##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission File Number 0-15829
 FIRST CHARTER CORPORATION
  North Carolina(State or Other Jurisdiction of
Incorporation or Organization)
    
    56-1355866(I.R.S. Employer
Identification No.)10200 David Taylor Drive, Charlotte, NC
(Address of Principal Executive Offices)
    
    28262-2373
(Zip Code)
 (704) 688-4300
  Title of each class
    
    Name of each exchange on which registeredN/A
    
    N/A
 Title of Each Class
  Series X Junior Participating Preferred Stock Purchase Rights
 þ o
 o þ
 þ o
 o
 
 o þ o
 o þ
   Documents Incorporated by Reference




---



##### 



PageItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    9Item 1B.
    
    Unresolved Staff Comments
    
    
    17Item 2.
    
    Properties
    
    
    17Item 3.
    
    Legal Proceedings
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17Item 4A.
    
    Executive Officers of the Registrant
    
    
    18PART IIItem 5.
    
    Market For Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    19Item 6.
    
    Selected Financial Data
    
    
    21Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    21Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    51Item 8.
    
    Financial Statements and Supplementary Data
    
    
    52Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    89Item 9A.
    
    Controls and Procedures
    
    
    89Item 9B.
    
    Other Information
    
    
    89PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    90Item 11.
    
    Executive Compensation
    
    
    90Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    90Item 13.
    
    Certain Relationships and Related Transactions
    
    
    90Item 14.
    
    Principal Accountant Fees and Services
    
    
    90PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    91
 2




---



##### 



Part I
 Item 1. Business
 General
       3




---



##### 



Note Two
 Competition
 de novo
  Government Supervision and Regulation
 General
  4




---



##### 



Gramm-Leach-Bliley Financial Modernization Act of 1999
  Restrictions on Bank Holding Companies
   5




---



##### 



Interstate Banking and Branching Legislation
 de
novo
 Consumer Protection
   The USA PATRIOT Act.
 Sarbanes-Oxley Act of 2002.
 6




---



##### 



Capital and Operational Requirements
   Prompt Corrective Action under FDICIA
  7




---



##### 



Note Twenty
  Distributions Note Twenty
  Deposit Insurance
  Source of Strength
 8




---



##### 



Future Legislation
 Regulatory Recommendations.
 Other Considerations
 Risk
Factors
 Available Information
  Item 1A. Risk Factors
   Risks Related To The Corporations Business
 The Corporation Is Subject To Interest Rate Risk.
  9




---



##### 



The Corporation Is Subject To Lending Risk.
   The Corporations Allowance For Loan Losses May Be Insufficient.
  10




---



##### 



The Corporation Is Subject To Environmental Liability Risk Associated With Lending Activities.
  The Corporations Profitability Depends Significantly On Economic Conditions In The Carolinas.
  The Corporation Operates In A Highly Competitive Industry and Market Area.
  11




---



##### 




    
    The ability to develop, maintain and build upon long-term customer relationships based
on top quality service, high ethical standards and safe, sound assets.
    
    The ability to expand the Corporations market position.
    
    The scope, relevance and pricing of products and services offered to meet customer needs
and demands.
    
    The rate at which the Corporation introduces new products and services relative to its competitors.
    
    Customer satisfaction with the Corporations level of service.
    
    Industry and general economic trends.
  The Corporation Is Subject To Extensive Government Regulation and Supervision.
 Note Twenty
 The Corporations Controls and Procedures May Fail or Be Circumvented.
  12




---



##### 



New Lines of Business or New Products and Services May Subject The Corporation to Additional Risks.
  The Corporation Relies On Dividends From the Bank For Most Of Its Revenue.
 Note Twenty
 Potential Acquisitions May Disrupt The Corporations Business and Dilute Shareholder Value.
  
    
    Potential exposure to unknown or contingent liabilities of the target company.
    
    Exposure to potential asset quality issues of the target company.
    
    Difficulty and expense of integrating the operations and personnel of the target company.
    
    Potential disruption to the Corporations business.
    
    Potential diversion of the time and attention of the Corporations management.
    
    The possible loss of key employees and customers of the target company.
    
    Difficulty in estimating the value of the target company.
 13




---



##### 




    
    Potential changes in banking or tax laws or regulations that may affect the target company.
  The Corporation May Not Be Able To Attract and Retain Skilled Personnel.
  The Corporations Information Systems May Experience An Interruption Or Breach In Security.
  The Corporation Continually Encounters Technological Advancements.
  The Corporation Is Subject To Claims and Litigation Pertaining To Fiduciary Responsibility.
  14




---



##### 



The Corporation May Need Additional Capital Resources In The Future Which May Not Be Available When
Needed Or At All.
  Severe Weather, Natural Disasters and Other Adverse External Events Could Significantly Impact The
Corporations Business.
  Risks Associated With The Corporations Common Stock
 The Corporations Stock Price Can Be Volatile.
  
    
    Actual or anticipated variations in quarterly results of operations.
    
    Recommendations by securities analysts.
    
    Operating and stock price performance of other financial institutions that investors
deem comparable to the Corporation.
    
    News reports relating to trends, concerns and other issues in the financial services industry.
    
    Perceptions in the marketplace regarding the Corporation and/or its competitors.
    
    New technology used, or services offered, by competitors.
    
    Significant acquisitions, business combinations or capital commitments by or involving
the Corporation or its competitors.
 15




---



##### 




    
    Failure to integrate acquisitions or realize anticipated benefits from acquisitions.
    
    Changes in government regulations.
    
    Geopolitical conditions such as acts or threats of terrorism or military conflicts.
  The Trading Volume In The Corporations Common Stock Is Less Than That Of Other Larger Financial
Services Companies.
  An Investment In The Corporations Common Stock Is Not An Insured Deposit.
  The Corporations Articles Of Incorporation, Bylaws and Stockholder Protection Rights Agreement As
Well As Certain Banking Laws May Have An Anti-Takeover Effect.
  Risks Associated With The Corporations Industry
 The Earnings Of Financial Services Companies Are Significantly Affected By General Business And
Economic Conditions.
  16




---



##### 



Financial Services Companies Depend On The Accuracy And Completeness Of Information About Customers
And Counterparties.
  Consumers May Decide Not To Use Banks To Complete Their Financial Transactions.
  Item 1B. Unresolved Staff Comments
  Item 2. Properties
   Item 3. Legal Proceedings
  Item 4. Submission of Matters to a Vote of Security Holders
  17




---



##### 



Item 4A. Executive Officers of the Registrant
  Year PositionName
    
    Age
    
    Office and Position
    
    HeldRobert E. James, Jr.
    
    55
    
    President and Chief Executive Officer of the Registrant
    
    2005  PresentPresident and Chief Executive Officer of the Bank
    
    2004  PresentExecutive
Vice President of the Registrant
    
    1999  2005Executive Vice President of the Bank
    
    1999  2004Charles A. Caswell
    
    43
    
    Executive Vice President, Chief Financial Officer and Treasurer of the Registrant and the Bank
    
    2005  PresentExecutive Vice President and Chief Financial Officer of Integra Bank Corporation
    
    2002  2005Chief Financial Officer of RBC Centura Banks, Inc.
    
    2001  2002Treasurer of RBC Centura Banks, Inc.
    
    1997  2001Richard A. Manley
    
    50
    
    Executive Vice President and Chief Banking Officer of the Registrant
    
    2005  PresentExecutive Vice President and Chief Banking Officer of the Bank
    
    2003  PresentSenior
Vice President and Chief Banking Officer of the Bank
    
    1999  2003Stephen M. Rownd
    
    46
    
    Executive Vice President and Chief Risk Officer of the Registrant and the Bank
    
    2004  PresentExecutive Vice President and Chief Credit Officer of the Registrant and the Bank
    
    2000  2004Cecil O. Smith, Jr.
    
    58
    
    Executive Vice President and Chief Information Officer of the Registrant and the Bank
    
    2005  PresentVice President, Duke Energy Business Solutions
    
    2004  2005Senior Vice President and Chief Information Officer, Duke Energy Corporation
    
    1995  2004Stephen J. Antal
    
    50
    
    Senior Vice President, General Counsel and Corporate Secretary of the Registrant and the Bank
    
    2005  PresentMember, Womble, Carlyle, Sandridge and Rice, PLLC
    
    2002  2005Senior Vice President and Assistant
    
    1996  2002General
Counsel, Wachovia Corporation(formerly
First Union Corporation)
 18




---



##### 



PART II
 Item 5. Market For Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Market Information, Holders and Dividends
  Quarter
    
    High
    
    Low2004
    
    first
    
    21.68
    
    19.52second
    
    21.89
    
    20.05third
    
    24.50
    
    20.86fourth
    
    28.11
    
    25.002005
    
    first
    
    25.74
    
    22.33second
    
    23.34
    
    20.85third
    
    25.73
    
    22.25fourth
    
    26.66
    
    22.34
  Quarter
    
    Dividend2004
    
    first
    
    
    0.185second
    
    
    0.185third
    
    
    0.190fourth
    
    
    0.1902005
    
    first
    
    
    0.190second
    
    
    0.190third
    
    
    0.190fourth
    
    
    0.190
 Managements Discussion and Analysis of Financial Condition and Results of Operations  Capital
Management
 19




---



##### 



Equity Compensation Plan Information
   Number of securities tobe issued upon exercise
    
    Weighted average exercise
    
    Number of securitiesof outstanding options,
    
    price of outstanding
    
    remaining availablePlan category:
    
    warrants and rights (1)
    
    options, warrants and rights
    
    for future issuanceEquity compensation plans
approved by security holders (2)
    
    
    1,754,733
    
    
    $
    19.21
    
    
    
    2,057,548Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,754,733
    
    
    $
    19.21
    
    
    
    2,057,548
 (1)
    
    The table does not include outstanding options to purchase 915,972 shares of Common Stock assumed through various mergers and acquisitions. As of December 31, 2005, these assumed options had a weighted average exercise price of $23.95 per share.(2)
    
    The table includes 32,647 restricted shares of Common Stock
which are not yet vested and were granted pursuant to the
Corporations Restricted Stock Award Program, which was approved by shareholders. 302,200 shares remain available for grant pursuant to such plan. Recent Sales of Unregistered Securities
   20




---



##### 



Issuer Purchases of Equity Securities
  Total Number of
    
    Maximum Number ofShares Purchased as
    
    Shares that May YetPart of Publicly
    
    Be Purchased UnderTotal Number of
    
    Average Price Paid
    
    Announced Plans or
    
    the Plans orPeriod
    
    Shares Purchased
    
    per Share
    
    Programs (1)
    
    ProgramsOctober 1,
2005
October 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,625,400November 1,
2005
November 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,625,400December 1,
2005
December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,625,400Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,625,400
 (1)
    
    On January 24, 2002, the Corporation announced that its Board of Directors had authorized a
stock repurchase plan to acquire up to 1,500,000 shares of the Corporations common stock from time
to time. As of December 31, 2005, the Corporation had repurchased 1,374,600 shares under this
authorization. No shares were repurchased under this authorization during the quarter ended
December 31, 2005. On November 3, 2003, the Corporation announced that its Board of Directors had
authorized a stock repurchase plan to acquire up to an additional 1,500,000 shares of the
Corporations common stock from time to time. As of December 31, 2005, no shares have been
repurchased under this authorization. These stock repurchase plans have no set expiration or
termination date. Item 6. Selected Financial Data
 Table One
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  21




---



##### 



Factors that May Affect Future Results
    Overview
      22




---



##### 



2005 Significant Events
  Executive Management Team Transition
  Financial Initiatives
  
    
    The Corporation sold approximately $466 million in fixed rate investment securities with
an average book yield of 3.50 percent and an average life of 3.1 years. This resulted in a
pre-tax loss on the sale of securities of approximately $16.7 million ($10.7 million
after-tax).
    
    The Corporation extinguished $222 million of its FHLB advances and related interest rate
swaps with an average effective cost of 3-Month LIBOR plus 183 basis points, or 5.67
percent at the time of extinguishment. The remaining average life of the debt and swaps was
approximately 4.2 years and maturities ranged from June 2006 to March 2011. The Corporation
incurred a prepayment penalty of approximately $6.4 million pre-tax ($4.1 million
after-tax) to extinguish these FHLB advances and incurred a loss of approximately $7.8
million pre-tax ($5.0 million after-tax) on the extinguishment of the related interest rate
swaps.
    
    The Corporation extinguished $25 million in FHLB advances with a fixed rate of 4.82
percent and a final maturity of June 2011. The Corporation incurred a prepayment penalty of
approximately $0.5 million pre-tax ($0.3 million after-tax) to extinguish this debt.
    
    The Corporation used the remaining surplus cash proceeds, together with the proceeds of
the Trust Securities sold by First Charter Capital Trust II, or approximately $224 million,
to repay FHLB overnight borrowings. The Corporation did not incur a prepayment penalty
related to this payment.
  23




---



##### 



Market Expansion  Raleigh, NC
    Existing Markets
  The Community Banking Model
  Financial Summary
  24




---



##### 



Earnings Analysis for Fourth Quarter 2005
       25




---



##### 



Table One  Selected Financial Data
 Years ended December 31,(Dollars in thousands, except per share amounts)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Income statementInterest income
    
    $
    224,605
    
    
    $
    187,303
    
    
    $
    178,292
    
    
    $
    196,388
    
    
    $
    215,276Interest expense
    
    
    99,722
    
    
    
    64,293
    
    
    
    70,490
    
    
    
    83,227
    
    
    
    109,912Net interest income
    
    
    124,883
    
    
    
    123,010
    
    
    
    107,802
    
    
    
    113,161
    
    
    
    105,364Provision for loan losses
    
    
    9,343
    
    
    
    8,425
    
    
    
    27,518
    
    
    
    8,270
    
    
    
    4,465Noninterest income
    
    
    50,213
    
    
    
    60,896
    
    
    
    63,933
    
    
    
    47,410
    
    
    
    38,773Noninterest expense
    
    
    131,222
    
    
    
    111,017
    
    
    
    126,785
    
    
    
    97,551
    
    
    
    87,579Income before income taxes
    
    
    34,531
    
    
    
    64,464
    
    
    
    17,432
    
    
    
    54,750
    
    
    
    52,093Income tax expense
    
    
    9,220
    
    
    
    22,022
    
    
    
    3,286
    
    
    
    14,947
    
    
    
    16,768Net income
    
    $
    25,311
    
    
    $
    42,442
    
    
    $
    14,146
    
    
    $
    39,803
    
    
    $
    35,325Per common shareBasic net income
    
    $
    0.83
    
    
    $
    1.42
    
    
    $
    0.47
    
    
    $
    1.30
    
    
    $
    1.12Diluted net income
    
    
    0.82
    
    
    
    1.40
    
    
    
    0.47
    
    
    
    1.30
    
    
    
    1.12Cash dividends declared
    
    
    0.76
    
    
    
    0.75
    
    
    
    0.74
    
    
    
    0.73
    
    
    
    0.72Period-end book value
    
    
    10.53
    
    
    
    10.47
    
    
    
    10.08
    
    
    
    10.80
    
    
    
    10.06Average shares outstanding  basic
    
    
    30,457,573
    
    
    
    29,859,683
    
    
    
    29,789,969
    
    
    
    30,520,125
    
    
    
    31,480,109Average shares outstanding 
diluted
    
    
    30,784,406
    
    
    
    30,277,063
    
    
    
    30,007,435
    
    
    
    30,702,107
    
    
    
    31,660,985RatiosReturn on average shareholders
equity
    
    
    7.86
    %
    
    
    14.05
    %
    
    
    4.50
    %
    
    
    12.52
    %
    
    
    11.03
    %Return on average assets
    
    
    0.56
    
    
    
    0.98
    
    
    
    0.35
    
    
    
    1.13
    
    
    
    1.14Net interest margin (2)
    
    
    3.05
    
    
    
    3.14
    
    
    
    3.00
    
    
    
    3.52
    
    
    
    3.72Average loans to average deposits
    
    
    102.01
    
    
    
    92.86
    
    
    
    86.60
    
    
    
    94.30
    
    
    
    95.43Average equity to average assets
    
    
    7.18
    
    
    
    6.99
    
    
    
    7.85
    
    
    
    9.02
    
    
    
    10.31Efficiency ratio (1)(2)
    
    
    60.05
    
    
    
    60.44
    
    
    
    65.79
    
    
    
    64.29
    
    
    
    60.97Dividend payout
    
    
    92.68
    
    
    
    53.57
    
    
    
    157.45
    
    
    
    56.15
    
    
    
    64.29Selected period end balancesSecurities available for sale
    
    $
    899,111
    
    
    $
    1,652,732
    
    
    $
    1,601,900
    
    
    $
    1,129,212
    
    
    $
    1,076,324Loans held for sale
    
    
    6,447
    
    
    
    5,326
    
    
    
    5,137
    
    
    
    158,404
    
    
    
    7,334Loans, net
    
    
    2,917,020
    
    
    
    2,412,529
    
    
    
    2,227,030
    
    
    
    2,045,266
    
    
    
    1,921,718Allowance for loan losses
    
    
    28,725
    
    
    
    26,872
    
    
    
    25,607
    
    
    
    27,204
    
    
    
    25,843Total assets
    
    
    4,232,420
    
    
    
    4,431,605
    
    
    
    4,206,693
    
    
    
    3,745,949
    
    
    
    3,332,737Total deposits
    
    
    2,799,479
    
    
    
    2,609,846
    
    
    
    2,427,897
    
    
    
    2,322,647
    
    
    
    2,162,945Borrowings
    
    
    1,068,574
    
    
    
    763,738
    
    
    
    473,106
    
    
    
    1,042,440
    
    
    
    808,512Total liabilities
    
    
    3,908,825
    
    
    
    4,116,918
    
    
    
    3,907,254
    
    
    
    3,421,263
    
    
    
    3,023,396Total shareholders equity
    
    
    323,595
    
    
    
    314,687
    
    
    
    299,439
    
    
    
    324,686
    
    
    
    309,341Selected average balancesLoans and loans held for sale
    
    
    2,795,711
    
    
    
    2,363,107
    
    
    
    2,152,748
    
    
    
    2,122,890
    
    
    
    1,990,406Earning assets
    
    
    4,164,969
    
    
    
    4,004,678
    
    
    
    3,662,460
    
    
    
    3,261,844
    
    
    
    2,881,295Total assets
    
    
    4,489,083
    
    
    
    4,322,727
    
    
    
    4,009,511
    
    
    
    3,525,090
    
    
    
    3,104,952Total deposits
    
    
    2,740,742
    
    
    
    2,544,865
    
    
    
    2,485,711
    
    
    
    2,251,256
    
    
    
    2,085,669Borrowings
    
    
    1,375,910
    
    
    
    1,428,124
    
    
    
    1,159,889
    
    
    
    906,263
    
    
    
    652,298Total shareholders equity
    
    
    322,226
    
    
    
    302,101
    
    
    
    314,562
    
    
    
    317,952
    
    
    
    320,215
 
 (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 (loss) gain on sale of
securities.(2)
    
    Amounts and ratios in 2004 have been adjusted to correct a calculation error with
respect to the taxable-equivalent adjustment. Critical Accounting Estimates and Policies
  Note One
  26




---



##### 



Allowance for Loan Losses
       27




---



##### 



Allowance for Loan Losses
 Income Taxes
  Derivative Instruments
    28




---



##### 



Earnings Performance
  Net Interest Income and Margin
 Table Two Table Three
     29




---



##### 



Table Two  Average Balances and Net Interest Income Analysis
 2005
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    
    
    
    2003Interest
    
    Average
    
    
    
    
    
    Interest
    
    Average
    
    
    
    
    
    Interest
    
    AverageAverage
    
    Income/
    
    Yield/Rate
    
    Average
    
    Income/
    
    Yield/Rate
    
    Average
    
    Income/
    
    Yield/Rate(Dollars in thousands)
    
    Balance
    
    Expense
    
    Paid
    
    Balance
    
    Expense
    
    Paid
    
    Balance
    
    Expense
    
    PaidInterest earning
assets:Loans and loans held
for
sale(1)(2)(3)
    
    $
    2,795,711
    
    
    $
    172,961
    
    
    
    6.19
    %
    
    $
    2,363,107
    
    
    $
    124,496
    
    
    
    5.27
    %
    
    $
    2,152,748
    
    
    $
    119,375
    
    
    
    5.55
    %Securities

taxable
(5)
    
    
    1,251,477
    
    
    
    47,657
    
    
    
    3.81
    
    
    
    1,538,133
    
    
    
    59,520
    
    
    
    3.87
    
    
    
    1,393,277
    
    
    
    55,596
    
    
    
    3.99Securities

nontaxable
(5)
    
    
    110,030
    
    
    
    6,100
    
    
    
    5.54
    
    
    
    84,969
    
    
    
    5,224
    
    
    
    6.15
    
    
    
    71,427
    
    
    
    5,077
    
    
    
    7.11Federal funds sold
    
    
    1,883
    
    
    
    60
    
    
    
    3.19
    
    
    
    1,566
    
    
    
    19
    
    
    
    1.22
    
    
    
    2,074
    
    
    
    20
    
    
    
    0.99Interest bearing
bank deposits
    
    
    5,868
    
    
    
    163
    
    
    
    2.78
    
    
    
    16,903
    
    
    
    200
    
    
    
    1.18
    
    
    
    42,934
    
    
    
    465
    
    
    
    1.08Total earning
assets(4)(5)
    
    
    4,164,969
    
    
    
    226,941
    
    
    
    5.45
    
    
    
    4,004,678
    
    
    
    189,459
    
    
    
    4.73
    
    
    
    3,662,460
    
    
    
    180,533
    
    
    
    4.93Cash and due from
banks
    
    
    94,971
    
    
    
    
    
    
    
    
    
    
    
    89,103
    
    
    
    
    
    
    
    
    
    
    
    90,941Other assets
    
    
    229,143
    
    
    
    
    
    
    
    
    
    
    
    228,946
    
    
    
    
    
    
    
    
    
    
    
    256,110Total assets
    
    $
    4,489,083
    
    
    
    
    
    
    
    
    
    
    $
    4,322,727
    
    
    
    
    
    
    
    
    
    
    $
    4,009,511Interest bearing
liabilities:Demand deposits
    
    
    840,645
    
    
    
    10,331
    
    
    
    1.23
    
    
    
    848,597
    
    
    
    6,643
    
    
    
    0.78
    
    
    
    778,600
    
    
    
    6,997
    
    
    
    0.90Savings deposits
    
    
    123,305
    
    
    
    277
    
    
    
    0.22
    
    
    
    122,339
    
    
    
    321
    
    
    
    0.26
    
    
    
    118,459
    
    
    
    520
    
    
    
    0.44Other time deposits
    
    
    1,378,634
    
    
    
    42,848
    
    
    
    3.11
    
    
    
    1,211,890
    
    
    
    28,386
    
    
    
    2.34
    
    
    
    1,253,538
    
    
    
    34,027
    
    
    
    2.71Other borrowings
    
    
    1,375,910
    
    
    
    46,266
    
    
    
    3.36
    
    
    
    1,428,124
    
    
    
    28,943
    
    
    
    1.99
    
    
    
    1,159,889
    
    
    
    28,946
    
    
    
    2.50Total interest
bearing liabilities
    
    
    3,718,494
    
    
    
    99,722
    
    
    
    2.68
    
    
    
    3,610,950
    
    
    
    64,293
    
    
    
    1.77
    
    
    
    3,310,486
    
    
    
    70,490
    
    
    
    2.13Noninterest bearing
sources:Noninterest bearing
deposits
    
    
    398,158
    
    
    
    
    
    
    
    
    
    
    
    362,038
    
    
    
    
    
    
    
    
    
    
    
    335,114Other liabilities
    
    
    50,205
    
    
    
    
    
    
    
    
    
    
    
    47,638
    
    
    
    
    
    
    
    
    
    
    
    49,349Shareholders equity
    
    
    322,226
    
    
    
    
    
    
    
    
    
    
    
    302,101
    
    
    
    
    
    
    
    
    
    
    
    314,562Total liabilities
and
shareholders equity
    
    $
    4,489,083
    
    
    
    
    
    
    
    
    
    
    $
    4,322,727
    
    
    
    
    
    
    
    
    
    
    $
    4,009,511Net interest spread
(5)
    
    
    
    
    
    
    
    
    
    
    2.77
    
    
    
    
    
    
    
    
    
    
    
    2.96
    
    
    
    
    
    
    
    
    
    
    
    2.80Impact of
noninterest
bearing sources
    
    
    
    
    
    
    
    
    
    
    0.28
    
    
    
    
    
    
    
    
    
    
    
    0.18
    
    
    
    
    
    
    
    
    
    
    
    0.20Net interest income/
yield on earning
assets(5)
    
    
    
    
    
    $
    127,219
    
    
    
    3.05
    %
    
    
    
    
    
    $
    125,166
    
    
    
    3.14
    %
    
    
    
    
    
    $
    110,043
    
    
    
    3.00
    %
 (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 approximately $2,343, $2,616, and
$2,576, for 2005, 2004 and 2003, respectively.(4)
    
    Yields on nontaxable securities and loans are stated on a taxable-equivalent basis,
assuming a Federal tax rate of 35 percent and applicable state taxes
for 2005, 2004 and 2003. The adjustments made to convert to a taxable-equivalent basis were $2,336,
$2,156, and $2,241 for 2005, 2004 and 2003, respectively.(5)
    
    Amounts in 2004 have been adjusted to correct a calculation error with respect to
the taxable-equivalent adjustment. 30




---



##### 



Table Three  Volume and Rate Variance Analysis
 Dec. 31, 2005 versus Dec. 31, 2004 versus Dec. 31, 2003Increase (Decrease) in Net Interest IncomeDue to Change in Rate and Volume(1)2005
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    
    
    
    2003Income/
    
    
    
    
    
    
    
    
    
    Income/
    
    
    
    
    
    
    
    
    
    Income/(Dollars in thousands)
    
    Expense
    
    Rate
    
    Volume
    
    Expense
    
    Rate
    
    Volume
    
    ExpenseInterest income:Loans and loans held for sale (2)
    
    $
    172,961
    
    
    $
    23,688
    
    
    $
    24,777
    
    
    $
    124,496
    
    
    $
    (6,253
    )
    
    $
    11,374
    
    
    $
    119,375Securities  taxable (3)
    
    
    47,657
    
    
    
    (857
    )
    
    
    (11,006
    )
    
    
    59,520
    
    
    
    (1,771
    )
    
    
    5,695
    
    
    
    55,596Securities  nontaxable (2)(3)
    
    
    6,100
    
    
    
    (590
    )
    
    
    1,466
    
    
    
    5,224
    
    
    
    (750
    )
    
    
    897
    
    
    
    5,077Federal funds sold
    
    
    60
    
    
    
    34
    
    
    
    7
    
    
    
    19
    
    
    
    5
    
    
    
    (6
    )
    
    
    20Interest bearing bank deposits
    
    
    163
    
    
    
    180
    
    
    
    (217
    )
    
    
    200
    
    
    
    30
    
    
    
    (295
    )
    
    
    465Total interest income
    
    $
    226,941
    
    
    $
    22,455
    
    
    $
    15,027
    
    
    $
    189,459
    
    
    $
    (8,739
    )
    
    $
    17,665
    
    
    $
    180,533Interest expense:Demand deposits
    
    $
    10,331
    
    
    $
    3,768
    
    
    $
    (80
    )
    
    $
    6,643
    
    
    $
    (943
    )
    
    $
    589
    
    
    $
    6,997Savings deposits
    
    
    277
    
    
    
    (46
    )
    
    
    2
    
    
    
    321
    
    
    
    (213
    )
    
    
    14
    
    
    
    520Other time deposits
    
    
    42,848
    
    
    
    9,918
    
    
    
    4,544
    
    
    
    28,386
    
    
    
    (4,589
    )
    
    
    (1,052
    )
    
    
    34,027Other borrowings
    
    
    46,266
    
    
    
    18,730
    
    
    
    (1,407
    )
    
    
    28,943
    
    
    
    (6,068
    )
    
    
    6,065
    
    
    
    28,946Total interest expense
    
    
    99,722
    
    
    
    32,370
    
    
    
    3,059
    
    
    
    64,293
    
    
    
    (11,813
    )
    
    
    5,616
    
    
    
    70,490Net interest income
    
    $
    127,219
    
    
    $
    (9,915
    )
    
    $
    11,968
    
    
    $
    125,166
    
    
    $
    2,793
    
    
    $
    12,049
    
    
    $
    110,043
 (1)
    
    The changes for each category of income and expense are divided between the
portion of change attributable to the variance in rate or volume for
that category. The amount of change that cannot be separated is allocated to each variance
proportionately.(2)
    
    Income on nontaxable securities and loans are stated on a taxable-equivalent basis.
Refer toTable Twofor further details.(3)
    
    Amounts in 2004 have been adjusted to correct a calculation error with respect to
the taxable-equivalent adjustment. Noninterest Income
   Table Four  Schedule of Selected Items Included in Noninterest Income
 Years Ended December 31(Dollars in thousands)
    
    2005
    
    2004(Loss) gain on sale of securities
    
    $
    (16,690
    )
    
    $
    2,383Gain on sale of deposits and loans
    
    
    
    
    
    
    339Bank owned life insurance payment
    
    
    925
    
    
    
    Gain on sale of property
    
    
    1,853
    
    
    
    777
   31




---



##### 



Noninterest Expense
   Table Five  Schedule of Selected Items Included in Noninterest Expense
 Years Ended December 31(Dollars in thousands)
    
    2005
    
    2004Employee benefit plan modification
    
    $
    1,079
    
    
    $
    Separation agreement
    
    
    1,010
    
    
    
    Fixed asset correction
    
    
    (1,386
    )
    
    
    Debt extinguishment expense
    
    
    6,884
    
    
    
    Derivative termination costs
    
    
    7,770
    
    
    
    
    Income Tax Expense
 Note Fourteen
 32




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##### 



Table Six  Selected Quarterly Financial Data
 (Dollars in thousands, except
    
    
    
    
    
    2005 Quarters
    
    
    
    
    
    
    
    
    
    2004 Quartersper share amounts)
    
    Fourth
    
    Third
    
    Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    FirstIncome statementTotal interest income
    
    $
    58,639
    
    
    $
    59,080
    
    
    $
    55,604
    
    
    $
    51,282
    
    
    $
    50,085
    
    
    $
    47,082
    
    
    $
    44,906
    
    
    $
    45,230Total interest expense
    
    
    26,710
    
    
    
    27,990
    
    
    
    24,314
    
    
    
    20,708
    
    
    
    18,275
    
    
    
    16,287
    
    
    
    14,874
    
    
    
    14,857Net interest income
    
    
    31,929
    
    
    
    31,090
    
    
    
    31,290
    
    
    
    30,574
    
    
    
    31,810
    
    
    
    30,795
    
    
    
    30,032
    
    
    
    30,373Provision for loan losses
    
    
    1,795
    
    
    
    2,770
    
    
    
    2,878
    
    
    
    1,900
    
    
    
    1,825
    
    
    
    1,600
    
    
    
    2,000
    
    
    
    3,000Total noninterest income
    
    
    39
    
    
    
    17,043
    
    
    
    17,317
    
    
    
    15,814
    
    
    
    15,302
    
    
    
    16,039
    
    
    
    14,890
    
    
    
    14,665Total noninterest expense
    
    
    44,046
    
    
    
    28,943
    
    
    
    29,364
    
    
    
    28,869
    
    
    
    27,677
    
    
    
    27,347
    
    
    
    27,685
    
    
    
    28,308Net (loss) income before
income taxes
    
    
    (13,873
    )
    
    
    16,420
    
    
    
    16,365
    
    
    
    15,619
    
    
    
    17,610
    
    
    
    17,887
    
    
    
    15,237
    
    
    
    13,730Income tax (benefit) expense
    
    
    (5,543
    )
    
    
    4,368
    
    
    
    5,085
    
    
    
    5,310
    
    
    
    6,051
    
    
    
    6,499
    
    
    
    4,982
    
    
    
    4,490Net (loss) income
    
    $
    (8,330
    )
    
    $
    12,052
    
    
    $
    11,280
    
    
    $
    10,309
    
    
    $
    11,559
    
    
    $
    11,388
    
    
    $
    10,255
    
    
    $
    9,240Per share data:Basic (loss) income
    
    $
    (0.27
    )
    
    $
    0.39
    
    
    $
    0.37
    
    
    $
    0.34
    
    
    $
    0.39
    
    
    $
    0.38
    
    
    $
    0.34
    
    
    $
    0.31Diluted (loss) income
    
    
    (0.27
    )
    
    
    0.39
    
    
    
    0.37
    
    
    
    0.34
    
    
    
    0.38
    
    
    
    0.38
    
    
    
    0.34
    
    
    
    0.31Cash dividends declared
    
    
    0.190
    
    
    
    0.190
    
    
    
    0.190
    
    
    
    0.190
    
    
    
    0.190
    
    
    
    0.190
    
    
    
    0.185
    
    
    
    0.185Period-end book value
    
    
    10.53
    
    
    
    10.82
    
    
    
    10.73
    
    
    
    10.31
    
    
    
    10.47
    
    
    
    10.35
    
    
    
    9.53
    
    
    
    10.38Average shares
outstanding  basic
    
    
    30,678,743
    
    
    
    30,575,440
    
    
    
    30,409,307
    
    
    
    30,234,683
    
    
    
    29,973,996
    
    
    
    29,810,917
    
    
    
    29,763,619
    
    
    
    29,738,553Average shares
outstanding  diluted
    
    
    30,678,743
    
    
    
    30,891,887
    
    
    
    30,679,636
    
    
    
    30,630,601
    
    
    
    30,605,826
    
    
    
    30,231,191
    
    
    
    30,067,462
    
    
    
    30,029,056RatiosReturn on average
shareholders equity (1)
    
    
    (10.21
    )%
    
    
    14.57
    %
    
    
    14.12
    %
    
    
    13.21
    %
    
    
    14.73
    %
    
    
    15.28
    %
    
    
    13.90
    %
    
    
    12.20
    %Return on average assets
(1)
    
    
    (0.77
    )
    
    
    1.02
    
    
    
    1.00
    
    
    
    0.94
    
    
    
    1.04
    
    
    
    1.04
    
    
    
    0.96
    
    
    
    0.88Net interest margin (1)
    
    
    3.27
    
    
    
    2.92
    
    
    
    3.03
    
    
    
    3.06
    
    
    
    3.15
    
    
    
    3.10
    
    
    
    3.07
    
    
    
    3.19Average loans to
average deposits
    
    
    103.30
    
    
    
    103.30
    
    
    
    103.68
    
    
    
    97.04
    
    
    
    93.52
    
    
    
    92.53
    
    
    
    91.82
    
    
    
    93.31Average equity to
average assets
    
    
    7.52
    
    
    
    7.03
    
    
    
    7.05
    
    
    
    7.13
    
    
    
    7.10
    
    
    
    7.00
    
    
    
    6.54
    
    
    
    7.27Efficiency ratio (3)
    
    
    59.70
    
    
    
    59.44
    
    
    
    59.70
    
    
    
    61.41
    
    
    
    58.41
    
    
    
    59.35
    
    
    
    61.56
    
    
    
    62.56Selected period end
balancesSecurities available for sale
    
    $
    899,111
    
    
    $
    1,374,163
    
    
    $
    1,412,885
    
    
    $
    1,440,494
    
    
    $
    1,652,732
    
    
    $
    1,630,655
    
    
    $
    1,604,585
    
    
    $
    1,622,967Loans held for sale
    
    
    6,447
    
    
    
    7,309
    
    
    
    8,159
    
    
    
    6,006
    
    
    
    5,326
    
    
    
    5,468
    
    
    
    26,768
    
    
    
    17,969Loans, net
    
    
    2,917,020
    
    
    
    2,900,357
    
    
    
    2,829,127
    
    
    
    2,676,707
    
    
    
    2,412,529
    
    
    
    2,398,116
    
    
    
    2,321,986
    
    
    
    2,254,130Allowance for loan losses
    
    
    28,725
    
    
    
    29,788
    
    
    
    29,032
    
    
    
    27,483
    
    
    
    26,872
    
    
    
    26,859
    
    
    
    26,052
    
    
    
    25,736Total assets
    
    
    4,232,420
    
    
    
    4,699,722
    
    
    
    4,633,236
    
    
    
    4,513,053
    
    
    
    4,431,605
    
    
    
    4,409,044
    
    
    
    4,339,213
    
    
    
    4,247,861Total deposits
    
    
    2,799,479
    
    
    
    2,872,993
    
    
    
    2,751,385
    
    
    
    2,702,708
    
    
    
    2,609,846
    
    
    
    2,557,062
    
    
    
    2,594,765
    
    
    
    2,507,442Borrowings
    
    
    1,068,573
    
    
    
    1,438,388
    
    
    
    1,503,322
    
    
    
    1,451,756
    
    
    
    1,449,736
    
    
    
    1,482,340
    
    
    
    1,410,481
    
    
    
    1,377,374Total liabilities
    
    
    3,908,824
    
    
    
    4,368,677
    
    
    
    4,305,538
    
    
    
    4,200,799
    
    
    
    4,116,918
    
    
    
    4,100,393
    
    
    
    4,055,432
    
    
    
    3,939,124Total shareholders equity
    
    
    323,596
    
    
    
    331,045
    
    
    
    327,698
    
    
    
    312,254
    
    
    
    314,687
    
    
    
    308,651
    
    
    
    283,781
    
    
    
    308,737Selected average
balancesLoans and loans held for sale
    
    
    2,932,195
    
    
    
    2,904,954
    
    
    
    2,788,438
    
    
    
    2,551,876
    
    
    
    2,444,827
    
    
    
    2,393,362
    
    
    
    2,339,435
    
    
    
    2,273,575Earning assets
    
    
    3,235,181
    
    
    
    3,828,135
    
    
    
    3,799,326
    
    
    
    4,122,175
    
    
    
    4,101,708
    
    
    
    4,035,259
    
    
    
    3,995,390
    
    
    
    3,884,954Total assets
    
    
    4,303,821
    
    
    
    4,665,301
    
    
    
    4,543,846
    
    
    
    4,439,768
    
    
    
    4,426,604
    
    
    
    4,343,207
    
    
    
    4,316,360
    
    
    
    4,210,401Total deposits
    
    
    2,838,566
    
    
    
    2,812,165
    
    
    
    2,689,390
    
    
    
    2,629,795
    
    
    
    2,614,161
    
    
    
    2,586,524
    
    
    
    2,547,909
    
    
    
    2,436,673Borrowings (2)
    
    
    1,099,350
    
    
    
    1,471,482
    
    
    
    1,491,636
    
    
    
    1,443,909
    
    
    
    1,441,129
    
    
    
    1,411,579
    
    
    
    1,424,556
    
    
    
    1,430,127Total shareholders equity
    
    
    323,753
    
    
    
    328,115
    
    
    
    320,412
    
    
    
    316,476
    
    
    
    312,122
    
    
    
    296,539
    
    
    
    296,699
    
    
    
    303,722
 
 (1)
    
    Annualized(2)
    
    Amounts in 2004 have been adjusted to correct a calculation error with respect to
average balances.(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 (loss) gain on sale of securities. 33




---



##### 



Balance Sheet Analysis
  Securities Available-for-Sale
     Table Seven  Investment Portfolio
 December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003Securities Available for SaleUS government obligations
    
    $
    14,878
    
    
    $
    54,374
    
    
    $
    60,273US government agency obligations
    
    
    320,408
    
    
    
    691,970
    
    
    
    635,267Mortgage-backed securities
    
    
    405,449
    
    
    
    726,381
    
    
    
    771,157State, county, and municipal obligations
    
    
    108,996
    
    
    
    115,380
    
    
    
    73,087Equity securities
    
    
    44,386
    
    
    
    64,627
    
    
    
    62,116Other
    
    
    4,994
    
    
    
    
    
    
    
    Total
    
    $
    899,111
    
    
    $
    1,652,732
    
    
    $
    1,601,900
 Loan Portfolio
  34




---



##### 



Commercial Non Real Estate
  Commercial Real Estate
  Construction
  Mortgage
  Consumer
  Home Equity
  35




---



##### 



Table Eight  Loan Portfolio Composition
 December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Commercial real estate
    
    $
    780,597
    
    
    $
    776,474
    
    
    $
    724,340
    
    
    $
    798,664
    
    
    $
    631,814Commercial non real estate
    
    
    233,409
    
    
    
    212,031
    
    
    
    212,010
    
    
    
    223,178
    
    
    
    222,497Construction
    
    
    517,392
    
    
    
    332,264
    
    
    
    358,217
    
    
    
    215,859
    
    
    
    321,716Mortgage
    
    
    573,007
    
    
    
    347,606
    
    
    
    280,748
    
    
    
    237,085
    
    
    
    289,953Consumer
    
    
    358,592
    
    
    
    304,151
    
    
    
    284,448
    
    
    
    280,201
    
    
    
    253,603Home equity
    
    
    482,921
    
    
    
    467,166
    
    
    
    393,041
    
    
    
    317,730
    
    
    
    228,169Total loans
    
    
    2,945,918
    
    
    
    2,439,692
    
    
    
    2,252,804
    
    
    
    2,072,717
    
    
    
    1,947,752Less  allowance for loan
losses
    
    
    (28,725
    )
    
    
    (26,872
    )
    
    
    (25,607
    )
    
    
    (27,204
    )
    
    
    (25,843
    )Unearned income
    
    
    (173
    )
    
    
    (291
    )
    
    
    (167
    )
    
    
    (247
    )
    
    
    (191
    )Loans, net
    
    $
    2,917,020
    
    
    $
    2,412,529
    
    
    $
    2,227,030
    
    
    $
    2,045,266
    
    
    $
    1,921,718
 Deposits
  Other Borrowings
  36




---



##### 



Consolidated Balance Sheet
  Table Nine  Other Borrowings
 December 31, 2005
    
    December 31, 2004
    
    December 31, 2003(Dollars in thousands)
    
    Balance
    
    Rate
    
    Balance
    
    Rate
    
    Balance
    
    RateFederal funds purchased and securities
sold under agreements to repurchase:Balance as of
    
    $
    312,283
    
    
    
    3.01
    %
    
    $
    250,314
    
    
    
    1.84
    %
    
    $
    319,018
    
    
    
    1.03
    %Average balance
    
    
    348,051
    
    
    
    2.94
    
    
    
    245,394
    
    
    
    1.21
    
    
    
    214,499
    
    
    
    1.06Maximum outstanding at any month-end
    
    
    494,566
    
    
    
    
    
    
    
    297,818
    
    
    
    
    
    
    
    319,018Commercial Paper:Balance as of
    
    
    58,432
    
    
    
    1.79
    
    
    
    59,684
    
    
    
    1.30
    
    
    
    35,076
    
    
    
    1.27Average balance
    
    
    40,786
    
    
    
    1.62
    
    
    
    32,658
    
    
    
    1.38
    
    
    
    23,763
    
    
    
    1.36Maximum outstanding at any month-end
    
    
    58,432
    
    
    
    
    
    
    
    59,684
    
    
    
    
    
    
    
    35,076Other short-term borrowings:Balance as of
    
    
    140,000
    
    
    
    4.39
    
    
    
    266,000
    
    
    
    2.49
    
    
    
    555,000
    
    
    
    1.17Average balance
    
    
    266,121
    
    
    
    3.32
    
    
    
    383,462
    
    
    
    1.59
    
    
    
    348,292
    
    
    
    1.34Maximum outstanding at any month-end
    
    
    716,000
    
    
    
    
    
    
    
    477,000
    
    
    
    
    
    
    
    555,000
 Credit Risk Management
   37




---



##### 



Loan Administration and Underwriting
     38




---



##### 



Derivatives
 Asset-Liability Management and Interest Rate Risk
 Nonperforming Assets
    Table Ten  Nonperforming and Problem Assets
 December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Nonaccrual loans
    
    $
    10,811
    
    
    $
    13,970
    
    
    $
    14,910
    
    
    $
    26,467
    
    
    $
    23,824Other real estate
    
    
    5,124
    
    
    
    3,844
    
    
    
    6,836
    
    
    
    10,278
    
    
    
    8,049Total nonperforming assets
    
    
    15,935
    
    
    
    17,814
    
    
    
    21,746
    
    
    
    36,745
    
    
    
    31,873Loans 90 days or more past due and
still accruing interest
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    152Total nonperforming assets and loans 90
days or
more past due and still accruing interest
    
    $
    15,935
    
    
    $
    17,814
    
    
    $
    21,767
    
    
    $
    36,745
    
    
    $
    32,025Nonperforming assets as a percentage of:Total assets
    
    
    0.38
    %
    
    
    0.40
    %
    
    
    0.52
    %
    
    
    0.98
    %
    
    
    0.96
    %Loans and other real estate
    
    
    0.54
    %
    
    
    0.73
    %
    
    
    0.96
    %
    
    
    1.76
    %
    
    
    1.63
    %Ratio of allowance for loan losses to
nonperforming loans
    
    
    2.66
    x
    
    
    1.92
    x
    
    
    1.72
    x
    
    
    1.03
    x
    
    
    1.08
    x
 39




---



##### 



Allowance for Loan Losses
 Allowance for Loan Losses
      40




---



##### 



Table Eleven  Allowance For Credit Losses
 Years Ended December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Balance, January 1
    
    $
    26,872
    
    
    $
    25,607
    
    
    $
    27,204
    
    
    $
    25,843
    
    
    $
    28,447Loan charge-offs:Commercial non real estate
    
    
    3,116
    
    
    
    1,449
    
    
    
    3,484
    
    
    
    2,397
    
    
    
    2,387Commercial real estate
    
    
    1,967
    
    
    
    2,791
    
    
    
    1,898
    
    
    
    659
    
    
    
    1,892Construction
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    641
    
    
    
    50Mortgage
    
    
    167
    
    
    
    29
    
    
    
    31
    
    
    
    111
    
    
    
    125Consumer
    
    
    2,538
    
    
    
    3,275
    
    
    
    3,382
    
    
    
    2,989
    
    
    
    2,513Home equity
    
    
    857
    
    
    
    1,008
    
    
    
    685
    
    
    
    193
    
    
    
    439Total loans charged-off
    
    
    8,652
    
    
    
    8,552
    
    
    
    9,480
    
    
    
    6,990
    
    
    
    7,406Recoveries of loans previously
charged-off:Commercial non real estate
    
    
    542
    
    
    
    894
    
    
    
    451
    
    
    
    20
    
    
    
    227Commercial real estate
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    228
    
    
    
    181Construction
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    Mortgage
    
    
    36
    
    
    
    29
    
    
    
    
    
    
    
    11
    
    
    
    Consumer
    
    
    545
    
    
    
    1,053
    
    
    
    635
    
    
    
    337
    
    
    
    289Home equity
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    132
    
    
    
    57Total recoveries of loans previously
charged-off
    
    
    1,162
    
    
    
    1,976
    
    
    
    1,148
    
    
    
    728
    
    
    
    754Net charge-offs
    
    
    7,490
    
    
    
    6,576
    
    
    
    8,332
    
    
    
    6,262
    
    
    
    6,652Provision for loan losses
    
    
    9,343
    
    
    
    8,425
    
    
    
    27,518
    
    
    
    8,270
    
    
    
    4,465Adjustment for loans sold, securitized or
transferred to held for sale
    
    
    
    
    
    
    (584
    )
    
    
    (20,783
    )
    
    
    (647
    )
    
    
    (417
    )Balance, December 31
    
    $
    28,725
    
    
    $
    26,872
    
    
    $
    25,607
    
    
    $
    27,204
    
    
    $
    25,843Average loans
    
    $
    2,788,755
    
    
    $
    2,353,605
    
    
    $
    2,126,821
    
    
    $
    2,112,855
    
    
    $
    1,980,080Net charge-offs to average loans
    
    
    0.27
    %
    
    
    0.28
    %
    
    
    0.39
    %
    
    
    0.30
    %
    
    
    0.34Allowance for loan losses to
gross loans at year-end
    
    
    0.98
    
    
    
    1.10
    
    
    
    1.14
    
    
    
    1.31
    
    
    
    1.33
 Nonperforming Assets
 41




---



##### 



Table Twelve  Allocation of the Allowance for Loan Losses (1)
 December 31,2005
    
    2004
    
    2003
    
    2002
    
    2001Loan/
    
    
    
    
    
    Loan/
    
    
    
    
    
    Loan/
    
    
    
    
    
    Loan/
    
    
    
    
    
    Loan/(Dollars in thousands)
    
    Amount
    
    Total Loans
    
    Amount
    
    Total Loans
    
    Amount
    
    Total Loans
    
    Amount
    
    Total Loans
    
    Amount
    
    Total LoansCommercial real estate
    
    $
    9,877
    
    
    
    27
    %
    
    $
    11,317
    
    
    
    32
    %
    
    $
    12,011
    
    
    
    32
    %
    
    $
    12,166
    
    
    
    39
    %
    
    $
    9,532
    
    
    
    32
    %Commercial non real estate
    
    
    5,007
    
    
    
    8
    
    
    
    4,496
    
    
    
    9
    
    
    
    4,368
    
    
    
    9
    
    
    
    4,529
    
    
    
    11
    
    
    
    4,779
    
    
    
    11Construction
    
    
    4,559
    
    
    
    18
    
    
    
    4,842
    
    
    
    14
    
    
    
    3,584
    
    
    
    16
    
    
    
    3,384
    
    
    
    10
    
    
    
    4,608
    
    
    
    17Mortgage
    
    
    2,351
    
    
    
    19
    
    
    
    980
    
    
    
    14
    
    
    
    812
    
    
    
    13
    
    
    
    845
    
    
    
    11
    
    
    
    1,420
    
    
    
    15Consumer
    
    
    4,044
    
    
    
    12
    
    
    
    3,845
    
    
    
    12
    
    
    
    3,569
    
    
    
    13
    
    
    
    4,560
    
    
    
    14
    
    
    
    4,124
    
    
    
    13Home equity
    
    
    2,887
    
    
    
    16
    
    
    
    1,392
    
    
    
    19
    
    
    
    1,263
    
    
    
    17
    
    
    
    1,720
    
    
    
    15
    
    
    
    1,380
    
    
    
    12Total
    
    $
    28,725
    
    
    
    100
    %
    
    $
    26,872
    
    
    
    100
    %
    
    $
    25,607
    
    
    
    100
    %
    
    $
    27,204
    
    
    
    100
    %
    
    $
    25,843
    
    
    
    100
    %
 (1)
    
    The allowance amounts assigned to each category of loans represent the
historical loss experience of the loans adjusted for current economic events or conditions.   Provision for Loan Losses
 Allowance for Loan Losses.
 42




---



##### 



Market Risk Management
  Asset-Liability Management and Interest Rate Risk
      Table Thirteen Table Thirteen
 43




---



##### 



Note Nineteen
 Table Thirteen  Market Risk
 Expected Maturity(Dollars in thousands)
    
    Total
    
    1 Year
    
    2 Years
    
    3 Years
    
    4 Years
    
    5 Years
    
    ThereafterAssetsDebt securitiesFixed rateBook value
    
    $
    766,686
    
    
    $
    169,706
    
    
    $
    299,713
    
    
    $
    155,074
    
    
    $
    68,075
    
    
    $
    34,085
    
    
    $
    40,033Weighted average effective yield
    
    
    4.26
    %Fair value
    
    $
    751,780Variable rateBook value
    
    $
    106,826
    
    
    
    30,353
    
    
    
    30,481
    
    
    
    30,644
    
    
    
    10,348
    
    
    
    
    
    
    
    5,000Weighted average effective yield
    
    
    3.69
    %Fair value
    
    $
    102,945Loans and loans held for saleFixed rateBook value
    
    $
    732,362
    
    
    
    145,856
    
    
    
    145,561
    
    
    
    152,190
    
    
    
    72,987
    
    
    
    114,925
    
    
    
    100,843Weighted average effective yield
    
    
    6.57
    %Fair value
    
    $
    730,170Variable rateBook value
    
    $
    2,191,105
    
    
    
    808,369
    
    
    
    327,880
    
    
    
    234,021
    
    
    
    122,726
    
    
    
    95,895
    
    
    
    602,215Weighted average effective yield
    
    
    7.00
    %Fair value
    
    $
    2,201,939LiabilitiesDepositsFixed rateBook value
    
    $
    1,321,741
    
    
    
    1,069,105
    
    
    
    194,873
    
    
    
    43,252
    
    
    
    8,309
    
    
    
    6,031
    
    
    
    170Weighted average effective yield
    
    
    3.52
    %Fair value
    
    $
    1,320,489Variable rateBook value
    
    $
    1,047,980
    
    
    
    266,475
    
    
    
    266,538
    
    
    
    265,299
    
    
    
    117,878
    
    
    
    62,114
    
    
    
    69,677Weighted average effective yield
    
    
    1.12
    %Fair value
    
    $
    991,529Long-term borrowingsFixed rateBook value
    
    $
    496,002
    
    
    
    285,053
    
    
    
    160,056
    
    
    
    50,059
    
    
    
    62
    
    
    
    65
    
    
    
    706Weighted average effective yield
    
    
    3.57
    %Fair value
    
    $
    495,280Variable rateBook value
    
    $
    61,857
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,857Weighted average effective yield
    
    
    3.13
    %Fair value
    
    $
    36,191
 44




---



##### 



Table Fourteen
 Table Fourteen  Maturity and Sensitivity to Changes in Interest Rates
 December 31, 2005CommercialCommercial
    
    Non Real(Dollars in thousands)
    
    Real Estate
    
    Estate
    
    Construction
    
    TotalFixed rate:1 year or less
    
    $
    15,782
    
    
    $
    3,625
    
    
    $
    54,924
    
    
    $
    74,3311-5 years
    
    
    95,967
    
    
    
    24,640
    
    
    
    906
    
    
    
    121,513After 5 years
    
    
    125,244
    
    
    
    57,700
    
    
    
    17,951
    
    
    
    200,895Total fixed rate
    
    
    236,993
    
    
    
    85,965
    
    
    
    73,781
    
    
    
    396,739Variable rate:1 year or less
    
    
    127,741
    
    
    
    68,203
    
    
    
    290,559
    
    
    
    486,5031-5 years
    
    
    293,349
    
    
    
    53,608
    
    
    
    107,529
    
    
    
    454,486After 5 years
    
    
    119,598
    
    
    
    23,245
    
    
    
    45,109
    
    
    
    187,952Total variable rate
    
    
    540,688
    
    
    
    145,056
    
    
    
    443,197
    
    
    
    1,128,941Total selected loans
    
    $
    777,681
    
    
    $
    231,021
    
    
    $
    516,978
    
    
    $
    1,525,680
 Off-Balance Sheet Risk
 Note Seventeen Note One
  Table Fifteen  Commitments
 Amount of Commitment Expiration Per PeriodLess than
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Amounts(Dollars in thousands)
    
    1 year
    
    1-3 Years
    
    4-5 Years
    
    Over 5 Years
    
    CommittedLines of credit
    
    $
    32,073
    
    
    $
    3,108
    
    
    $
    1,793
    
    
    $
    404,881
    
    
    $
    441,855Standby letters of credit
    
    
    14,570
    
    
    
    1,030
    
    
    
    
    
    
    
    
    
    
    
    15,600Loan commitments
    
    
    498,402
    
    
    
    124,964
    
    
    
    30,295
    
    
    
    14,695
    
    
    
    668,356Total commitments
    
    $
    545,045
    
    
    $
    129,102
    
    
    $
    32,088
    
    
    $
    419,576
    
    
    $
    1,125,811
 45




---



##### 



Liquidity Risk
   Consolidated Balance Sheet
    Table Sixteen  Contractual Obligations
 Payments Due by PeriodLess than(Dollars in thousands)
    
    1 year
    
    1-3 Years
    
    4-5 Years
    
    Over 5 Years
    
    TotalOther borrowings  long-term debt
    
    $
    285,000
    
    
    $
    210,000
    
    
    $
    
    
    
    $
    62,859
    
    
    $
    557,859Operating lease obligations
    
    
    2,766
    
    
    
    4,662
    
    
    
    4,062
    
    
    
    48,102
    
    
    
    59,592Purchase obligations (1)
    
    
    5,162
    
    
    
    2,594
    
    
    
    197
    
    
    
    
    
    
    
    7,953Equity method investees funding
    
    
    2,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,645Deposits (2)
    
    
    2,546,660
    
    
    
    238,267
    
    
    
    14,513
    
    
    
    39
    
    
    
    2,799,479Other obligations (3)
    
    
    1,907
    
    
    
    4,188
    
    
    
    829
    
    
    
    1,748
    
    
    
    8,672Total contractual obligations
    
    $
    2,844,140
    
    
    $
    459,711
    
    
    $
    19,601
    
    
    $
    112,748
    
    
    $
    3,436,200
 (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. 46




---



##### 



Capital Management
       Business -Governmental Supervision and Regulation,
Business-Capital and Operational Requirements Note Twenty
   Business-Governmental Supervision and Regulation, Business-Capital and Operational
Requirements Note Twenty
 47




---



##### 



Table Seventeen  Capital Ratios
 Risk-Based CapitalLeverage Capital
    
    Tier 1 Capital
    
    Total Capital(Dollars in thousands)
    
    Amount
    
    Percentage(1)
        Amount
        Percentage(2)
        Amount
        Percentage(2)Actual
    
    $
    372,953
    
    
    
    8.67
    %
    
    $
    372,953
    
    
    
    11.20
    %
    
    $
    401,760
    
    
    
    12.06
    %Required
    
    
    172,102
    
    
    
    4.00
    
    
    
    133,208
    
    
    
    4.00
    
    
    
    266,416
    
    
    
    8.00Excess
    
    
    200,851
    
    
    
    4.67
    
    
    
    239,745
    
    
    
    7.20
    
    
    
    135,344
    
    
    
    4.06
 
 (1)
    
    Percentage of total adjusted average assets. The Federal Reserve Board minimum leverage
ratio requirement is
3.00 percent to 5.00 percent, depending on the institutions composite rating as determined by its
regulators.
The Federal Reserve Board has not advised the Corporation of any specific requirement applicable to
it.(2)
    
    Percentage of risk-weighted assets. 2004 VERSUS 2003
  Table One
 Overview
  Net Interest Income
   48




---



##### 



Provision for Loan Losses
   Noninterest Income
   Noninterest Expense
  Income Tax Expense
 Note Fourteen
 49




---



##### 



Regulatory Recommendations
   Accounting Matters
     50




---



##### 



Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 Market Risk
Management
 51




---



##### 



Item 8. Financial Statements and Supplementary Data
 Report of Independent Registered Public Accounting Firm
 
 Managements Annual Report on
Internal Control over Financial Reporting Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal
ControlIntegrated Framework
  52




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53




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Report of Independent Registered Public Accounting Firm
 
    Internal
ControlIntegrated Framework
 
 
 54




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First Charter Corporation and Subsidiaries
Consolidated Balance Sheets
 December 31,
    
    December 31,(Dollars in thousands, except share data)
    
    2005
    
    2004Assets:Cash and due from banks
    
    $
    119,080
    
    
    $
    90,238Federal funds sold
    
    
    2,474
    
    
    
    1,589Interest bearing bank deposits
    
    
    3,998
    
    
    
    6,184Cash and cash equivalents
    
    
    125,552
    
    
    
    98,011Securities available for sale (cost of $917,710 at December 31, 2005 and
$1,660,703 at December 31, 2004; carrying amount of pledged collateral
at December 31, 2005, $557,132)
    
    
    899,111
    
    
    
    1,652,732Loans held for sale
    
    
    6,447
    
    
    
    5,326Loans
    
    
    2,945,918
    
    
    
    2,439,692Less: Unearned income
    
    
    (173
    )
    
    
    (291
    )Allowance for loan losses
    
    
    (28,725
    )
    
    
    (26,872
    )Loans, net
    
    
    2,917,020
    
    
    
    2,412,529Premises and equipment, net
    
    
    106,773
    
    
    
    97,565Goodwill and other intangible assets
    
    
    21,897
    
    
    
    21,594Other assets
    
    
    155,620
    
    
    
    143,848Total assets
    
    $
    4,232,420
    
    
    $
    4,431,605Liabilities:Deposits, domestic:Noninterest bearing demand
    
    $
    429,758
    
    
    $
    377,793Interest bearing
    
    
    2,369,721
    
    
    
    2,232,053Total deposits
    
    
    2,799,479
    
    
    
    2,609,846Federal funds purchased and securities sold under
agreements to repurchase
    
    
    312,283
    
    
    
    250,314Commercial paper and other short-term borrowings
    
    
    198,432
    
    
    
    325,684Long-term debt
    
    
    557,859
    
    
    
    873,738Other liabilities
    
    
    40,772
    
    
    
    57,336Total liabilities
    
    
    3,908,825
    
    
    
    4,116,918Shareholders 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 30,736,936 and 30,054,256 shares
    
    
    133,408
    
    
    
    121,464Common stock held in Rabbi Trust for deferred compensation
    
    
    (893
    )
    
    
    (808
    )Deferred compensation payable in common stock
    
    
    893
    
    
    
    808Retained earnings
    
    
    201,442
    
    
    
    198,085Accumulated other comprehensive loss:Unrealized losses on securities available for sale, net
    
    
    (11,255
    )
    
    
    (4,862
    )Total shareholders equity
    
    
    323,595
    
    
    
    314,687Total liabilities and shareholders equity
    
    $
    4,232,420
    
    
    $
    4,431,605
  55




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##### 



First Charter Corporation and Subsidiaries
Consolidated Statements of Income
 Years Ended December 31(Dollars in thousands, except share and per share data)
    
    2005
    
    2004
    
    2003Interest income:Loans
    
    $
    172,760
    
    
    $
    124,169
    
    
    $
    118,911Federal funds sold
    
    
    60
    
    
    
    19
    
    
    
    20Interest bearing bank deposits
    
    
    163
    
    
    
    201
    
    
    
    465Securities
    
    
    51,622
    
    
    
    62,914
    
    
    
    58,896Total interest income
    
    
    224,605
    
    
    
    187,303
    
    
    
    178,292Interest expense:Deposits
    
    
    53,456
    
    
    
    35,350
    
    
    
    41,544Federal funds purchased and securities
sold under agreements to repurchase
    
    
    10,246
    
    
    
    2,969
    
    
    
    2,288Federal Home Loan Bank and other borrowings
    
    
    36,020
    
    
    
    25,974
    
    
    
    26,658Total interest expense
    
    
    99,722
    
    
    
    64,293
    
    
    
    70,490Net interest income
    
    
    124,883
    
    
    
    123,010
    
    
    
    107,802Provision for loan losses
    
    
    9,343
    
    
    
    8,425
    
    
    
    27,518Net interest income after provision for loan losses
    
    
    115,540
    
    
    
    114,585
    
    
    
    80,284Noninterest income:Service charges on deposit accounts
    
    
    27,809
    
    
    
    25,564
    
    
    
    22,143Financial management income
    
    
    5,900
    
    
    
    5,848
    
    
    
    3,705(Loss) gain on sale of securities, net
    
    
    (16,690
    )
    
    
    2,383
    
    
    
    10,287Gain on sale of credit card loan portfolio
    
    
    
    
    
    
    
    
    
    
    2,262Loss from equity method investees
    
    
    (271
    )
    
    
    (349
    )
    
    
    (285
    )Mortgage services income
    
    
    2,873
    
    
    
    1,748
    
    
    
    2,912Brokerage services income
    
    
    3,119
    
    
    
    3,112
    
    
    
    3,016Insurance services income
    
    
    12,360
    
    
    
    11,269
    
    
    
    9,408Trading gains
    
    
    51
    
    
    
    163
    
    
    
    1,801Bank owned life insurance
    
    
    4,311
    
    
    
    3,413
    
    
    
    3,888Gain on sale of property
    
    
    1,853
    
    
    
    777
    
    
    
    382ATM and merchant income
    
    
    6,702
    
    
    
    5,160
    
    
    
    4,054Other
    
    
    2,196
    
    
    
    1,808
    
    
    
    360Total noninterest income
    
    
    50,213
    
    
    
    60,896
    
    
    
    63,933Noninterest expense:Salaries and employee benefits
    
    
    63,595
    
    
    
    58,493
    
    
    
    54,752Occupancy and equipment
    
    
    16,807
    
    
    
    17,226
    
    
    
    16,504Data processing
    
    
    5,376
    
    
    
    4,034
    
    
    
    2,816Marketing
    
    
    4,668
    
    
    
    4,351
    
    
    
    4,435Postage and supplies
    
    
    4,659
    
    
    
    4,959
    
    
    
    4,521Professional services
    
    
    8,260
    
    
    
    9,574
    
    
    
    11,582Telephone
    
    
    2,194
    
    
    
    1,998
    
    
    
    2,267Amortization of intangibles
    
    
    538
    
    
    
    461
    
    
    
    441Debt extinguishment expense
    
    
    6,884
    
    
    
    
    
    
    
    19,089Derivative termination costs
    
    
    7,770
    
    
    
    
    
    
    
    Other
    
    
    10,471
    
    
    
    9,921
    
    
    
    10,378Total noninterest expense
    
    
    131,222
    
    
    
    111,017
    
    
    
    126,785Income before income taxes
    
    
    34,531
    
    
    
    64,464
    
    
    
    17,432Income taxes
    
    
    9,220
    
    
    
    22,022
    
    
    
    3,286Net income
    
    $
    25,311
    
    
    $
    42,442
    
    
    $
    14,146Net income per share:Basic
    
    $
    0.83
    
    
    $
    1.42
    
    
    $
    0.47Diluted
    
    $
    0.82
    
    
    $
    1.40
    
    
    $
    0.47Weighted average shares:Basic
    
    
    30,457,573
    
    
    
    29,859,683
    
    
    
    29,789,969Diluted
    
    
    30,784,406
    
    
    
    30,277,063
    
    
    
    30,007,435
  56




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##### 



First Charter Corporation and Subsidiaries
Consolidated Statements of Shareholders Equity
 Common Stockheld in Rabbi
    
    Deferred
    
    
    
    
    
    AccumulatedTrust for
    
    Compensation
    
    
    
    
    
    OtherCommon Stock
    
    Deferred
    
    Payable in
    
    Retained
    
    Comprehensive(Dollars in thousands, except share data)
    
    Shares
    
    Amount
    
    Compensation
    
    Common Stock
    
    Earnings
    
    Income (Loss)
    
    TotalBalance, December 31, 2002
    
    
    30,069,147
    
    
    
    122,870
    
    
    
    (476
    )
    
    
    476
    
    
    
    185,900
    
    
    
    15,916
    
    
    
    324,686Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,146
    
    
    
    
    
    
    
    14,146Unrealized loss on securities available
for sale, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,755
    )
    
    
    (9,755
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,391Common stock purchased by Rabbi Trust
for deferred compensation
    
    
    
    
    
    
    
    
    
    
    (160
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (160
    )Deferred compensation payable
in common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    160Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,038
    )
    
    
    
    
    
    
    (22,038
    )Stock options exercised
    
    
    137,575
    
    
    
    1,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,700Shares issued in connection with
business acquisition
    
    
    78,441
    
    
    
    1,323
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,323Purchase and retirement of common stock
    
    
    (565,000
    )
    
    
    (10,623
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,623
    )Balance, December 31, 2003
    
    
    29,720,163
    
    
    
    115,270
    
    
    
    (636
    )
    
    
    636
    
    
    
    178,008
    
    
    
    6,161
    
    
    
    299,439Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,442
    
    
    
    
    
    
    
    42,442Unrealized loss on securities available
for sale, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,023
    )
    
    
    (11,023
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,419Common stock purchased by Rabbi Trust
for deferred compensation
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (172
    )Deferred compensation payable
in common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    
    
    
    
    
    
    
    
    172Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,365
    )
    
    
    
    
    
    
    (22,365
    )Stock options exercised and Dividend
Reinvestment Plan stock issued
    
    
    267,576
    
    
    
    4,605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,605Shares issued in connection with
business acquisition
    
    
    47,970
    
    
    
    1,175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,175Restricted stock issued
    
    
    18,547
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    414Balance, December 31, 2004
    
    
    30,054,256
    
    
    $
    121,464
    
    
    $
    (808
    )
    
    $
    808
    
    
    $
    198,085
    
    
    $
    (4,862
    )
    
    $
    314,687Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,311
    
    
    
    
    
    
    
    25,311Unrealized loss on securities available
for sale, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,393
    )
    
    
    (6,393
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,918Common stock purchased by Rabbi Trust
for deferred compensation
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )Deferred compensation payable
in common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    85Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,954
    )
    
    
    
    
    
    
    (21,954
    )Stock options exercised and Dividend Reinvestment Plan stock issued
    
    
    646,003
    
    
    
    11,078
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,078Shares issued in connection with
business acquisition
    
    
    21,277
    
    
    
    501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    501Restricted stock issued
    
    
    15,400
    
    
    
    365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    365Balance, December 31, 2005
    
    
    30,736,936
    
    
    $
    133,408
    
    
    $
    (893
    )
    
    $
    893
    
    
    $
    201,442
    
    
    $
    (11,255
    )
    
    $
    323,595
  57




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##### 



First Charter Corporation and Subsidiaries
Consolidated Statements of Cash Flows
 Years Ended December 31(Dollars in thousands)
    
    2005
    
    2004
    
    2003Cash flows from operating activities:Net income
    
    $
    25,311
    
    
    $
    42,442
    
    
    $
    14,146Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Provision for loan losses
    
    
    9,343
    
    
    
    8,425
    
    
    
    27,518Depreciation
    
    
    7,876
    
    
    
    9,064
    
    
    
    8,952Amortization of intangibles
    
    
    538
    
    
    
    461
    
    
    
    441Premium amortization and discount accretion, net
    
    
    2,395
    
    
    
    3,296
    
    
    
    6,867Net loss (gain) on securities available for sale transactions
    
    
    16,690
    
    
    
    (2,383
    )
    
    
    (10,287
    )Net loss (gain) loss on foreclosed assets
    
    
    50
    
    
    
    (172
    )
    
    
    265Write-downs on foreclosed assets
    
    
    154
    
    
    
    116
    
    
    
    Net loss from equity method investments
    
    
    271
    
    
    
    349
    
    
    
    285Net gain on sale of property
    
    
    (1,853
    )
    
    
    (777
    )
    
    
    (382
    )Net (gain) loss on sale of equipment
    
    
    (15
    )
    
    
    62
    
    
    
    5Gain on sale of credit card loan portfolio
    
    
    
    
    
    
    
    
    
    
    (2,262
    )Gain on sale of deposits and loans
    
    
    
    
    
    
    (339
    )
    
    
    Payment on BOLI claims
    
    
    (935
    )
    
    
    
    
    
    
    Origination of mortgage loans held for sale
    
    
    (154,303
    )
    
    
    (95,635
    )
    
    
    (278,165
    )Proceeds from sale of mortgage loans held for sale
    
    
    153,182
    
    
    
    54,704
    
    
    
    144,510Increase in cash surrender value of bank owned life insurance
    
    
    (2,685
    )
    
    
    (3,413
    )
    
    
    (3,888
    )(Increase) decrease in other assets
    
    
    (1,029
    )
    
    
    6,463
    
    
    
    (5,954
    )(Decrease) Increase in other liabilities
    
    
    (16,564
    )
    
    
    9,425
    
    
    
    (9,642
    )Net cash provided by (used in) operating activities
    
    
    38,426
    
    
    
    32,088
    
    
    
    (107,591
    )Cash flows from investing activities:Proceeds from sales of securities available for sale
    
    
    652,583
    
    
    
    139,261
    
    
    
    1,004,264Proceeds from calls and maturities of securities available for sale
    
    
    166,191
    
    
    
    419,251
    
    
    
    551,072Purchase of securities available for sale
    
    
    (94,866
    )
    
    
    (587,582
    )
    
    
    (1,753,691
    )Net increase in loans
    
    
    (520,366
    )
    
    
    (204,108
    )
    
    
    (267,843
    )Proceeds from sale of loans
    
    
    
    
    
    
    5,828
    
    
    
    40,220Proceeds from sales of other real estate
    
    
    5,048
    
    
    
    5,433
    
    
    
    10,452Net purchases of premises and equipment
    
    
    (17,069
    )
    
    
    (10,136
    )
    
    
    (9,528
    )Proceeds from sale of credit card portfolio
    
    
    
    
    
    
    
    
    
    
    13,242Acquisition of businesses, net of cash paid
    
    
    
    
    
    
    (6,755
    )
    
    
    (991
    )Net cash provided by (used in) investing activities
    
    
    191,521
    
    
    
    (238,808
    )
    
    
    (412,803
    )Cash flows from financing activities:Net increase in demand, money market and savings accounts
    
    
    153,340
    
    
    
    93,219
    
    
    
    210,268Net increase (decrease) in certificates of deposit
    
    
    36,293
    
    
    
    98,229
    
    
    
    (105,016
    )Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase
    
    
    61,968
    
    
    
    (68,703
    )
    
    
    (7,727
    )Net (decrease) increase in commercial paper and other
short-term borrowings
    
    
    (127,252
    )
    
    
    (264,392
    )
    
    
    332,710Proceeds from the issuance of long-term debt and trust preferred
securities
    
    
    186,857
    
    
    
    580,000
    
    
    
    225,816Retirement of long-term debt
    
    
    (502,736
    )
    
    
    (229,368
    )
    
    
    (161,040
    )Purchase and retirement of common stock
    
    
    
    
    
    
    
    
    
    
    (10,623
    )Proceeds from issuance of common stock
    
    
    11,078
    
    
    
    4,605
    
    
    
    1,700Dividends paid
    
    
    (21,954
    )
    
    
    (22,365
    )
    
    
    (22,038
    )Net cash (used in) provided by financing activities
    
    
    (202,406
    )
    
    
    191,225
    
    
    
    464,050Net increase (decrease) in cash and cash equivalents
    
    
    27,541
    
    
    
    (15,495
    )
    
    
    (56,344
    )Cash and cash equivalents at beginning of period
    
    
    98,011
    
    
    
    113,506
    
    
    
    169,850Cash and cash equivalents at end of period
    
    $
    125,552
    
    
    $
    98,011
    
    
    $
    113,506Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    96,857
    
    
    $
    62,977
    
    
    $
    72,699Cash paid for income taxes
    
    
    21,520
    
    
    
    18,548
    
    
    
    12,619Supplemental disclosure of non-cash transactions:Transfer of loans and premises and equipment to other real estate owned
    
    
    6,532
    
    
    
    2,385
    
    
    
    7,272Unrealized loss on securities available for sale
(net of tax effect of ($4,235), ($7,045) and ($6,254) for the years ended
December 31, 2005, 2004, and 2003, respectively)
    
    
    (6,393
    )
    
    
    (11,023
    )
    
    
    (9,755
    )Issuance of common stock for business acquisitions
    
    
    501
    
    
    
    1,175
    
    
    
    1,323Loans held for sale securitized and transferred to the securities
available for sale portfolio
    
    
    
    
    
    
    40,742
    
    
    
    286,922Allowance related to loans sold, securitized or transferred
to held for sale
    
    
    
    
    
    
    584
    
    
    
    20,783
  58




---



##### 



First Charter Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005, 2004 and 2003
 Note One  Summary of Significant Accounting Policies
 General
    Principles of Consolidation and Basis of Presentation
   59




---



##### 



Recently Adopted Accounting Pronouncements
   Securities
 Note Seven
  Loans Held for Sale
  60




---



##### 



Loans
   Allowance for Loan Losses
    Derivative Instruments
  61




---



##### 



Loan Securitizations
  62




---



##### 



Servicing Rights
    Capitalized MortgageServicing Rights(Dollars in thousands)
    
    2005
    
    2004
    
    2003Balance, January 1,
    
    $
    1,647
    
    
    $
    2,106
    
    
    $
    1,478Servicing rights capitalized
    
    
    
    
    
    
    474
    
    
    
    2,440Amortization expense
    
    
    (514
    )
    
    
    (903
    )
    
    
    (1,282
    )Write-downs
    
    
    
    
    
    
    (30
    )
    
    
    (530
    )Valuation allowance
    
    
    
    
    
    
    
    
    
    
    Balance, December 31,
    
    $
    1,133
    
    
    $
    1,647
    
    
    $
    2,106
  Loan Fees and Costs
  Premises and Equipment
   63




---



##### 



Consolidated Statements of Income
 Foreclosed Properties
  Intangible Assets
     Income Taxes
  Cash and Cash Equivalents
  64




---



##### 



Securities Sold under Agreements to Repurchase
  Equity Method Investments
    Net Income Per Share
   Years Ended December 312005
    
    2004
    
    2003Basic weighted average number of common shares outstanding
    
    
    30,457,573
    
    
    
    29,859,683
    
    
    
    29,789,969Dilutive effect arising from
potential common stock issuances
    
    
    326,833
    
    
    
    417,380
    
    
    
    217,466Diluted weighted average number of common shares outstanding
    
    
    30,784,406
    
    
    
    30,277,063
    
    
    
    30,007,435
 65




---



##### 



Dividends Per Share
  Stock-Based Compensation
  Years Ended December 31,(Dollars in thousands, except per share data)
    
    2005
    
    2004
    
    2003Net income, as reported
    
    $
    25,311
    
    
    $
    42,442
    
    
    $
    14,146Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects
    
    
    (1,733
    )
    
    
    (1,821
    )
    
    
    (2,293
    )Impact of change in prior period
forfeiture assumptions
    
    
    932
    
    
    
    
    
    
    
    Pro forma net income
    
    $
    24,510
    
    
    $
    40,621
    
    
    $
    11,853Earnings per share:Basic-as reported
    
    $
    0.83
    
    
    $
    1.42
    
    
    $
    0.47Basic-pro forma
    
    $
    0.80
    
    
    $
    1.36
    
    
    $
    0.40Diluted-as reported
    
    $
    0.82
    
    
    $
    1.40
    
    
    $
    0.47Diluted-pro forma
    
    $
    0.80
    
    
    $
    1.34
    
    
    $
    0.40
  66




---



##### 



Years Ended December 31,2005
    
    2004
    
    20032000 Omnibus Stock Option and Award PlanDividend yield
    
    
    3.19
    %
    
    
    3.52
    %
    
    
    3.79
    %Risk free interest rates
    
    
    4.01
    %
    
    
    4.04
    %
    
    
    4.09
    %Expected lives
    
    8 years
    
    8 years
    
    8 yearsVolatility
    
    
    26
    %
    
    
    26
    %
    
    
    33
    %Comprehensive Stock Option PlanDividend yield
    
    
    3.20
    %
    
    
    
    
    
    
    Risk free interest rates
    
    
    4.10
    %
    
    
    
    
    
    
    Expected lives
    
    7 years
    
    
    
    
    
    
    Volatility
    
    
    26
    %
    
    
    
    
    
    
    Director PlanDividend yield
    
    
    
    
    
    
    3.70
    %
    
    
    3.79
    %Risk free interest rates
    
    
    
    
    
    
    4.05
    %
    
    
    3.95
    %Expected lives
    
    
    
    
    
    10 years
    
    9 yearsVolatility
    
    
    
    
    
    
    26
    %
    
    
    33
    %1999 Employee Stock Purchase PlanDividend yield
    
    
    2.93
    %
    
    
    3.76
    %
    
    
    3.79
    %Risk free interest rates
    
    
    2.79
    %
    
    
    1.31
    %
    
    
    4.07
    %Expected lives
    
    1 year
    
    1 year
    
    1 yearVolatility
    
    
    26
    %
    
    
    23
    %
    
    
    33
    %
 Note Two  Business Segment Information
  Note One
  67




---



##### 



For the year endedDecember 31, 2005(Dollars in thousands)
    
    The Bank
    
    Other
    
    Eliminations
    
    TotalsTotal interest income
    
    $
    224,567
    
    
    $
    38
    
    
    $
    
    
    
    $
    224,605Total interest expense
    
    
    97,490
    
    
    
    2,232
    
    
    
    
    
    
    
    99,722Net interest income (loss)
    
    
    127,077
    
    
    
    (2,194
    )
    
    
    
    
    
    
    124,883Provision for loan losses
    
    
    9,343
    
    
    
    
    
    
    
    
    
    
    
    9,343Total noninterest income
    
    
    50,074
    
    
    
    139
    
    
    
    
    
    
    
    50,213Total noninterest expense
    
    
    131,000
    
    
    
    222
    
    
    
    
    
    
    
    131,222Net income (loss) before income taxes
    
    
    36,808
    
    
    
    (2,277
    )
    
    
    
    
    
    
    34,531Income taxes expense (benefit)
    
    
    9,828
    
    
    
    (608
    )
    
    
    
    
    
    
    9,220Net income (loss)
    
    $
    26,980
    
    
    $
    (1,669
    )
    
    $
    
    
    
    $
    25,311Total loans held for sale and loans, net
    
    $
    2,923,467
    
    
    $
    
    
    
    $
    
    
    
    $
    2,923,467Total assets
    
    
    4,216,063
    
    
    
    445,788
    
    
    
    (429,432
    )
    
    
    4,232,420
 For the year endedDecember 31, 2004(Dollars in thousands)
    
    The Bank
    
    Other
    
    Eliminations
    
    TotalsTotal interest income
    
    $
    187,253
    
    
    $
    50
    
    
    $
    
    
    
    $
    187,303Total interest expense
    
    
    63,511
    
    
    
    782
    
    
    
    
    
    
    
    64,293Net interest income (loss)
    
    
    123,742
    
    
    
    (732
    )
    
    
    
    
    
    
    123,010Provision for loan losses
    
    
    8,425
    
    
    
    
    
    
    
    
    
    
    
    8,425Total noninterest income
    
    
    59,639
    
    
    
    1,257
    
    
    
    
    
    
    
    60,896Total noninterest expense
    
    
    110,814
    
    
    
    203
    
    
    
    
    
    
    
    111,017Net income before income taxes
    
    
    64,142
    
    
    
    322
    
    
    
    
    
    
    
    64,464Income taxes expense
    
    
    21,912
    
    
    
    110
    
    
    
    
    
    
    
    22,022Net income
    
    $
    42,230
    
    
    $
    212
    
    
    $
    
    
    
    $
    42,442Total loans held for sale and loans, net
    
    $
    2,417,855
    
    
    $
    
    
    
    $
    
    
    
    $
    2,417,855Total assets
    
    
    4,410,081
    
    
    
    391,703
    
    
    
    (370,179
    )
    
    
    4,431,605
 For the year endedDecember 31, 2003(Dollars in thousands)
    
    The Bank
    
    Other
    
    Eliminations
    
    TotalsTotal interest income
    
    $
    178,220
    
    
    $
    72
    
    
    $
    
    
    
    $
    178,292Total interest expense
    
    
    69,893
    
    
    
    597
    
    
    
    
    
    
    
    70,490Net interest income (loss)
    
    
    108,327
    
    
    
    (525
    )
    
    
    
    
    
    
    107,802Provision for loan losses
    
    
    27,518
    
    
    
    
    
    
    
    
    
    
    
    27,518Total noninterest income
    
    
    63,896
    
    
    
    37
    
    
    
    
    
    
    
    63,933Total noninterest expense
    
    
    126,718
    
    
    
    67
    
    
    
    
    
    
    
    126,785Net income before income taxes
    
    
    17,987
    
    
    
    (555
    )
    
    
    
    
    
    
    17,432Income taxes expense
    
    
    3,391
    
    
    
    (105
    )
    
    
    
    
    
    
    3,286Net income
    
    $
    14,596
    
    
    $
    (450
    )
    
    $
    
    
    
    $
    14,146Total loans held for sale and loans, net
    
    $
    2,232,167
    
    
    $
    
    
    
    $
    
    
    
    $
    2,232,167Total assets
    
    
    4,183,057
    
    
    
    354,680
    
    
    
    (331,044
    )
    
    
    4,206,693
 Note Three  Acquisitions
 (a) Insurance Agencies
 68




---



##### 



(b) Third Party Benefits Administrator
 Note Four  Goodwill and Other Intangible Assets
  December 31,2005
    
    2004Gross Carrying
    
    Accumulated
    
    Gross Carrying
    
    Accumulated(Dollars in thousands)
    
    Amount
    
    Amortization
    
    Amount
    
    AmortizationAmortized intangible assets:Noncompete agreements
    
    $
    1,037
    
    
    $
    979
    
    
    $
    1,037
    
    
    $
    949Customer lists
    
    
    2,676
    
    
    
    998
    
    
    
    2,270
    
    
    
    545Other intangibles (1)
    
    
    379
    
    
    
    127
    
    
    
    306
    
    
    
    72Total
    
    $
    4,092
    
    
    $
    2,104
    
    
    $
    3,613
    
    
    $
    1,566Unamortized intangible assets:Goodwill (2)
    
    $
    19,910
    
    
    $
    
    
    
    $
    19,547
    
    
    $
    
 (1)
    
    Other intangibles include trade name and proprietary software.(2)
    
    Goodwill of $19,910 is recorded in the Bank.
    69




---



##### 



Noncompete
    
    Customer
    
    Other(Dollars in thousands)
    
    Agreements
    
    Lists
    
    Intangibles
    
    Total2006
    
    $
    30
    
    
    $
    474
    
    
    $
    62
    
    
    $
    5662007
    
    
    28
    
    
    
    386
    
    
    
    54
    
    
    
    4682008
    
    
    
    
    
    
    298
    
    
    
    46
    
    
    
    3442009
    
    
    
    
    
    
    210
    
    
    
    36
    
    
    
    2462010
    
    
    
    
    
    
    125
    
    
    
    27
    
    
    
    1522011 and after
    
    
    
    
    
    
    185
    
    
    
    27
    
    
    
    212Total
    
    $
    58
    
    
    $
    1,678
    
    
    $
    252
    
    
    $
    1,988
 Note Five  Comprehensive Income
   Years ended December 31,2005
    
    2004
    
    2003Before Tax
    
    
    
    
    
    After Tax
    
    Before Tax
    
    
    
    
    
    After Tax
    
    Before Tax
    
    
    
    
    
    After Tax(Dollars in thousands)
    
    Amount
    
    Tax Effect
    
    Amount
    
    Amount
    
    Tax Effect
    
    Amount
    
    Amount
    
    Tax Effect
    
    AmountComprehensive income:Net income
    
    $
    34,531
    
    
    $
    9,220
    
    
    $
    25,311
    
    
    $
    64,464
    
    
    $
    22,022
    
    
    $
    42,442
    
    
    $
    17,432
    
    
    $
    3,286
    
    
    $
    14,146Other comprehensive (loss) income:Unrealized (losses) gains on securities:Unrealized (losses) gains arising during period
    
    
    (27,318
    )
    
    
    (10,886
    )
    
    
    (16,432
    )
    
    
    (15,685
    )
    
    
    (6,116
    )
    
    
    (9,569
    )
    
    
    (5,722
    )
    
    
    (2,242
    )
    
    
    (3,480
    )Less: Reclassification for realized (losses) gains
    
    
    (16,690
    )
    
    
    (6,651
    )
    
    
    (10,039
    )
    
    
    2,383
    
    
    
    929
    
    
    
    1,454
    
    
    
    10,287
    
    
    
    4,012
    
    
    
    6,275Unrealized (losses), net of reclassification
    
    $
    (10,628
    )
    
    $
    (4,235
    )
    
    $
    (6,393
    )
    
    $
    (18,068
    )
    
    $
    (7,045
    )
    
    $
    (11,023
    )
    
    $
    (16,009
    )
    
    $
    (6,254
    )
    
    $
    (9,755
    )Total comprehensive income
    
    $
    23,903
    
    
    $
    4,985
    
    
    $
    18,918
    
    
    $
    46,396
    
    
    $
    14,977
    
    
    $
    31,419
    
    
    $
    1,423
    
    
    $
    (2,968
    )
    
    $
    4,391
 70




---



##### 



Note Six  Securities Available-for-Sale
  December 31, 2005Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair(Dollars in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    ValueUS government obligations
    
    $
    14,905
    
    
    $
    
    
    
    $
    27
    
    
    $
    14,878US government agency obligations
    
    
    327,418
    
    
    
    21
    
    
    
    7,032
    
    
    
    320,407Mortgage-backed securities
    
    
    417,891
    
    
    
    335
    
    
    
    12,776
    
    
    
    405,450State, county, and municipal obligations
    
    
    108,298
    
    
    
    1,125
    
    
    
    427
    
    
    
    108,996Equity securities
    
    
    44,198
    
    
    
    188
    
    
    
    
    
    
    
    44,386Other
    
    
    5,000
    
    
    
    
    
    
    
    6
    
    
    
    4,994Total
    
    $
    917,710
    
    
    $
    1,669
    
    
    $
    20,268
    
    
    $
    899,111
 December 31, 2004Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair(Dollars in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    ValueUS government obligations
    
    $
    54,755
    
    
    $
    331
    
    
    $
    712
    
    
    $
    54,374US government agency obligations
    
    
    697,083
    
    
    
    908
    
    
    
    6,021
    
    
    
    691,970Mortgage-backed securities
    
    
    731,389
    
    
    
    3,349
    
    
    
    8,357
    
    
    
    726,381State, county, and municipal obligations
    
    
    112,935
    
    
    
    2,568
    
    
    
    123
    
    
    
    115,380Equity securities
    
    
    64,541
    
    
    
    86
    
    
    
    
    
    
    
    64,627Total
    
    $
    1,660,703
    
    
    $
    7,242
    
    
    $
    15,213
    
    
    $
    1,652,732
  Due after 1
    
    Due after 5Due in 1 year
    
    through 5
    
    through 10
    
    Due afteror less
    
    years
    
    years
    
    10 years
    
    Total(Dollars in thousands)
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    YieldFair value of securities
available for saleU.S. government
obligations
    
    $
    14,878
    
    
    
    4.28
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    14,878
    
    
    
    4.28
    %U.S. government
agency obligations
    
    
    16,033
    
    
    
    4.77
    
    
    
    304,374
    
    
    
    3.58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    320,407
    
    
    
    3.64Mortgage-backed
securities (1)
    
    
    11,791
    
    
    
    4.49
    
    
    
    351,032
    
    
    
    4.16
    
    
    
    42,627
    
    
    
    4.66
    
    
    
    
    
    
    
    
    
    
    
    405,450
    
    
    
    4.22State and municipal
obligations
    
    
    17,979
    
    
    
    7.28
    
    
    
    44,648
    
    
    
    6.37
    
    
    
    10,826
    
    
    
    5.20
    
    
    
    35,543
    
    
    
    5.34
    
    
    
    108,996
    
    
    
    6.07Equity securities (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,386
    
    
    
    4.38
    
    
    
    44,386
    
    
    
    4.38Other
    
    
    
    
    
    
    
    
    
    
    4,994
    
    
    
    6.69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,994
    
    
    
    6.69Total
    
    $
    60,681
    
    
    
    5.34
    %
    
    $
    705,048
    
    
    
    4.07
    %
    
    $
    53,453
    
    
    
    4.77
    %
    
    $
    79,929
    
    
    
    4.81
    %
    
    $
    899,111
    
    
    
    4.26
    %Amortized cost of securities
available for sale
    
    $
    60,516
    
    
    
    
    
    
    $
    723,144
    
    
    
    
    
    
    $
    54,348
    
    
    
    
    
    
    $
    79,702
    
    
    
    
    
    
    $
    917,710
 (1)
    
    Maturities estimated based on average life of security.(2)
    
    Although equity securities have no stated maturity, they are presented for illustrative purposes only.
  71




---



##### 



Years ended December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003Gross gains
    
    $
    1,225
    
    
    $
    3,447
    
    
    $
    10,376Gross losses
    
    
    (17,915
    )
    
    
    (1,064
    )
    
    
    (89
    )Net (losses) gains
    
    $
    (16,690
    )
    
    $
    2,383
    
    
    $
    10,287
      As of December 31, 2005Less than 12 months
    
    12 months or longer
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    Unrealized(Dollars in thousands)
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesUS government obligations
    
    $
    14,878
    
    
    $
    (27
    )
    
    $
    
    
    
    $
    
    
    
    $
    14,878
    
    
    $
    (27
    )US government agency obligations
    
    
    58,593
    
    
    
    (1,111
    )
    
    
    245,781
    
    
    
    (5,921
    )
    
    
    304,374
    
    
    
    (7,032
    )Mortgage-backed securities
    
    
    115,587
    
    
    
    (1,914
    )
    
    
    268,121
    
    
    
    (10,862
    )
    
    
    383,708
    
    
    
    (12,776
    )State, county and muncipal obligations
    
    
    13,569
    
    
    
    (170
    )
    
    
    7,039
    
    
    
    (257
    )
    
    
    20,608
    
    
    
    (427
    )Other
    
    
    4,994
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    4,994
    
    
    
    (6
    )Total temporarily impaired securities
    
    $
    207,621
    
    
    $
    (3,228
    )
    
    $
    520,941
    
    
    $
    (17,040
    )
    
    $
    728,562
    
    
    $
    (20,268
    )
  72




---



##### 



Note Seven  Trading Activity
 Note Fifteen
 Note Eight  Derivatives
  Note Nine  Loans
   December 31,2005
    
    2004(Dollars in thousands)
    
    Amount
    
    Percent
    
    Amount
    
    PercentCommercial real estate
    
    $
    780,597
    
    
    
    26.5
    %
    
    $
    776,474
    
    
    
    31.8
    %Commercial non real estate
    
    
    233,409
    
    
    
    7.9
    
    
    
    212,031
    
    
    
    8.7Construction
    
    
    517,392
    
    
    
    17.6
    
    
    
    332,264
    
    
    
    13.6Mortgage
    
    
    573,007
    
    
    
    19.4
    
    
    
    347,606
    
    
    
    14.2Consumer
    
    
    358,592
    
    
    
    12.2
    
    
    
    304,151
    
    
    
    12.5Home equity
    
    
    482,921
    
    
    
    16.4
    
    
    
    467,166
    
    
    
    19.2Total loans
    
    $
    2,945,918
    
    
    
    100.0
    %
    
    $
    2,439,692
    
    
    
    100.0
    %
  73




---



##### 



December 31,(Dollars in thousands)
    
    2005
    
    2004Nonaccrual loans
    
    $
    10,811
    
    
    $
    13,970Other real estate owned
    
    
    5,124
    
    
    
    3,844Total nonperforming assets
    
    
    15,935
    
    
    
    17,814Loans 90 days or more past due and still accruing
    
    
    
    
    
    
    Total nonperforming assets and loans 90 days
or more past due and still accruing
    
    $
    15,935
    
    
    $
    17,814
    (Dollars in thousands)Balance at December 31, 2004
    
    $
    760New loans
    
    
    878Principal repayments
    
    
    (175
    )Director and Officer changes
    
    
    283Balance at December 31, 2005
    
    $
    1,746
  74




---



##### 



Note Ten  Allowance for Loan Losses
  Years ended December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003Beginning balance
    
    $
    26,872
    
    
    $
    25,607
    
    
    $
    27,204Provision for loan losses
    
    
    9,343
    
    
    
    8,425
    
    
    
    27,518Allowance related to loans sold, securitized
or transferred to held for sale
    
    
    
    
    
    
    (584
    )
    
    
    (20,783
    )Charge-offs
    
    
    (8,652
    )
    
    
    (8,552
    )
    
    
    (9,480
    )Recoveries
    
    
    1,162
    
    
    
    1,976
    
    
    
    1,148Net loan charge-offs
    
    
    (7,490
    )
    
    
    (6,576
    )
    
    
    (8,332
    )Ending balance
    
    $
    28,725
    
    
    $
    26,872
    
    
    $
    25,607
 Note Eleven  Premises and Equipment
  December 31,(Dollars in thousands)
    
    2005
    
    2004Land
    
    $
    23,817
    
    
    $
    23,490Buildings
    
    
    73,954
    
    
    
    71,745Furniture and equipment
    
    
    53,281
    
    
    
    55,261Leasehold improvements
    
    
    10,446
    
    
    
    2,973Construction in progress
    
    
    2,023
    
    
    
    2,384Total premises and equipment
    
    
    163,521
    
    
    
    155,853Less accumulated depreciation and amortization
    
    
    56,748
    
    
    
    58,288Premises and equipment, net
    
    $
    106,773
    
    
    $
    97,565
 Consolidated Statements of Income
 Note Twelve  Deposits
  December 31,(Dollars in thousands)
    
    2005
    
    2004Noninterest bearing demand
    
    $
    429,758
    
    
    $
    377,793Interest bearing demand
    
    
    368,291
    
    
    
    348,677Money market accounts
    
    
    559,865
    
    
    
    478,314Savings deposits
    
    
    119,824
    
    
    
    119,615Certificates of deposit
    
    
    1,321,741
    
    
    
    1,285,447Total deposits
    
    $
    2,799,479
    
    
    $
    2,609,846
  75




---



##### 



(Dollars in thousands)2006
    
    $
    1,068,9232007
    
    
    194,5812008
    
    
    43,6852009
    
    
    8,4722010
    
    
    6,0412011 and after
    
    
    39Total
    
    $
    1,321,741
 Note Thirteen  Other Borrowings
  December 31,(Dollars in thousands)
    
    2005
    
    2004Federal funds purchased and securities sold under
agreements to repurchase
    
    $
    312,283
    
    
    $
    250,314Commercial paper and other short-term borrowings
    
    
    198,432
    
    
    
    325,684Long-term debt
    
    
    557,859
    
    
    
    873,738Total other borrowings
    
    $
    1,068,574
    
    
    $
    1,449,736
      Consolidated Balance Sheet
 76




---



##### 



AggregatePrincipal
    
    
    Aggregate
    
    
    
    
    
    
    Per AnnumAmount of Trust
    
    
    Prinicpal
    
    
    Stated
    
    
    Interest
    
    
    InterestPreferred
    
    
    Amount of
    
    
    Maturity of
    
    
    Rate of the
    
    
    Payment
    
    
    RedemptionIssuer
    
    Issuance Date
    
    
    Securitites
    
    
    the Notes
    
    
    the Notes
    
    
    Notes
    
    
    Dates
    
    
    PeriodFirst Charter Corporation3 mo.
    
    
    3/15, 6/15,September
    
    LIBOR +
    
    
    9/15,
    
    
    On or afterCapital Trust I
    
    June 2005
    
    
    35,000
    
    
    
    36,083
    
    
    
    2035
    
    
    169 bps
    
    
    12/15
    
    
    
    9/15/20103 mo.
    
    
    3/15, 6/15,December
    
    LIBOR +
    
    
    9/15,
    
    
    On or afterCapital Trust II
    
    September 2005
    
    
    25,000
    
    
    
    25,774
    
    
    
    2035
    
    
    142 bps
    
    
    12/15
    
    
    
    12/15/2010Total
    
    
    
    
    
    $
    60,000
    
    
    $
    61,857
     (Dollars in thousands)
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    TotalFederal funds purchased and securities sold under
agreements to repurchase
    
    $
    312,283
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    312,283Commercial paper and other short-term borrowings
    
    
    198,432
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198,432Long-term debt
    
    
    285,000
    
    
    
    160,000
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    62,859
    
    
    
    557,859Total other borrowings
    
    $
    795,715
    
    
    $
    160,000
    
    
    $
    50,000
    
    
    $
    
    
    
    $
    
    
    
    $
    62,859
    
    
    $
    1,068,574
 Note Fourteen  Income Tax
  Years ended December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003Current:Federal
    
    $
    8,763
    
    
    $
    15,470
    
    
    $
    (473
    )State
    
    
    704
    
    
    
    2,426
    
    
    
    94Total current
    
    $
    9,467
    
    
    $
    17,896
    
    
    $
    (379
    )Deferred:Federal
    
    $
    (219
    )
    
    $
    4,193
    
    
    $
    3,565State
    
    
    (28
    )
    
    
    (67
    )
    
    
    100Total deferred
    
    $
    (247
    )
    
    $
    4,126
    
    
    $
    3,665Total income taxes:Federal
    
    $
    8,544
    
    
    $
    19,663
    
    
    $
    3,092State
    
    
    676
    
    
    
    2,359
    
    
    
    194Total income taxes
    
    $
    9,220
    
    
    $
    22,022
    
    
    $
    3,286
 77




---



##### 



Years ended December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003Net income
    
    $
    9,220
    
    
    $
    22,022
    
    
    $
    3,286Shareholders equity, for unrealized losses
on securities available for sale
    
    
    (4,235
    )
    
    
    (7,045
    )
    
    
    (6,254
    )Total
    
    $
    4,985
    
    
    $
    14,977
    
    
    $
    (2,968
    )
  Years ended December 31,(Dollars in thousands)
    
    2005
    
    2004
    
    2003Federal tax at statutory rate
    
    $
    12,086
    
    
    
    35.00
    %
    
    $
    22,563
    
    
    
    35.00
    %
    
    $
    6,101
    
    
    
    35.00
    %Increase (reduction) in income taxes
resulting from:Tax exempt income
    
    
    (1,335
    )
    
    
    (3.87
    )
    
    
    (1,318
    )
    
    
    (2.04
    )
    
    
    (1,058
    )
    
    
    (6.07
    )Bank owned life insurance
    
    
    (1,509
    )
    
    
    (4.37
    )
    
    
    (1,195
    )
    
    
    (1.85
    )
    
    
    (1,361
    )
    
    
    (7.81
    )State income tax, net of federal
    
    
    439
    
    
    
    1.27
    
    
    
    1,534
    
    
    
    2.37
    
    
    
    126
    
    
    
    0.72Change in valuation allowance
    
    
    (526
    )
    
    
    (1.52
    )
    
    
    (200
    )
    
    
    (0.31
    )
    
    
    63
    
    
    
    0.36Other, net
    
    
    65
    
    
    
    0.19
    
    
    
    638
    
    
    
    0.99
    
    
    
    (585
    )
    
    
    (3.35
    )Total
    
    $
    9,220
    
    
    
    26.70
    %
    
    $
    22,022
    
    
    
    34.16
    %
    
    $
    3,286
    
    
    
    18.85
    %
  Years ended December 31,(Dollars in thousands)
    
    2005
    
    
    
    
    
    2004
    
    2003Deferred tax expense (benefit) (exclusive of the
effects of other components below)
    
    $
    (247
    )
    
    
    
    
    
    $
    4,126
    
    
    $
    3,665Shareholders equity, for unrealized gains
(losses) on securities available for sale
    
    
    (4,235
    )
    
    
    
    
    
    
    (7,045
    )
    
    
    (6,254
    )Purchase accounting adjustment
    
    
        
    
    
    

    
    
    
    (135
    )
    
    
    (269
    )Total
    
    $
    (4,482
    )
    
    
    
    
    
    $
    (3,054
    )
    
    $
    (2,858
    )
  December 31,(Dollars in thousands)
    
    2005
    
    2004Deferred tax assets:Allowance for loan losses
    
    $
    11,352
    
    
    $
    10,631Unrealized losses on securities available for sale
    
    
    7,213
    
    
    
    2,978Deferred compensation
    
    
    2,465
    
    
    
    2,571Investments
    
    
    506
    
    
    
    523Depreciable assets
    
    
    4,547
    
    
    
    6,076Other
    
    
    1,955
    
    
    
    1,310Total gross deferred tax assets
    
    
    28,038
    
    
    
    24,089Less valuation allowance
    
    
    110
    
    
    
    636Net deferred tax assets
    
    
    27,928
    
    
    
    23,453Deferred tax liabilities:Loan Origination Costs
    
    
    (2,605
    )
    
    
    (2,605
    )Federal Home Loan Bank of Atlanta stock
    
    
    (1,053
    )
    
    
    (1,053
    )Mortgage Servicing Rights
    
    
    (447
    )
    
    
    (650
    )Intangibles
    
    
    (1,248
    )
    
    
    (944
    )Other
    
    
    (515
    )
    
    
    (623
    )Total gross deferred tax liabilities
    
    
    (5,868
    )
    
    
    (5,875
    )Net deferred tax asset
    
    $
    22,060
    
    
    $
    17,578
 78




---



##### 



Note Fifteen  Employee Benefit Plans
 First Charter Retirement Savings Plan.
 First Charter Option Plan Trust.
 First Charter Directors Option Deferral Plan.
 79




---



##### 



Note Sixteen  Shareholders Equity, Stock Plans and Stock Awards
 Stock Repurchase Programs.
  Deferred Compensation for Non-Employee Directors.
  Stockholder Protection Rights Agreement.
   80




---



##### 



Dividend Reinvestment and Stock Purchase Plan.
 Restricted Stock Award Program.
 WeightedAverage GrantShares
    
    
    PriceOutstanding at December 31, 2003
    
    
    1,000
    
    
    $
    13.4375Granted
    
    
    18,547
    
    
    
    22.3400Vested
    
    
    (1,000
    )
    
    
    13.4375Forfeited
    
    
    
    
    
    
    Outstanding at December 31, 2004
    
    
    18,547
    
    
    $
    22.3400Granted
    
    
    17,400
    
    
    
    23.9755Vested
    
    
    (1,300
    )
    
    
    23.6600Forfeited
    
    
    (2,000
    )
    
    
    25.4900Outstanding at December 31, 2005
    
    
    32,647
    
    
    $
    22.9724
 First Charter Comprehensive Stock Option Plan.
 First Charter Corporation Stock Option Plan for Non-Employee Directors.
 81




---



##### 



2000 Omnibus Stock Option and Award Plan.
 Employee Stock Purchase Plans
    82




---



##### 



Summary of Stock Option and Employee Stock Purchase Plan Programs.
 2005
    
    2004 (1)
    
    2003 (1)Weighted-
    
    
    
    
    
    Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    Exercise(Option)
    
    
    
    
    
    (Option)
    
    
    
    
    
    (Option)Summary of Stock Options
    
    Shares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at January 1
    
    
    2,801,263
    
    
    $
    19.97
    
    
    
    2,742,283
    
    
    $
    19.57
    
    
    
    2,406,889
    
    
    $
    19.43Granted
    
    
    461,996
    
    
    
    23.55
    
    
    
    393,134
    
    
    
    20.33
    
    
    
    558,576
    
    
    
    18.20Exercised
    
    
    (499,194
    )
    
    
    16.93
    
    
    
    (238,827
    )
    
    
    16.51
    
    
    
    (113,019
    )
    
    
    11.57Forfeited
    
    
    (126,007
    )
    
    
    21.68
    
    
    
    (95,327
    )
    
    
    18.52
    
    
    
    (110,163
    )
    
    
    17.79Outstanding at December 31
    
    
    2,638,058
    
    
    
    21.09
    
    
    
    2,801,263
    
    
    
    19.97
    
    
    
    2,742,283
    
    
    
    19.57Options exercisable at December 31
    
    
    1,786,287
    
    
    
    21.01
    
    
    
    1,948,723
    
    
    
    20.42
    
    
    
    1,849,463
    
    
    
    20.53Weighted-average Black-Scholes fair value
of options granted during the year
    
    
    
    
    
    $
    5.54
    
    
    
    
    
    
    $
    4.48
    
    
    
    
    
    
    $
    4.81
 (1)
    
    Amounts for 2004 and 2003 have been adjusted to correct an error in the calculation of exercised and forfeited options   Outstanding Options
    
    Options ExercisableNumber
    
    Weighted Average
    
    
    
    
    
    NumberRange of
    
    Outstanding
    
    Remaining
    
    Weighted Average
    
    Outstanding
    
    Weighted AverageExercise Prices
    
    at December 31
    
    Contractual Life
    
    Exercise Price
    
    at December 31
    
    Exercise Price$0.0000 - $5.0000
    
    
    6,000
    
    
    .2 years
    
    $
    4.9700
    
    
    
    6,000
    
    
    $
    4.9700$5.0100 - $10.0000
    
    
    3,400
    
    
    3.7 years
    
    
    9.0400
    
    
    
    3,400
    
    
    
    9.0400$10.0100 - $12.5000
    
    
    18,702
    
    
    3.0 years
    
    
    11.6300
    
    
    
    18,702
    
    
    
    11.6300$12.5100 - $15.0000
    
    
    94,534
    
    
    3.5 years
    
    
    14.4340
    
    
    
    94,534
    
    
    
    14.4340$15.0100 - $17.5000
    
    
    428,361
    
    
    5.2 years
    
    
    16.7092
    
    
    
    365,210
    
    
    
    16.6052$17.5100 - $20.0000
    
    
    488,602
    
    
    5.6 years
    
    
    18.4188
    
    
    
    282,205
    
    
    
    18.3745$20.0100 - $22.5000
    
    
    268,306
    
    
    7.7 years
    
    
    20.8385
    
    
    
    59,342
    
    
    
    20.9845$22.5100 - $25.0000
    
    
    1,098,686
    
    
    3.7 years
    
    
    23.8795
    
    
    
    736,579
    
    
    
    23.9844$25.0100 - $27.5000
    
    
    231,467
    
    
    1.7 years
    
    
    25.9880
    
    
    
    220,315
    
    
    
    26.0004Total
    
    
    2,638,058
    
    
    4.5 years
    
    $
    21.0921
    
    
    
    1,786,287
    
    
    $
    21.0113
 Note Seventeen  Commitments, Contingencies and Off-Balance Sheet Risk
 Commitments and Off-Balance Sheet Risk
 83




---



##### 



Contingencies
 Note Fourteen
 Note Eighteen  Related Party Transactions
  Note Nine
 Note Nineteen  Fair Value of Financial Instruments
  84




---



##### 



Short-term financial instruments
 Derivatives 
 Loans
held for sale
 Loans
 Deposit
accounts
 Long-term debt 
  December 31,2005
    
    2004Estimated
    
    
    
    
    
    EstimatedCarrying
    
    Fair
    
    Carrying
    
    Fair(Dollars in thousands)
    
    Amount
    
    Value
    
    Amount
    
    ValueFinancial assets:Loans, net of allowance for loan losses
    
    
    2,917,020
    
    
    
    2,925,661
    
    
    
    2,412,529
    
    
    
    2,522,645Financial liabilities:Deposits
    
    
    2,799,479
    
    
    
    2,705,001
    
    
    
    2,609,846
    
    
    
    2,558,570Long Term Borrowings
    
    
    557,859
    
    
    
    595,280
    
    
    
    873,738
    
    
    
    894,827Derivative instruments
    
    
    
    
    
    
    
    
    
    
    4,247
    
    
    
    4,247
 85




---



##### 



Note Twenty  Regulatory Matters
     For Capital
    
    
    Well CapitalizedAdequacy Purposes
    
    
    DesignationActual
    
    
    
    
    
    
    Minimum
    
    
    
    
    
    
    Minimum(Dollars in thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAt December 31, 2005:Total Capital (to Risk Weighted Assets)First Charter Corporation
    
    $
    401,760
    
    
    
    12.06
    %
    
    $
    266,416
    
    
    
    8.00
    %
    
    None
    
    NoneFirst Charter Bank
    
    
    383,569
    
    
    
    11.56
    
    
    
    265,504
    
    
    
    8.00
    
    
    $
    331,880
    
    
    
    10.00
    %Tier I Capital (to Risk Weighted Assets)First Charter Corporation
    
    $
    372,953
    
    
    
    11.20
    %
    
    $
    133,208
    
    
    
    4.00
    %
    
    None
    
    NoneFirst Charter Bank
    
    
    354,844
    
    
    
    10.69
    
    
    
    132,752
    
    
    
    4.00
    
    
    $
    199,128
    
    
    
    6.00
    %Tier I Capital (to Adjusted Average Assets)First Charter Corporation
    
    $
    372,953
    
    
    
    8.67
    %
    
    $
    172,102
    
    
    
    4.00
    %
    
    None
    
    NoneFirst Charter Bank
    
    
    354,844
    
    
    
    8.28
    
    
    
    171,353
    
    
    
    4.00
    
    
    $
    214,191
    
    
    
    5.00
    %At December 31, 2004:Total Capital (to Risk Weighted Assets)First Charter Corporation
    
    $
    324,814
    
    
    
    10.99
    %
    
    $
    236,421
    
    
    
    8.00
    %
    
    None
    
    NoneFirst Charter Bank
    
    
    314,491
    
    
    
    10.70
    
    
    
    235,183
    
    
    
    8.00
    
    
    $
    293,978
    
    
    
    10.00
    %Tier I Capital (to Risk Weighted Assets)First Charter Corporation
    
    $
    297,906
    
    
    
    10.08
    %
    
    $
    118,211
    
    
    
    4.00
    %
    
    None
    
    NoneFirst Charter Bank
    
    
    287,619
    
    
    
    9.78
    
    
    
    117,591
    
    
    
    4.00
    
    
    $
    176,387
    
    
    
    6.00
    %Tier I Capital (to Adjusted Average Assets)First Charter Corporation
    
    $
    297,906
    
    
    
    6.76
    %
    
    $
    176,194
    
    
    
    4.00
    %
    
    None
    
    NoneFirst Charter Bank
    
    
    287,619
    
    
    
    6.46
    
    
    
    178,106
    
    
    
    4.00
    
    
    $
    222,633
    
    
    
    5.00
    %
  86




---



##### 



Note Twenty-One  First Charter Corporation (Parent Company)
   December 31
    
    December 31(Dollars in thousands)
    
    2005
    
    2004Balance sheet data:Cash
    
    $
    64,053
    
    
    $
    65,828Securities available for sale
    
    
    1,152
    
    
    
    1,048Investment in subsidiaries
    
    
    373,648
    
    
    
    313,347Receivable from subsidiaries
    
    
    3,000
    
    
    
    6,000Other assets
    
    
    3,935
    
    
    
    5,480Total assets
    
    $
    445,788
    
    
    $
    391,703Accrued liabilities
    
    $
    1,904
    
    
    $
    5,332Commercial paper and other short-term borrowings
    
    
    58,432
    
    
    
    71,684Long-term debt
    
    
    61,857
    
    
    
    0Shareholders equity
    
    
    323,595
    
    
    
    314,687Total liabilities and shareholders equity
    
    $
    445,788
    
    
    $
    391,703
 Years Ended December 31(Dollars in thousands)
    
    2005
    
    2004
    
    2003Income statement data:Dividends from subsidiaries
    
    $
    13,724
    
    
    $
    21,290
    
    
    $
    28,484Interest income
    
    
    38
    
    
    
    50
    
    
    
    72Noninterest income
    
    
    139
    
    
    
    1,257
    
    
    
    37Total income
    
    
    13,901
    
    
    
    22,597
    
    
    
    28,593Interest expense
    
    
    2,232
    
    
    
    782
    
    
    
    597Noninterest expense
    
    
    221
    
    
    
    203
    
    
    
    67Total expense
    
    
    2,453
    
    
    
    985
    
    
    
    664Income before income tax and equity in undistributed
net income of subsidiaries
    
    
    11,448
    
    
    
    21,612
    
    
    
    27,929Income tax (benefit) expense
    
    
    (608
    )
    
    
    110
    
    
    
    (105
    )Income before equity in undistributed
net income of subsidiaries
    
    
    12,056
    
    
    
    21,502
    
    
    
    28,034Equity in undistributed (excess of dividends over)
net income of subsidiaries
    
    
    13,255
    
    
    
    20,940
    
    
    
    (13,888
    )Net income
    
    $
    25,311
    
    
    $
    42,442
    
    
    $
    14,146
 87




---



##### 



Years Ended December 31(Dollars in thousands)
    
    2005
    
    2004
    
    2003Cash flow statement data:Cash flows from operating activities:Net income
    
    $
    25,311
    
    
    $
    42,442
    
    
    $
    14,146Net gain on securities available for sale
    
    
    
    
    
    
    (1,362
    )
    
    
    (226
    )(Decrease) increase in accrued liabilities
    
    
    (3,428
    )
    
    
    167
    
    
    
    (185
    )Decrease (Increase) in other assets
    
    
    1,868
    
    
    
    (97
    )
    
    
    469Decrease (increase) in receivable from subsidiaries
    
    
    3,000
    
    
    
    (500
    )
    
    
    1,500(Equity in undistributed) excess of dividends paid over
net income of subsidiaries
    
    
    (16,255
    )
    
    
    (20,440
    )
    
    
    12,388Net cash provided by operating activities
    
    
    10,496
    
    
    
    20,210
    
    
    
    28,092Cash flows from investing activities:Purchase of securities available for sale
    
    
    
    
    
    
    (46
    )
    
    
    Proceeds from sale of securities available for sale
    
    
    
    
    
    
    2,746
    
    
    
    577Capital investment in subsidiaries
    
    
    (50,000
    )
    
    
    
    
    
    
    Other investing activities
    
    
    
    
    
    
    
    
    
    
    (9
    )Net cash (used in) provided by investing activities
    
    
    (50,000
    )
    
    
    2,700
    
    
    
    568Cash flows from financing activities:Net (decrease) increase in commercial paper and
other short-term borrowings
    
    
    (13,252
    )
    
    
    21,608
    
    
    
    16,711Proceeds from the issuance of trust preferred securities
    
    
    61,857
    
    
    
    
    
    
    
    Purchase and retirement of common stock
    
    
    
    
    
    
    
    
    
    
    (10,623
    )Proceeds from issuance of common stock
    
    
    11,078
    
    
    
    5,019
    
    
    
    1,700Dividends paid
    
    
    (21,954
    )
    
    
    (22,365
    )
    
    
    (22,038
    )Net cash provided by (used in) financing activities
    
    
    37,729
    
    
    
    4,262
    
    
    
    (14,250
    )Net (decrease) increase in cash
    
    
    (1,775
    )
    
    
    27,172
    
    
    
    14,410Cash at beginning of year
    
    
    65,828
    
    
    
    38,656
    
    
    
    24,246Cash at end of year
    
    $
    64,053
    
    
    $
    65,828
    
    
    $
    38,656
 88




---



##### 



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
 Internal Control  Integrated Framework
   Changes in Internal Control Over Financial Reporting
  Item 9B. Other Information
  89




---



##### 



PART III
 Item 10. Directors and Executive Officers of the Registrant
  Item 11. Executive Compensation
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  Item 13. Certain Relationships and Related Transactions
  Item 14. Principal Accountant Fees and Services
  90




---



##### 



PART IV
 Item 15. Exhibits and Financial Statement Schedules
  Page(1) Financial Statements:Reports of Independent Registered Public Accounting Firm
    
    
    52Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    55Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003
    
    
    56Consolidated Statements of Shareholders Equity for the years ended December 31, 2005,
2004 and 2003
    
    
    57Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
    
    
    58Notes to Consolidated Financial Statements
    
    
    59(2) Financial Statement Schedules:None
 91




---



##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits3.1
    
    Amended and Restated Articles of Incorporation of the Registrant, incorporated herein by
reference to Exhibit 3.1 of the Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004 (Commission File No. 0-15829).3.2
    
    Amended and Restated By-laws of the Registrant, as amended, incorporated herein by reference
to Exhibit 3.2 of the Registrants Quarterly Report on Form 10-Q for the quarter ended March
31, 2004 (Commission File No. 0-15829).4.1
    
    Indenture dated June 28, 2005 between First Charter Corporation and Wilmington Trust Company,
as trustee, incorporated herein by reference to Exhibit 4.1 of the Registrants Current Report
on Form 8-K dated June 28, 2005.4.2
    
    Indenture dated September 29, 2005 between First Charter Corporation and Wilmington Trust
Company, as trustee, incorporated herein by reference to Exhibit 4.1 of the Registrants
Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (Commission File No.
0-15829).*10.1
    
    Comprehensive Stock Option Plan, incorporated herein by reference to Exhibit 10.1 of the
Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1992
(Commission File No. 0-15829).10.2
    
    Dividend Reinvestment and Stock Purchase Plan, incorporated herein by reference to Exhibit
99.1 of the Registrants Registration Statement No. 333-60641, dated August 8, 1998.*10.3
    
    Executive Incentive Bonus Plan, incorporated herein by reference to
Exhibit 10.3 of the Registrants Annual Report on Form 10-K for the
year ended December 31, 1998 (Commission File No. 0-15829.)*10.4
    
    Amended and Restated Employment Agreement dated December 19, 2001
for Lawrence M. Kimbrough, incorporated herein by reference to
Exhibit 10.4 of the Registrants Annual Report on Form 10-K for the
year ended December 31, 2001 (Commission File No. 0-15829).*10.5
    
    Amended and Restated Employment Agreement dated December 19, 2001
for Robert O. Bratton, incorporated herein by reference to Exhibit
10.5 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.6
    
    Amended and Restated Employment Agreement dated December 19, 2001
for Robert E. James, incorporated herein by reference to Exhibit
10.6 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.7
    
    Amended and Restated Supplemental Agreement dated December 19, 2001
for Lawrence M. Kimbrough, incorporated herein by reference to
Exhibit 10.8 of the Registrants Annual Report on Form 10-K for the
year ended December 31, 2001 (Commission File No. 0-15829).
 92




---



##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits*10.8
    
    Amended and Restated Supplemental Agreement dated December 19, 2001
for Robert O. Bratton, incorporated herein by reference to Exhibit
10.9 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.9
    
    Amended and Restated Supplemental Agreement dated December 19, 2001
for Robert E. James, incorporated herein by reference to Exhibit
10.10 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.10
    
    Change in Control Agreement dated November 16, 1994 for Robert G.
Fox, Jr. incorporated herein by reference to Exhibit 10.7 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 1994 (Commission File No. 0-15829.)*10.11
    
    Restricted Stock Award Program, incorporated herein by reference to
Exhibit 99.1 of the Registrants Registration Statement No.
333-60949, dated July 10, 1995.*10.12
    
    The 1999 Employee Stock Purchase Plan, incorporated herein by
reference to the Registrants Registration Statement No. 333-54019,
dated May 29, 1998.*10.13
    
    The First Charter Corporation Comprehensive Stock Option Plan,
incorporated herein by reference to Exhibit 99.1 of the
Registrants Registration Statement No. 333-54021, dated May 29,
1998.*10.14
    
    The Stock Option Plan for Non-employee Directors, incorporated
herein by reference to Exhibit 24.2 of the Registrants
Registration Statement No. 333-54023, dated May 29, 1998.*10.15
    
    The Home Federal Savings and Loan Employee Stock Ownership Plan,
incorporated herein by reference to the Registrants Registration
Statement No. 333-71495, dated January 29, 1999.*10.16
    
    The HFNC Financial Corp. Stock Option Plan, incorporated herein by
reference to the Registrants Registration Statement No. 333-71497,
dated February 1, 1999.10.17
    
    Agreement and Plan of Merger by and between the Registrant and Carolina First Bancshares,
Inc. dated as of November 7, 1999, incorporated herein by reference to Appendix A of the
Registrants Registration Statement No. 333-95003 filed January 20, 1999.*10.18
    
    Amended and Restated Employment Agreement dated December 19, 2001
for Stephen M. Rownd, incorporated herein by reference to Exhibit
10.22 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.19
    
    The First Charter Corporation 2000 Omnibus Stock Option and Award
Plan, incorporated herein by reference to Exhibit 10.1 of the
Registrants Registration Statement No. 333-132033.*10.20
    
    The First Charter 1994 Deferred Compensation Plan for Non-Employee
Directors, incorporated herein by reference to Exhibit 10.26 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).
 93




---



##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits*10.21
    
    The First Charter Option Plan Trust, incorporated herein by
reference to Exhibit 10.27 of the Registrants Annual Report on
Form 10-K for the year ended December 31, 2000 (Commission File No.
0-15829).*10.22
    
    The Carolina First BancShares, Inc. Amended 1990 Stock Option Plan,
incorporated herein by reference to Exhibit 10.28 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.23
    
    The Carolina First BancShares, Inc. 1999 Long-Term Incentive Plan,
incorporated herein by reference to Exhibit 10.29 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.24
    
    Deferred Compensation Agreement dated as of February 18, 1993 by
and between Cabarrus Bank of North Carolina and Ronald D. Smith,
incorporated herein by reference to Exhibit 10.30 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.25
    
    Deferred Compensation Agreement dated as of December 31, 1996 by
and between Carolina First BancShares, Inc. and James E. Burt, III,
incorporated herein by reference to Exhibit 10.31 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.26
    
    Separation and Consulting Agreement between First Charter
Corporation and James E. Burt, III dated June 29, 2000,
incorporated herein by reference to Exhibit 10.32 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.27
    
    Carolina First BancShares, Inc. Amended and Restated Directors
Deferred Compensation Plan, incorporated herein by reference to
Exhibit 10.33 of the Registrants Annual Report on Form 10-K for
the year ended December 31, 2000 (Commission File No. 0-15829).*10.28
    
    Amended and Restated Deferred Compensation Plan for Non-Employee
Directors, incorporated herein by reference to Exhibit 10.1 of the
Registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 (Commission File No. 0-15829).*10.29
    
    First Charter Corporation Directors Option Deferral Plan,
incorporated herein by reference to Exhibit 10.35 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2001 (Commission File No. 0-15829).*10.30
    
    Supplemental Agreement dated December 19, 2001 for Stephen M.
Rownd, incorporated herein by reference to Exhibit 10.37 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2001 (Commission File No. 0-15829).10.31
    
    Stockholder Protection Rights Agreement dated July 19, 2000 incorporated herein by reference
to the Registrants Current Report on Form 8-K dated July 21, 2000.*10.32
    
    Form of Award Agreement for Incentive Stock Options Granted under the First Charter Corporation 2000 Omnibus Stock
Option and Award Plan, incorporated herein by reference to Exhibit 10.32 of the Registrants Annual Report on Form 10-K
for the year ended December 31, 2004 (Commission File No. 0-15829).
 94




---



##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits*10.33
    
    Form of Award Agreement for Nonqualified Stock Options Granted under the First Charter Corporation 2000 Omnibus Stock
Option and Award Plan, incorporated herein by reference to Exhibit 10.33 of the Registrants Annual Report on Form 10-K
for the year ended December 31, 2004 (Commission File No. 0-15829).*10.34
    
    Form of First Charter Corporation Incentive Stock Option Agreement
Pursuant to First Charter Corporation Comprehensive Stock Option Plan, incorporated herein by reference to Exhibit
10.34 of the Registrants Annual Report on Form 10-K for the year ended December 31, 2004 (Commission File No.
0-15829).*10.35
    
    Form of First Charter Corporation Nonqualified Stock Option Agreement
Pursuant to First Charter Corporation Comprehensive Stock Option Plan, incorporated herein by reference to Exhibit
10.35 of the Registrants Annual Report on Form 10-K for the year ended December 31, 2004 (Commission File No.
0-15829).*10.36
    
    Form of First Charter Corporation Restricted Stock Award Agreement for use under the Restricted Stock Award Program,
incorporated herein by reference to Exhibit 10.5 of the Registrants Annual Report on Form 8-K dated February 27, 2006.*10. 37
    
    Separation Agreement, dated February 1, 2005, by and between First Charter Corporation and Robert O. Bratton,
incorporated herein by reference to Exhibit 10.1 of the Registrants Form 8-K dated February 1, 2005.*10.38
    
    Employment Agreement, dated April 13, 2005, by and between First Charter Corporation and Charles A. Caswell,
incorporated herein by reference to Exhibit 10.1 of the Registrants Form 8-K dated April 13, 2005.*10.39
    
    Change in Control Agreement, dated April 13, 2005, by and between First Charter Corporation and Cecil O. Smith, Jr.,
incorporated herein by reference to Exhibit 10.2 of the Registrants Form 8-K dated April 13, 2005.*10.40
    
    Change in Control Agreement, dated April 13, 2005, by and between First Charter Corporation and Stephen J. Antal,
incorporated herein by reference to Exhibit 10.3 of the Registrants Form 8-K dated April 13, 2005.*10.41
    
    Transition Agreement and Release, dated April 27, 2005, by and between First Charter Corporation and Lawrence M.
Kimbrough, incorporated herein by reference to Exhibit 10.1 of the Registrants Form 8-K dated April 27, 2005.*10. 42
    
    Form of Performance Shares Award Agreement under the First Charter Corporation 2000 Omnibus Stock Option and Award
Plan, incorporated herein by reference to Exhibit 10. 1 of the Registrants Form 8-K dated February 27, 2006.*10.43
    
    Form of Restricted Stock Award Agreement under the First Charter Corporation 2000 Omnibus Stock Option and Award Plan,
incorporated herein by reference to Exhibit 10.2 of the Registrants Form 8-K dated February 27, 2006.11.1
    
    Statement regarding computation of per share earnings, incorporated herein by reference to
Footnote 1 of the Consolidated Financial Statements.
 95




---



##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits21.1
    
    List of subsidiaries of the Registrant.23.1
    
    Consent of KPMG LLP.31.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Indicates a management contract or compensatory plan 96




---



##### 



SIGNATURES
  FIRST CHARTER CORPORATION
(Registrant)By:
    /s/   Robert E. James, Jr.Robert E. James, Jr., President andChief Executive Officer (Principal Executive
Officer duly authorized to sign on behalf of
the Registrant)Date: March 14, 2006  Signature
    
    Title
    
    Date/s/ Robert E James, Jr.
    
    President, Chief Executive Officer
    
    March 14, 2006(Robert E James, Jr.)
    
    and Director (Principal Executive
Officer)/s/ James E. Burt, III
    
    Chairman of the Board
    
    March 14, 2006(James E. Burt, III)
    
    and Director/s/ Michael R. Coltrane
    
    Vice Chairman of the
    
    March 14, 2006(Michael R. Coltrane)
    
    Board and Director/s/ Charles A. Caswell
    
    Executive Vice President
    
    March 14, 2006(Charles A. Caswell)
    
    Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)/s/ Harold D. Alexander
    
    Director
    
    March 14, 2006(Harold D. Alexander)/s/ William R. Black
    
    Director
    
    March 14, 2006(William R. Black)/s/ Jerry A. Felts
    
    Director
    
    March 14, 2006(Jerry A. Felts)/s/ John J. Godbold, Jr.
    
    Director
    
    March 14, 2006(John J. Godbold, Jr.)/s/ Charles A. James
    
    Director
    
    March 14, 2006(Charles A. James)/s/ Walter H. Jones, Jr.
    
    Director
    
    March 14, 2006(Walter H. Jones, Jr.)
 97




---



##### 



Signature
    
    Title
    
    Date/s/ Samuel C. King, Jr.
    
    Director
    
    March 14, 2006(Samuel C. King, Jr.)/s/ Jerry E. McGee
    
    Director
    
    March 14, 2006(Jerry E. McGee)/s/ Ellen L. Messinger
    
    Director
    
    March 14, 2006(Ellen L. Messinger)/s/ Hugh H. Morrison
    
    Director
    
    March 14, 2006(Hugh H. Morrison)/s/ Thomas R. Revels
    
    Director
    
    March 14, 2006(Thomas R. Revels)/s/ L. D. Warlick, Jr.
    
    Director
    
    March 14, 2006(L. D. Warlick, Jr.)/s/ William W. Waters
    
    Director
    
    March 14, 2006(William W. Waters)
 98




---



##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits3.1
    
    Amended and Restated Articles of Incorporation of the Registrant, incorporated herein by
reference to Exhibit 3.1 of the Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004 (Commission File No. 0-15829).3.2
    
    Amended and Restated By-laws of the Registrant, as amended, incorporated herein by reference
to Exhibit 3.2 of the Registrants Quarterly Report on Form 10-Q for the quarter ended March
31, 2004 (Commission File No. 0-15829).4.1
    
    Indenture dated June 28, 2005 between First Charter Corporation and Wilmington Trust Company,
as trustee, incorporated herein by reference to Exhibit 4.1 of the Registrants Current Report
on Form 8-K dated June 28, 2005.4.2
    
    Indenture dated September 29, 2005 between First Charter Corporation and Wilmington Trust
Company, as trustee, incorporated herein by reference to Exhibit 4.1 of the Registrants
Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (Commission File No.
0-15829).*10.1
    
    Comprehensive Stock Option Plan, incorporated herein by reference to Exhibit 10.1 of the
Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1992
(Commission File No. 0-15829).10.2
    
    Dividend Reinvestment and Stock Purchase Plan, incorporated herein by reference to Exhibit 99.1 of the Registrants Registration Statement No. 333-60641, dated August 8, 1998.*10.3
    
    Executive Incentive Bonus Plan, incorporated herein by reference to
Exhibit 10.3 of the Registrants Annual Report on Form 10-K for the
year ended December 31, 1998 (Commission File No. 0-15829.)*10.4
    
    Amended and Restated Employment Agreement dated December 19, 2001
for Lawrence M. Kimbrough, incorporated herein by reference to
Exhibit 10.4 of the Registrants Annual Report on Form 10-K for the
year ended December 31, 2001 (Commission File No. 0-15829).*10.5
    
    Amended and Restated Employment Agreement dated December 19, 2001
for Robert O. Bratton, incorporated herein by reference to Exhibit
10.5 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.6
    
    Amended and Restated Employment Agreement dated December 19, 2001
for Robert E. James, incorporated herein by reference to Exhibit
10.6 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.7
    
    Amended and Restated Supplemental Agreement dated December 19, 2001
for Lawrence M. Kimbrough, incorporated herein by reference to
Exhibit 10.8 of the Registrants Annual Report on Form 10-K for the
year ended December 31, 2001 (Commission File No. 0-15829).
 99




---



##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits*10.8
    
    Amended and Restated Supplemental Agreement dated December 19, 2001
for Robert O. Bratton, incorporated herein by reference to Exhibit
10.9 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.9
    
    Amended and Restated Supplemental Agreement dated December 19, 2001
for Robert E. James, incorporated herein by reference to Exhibit
10.10 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.10
    
    Change in Control Agreement dated November 16, 1994 for Robert G.
Fox, Jr. incorporated herein by reference to Exhibit 10.7 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 1994 (Commission File No. 0-15829.)*10.11
    
    Restricted Stock Award Program, incorporated herein by reference to
Exhibit 99.1 of the Registrants Registration Statement No.
333-60949, dated July 10, 1995.*10.12
    
    The 1999 Employee Stock Purchase Plan, incorporated herein by
reference to the Registrants Registration Statement No. 333-54019,
dated May 29, 1998.*10.13
    
    The First Charter Corporation Comprehensive Stock Option Plan,
incorporated herein by reference to Exhibit 99.1 of the
Registrants Registration Statement No. 333-54021, dated May 29,
1998.*10.14
    
    The Stock Option Plan for Non-employee Directors, incorporated
herein by reference to Exhibit 24.2 of the Registrants
Registration Statement No. 333-54023, dated May 29, 1998.*10.15
    
    The Home Federal Savings and Loan Employee Stock Ownership Plan,
incorporated herein by reference to the Registrants Registration
Statement No. 333-71495, dated January 29, 1999.*10.16
    
    The HFNC Financial Corp. Stock Option Plan, incorporated herein by
reference to the Registrants Registration Statement No. 333-71497,
dated February 1, 1999.10.17
    
    Agreement and Plan of Merger by and between the Registrant and Carolina First Bancshares,
Inc. dated as of November 7, 1999, incorporated herein by reference to Appendix A of the
Registrants Registration Statement No. 333-95003 filed January 20, 1999.*10.18
    
    Amended and Restated Employment Agreement dated December 19, 2001
for Stephen M. Rownd, incorporated herein by reference to Exhibit
10.22 of the Registrants Annual Report on Form 10-K for the year
ended December 31, 2001 (Commission File No. 0-15829).*10.19
    
    The First Charter Corporation 2000 Omnibus Stock Option and Award
Plan, incorporated herein by reference to Exhibit 10.1 of the
Registrants Registration Statement No. 333-132033.*10.20
    
    The First Charter 1994 Deferred Compensation Plan for Non-Employee
Directors, incorporated herein by reference to Exhibit 10.26 of the
Registrants Annual Report
on Form 10-K for the year ended December 31, 2000 (Commission File No.
0-15829).
 100




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##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits*10.21
    
    The First Charter Option Plan Trust, incorporated herein by
reference to Exhibit 10.27 of the Registrants Annual Report on
Form 10-K for the year ended December 31, 2000 (Commission File No.
0-15829).*10.22
    
    The Carolina First BancShares, Inc. Amended 1990 Stock Option Plan,
incorporated herein by reference to Exhibit 10.28 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.23
    
    The Carolina First BancShares, Inc. 1999 Long-Term Incentive Plan,
incorporated herein by reference to Exhibit 10.29 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.24
    
    Deferred Compensation Agreement dated as of February 18, 1993 by
and between Cabarrus Bank of North Carolina and Ronald D. Smith,
incorporated herein by reference to Exhibit 10.30 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.25
    
    Deferred Compensation Agreement dated as of December 31, 1996 by
and between Carolina First BancShares, Inc. and James E. Burt, III,
incorporated herein by reference to Exhibit 10.31 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.26
    
    Separation and Consulting Agreement between First Charter
Corporation and James E. Burt, III dated June 29, 2000,
incorporated herein by reference to Exhibit 10.32 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2000 (Commission File No. 0-15829).*10.27
    
    Carolina First BancShares, Inc. Amended and Restated Directors
Deferred Compensation Plan, incorporated herein by reference to
Exhibit 10.33 of the Registrants Annual Report on Form 10-K for
the year ended December 31, 2000 (Commission File No. 0-15829).*10.28
    
    Amended and Restated Deferred Compensation Plan for Non-Employee
Directors, incorporated herein by reference to Exhibit 10.1 of the
Registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 (Commission File No. 0-15829).*10.29
    
    First Charter Corporation Directors Option Deferral Plan,
incorporated herein by reference to Exhibit 10.35 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2001 (Commission File No. 0-15829).*10.30
    
    Supplemental Agreement dated December 19, 2001 for Stephen M.
Rownd, incorporated herein by reference to Exhibit 10.37 of the
Registrants Annual Report on Form 10-K for the year ended December
31, 2001 (Commission File No. 0-15829).10.31
    
    Stockholder Protection Rights Agreement dated July 19, 2000 incorporated herein by reference
to the Registrants Current Report on Form 8-K dated July 21, 2000.*10.32
    
    Form of Award Agreement for Incentive Stock Options Granted under the First Charter Corporation 2000 Omnibus Stock
Option and Award Plan, incorporated herein by reference to Exhibit 10.32 of the Registrants Annual Report on Form 10-K
for the year ended December 31, 2004 (Commission File No. 0-15829).
 101




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##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits*10.33
    
    Form of Award Agreement for Nonqualified Stock Options Granted under the First Charter Corporation 2000 Omnibus Stock
Option and Award Plan, incorporated herein by reference to Exhibit 10.33 of the Registrants Annual Report on Form 10-K
for the year ended December 31, 2004 (Commission File No. 0-15829).*10.34
    
    Form of First Charter Corporation Incentive Stock Option Agreement
Pursuant to First Charter Corporation Comprehensive Stock Option Plan, incorporated herein by reference to Exhibit
10.34 of the Registrants Annual Report on Form 10-K for the year ended December 31, 2004 (Commission File No.
0-15829).*10.35
    
    Form of First Charter Corporation Nonqualified Stock Option Agreement
Pursuant to First Charter Corporation Comprehensive Stock Option Plan, incorporated herein by reference to Exhibit
10.35 of the Registrants Annual Report on Form 10-K for the year ended December 31, 2004 (Commission File No.
0-15829).*10.36
    
    Form of First Charter Corporation Restricted Stock Award Agreement for use under the Restricted Stock Award Program,
incorporated herein by reference to Exhibit 10.5 of the Registrants Annual Report on Form 8-K dated February 27, 2006.*10. 37
    
    Separation Agreement, dated February 1, 2005, by and between First Charter Corporation and Robert O. Bratton,
incorporated herein by reference to Exhibit 10.1 of the Registrants Form 8-K dated February 1, 2005.*10.38
    
    Employment Agreement, dated April 13, 2005, by and between First Charter Corporation and Charles A. Caswell,
incorporated herein by reference to Exhibit 10.1 of the Registrants Form 8-K dated April 13, 2005.*10.39
    
    Change in Control Agreement, dated April 13, 2005, by and between First Charter Corporation and Cecil O. Smith, Jr.,
incorporated herein by reference to Exhibit 10.2 of the Registrants Form 8-K dated April 13, 2005.*10.40
    
    Change in Control Agreement, dated April 13, 2005, by and between First Charter Corporation and Stephen J. Antal,
incorporated herein by reference to Exhibit 10.3 of the Registrants Form 8-K dated April 13, 2005.*10.41
    
    Transition Agreement and Release, dated April 27, 2005, by and between First Charter Corporation and Lawrence M.
Kimbrough, incorporated herein by reference to Exhibit 10.1 of the Registrants Form 8-K dated April 27, 2005.*10. 42
    
    Form of Performance Shares Award Agreement under the First Charter Corporation 2000 Omnibus Stock Option and Award
Plan, incorporated herein by reference to Exhibit 10. 1 of the Registrants Form 8-K dated February 27, 2006.*10.43
    
    Form of Restricted Stock Award Agreement under the First Charter Corporation 2000 Omnibus Stock Option and Award Plan,
incorporated herein by reference to Exhibit 10.2 of the Registrants Form 8-K dated February 27, 2006.11.1
    
    Statement regarding computation of per share earnings, incorporated herein by reference to
Footnote 1 of the Consolidated Financial Statements.21.1
    
    List of subsidiaries of the Registrant.
 102




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##### 



Exhibit No.(per ExhibitTable inItem 601 ofRegulation S-K)
    
    Description of Exhibits23.1
    
    Consent of KPMG LLP.31.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Indicates a management contract or compensatory plan 103