Charter Financial Announces Third Quarter Fiscal 2017 Earnings of $3.5 Million; Increased Quarterly Dividend

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| Source: Charter Financial Corporation
  • Basic and diluted EPS of $0.24 and $0.23, respectively
  • 11.0% increase in quarterly bankcard fees year over year
  • $24.9 million growth in loans in quarter
  • Continued strong asset quality
  • Signed merger agreement with Resurgens Bancorp expected to close in Q4
  • Fourth consecutive quarterly dividend increase

WEST POINT, Ga., July 25, 2017 (GLOBE NEWSWIRE) -- Charter Financial Corporation (the “Company”) (NASDAQ:CHFN) today reported net income of $3.5 million for the quarter ended June 30, 2017, or $0.24 and $0.23 per basic and diluted share, respectively, compared with net income of $1.3 million, or $0.09 per basic and diluted share for the quarter ended June 30, 2016.

Net income for the current-year quarter increased $2.2 million over the prior-year quarter. A driving factor was an increase of $305,000, or 9.8%, in deposit and bankcard fees during the current-year quarter. The 2016 third quarter included $3.5 million in merger costs from the acquisition of CBS Financial Corporation ("CBS").

Net income for the nine months ended June 30, 2017 was $11.9 million, or $0.83 and $0.78 per basic and diluted share, respectively, compared with net income of $8.1 million, or $0.56 and $0.53 per basic and diluted share, respectively, for the nine months ended June 30, 2016.

The Company's board of directors has declared an increased quarterly cash dividend of $0.07 per share, the fourth consecutive increase after a $0.05 per share dividend was announced in the previous 14 quarters. The dividend is payable on August 24, 2017, to stockholders of record as of August 10, 2017.

On June 1, 2017, the Company announced its merger agreement with Resurgens Bancorp ("Resurgens"), in which it intends to acquire Resurgens and its wholly-owned subsidiary, Resurgens Bank. The transaction is expected to close late in the fourth quarter of fiscal 2017. The transaction is projected to bring in $167.0 million of total assets, $135.0 million of gross loans and $138.0 million of total deposits to the Company's books upon closing.

"The Resurgens acquisition is another progression in our long term shareholder value plan," said Chairman and CEO Robert L. Johnson. "It is remarkable to reflect that we entered the new century as a sleepy, small town mutual and now we are fully stockholder owned, have broadened our base into thriving markets, leveraged most of the excess capital generated in our stock conversion and are now trading on earnings rather than book value."

Quarterly Operating Results

Quarterly earnings for the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016 were positively impacted by:

  • An increase in deposit and bankcard fee income of $305,000, or 9.8%.
  • A decrease in total noninterest expense of $4.0 million, or 26.3%, largely due to $3.5 million of merger costs associated with the CBS acquisition in the prior-year quarter.
  • Interest on interest-bearing deposits in other financial institutions and taxable investment securities increased $190,000  and $114,000, respectively. Interest-bearing deposits saw a 57 basis point increase in yield, while the Company's yield on taxable investment securities increased six basis points.
  • A decrease in interest expense on FHLB borrowings of $142,000, or 30.3%, due to the Company renegotiating both of its existing advances in May 2016 and March 2017.

Quarterly earnings for the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016 were negatively impacted by:

  • A decrease in loans receivable income of $287,000, or 2.3%, to $12.3 million for the 2017 third quarter as compared to $12.6 million for the same period in 2016, driven entirely by a decline of $1.1 million, or 86.5%, in accretion of acquired loan discounts. Loans receivable income excluding accretion increased $818,000, or 7.2%, to $12.1 million during the quarter.
  • An increase in interest expense on deposits of $205,000, or 21.0%, due to higher balances as well as an increase of four basis points in the Company's cost of deposits.
  • An increase in income tax expense of $1.5 million to $2.0 million for the current-year quarter, compared to $527,000 in the prior-year period attributable to increased net income as well as a higher effective tax rate.

"Our strong earnings continue to show the value of our expansion into the North Atlanta market," Mr. Johnson continued. "We had our best-ever quarter of deposit and bankcard fees, and grew our loan portfolio as well as our loans receivable income excluding purchase discount accretion. We believe we will be able to continue this growth as we expand into the DeKalb County market with the Resurgens merger."

Financial Condition

Total assets increased $41.7 million to $1.5 billion at June 30, 2017, from $1.4 billion at September 30, 2016, largely attributable to a $28.3 million increase in cash and cash equivalents. The increase in cash was largely the result of increased deposits and sales and paydowns of investment securities, offset in part by growth in loans. Net loans grew $38.1 million, or 3.8%, to $1.0 billion at June 30, 2017, from $994.1 million at September 30, 2016. Loans increased $24.9 million during the current quarter.

Total deposits increased $32.4 million to $1.2 billion during the nine months ended June 30, 2017. Transaction and certificate of deposit accounts increased $32.8 million and $4.1 million, respectively, while money market accounts decreased $6.1 million from September 30, 2016.

From September 30, 2016 to June 30, 2017, total stockholders' equity increased $8.9 million to $212.1 million from $203.1 million due primarily to $11.9 million of net income, partially offset by a $2.5 million decrease in accumulated other comprehensive income on the Company's portfolio of investment securities available for sale. The decrease in accumulated other comprehensive income was driven by market interest rate changes since the November presidential election. Book value per share increased to $14.03 while tangible book value per share increased from $11.36 to $11.92, both due to the Company's retention of earnings.

Net Interest Income and Net Interest Margin

Net interest income decreased $95,000 to $12.0 million for the third quarter of fiscal 2017, compared with $12.1 million for the prior-year period. Total interest income declined $7,000. The decrease was primarily attributable to a $287,000 decline in loans receivable income, which was the result of a $1.1 million decrease in accretion of acquired loan discounts. Loans receivable income, excluding accretion of acquired loan discounts, increased $818,000 to $12.1 million during the current quarter from $11.3 million during the prior-year quarter. The Company also experienced increases of $190,000 in interest on interest bearing deposits in other financial institutions and $114,000 in interest on taxable investment securities during the current-year quarter. Total interest expense increased $88,000 to $1.6 million for the current quarter, largely due to increased balances of higher-costing deposits from CBS. These increases were offset in part by a $142,000 decline in interest expense on FHLB borrowings due to a restructuring of one of the Company's $25.0 million advances in March of 2017 from an interest rate of 4.30% to 3.43%, as well as the replacement of the Company's other $25.0 million advance with a new, substantially lower-costing advance in May of 2016.

The Company's net interest margin, excluding the effects of purchase accounting, increased to 3.55% for the quarter ended June 30, 2017, from 3.53% for the quarter ended June 30, 2016. Net interest margin was 3.60% for the third quarter of fiscal 2017, compared to 3.97% for the third quarter of fiscal 2016. The decrease was largely due to the aforementioned significant decline in accretion income. Net interest margin was also impacted negatively by the Company's higher balances in lower-yielding Federal Reserve deposits and slightly higher interest expense on its own deposits.

"We are seeing steady growth in our net interest income and net interest margin excluding the effects of purchase accounting," Mr. Johnson continued. "Accretion of purchase discounts was high in the three quarters following the April 2016 closing of the Community Bank of the South deal from high volumes of loan renewals, construction loan maturities and some payoffs. The substantial decline of accretion income this quarter was nearly offset by net interest income growth in our loan portfolio."

Net interest income for the nine months ended June 30, 2017, increased $5.9 million, or 19.7%, to $35.8 million, compared to $30.0 million for the prior-year period. Interest income increased $6.8 million to $40.8 million due to increased loan balances as a result of the CBS acquisition early in the third quarter of fiscal 2016, as well as a $447,000 increase in interest bearing deposits in other financial institutions, primarily the result of increased cash balances and the Federal Reserve's increases of interest rates. Loan interest income, excluding accretion of acquired loan discounts, increased $7.9 million, while net purchase discount accretion decreased $2.0 million.

The Company currently expects to realize remaining loan discount accretion of $64,000 next quarter related to its 2011 acquisition of the First National Bank of Florida under purchase accounting rules. The Company has $1.8 million of remaining loan discount accretion related to the CBS acquisition, which will be accreted over the life of the loans acquired.

Provision for Loan Losses

The Company recorded provisions for loan losses of $0 and $(900,000) in the three and nine month periods ended June 30, 2017, respectively, due to the continued positive credit quality trends of its loan portfolio and net recoveries of previously charged-off loans. A provision of $(100,000) was recorded in the three and nine month periods ended June 30, 2016, respectively.

Noninterest Income and Expense

Noninterest income decreased $63,000 to $4.6 million in the fiscal 2017 third quarter from $4.7 million during the fiscal 2016 third quarter. The decrease was primarily due to a $259,000 gain on the settlement of life insurance during the prior-year quarter, which was recognized in other noninterest income, as well as a $59,000 decrease in gain on sale of loans due to reduced activity. The current-year quarter included increases in core components of $305,000 in bankcard fee and other deposit fee income and $22,000 in brokerage commissions. Bankcard fees increased $143,000, or 11.0%, compared to the prior-year period, due mainly to the Company's marketing efforts for signature debit card transactions.

Noninterest expense for the quarter ended June 30, 2017, decreased $4.0 million to $11.1 million, compared with $15.1 million for the prior-year quarter, due largely to $3.5 million of merger costs from the CBS acquisition in the prior-year quarter, which were largely concentrated in severance costs, occupancy, data processing and legal and professional fees. Other noninterest expense also fell $501,000 due largely to a $325,000 write-down on assets available for sale during the prior-year period. Net cost of operations of real estate owned increased $94,000.

Noninterest income for the nine months ended June 30, 2017, decreased $1.9 million to $14.2 million, compared with $16.0 million for the prior-year period. In the fiscal 2017 period, the Company recorded $250,000 of recoveries on loans formerly covered by FDIC loss sharing agreements, compared to $3.6 million of such recoveries in the prior-year period. The decrease in recoveries was partially offset by increased service charge and bankcard fees of $835,000, gains on the sale of loans of $507,000, gains on investment securities available for sale of $199,000 and brokerage commissions of $124,000 during the current-year period.

Noninterest expense for the nine months ended June 30, 2017 decreased $1.9 million to $32.1 million compared with $34.0 million for the prior-year period due to $4.0 million of acquisition-related expenses during the nine months ended June 30, 2016, as well as a $302,000 increase in the benefit of operations of real estate owned due to large gains on sales early in the Company's current fiscal year. These were partly offset by increases in ongoing operational costs in salaries, occupancy and data processing as a result of the CBS acquisition, as well as a $163,000 increase in core deposit intangible expense, also related to the CBS acquisition.

Asset Quality

Nonperforming assets at June 30, 2017 were at 0.26% of total assets, down from 0.45% at September 30, 2016, due to payoffs of two long-standing, high-balance, non-performing loans and continued positive asset quality trends. The allowance for loan losses was at 1.04% of total loans and 586.83% of nonperforming loans at June 30, 2017, compared to 1.03% and 277.66%, respectively, at September 30, 2016. Not included in the allowance is $1.8 million in yield and credit discounts on the CBS-acquired loans. At June 30, 2017, the allowance for loan losses was 1.22% of legacy loans, compared to 1.35% at September 30, 2016. The Company recorded net loan recoveries of $296,000 and $1.3 million in its allowance for loan losses for the three and nine months ended June 30, 2017, respectively, compared with net loan recoveries of $367,000 and $729,000 for the same periods in the prior year.

"Our historically conservative lending practices gave us the flexibility to work through problem assets, both legacy and acquired, during the recent economic downturn," Mr. Johnson said. "As we've come out of it and seen economic improvement, our loan portfolio quality, measured by our credit metrics, has improved commensurately, demonstrating superior asset quality."

Capital Management

From the first quarter of fiscal 2014 through the first quarter of fiscal 2017, the Company has repurchased 8.1 million shares, or 35.6%, of its common stock, for $91.9 million. No shares were repurchased during the second or third quarter.

Mr. Johnson concluded, “Our strong capital position has again allowed us to seek out accretive growth opportunities and improve our markets, this time with the planned acquisition of Resurgens. We are very pleased to partner with their team to continue our expansion into the Metro Atlanta market. We are building long-term shareholder value through earnings growth arising out of entry and growth in thriving markets on our I-85 driven geography and continued leverage of our capital and operating infrastructure."

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,” “well-positioned,” “planned,” “intend,” “strive,” “probably,” “focused on,” “estimated,” “working on,” “continue to,” “seek,” "leverage," "building," 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 potential inability to consummate the acquisition of Resurgens; 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; the uncertainty in global markets resulting from the new administration; 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, 2016. 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)
 
 June 30, 2017 September 30, 2016 (1)
Assets
Cash and amounts due from depository institutions$25,227,855  $14,472,867 
Interest-earning deposits in other financial institutions94,916,159  77,376,632 
Cash and cash equivalents120,144,014  91,849,499 
Loans held for sale, fair value of $2,064,880 and $2,991,7562,029,228  2,941,982 
Certificates of deposit held at other financial institutions7,767,710  14,496,410 
Investment securities available for sale187,654,517  206,336,287 
Federal Home Loan Bank stock3,484,600  3,361,800 
Restricted securities, at cost279,000  279,000 
Loans receivable1,044,141,434  1,005,702,737 
Unamortized loan origination fees, net(1,233,347) (1,278,830)
Allowance for loan losses(10,800,257) (10,371,416)
Loans receivable, net1,032,107,830  994,052,491 
Other real estate owned1,937,613  2,706,461 
Accrued interest and dividends receivable3,574,445  3,442,051 
Premises and equipment, net28,363,881  28,078,591 
Goodwill29,793,756  29,793,756 
Other intangible assets, net of amortization2,218,706  2,639,608 
Cash surrender value of life insurance50,153,948  49,268,973 
Deferred income taxes5,651,703  4,366,522 
Other assets4,960,815  4,775,805 
Total assets$1,480,121,766  $1,438,389,236 
Liabilities and Stockholders’ Equity
Liabilities:   
Deposits$1,194,253,739  $1,161,843,586 
Long-term borrowings50,000,000  50,000,000 
Floating rate junior subordinated debt6,690,372  6,587,549 
Advance payments by borrowers for taxes and insurance2,392,561  2,298,513 
Other liabilities14,704,845  14,510,052 
Total liabilities1,268,041,517  1,235,239,700 
Stockholders’ equity:   
Common stock, $0.01 par value; 15,112,432 shares issued and outstanding at June 30, 2017 and 15,031,076 shares issued and outstanding at September 30, 2016151,124  150,311 
Preferred stock, $0.01 par value; 50,000,000 shares authorized at June 30, 2017 and September 30, 2016   
Additional paid-in capital85,339,406  83,651,623 
Unearned compensation – ESOP(4,673,761) (5,106,169)
Retained earnings132,654,363  123,349,890 
Accumulated other comprehensive (loss) income(1,390,883) 1,103,881 
Total stockholders’ equity212,080,249  203,149,536 
   Total liabilities and stockholders’ equity$1,480,121,766  $1,438,389,236 


__________________________________
(1)Financial information at September 30, 2016 has been derived from audited financial statements.


Charter Financial Corporation
Condensed Consolidated Statements of Income (unaudited)
 
 Three Months Ended
 June 30,
 Nine Months Ended
 June 30,
 2017 2016 2017 2016
Interest income:       
Loans receivable$12,276,095  $12,563,466  $36,749,414  $30,868,429 
Taxable investment securities1,036,572  922,435  3,236,212  2,803,482 
Nontaxable investment securities4,571  6,702  13,714  6,702 
Federal Home Loan Bank stock39,913  38,416  119,432  113,493 
Interest-earning deposits in other financial institutions235,928  46,374  560,055  112,812 
Certificates of deposit held at other financial institutions30,953  54,452  112,357  54,452 
Restricted securities2,855  2,503  8,107  2,503 
Total interest income13,626,887  13,634,348  40,799,291  33,961,873 
Interest expense:       
Deposits1,182,649  977,520  3,506,425  2,335,171 
Borrowings327,790  470,219  1,077,644  1,568,470 
Floating rate junior subordinated debt129,051  103,771  373,473  103,771 
Total interest expense1,639,490  1,551,510  4,957,542  4,007,412 
   Net interest income11,987,397  12,082,838  35,841,749  29,954,461 
Provision for loan losses  (100,000) (900,000) (100,000)
   Net interest income after provision for loan losses11,987,397  12,182,838  36,741,749  30,054,461 
Noninterest income:       
Service charges on deposit accounts1,972,205  1,810,166  5,560,729  5,182,869 
Bankcard fees1,443,151  1,299,988  4,092,195  3,634,995 
Gain on investment securities available for sale  12,920  247,780  48,885 
Bank owned life insurance305,709  327,304  884,976  892,828 
Gain on sale of loans542,762  602,178  1,816,848  1,309,784 
Brokerage commissions185,674  163,912  576,237  452,057 
Recoveries on acquired loans previously covered under FDIC loss share agreements    250,000  3,625,000 
Other189,996  486,462  739,733  899,955 
Total noninterest income4,639,497  4,702,930  14,168,498  16,046,373 
Noninterest expenses:       
Salaries and employee benefits6,530,408  8,470,498  18,742,656  19,020,827 
Occupancy1,156,618  1,534,222  3,699,807  3,741,652 
Data processing1,091,208  1,654,015  3,004,137  3,523,867 
Legal and professional384,240  793,489  1,055,985  1,851,892 
Marketing383,890  500,377  1,152,357  1,169,040 
Federal insurance premiums and other regulatory fees198,350  185,333  561,106  619,213 
Net cost (benefit) of operations of real estate owned18,079  (75,897) (327,365) (25,732)
Furniture and equipment202,259  301,137  604,696  630,859 
Postage, office supplies and printing224,073  236,704  717,775  592,086 
Core deposit intangible amortization expense117,806  172,706  420,902  257,845 
Other790,204  1,291,259  2,504,298  2,663,095 
Total noninterest expenses11,097,135  15,063,843  32,136,354  34,044,644 
Income before income taxes5,529,759  1,821,925  18,773,893  12,056,190 
Income tax expense2,015,909  526,690  6,897,581  4,003,588 
   Net income$3,513,850  $1,295,235  $11,876,312  $8,052,602 
Basic net income per share$0.24  $0.09  $0.83  $0.56 
Diluted net income per share$0.23  $0.09  $0.78  $0.53 
Weighted average number of common shares outstanding14,353,082  14,184,675  14,293,859  14,433,345 
Weighted average number of common and potential common shares outstanding15,256,623  14,841,814  15,197,400  15,090,484 


 
Charter Financial Corporation
Supplemental Financial Data (unaudited)
in thousands except per share data
 
 Quarter to Date  Year to Date
 6/30/2017 3/31/2017 12/31/2016 9/30/2016 (1) 6/30/2016  6/30/2017 6/30/2016
               
Consolidated balance sheet data:              
Total assets$1,480,122  $1,484,796  $1,461,667  $1,438,389  $1,427,851   $1,480,122  $1,427,851 
Cash and cash equivalents120,144  140,285  131,849  91,849  106,108   120,144  106,108 
Loans receivable, net1,032,108  1,007,552  990,635  994,052  993,786   1,032,108  993,786 
Other real estate owned1,938  1,957  2,161  2,706  3,181   1,938  3,181 
Securities available for sale187,655  191,483  196,279  206,336  169,737   187,655  169,737 
Transaction accounts510,810  513,294  481,841  478,028  472,123   510,810  472,123 
Total deposits1,194,254  1,201,731  1,186,347  1,161,844  1,155,245   1,194,254  1,155,245 
Borrowings56,690  56,656  56,622  56,588  56,553   56,690  56,553 
Total stockholders’ equity212,080  208,413  205,500  203,150  199,800   212,080  199,800 
               
Consolidated earnings summary:              
Interest income$13,626  $13,307  $13,866  $13,822  $13,635   $40,799  $33,962 
Interest expense1,639  1,652  1,666  1,622  1,552   4,957  4,008 
Net interest income11,987  11,655  12,200  12,200  12,083   35,842  29,954 
Provision for loan losses  (150) (750) (150) (100)  (900) (100)
Net interest income after provision for loan losses11,987  11,805  12,950  12,350  12,183   36,742  30,054 
Noninterest income4,639  4,546  4,983  4,918  4,703   14,168  16,046 
Noninterest expense11,096  10,750  10,290  11,354  15,064   32,136  34,043 
Income tax expense2,016  2,284  2,597  2,103  527   6,898  4,004 
Net income$3,514  $3,317  $5,046  $3,811  $1,295   $11,876  $8,053 
               
Per share data:              
Earnings per share – basic$0.24  $0.23  $0.36  $0.27  $0.09   $0.83  $0.56 
Earnings per share – fully diluted$0.23  $0.22  $0.33  $0.26  $0.09   $0.78  $0.53 
Cash dividends per share$0.065  $0.060  $0.055  $0.050  $0.050   $0.180  $0.150 
               
Weighted average basic shares14,353  14,322  14,207  14,186  14,185   14,294  14,433 
Weighted average diluted shares15,257  15,340  15,065  14,798  14,842   15,197  15,090 
Total shares outstanding15,112  15,061  15,031  15,031  15,031   15,112  15,031 
               
Book value per share$14.03  $13.84  $13.67  $13.52  $13.29   $14.03  $13.29 
Tangible book value per share (2)$11.92  $11.70  $11.52  $11.36  $11.11   $11.92  $11.11 


__________________________________
(1)Financial information at and for the year ended September 30, 2016 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
 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016  6/30/2017 6/30/2016
               
Loans receivable:              
1-4 family residential real estate$222,904  $223,216  $223,609  $236,940  $234,346   $222,904  $234,346 
Commercial real estate624,926  608,206  595,207  595,157  586,082   624,926  586,082 
Commercial79,695  73,119  73,182  71,865  64,700   79,695  64,700 
Real estate construction75,941  77,332  79,136  80,500  104,389   75,941  104,389 
Consumer and other40,675  37,300  31,212  21,241  15,638   40,675  15,638 
Total loans receivable$1,044,141  $1,019,173  $1,002,346  $1,005,703  $1,005,155   $1,044,141  $1,005,155 
               
Allowance for loan losses:              
Balance at beginning of period$10,505  $10,499  $10,371  $10,118  $9,850   $10,371  $9,489 
Charge-offs(73) (103) (50) (1) (7)  (226) (227)
Recoveries368  259  928  404  375   1,555  956 
Provision  (150) (750) (150) (100)  (900) (100)
Balance at end of period$10,800  $10,505  $10,499  $10,371  $10,118   $10,800  $10,118 
               
Nonperforming assets: (1)              
Nonaccrual loans$1,549  $1,610  $1,527  $3,735  $3,371   $1,549  $3,371 
Loans delinquent 90 days or greater and still accruing291    238       291   
Total nonperforming loans1,840  1,610  1,765  3,735  3,371   1,840  3,371 
Other real estate owned1,938  1,957  2,161  2,706  3,181   1,938  3,181 
Total nonperforming assets$3,778  $3,567  $3,926  $6,441  $6,552   $3,778  $6,552 
               
Troubled debt restructuring:              
Troubled debt restructurings - accruing$5,007  $5,073  $4,761  $4,585  $4,999   $5,007  $4,999 
Troubled debt restructurings - nonaccrual107  137  192  1,760  1,716   107  1,716 
Total troubled debt restructurings$5,114  $5,210  $4,953  $6,345  $6,715   $5,114  $6,715 


__________________________________
(1) 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.


Charter Financial Corporation
Supplemental Information (unaudited)
 
 Quarter to Date  Year to Date
 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016  6/30/2017 6/30/2016
               
Return on equity (annualized)6.65% 6.40% 9.84% 7.55% 2.61%  7.62% 5.34%
Return on assets (annualized)0.96% 0.91% 1.39% 1.07% 0.38%  1.08% 0.95%
Net interest margin (annualized)3.60% 3.52% 3.71% 3.82% 3.97%  3.61% 3.91%
Net interest margin, excluding the effects of purchase accounting (1)3.55% 3.41% 3.48% 3.47% 3.53%  3.48% 3.47%
Holding company tier 1 leverage ratio (2)13.08% 12.92% 12.83% 12.68% 12.60%  13.08% 12.60%
Holding company total risk-based capital ratio (2)17.98% 17.93% 17.38% 16.74% 15.93%  17.98% 15.93%
Bank tier 1 leverage ratio (2) (3)12.06% 11.84% 11.70% 11.51% 11.32%  12.06% 11.32%
Bank total risk-based capital ratio (2)16.67% 16.53% 15.91% 15.26% 14.99%  16.67% 14.99%
Effective tax rate36.46% 40.78% 33.98% 35.56% 28.91%  36.74% 33.21%
Yield on loans4.79% 4.74% 5.01% 5.07% 5.20%  4.84% 5.19%
Cost of deposits0.47% 0.46% 0.46% 0.46% 0.43%  0.47% 0.42%
                      
Asset quality ratios: (4)                     
Allowance for loan losses as a % of total loans (5)1.04% 1.04% 1.05% 1.03% 1.00%  1.04% 1.00%
Allowance for loan losses as a % of nonperforming loans586.83% 652.47% 594.81% 277.66% 300.10%  586.83% 300.10%
Nonperforming assets as a % of total loans and OREO0.36% 0.35% 0.39% 0.64% 0.65%  0.36% 0.65%
Nonperforming assets as a % of total assets0.26% 0.24% 0.27% 0.45% 0.46%  0.26% 0.46%
Net charge-offs (recoveries) as a % of average loans (annualized)(0.12)% (0.06)% (0.35)% (0.16)% (0.15)%  (0.17)% (0.12)%


__________________________________
(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 $2.0 million, $2.2 million, $2.9 million, $3.8 million, and $4.7 million for the quarters ended June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively.
(2)Current period bank and holding company capital ratios are estimated as of the date of this earnings release.
(3)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.
(4)Ratios for the three months ended June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016 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.
(5)Excluding former CBS loans totaling $154.0 million, $166.5 million, $191.9 million, $236.4 million and $264.7 million at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively, which were recorded at acquisition date fair value, the allowance approximated 1.22%, 1.24%, 1.30%, 1.35% and 1.37% of all other loans at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively.


 
Charter Financial Corporation
Average Balances, Interest Rates and Yields (unaudited)
dollars in thousands
 
 Quarter to Date
 6/30/2017 6/30/2016
 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$102,944  $236  0.92% $54,423  $47  0.35%
Certificates of deposit held at other financial institutions9,021  31  1.37  19,404  54  1.12 
FHLB common stock and other equity securities3,485  40  4.58  3,442  38  4.46 
Taxable investment securities188,138  1,037  2.20  172,065  922  2.14 
Nontaxable investment securities (1)1,579  5  1.16  2,409  7  1.11 
Restricted securities279  3  4.09  236  3  4.24 
Loans receivable (1)(2)(3)(4)1,025,454  12,103  4.72  966,375  11,285  4.67 
Accretion, net, of acquired loan discounts (5)  173  0.07    1,278  0.53 
Total interest-earning assets1,330,900  13,628  4.10  1,218,354  13,634  4.48 
Total noninterest-earning assets139,050      145,454     
Total assets$1,469,950      $1,363,808     
Liabilities and Equity:           
Interest-bearing liabilities:           
Interest bearing checking$254,983  $104  0.16% $229,650  $72  0.12%
Bank rewarded checking54,845  27  0.20  50,188  25  0.20 
Savings accounts65,036  6  0.04  61,364  9  0.06 
Money market deposit accounts240,561  178  0.30  228,316  178  0.31 
Certificate of deposit accounts381,863  868  0.91  349,773  694  0.79 
Total interest-bearing deposits997,288  1,183  0.47  919,291  978  0.43 
Borrowed funds50,000  328  2.62  53,101  470  3.54 
Floating rate junior subordinated debt6,668  129  7.74  5,516  104  7.53 
Total interest-bearing liabilities1,053,956  1,640  0.62  977,908  1,552  0.63 
Noninterest-bearing deposits187,354      171,913     
Other noninterest-bearing liabilities17,345      15,390     
Total noninterest-bearing liabilities204,699      187,303     
  Total liabilities1,258,655      1,165,211     
  Total stockholders' equity211,295      198,597     
    Total liabilities and stockholders' equity$1,469,950      $1,363,808     
      Net interest income  $11,988      $12,082   
      Net interest earning assets (6)  $276,944      $240,446   
Net interest rate spread (7)    3.48%     3.84%
Net interest margin (8)    3.60%     3.97%
Net interest margin, excluding the effects of purchase accounting (9)    3.55%     3.53%
Ratio of average interest-earning assets to average interest-bearing liabilities    126.28%     124.59%


__________________________________
(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.
(5)Accretion of accretable purchase discount on loans acquired.
(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 $2.0 million and $4.7 million for the quarters ended June 30, 2017 and June 30, 2016, respectively.
(10)Annualized.


 
Charter Financial Corporation
Average Balances, Interest Rates and Yields (unaudited)
dollars in thousands
 
 Fiscal Year to Date
 6/30/2017 6/30/2016
 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$102,615  $560  0.73% $41,580  $113  0.36%
Certificates of deposit held at other financial institutions11,427  112  1.31  6,444  54  1.13 
FHLB common stock and other equity securities3,413  119  4.67  3,175  113  4.77 
Taxable investment securities192,986  3,236  2.24  175,776  2,803  2.13 
Nontaxable investment securities (1)1,588  14  1.15  800  7  1.12 
Restricted securities279  8  3.87  78  3  4.28 
Loans receivable (1)(2)(3)(4)1,011,408  35,495  4.68  792,607  27,588  4.64 
Accretion and amortization of acquired loan discounts (5)  1,255  0.17    3,280  0.55 
Total interest-earning assets1,323,716  40,799  4.11  1,020,460  33,961  4.44 
Total noninterest-earning assets136,939      112,802     
Total assets$1,460,655      $1,133,262     
Liabilities and Equity:           
Interest-bearing liabilities:           
Interest bearing checking$252,401  $283  0.15% $196,187  $182  0.12%
Bank rewarded checking53,409  78  0.19  48,577  73  0.20 
Savings accounts63,302  19  0.04  54,871  16  0.04 
Money market deposit accounts251,773  567  0.30  167,194  342  0.27 
Certificate of deposit accounts381,010  2,559  0.90  271,776  1,722  0.84 
Total interest-bearing deposits1,001,895  3,506  0.47  738,605  2,335  0.42 
Borrowed funds50,004  1,078  2.87  51,577  1,568  4.05 
Floating rate junior subordinated debt6,634  373  7.51  1,833  104  7.55 
Total interest-bearing liabilities1,058,533  4,957  0.62  792,015  4,007  0.67 
Noninterest-bearing deposits178,159      127,130     
Other noninterest-bearing liabilities16,087      13,172     
Total noninterest-bearing liabilities194,246      140,302     
Total liabilities1,252,779      932,317     
Total stockholders' equity207,876      200,945     
  Total liabilities and stockholders' equity$1,460,655      $1,133,262     
    Net interest income  $35,842      $29,954   
    Net interest earning assets (6)  $265,183      $228,445   
Net interest rate spread (7)    3.49%     3.77%
Net interest margin (8)    3.61%     3.91%
Net interest margin, excluding the effects of purchase accounting (9)    3.48%     3.47%
Ratio of average interest-earning assets to average interest-bearing liabilities    125.05%     128.84%


__________________________________
(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.
(5)Accretion of accretable purchase discount on loans acquired.
(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 $2.4 million and $3.2 million for the nine months ended June 30, 2017 and June 30, 2016, 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, 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 excludes the following from loans receivable income: accretion from purchase discounts related to acquired loans. Net interest margin excluding the effects of purchase accounting excludes the following from net interest margin: net purchase discount accretion 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
 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016
Loans Receivable Income Excluding Accretion         
Loans receivable income$12,276,095  $11,903,416  $12,569,903  $12,680,420  $12,563,466 
Net purchase discount accretion173,014  358,031  724,109  1,090,886  1,278,040 
Loans receivable income excluding accretion (Non-GAAP)$12,103,081  $11,545,385  $11,845,794  $11,589,534  $11,285,426 
          
Net Interest Margin Excluding the Effects of Purchase Accounting         
Net Interest Margin3.60% 3.52% 3.71% 3.82% 3.97%
Effect to adjust for net purchase discount accretion(0.05) (0.11) (0.23) (0.35) (0.44)
Net interest margin excluding the effects of purchase accounting (Non-GAAP)3.55% 3.41% 3.48% 3.47% 3.53%
          
Tangible Book Value Per Share         
Book value per share$14.03  $13.84  $13.67  $13.52  $13.29 
Effect to adjust for goodwill and other intangible assets(2.11) (2.14) (2.15) (2.16) (2.18)
Tangible book value per share (Non-GAAP)$11.92  $11.7  $11.52  $11.36  $11.11 


 For the Six Months Ended
 6/30/2017 6/30/2016
Loans Receivable Income Excluding Accretion   
Loans receivable income$36,749,414  $30,868,429 
Net purchase discount accretion1,255,154  3,280,201 
Loans receivable income excluding accretion (Non-GAAP)$35,494,260  $27,588,228 
    
Net Interest Margin Excluding the Effects of Purchase Accounting   
Net Interest Margin3.61% 3.91%
Effect to adjust for net purchase discount accretion(0.13) (0.44)
Net interest margin excluding the effects of purchase accounting (Non-GAAP)3.48% 3.47%
        
Tangible Book Value Per Share       
Book value per share$14.03  $13.29 
Effect to adjust for goodwill and other intangible assets(2.11) (2.18)
Tangible book value per share (Non-GAAP)$11.92  $11.11 

 

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