Edgar Filing: FIRST CHARTER CORP /NC/

First Charter Corporation

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 11-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2003

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period: N/A

Commission file number 0-15829

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

FIRST CHARTER CORPORATION
RETIREMENT SAVINGS PLAN

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

FIRST CHARTER CORPORATION
10200 DAVID TAYLOR DRIVE
CHARLOTTE, NORTH CAROLINA 28262-2373
(704) 688-4300

REQUIRED INFORMATION

The First Charter Corporation Retirement Savings Plan (“Plan”) is subject to the Employee Retirement Income Security Act of 1974 (“ERISA”). Accordingly, the financial statements and schedule of the Plan for the fiscal year ended December 31, 2003, which have been prepared in accordance with the financial reporting requirements of ERISA, are included in this report.

FIRST CHARTER CORPORATION
RETIREMENT SAVINGS PLAN

Financial Statements and Supplemental Schedule

December 31, 2003 and 2002

(With Report of Independent Registered Public Accounting Firm Thereon)

FIRST CHARTER CORPORATION

RETIREMENT SAVINGS PLAN

TABLE OF CONTENTS


Report of Independent Registered Public Accounting Firm			1
Financial Statements
Statements of Net Assets Available for Plan Benefits			2
Statement of Changes in Net Assets Available for Plan Benefits			3
Notes to Financial Statements			4
Schedule Supporting Financial Statements
Schedule 1 - Schedule of Assets (Held at End of Year)			7

Report of Independent Registered Public Accounting Firm

The Compensation Committee
First Charter Corporation:

We have audited the accompanying statements of net assets available for plan benefits of the First Charter Corporation Retirement Savings Plan (the Plan) as of December 31, 2003 and 2002, and the related statement of changes in net assets available for plan benefits for the year ended December 31, 2003. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 2003 and 2002, and the changes in net assets available for plan benefits for the year ended December 31, 2003, in conformity with U. S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. This supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Charlotte, North Carolina
June 25, 2004

FIRST CHARTER CORPORATION RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2003 and 2002


	2003		2002
Assets
Cash	$	37,826	$	21,207
Investments, at fair value:
Mutual funds (cost of $26,878,625 at December 31, 2003 and $24,659,716 at December 31, 2002)		25,344,528		18,581,907
First Charter Corporation common stock (cost of $4,837,475 at December 31, 2003 and $4,315,865 at December 31, 2002)		5,238,286		4,327,551
Participants’ loans receivable		80,929		168,567

Total investments		30,663,743		23,078,025
Receivables:
Contribution receivable from employer		1,231,055		1,840,651
Contribution receivable from employees		3,948		75,328
Accrued income receivable		95,017		44,590

Total receivables		1,330,020		1,960,569

Total assets	$	32,031,589	$	25,059,801


Liabilities
Miscellaneous liabilities	$	598	$	1,667

Net assets available for plan benefits	$	32,030,991	$	25,058,134

See accompanying notes to financial statements.

FIRST CHARTER CORPORATION RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 2003


Additions:
Investment income:
Net realized and unrealized appreciation	$	4,074,025
Dividends		663,185
Interest on participant loans		6,779

Net investment income		4,743,989


Contributions:
Participant		2,563,675
Employer		1,777,797
Rollovers		203,291

Total contributions		4,544,763


Total additions		9,288,752


Deductions:
Benefits paid		2,315,895

Total deductions		2,315,895

Net increase in assets available for plan benefits		6,972,857

Net assets available for plan benefits:
Beginning of year		25,058,134

End of year	$	32,030,991

See accompanying notes to financial statements.

FIRST CHARTER CORPORATION RETIREMENT SAVINGS PLAN

Notes to Financial Statements

December 31, 2003 and 2002

(1)		Description of the Plan

		The First Charter Corporation Retirement Savings Plan (the Plan) is a defined contribution plan which covers substantially all employees of First Charter Corporation (the Corporation). The Plan was established on January 1, 1973 to provide retirement benefits for the Corporation’s employees. The notes to the financial statements include only general information regarding the Plan. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

		The Corporation and First Charter Bank (the Bank), a wholly-owned subsidiary and a related party-in-interest, either directly or through subsidiaries, provide businesses and individuals a broad range of financial services, including banking, financial planning, funds management, investments, insurance, mortgages and employee benefit services. The Bank is a regional financial services company operating 54 financial centers, 6 insurance offices and 93 ATMs located in 17 counties throughout North Carolina. The Corporation also operates one mortgage origination office in Virginia.

		During 2002, the Plan was amended to provide for the addition of an Employee Stock Ownership Plan (“ESOP”) provision. Shares of the Corporation’s common stock are held in this ESOP, which does not have any debt to the Corporation or to third parties. All such shares have been allocated to participants. The adoption of this amendment did not have a material impact on the accompanying financial statements.

(2)		Summary of Significant Accounting Policies

*(a)*		*Basis of Presentation*

		The accompanying financial statements of the Plan have been prepared on an accrual basis and present the net assets and changes in net assets available for plan benefits.

		The preparation of financial statements in accordance with United States generally accepted accounting principles requires the use of Plan administrator estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period. Actual results could differ from those estimates.

*(b)*		*Trustee*

		Under the terms of the trust agreement between the Bank and the Plan, the Bank acts as trustee for the Plan.

*(c)*		*Investments*

		Investments in marketable securities are stated at their fair value, which is based on closing market quotations at December 31, 2003 and 2002. Purchases and sales of investments are recorded on a trade date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Participant loans receivable are stated at cost which approximates fair value. Interest rates on participant loans ranged from 6.00% to 10.50% during 2003.

*(d)*		*Administrative Expenses*

		All expenses incurred related to the administration of the Plan are paid by the Corporation, which totaled $118,871 in 2003.

(3)		Investments

		The Plan is a participant directed plan, providing participants with thirteen investment options consisting of mutual funds and First Charter Corporation common stock.

		The following is a summary of investments at fair value as of December 31, 2003 and 2002 with investments representing 5% or more of the Plan’s net assets separately identified:


Description of Investment	2003		2002
Federated Capital Preservation Fund	$	4,602,136	$	4,187,030
Federated Income Trust Fund		2,277,259		1,882,487
Fidelity Advisor Equity Growth Fund		2,899,441		1,834,684
First Charter Corporation Common Stock		5,238,286		4,327,551
Vanguard Balanced Index Fund		3,005,181		2,400,731
Vanguard Index 500 Fund		4,873,192		3,275,713
Other investments – mutual funds and participant loans		7,768,248		5,169,829

Total investments	$	30,663,743	$	23,078,025

		During 2003, Plan investments in various mutual funds (including gains and losses on mutual funds bought and sold, as well as held during the year) appreciated in value by $3,663,703.

		As of December 31, 2003 and 2002, the Plan held 267,943 shares and 240,286 shares, respectively, of First Charter Corporation common stock. This common stock (including gains and losses on such common stock bought and sold, as well as held during the year) appreciated in value by $410,322 for the year ended December 31, 2003. Dividends on First Charter Corporation common stock amounted to $193,112.

(4)		Contributions

		The Plan is a defined contribution 401(k) plan sponsored by the Corporation and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). An employee is eligible to become a participant in the Plan on the Plan’s first entry date (first day of each calendar month) following the completion of one month of service and the attainment of age 20. Employees may contribute up to 15% of their qualified compensation to the Plan. Contributions were limited to a maximum of $12,000 in 2003. Participants attaining age 50 or older prior to the close of the plan year may contribute additional catch-up contributions after contributing the maximum allowable by the IRS. For 2003, the catch-up contribution is limited to $2,000, increasing ratably to a maximum of $5,000 in 2006. Participants may also contribute amounts representing distributions from other qualified plans.

		Employer matching contributions to the Plan are made by the Corporation quarterly. Plan participants with 6 months of service will receive $0.50 for every dollar contributed up to 6% of their compensation. The Corporation may also make a discretionary contribution amounting to 3% of an employee’s compensation. To receive the discretionary contribution, an employee must have completed one year of service, been an employee on January 1st or July 1st and been employed on the last day of the plan year. The aggregate of all discretionary contributions made by the Corporation in 2003 were $1,022,874.

(5)		Benefits and Vesting

		The net investment income or loss and employer contributions are allocated to the individual participants’ accounts on a daily basis. Employer and employee contributions, including related net investment income or loss, are accumulated separately within each participant’s account. Employee contributions and the related net investment income or loss are fully vested at all times. Participants become 25% vested in the employer contribution and the related net investment income or loss after two years of credited service and vesting continues to increase by 25% for each additional year of service. Participants become 100% vested following five years of credited service or upon death or attainment of normal retirement age of 65. Terminating participants receive the appropriate vested percentage of each annual employer contribution. Non-vested amounts will be forfeited and used to reduce the employer’s contribution. This forfeited amount will remain in the participant’s individual account until the December 31 valuation date coinciding with or next following a one year break in service. During this time, the forfeited amount does not share in any adjustments related to net investment income or loss. Excess contributions by the Corporation are also deemed to be non-vested forfeited balances. Forfeitures totaling $115,326 were used to reduce total cash contributed by the Corporation in 2003.

		A participant may withdraw, in whole or in part, the current portion of his/her Extra Savings Account contributions without specifying the reason for such a withdrawal. This type of withdrawal may be made once during a plan year. A participant may also receive a hardship withdrawal with the approval of the Retirement Savings Plan Administrative Committee (the Committee). An employee must obtain the Committee’s approval before such a distribution will be made, and this withdrawal will result in a six-month suspension of the participants’ Before Tax Contribution Account contributions.

		The Plan allows the Corporation to authorize the trustee to make loans to Plan participants and beneficiaries under certain circumstances and with certain conditions as set forth in the Plan. Loans outstanding at December 31, 2003 and 2002 were $80,929, and $168,567, respectively.

		A participant, at his/her retirement date, may elect to receive the accumulated benefits due him/her under the Plan by lump sum cash payment, purchase of a nontransferable annuity contract, installments from fixed income account or trust fund or any other method providing for installments in approximately equal amounts not to exceed a period longer than the life expectancy of the participant or his/her spouse. Such benefits are also payable to the participant if he/she becomes permanently disabled or to his/her beneficiaries upon his/her death.

(6)		Plan Termination

		Although the Corporation has not expressed any intent to terminate the Plan, it reserves the right to amend or terminate the Plan or discontinue the discretionary contributions at any time. If the Plan is terminated or contributions are discontinued, each participant becomes fully vested in the amount allocated to his/her individual account.

(7)		Federal Income Taxes

		The IRS issued its latest determination letter on September 5, 2003, which stated that the Plan and its underlying trust qualify under the applicable provisions of the Internal Revenue Code and, therefore, are exempt from federal income taxes. In the opinion of the Plan administrator, the Plan and its underlying trust have operated within the terms of the Plan and remain qualified under the applicable provisions of the Internal Revenue Code.

Schedule 1

FIRST CHARTER CORPORATION RETIREMENT SAVINGS PLAN

Schedule H, Line 4i — Schedule of Assets (Held at End of Year)

December 31, 2003


*(a) Party-in-**	(b) Identity of issue, borrower, lessor or similar party,			Current
Interest	and (c) description of investment	(d) Cost		(e) Value
	Participant loans receivable, at various rates ranging from 6.00% through 10.50%	$	80,929	$	80,929
	AIM Constellation Fund – 51,786 units		1,258,115		1,113,924
	AIM Premier Equity Fund – 140,925 units		1,640,454		1,321,876
	American Century International Growth Fund – 48,329 units		416,957		383,251
	Dreyfus Worldwide Growth Fund – 37,984 units		1,175,793		1,221,198
	Federated Capital Preservation Fund – 460,214 units		4,602,145		4,602,136
	Federated Growth Strategies Fund – 50,532 units		1,359,113		1,327,486
	Federated Income Trust Fund – 216,059 units		2,258,642		2,277,259
	Fidelity Advisor Equity Growth Fund – 62,313 units		3,267,351		2,899,441
	Fidelity Advisor Growth Opportunities Fund – 30,829 units		955,293		882,013
*	First Charter Corporation Common Stock – 267,943 shares		4,837,475		5,238,286
	Janus Advisor Capital Appreciation Fund – 67,460 units		1,552,326		1,437,571
	Vanguard Balanced Index Fund – 164,487 units		2,964,786		3,005,181
	Vanguard Index 500 Fund – 47,465 units		5,427,649		4,873,192

	Total	$	31,797,028	$	30,663,743

SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.


	FIRST CHARTER CORPORATION
	RETIREMENT SAVINGS PLAN

	By:	FIRST CHARTER BANK, Trustee

Date June 25, 2004	By:	/s/ Robert E. James, Jr.

		Robert E. James, Jr.
		President and Chief Executive Officer

EXHIBIT INDEX


EXHIBIT NO.

23		Consent of KPMG LLP