Charter Financial Announces Fiscal 2016 Earnings of $11.9 Million

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| Source: Charter Financial Corporation
  • Basic and diluted EPS of $0.27 and $0.26 for the quarter and $0.83 and $0.79 for the year
  • Year over year increases of $2.9 million and $9.3 million in quarterly and yearly net interest income
  • Bankcard and deposit fee quarterly income grew year over year by $413,000, or 14.9%
  • Nonperforming assets at 0.45% of total assets at September 30, 2016
  • Growth in legacy loans of $6.4 million for the quarter
  • Quarterly growth in tangible book value per share of $0.25 to $11.36 at September 30, 2016

WEST POINT, Ga., Nov. 04, 2016 (GLOBE NEWSWIRE) -- Charter Financial Corporation (the “Company”) (NASDAQ:CHFN) today reported net income of $3.8 million for the quarter ended September 30, 2016, or $0.27 and $0.26 per basic and diluted share, respectively, compared with net income of $553,000, or $0.04 per basic and diluted share, for the quarter ended September 30, 2015. Net income for the year ended September 30, 2016, was $11.9 million, or $0.83 and $0.79 per basic and diluted share, respectively, compared with net income of $5.6 million, or $0.35 and $0.34 per basic and diluted share, respectively, for the year ended September 30, 2015.

Net income for the current year quarter increased $3.3 million over the prior-year quarter due in part to a $2.5 million impairment charge to the FDIC receivable in the prior-year quarter, as well as increased loan interest income and deposit fee income generated by the acquisition of CBS Financial Corporation ("CBS") in the third quarter of fiscal 2016.

The year over year increase in net income of $6.3 million was partially attributable to $3.6 million of nonrecurring recoveries on loans that were previously covered by loss share agreements with the FDIC, as well as the prior-year FDIC impairment charge, partially offset by $4.2 million of acquisition expenses from the purchase of CBS. Core system conversion was completed in July and integration expenses are substantially completed.

Quarterly Operating Results

Quarterly earnings for the fourth quarter of fiscal 2016 compared with the fourth quarter of fiscal 2015 were positively impacted by the following items:

  • Loan interest income increased $3.1 million, or 32.9%, while loan interest income excluding accretion and amortization of loss share receivable increased $3.6 million, or 44.7%.
  • Deposit and bankcard fee income increased by a combined $413,000, or 14.9%.
  • Gain on sale of loans and servicing released loan fees increased $350,000, or 76.2%, due to increased activity in both legacy markets and the newly acquired market.
  • Interest expense on FHLB borrowings decreased $173,000, or 30.9%, due to a maturing advance being extended at a substantially lower rate during the third quarter of fiscal 2016.
  • As a result of the early termination of the Company's loss-sharing agreements with the FDIC in the fourth quarter of fiscal 2015, a $2.5 million impairment charge to earnings was recorded. No such charge was recorded in the fourth quarter of fiscal 2016.

The above increases to net income were partially offset by the following items:

  • Interest expense on deposits increased $454,000, or 68.4%, due to higher balances from both the CBS acquisition and legacy markets.
  • Salaries and employee benefits increased $1.0 million, or 18.8%, due to increased payroll as well as final severance costs related to the CBS acquisition.
  • Income tax expense increased $1.8 million due to an increase of $5.1 million in income before income taxes.

Chairman and CEO Robert L. Johnson said, “Our fourth quarter results clearly show the transformative impact of the acquisition of CBS Financial Corporation on our earnings. With the acquisition now behind us, the Company can focus on its expanded market presence in Atlanta.

"We have taken a major step toward our goal of increasing our earnings to the level that supports our stock price," Mr. Johnson continued. "Looking ahead to 2017, we believe our strategy of building bankcard and deposit fee income, in addition to net interest income, provides revenue diversification, which lowers risk to our earnings."

Financial Condition

The Company's total assets increased $415.9 million to $1.4 billion at September 30, 2016, from $1.0 billion at September 30, 2015. Net loans increased $279.3 million, or 39.1%, to $994.1 million at September 30, 2016, from $714.8 million at September 30, 2015. These increases were largely attributable to the completion of the acquisition of CBS, which brought in $376.4 million of total assets and $300.8 million of loans, respectively. Legacy loans increased $6.4 million and $3.8 million during the quarter and year ended September 30, 2016, to $729.5 million, while new originations from former CBS branches totaled $22.8 million since the acquisition date of April 15, 2016.

Total deposits were $1.2 billion at September 30, 2016, compared with $738.9 million at September 30, 2015. The increase was due in part to the acquisition of CBS, which added $333.7 million of deposits to the Company's portfolio, as well as a continued increase in the Company's legacy deposits, which grew $75.2 million during the year ended September 30, 2016. Overall, transaction and money market accounts increased $150.7 million and $115.6 million, respectively, at September 30, 2016.

Total stockholders' equity decreased to $203.1 million at September 30, 2016, compared to $204.9 million at September 30, 2015, due primarily to $13.2 million of share repurchases during fiscal 2016, offset by $11.9 million of net income during the same period. Book value per share increased to $13.52 at September 30, 2016, from $12.79 per share at September 30, 2015, due to the effects of the company's stock repurchases, offset by our retention of earnings. Tangible book value per share decreased to $11.36 at September 30, 2016, compared to $12.48 at September 30, 2015, due to $25.5 million of goodwill generated by the purchase of CBS, partially offset by stock repurchases during fiscal 2016 and the associated reduced share count at September 30, 2016. However, tangible book value per share increased $0.25 from $11.11 at June 30, 2016, as a result of our earnings in the current quarter.

Net Interest Income and Net Interest Margin

Net interest income increased to $12.2 million for the quarter ended September 30, 2016, compared with $9.3 million for the quarter ended September 30, 2015. Interest income increased $3.3 million due to a $3.6 million increase in loan interest income, excluding accretion and amortization of loss share receivable, offset by a $444,000 decrease in net purchase discount accretion and amortization of loss share receivable. Quarter over quarter, total interest expense increased $399,000 to $1.6 million for the quarter ended September 30, 2016, largely due to increased balances of higher-costing deposits from CBS. Net interest margin was 3.82% for the three months ended September 30, 2016, compared to 4.05% for the same period in 2015. The decrease was largely due to increased deposit balances, both from legacy growth and the acquisition of CBS, as well as a continued drop in accretion income. The Company's net interest margin, excluding the effects of purchase accounting, increased to 3.47% for the quarter ended September 30, 2016, compared with 3.37% for the quarter ended September 30, 2015.

Net interest income for the year ended September 30, 2016 increased $9.3 million, or 28.2%, to $42.2 million, compared to $32.9 million for the prior-year period. Interest income increased $9.9 million primarily due to an increase of $7.2 million, or 19.7%, in loan interest income to $43.5 million. Loan interest income, excluding accretion and amortization of loss share receivable increased $8.7 million, while net purchase discount accretion and amortization of loss share receivable increased $813,000 during the twelve months ended September 30, 2016, partly due to the discontinuation of the Company's loss-sharing agreements and resultant discontinuation of amortization of the FDIC loss share receivable, which totaled $2.4 million during the year ended September 30, 2015. Income on interest-earning deposits in other financial institutions increased $123,000 due to higher cash balances as well as the Federal Reserve's decision to increase interest rates in December of 2015.

Under purchase accounting rules, the Company currently expects to realize remaining loan discount accretion of $462,000 over the next four quarters related to its acquisition of the First National Bank of Florida and $2.6 million related to the CBS acquisition over the life of the loans acquired.

Provision for Loan Losses

The Company recorded a negative provision for loan losses of $150,000 and $250,000 in the quarter and year ended September 30, 2016, respectively, due to the continued positive credit quality trends of the loan portfolio and net recoveries of previously charged-off loans. No provision was recorded in the three and 12 months ended September 30, 2015.

Noninterest Income and Expense

Noninterest income for the quarter ended September 30, 2016 increased to $4.9 million, compared with $1.5 million for the prior-year period. The increase was due to a $2.5 million impairment charge to the Company's FDIC receivable for loss sharing agreements taken in the fourth quarter of 2015 as part of the early termination of the agreements, along with a $413,000 increase in bankcard fee and other deposit fee income and a $350,000 increase in gain on sale of loans and servicing released loan fees in the current-year quarter.

Noninterest expense for the quarter ended September 30, 2016 increased $1.4 million to $11.4 million, compared with the same period in fiscal 2015, due in part to an increase of $1.0 million in salaries and employee benefits, $103,000 of which was attributable to merger expenses in the form of severance payments and contract buyouts. Additionally, occupancy and data processing expenses increased $289,000 and $104,000 to $1.4 million and $904,000, respectively, while the net benefit of operations of real estate owned increased $290,000 to $309,000 as a result of several gains on the sales of real estate. The Company's efficiency ratio for the quarter and year ended September 30, 2016 was 66.33% and 71.93%, respectively, compared to 92.49% and 81.47% for the same periods in 2015.

"Our improved efficiency ratio shows the impact of the additional operating leverage from the CBS acquisition," Mr. Johnson said.

Noninterest income for the year ended September 30, 2016 increased $8.6 million to $21.0 million, compared with $12.3 million for the prior-year period. The improvement was due to $3.6 million in nonrecurring recoveries on loans that were previously covered by loss share agreements with the FDIC and a prior-year $2.4 million impairment charge to the FDIC receivable for loss sharing agreements, along with increases of $1.5 million in bankcard fee and other deposit fee income and $506,000 in gain on sale of loans and servicing released loan fees.

Noninterest expense for the year ended September 30, 2016 increased $8.6 million to $45.4 million, compared with the same period in fiscal 2015. The increase was partly attributable to merger-related costs for the current year period, which totaled $4.2 million, largely concentrated in severance costs, data processing expenses and legal and professional fees. The acquisition also impacted ongoing operational costs due to increased payroll and operational expenses. There were smaller increases in legacy operations in compensation and professional fees. These increases were offset slightly by a $371,000 decrease in the net cost of operations of real estate owned.

Asset Quality

Asset quality remained strong with nonperforming assets at 0.45% of total assets and the allowance for loan losses at 1.03% of total loans and 277.66% of nonperforming loans at September 30, 2016. Not included in the allowance is $2.6 million in yield and credit discounts on the CBS acquired loans. The allowance for loan losses was 1.35% of legacy loans. The Company recorded net loan recoveries of $404,000 and $1.1 million in its allowance for loan losses for the quarter and year ended September 30, 2016, respectively, compared with net loan recoveries of $55,000 and $18,000 for the same periods in fiscal 2015.

Capital Management

The company did not repurchase shares during the quarter ended September 30, 2016. Beginning with the first quarter of fiscal 2014 through the third quarter of fiscal 2016, the Company repurchased 8.1 million shares, or 35.6%, of the Company's common stock for $91.9 million. On October 25, 2016, the company announced an increased dividend of $0.055 per share, up from the $0.05 per share dividend announced in the previous 14 quarters.

Mr. Johnson concluded, “With slightly less than two full quarters since the CBS acquisition, we have seen significant improvements in our return on assets and return on equity for the year to 0.98% and 5.90%, respectively, and we have added significant leverage to both our capital and operational structure. We are well-positioned to continue leveraging our expense structure and capital through organic and potential acquisitive growth. Our acquisition strategy is to seek out targets with an enduring loan portfolio, quality retail deposits and strongly accretive earnings. We continue to look for potential acquisitions that are additive to our existing franchise and will focus on these factors to maximize returns to our shareholders."

About Charter Financial Corporation

Charter Financial Corporation is a savings and loan holding company and the parent company of CharterBank, a full-service community bank and a federal savings institution. CharterBank is headquartered in West Point, Georgia, and operates branches in Metro Atlanta, the I-85 corridor south to Auburn, Alabama, and the Florida Gulf Coast. CharterBank's deposits are insured by the Federal Deposit Insurance Corporation. Investors may obtain additional information about Charter Financial Corporation and CharterBank on the internet at www.charterbk.com under About Us.

Forward-Looking Statements

This release may contain “forward-looking statements” within the meaning of the federal securities laws. These statements may be identified by use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “intend,” “focused on,” “estimated,” “working on,” “continue to,” “seek,” "leverage," and “potential.” Examples of forward-looking statements include, but are not limited to, statements regarding future growth, profitability, expense reduction, improvements in income and margins, increasing stockholder value, and estimates with respect to our financial condition and results of operation and business that are subject to various factors that could cause actual results to differ materially from these estimates. These factors include but are not limited to the Company's inability to implement its business strategy; general and local economic conditions; changes in interest rates, deposit flows, demand for mortgages and other loans, real estate values, and competition; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating an increase in borrowing to fund loans and investments; the changing exposure to credit risk; the inability to identify suitable future acquisition targets; the potential inability to effectively manage the new businesses and lending teams that transitioned from Community Bank of the South; the inability to properly leverage the expansion into the North Atlanta market; changes in legislation or regulation; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products, and services; the effect of cyberterrorism and system failures; and the effects of geopolitical instability and risks such as terrorist attacks, the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes, and the effect of any damage to our reputation resulting from developments relating to any of the factors listed herein. Any or all forward-looking statements in this release and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or known or unknown risks and uncertainties. Consequently, no forward-looking statements can be guaranteed. Except as required by law, the Company disclaims any obligation to subsequently revise or update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company's filings with the Securities and Exchange Commission. The company refers you to the section entitled “Risk Factors” contained in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015. Copies of each filing may be obtained from the Company or the Securities and Exchange Commission.

The risks included here are not exhaustive and undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to the company, its management, or persons acting on their behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law.

Charter Financial Corporation
Condensed Consolidated Statements of Financial Condition (unaudited)

 September 30, 2016 September 30, 2015 (1)
Assets
Cash and amounts due from depository institutions$14,472,867  $9,921,822 
Interest-earning deposits in other financial institutions77,376,632  20,421,403 
Cash and cash equivalents91,849,499  30,343,225 
Loans held for sale, fair value of $2,991,756 and $1,444,0422,941,982  1,406,902 
Certificates of deposit held at other financial institutions14,496,410   
Investment securities available for sale206,336,287  184,404,089 
Federal Home Loan Bank stock3,361,800  3,515,600 
Restricted securities, at cost279,000   
Loans receivable1,005,702,737  725,673,178 
Unamortized loan origination fees, net(1,278,830) (1,423,456)
Allowance for loan losses(10,371,416) (9,488,512)
Loans receivable, net994,052,491  714,761,210 
Other real estate owned2,706,461  3,410,538 
Accrued interest and dividends receivable3,442,051  2,668,406 
Premises and equipment, net28,078,591  19,660,012 
Goodwill29,793,756  4,325,282 
Other intangible assets, net of amortization2,639,608  157,226 
Cash surrender value of life insurance49,268,973  48,423,510 
Deferred income taxes5,416,625  5,674,095 
Other assets8,349,888  8,329,239 
Total assets$1,443,013,422  $1,027,079,334 
Liabilities and Stockholders’ Equity
Liabilities:   
Deposits$1,161,843,586  $738,855,076 
Federal Home Loan Bank advances50,000,000  62,000,000 
Floating rate junior subordinated debt6,587,549   
Advance payments by borrowers for taxes and insurance2,298,513  1,745,753 
Other liabilities19,134,238  19,547,895 
Total liabilities1,239,863,886  822,148,724 
Stockholders’ equity:   
Common stock, $0.01 par value; 15,031,076 shares issued and outstanding at September 30, 2016 and 16,027,654 shares issued and outstanding at September 30, 2015150,311  160,277 
Preferred stock, $0.01 par value; 50,000,000 shares authorized at September 30, 2016 and September 30, 2015   
Additional paid-in capital83,651,623  95,355,054 
Unearned compensation – ESOP(5,106,169) (5,551,193)
Retained earnings123,349,890  114,362,386 
Accumulated other comprehensive income1,103,881  604,086 
Total stockholders’ equity203,149,536  204,930,610 
Total liabilities and stockholders’ equity$1,443,013,422  $1,027,079,334 
        

__________________________________

(1) Financial information at September 30, 2015 has been derived from audited financial statements.

Charter Financial Corporation
Condensed Consolidated Statements of Income (unaudited)

 Three Months Ended
 September 30,
 Twelve Months Ended
 September 30,
 2016 2015 2016 2015
Interest income:       
Loans receivable$12,680,420  $9,542,999  $43,548,848  $36,375,782 
Taxable investment securities938,603  934,694  3,742,085  3,655,493 
Nontaxable investment securities4,955    11,657  12,417 
Federal Home Loan Bank stock40,778  33,945  154,272  142,947 
Interest-earning deposits in other financial institutions103,924  7,973  216,736  93,432 
Certificates of deposit held at other financial institutions50,999    105,451   
Restricted securities2,510    5,013   
Amortization of FDIC loss share receivable      (2,387,205)
Total interest income13,822,189  10,519,611  47,784,062  37,892,866 
Interest expense:       
Deposits1,117,586  663,474  3,452,758  2,727,372 
Borrowings386,975  559,800  1,955,445  2,285,550 
Floating rate junior subordinated debt117,801    221,571   
Total interest expense1,622,362  1,223,274  5,629,774  5,012,922 
Net interest income12,199,827  9,296,337  42,154,288  32,879,944 
Provision for loan losses(150,000)   (250,000)  
Net interest income after provision for loan losses12,349,827  9,296,337  42,404,288  32,879,944 
Noninterest income:       
Service charges on deposit accounts1,860,824  1,690,972  7,043,693  6,449,248 
Bankcard fees1,318,650  1,075,541  4,953,645  4,032,421 
Gain (loss) on investment securities available for sale    48,885  (27,209)
Bank owned life insurance332,594  320,565  1,225,422  1,245,382 
Gain on sale of loans and loan servicing release fees808,228  458,699  2,118,012  1,612,335 
Brokerage commissions198,670  164,987  650,727  732,336 
Recoveries on acquired loans previously covered under FDIC loss share agreements    3,625,000   
FDIC receivable for loss sharing agreements impairment  (2,529,134)   (2,434,903)
Other398,791  314,535  1,298,746  719,620 
Total noninterest income4,917,757  1,496,165  20,964,130  12,329,230 
Noninterest expenses:       
Salaries and employee benefits6,634,984  5,585,634  25,655,810  20,712,215 
Occupancy1,397,882  1,109,286  5,139,533  4,380,783 
Data processing903,769  799,864  4,427,636  2,931,736 
Legal and professional462,627  404,274  2,314,519  1,382,300 
Marketing421,130  464,496  1,590,171  1,639,943 
Federal insurance premiums and other regulatory fees239,912  191,337  859,125  755,872 
Net (benefit) cost of operations of real estate owned(309,222) (19,011) (334,954) 35,562 
Furniture and equipment239,817  278,160  870,675  881,465 
Postage, office supplies and printing276,588  186,055  868,674  872,837 
Core deposit intangible amortization expense157,773  60,045  415,617  266,451 
Other928,310  922,206  3,591,408  2,972,536 
Total noninterest expenses11,353,570  9,982,346  45,398,214  36,831,700 
Income before income taxes5,914,014  810,156  17,970,204  8,377,474 
Income tax expense2,103,296  257,463  6,106,884  2,805,312 
Net income$3,810,718  $552,693  $11,863,320  $5,572,162 
Basic net income per share$0.27  $0.04  $0.83  $0.35 
Diluted net income per share$0.26  $0.04  $0.79  $0.34 
Weighted average number of common shares outstanding14,185,824  15,299,717  14,371,126  15,717,421 
Weighted average number of common and potential common shares outstanding14,798,042  15,982,127  14,983,344  16,399,831 
            

Charter Financial Corporation
Supplemental Financial Data (unaudited)
in thousands except per share data

 Quarter to Date  Year to Date
 9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 (1)  9/30/2016 9/30/2015 (1)
               
Consolidated balance sheet data:              
Total assets$1,443,013  $1,427,851  $1,051,281  $1,004,880  $1,027,079   $1,443,013  $1,027,079 
Cash and cash equivalents91,849  106,108  79,331  51,881  30,343   91,849  30,343 
Loans receivable, net994,052  993,786  701,399  679,870  714,761   994,052  714,761 
Other real estate owned2,706  3,181  2,711  3,165  3,411   2,706  3,411 
Securities available for sale206,336  169,737  172,197  175,988  184,404   206,336  184,404 
Transaction accounts478,028  472,123  353,834  331,570  327,373   478,028  327,373 
Total deposits1,161,844  1,155,245  791,692  744,234  738,855   1,161,844  738,855 
Borrowings56,588  56,553  50,000  50,000  62,000   56,588  62,000 
Total stockholders’ equity203,150  199,800  198,031  198,368  204,931   203,150  204,931 
               
Consolidated earnings summary:              
Interest income$13,822  $13,635  $9,888  $10,439  $10,519   $47,784  $37,893 
Interest expense1,622  1,552  1,237  1,218  1,223   5,630  5,013 
Net interest income12,200  12,083  8,651  9,221  9,296   42,154  32,880 
Provision for loan losses(150) (100)        (250)  
Net interest income after provision for loan losses12,350  12,183  8,651  9,221  9,296   42,404  32,880 
Noninterest income4,918  4,703  4,513  6,831  1,496   20,964  12,329 
Noninterest expense11,354  15,064  9,903  9,079  9,982   45,398  36,832 
Income tax expense2,103  527  1,118  2,359  257   6,107  2,805 
Net income$3,811  $1,295  $2,143  $4,614  $553   $11,863  $5,572 
               
Per share data:              
Earnings per share – basic$0.27  $0.09  $0.15  $0.31  $0.04   $0.83  $0.35 
Earnings per share – fully diluted$0.26  $0.09  $0.14  $0.30  $0.04   $0.79  $0.34 
Cash dividends per share$0.05  $0.05  $0.05  $0.05  $0.05   $0.20  $0.20 
               
Weighted average basic shares14,186  14,185  14,225  14,886  15,300   14,371  15,717 
Weighted average diluted shares14,798  14,842  14,910  15,545  15,982   14,983  16,400 
Total shares outstanding15,031  15,031  15,026  15,229  16,028   15,031  16,028 
               
Book value per share$13.52  $13.29  $13.18  $13.03  $12.79   $13.52  $12.79 
Tangible book value per share (2)$11.36  $11.11  $12.89  $12.73  $12.48   $11.36  $12.48 
                             

__________________________________

(1) Financial information at and for the year ended September 30, 2015 has been derived from audited financial statements.
(2) Non-GAAP financial measure, calculated as total stockholders’ equity less goodwill and other intangible assets divided by period-end shares outstanding.

Charter Financial Corporation
Supplemental Information (unaudited)
dollars in thousands

 Quarter to Date  Year to Date
 9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015  9/30/2016 9/30/2015
               
Loans receivable:              
1-4 family residential real estate$236,940  $234,346  $190,180  $182,297  $188,044   $236,940  $188,044 
Commercial real estate595,157  586,082  392,946  396,023  416,576   595,157  416,576 
Commercial71,865  64,700  43,741  39,836  37,444   71,865  37,444 
Real estate construction80,500  104,389  72,323  61,816  77,217   80,500  77,217 
Consumer and other21,241  15,638  13,205  10,715  6,392   21,241  6,392 
Total loans receivable (1)$1,005,703  $1,005,155  $712,395  $690,687  $725,673   $1,005,703  $725,673 
               
Allowance for loan losses:              
Balance at beginning of period$10,118  $9,850  $9,695  $9,489  $9,433   $9,489  $9,471 
Charge-offs(1) (7) (205) (15) (263)  (228) (529)
Recoveries404  375  360  221  319   1,360  547 
Provision(150) (100)        (250)  
Balance at end of period$10,371  $10,118  $9,850  $9,695  $9,489   $10,371  $9,489 
               
Nonperforming assets: (2)              
Nonaccrual loans$3,735  $3,371  $2,098  $2,463  $4,114   $3,735  $4,114 
Loans delinquent 90 days or greater and still accruing    52  14  14     14 
Total nonperforming loans3,735  3,371  2,150  2,477  4,128   3,735  4,128 
Other real estate owned (3)2,706  3,181  2,711  3,165  3,411   2,706  3,411 
Total nonperforming assets$6,441  $6,552  $4,861  $5,642  $7,539   $6,441  $7,539 
               
Troubled debt restructuring:              
Troubled debt restructurings - accruing$4,585  $4,999  $7,267  $7,265  $6,046   $4,585  $6,046 
Troubled debt restructurings - nonaccrual1,760  1,716  332  317  1,607   1,760  1,607 
Total troubled debt restructurings$6,345  $6,715  $7,599  $7,582  $7,653   $6,345  $7,653 
                             

__________________________________

(1) Included in the loan balances are loans that were previously covered under loss share agreements with the FDIC in the amount of $46.8 million at September 30, 2015.
(2) Loans being accounted for under purchase accounting rules which have associated accretion income established at the time of acquisition remaining to recognize, that were greater than 90 days delinquent or otherwise considered nonperforming loans are excluded from this table.
(3) Included in the balances is OREO that was previously covered under loss share agreements with the FDIC in the amount of $2.4 million at September 30, 2015.

Charter Financial Corporation
Supplemental Information (unaudited)

 Quarter to Date  Year to Date
 9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015  9/30/2016 9/30/2015
               
Return on equity (annualized)7.55% 2.61% 4.32% 8.97% 1.06%  5.90% 2.62%
Return on assets (annualized)1.07% 0.38% 0.83% 1.83% 0.22%  0.98% 0.56%
Net interest margin (annualized)3.82% 3.97% 3.72% 4.03% 4.05%  3.89% 3.67%
Net interest margin, excluding the effects of purchase accounting (1)3.47% 3.53% 3.36% 3.51% 3.37%  3.47% 3.26%
Bank tier 1 leverage ratio (2)11.51% 11.32% 17.13% 17.19% 16.04%  11.51% 16.04%
Bank total risk-based capital ratio15.26% 14.99% 22.98% 23.23% 21.71%  15.26% 21.71%
Effective tax rate35.56% 28.91% 34.28% 33.83% 31.78%  33.98% 33.49%
Yield on loans5.07% 5.20% 5.03% 5.33% 5.40%  5.15% 5.13%
Cost of deposits0.46% 0.43% 0.42% 0.42% 0.42%  0.43% 0.44%
               
Asset quality ratios: (3)              
Allowance for loan losses as a % of total loans (4)1.03% 1.00% 1.38% 1.40% 1.30%  1.03% 1.30%
Allowance for loan losses as a % of nonperforming loans277.66% 300.10% 458.13% 391.42% 229.85%  277.66% 229.85%
Nonperforming assets as a % of total loans and OREO0.64% 0.65% 0.68% 0.81% 1.04%  0.64% 1.04%
Nonperforming assets as a % of total assets0.45% 0.46% 0.46% 0.56% 0.73%  0.45% 0.73%
Net charge-offs (recoveries) as a % of average loans (annualized)(0.16)% (0.15)% (0.09)% (0.12)% (0.15)%  (0.13)% %
                      

__________________________________

(1) Net interest income excluding accretion and amortization of acquired loans divided by average net interest earning assets excluding average loan accretable discounts, a non-GAAP measure, in the amount of $3.8 million, $4.7 million, $2.0 million, $3.1 million and $3.8 million for the quarters ended September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively.
(2) During the quarter ended June 30, 2016, a net downstream of capital was made between the holding company and the bank in the amount of $6.1 million as part of the Company's acquisition of CBS.
(3) Ratios for the three and twelve months ended September 30, 2016 and 2015, and the three months ended June 30, 2016, March 31, 2016, and December 31, 2015 include all assets with the exception of FAS ASC 310-30 loans that are excluded from nonperforming loans due to the ongoing recognition of accretion income established at the time of acquisition.
(4) Accounting requirements for the third quarter 2016 acquisition of CBS have affected the comparability of the allowance for loan losses as a percentage of loans. Excluding former CBS loans totaling $236.4 million and $264.7 million at September 30, 2016, and June 30, 2016, respectively, which were recorded at acquisition date fair value, the allowance approximated 1.35% and 1.37% of all other loans at September 30, 2016 and June 30, 2016, respectively.

Charter Financial Corporation
Average Balances, Interest Rates and Yields (unaudited)
dollars in thousands

 Quarter to Date
 9/30/2016 9/30/2015
 Average Balance Interest Average Yield/Cost (10) Average Balance Interest Average Yield/Cost (10)
Assets:           
Interest-earning assets:           
Interest-earning deposits in other financial institutions$85,687  $104  0.49% $21,165  $8  0.15%
Certificates of deposit held at other financial institutions16,395  51  1.24       
FHLB common stock and other equity securities3,362  41  4.85  3,387  34  4.01 
Taxable investment securities169,555  939  2.21  187,117  934  2.00 
Nontaxable investment securities (1)1,607  5  1.23       
Restricted securities279  3  3.60       
Loans receivable (1)(2)(3)(4)1,001,096  11,590  4.63  706,724  8,009  4.53 
Accretion and amortization of acquired loan discounts (5)  1,090  0.43    1,534  0.86 
Total interest-earning assets1,277,981  13,823  4.33  918,393  10,519  4.58 
Total noninterest-earning assets148,359      98,994     
Total assets$1,426,340      $1,017,387     
Liabilities and Equity:           
Interest-bearing liabilities:           
Interest bearing checking$239,141  $97  0.15% $178,538  $57  0.13%
Bank rewarded checking50,566  24  0.19  46,915  23  0.20 
Savings accounts63,196  7  0.04  51,300  3  0.02 
Money market deposit accounts241,286  180  0.30  126,889  69  0.22 
Certificate of deposit accounts373,197  810  0.87  232,738  511  0.88 
Total interest-bearing deposits967,386  1,118  0.46  636,380  663  0.42 
Borrowed funds50,000  387  3.10  58,773  560  3.81 
Floating rate junior subordinated debt6,564  118  7.18       
Total interest-bearing liabilities1,023,950  1,623  0.63  695,153  1,223  0.70 
Noninterest-bearing deposits180,015      100,544     
Other noninterest-bearing liabilities20,605      13,379     
Total noninterest-bearing liabilities200,620      113,923     
Total liabilities1,224,570      809,076     
Total stockholders' equity201,770      208,311     
Total liabilities and stockholders' equity$1,426,340      $1,017,387     
Net interest income  $12,200      $9,296   
Net interest earning assets (6)  $254,031      $223,240   
Net interest rate spread (7)    3.70%     3.88%
Net interest margin (8)    3.82%     4.05%
Net interest margin, excluding the effects of purchase accounting (9)    3.47%     3.37%
Ratio of average interest-earning assets to average interest-bearing liabilities    124.81%     132.11%
              

__________________________________

(1) Tax exempt or tax-advantaged securities and loans are shown at their contractual yields and are not shown at a tax equivalent yield.
(2) Includes net loan fees deferred and accreted pursuant to applicable accounting requirements.
(3) Interest income on loans is interest income as recorded in the income statement and does not include interest income on nonaccrual loans.
(4) Interest income on loans excludes discount accretion and amortization of the indemnification asset.
(5) Accretion of accretable purchase discount on loans acquired and amortization of the overstatement of FDIC indemnification asset.
(6) Net interest-earning assets represent total average interest-earning assets less total average interest-bearing liabilities.
(7) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(8) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(9) Net interest margin, excluding the effects of purchase accounting, a non-GAAP measure, represents net interest income excluding accretion and amortization of acquired loans receivable as a percentage of average net interest earning assets excluding loan accretable discounts in the amount of $3.8 million and $3.8 million for the quarters ended September 30, 2016 and September 30, 2015, respectively.
(10) Annualized.

Charter Financial Corporation
Average Balances, Interest Rates and Yields (unaudited)
dollars in thousands

 Fiscal Year to Date
 9/30/2016 9/30/2015
 Average Balance Interest Average Yield/Cost (10) Average Balance Interest Average Yield/Cost (10)
Assets:           
Interest-earning assets:           
Interest-earning deposits in other financial institutions$52,667  $217  0.41% $42,836  $93  0.22%
Certificates of deposit held at other financial institutions8,946  105  1.18       
FHLB common stock and other equity securities3,222  154  4.79  3,304  143  4.33 
Taxable investment securities173,888  3,742  2.15  183,956  3,656  1.99 
Nontaxable investment securities (1)997  12  1.17  2,988  12  0.42 
Restricted securities129  5  3.89       
Loans receivable (1)(2)(3)(4)845,014  39,178  4.64  662,283  30,431  4.59 
Accretion and amortization of acquired loan discounts (5)  4,371  0.52    3,558  0.53 
Total interest-earning assets1,084,863  47,784  4.40  895,367  37,893  4.23 
Total noninterest-earning assets122,069      105,145     
Total assets$1,206,932      $1,000,512     
Liabilities and Equity:           
Interest-bearing liabilities:           
Interest bearing checking$206,985  $278  0.13% $171,792  $214  0.12%
Bank rewarded checking49,077  97  0.20  48,272  100  0.21 
Savings accounts56,963  23  0.04  49,782  10  0.02 
Money market deposit accounts185,818  522  0.28  125,151  265  0.21 
Certificate of deposit accounts297,270  2,533  0.85  227,917  2,138  0.94 
Total interest-bearing deposits796,113  3,453  0.43  622,914  2,727  0.44 
Borrowed funds51,181  1,955  3.82  54,513  2,286  4.19 
Floating rate junior subordinated debt3,022  222  7.33       
Total interest-bearing liabilities850,316  5,630  0.66  677,427  5,013  0.74 
Noninterest-bearing deposits140,423      98,340     
Other noninterest-bearing liabilities15,040      12,203     
Total noninterest-bearing liabilities155,463      110,543     
Total liabilities1,005,779      787,970     
Total stockholders' equity201,153      212,542     
Total liabilities and stockholders' equity$1,206,932      $1,000,512     
Net interest income  $42,154      $32,880   
Net interest earning assets (6)  $234,547      $217,940   
Net interest rate spread (7)    3.74%     3.49%
Net interest margin (8)    3.89%     3.67%
Net interest margin, excluding the effects of purchase accounting (9)    3.47%     3.26%
Ratio of average interest-earning assets to average interest-bearing liabilities    127.58%     132.17%
              

__________________________________

(1) Tax exempt or tax-advantaged securities and loans are shown at their contractual yields and are not shown at a tax equivalent yield.
(2) Includes net loan fees deferred and accreted pursuant to applicable accounting requirements.
(3) Interest income on loans is interest income as recorded in the income statement and does not include interest income on nonaccrual loans.
(4) Interest income on loans excludes discount accretion and amortization of the indemnification asset.
(5) Accretion of accretable purchase discount on loans acquired and amortization of the overstatement of FDIC indemnification asset.
(6) Net interest-earning assets represent total average interest-earning assets less total average interest-bearing liabilities.
(7) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(8) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(9) Net interest margin, excluding the effects of purchase accounting, a non-GAAP measure, represents net interest income excluding accretion and amortization of acquired loans receivable as a percentage of average net interest earning assets excluding loan accretable discounts in the amount of $3.4 million and $4.6 million for the twelve months ended September 30, 2016 and September 30, 2015, respectively.
(10) Annualized.

Charter Financial Corporation
Reconciliation of Non-GAAP Measures (unaudited)

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. Charter Financial management uses non-GAAP financial measures, including loans receivable income excluding accretion and amortization of loss share receivable, net interest margin excluding the effects of purchase accounting, and tangible book value per share, in its analysis of the Company's performance. Loans receivable income excluding accretion and amortization of loss share receivable excludes the following from loans receivable income: accretion from purchase discounts related to acquired loans and amortization of the FDIC loss share receivable. Net interest margin excluding the effects of purchase accounting excludes the following from net interest margin: net purchase discount accretion and amortization and the average balance of purchase discounts. Tangible book value per share excludes the following from book value per share: the balance of goodwill and other intangible assets.

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company and provide meaningful comparison to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

 For the Quarters Ended
 9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
Loans Receivable Income Excluding Accretion and Amortization of Loss Share Receivable         
Loans receivable income$12,680,420  $12,563,466  $8,863,437  $9,441,525  $9,542,999 
Loan purchase discount accretion1,090,886  1,278,040  833,179  1,168,982  1,533,850 
Amortization of FDIC loss share receivable         
Net purchase discount accretion and amortization1,090,886  1,278,040  833,179  1,168,982  1,533,850 
Loans receivable income excluding accretion and amortization of loss share receivable (Non-GAAP)$11,589,534  $11,285,426  $8,030,258  $8,272,543  $8,009,149 
          
Net Interest Margin Excluding the Effects of Purchase Accounting         
Net Interest Margin3.82% 3.97% 3.72% 4.03% 4.05%
Effect to adjust for net purchase discount accretion and amortization(0.35) (0.44) (0.36) (0.52) (0.68)
Net interest margin excluding the effects of purchase accounting (Non-GAAP)3.47% 3.53% 3.36% 3.51% 3.37%
          
Tangible Book Value Per Share         
Book value per share$13.52  $13.29  $13.18  $13.03  $12.79 
Effect to adjust for goodwill and other intangible assets(2.16) (2.18) (0.29) (0.30) (0.31)
Tangible book value per share (Non-GAAP)$11.36  $11.11  $12.89  $12.73  $12.48 
                    


 For the Years Ended
 9/30/2016 9/30/2015
Loans Receivable Income Excluding Accretion and Amortization of Loss Share Receivable   
Loans receivable income$43,548,848  $36,375,782 
Loan purchase discount accretion4,371,087  5,945,442 
Amortization of FDIC loss share receivable  (2,387,205)
Net purchase discount accretion and amortization4,371,087  3,558,237 
Loans receivable income excluding accretion and amortization of loss share receivable (Non-GAAP)$39,177,761  $32,817,545 
    
Net Interest Margin Excluding the Effects of Purchase Accounting   
Net Interest Margin3.89% 3.67%
Effect to adjust for net purchase discount accretion and amortization(0.42) (0.41)
Net interest margin excluding the effects of purchase accounting (Non-GAAP)3.47% 3.26%
    
Tangible Book Value Per Share   
Book value per share$13.52  $12.79 
Effect to adjust for goodwill and other intangible assets(2.16) (0.31)
Tangible book value per share (Non-GAAP)$11.36  $12.48 
        

 

Contact:
Robert L. Johnson, Chairman & CEO
Curt Kollar, CFO
706-645-1391
bjohnson@charterbank.net or
ckollar@charterbank.net

Dresner Corporate Services
Steve Carr
312-780-7211
scarr@dresnerco.com