (2,301 | ) | (3,527 | ) | ||||||
Other comprehensive income | 8,825 | 3,488 | 5,337 | |||||||||
Total comprehensive income | $ | 80,984 | $ | 28,252 | $ | 52,732 | ||||||
Accumulated other comprehensive loss at January 1, 2006 | $ | (18,599 | ) | $ | (7,344 | ) | $ | (11,255 | ) | |||
Other comprehensive income | 8,825 | 3,488 | 5,337 | |||||||||
Accumulated other comprehensive loss at December 31, 2006 | $ | (9,774 | ) | $ | (3,856 | ) | $ | (5,918 | ) | |||
Pre-Tax | Tax Expense | After-Tax | ||||||||||
Amount | (Benefit) | Amount | ||||||||||
(In thousands) | ||||||||||||
2005 | ||||||||||||
Comprehensive income | ||||||||||||
Net income | $ | 34,531 | $ | 9,220 | $ | 25,311 | ||||||
Other comprehensive income (loss): | ||||||||||||
Unrealized losses onavailable-for-sale securities: | ||||||||||||
Net unrealized losses | (27,318 | ) | (10,886 | ) | (16,432 | ) | ||||||
Reclassification adjustment for losses included in net income | (16,690 | ) | (6,651 | ) | (10,039 | ) | ||||||
Other comprehensive loss | (10,628 | ) | (4,235 | ) | (6,393 | ) | ||||||
Total comprehensive income | $ | 23,903 | $ | 4,985 | $ | 18,918 | ||||||
Accumulated other comprehensive loss at January 1, 2005 | $ | (7,971 | ) | $ | (3,109 | ) | $ | (4,862 | ) | |||
Other comprehensive loss | (10,628 | ) | (4,235 | ) | (6,393 | ) | ||||||
Accumulated other comprehensive loss at December 31, 2005 | $ | (18,599 | ) | $ | (7,344 | ) | $ | (11,255 | ) | |||
F-33
Table of Contents
Pre-Tax | Tax Expense | After-Tax | ||||||||||
Amount | (Benefit) | Amount | ||||||||||
(In thousands) | ||||||||||||
2004 | ||||||||||||
Comprehensive income | ||||||||||||
Net income | $ | 64,464 | $ | 22,022 | $ | 42,442 | ||||||
Other comprehensive income (loss): | ||||||||||||
Unrealized losses onavailable-for-sale securities: | ||||||||||||
Net unrealized losses | (15,685 | ) | (6,116 | ) | (9,569 | ) | ||||||
Reclassification adjustment for gains included in net income | 2,383 | 929 | 1,454 | |||||||||
Other comprehensive loss | (18,068 | ) | (7,045 | ) | (11,023 | ) | ||||||
Total comprehensive income | $ | 46,396 | $ | 14,977 | $ | 31,419 | ||||||
Accumulated other comprehensive income at January 1, 2004 | $ | 10,097 | $ | 3,936 | $ | 6,161 | ||||||
Other comprehensive loss | (18,068 | ) | (7,045 | ) | (11,023 | ) | ||||||
Accumulated other comprehensive loss at December 31, 2004 | $ | (7,971 | ) | $ | (3,109 | ) | $ | (4,862 | ) | |||
8. | SecuritiesAvailable-for-Sale |
December 31, 2006 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government agency obligations | $ | 278,106 | $ | 358 | $ | 3,070 | $ | 275,394 | ||||||||
Mortgage-backed securities | 419,824 | 768 | 8,572 | 412,020 | ||||||||||||
State, county, and municipal obligations | 102,221 | 745 | 364 | 102,602 | ||||||||||||
Asset-backed securities | 65,141 | 11 | 37 | 65,115 | ||||||||||||
Equity securities | 50,897 | 387 | — | 51,284 | ||||||||||||
Total securities | $ | 916,189 | $ | 2,269 | $ | 12,043 | $ | 906,415 | ||||||||
December 31, 2005 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government obligations | $ | 14,905 | $ | — | $ | 27 | $ | 14,878 | ||||||||
U.S. government agency obligations | 327,418 | 21 | 7,032 | 320,407 | ||||||||||||
Mortgage-backed securities | 417,891 | 335 | 12,776 | 405,450 | ||||||||||||
State, county, and municipal obligations | 108,298 | 1,125 | 427 | 108,996 | ||||||||||||
Asset-backed securities | 5,000 | — | 6 | 4,994 | ||||||||||||
Equity securities | 44,198 | 188 | — | 44,386 | ||||||||||||
Total securities | $ | 917,710 | $ | 1,669 | $ | 20,268 | $ | 899,111 | ||||||||
F-34
Table of Contents
Due After 1 | Due After 5 | |||||||||||||||||||||||||||||||||||||||
Due in 1 Year | Through 5 | Through 10 | Due After | |||||||||||||||||||||||||||||||||||||
or Less | Years | Years | 10 Years | Total | ||||||||||||||||||||||||||||||||||||
Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | |||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
Fair value of securities available for sale | ||||||||||||||||||||||||||||||||||||||||
U.S. government agency obligations | $ | 169,748 | 3.28 | % | $ | 97,875 | 4.42 | % | $ | 7,771 | 5.52 | % | $ | — | — | % | $ | 275,394 | 3.75 | % | ||||||||||||||||||||
Mortgage-backed securities(1) | — | — | 270,912 | 4.58 | 132,958 | 5.37 | 8,150 | 5.74 | 412,020 | 4.86 | ||||||||||||||||||||||||||||||
State and municipal obligations(2) | 19,539 | 7.28 | 38,114 | 5.91 | 9,968 | 5.52 | 34,981 | 5.95 | 102,602 | 6.15 | ||||||||||||||||||||||||||||||
Asset-backed securities | — | — | 14,750 | 8.11 | 20,000 | 6.71 | 30,365 | 7.37 | 65,115 | 7.34 | ||||||||||||||||||||||||||||||
Equity securities(3) | — | — | — | — | — | — | 51,284 | 6.08 | 51,284 | 6.08 | ||||||||||||||||||||||||||||||
Total | $ | 189,287 | 3.69 | % | $ | 421,651 | 4.79 | % | $ | 170,697 | 5.54 | % | $ | 124,780 | 6.34 | % | $ | 906,415 | 4.91 | % | ||||||||||||||||||||
Amortized cost of securities available for sale | $ | 190,807 | $ | 429,134 | $ | 171,844 | $ | 124,404 | $ | 916,189 | ||||||||||||||||||||||||||||||
(1) | Maturities estimated based on average life of security. | |
(2) | Yields on tax-exempt securities are calculated on a tax-equivalent basis using the marginal Federal income tax rate of 35 percent. | |
(3) | Although equity securities have no stated maturity, they are presented for illustrative purposes only. The 6.08% yield represents the expected dividend yield to be earned on equity securities, principally investments in Federal Home Loan Bank of Atlanta and Federal Reserve Bank stock. |
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Gross gains | $ | 32 | $ | 1,225 | $ | 3,447 | ||||||
Gross losses | (5,860 | ) | (17,915 | ) | (1,064 | ) | ||||||
Net gains (losses) | $ | (5,828 | ) | $ | (16,690 | ) | $ | 2,383 | ||||
F-35
Table of Contents
Less Than 12 Months | 12 months or longer | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
AAA/AA-RATED SECURITIES | ||||||||||||||||||||||||
U.S. government agency obligations | $ | 982 | $ | 74 | $ | 236,996 | $ | 2,996 | $ | 237,978 | $ | 3,070 | ||||||||||||
Mortgage-backed securities | 65,082 | 200 | 246,337 | 8,372 | 311,419 | 8,572 | ||||||||||||||||||
State, county, and municipal obligations | 1,008 | 4 | 17,189 | 360 | 18,197 | 364 | ||||||||||||||||||
Total AAA/AA-rated securities | 67,072 | 278 | 500,522 | 11,728 | 567,594 | 12,006 | ||||||||||||||||||
A/BBB-RATED SECURITIES | ||||||||||||||||||||||||
Asset-backed securities | 17,376 | 37 | — | — | 17,376 | 37 | ||||||||||||||||||
Total A/BBB-rated securities | 17,376 | 37 | — | — | 17,376 | 37 | ||||||||||||||||||
Total temporarily impaired securities | $ | 84,448 | $ | 315 | $ | 500,522 | $ | 11,728 | $ | 584,970 | $ | 12,043 | ||||||||||||
9. | Trading Activity |
10. | Derivatives |
F-36
Table of Contents
11. | Loans |
December 31 | ||||||||||||||||
2006 | 2005 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Commercial real estate | $ | 1,034,330 | 29.7 | % | $ | 780,597 | 26.5 | % | ||||||||
Commercial non real estate | 301,958 | 8.7 | 233,409 | 7.9 | ||||||||||||
Construction | 793,294 | 22.8 | 517,392 | 17.6 | ||||||||||||
Mortgage | 618,142 | 17.7 | 660,720 | 22.4 | ||||||||||||
Home equity | 447,849 | 12.8 | 495,181 | 16.8 | ||||||||||||
Consumer | 289,493 | 8.3 | 258,619 | 8.8 | ||||||||||||
Total portfolio loans | $ | 3,485,066 | 100.0 | % | $ | 2,945,918 | 100.0 | % | ||||||||
December 31 | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Nonaccrual loans | $ | 8,200 | $ | 10,811 | ||||
Loans 90 days or more past due and accruing interest | — | — | ||||||
Total nonperforming loans | 8,200 | 10,811 | ||||||
Other real estate | 6,477 | 5,124 | ||||||
Total nonperforming assets | $ | 14,677 | $ | 15,935 | ||||
F-37
Table of Contents
2006 | ||||
(In thousands) | ||||
Balance at December 31, 2005 | $ | 1,746 | ||
New loans | 77 | |||
Principal repayments | (884 | ) | ||
Director and officer changes | (305 | ) | ||
Balance at December 31, 2006 | $ | 634 | ||
12. | Allowance for Loan Losses |
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Balance at beginning of period | $ | 28,725 | $ | 26,872 | $ | 25,607 | ||||||
Allowance related to acquired company | 4,211 | — | — | |||||||||
Provision for loan losses | 5,290 | 9,343 | 8,425 | |||||||||
Allowance related to loans sold | — | — | (584 | ) | ||||||||
Charge-offs | (4,578 | ) | (8,652 | ) | (8,552 | ) | ||||||
Recoveries | 1,318 | 1,162 | 1,976 | |||||||||
Net charge-offs | (3,260 | ) | (7,490 | ) | (6,576 | ) | ||||||
Balance at end of period | $ | 34,966 | $ | 28,725 | $ | 26,872 | ||||||
13. | Servicing Rights |
F-38
Table of Contents
2006 | 2005 | 2004 | ||||||||||||||||||||||
MSR | SSR | MSR | SSR | MSR | SSR | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Balance, January 1 | $ | 1,133 | $ | — | $ | 1,647 | $ | — | $ | 2,106 | $ | — | ||||||||||||
Servicing rights capitalized or acquired | — | 1,186 | — | — | 474 | — | ||||||||||||||||||
Amortization expense | (377 | ) | (49 | ) | (514 | ) | — | (903 | ) | — | ||||||||||||||
Write-downs | — | — | — | — | (30 | ) | — | |||||||||||||||||
Valuation allowance | — | — | — | — | — | — | ||||||||||||||||||
Balance, December 31 | $ | 756 | $ | 1,137 | $ | 1,133 | $ | — | $ | 1,647 | $ | — | ||||||||||||
F-39
Table of Contents
MSR | SSR | Total | ||||||||||
(In thousands) | ||||||||||||
2007 | $ | 165 | $ | 292 | $ | 457 | ||||||
2008 | 135 | 261 | 396 | |||||||||
2009 | 111 | 227 | 338 | |||||||||
2010 | 92 | 186 | 278 | |||||||||
2011 | 74 | 130 | 204 | |||||||||
2012 and after | 179 | 41 | 220 | |||||||||
Total amortization | $ | 756 | $ | 1,137 | $ | 1,893 | ||||||
14. | Premises and Equipment |
December 31 | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Land | $ | 24,467 | $ | 23,817 | ||||
Buildings | 78,887 | 73,954 | ||||||
Furniture and equipment | 58,077 | 53,281 | ||||||
Leasehold improvements | 11,121 | 10,446 | ||||||
Construction in progress | 2,247 | 2,023 | ||||||
Total premises and equipment | 174,799 | 163,521 | ||||||
Less accumulated depreciation and amortization | 63,211 | 56,748 | ||||||
Premises and equipment, net | $ | 111,588 | $ | 106,773 | ||||
F-40
Table of Contents
15. | Deposits |
December 31 | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Noninterest bearing demand | $ | 454,975 | $ | 429,758 | ||||
Interest bearing demand | 420,774 | 368,291 | ||||||
Money market accounts | 620,699 | 559,865 | ||||||
Savings deposits | 111,047 | 119,824 | ||||||
Certificates of deposit | 1,223,252 | 916,569 | ||||||
Brokered certificates of deposit | 417,381 | 405,172 | ||||||
Total deposits | $ | 3,248,128 | $ | 2,799,479 | ||||
December 31 | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
2006 | $ | — | $ | 1,068,923 | ||||
2007 | 1,477,900 | 194,581 | ||||||
2008 | 134,368 | 43,685 | ||||||
2009 | 15,100 | 8,472 | ||||||
2010 | 7,309 | 6,041 | ||||||
2011 | 5,923 | 39 | ||||||
2012 and after | 33 | — | ||||||
Total certificates of deposit | $ | 1,640,633 | $ | 1,321,741 | ||||
16. | Other Borrowings |
2006 | 2005 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Contractual | Contractual | |||||||||||||||
Balance | Rate | Balance | Rate | |||||||||||||
(In thousands) | ||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 201,713 | 4.60 | % | $ | 312,283 | 3.01 | % | ||||||||
Commercial paper | 38,191 | 2.72 | 58,432 | 1.79 | ||||||||||||
Other short-term borrowings | 371,000 | 5.35 | 140,000 | 4.39 | ||||||||||||
Long-term debt | 487,794 | 4.79 | 557,859 | 3.84 | ||||||||||||
Total other borrowings | $ | 1,098,698 | 4.87 | % | $ | 1,068,574 | 3.56 | % | ||||||||
F-41
Table of Contents
Aggregate | ||||||||||||||||||
Principal | ||||||||||||||||||
Amount of | Aggregate | |||||||||||||||||
Trust | Principal | Stated | Interest | |||||||||||||||
Preferred | Amount of | Maturity of | Per Annum Interest Rate | Payment | ||||||||||||||
Issuer | Issuance Date | Securities | the Notes | the Notes | of the Notes | Dates | Redemption Period | |||||||||||
(Dollars in thousands) | ||||||||||||||||||
Capital Trust I | June 2005 | $ | 35,000 | $ | 36,083 | September 2035 | 3 mo. LIBOR + 169 bps | 3/15, 6/15, 9/15, 12/15 | On or after9/15/2010 | |||||||||
Capital Trust II | September 2005 | 25,000 | 25,774 | December 2035 | 3 mo. LIBOR + 142 bps | 3/15, 6/15, 9/15, 12/15 | On or after12/15/2010 | |||||||||||
Total | $ | 60,000 | $ | 61,857 | ||||||||||||||
F-42
Table of Contents
2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 201,713 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 201,713 | ||||||||||||||
Commercial paper | 38,191 | — | — | — | — | — | 38,191 | |||||||||||||||||||||
Other short-term borrowings | 371,000 | — | — | — | — | — | 371,000 | |||||||||||||||||||||
Long-term debt | 160,000 | 20,000 | 195,000 | — | 50,170 | 62,624 | 487,794 | |||||||||||||||||||||
Total other borrowings | $ | 770,904 | $ | 20,000 | $ | 195,000 | $ | — | $ | 50,170 | $ | 62,624 | $ | 1,098,698 | ||||||||||||||
17. | Income Tax |
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 22,310 | $ | 8,690 | $ | 15,360 | ||||||
State | 2,883 | 689 | 2,403 | |||||||||
Total current | 25,193 | 9,379 | 17,763 | |||||||||
Deferred: | ||||||||||||
Federal | (1,238 | ) | (219 | ) | 4,193 | |||||||
State | (156 | ) | (28 | ) | (67 | ) | ||||||
Total deferred | (1,394 | ) | (247 | ) | 4,126 | |||||||
Income tax expense from continuing operations | $ | 23,799 | $ | 9,132 | $ | 21,889 | ||||||
Income tax expense from discontinued operations | $ | 965 | $ | 88 | $ | 133 | ||||||
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Net income from continuing operations | $ | 23,799 | $ | 9,132 | $ | 21,889 | ||||||
Net income from discontinued operations | 965 | 88 | 133 | |||||||||
Shareholders’ equity, for unrealized losses on securities available for sale | 3,488 | (4,235 | ) | (7,045 | ) | |||||||
Total | $ | 28,252 | $ | 4,985 | $ | 14,977 | ||||||
F-43
Table of Contents
For the Calendar Year | ||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Tax at statutory federal rate | $ | 24,906 | 35.0 | % | $ | 12,008 | 35.0 | % | $ | 22,445 | 35.0 | % | ||||||||||||
Increase (reduction) in income taxes resulting from: | ||||||||||||||||||||||||
Tax-exempt income | (1,409 | ) | (2.0 | ) | (1,335 | ) | (3.9 | ) | (1,318 | ) | (2.1 | ) | ||||||||||||
Bank-owned life insurance | (1,233 | ) | (1.7 | ) | (1,509 | ) | (4.4 | ) | (1,195 | ) | (1.9 | ) | ||||||||||||
State income tax, net of federal | 1,773 | 2.5 | 429 | 1.2 | 1,519 | 2.4 | ||||||||||||||||||
Change in valuation allowance | (80 | ) | (0.1 | ) | (526 | ) | (1.5 | ) | (200 | ) | (0.3 | ) | ||||||||||||
Other, net | (158 | ) | (0.3 | ) | 65 | 0.2 | 638 | 1.0 | ||||||||||||||||
Income tax expense from continuing operations | $ | 23,799 | 33.4 | % | $ | 9,132 | 26.6 | % | $ | 21,889 | 34.1 | % | ||||||||||||
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Deferred tax expense (benefit) (exclusive of the effects of other components below) | $ | (1,394 | ) | $ | (247 | ) | $ | 4,126 | ||||
Shareholders’ equity, for unrealized gains (losses) on securities available for sale | 3,488 | (4,235 | ) | (7,045 | ) | |||||||
Purchase accounting adjustment | (2,185 | ) | — | (135 | ) | |||||||
Total | $ | (91 | ) | $ | (4,482 | ) | $ | (3,054 | ) | |||
F-44
Table of Contents
December 31 | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Deferred tax assets: | ||||||||
Allowance for loan losses | $ | 13,201 | $ | 11,352 | ||||
Unrealized losses on securities available for sale | 3,726 | 7,213 | ||||||
Deferred compensation | 3,464 | 2,465 | ||||||
Investments | 805 | 506 | ||||||
Depreciable assets | 5,588 | 4,547 | ||||||
Other | 3,376 | 1,955 | ||||||
Total deferred tax assets | 30,160 | 28,038 | ||||||
Less valuation allowance | 30 | 110 | ||||||
Net deferred tax assets | 30,130 | 27,928 | ||||||
Deferred tax liabilities: | ||||||||
Loan origination costs | 2,718 | 2,605 | ||||||
Federal Home Loan Bank of Atlanta stock | 1,053 | 1,053 | ||||||
Mortgage servicing rights | 1,889 | 447 | ||||||
Intangibles | 1,501 | 1,248 | ||||||
Other | 818 | 515 | ||||||
Total deferred tax liabilities | 7,979 | 5,868 | ||||||
Net deferred tax asset | $ | 22,151 | $ | 22,060 | ||||
F-45
Table of Contents
18. | Employee Benefit Plans |
19. | Shareholders’ Equity, Stock Plans and Stock Awards |
F-46
Table of Contents
F-47
Table of Contents
F-48
Table of Contents
F-49
Table of Contents
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Weighted- | Remaining | |||||||||||||||
Average | Contractual | Aggregate | ||||||||||||||
Exercise | Term | Intrinsic | ||||||||||||||
Shares | Price | (in Years) | Value | |||||||||||||
Outstanding at January 1, 2004(1) | 2,742,283 | $ | 19.57 | |||||||||||||
Granted | 393,134 | 20.33 | ||||||||||||||
Exercised | (238,827 | ) | 16.51 | $ | 2,033,207 | |||||||||||
Forfeited or expired | (95,327 | ) | 18.52 | |||||||||||||
Outstanding at December 31, 2004 | 2,801,263 | $ | 19.97 | 3.6 | $ | 17,374,803 | ||||||||||
Exercisable at December 31, 2004 | 1,948,723 | $ | 20.42 | 2.9 | $ | 11,220,433 | ||||||||||
Outstanding at January 1, 2005 | 2,801,263 | $ | 19.97 | |||||||||||||
Granted | 461,996 | 23.55 | ||||||||||||||
Exercised | (499,194 | ) | 16.93 | $ | 3,103,802 | |||||||||||
Forfeited or expired | (126,007 | ) | 21.68 | |||||||||||||
Outstanding at December 31, 2005 | 2,638,058 | $ | 21.09 | 3.6 | $ | 7,572,117 | ||||||||||
Exercisable at December 31, 2005 | 1,786,287 | $ | 21.01 | 2.4 | $ | 5,498,109 | ||||||||||
Outstanding at January 1, 2006 | 2,638,058 | $ | 21.09 | |||||||||||||
Granted | 69,250 | 23.68 | ||||||||||||||
Exercised | (883,684 | ) | 21.50 | $ | 2,711,016 | |||||||||||
Forfeited or expired | (326,005 | ) | 22.95 | |||||||||||||
Outstanding at December 31, 2006 | 1,497,619 | $ | 20.57 | 4.7 | $ | 6,365,913 | ||||||||||
Exercisable at December 31, 2006 | 1,435,769 | $ | 20.43 | 4.5 | $ | 6,308,859 | ||||||||||
(1) | Amounts for 2004 have been adjusted to correct an error in the calculation of exercised and forfeited options. |
F-50
Table of Contents
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Expected volatility | 24.8 | % | 26.4 | % | 25.6 | % | ||||||
Expected dividend yield | 3.2 | 3.2 | 3.6 | |||||||||
Risk-free interest rate | 4.7 | 3.9 | 3.6 | |||||||||
Expected term (in years) | 8.0 | 7.4 | 7.0 |
Outstanding Options | Options Exercisable | |||||||||||||||
Weighted- | Weighted | |||||||||||||||
Average | -Average | Weighted- | ||||||||||||||
Remaining | Weighted- | Remaining | Average | |||||||||||||
Number | Contractual | Average | Number | Contractual | Exercise | |||||||||||
Range of Exercise Prices | Outstanding | Life (in years) | Exercise Price | Exercisable | Life (in years) | Price | ||||||||||
$ 5.01 - 10.00 | 3,400 | 2.7 | $ 9.04 | 3,400 | 2.7 | $ 9.04 | ||||||||||
10.01 - 12.50 | 18,702 | 2.0 | 11.63 | 18,702 | 2.0 | 11.63 | ||||||||||
12.51 - 15.00 | 71,525 | 2.7 | 14.44 | 71,525 | 2.7 | 14.44 | ||||||||||
15.01 - 17.50 | 290,124 | 4.3 | 16.64 | 290,124 | 4.3 | 16.64 | ||||||||||
17.51 - 20.00 | 319,834 | 4.3 | 18.44 | 319,834 | 4.3 | 18.44 | ||||||||||
20.01 - 22.50 | 190,885 | 6.4 | 20.78 | 190,885 | 6.4 | 20.78 | ||||||||||
22.51 - 25.00 | 371,682 | 7.6 | 23.71 | 309,832 | 7.3 | 23.72 | ||||||||||
25.01 - 27.50 | 231,467 | 0.6 | 25.99 | 231,467 | 0.6 | 25.99 | ||||||||||
Total | 1,497,619 | 4.7 | $ 20.57 | 1,435,769 | 4.5 | $ 20.43 | ||||||||||
F-51
Table of Contents
Service-Based | Performance-Based | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Grant Date | Grant Date | |||||||||||||||
Shares | Fair Value | Shares | Fair Value | |||||||||||||
Outstanding at January 1, 2004 | 1,000 | $ | 13.44 | — | $ | — | ||||||||||
Granted | 18,547 | 22.34 | — | — | ||||||||||||
Vested | (1,000 | ) | 13.44 | — | — | |||||||||||
Forfeited | — | — | — | — | ||||||||||||
Outstanding at December 31, 2004 | 18,547 | 22.34 | — | — | ||||||||||||
Granted | 17,400 | 23.98 | — | — | ||||||||||||
Vested | (1,300 | ) | 23.50 | — | — | |||||||||||
Forfeited | (2,000 | ) | 25.49 | — | — | |||||||||||
Outstanding at December 31, 2005 | 32,647 | 22.97 | — | — | ||||||||||||
Granted | 193,792 | 24.14 | 58,000 | 23.66 | ||||||||||||
Vested | (1,300 | ) | 23.50 | — | — | |||||||||||
Forfeited | (9,476 | ) | 23.30 | (6,400 | ) | 23.66 | ||||||||||
Outstanding at December 31, 2006 | 215,663 | $ | 24.00 | 51,600 | $ | 23.66 | ||||||||||
20. | Commitments, Contingencies, and Off-Balance Sheet Risk |
F-52
Table of Contents
21. | Related Party Transactions |
22. | Fair Value of Financial Instruments |
F-53
Table of Contents
F-54
Table of Contents
December 31 | ||||||||||||||||
2006 | 2005 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
(In thousands) | ||||||||||||||||
Financial assets | ||||||||||||||||
Cash and cash equivalents | $ | 102,827 | $ | 102,827 | $ | 125,552 | $ | 125,552 | ||||||||
Securities available for sale | 906,415 | 906,415 | 899,111 | 899,111 | ||||||||||||
Loans held for sale | 12,292 | 12,292 | 6,447 | 6,447 | ||||||||||||
Portfolio loans, net of allowance for loan losses | 3,450,087 | 3,412,590 | 2,917,020 | 2,925,661 | ||||||||||||
Financial liabilities | ||||||||||||||||
Deposits | 3,248,128 | 3,170,976 | 2,799,479 | 2,741,776 | ||||||||||||
Short-term borrowings | 610,904 | 606,119 | 510,715 | 510,798 | ||||||||||||
Long-term debt | 487,794 | 477,650 | 557,859 | 557,137 |
23. | Regulatory Restrictions and Capital Ratios |
F-55
Table of Contents
For Capital Adequacy Purposes | To be Well Capitalized | |||||||||||||||||||||||
Actual | Minimum | Minimum | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
At December 31, 2006: | ||||||||||||||||||||||||
Leverage | ||||||||||||||||||||||||
First Charter Corporation | $ | 428,136 | 9.32 | % | $ | 183,678 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 362,970 | 8.36 | 173,591 | 4.00 | $ | 216,988 | 5.00 | % | ||||||||||||||||
Gwinnett Banking Company | 37,049 | 9.75 | 15,192 | 4.00 | 18,991 | 5.00 | ||||||||||||||||||
Tier I Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 428,136 | 10.49 | % | $ | 163,299 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 362,970 | 9.99 | 145,275 | 4.00 | $ | 217,913 | 6.00 | % | ||||||||||||||||
Gwinnett Banking Company | 37,049 | 10.38 | 14,280 | 4.00 | 21,420 | 6.00 | ||||||||||||||||||
Total Risk-Based Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 463,268 | 11.35 | % | $ | 326,598 | 8.00 | % | None | None | ||||||||||||||
First Charter Bank | 393,664 | 10.84 | 290,550 | 8.00 | $ | 363,188 | 10.00 | % | ||||||||||||||||
Gwinnett Banking Company | 41,321 | 11.57 | 28,560 | 8.00 | 35,700 | 10.00 | ||||||||||||||||||
At December 31, 2005: | ||||||||||||||||||||||||
Leverage | ||||||||||||||||||||||||
First Charter Corporation | $ | 372,953 | 8.67 | % | $ | 172,102 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 363,113 | 8.46 | 171,688 | 4.00 | $ | 214,610 | 5.00 | % | ||||||||||||||||
Tier I Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 372,953 | 11.20 | % | $ | 133,208 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 363,113 | 10.91 | 133,083 | 4.00 | $ | 199,624 | 6.00 | % | ||||||||||||||||
Total Risk-Based Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 401,760 | 12.06 | % | $ | 266,416 | 8.00 | % | None | None | ||||||||||||||
First Charter Bank | 391,838 | 11.78 | 266,166 | 8.00 | $ | 332,707 | 10.00 | % |
F-56
Table of Contents
24. | Business Segment Information |
F-57
Table of Contents
For the Calendar Year 2006 | ||||||||||||||||
Consolidated | ||||||||||||||||
The Bank | Other | Eliminations | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income | $ | 264,509 | $ | 420 | $ | — | $ | 264,929 | ||||||||
Interest expense | 126,415 | 4,804 | — | 131,219 | ||||||||||||
Net interest income (expense) | 138,094 | (4,384 | ) | — | 133,710 | |||||||||||
Provision for loan losses | 5,290 | — | — | 5,290 | ||||||||||||
Noninterest income | 64,247 | 3,431 | — | 67,678 | ||||||||||||
Noninterest expense | 124,740 | 197 | — | 124,937 | ||||||||||||
Income (loss) from continuing operations before income tax expense | 72,311 | (1,150 | ) | — | 71,161 | |||||||||||
Income tax expense (benefit) | 24,185 | (386 | ) | — | 23,799 | |||||||||||
Income (loss) from continuing operations, net of tax | 48,126 | (764 | ) | — | 47,362 | |||||||||||
Discontinued operations: | ||||||||||||||||
Income from discontinued operations | 36 | — | — | 36 | ||||||||||||
Gain on sale | 962 | — | — | 962 | ||||||||||||
Income tax expense | 965 | — | — | 965 | ||||||||||||
Income from discontinued operations, net of tax | 33 | — | — | 33 | ||||||||||||
Net income (loss) | $ | 48,159 | $ | (764 | ) | $ | — | $ | 47,395 | |||||||
Average loans | $ | 3,101,820 | $ | — | $ | — | $ | 3,101,820 | ||||||||
Average assets of continuing operations | 4,538,879 | 440,931 | (612,208 | ) | 4,367,602 | |||||||||||
Average assets of discontinued operations | 2,232 | — | — | 2,232 |
F-58
Table of Contents
For the Calendar Year 2005 | ||||||||||||||||
Consolidated | ||||||||||||||||
The Bank | Other | Eliminations | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income | $ | 224,567 | $ | 38 | $ | — | $ | 224,605 | ||||||||
Interest expense | 97,490 | 2,232 | — | 99,722 | ||||||||||||
Net interest income (expense) | 127,077 | (2,194 | ) | — | 124,883 | |||||||||||
Provision for loan losses | 9,343 | — | — | 9,343 | ||||||||||||
Noninterest income | 46,599 | 139 | — | 46,738 | ||||||||||||
Noninterest expense | 127,750 | 221 | — | 127,971 | ||||||||||||
Income (loss) from continuing operations before income tax expense | 36,583 | (2,276 | ) | — | 34,307 | |||||||||||
Income tax expense (benefit) | 9,740 | (608 | ) | — | 9,132 | |||||||||||
Income (loss) from continuing operations, net of tax | 26,843 | (1,668 | ) | — | 25,175 | |||||||||||
Discontinued operations: | ||||||||||||||||
Income from discontinued operations | 224 | — | — | 224 | ||||||||||||
Income tax expense | 88 | — | — | 88 | ||||||||||||
Income from discontinued operations, net of tax | 136 | — | — | 136 | ||||||||||||
Net income (loss) | $ | 26,979 | $ | (1,668 | ) | $ | — | $ | 25,311 | |||||||
Average loans | $ | 2,795,711 | $ | — | $ | — | $ | 2,795,711 | ||||||||
Average assets of continuing operations | 4,566,915 | 391,698 | (471,903 | ) | 4,486,710 | |||||||||||
Average assets of discontinued operations | 2,373 | — | — | 2,373 |
F-59
Table of Contents
For the Calendar Year 2004 | ||||||||||||||||
Consolidated | ||||||||||||||||
The Bank | Other | Eliminations | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income | $ | 187,253 | $ | 50 | $ | — | $ | 187,303 | ||||||||
Interest expense | 63,511 | 782 | — | 64,293 | ||||||||||||
Net interest income (expense) | 123,742 | (732 | ) | — | 123,010 | |||||||||||
Provision for loan losses | 8,425 | — | — | 8,425 | ||||||||||||
Noninterest income | 55,781 | 1,257 | — | 57,038 | ||||||||||||
Noninterest expense | 107,294 | 202 | — | 107,496 | ||||||||||||
Income from continuing operations before income tax expense | 63,804 | 323 | — | 64,127 | ||||||||||||
Income tax expense | 21,779 | 110 | — | 21,889 | ||||||||||||
Income (loss) from continuing operations, net of tax | 42,025 | 213 | — | 42,238 | ||||||||||||
Discontinued operations: | ||||||||||||||||
Income from discontinued operations | 337 | — | — | 337 | ||||||||||||
Income tax expense | 133 | — | — | 133 | ||||||||||||
Income from discontinued operations, net of tax | 204 | — | — | 204 | ||||||||||||
Net income | $ | 42,229 | $ | 213 | $ | — | $ | 42,442 | ||||||||
Average loans | $ | 2,363,107 | $ | — | $ | — | $ | 2,363,107 | ||||||||
Average assets of continuing operations | 4,360,336 | 347,441 | (388,150 | ) | 4,319,627 | |||||||||||
Average assets of discontinued operations | 3,100 | — | — | 3,100 |
25. | First Charter Corporation (Parent Company) |
F-60
Table of Contents
December 31 | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Assets | ||||||||
Cash | $ | 60,447 | $ | 64,053 | ||||
Securities available for sale | 8,715 | 1,152 | ||||||
Investments in subsidiaries | 479,028 | 373,648 | ||||||
Receivables from subsidiaries | — | 3,000 | ||||||
Other assets | 6,945 | 7,631 | ||||||
Total Assets | $ | 555,135 | $ | 449,484 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Accrued liabilities | $ | 6,988 | $ | 5,600 | ||||
Payable to subsidiaries | 737 | — | ||||||
Commercial paper | 38,191 | 58,432 | ||||||
Long-term debt | 61,857 | 61,857 | ||||||
Total liabilities | 107,773 | 125,889 | ||||||
Shareholders’ equity | 447,362 | 323,595 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 555,135 | $ | 449,484 | ||||
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Income | ||||||||||||
Dividends from subsidiaries | $ | 45,000 | $ | 13,724 | $ | 21,290 | ||||||
Interest and dividends on securities | 546 | 79 | 50 | |||||||||
Securities gains, net | 6 | — | 1,362 | |||||||||
Noninterest income | 3,300 | 98 | — | |||||||||
Total income | 48,852 | 13,901 | 22,702 | |||||||||
Expense | ||||||||||||
Interest | 4,804 | 2,232 | 782 | |||||||||
Noninterest expense | 197 | 221 | 308 | |||||||||
Total expense | 5,001 | 2,453 | 1,090 | |||||||||
Income before income tax expense (benefit) and equity in undistributed net income of subsidiaries | 43,851 | 11,448 | 21,612 | |||||||||
Income tax expense (benefit) | (386 | ) | (608 | ) | 110 | |||||||
Income before equity in undistributed net income of subsidiaries | 44,237 | 12,056 | 21,502 | |||||||||
Equity in undistributed net income of subsidiaries | 3,158 | 13,255 | 20,940 | |||||||||
Net Income | $ | 47,395 | $ | 25,311 | $ | 42,442 | ||||||
F-61
Table of Contents
For the Calendar Year | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Operating Activities | ||||||||||||
Net income | $ | 47,395 | $ | 25,311 | $ | 42,442 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Securities gains, net | (6 | ) | — | (1,362 | ) | |||||||
Tax benefits from stock-based compensation plans | (1,568 | ) | — | — | ||||||||
Premium amortization and discount accretion, net | 1 | — | — | |||||||||
Increase (decrease) in accrued liabilities | 24 | 177 | (43 | ) | ||||||||
Decrease (increase) in other assets | 2,254 | (1,787 | ) | (647 | ) | |||||||
Decrease (increase) in receivable from subsidiaries | 3,737 | 3,000 | (500 | ) | ||||||||
Equity in undistributed net income of subsidiaries | (3,159 | ) | (13,255 | ) | (20,940 | ) | ||||||
Net cash provided by operating activities | 48,678 | 13,446 | 18,950 | |||||||||
Investing Activities | ||||||||||||
Purchases of securities available for sale | (22,370 | ) | — | (665 | ) | |||||||
Proceeds from sales of securities available for sale | 14,994 | — | 2,004 | |||||||||
Investments in subsidiaries | 498 | (53,042 | ) | 9,180 | ||||||||
Cash paid for acquisitions, net of cash acquired | (27,332 | ) | — | (6,755 | ) | |||||||
Net cash provided by (used in) investing activities | (34,210 | ) | (53,042 | ) | 3,764 | |||||||
Financing Activities | ||||||||||||
Net increase (decrease) in commercial paper and other short-term borrowings | (20,241 | ) | (13,252 | ) | 21,608 | |||||||
Proceeds from issuance of trust preferred securities | — | 61,857 | — | |||||||||
Proceeds from issuance of common stock | 23,649 | 11,443 | 5,019 | |||||||||
Tax benefits from stock-based compensation plans | 1,568 | — | — | |||||||||
Cash dividends paid | (23,050 | ) | (22,227 | ) | (22,169 | ) | ||||||
Net cash provided by financing activities | (18,074 | ) | 37,821 | 4,458 | ||||||||
Net increase (decrease) in cash | (3,606 | ) | (1,775 | ) | 27,172 | |||||||
Cash at beginning of year | 64,053 | 65,828 | 38,656 | |||||||||
Cash at end of year | $ | 60,447 | $ | 64,053 | $ | 65,828 | ||||||
Supplemental Information | ||||||||||||
Cash paid for interest | $ | 4,981 | $ | 2,056 | $ | 825 | ||||||
Noncash transactions: | ||||||||||||
Issuance of common stock in business acquisitions | 72,977 | 501 | 1,175 |
F-62
Table of Contents
June 30 | December 31 | |||||||
2007 | 2006 | |||||||
(Dollars in thousands, except share data) | ||||||||
ASSETS | ||||||||
Cash and due from banks | $ | 91,446 | $ | 87,771 | ||||
Federal funds sold | 22,495 | 10,515 | ||||||
Interest-bearing bank deposits | 5,145 | 4,541 | ||||||
Cash and cash equivalents | 119,086 | 102,827 | ||||||
Securities available for sale (cost of $912,883 and $916,189 at June 30, 2007 and December 31, 2006, respectively) | 898,528 | 906,415 | ||||||
Loans held for sale | 11,471 | 12,292 | ||||||
Portfolio loans: | ||||||||
Commercial and construction | 2,272,151 | 2,129,569 | ||||||
Mortgage | 589,976 | 618,142 | ||||||
Consumer | 691,710 | 737,342 | ||||||
Total portfolio loans | 3,553,837 | 3,485,053 | ||||||
Allowance for loan losses | (44,790 | ) | (34,966 | ) | ||||
Portfolio loans, net | 3,509,047 | 3,450,087 | ||||||
Premises and equipment, net | 112,874 | 111,588 | ||||||
Goodwill and other intangible assets | 84,107 | 85,068 | ||||||
Other assets | 181,608 | 188,440 | ||||||
Total Assets | $ | 4,916,721 | $ | 4,856,717 | ||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 480,078 | $ | 454,975 | ||||
Demand | 427,899 | 420,774 | ||||||
Money market | 587,691 | 620,699 | ||||||
Savings | 114,245 | 111,047 | ||||||
Certificates of deposit | 1,620,433 | 1,640,633 | ||||||
Total deposits | 3,230,346 | 3,248,128 | ||||||
Federal funds purchased and securities sold under agreements to repurchase | 216,152 | 201,713 | ||||||
Commercial paper and other short-term borrowings | 342,844 | 409,191 | ||||||
Long-term debt | 617,762 | 487,794 | ||||||
Accrued expenses and other liabilities | 63,789 | 62,529 | ||||||
Total Liabilities | 4,470,893 | 4,409,355 | ||||||
Shareholders’ Equity | ||||||||
Preferred stock — no par value; authorized 2,000,000 shares; no shares issued and outstanding | — | — | ||||||
Common stock — no par value; authorized 100,000,000 shares; issued and outstanding 34,689,641 and 34,922,222 shares at June 30, 2007 and December 31, 2006, respectively | 225,139 | 231,602 | ||||||
Common stock held in Rabbi Trust for deferred compensation | (1,408 | ) | (1,226 | ) | ||||
Deferred compensation payable in common stock | 1,408 | 1,226 | ||||||
Retained earnings | 229,379 | 221,678 | ||||||
Accumulated other comprehensive loss | (8,690 | ) | (5,918 | ) | ||||
Total Shareholders’ Equity | 445,828 | 447,362 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 4,916,721 | $ | 4,856,717 | ||||
F-63
Table of Contents
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(Dollars in thousands, except per share amounts | ||||||||||||||||
Interest income | ||||||||||||||||
Loans | $ | 67,124 | $ | 54,123 | $ | 133,242 | $ | 104,383 | ||||||||
Securities | 11,058 | 9,522 | 21,976 | 18,833 | ||||||||||||
Federal funds sold | 48 | 37 | 176 | 73 | ||||||||||||
Interest-bearing bank deposits | 61 | 60 | 111 | 99 | ||||||||||||
Total interest income | 78,291 | 63,742 | 155,505 | 123,388 | ||||||||||||
Interest expense | ||||||||||||||||
Deposits | 26,364 | 18,343 | 52,904 | 34,904 | ||||||||||||
Borrowings | 14,383 | 12,752 | 28,322 | 23,747 | ||||||||||||
Total interest expense | 40,747 | 31,095 | 81,226 | 58,651 | ||||||||||||
Net interest income | 37,544 | 32,647 | 74,279 | 64,737 | ||||||||||||
Provision for loan losses | 9,124 | 880 | 10,490 | 2,399 | ||||||||||||
Net interest income after provision for loan losses | 28,420 | 31,767 | 63,789 | 62,338 | ||||||||||||
Noninterest income | ||||||||||||||||
Service charges on deposits | 7,942 | 7,469 | 15,332 | 14,167 | ||||||||||||
ATM, debit, and merchant fees | 2,636 | 2,117 | 5,080 | 4,015 | ||||||||||||
Wealth management | 944 | 693 | 1,660 | 1,393 | ||||||||||||
Equity method investments gains, net | 678 | 11 | 1,805 | 556 | ||||||||||||
Mortgage services | 1,056 | 812 | 1,957 | 1,335 | ||||||||||||
Gain on sale of Small Business Administration loans | 132 | — | 509 | — | ||||||||||||
Brokerage services | 1,007 | 692 | 2,088 | 1,403 | ||||||||||||
Insurance services | 3,422 | 2,898 | 7,056 | 7,232 | ||||||||||||
Bank owned life insurance | 1,162 | 850 | 2,301 | 1,677 | ||||||||||||
Property sale gains, net | 152 | 107 | 215 | 188 | ||||||||||||
Securities gains (losses), net | — | 32 | (11 | ) | 32 | |||||||||||
Other | 1,010 | 611 | 1,715 | 1,285 | ||||||||||||
Total noninterest income | 20,141 | 16,292 | 39,707 | 33,283 | ||||||||||||
Noninterest expense | ||||||||||||||||
Salaries and employee benefits | 19,576 | 16,343 | 39,163 | 33,543 | ||||||||||||
Occupancy and equipment | 4,759 | 4,826 | 9,371 | 9,531 | ||||||||||||
Data processing | 1,492 | 1,448 | 3,282 | 2,858 | ||||||||||||
Marketing | 1,055 | 1,196 | 2,406 | 2,484 | ||||||||||||
Postage and supplies | 1,164 | 1,282 | 2,336 | 2,464 | ||||||||||||
Professional services | 3,181 | 2,258 | 6,767 | 4,161 | ||||||||||||
Telecommunications | 519 | 513 | 1,190 | 1,076 | ||||||||||||
Amortization of intangibles | 314 | 107 | 537 | 209 | ||||||||||||
Foreclosed properties | 226 | 418 | 379 | 472 | ||||||||||||
Other | 2,921 | 2,297 | 5,696 | 4,631 | ||||||||||||
Total noninterest expense | 35,207 | 30,688 | 71,127 | 61,429 | ||||||||||||
Income from continuing operations before income tax expense | 13,354 | 17,371 | 32,369 | 34,192 | ||||||||||||
Income tax expense | 4,404 | 5,946 | 11,063 | 11,614 | ||||||||||||
Income from continuing operations, net of tax | 8,950 | 11,425 | 21,306 | 22,578 | ||||||||||||
Discontinued operations | ||||||||||||||||
Income from discontinued operations before gain on sale and income tax expense | — | 50 | — | 198 | ||||||||||||
Income tax expense | — | 20 | — | 78 | ||||||||||||
Income from discontinued operations, net of tax | — | 30 | — | 120 | ||||||||||||
Net income | $ | 8,950 | $ | 11,455 | $ | 21,306 | $ | 22,698 | ||||||||
Net income per common share | ||||||||||||||||
Basic | ||||||||||||||||
Income from continuing operations, net of tax | $ | 0.26 | $ | 0.37 | $ | 0.61 | $ | 0.73 | ||||||||
Income from discontinued operations, net of tax | — | — | — | — | ||||||||||||
Net income | 0.26 | 0.37 | 0.61 | 0.73 | ||||||||||||
Diluted | ||||||||||||||||
Income from continuing operations, net of tax | $ | 0.26 | $ | 0.37 | $ | 0.61 | $ | 0.72 | ||||||||
Income from discontinued operations, net of tax | — | — | — | — | ||||||||||||
Net income | 0.26 | 0.37 | 0.61 | 0.73 | ||||||||||||
Average common shares outstanding | ||||||||||||||||
Basic | 34,698 | 31,059 | 34,734 | 30,960 | ||||||||||||
Diluted | 34,987 | 31,339 | 35,036 | 31,249 | ||||||||||||
Dividends declared per common share | $ | 0.195 | $ | 0.195 | $ | 0.390 | $ | 0.385 |
F-64
Table of Contents
Common Stock | ||||||||||||||||||||||||||||
in Rabbi | Deferred | Accumulated | ||||||||||||||||||||||||||
Trust for | Compensation | Other | ||||||||||||||||||||||||||
Common Stock | Deferred | Payable in | Retained | Comprehensive | ||||||||||||||||||||||||
Shares | Amount | Compensation | Common Stock | Earnings | Loss | Total | ||||||||||||||||||||||
(Dollars in thousands, except share and per share amounts) | ||||||||||||||||||||||||||||
Balance, December 31, 2006 | 34,922,222 | $ | 231,602 | $ | (1,226 | ) | $ | 1,226 | $ | 221,678 | $ | (5,918 | ) | $ | 447,362 | |||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 21,306 | — | 21,306 | |||||||||||||||||||||
Change in unrealized gains and losses on securities, net of reclassificiatio n adjustment for net losses included in net income | — | — | — | — | — | (2,772 | ) | (2,772 | ) | |||||||||||||||||||
Total comprehensive income | 18,534 | |||||||||||||||||||||||||||
Cummulative transaction adjustment for FIN 48 | — | — | — | — | 29 | — | 29 | |||||||||||||||||||||
Common stock purchased by Rabbi Trust for deferred compensation | — | — | (182 | ) | — | — | — | (182 | ) | |||||||||||||||||||
Deferred compensation payable in common stock | — | — | — | 182 | — | 182 | ||||||||||||||||||||||
Cash dividends declared, $0.39 per share | — | — | — | (13,634 | ) | — | (13,634 | ) | ||||||||||||||||||||
Issuance of shares under stock-based compensation plans, including related tax effects | 256,787 | 4,889 | — | — | — | — | 4,889 | |||||||||||||||||||||
Repurchase of common stock | (500,000 | ) | (10,626 | ) | — | — | — | — | (10,626 | ) | ||||||||||||||||||
Issuance of shares pursuant to acquisition | 10,632 | (726 | ) | — | — | — | — | (726 | ) | |||||||||||||||||||
Balance, June 30, 2007 | 34,689,641 | $ | 225,139 | $ | (1,408 | ) | $ | 1,408 | $ | 229,379 | $ | (8,690 | ) | $ | 445,828 | |||||||||||||
F-65
Table of Contents
Six Months Ended | ||||||||
June 30 | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Operating activities | ||||||||
Net income | $ | 21,306 | $ | 22,698 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for loan losses | 10,490 | 2,399 | ||||||
Depreciation | 3,845 | 4,761 | ||||||
Amortization of intangibles | 537 | 304 | ||||||
Amortization of servicing rights | 173 | 201 | ||||||
Stock-based compensation expense | 1,787 | 1,068 | ||||||
Tax benefits from stock-based compensation plans | (137 | ) | (328 | ) | ||||
Premium amortization and discount accretion, net | 199 | 579 | ||||||
Securities (gains) losses, net | 11 | (32 | ) | |||||
Net gains on sales of other real estate owned | (101 | ) | (89 | ) | ||||
Write-downs on other real estate owned | 278 | 355 | ||||||
Equity method investment gains, net | (1,805 | ) | (556 | ) | ||||
Gains on sales of loans held for sale | (1,459 | ) | (776 | ) | ||||
Gains on sale of Small Business Administration loans | (509 | ) | — | |||||
Property sale gains, net | (215 | ) | (188 | ) | ||||
Origination of loans held for sale | (140,022 | ) | (93,448 | ) | ||||
Proceeds from sale of loans held for sale | 142,302 | 92,290 | ||||||
Change in cash surrender value of life insurance | (398 | ) | 1,677 | |||||
Change in other assets | 5,545 | (5,062 | ) | |||||
Change in other liabilities | 1,449 | 308 | ||||||
Net cash provided by operating activities | 43,276 | 26,161 | ||||||
Investing activities | ||||||||
Proceeds from sales of securities available for sale | 25,180 | 24,603 | ||||||
Proceeds from maturities, calls and paydowns of securities available for sale | 126,006 | 48,719 | ||||||
Purchases of securities available for sale | (148,079 | ) | (69,174 | ) | ||||
Net change in loans | (70,119 | ) | (130,822 | ) | ||||
Proceeds from sales of other real estate owned | 4,242 | 1,170 | ||||||
Net purchases of premises and equipment | (5,131 | ) | (5,232 | ) | ||||
Net cash used in investing activities | (67,901 | ) | (130,736 | ) | ||||
Financing activities | ||||||||
Net change in deposits | (17,782 | ) | 189,323 | |||||
Net change in federal funds purchased and securities sold under repurchase agreements | 14,439 | (92,460 | ) | |||||
Net change in commercial paper and other short-term borrowings | (66,347 | ) | (65,374 | ) | ||||
Proceeds from issuance of long-term debt and trust preferred securities | 240,000 | 220,000 | ||||||
Retirement of long-term debt | (110,032 | ) | (135,032 | ) | ||||
Proceeds from issuance of common stock | 4,752 | 3,721 | ||||||
Purchases of common stock | (10,626 | ) | — | |||||
Tax benefits from stock-based compensation plans | 137 | 328 | ||||||
Cash dividends paid | (13,657 | ) | (10,147 | ) | ||||
Net cash provided by financing activities | 40,884 | 110,359 | ||||||
Net increase in cash and cash equivalents | 16,259 | 5,784 | ||||||
Cash and cash equivalents at beginning of period | 102,827 | 125,552 | ||||||
Cash and cash equivalents at end of period | $ | 119,086 | $ | 131,336 | ||||
Supplemental information | ||||||||
Cash paid for: | ||||||||
Interest | $ | 79,570 | $ | 55,949 | ||||
Income taxes | 10,215 | 11,875 | ||||||
Non-cash items: | ||||||||
Transfer of loans to other real estate owned | 669 | 2,674 | ||||||
Unrealized losses on securities available for sale (net of tax benefit of $1,810, and $3,968, respectively) | (2,772 | ) | (6,079 | ) | ||||
Issuance of common stock for business acquisition | (726 | ) | 362 |
F-66
Table of Contents
1. | Accounting Policies |
2. | Recent Accounting Pronouncements |
F-67
Table of Contents
F-68
Table of Contents
F-69
Table of Contents
As of and For the Three Months Ended June 30, 2006 | ||||||||||||
Before | As | |||||||||||
Adjustment | Adjustment | Adjusted | ||||||||||
(In thousands, except per share data) | ||||||||||||
Other assets | $ | 167,149 | $ | (2,043 | ) | $ | 165,106 | |||||
Other liabilities | 41,830 | 994 | 42,824 | |||||||||
Shareholders’ equity | 336,935 | (3,037 | ) | 333,898 | ||||||||
Mortgage services revenue | 916 | (104 | ) | 812 | ||||||||
Total noninterest income | 16,396 | (104 | ) | 16,292 | ||||||||
Salaries and employee benefits expense | 16,297 | 46 | 16,343 | |||||||||
Total noninterest expense | 30,642 | 46 | 30,688 | |||||||||
Total income tax expense | 6,025 | (59 | ) | 5,966 | ||||||||
Net income | 11,546 | (91 | ) | 11,455 | ||||||||
Diluted earnings per share | 0.37 | — | 0.37 |
As of and For the Six Months Ended June 30, 2006 | ||||||||||||
Before | As | |||||||||||
Adjustment | Adjustment | Adjusted | ||||||||||
(In thousands, except per share data) | ||||||||||||
Other assets | $ | 167,149 | $ | (2,043 | ) | $ | 165,106 | |||||
Other liabilities | 41,830 | 994 | 42,824 | |||||||||
Shareholders’ equity | 336,935 | (3,037 | ) | 333,898 | ||||||||
Mortgage services revenue | 1,724 | (389 | ) | 1,335 | ||||||||
Total noninterest income | 33,672 | (389 | ) | 33,283 | ||||||||
Salaries and employee benefits expense | 33,451 | 92 | 33,543 | |||||||||
Total noninterest expense | 61,337 | 92 | 61,429 | |||||||||
Total income tax expense | 11,881 | (189 | ) | 11,692 | ||||||||
Net income | 22,990 | (292 | ) | 22,698 | ||||||||
Diluted earnings per share | 0.74 | (0.01 | ) | 0.73 |
3. | Acquisitions and Divestitures |
F-70
Table of Contents
Initial | Adjusted | |||||||||||
Purchase | Purchase | Purchase | ||||||||||
Price | Price | Price | ||||||||||
Allocation | Refinements | Allocation | ||||||||||
(In thousands) | ||||||||||||
Purchase price | $ | 103,221 | $ | (982 | ) | $ | 102,239 | |||||
Capitalized merger costs | 1,211 | 88 | 1,299 | |||||||||
Carrying value of net assets acquired | 39,869 | — | 39,869 | |||||||||
Excess of the purchase price over capitalized merger costs and carrying value of net assets acquired | 64,563 | (894 | ) | 63,669 | ||||||||
Purchase accounting adjustments: | ||||||||||||
Securities | 241 | — | 241 | |||||||||
Loans | 643 | (108 | ) | 535 | ||||||||
Deferred taxes | 794 | — | 794 | |||||||||
Certificates of deposit | — | 33 | 33 | |||||||||
Subtotal | 1,678 | (75 | ) | 1,603 | ||||||||
Core deposit intangibles | (3,091 | ) | (469 | ) | (3,560 | ) | ||||||
Other identifiable intangible assets | (1,186 | ) | 238 | (948 | ) | |||||||
Goodwill | $ | 61,964 | $ | (1,200 | ) | $ | 60,764 | |||||
Six Months Ended | ||||||||
June 30 | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Noninterest income | $ | — | $ | 1,809 | ||||
Noninterest expense | — | 1,611 | ||||||
Income from discontinued operations before tax | — | 198 | ||||||
Gain on sale | — | — | ||||||
Income tax expense | — | 78 | ||||||
Income from discontinued operations, after tax | $ | — | $ | 120 | ||||
F-71
Table of Contents
4. | Net Income Per Share |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Basic weighted-average number of common shares outstanding | 34,697,944 | 31,058,858 | 34,733,825 | 30,959,711 | ||||||||||||
Dilutive effect arising from potential common stock issuances | 288,718 | 280,467 | 302,190 | 289,338 | ||||||||||||
Diluted weighted-average number of common shares outstanding | 34,986,662 | 31,339,325 | 35,036,015 | 31,249,049 | ||||||||||||
5. | Goodwill and Other Intangible Assets |
June 30, 2007 | December 31, 2006 | |||||||||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||||||||
Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Amortized intangible assets from continuing operations: | ||||||||||||||||||||||||
Core deposits | $ | 3,560 | $ | 475 | $ | 3,085 | $ | 3,091 | $ | 200 | $ | 2,891 | ||||||||||||
Noncompete agreements | 90 | 78 | 12 | 90 | 63 | 27 | ||||||||||||||||||
Customer lists | 2,487 | 1,424 | 1,063 | 2,359 | 1,177 | 1,182 | ||||||||||||||||||
Total Amortized Intangible Assets | 6,137 | 1,977 | 4,160 | 5,540 | 1,440 | 4,100 | ||||||||||||||||||
Goodwill | 79,947 | N/A | 79,947 | 80,968 | N/A | 80,968 | ||||||||||||||||||
Total goodwill and amortized intangible assets | $ | 86,084 | $ | 1,977 | $ | 84,107 | $ | 86,508 | $ | 1,440 | $ | 85,068 | ||||||||||||
F-72
Table of Contents
Six Months Ended | ||||||||
June 30 | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Continuing operations | $ | 537 | $ | 209 | ||||
Discontinued operations | — | 95 | ||||||
Total intangibles amortization expense | $ | 537 | $ | 304 | �� | |||
Core | Noncompete | Customer | ||||||||||||||
Deposits | Agreements | Lists | Total | |||||||||||||
(In thousands) | ||||||||||||||||
July 1 — December 31 ,2007 | $ | 333 | $ | 12 | $ | 215 | $ | 560 | ||||||||
2008 | 608 | — | 344 | 952 | ||||||||||||
2009 | 531 | — | 229 | 760 | ||||||||||||
2010 | 453 | — | 117 | 570 | ||||||||||||
2011 | 375 | — | 68 | 443 | ||||||||||||
2012 and after | 785 | — | 90 | 875 | ||||||||||||
Total intangibles amortization | $ | 3,085 | $ | 12 | $ | 1,063 | $ | 4,160 | ||||||||
6. | Comprehensive Income |
F-73
Table of Contents
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Comprehensive income | ||||||||||||||||
Net Income | $ | 8,950 | $ | 11,455 | $ | 21,306 | $ | 22,698 | ||||||||
Other comprehensive loss | ||||||||||||||||
Unrealized losses on available-for-sale securities, net | (5,538 | ) | (8,542 | ) | (4,593 | ) | (10,015 | ) | ||||||||
Reclassification adjustment for gain/(losses) included in net income | — | 32 | (11 | ) | 32 | |||||||||||
Income tax effect, net | (2,188 | ) | (3,385 | ) | (1,810 | ) | (3,968 | ) | ||||||||
Other comprehensive loss | (3,350 | ) | (5,189 | ) | (2,772 | ) | (6,079 | ) | ||||||||
Total comprehensive income | $ | 5,600 | $ | 6,266 | $ | 18,534 | $ | 16,619 | ||||||||
7. | Securities Available for Sale |
June 30, 2007 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government agency obligations | $ | 238,155 | $ | 41 | $ | 1,494 | $ | 236,702 | ||||||||
Mortgage-backed securities | 469,821 | 149 | 11,466 | 458,504 | ||||||||||||
State, county, and municipal obligations | 92,474 | 386 | 671 | 92,189 | ||||||||||||
Asset-backed securities | 57,767 | 155 | 1,865 | 56,057 | ||||||||||||
Equity securities | 54,666 | 438 | 28 | 55,076 | ||||||||||||
Total securities | $ | 912,883 | $ | 1,169 | $ | 15,524 | $ | 898,528 | ||||||||
December 31, 2006 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government agency obligations | $ | 278,106 | $ | 358 | $ | 3,070 | $ | 275,394 | ||||||||
Mortgage-backed securities | 419,824 | 768 | 8,572 | 412,020 | ||||||||||||
State, county, and municipal obligations | 102,221 | 745 | 364 | 102,602 | ||||||||||||
Asset-backed securities | 65,141 | 11 | 37 | 65,115 | ||||||||||||
Equity securities | 50,897 | 387 | — | 51,284 | ||||||||||||
Total securities | $ | 916,189 | $ | 2,269 | $ | 12,043 | $ | 906,415 | ||||||||
F-74
Table of Contents
Due After 1 | Due After 5 | |||||||||||||||||||||||||||||||||||||||
Due in 1 Year | Through 5 | Through 10 | Due After | |||||||||||||||||||||||||||||||||||||
or Less | years | years | 10 Years | Total | ||||||||||||||||||||||||||||||||||||
Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | |||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
Fair value of securities available for sale | ||||||||||||||||||||||||||||||||||||||||
U.S. government agency obligations | $ | 130,804 | 3.76 | % | $ | 98,245 | 4.72 | % | $ | 7,653 | 5.56 | % | $ | — | — | % | $ | 236,702 | 4.22 | % | ||||||||||||||||||||
Mortgage-backed securities(1) | 4,351 | 4.77 | 354,130 | 5.00 | 89,942 | 4.96 | 10,081 | 5.76 | 458,504 | 5.01 | ||||||||||||||||||||||||||||||
State and municipal obligations(2) | 10,797 | 7.11 | 31,044 | 5.69 | 13,284 | 6.14 | 37,064 | 5.76 | 92,189 | 5.95 | ||||||||||||||||||||||||||||||
Asset-backed securities | — | — | 24,503 | 7.53 | 9,900 | 6.70 | 21,654 | 7.41 | 56,057 | 7.34 | ||||||||||||||||||||||||||||||
Equity securities(3) | — | — | — | — | — | — | 55,076 | 5.77 | 55,076 | 5.77 | ||||||||||||||||||||||||||||||
Total | $ | 145,952 | 4.04 | % | $ | 507,922 | 5.11 | % | $ | 120,779 | 5.27 | % | $ | 123,875 | 6.05 | % | $ | 898,528 | 5.09 | % | ||||||||||||||||||||
Amortized cost of securities available for sale | $ | 146,489 | $ | 518,030 | $ | 123,405 | $ | 124,959 | $ | 912,883 | ||||||||||||||||||||||||||||||
(1) | Maturities estimated based on average life of security. | |
(2) | Yields on tax-exempt securities are calculated on a tax-equivalent basis using the marginal Federal income tax rate of 35 percent. | |
(3) | Although equity securities have no stated maturity, they are presented for illustrative purposes only. The 5.77% yield represents the expected dividend yield to be earned on equity securities, principally investments in Federal Home Loan Bank of Atlanta and Federal Reserve Bank Stock. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In thousands) | ||||||||||||||||
Gross gains | $ | — | $ | 32 | $ | 94 | $ | 32 | ||||||||
Gross losses | — | — | (105 | ) | — | |||||||||||
Securities gains (losses), net | $ | — | $ | 32 | $ | (11 | ) | $ | 32 | |||||||
F-75
Table of Contents
Less Than 12 Months | 12 months or Longer | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
AAA/AA-RATED SECURITIES | ||||||||||||||||||||||||
U.S. government agency obligations | $ | 47,600 | $ | 101 | $ | 158,574 | $ | 1,393 | $ | 206,174 | $ | 1,494 | ||||||||||||
Mortgage-backed securities | 187,677 | 1,689 | 230,436 | 9,777 | 418,113 | 11,466 | ||||||||||||||||||
State, county, and muncipal obligations | 9,595 | 136 | 17,911 | 535 | 27,506 | 671 | ||||||||||||||||||
Total AAA/AA-rated securities | 244,872 | 1,926 | 406,921 | 11,705 | 651,793 | 13,631 | ||||||||||||||||||
A/BBB-RATED SECURITIES | ||||||||||||||||||||||||
Asset-backed securities | 42,903 | 1,865 | — | — | 42,903 | 1,865 | ||||||||||||||||||
Total A/BBB-rated securities | 42,903 | 1,865 | — | — | 42,903 | 1,865 | ||||||||||||||||||
UNRATED SECURITIES | ||||||||||||||||||||||||
Equity securities | 472 | 28 | — | — | 472 | 28 | ||||||||||||||||||
Total unrated securities | 472 | 28 | — | — | 472 | 28 | ||||||||||||||||||
Total temporarily impaired securities | $ | 288,247 | $ | 3,819 | $ | 406,921 | $ | 11,705 | $ | 695,168 | $ | 15,524 | ||||||||||||
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8. | Loans and Allowance for Loan Losses |
June 30, 2007 | December 31, 2006 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Commercial real estate | $ | 1,094,866 | 30.8 | % | $ | 1,034,317 | 29.7 | % | ||||||||
Commercial non real estate | 317,984 | 8.9 | 301,958 | 8.7 | ||||||||||||
Construction | 859,301 | 24.2 | 793,294 | 22.8 | ||||||||||||
Mortgage | 589,976 | 16.6 | 618,142 | 17.7 | ||||||||||||
Home equity | 415,705 | 11.7 | 447,849 | 12.8 | ||||||||||||
Consumer | 276,005 | 7.8 | 289,493 | 8.3 | ||||||||||||
Total portfolio loans | $ | 3,553,837 | 100.0 | % | $ | 3,485,053 | 100.0 | % | ||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In thousands) | ||||||||||||||||
Balance, beginning of period | $ | 35,854 | $ | 29,505 | $ | 34,966 | $ | 28,725 | ||||||||
Provision for loan losses | 9,124 | 880 | 10,490 | 2,399 | ||||||||||||
Charge-offs | (547 | ) | (1,135 | ) | (1,333 | ) | (2,364 | ) | ||||||||
Recoveries | 359 | 270 | 667 | 760 | ||||||||||||
Net charge-offs | (188 | ) | (865 | ) | (666 | ) | (1,604 | ) | ||||||||
Balance, June 30 | $ | 44,790 | $ | 29,520 | $ | 44,790 | $ | 29,520 | ||||||||
June 30 | December 31 | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Nonaccrual loans | $ | 17,387 | $ | 8,200 | ||||
Loans 90 days or more past due and accruing interest | — | — | ||||||
Total nonperforming loans | 17,387 | 8,200 | ||||||
Other real estate | 2,726 | 6,477 | ||||||
Total nonperforming assets | $ | 20,113 | $ | 14,677 | ||||
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9. | Servicing Rights |
F-78
Table of Contents
2007 | 2006 | |||||||||||||||
MSR | SSR | MSR | SSR | |||||||||||||
(In thousands) | ||||||||||||||||
Beginning Balance | $ | 756 | $ | 1,137 | $ | 1,133 | $ | — | ||||||||
Servicing rights capitalized | — | 13 | — | — | ||||||||||||
Purchase accounting adjustment | — | (238 | ) | — | — | |||||||||||
Amortization expense | (41 | ) | (40 | ) | (101 | ) | — | |||||||||
Balance, March 31 | $ | 715 | $ | 872 | $ | 1,032 | $ | — | ||||||||
Servicing rights capitalized | — | 8 | — | — | ||||||||||||
Amortization expense | (41 | ) | (51 | ) | (100 | ) | — | |||||||||
Balance, June 30 | $ | 674 | $ | 829 | $ | 932 | $ | — | ||||||||
MSR | SSR | Total | ||||||||||
(In thousands) | ||||||||||||
July 1 — December 31, 2007 | $ | 83 | $ | 97 | $ | 180 | ||||||
2008 | 135 | 170 | 305 | |||||||||
2009 | 111 | 141 | 252 | |||||||||
2010 | 92 | 116 | 208 | |||||||||
2011 | 74 | 95 | 169 | |||||||||
2012 and after | 179 | 210 | 389 | |||||||||
Total amortization | $ | 674 | $ | 829 | $ | 1,503 | ||||||
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10. | Stock-Based Compensation |
F-80
Table of Contents
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Expected volatility | N/A | N/A | 22.4 | % | 25.0 | % | ||||||||||
Expected dividend yield | N/A | N/A | 3.2 | 3.2 | ||||||||||||
Risk-free interest rate | N/A | N/A | 4.8 | 3.9 | ||||||||||||
Expected term (in years) | N/A | N/A | 8.0 | 7.0 | ||||||||||||
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Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Weighted- | Remaining | |||||||||||||||
Average | Contractual | Aggregate | ||||||||||||||
Exercise | Term | Intrinsic | ||||||||||||||
Shares | Price | (in Years) | Value | |||||||||||||
Outstanding at January 1, 2007 | 1,497,619 | $ | 20.57 | |||||||||||||
Granted | 71,500 | 24.46 | ||||||||||||||
Exercised | (56,960 | ) | 18.98 | $ | 297,893 | |||||||||||
Forfeited or expired | (204,906 | ) | 25.79 | |||||||||||||
Outstanding at March 31, 2007 | 1,307,253 | $ | 20.03 | 5.5 | $ | 3,093,754 | ||||||||||
Exercisable at March 31, 2007 | 1,187,673 | $ | 19.62 | 5.1 | $ | 3,093,754 | ||||||||||
Weighted-average Black-Scholes fair value of options granted during the period | $ | 5.63 | ||||||||||||||
Outstanding at March 31, 2007 | 1,307,253 | $ | 20.03 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (60,338 | ) | 17.75 | $ | 239,159 | |||||||||||
Forfeited or expired | (22,878 | ) | 22.76 | |||||||||||||
Outstanding at June 30, 2007 | 1,224,037 | $ | 20.09 | 5.3 | $ | 1,501,676 | ||||||||||
Exercisable at June 30, 2007 | 1,104,457 | $ | 19.65 | 5.1 | $ | 1,501,676 | ||||||||||
Weighted-average Black-Scholes fair value of options granted during the period | $ | — | ||||||||||||||
Service-Based | Performance-Based | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Grant Date | Grant Date | |||||||||||||||
Shares | Fair Value | Shares | Fair Value | |||||||||||||
Outstanding at January 1, 2007 | 215,663 | $ | 24.00 | 52,100 | $ | 21.91 | ||||||||||
Granted | 92,203 | 24.34 | 54,600 | 22.70 | ||||||||||||
Vested | (5,342 | ) | 23.66 | — | — | |||||||||||
Forfeited or expired | (13,262 | ) | 23.81 | — | — | |||||||||||
Outstanding at March 31, 2007 | 289,262 | $ | 24.14 | 106,700 | $ | 22.31 | ||||||||||
Granted | 18,732 | 20.64 | — | — | ||||||||||||
Vested | — | — | (5,967 | ) | 22.13 | |||||||||||
Forfeited or expired | (4,666 | ) | 23.88 | (9,333 | ) | 22.41 | ||||||||||
Outstanding at June 30, 2007 | 303,328 | $ | 23.92 | 91,400 | $ | 22.32 | ||||||||||
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Outstanding Options | Options Exercisable | |||||||||||||||||||
Weighted-Average | ||||||||||||||||||||
Remaining | Weighted- | Weighted- | ||||||||||||||||||
Number | Contractual | Average | Number | Average | ||||||||||||||||
Range of Exercise Prices | Outstanding | Life (in Years) | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
$5.01 — 10.00 | 3,400 | 2.2 | $ | 9.04 | 3,400 | $ | 9.04 | |||||||||||||
10.01 — 12.50 | 18,702 | 1.5 | 11.63 | 18,702 | 11.63 | |||||||||||||||
12.51 — 15.00 | 63,160 | 2.5 | 14.43 | 63,160 | 14.43 | |||||||||||||||
15.01 — 17.50 | 256,537 | 4.0 | 16.62 | 256,537 | 16.62 | |||||||||||||||
17.51 — 20.00 | 262,845 | 4.4 | 18.44 | 262,845 | 18.44 | |||||||||||||||
20.01 — 22.50 | 167,814 | 6.4 | 20.78 | 167,814 | 20.78 | |||||||||||||||
22.51 — 25.00 | 422,514 | 7.1 | 23.83 | 302,934 | 23.71 | |||||||||||||||
25.01 — 27.50 | 29,065 | 2.7 | 26.35 | 29,065 | 26.35 | |||||||||||||||
Total | 1,224,037 | 5.3 | $ | 20.09 | 1,104,457 | $ | 19.65 | |||||||||||||
11. | Other Borrowings |
June 30, 2007 | December 31, 2006 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Contractual | Contractual | |||||||||||||||
Balance | Rate | Balance | Rate | |||||||||||||
(In thousands) | ||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 216,152 | 4.71 | % | $ | 201,713 | 4.60 | % | ||||||||
Commercial paper | 77,844 | 2.71 | 38,191 | 2.72 | ||||||||||||
Other short-term borrowings | 265,000 | 5.30 | 371,000 | 5.35 | ||||||||||||
Long-term debt | 617,762 | 5.13 | 487,794 | 4.79 | ||||||||||||
Total other borrowings | $ | 1,176,758 | 4.93 | % | $ | 1,098,698 | 4.87 | % | ||||||||
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Aggregate | ||||||||||||||||||||
Principal | ||||||||||||||||||||
Amount of | Aggregate | |||||||||||||||||||
Trust | Principal | Stated | Per Annum | Interest | ||||||||||||||||
Preferred | Amount of | Maturity of | Interest Rate | Payment | Redemption | |||||||||||||||
Issuer | Issuance Date | Securities | the Notes | the Notes | of the Notes | Dates | Period | |||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Capital Trust I | June 2005 | $ | 35,000 | $ | 36,083 | September 2035 | 3 mo. LIBOR + 169 bps | 3/15, 6/15, 9/15, 12/15 | On or after 9/15/2010 | |||||||||||
Capital Trust II | September 2005 | 25,000 | 25,774 | December 2035 | 3 mo. LIBOR + 142 bps | 3/15, 6/15, 9/15, 12/15 | On or after 12/15/2010 | |||||||||||||
Total | $ | 60,000 | $ | 61,857 | ||||||||||||||||
12. | Commitments, Contingencies, and Off-Balance-Sheet Risk |
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Less Than | Timing not | |||||||||||||||||||||||
1 Year | 1-3 Years | 4-5 Years | Over 5 Years | Determinable | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Loan commitments | $ | 703,813 | $ | 118,172 | $ | 42,662 | $ | 59,637 | $ | — | $ | 924,284 | ||||||||||||
Lines of credit | 31,390 | 1,639 | 2,921 | 455,613 | — | 491,563 | ||||||||||||||||||
Standby letters of credit | 22,920 | 3,548 | — | — | — | 26,468 | ||||||||||||||||||
Anticipated tax settlements | 584 | — | — | — | 10,551 | 11,135 | ||||||||||||||||||
Total commitments | $ | 758,707 | $ | 123,359 | $ | 45,583 | $ | 515,250 | $ | 10,551 | $ | 1,453,450 | ||||||||||||
13. | Regulatory Restrictions and Capital Ratios |
F-85
Table of Contents
For Capital | ||||||||||||||||||||||||
Adequacy Purposes | To be Well Capitalized | |||||||||||||||||||||||
Actual | Minimum | Minimum | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
At June 30, 2007: | ||||||||||||||||||||||||
Leverage | ||||||||||||||||||||||||
First Charter Corporation | $ | 430,373 | 8.97 | % | $ | 192,023 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 411,177 | 8.57 | 191,914 | 4.00 | $ | 239,893 | 5.00 | % | ||||||||||||||||
Tier I Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 430,373 | 10.57 | % | $ | 162,932 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 411,177 | 10.10 | 162,782 | 4.00 | $ | 244,174 | 6.00 | % | ||||||||||||||||
Total Risk-Based Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 475,358 | 11.67 | % | $ | 325,863 | 8.00 | % | None | None | ||||||||||||||
First Charter Bank | 455,967 | 11.20 | 325,565 | 8.00 | $ | 406,956 | 10.00 | % | ||||||||||||||||
At December 31, 2006: | ||||||||||||||||||||||||
Leverage | ||||||||||||||||||||||||
First Charter Corporation | $ | 428,135 | 9.32 | % | $ | 183,678 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 362,970 | 8.36 | 173,591 | 4.00 | $ | 216,988 | 5.00 | % | ||||||||||||||||
Tier I Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 428,135 | 10.53 | % | $ | 162,614 | 4.00 | % | None | None | ||||||||||||||
First Charter Bank | 362,970 | 9.99 | 145,275 | 4.00 | $ | 217,913 | 6.00 | % | ||||||||||||||||
Total Risk-Based Capital | ||||||||||||||||||||||||
First Charter Corporation | $ | 463,273 | 11.40 | % | $ | 325,228 | 8.00 | % | None | None | ||||||||||||||
First Charter Bank | 393,664 | 10.84 | 290,550 | 8.00 | $ | 363,188 | 10.00 | % |
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Table of Contents
14. | Subsequent Event |
15. | Business Segment Information |
Three Months Ended | ||||||||||||||||
June 30, 2007 | ||||||||||||||||
Consolidated | ||||||||||||||||
The Bank | Other | Eliminations | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income | $ | 78,280 | $ | 11 | $ | — | $ | 78,291 | ||||||||
Interest expense | 39,520 | 1,227 | — | 40,747 | ||||||||||||
Net interest income (expense) | 38,760 | (1,216 | ) | — | 37,544 | |||||||||||
Provision for loan losses | 9,124 | — | — | 9,124 | ||||||||||||
Noninterest income | 20,109 | 32 | — | 20,141 | ||||||||||||
Noninterest expense | 34,951 | 256 | — | 35,207 | ||||||||||||
Income (loss) from continuing operations before income tax expense | 14,794 | (1,440 | ) | — | 13,354 | |||||||||||
Income tax expense (benefit) | 4,886 | (482 | ) | — | 4,404 | |||||||||||
Net income (loss) | $ | 9,908 | $ | (958 | ) | $ | — | $ | 8,950 | |||||||
Average loans | $ | 3,543,840 | $ | — | $ | — | $ | 3,543,840 | ||||||||
Average assets | 4,861,455 | 537,631 | (524,344 | ) | 4,874,742 | |||||||||||
Total assets | 4,898,290 | 589,514 | (571,083 | ) | 4,916,721 | |||||||||||
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Table of Contents
Three Months Ended | ||||||||||||||||
June 30, 2006 | ||||||||||||||||
Consolidated | ||||||||||||||||
The Bank | Other | Eliminations | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income | $ | 63,653 | $ | 89 | $ | — | $ | 63,742 | ||||||||
Interest expense | 29,935 | 1,160 | — | 31,095 | ||||||||||||
Net interest income (expense) | 33,718 | (1,071 | ) | — | 32,647 | |||||||||||
Provision for loan losses | 880 | — | — | 880 | ||||||||||||
Noninterest income (loss) | 16,301 | (9 | ) | — | 16,292 | |||||||||||
Noninterest expense | 30,649 | 39 | — | 30,688 | ||||||||||||
Income (loss) from continuing operations before income tax expense | 18,490 | (1,119 | ) | — | 17,371 | |||||||||||
Income tax expense (benefit) | 6,329 | (383 | ) | — | 5,946 | |||||||||||
Income (loss) from continuing operations, net of tax | 12,161 | (736 | ) | — | 11,425 | |||||||||||
Discontinued operations: | ||||||||||||||||
Income from discontinued operations | 50 | — | — | 50 | ||||||||||||
Income tax expense | 20 | — | — | 20 | ||||||||||||
Income from discontinued operations, net of tax | 30 | — | — | 30 | ||||||||||||
Net income (loss) | $ | 12,191 | $ | (736 | ) | $ | — | $ | 11,455 | |||||||
Average loans | $ | 3,030,815 | $ | — | $ | — | $ | 3,030,815 | ||||||||
Average assets of continuing operations | 4,251,761 | 417,805 | (397,703 | ) | 4,271,863 | |||||||||||
Average assets of discontinued operations | 2,482 | — | — | 2,482 | ||||||||||||
Total assets of continuing operations | 4,332,140 | 443,647 | (417,139 | ) | 4,358,648 | |||||||||||
Total assets of discontinued operations | 2,583 | — | — | 2,583 | ||||||||||||
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Table of Contents
Six Months Ended June 30, 2007 | ||||||||||||||||
Consolidated | ||||||||||||||||
The Bank | Other | Eliminations | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income | $ | 155,412 | $ | 93 | $ | — | $ | 155,505 | ||||||||
Interest expense | 78,742 | 2,484 | — | 81,226 | ||||||||||||
Net interest income (expense) | 76,670 | (2,391 | ) | — | 74,279 | |||||||||||
Provision for loan losses | 10,490 | — | — | 10,490 | ||||||||||||
Noninterest income | 39,567 | 140 | — | 39,707 | ||||||||||||
Noninterest expense | 70,661 | 466 | — | 71,127 | ||||||||||||
Income (loss) from continuing operations before income tax expense | 35,086 | (2,717 | ) | — | 32,369 | |||||||||||
Income tax expense (benefit) | 11,992 | (929 | ) | — | 11,063 | |||||||||||
Net income (loss) | $ | 23,094 | $ | (1,788 | ) | $ | — | $ | 21,306 | |||||||
Average loans | $ | 3,532,915 | $ | — | $ | — | $ | 3,532,915 | ||||||||
Average assets | 4,858,766 | 539,157 | (525,001 | ) | 4,872,922 | |||||||||||
Total assets | 4,898,290 | 589,514 | (571,083 | ) | 4,916,721 | |||||||||||
F-89
Table of Contents
Six Months Ended June 30, 2006 | ||||||||||||||||
Consolidated | ||||||||||||||||
The Bank | Other | Eliminations | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income | $ | 123,281 | $ | 107 | $ | — | $ | 123,388 | ||||||||
Interest expense | 56,411 | 2,240 | — | 58,651 | ||||||||||||
Net interest income (expense) | 66,870 | (2,133 | ) | — | 64,737 | |||||||||||
Provision for loan losses | 2,399 | — | — | 2,399 | ||||||||||||
Noninterest income | 33,204 | 79 | — | 33,283 | ||||||||||||
Noninterest expense | 61,327 | 102 | — | 61,429 | ||||||||||||
Income (loss) from continuing operations before income tax expense | 36,348 | (2,156 | ) | — | 34,192 | |||||||||||
Income tax expense (benefit) | 12,348 | (734 | ) | — | 11,614 | |||||||||||
Income (loss) from continuing operations, net of tax | 24,000 | (1,422 | ) | — | 22,578 | |||||||||||
Discontinued operations: | ||||||||||||||||
Income from discontinued operations | 198 | — | — | 198 | ||||||||||||
Income tax expense | 78 | — | — | 78 | ||||||||||||
Income from discontinued operations, net of tax | 120 | — | — | 120 | ||||||||||||
Net income (loss) | $ | 24,120 | $ | (1,422 | ) | $ | — | $ | 22,698 | |||||||
Average loans | $ | 2,988,596 | $ | — | $ | — | $ | 2,988,596 | ||||||||
Average assets of continuing operations | 4,217,951 | 417,950 | (400,284 | ) | 4,235,617 | |||||||||||
Average assets of discontinued operations | 2,511 | — | — | 2,511 | ||||||||||||
Total assets of continuing operations | 4,332,140 | 443,647 | (417,139 | ) | 4,358,648 | |||||||||||
Total assets of discontinued operations | 2,583 | — | — | 2,583 | ||||||||||||
F-90
Table of Contents
Table of Contents
Page | ||||||
ARTICLE I THE MERGER | A-1 | |||||
1.1 | The Merger | A-1 | ||||
1.2 | Effective Time | A-2 | ||||
1.3 | Effects of the Merger | A-2 | ||||
1.4 | Conversion of First Charter Common Stock | A-2 | ||||
1.5 | Proration | A-3 | ||||
1.6 | Stock Options and Other Stock-Based Awards | A-4 | ||||
1.7 | Articles of Incorporation of Fifth Third Financial | A-5 | ||||
1.8 | Code of Regulations of Fifth Third Financial | A-5 | ||||
1.9 | Tax Consequences | A-5 | ||||
1.10 | Board of Directors | A-5 | ||||
ARTICLE II DELIVERY OF MERGER CONSIDERATION | A-5 | |||||
2.1 | Election Procedures | A-5 | ||||
2.2 | Deposit of Merger Consideration | A-6 | ||||
2.3 | Delivery of Merger Consideration | A-7 | ||||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FIRST CHARTER CORPORATION | A-8 | |||||
3.1 | Corporate Organization | A-9 | ||||
3.2 | Capitalization | A-9 | ||||
3.3 | Authority; No Violation | A-10 | ||||
3.4 | Consents and Approvals | A-11 | ||||
3.5 | Reports; Regulatory Matters | A-12 | ||||
3.6 | Financial Statements | A-13 | ||||
3.7 | Broker’s Fees | A-13 | ||||
3.8 | Absence of Certain Changes or Events | A-13 | ||||
3.9 | Legal Proceedings | A-14 | ||||
3.10 | Taxes and Tax Returns | A-14 | ||||
3.11 | Employee Matters | A-15 | ||||
3.12 | Compliance with Applicable Law | A-17 | ||||
3.13 | Certain Contracts | A-18 | ||||
3.14 | Risk Management Instruments | A-18 | ||||
3.15 | Investment Securities and Commodities | A-19 | ||||
3.16 | Loan Portfolio | A-19 | ||||
3.17 | Property | A-20 | ||||
3.18 | Intellectual Property | A-20 | ||||
3.19 | Environmental Liability | A-21 | ||||
3.20 | Leases | A-21 | ||||
3.21 | Securitizations | A-21 | ||||
3.22 | State Takeover Laws; Stockholder Protection Rights Agreement | A-21 | ||||
3.23 | Reorganization; Approvals | A-21 | ||||
3.24 | Opinion | A-21 | ||||
3.25 | First Charter Information | A-21 |
A-i
Table of Contents
Page | ||||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FIFTH THIRD BANCORP AND FIFTH THIRD FINANCIAL CORPORATION | A-22 | |||||
4.1 | Corporate Organization | A-22 | ||||
4.2 | Capitalization | A-22 | ||||
4.3 | Authority; No Violation | A-23 | ||||
4.4 | Consents and Approvals | A-24 | ||||
4.5 | Reports; Regulatory Matters | A-24 | ||||
4.6 | Financial Statements | A-25 | ||||
4.7 | Broker’s Fees | A-26 | ||||
4.8 | Absence of Certain Changes or Events | A-26 | ||||
4.9 | Legal Proceedings | A-26 | ||||
4.10 | Taxes and Tax Returns | A-26 | ||||
4.11 | Compliance with Applicable Law | A-26 | ||||
4.12 | Reorganization; Approvals | A-26 | ||||
4.13 | Aggregate Cash Consideration | A-27 | ||||
4.14 | Fifth Third Information | A-27 | ||||
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS | A-27 | |||||
5.1 | Conduct of First Charter’s Business Before the Effective Time | A-27 | ||||
5.2 | First Charter Forbearances | A-27 | ||||
5.3 | Fifth Third Forbearances | A-29 | ||||
5.4 | Loan Review | A-29 | ||||
5.5 | Fifth Third Conversion | A-30 | ||||
ARTICLE VI ADDITIONAL AGREEMENTS | A-30 | |||||
6.1 | Regulatory Matters | A-30 | ||||
6.2 | Access to Information; Confidentiality | A-31 | ||||
6.3 | Shareholder Approval | A-32 | ||||
6.4 | Affiliates | A-32 | ||||
6.5 | The Nasdaq Global Select Market Listing | A-32 | ||||
6.6 | Employee Matters | A-32 | ||||
6.7 | Indemnification; Directors’ and Officers’ Insurance | A-34 | ||||
6.8 | Additional Agreements | A-35 | ||||
6.9 | Advice of Changes | A-35 | ||||
6.10 | No Solicitation | A-35 | ||||
6.11 | Advisory Board; Noncompetes | A-37 | ||||
6.12 | Restructuring Efforts | A-37 | ||||
6.13 | Reasonable Best Efforts; Cooperation | A-37 | ||||
6.14 | Dividends | A-37 | ||||
ARTICLE VII CONDITIONS PRECEDENT | A-38 | |||||
7.1 | Conditions to Each Party’s Obligation To Effect the Merger | A-38 | ||||
7.2 | Conditions to Obligations of Fifth Third | A-38 | ||||
7.3 | Conditions to Obligations of First Charter | A-39 |
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ARTICLE VIII TERMINATION AND AMENDMENT | A-39 | |||||
8.1 | Termination | A-39 | ||||
8.2 | Effect of Termination | A-40 | ||||
8.3 | Fees and Expenses | A-40 | ||||
8.4 | Amendment | A-41 | ||||
8.5 | Extension; Waiver | A-41 | ||||
ARTICLE IX GENERAL PROVISIONS | A-41 | |||||
9.1 | Closing | A-41 | ||||
9.2 | Standard | A-42 | ||||
9.3 | Nonsurvival of Representations, Warranties and Agreements | A-42 | ||||
9.4 | Notices | A-42 | ||||
9.5 | Interpretation | A-42 | ||||
9.6 | Counterparts | A-43 | ||||
9.7 | Entire Agreement | A-43 | ||||
9.8 | Governing Law; Jurisdiction | A-43 | ||||
9.9 | Publicity | A-43 | ||||
9.10 | Assignment; Third-Party Beneficiaries | A-43 | ||||
Exhibit A — Form of Affiliate Letter | ||||||
Exhibit B — Form of FTPS Agreement |
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Defined Term | Section | |||
2000 Plan | 1.6 | (a) | ||
Adjusted Option | 1.6 | (c) | ||
Agreement | Preamble | |||
Alternative Proposal | 6.10 | (a) | ||
Alternative Transaction | 6.10 | (a) | ||
BHC Act | 3.1 | (b) | ||
Cash Consideration | 1.4 | (c) | ||
Cash Designated Shares | 1.5 | (b) | ||
Cash Election | 1.4 | (c) | ||
Cash Election Shares | 1.4 | (c) | ||
Certificate | 1.4 | (d) | ||
Claim | 6.7 | (a) | ||
Closing | 9.1 | |||
Closing Date | 9.1 | |||
Code | Recitals | |||
Confidentiality Agreement | 6.2 | (c) | ||
Conversion Number | 1.4 | (c) | ||
Covered Employees | 6.6 | (a) | ||
Derivative Transactions | 3.14 | (a) | ||
DPC Common Shares | 1.4 | (b) | ||
Effective Time | 1.2 | |||
EGTRRA | 3.11 | (c) | ||
Election | 2.1 | (a) | ||
Election Deadline | 2.1 | (c) | ||
Election Form | 2.1 | (b) | ||
Election Form Record Date | 2.1 | (b) | ||
ERISA | 3.11 | (a) | ||
Exchange Act | 3.5 | (c) | ||
Exchange Agent | 2.1 | (b) | ||
Exchange Agent Agreement | 2.1 | (b) | ||
Exchange Fund | 2.2 | |||
FDIC | 3.1 | (d) | ||
Federal Reserve Board | 3.4 | |||
First Charter | Preamble | |||
First Charter Articles | 3.1 | (b) | ||
First Charter Bank | 3.1 | (b) | ||
First Charter Bank Subsidiaries | 3.16 | (c) | ||
First Charter Benefit Plans | 3.11 | (a) | ||
First Charter Board | 3.3 | |||
First Charter Bylaws | 3.1 | (b) | ||
First Charter Capitalization Date | 3.2 | (a) | ||
First Charter Common Stock | 1.4 | (b) | ||
First Charter Contract | 3.13 | (a) | ||
First Charter Disclosure Schedule | Art. III |
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Defined Term | Section | |||
First Charter Options | 1.6 | (c) | ||
First Charter Preferred Stock | 3.2 | (a) | ||
First Charter Regulatory Agreement | 3.5 | (b) | ||
First Charter Requisite Regulatory Approvals | 7.3 | (d) | ||
First Charter SEC Reports | 3.5 | (c) | ||
First Charter Shareholder Meeting | 6.3 | |||
First Charter Stock Plans | 1.6 | (a) | ||
First Charter Subsidiary | 3.1 | (c) | ||
Fifth Third | Preamble | |||
Fifth Third Articles | 4.1 | (b) | ||
Fifth Third Capitalization Date | 4.2 | (a) | ||
Fifth Third Code of Regulations | 4.1 | (b) | ||
Fifth Third Common Stock | 1.4 | (a) | ||
Fifth Third Disclosure Schedule | Art. IV | |||
Fifth Third Financial | Preamble | |||
Fifth Third Financial Articles | 4.1 | (b) | ||
Fifth Third Financial Code of Regulations | 4.1 | (b) | ||
Fifth Third Preferred Stock | 4.2 | (a) | ||
Fifth Third Regulatory Agreement | 4.5 | (b) | ||
Fifth Third Requisite Regulatory Approvals | 7.2 | (d) | ||
Fifth Third SEC Reports | 4.5 | (c) | ||
Fifth Third Stock Plans | 4.2 | (a) | ||
Fifth Third Subsidiary | 3.1 | (c) | ||
Form S-4 | 3.4 | |||
FTPS | 5.5 | |||
FTPS Agreement | 5.5 | |||
GAAP | 3.1 | (c) | ||
Governmental Entity | 3.4 | |||
Holder | 2.1 | |||
HSR Act | 3.4 | |||
Indemnified Parties | 6.7 | (a) | ||
Injunction | 7.1 | (d) | ||
Insurance Amount | 6.7 | (c) | ||
Intellectual Property | 3.18 | |||
IRS | 3.10 | (a) | ||
knowledge | 9.5 | |||
Leased Properties | 3.17 | |||
Letter of Transmittal | 2.3 | (a) | ||
Liens | 3.2 | (b) | ||
Loans | 3.16 | (a) | ||
Mailing Date | 2.1 | (b) | ||
Market Price | 1.4 | (c) | ||
Material Adverse Effect | 3.8 | (a) |
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Defined Term | Section | |||
Materially Burdensome Regulatory Condition | 6.1 | (b) | ||
Merger | Recitals | |||
Merger Consideration | 1.4 | (c) | ||
Nasdaq Global Select Market | 1.4 | (c) | ||
NCBCA | 1.1 | (a) | ||
Non-Election | 2.1 | (b) | ||
Non-Election Shares | 1.4 | (c) | ||
North Carolina Articles of Merger | 1.2 | |||
OGCL | 1.1 | (a) | ||
Ohio Certificate of Merger | 1.2 | |||
Original Merger Agreement | Recitals | |||
Other Regulatory Approvals | 3.4 | |||
Owned Properties | 3.17 | |||
Permitted Encumbrances | 3.17 | |||
Per Share Amount | 1.4 | (c) | ||
person | 9.5 | |||
Policies, Practices and Procedures | 3.15 | (b) | ||
Pricing Period | 1.4 | (c) | ||
Property Lease | 3.20 | |||
Proxy Statement | 3.4 | |||
Real Property | 3.17 | |||
Regulatory Agencies | 3.5 | (a) | ||
Representative | 2.1 | (b) | ||
Rights Agreement | 3.22 | (b) | ||
Sarbanes-Oxley Act | 3.5 | (c) | ||
SEC | 3.4 | |||
Securities Act | 3.2 | (a) | ||
SERP | 3.11 | (c) | ||
Share Ratio | 1.4 | (c) | ||
SRO | 3.4 | |||
Stock Consideration | 1.4 | (c) | ||
Stock Designated Shares | 1.5 | (a) | ||
Stock Election | 1.4 | (c) | ||
Stock Election Number | 2.2 | (a) | ||
Stock Election Shares | 1.4 | (c) | ||
Subsidiary | 3.1 | (c) | ||
Surviving Corporation | Recitals | |||
Takeover Statutes | 3.22 | (a) | ||
Tax(es) | 3.10 | (b) | ||
Tax Return | 3.10 | (c) | ||
Termination Fee | 8.3 | (b) | ||
Total Cash Amount | 1.4 | (c) | ||
Trust Account Common Shares | 1.4 | (b) | ||
Voting Debt | 3.2 | (a) |
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AGREEMENT AND PLAN OF MERGER
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10200 David Taylor Drive
Charlotte, North Carolina 28262
Attention: Stephen J. Antal
Facsimile:(704) 688-2282
201 North Tryon Street, Suite 3000
Charlotte, North Carolina 28202
Attention: Richard W. Viola
Facsimile:(704) 343-2300
38 Fountain Square Plaza
MD10AT76
Cincinnati, Ohio 45263
Attention: General Counsel
Facsimile:(513) 534-6757
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By: | /s/ Robert E. James, Jr. |
Title: | President and Chief Executive Officer |
By: | /s/ Paul L. Reynolds |
Title: | Executive Vice President, General |
By: | /s/ Paul L. Reynolds |
Title: | Executive Vice President, General |
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Document | Exhibit | Reference | ||||
Amended and Restated Agreement and Plan of Merger dated September 14, 2007 by and among First Charter Corporation, Fifth Third Bancorp and Fifth Third Financial Corporation | 2.1 | Included in Annex A | ||||
Second Amended Articles of Incorporation of Fifth Third Bancorp, as amended | 3.1 | Incorporated by Reference (1) | ||||
Code of Regulations of Fifth Third Bancorp, as amended | 3.2 | Incorporated by Reference (2) | ||||
Opinion of counsel employed by Fifth Third Bancorp as to the legality of the securities being issued | 5.1 | * | ||||
Opinion of Alston & Bird LLP to Fifth Third as to tax matters relating to the merger of First Charter with and into Fifth Third Financial Corporation | 8.1 | * | ||||
Opinion of Helms Mulliss & Wicker, PLLC to First Charter as to tax matters relating to the merger of First Charter with and into Fifth Third Financial Corporation | 8.2 | * | ||||
2006 Annual Report on Form 10-K/A to Shareholders of Fifth Third Bancorp | 13.1 | Incorporated by Reference (3) | ||||
Quarterly Report onForm 10-Q to Shareholders of Fifth Third Bancorp for the quarter ended June 30, 2007 | 13.2 | Incorporated by Reference (4) | ||||
Consent of Deloitte & Touche LLP | 23.1 | |||||
Consent of KPMG LLP | 23.2 | |||||
Consent of Keefe, Bruyette & Woods, Inc. | 23.3 | |||||
Consent of counsel employed by Fifth Third Bancorp | 23.4 | * | ||||
Consent of Alston & Bird LLP | 23.5 | * | ||||
Consent of Helms Mulliss & Wicker, PLLC | 23.6 | * | ||||
A power of attorney where various individuals authorize the signing of their names to any and all amendments to this registration statement and other documents submitted in connection herewith is contained on the first page of the signature pages following Part II of this registration statement | 24.1 | |||||
Fairness Opinion of Keefe, Bruyette & Woods, Inc. | 99.1 | Included in Annex B | ||||
Form of Proxy Card for Special Meeting | 99.2 | |||||
Form of Notice of Special Meeting of First Charter Shareholders | 99.3 |
(1) | Incorporated by reference to Fifth Third’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2001. | |
(2) | Incorporated by reference to Fifth Third’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2007. | |
(3) | Incorporated by reference to Fifth Third’s Annual Report onForm 10-K/A filed for the year ended December 31, 2006. | |
(4) | Incorporated by reference to Fifth Third’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2007. | |
* | To be filed by an amendment. |
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By: | /s/ KEVIN T. KABAT |
/s/ KEVIN T. KABAT Kevin T. Kabat President and Chief Executive Officer | Date: October 31, 2007 | |||||
Principal Financial Officer: | ||||||
/s/ CHRISTOPHER G. MARSHALL Christopher G. Marshall Executive Vice President and Chief Financial Officer | Date: October 31, 2007 | |||||
Principal Accounting Officer: | ||||||
/s/ DANIEL T. POSTON Daniel T. Poston Executive Vice President and Controller | Date: October 31, 2007 |
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Directors of the Company: | ||||||
/s/ DARRYL F. ALLEN Darryl F. Allen | Date: October 31, 2007 | |||||
/s/ JOHN F. BARRETT John F. Barrett | Date: October 31, 2007 | |||||
/s/ ULYSSES L. BRIDGEMAN, JR. Ulysses L. Bridgeman, Jr. | Date: October 31, 2007 | |||||
/s/ JAMES P. HACKETT James P. Hackett | Date: October 31, 2007 | |||||
/s/ GARY R. HEMINGER Gary R. Heminger | Date: October 31, 2007 | |||||
/s/ JOAN R. HERSCHEDE Joan R. Herschede | Date: October 31, 2007 | |||||
/s/ ALLEN M. HILL Allen M. Hill | Date: October 31, 2007 | |||||
/s/ KEVIN T. KABAT Kevin T. Kabat | Date: October 31, 2007 | |||||
/s/ ROBERT L. KOCH, II Robert L. Koch, II | Date:October 31, 2007 | |||||
/s/ MITCHEL D. LIVINGSTON, PH.D. Mitchel D. Livingston, Ph.D. | Date:October 31, 2007 | |||||
/s/ HENDRIK G. MEIJER Hendrik G. Meijer | Date: October 31, 2007 | |||||
/s/ JAMES E. ROGERS James E. Rogers | Date: October 31, 2007 | |||||
/s/ GEORGE A. SCHAEFER, JR. George A. Schaefer, Jr. | Date: October 31, 2007 | |||||
/s/ JOHN J. SCHIFF, JR. John J. Schiff, Jr. | Date:October 31, 2007 | |||||
/s/ DUDLEY S. TAFT Dudley S. Taft | Date: October 31, 2007 | |||||
/s/ THOMAS W. TRAYLOR Thomas W. Traylor | Date: October 31, 2007 |
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