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Charter Financial Announces Second Quarter Fiscal 2018 Earnings of $5.2 Million

  • Basic and diluted EPS of $0.36 and $0.34 for the quarter, respectively
  • Quarterly net interest income up 26.0% over prior-year quarter
  • Continued bankcard fee growth, 12.8% increase over the same quarter in 2017
  • Nonperforming assets at 0.10% of total assets as of March 31, 2018
  • Quarterly return on assets and return on equity of 1.29% and 9.56%, respectively
  • Full conversion of Resurgens acquisition completed successfully during February 2018

WEST POINT, Ga., April 24, 2018 (GLOBE NEWSWIRE) -- Charter Financial Corporation (the “Company”) (NASDAQ:CHFN) today reported net income of $5.2 million for the quarter ended March 31, 2018, or $0.36 and $0.34 per basic and diluted share, respectively, compared with net income of $3.3 million, or $0.23 and $0.22 per basic and diluted share, respectively, for the quarter ended March 31, 2017.

Net income for the current-year quarter increased $1.9 million from the prior-year quarter. The difference was attributable to an increase of $3.0 million, or 26.0%, in net interest income due largely to the Company's September 2017 acquisition of Resurgens Bancorp ("Resurgens") and the associated increase in loan balances, offset in part by a $2.0 million increase in noninterest expense. Of the noninterest expense increase, $618,000 was related to nonrecurring merger-related costs. Full conversion of the Resurgens acquisition was completed in February 2018, and no further expenses are expected.

"We had a strong second fiscal quarter, which has traditionally been a challenging quarter for us due to seasonality," said Chairman and CEO Robert L. Johnson. "We continued to see expansion of net interest income and net interest margin despite limited growth in loan and deposit portfolios, and improvement in already impressive asset quality metrics. Earnings also benefited from reduced income tax expense, with an effective tax rate of 27.73% for this quarter as compared to 40.78% for the prior-year quarter."

Net income for the six months ended March 31, 2018 was $9.6 million, or $0.67 and $0.63 per basic and diluted share, respectively, compared with net income of $8.4 million, or $0.59 and $0.55 per basic and diluted share, respectively, for the same period in 2017. The increase was largely a result of increased interest income as a result of the Resurgens acquisition, offset in part by a discrete tax expense of $1.5 million as a result of the Tax Cuts and Jobs Act of 2017, enacted on December 22, 2017 (the "Tax Act"). The Company's year-to-date annualized return on equity as of March 31, 2018 was 8.84%, as compared to 6.89% for the last full fiscal year, while the Company's return on tangible equity (a non-GAAP measure which excludes the average balance of intangible assets from average equity) was 10.99%, as compared to 8.18% for the fiscal year ended September 30, 2017.

Quarterly Operating Results

/EIN News/ -- Quarterly earnings for the second quarter of fiscal 2018 compared with the second quarter of fiscal 2017 were positively impacted by:

  • An increase in loans receivable income of $3.2 million, or 26.9%, to $15.1 million for the 2018 second quarter, compared with $11.9 million for the same quarter in 2017, as a result of the Resurgens acquisition, as well as additional accretion of $380,000 due to the early payoff of an acquired Resurgens loan.
  • A negative provision for loan losses of $350,000 due to the Company's continued trend of net recoveries and positive asset quality. A negative provision of $150,000 was recorded during the quarter ended March 31, 2017.
  • An increase in bankcard fee income of $176,000, or 12.8%.
  • Interest on interest-bearing deposits in other financial institutions increased $273,000 due to increased cash balances and the Federal Reserve's rate increases.
  • A new quarterly incentive payment of $79,000 from the Company's bankcard vendor, included in other income.
  • A decrease of $271,000, or 11.8%, in income tax expense due to a 13.05% decrease in the Company's effective tax rate as a result of the Tax Act. Due to the Company's fiscal year, its federal tax is calculated at a blended statutory rate of 24.5% during the current fiscal year, and will drop to 21% during fiscal 2019.

Quarterly earnings for the second quarter of fiscal 2018 compared with the second quarter of fiscal 2017 were negatively impacted by:

  • Nonrecurring merger-related expenses from the Resurgens acquisition of $618,000, largely concentrated in severance costs and data processing fees. No merger-related costs were recorded in the same period in 2017.
  • An increase in interest expense on deposits of $309,000, or 26.5%, due to higher balances as well as an increase of eight basis points in the Company's cost of deposits due to higher-costing deposits from Resurgens assumed in September 2017 and higher interest rates pushing legacy deposit costs higher.
  • Salaries and employee benefits increased $944,000, or 15.5%, data processing increased $421,000, and occupancy increased $385,000, all due to transaction costs related to the Resurgens acquisition as well as increased ongoing operating costs as a result of the acquisition.

Financial Condition

Total assets increased $13.8 million from September 30, 2017, to $1.7 billion at March 31, 2018, largely attributable to a $27.1 million increase in cash and cash equivalents from deposit growth and paydowns on the Company's portfolio of investment securities available for sale. Net loans grew $2.6 million, or 0.2%, to $1.2 billion at March 31, 2018, due primarily to $10.0 million of growth in the Atlanta Metropolitan Statistical Area ("MSA"). Loans in the Atlanta MSA now account for 57% of the Company's gross loan balance.

"We're happy to see the usual tax season growth in our checking deposit accounts and balances," Mr. Johnson said. "Seasonal factors negatively impacted loan growth, which is typically slow during our fiscal year's first half. We believe loan growth will improve in the second half of the year if the economy remains reasonably strong. As we continue to integrate our new Resurgens team, we will leverage our capital and market base to further grow the loan portfolio."

Total deposits increased $10.1 million to $1.3 billion during the six months ended March 31, 2018, largely due to growth in transaction accounts of $28.0 million. Money market deposit accounts increased $11.2 million from September 30, 2017, while retail certificates of deposit decreased $25.9 million.

From September 30, 2017 to March 31, 2018, total stockholders' equity increased $7.4 million to $221.6 million due primarily to $9.6 million of net income, offset by a $1.9 million increase in accumulated other comprehensive loss. Book value per share increased to $14.64 at March 31, 2018, from $14.17 at September 30, 2017, while tangible book value per share, a non-GAAP financial measure (see Reconciliation of Non-GAAP Measures for further information) increased to $11.83 from $11.33, both due to the Company's retention of earnings.

Net Interest Income and Net Interest Margin

Net interest income increased $3.0 million to $14.7 million for the second quarter of fiscal 2018, compared with $11.7 million for the prior-year period. Total interest income increased $3.4 million. These increases were attributable to increased loan balances and loans receivable interest income as a result of the Resurgens acquisition, as well as increased loan interest income from the higher market interest rates. Loans receivable interest income increased $3.2 million to $15.1 million during the current quarter from $11.9 million during the prior-year quarter. The Company also experienced an increase of $273,000 in interest income on interest-bearing deposits in other financial institutions during the current-year quarter due to higher balances and higher rates paid on overnight balances. Total interest expense increased $326,000 to $2.0 million for the current quarter, due to a six basis point increase in the average cost and a $96.2 million increase in the average balance of interest-bearing liabilities. A portion of the rate increase was attributable to increased interest rates on money market accounts and certificates of deposit, while the remainder was tied to higher-costing deposits from the Resurgens acquisition.

"Our recent acquisitions and loan production capabilities in Metro Atlanta paired with our exceptional deposit base have, to date, favorably driven our net interest income and net interest margin," Mr. Johnson added. "We expect to continue to enjoy a competitive funding advantage that will allow us to compete assertively for high-quality loans and deposits in a rising rate environment."

Net interest margin was 3.98% for the second quarter of fiscal 2018, compared to 3.52% for the second quarter of fiscal 2017. The impact of purchase accounting on the Company's net interest margin was 0.23% for the quarter ended March 31, 2018, compared to 0.11% for the quarter ended March 31, 2017, due to the aforementioned $380,000 of additional accretion during the current quarter. The increase in net interest margin was attributable to increased loan income, both from acquisitions and legacy loan growth, as well as increased yields on the Company's Federal Reserve deposits.

Net interest income for the six months ended March 31, 2018, increased $5.1 million, or 21.5%, to $29.0 million, compared to $23.9 million for the prior-year period. Interest income increased $5.8 million, or 21.2%, to $32.9 million due to increased balances and higher yields on loans from the Resurgens acquisition and interest-bearing deposits in other financial institutions. Interest expense increased $632,000, or 19.1%, to $4.0 million due to higher deposit balances from the Resurgens acquisition and an increase in the average cost of deposits of eight basis points.

At March 31, 2018, the Company had $2.9 million of remaining loan discount accretion related to the Community Bank of the South ("CBS") and Resurgens acquisitions, which will be accreted over the lives of the loans acquired.

Provision for Loan Losses

The Company recorded a $350,000 negative provision for loan losses during the three and six months ended March 31, 2018, respectively, due to the continued positive credit quality trends of its loan portfolio and net recoveries of previously charged-off loans. Negative provisions of $150,000 and $900,000 were recorded during the three and six months ended March 31, 2017, respectively.

Noninterest Income and Expense

Noninterest income increased $417,000 to $5.0 million in the fiscal 2018 second quarter compared to $4.5 million in the same period of 2017. The increase was primarily due to a $458,000, or 14.9%, increase in deposit and bankcard fees. The Company's $1.5 million of bankcard fee income was its highest-ever quarterly total. The Company also saw an increase of $122,000 in income on bank owned life insurance due to an annual pricing adjustment that ended during the prior fiscal year. There was also a $79,000 gain on incentive rebates from our debit card vendor. These increases were offset in part by a $248,000 decrease in gains on the sale of investment securities for sale and an $86,000 decrease in gain on sale of loans due to reduced mortgage sale activity.

Noninterest expense for the quarter ended March 31, 2018, increased $2.0 million to $12.7 million, compared with $10.7 million for the prior-year quarter, primarily due to increased ongoing operational costs as a result of the acquisition of Resurgens. Salaries and employee benefits increased $944,000, or 15.5%, to $7.0 million during the current quarter, while occupancy and data processing increased $385,000 and $421,000, or 31.6% and 42.0%, over the prior-year quarter. The Company also recorded $618,000 of merger costs from the Resurgens acquisition, which were largely concentrated in severance and data processing costs. Federal insurance premiums and other regulatory fees increased $110,000 due to the Company's increased asset size as a result of the Resurgens acquisition.

"We have sustained our decades-long efforts to diversify our revenue streams, control costs, and increase operating and capital leverage," Mr. Johnson continued. "Our success in growing checking accounts and encouraging signature debit card use give us tremendous flexibility in reacting to anticipated changes in the business cycle. Overall, revenue growth rates in both our interest and noninterest income have outpaced expense growth as reflected in both our quarterly and year-to-date efficiency ratios of 64.82% and 62.54%, respectively, as compared to 66.35% and 63.02% for the same respective periods last year."

Noninterest income for the six months ended March 31, 2018, increased $826,000, or 8.7%, to $10.4 million, compared with $9.5 million for the prior-year period. The increase was largely due to an increase of $861,000, or 13.8%, in deposit and bankcard fees, $294,000 in incentive rebates from the Company's bankcard vendor, a nonrecurring $266,000 gain on the sale of assets available for sale, and a $112,000, or 19.3% increase in bank owned life insurance. These increases were offset in part by a $247,000 decrease in gains on the sale of investment securities for sale and a decrease in gains on sale of loans of $198,000 due to reduced activity. The Company also recorded a $250,000 recovery on loans previously covered in FDIC-assisted acquisitions during the prior year, while no such gain was recorded for the same period in the current fiscal year.

Noninterest expense for the six months ended March 31, 2018 increased $3.6 million, or 17.0%, to $24.6 million compared with $21.0 million for the prior-year period. The increase was primarily attributable to increased ongoing operational costs from the Resurgens acquisition, as well as $927,000 of merger-related expenses from the acquisition. Salaries and employee benefits, occupancy, and data processing increased $1.8 million, $540,000, and $665,000, respectively. The net benefit of operations of real estate owned also decreased $296,000 due to reduced sales activity as the Company's portfolio of other real estate has fallen to minimal levels. These increases were offset in part by a reduction of $187,000 in legal and professional fees.

Asset Quality

Nonperforming assets at March 31, 2018, were at 0.10% of total assets, a nine basis point decline from September 30, 2017. The decrease was primarily attributable to a $1.1 million, or 78.9%, decline in the balance of other real estate owned to $303,000 at March 31, 2018. Nonaccrual loans also declined $356,000 from September 30, 2017.

The allowance for loan losses was at 0.96% of total loans and 780.63% of nonperforming loans at March 31, 2018, compared to 0.96% and 649.13%, respectively, at September 30, 2017. Not included in the allowance at March 31, 2018, was $2.9 million in yield and credit discounts on the acquired loans from CBS and Resurgens. At March 31, 2018, the allowance for loan losses was 1.15% of legacy loans, compared to 1.22% at September 30, 2017. The Company recorded net loan recoveries of $347,000 and $382,000 in its allowance for loan losses for the three and six months ended March 31, 2018, respectively, compared with net loan recoveries of $156,000 and $1.0 million for the same periods in the prior year.

"Our asset quality metrics are historically strong," Mr. Johnson said. "We maintained a strong credit culture as we worked through most of the problem assets inherited from our FDIC-assisted acquisitions, disposing of practically all of our foreclosed real estate and adding high-quality loans in the CBS and Resurgens acquisitions. The metro-area market economies where we operate seem resilient at present, although we expect rising interest rates will eventually have some impact."

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. The Company repurchased no shares during the quarter ended March 31, 2018.

During the quarter ended March 31, 2018, the Company paid a $0.08 per share dividend, the sixth consecutive quarterly dividend increase.  Additionally, the Company announced on April 24, 2018, it would pay another increased dividend of $0.085 on May 24, 2018, to shareholders of record as of May 10, 2018. The Company's equity as a percent of total assets was 13.40% at March 31, 2018, as compared to 13.06% at September 30, 2017, while the Company's tangible common equity ratio, a non-GAAP measure (see Reconciliation of Non-GAAP Measures for further information), was 11.11% at March 31, 2018, up from 10.72% at September 30, 2017.

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 and Resurgens Bank; 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, 2017. 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.

     
Contact:    
Robert L. Johnson, Chairman & CEO   Dresner Corporate Services
Curt Kollar, CFO   Steve Carr
706-645-1391   312-780-7211
bjohnson@charterbank.net or   scarr@dresnerco.com
ckollar@charterbank.net    
     

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

  March 31, 2018   September 30,
2017
(1)
Assets
Cash and amounts due from depository institutions $ 22,854,837     $ 25,455,465  
Interest-earning deposits in other financial institutions 156,546,379     126,882,924  
Cash and cash equivalents 179,401,216     152,338,389  
Loans held for sale, fair value of $2,934,511 and $1,998,988 2,895,620     1,961,185  
Certificates of deposit held at other financial institutions 5,027,920     7,514,630  
Investment securities available for sale 174,536,308     183,789,821  
Federal Home Loan Bank stock 4,075,200     4,054,400  
Restricted securities, at cost 279,000     279,000  
Loans receivable 1,163,964,177     1,161,519,752  
Unamortized loan origination fees, net (967,809 )   (1,165,148 )
Allowance for loan losses (11,110,903 )   (11,078,422 )
Loans receivable, net 1,151,885,465     1,149,276,182  
Other real estate owned 302,736     1,437,345  
Accrued interest and dividends receivable 4,321,617     4,197,708  
Premises and equipment, net 29,125,704     29,578,513  
Goodwill 39,347,378     39,347,378  
Other intangible assets, net of amortization 3,233,331     3,614,833  
Cash surrender value of life insurance 54,207,205     53,516,317  
Deferred income taxes 3,771,457     5,970,282  
Other assets 1,505,525     3,282,577  
Total assets $ 1,653,915,682     $ 1,640,158,560  
Liabilities and Stockholders’ Equity
Liabilities:      
Deposits $ 1,349,260,830     $ 1,339,143,287  
Short-term borrowings 3,007,550      
Long-term borrowings 57,007,550     60,023,100  
Floating rate junior subordinated debt 6,793,195     6,724,646  
Advance payments by borrowers for taxes and insurance 1,904,707     2,956,441  
Other liabilities 14,354,882     17,112,581  
Total liabilities 1,432,328,714     1,425,960,055  
Stockholders’ equity:      
Common stock, $0.01 par value; 15,137,631 shares issued and outstanding at March 31, 2018 and 15,115,883 shares issued and outstanding at September 30, 2017 151,376     151,159  
Preferred stock, $0.01 par value; 50,000,000 shares authorized at March 31, 2018 and September 30, 2017      
Additional paid-in capital 86,807,092     85,651,391  
Unearned compensation – ESOP (4,192,308 )   (4,673,761 )
Retained earnings 141,832,263     134,207,368  
Accumulated other comprehensive loss (3,011,455 )   (1,137,652 )
Total stockholders’ equity 221,586,968     214,198,505  
Total liabilities and stockholders’ equity $ 1,653,915,682     $ 1,640,158,560  
               

__________________________________

  1. Financial information at September 30, 2017 has been derived from audited financial statements.

Charter Financial Corporation
Condensed Consolidated Statements of Income (unaudited)

  Three Months Ended
 March 31,
  Six Months Ended
 March 31,
  2018   2017   2018   2017
Interest income:              
Loans receivable $ 15,102,749     $ 11,903,416     $ 29,874,576     $ 24,473,319  
Taxable investment securities 995,891     1,103,740     2,059,974     2,199,640  
Nontaxable investment securities 3,274     4,571     6,548     9,143  
Federal Home Loan Bank stock 52,732     40,309     103,930     79,519  
Interest-earning deposits in other financial institutions 485,917     213,310     847,193     324,127  
Certificates of deposit held at other financial institutions 20,529     38,775     45,635     81,404  
Restricted securities 3,231     2,679     6,298     5,252  
Total interest income 16,664,323     13,306,800     32,944,154     27,172,404  
Interest expense:              
Deposits 1,474,290     1,165,459     2,937,587     2,323,776  
Borrowings 363,464     362,880     735,040     749,855  
Floating rate junior subordinated debt 140,387     123,631     277,867     244,422  
Total interest expense 1,978,141     1,651,970     3,950,494     3,318,053  
Net interest income 14,686,182     11,654,830     28,993,660     23,854,351  
Provision for loan losses (350,000 )   (150,000 )   (350,000 )   (900,000 )
Net interest income after provision for loan losses 15,036,182     11,804,830     29,343,660     24,754,351  
Noninterest income:              
Service charges on deposit accounts 1,982,838     1,700,713     4,096,369     3,588,524  
Bankcard fees 1,542,258     1,366,686     3,001,732     2,649,045  
Gain on investment securities available for sale     247,780     1,074     247,780  
Gain (loss) on sale of other assets held for sale         265,806     (38,528 )
Bank owned life insurance 368,803     246,915     690,888     579,266  
Gain on sale of loans 457,314     542,824     1,076,523     1,274,086  
Brokerage commissions 163,160     224,567     335,537     390,563  
Recoveries on acquired loans previously covered under FDIC-assisted acquisitions             250,000  
Other 448,710     216,671     886,612     588,265  
Total noninterest income 4,963,083     4,546,156     10,354,541     9,529,001  
Noninterest expenses:              
Salaries and employee benefits 7,022,241     6,078,575     14,031,032     12,212,248  
Occupancy 1,605,185     1,219,866     3,083,003     2,543,189  
Data processing 1,425,378     1,003,974     2,578,106     1,912,929  
Legal and professional 218,830     387,590     485,224     671,745  
Marketing 477,395     411,943     806,532     768,467  
Federal insurance premiums and other regulatory fees 307,643     197,261     495,956     362,756  
Net cost (benefit) of operations of real estate owned 628     13,827     (48,974 )   (345,443 )
Furniture and equipment 305,920     228,383     545,904     402,437  
Postage, office supplies and printing 224,797     223,317     456,516     493,702  
Core deposit intangible amortization expense 190,751     149,435     381,502     303,097  
Other 957,074     835,540     1,792,383     1,714,092  
Total noninterest expenses 12,735,842     10,749,711     24,607,184     21,039,219  
Income before income taxes 7,263,423     5,601,275     15,091,017     13,244,133  
Income tax expense 2,013,914     2,284,480     5,444,505     4,881,671  
Net income $ 5,249,509     $ 3,316,795     $ 9,646,512     $ 8,362,462  
Basic net income per share $ 0.36     $ 0.23     $ 0.67     $ 0.59  
Diluted net income per share $ 0.34     $ 0.22     $ 0.63     $ 0.55  
Weighted average number of common shares outstanding 14,521,387     14,322,290     14,464,281     14,264,248  
Weighted average number of common and potential common shares outstanding 15,371,827     15,340,320     15,292,964     15,282,278  
                       

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

  Quarter to Date     Year to Date
  3/31/2018   12/31/2017   9/30/2017 (1)   6/30/2017   3/31/2017     3/31/2018   3/31/2017
                             
Consolidated balance sheet data:                            
Total assets $ 1,653,916     $ 1,643,673     $ 1,640,159     $ 1,480,122     $ 1,484,796       $ 1,653,916     $ 1,484,796  
Cash and cash equivalents 179,401     163,143     152,338     120,144     140,285       179,401     140,285  
Loans receivable, net 1,151,885     1,151,314     1,149,276     1,032,108     1,007,552       1,151,885     1,007,552  
Other real estate owned 303     1,244     1,437     1,938     1,957       303     1,957  
Securities available for sale 174,536     180,205     183,790     187,655     191,483       174,536     191,483  
Transaction accounts 595,216     574,682     567,213     510,810     513,294       595,216     513,294  
Total deposits 1,349,261     1,343,997     1,339,143     1,194,254     1,201,731       1,349,261     1,201,731  
Borrowings 66,808     66,778     66,748     56,690     56,656       66,808     56,656  
Total stockholders’ equity 221,587     218,187     214,199     212,080     208,413       221,587     208,413  
                             
Consolidated earnings summary:                            
Interest income $ 16,664     $ 16,280     $ 15,062     $ 13,626     $ 13,307       $ 32,944     $ 27,172  
Interest expense 1,978     1,973     1,762     1,639     1,652       3,950     3,318  
Net interest income 14,686     14,307     13,300     11,987     11,655       28,994     23,854  
Provision for loan losses (350 )               (150 )     (350 )   (900 )
Net interest income after provision for loan losses 15,036     14,307     13,300     11,987     11,805       29,344     24,754  
Noninterest income 4,963     5,391     5,070     4,639     4,546       10,355     9,529  
Noninterest expense 12,735     11,870     14,386     11,096     10,750       24,607     21,039  
Income tax expense 2,014     3,431     1,424     2,016     2,284       5,445     4,882  
Net income $ 5,250     $ 4,397     $ 2,560     $ 3,514     $ 3,317       $ 9,647     $ 8,362  
                             
Per share data:                            
Earnings per share – basic $ 0.36     $ 0.31     $ 0.18     $ 0.24     $ 0.23       $ 0.67     $ 0.59  
Earnings per share – fully diluted $ 0.34     $ 0.29     $ 0.17     $ 0.23     $ 0.22       $ 0.63     $ 0.55  
Cash dividends per share $ 0.080     $ 0.075     $ 0.070     $ 0.065     $ 0.060       $ 0.155     $ 0.120  
                             
Weighted average basic shares 14,521     14,408     14,384     14,353     14,322       14,464     14,264  
Weighted average diluted shares 15,372     15,236     15,241     15,257     15,340       15,293     15,282  
Total shares outstanding 15,138     15,132     15,116     15,112     15,061       15,138     15,061  
                             
Book value per share $ 14.64     $ 14.42     $ 14.17     $ 14.03     $ 13.84       $ 14.64     $ 13.84  
Tangible book value per share (2) $ 11.83     $ 11.59     $ 11.33     $ 11.92     $ 11.70       $ 11.83     $ 11.70  
                                                         

__________________________________

  1. Financial information at and for the year ended September 30, 2017 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
  3/31/2018   12/31/2017   9/30/2017   6/30/2017   3/31/2017     3/31/2018   3/31/2017
                             
Loans receivable:                            
1-4 family residential real estate $ 246,513     $ 224,829     $ 232,040     $ 222,904     $ 223,216       $ 246,513     $ 223,216  
Commercial real estate 682,151     698,906     697,071     624,926     608,206       682,151     608,206  
Commercial 106,099     106,669     103,673     79,695     73,119       106,099     73,119  
Real estate construction 91,739     94,142     88,792     75,941     77,332       91,739     77,332  
Consumer and other 37,462     38,902     39,944     40,675     37,300       37,462     37,300  
Total loans receivable $ 1,163,964     $ 1,163,448     $ 1,161,520     $ 1,044,141     $ 1,019,173       $ 1,163,964     $ 1,019,173  
                             
Allowance for loan losses:                            
Balance at beginning of period $ 11,114     $ 11,078     $ 10,800     $ 10,505     $ 10,499       $ 11,078     $ 10,371  
Charge-offs (233 )   (267 )   (76 )   (73 )   (103 )     (501 )   (153 )
Recoveries 580     303     354     368     259       884     1,187  
Provision (350 )               (150 )     (350 )   (900 )
Balance at end of period $ 11,111     $ 11,114     $ 11,078     $ 10,800     $ 10,505       $ 11,111     $ 10,505  
                             
Nonperforming assets: (1)                            
Nonaccrual loans $ 1,304     $ 1,600     $ 1,661     $ 1,549     $ 1,610       $ 1,304     $ 1,610  
Loans delinquent 90 days or greater and still accruing 119     332     46     291           119      
Total nonperforming loans 1,423     1,932     1,707     1,840     1,610       1,423     1,610  
Other real estate owned 303     1,244     1,437     1,938     1,957       303     1,957  
Total nonperforming assets $ 1,726     $ 3,176     $ 3,144     $ 3,778     $ 3,567       $ 1,726     $ 3,567  
                             
Troubled debt restructuring:                            
Troubled debt restructurings - accruing $ 4,051     $ 4,368     $ 4,951     $ 5,007     $ 5,073       $ 4,051     $ 5,073  
Troubled debt restructurings - nonaccrual 175     90     92     107     137       175     137  
Total troubled debt restructurings $ 4,226     $ 4,458     $ 5,043     $ 5,114     $ 5,210       $ 4,226     $ 5,210  
                                                         

__________________________________

  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 at the acquisition date are excluded from this table.

Charter Financial Corporation
Supplemental Information (unaudited)

  Quarter to Date     Year to Date
  3/31/2018   12/31/2017   9/30/2017   6/30/2017   3/31/2017     3/31/2018   3/31/2017
                             
Return on equity (annualized) 9.56 %   8.10 %   4.77 %   6.65 %   6.40 %     8.84 %   8.11 %
Return on tangible equity (annualized) (1) 11.86 %   10.10 %   5.72 %   7.84 %   7.58 %     10.99 %   9.62 %
Return on assets (annualized) 1.29 %   1.08 %   0.67 %   0.96 %   0.91 %     1.18 %   1.15 %
Net interest margin (annualized) 3.98 %   3.87 %   3.85 %   3.60 %   3.52 %     3.92 %   3.61 %
Impact of purchase accounting on net interest margin (2) 0.23 %   0.10 %   0.14 %   0.05 %   0.11 %     0.16 %   0.17 %
Holding company tier 1 leverage ratio (3) 11.83 %   11.55 %   12.05 %   13.08 %   12.92 %     11.83 %   12.92 %
Holding company total risk-based capital ratio (3) 16.14 %   15.90 %   15.79 %   17.98 %   17.93 %     16.14 %   17.93 %
Bank tier 1 leverage ratio (3) (4) 10.94 %   10.57 %   10.96 %   12.06 %   11.84 %     10.94 %   11.84 %
Bank total risk-based capital ratio (3) 14.98 %   14.61 %   14.45 %   16.67 %   16.53 %     14.98 %   16.53 %
Effective tax rate (5) 27.73 %   43.83 %   35.75 %   36.46 %   40.78 %     36.08 %   36.86 %
Yield on loans 5.21 %   5.10 %   5.04 %   4.79 %   4.74 %     5.16 %   4.87 %
Cost of deposits 0.54 %   0.53 %   0.50 %   0.47 %   0.46 %     0.54 %   0.46 %
                             
Asset quality ratios: (6)                            
Allowance for loan losses as a % of total loans (7) 0.96 %   0.96 %   0.96 %   1.04 %   1.04 %     0.96 %   1.04 %
Allowance for loan losses as a % of nonperforming loans 780.63 %   575.09 %   649.13 %   586.83 %   652.47 %     780.63 %   652.47 %
Nonperforming assets as a % of total loans and OREO 0.15 %   0.27 %   0.27 %   0.36 %   0.35 %     0.15 %   0.35 %
Nonperforming assets as a % of total assets 0.10 %   0.19 %   0.19 %   0.26 %   0.24 %     0.10 %   0.24 %
Net charge-offs (recoveries) as a % of average loans (annualized) (0.12 )%   (0.01 )%   (0.10 )%   (0.12 )%   (0.06 )%     (0.07 )%   (0.21 )%
                                           

__________________________________

  1. Non-GAAP financial measure, derived as net income divided by average tangible equity.
  2. Impact on net interest margin when excluding accretion income and average balance of accretable discounts.
  3. Current period bank and holding company capital ratios are estimated as of the date of this earnings release.
  4. During the quarter ended September 30, 2017, a net upstream of capital was made between the bank and the holding company in the amount of $2.7 million as part of the Company's acquisition of Resurgens.
  5. Excluding the revaluation of the Company's deferred tax asset, which resulted in additional charges to income tax expense of $49,000 and $1.4 million during the three months ended March 31, 2018 and December 31, 2017, respectively, the Company's effective tax rate for the three months ended March 31, 2018 and December 31, 2017 was 27.0% and 25.7%, respectively.
  6. Ratios for the three months ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017, and March 31, 2017 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.
  7. Excluding former CBS and Resurgens loans totaling $192.0 million, $254.2 million, $154.0 million, $166.5 million, and $191.9 million at March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017, and March 31, 2017, respectively, which were recorded at acquisition date fair value, the allowance approximated 1.15%, 1.19%, 1.22%, 1.22%, and 1.24% of all other loans at March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017,  and March 31, 2017, respectively.

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

  Quarter to Date
  3/31/2018   3/31/2017
  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 $ 125,911     $ 486     1.54 %   $ 105,705     $ 213     0.81 %
Certificates of deposit held at other financial institutions 5,729     21     1.43     11,893     39     1.30  
FHLB common stock and other equity securities 4,056     53     5.20     3,393     40     4.75  
Taxable investment securities 179,824     996     2.22     195,694     1,104     2.26  
Nontaxable investment securities (1) 1,055     3     1.24     1,588     5     1.15  
Restricted securities 279     3     4.63     279     3     3.84  
Loans receivable (1)(2)(3)(4) 1,159,420     14,303     4.93     1,005,473     11,545     4.59  
Accretion, net, of acquired loan discounts (5)     799     0.27         358     0.14  
Total interest-earning assets 1,476,274     16,664     4.52     1,324,025     13,307     4.02  
Total noninterest-earning assets 154,799             134,605          
Total assets $ 1,631,073             $ 1,458,630          
Liabilities and Equity:                      
Interest-bearing liabilities:                      
Interest bearing checking $ 277,300     $ 121     0.17 %   $ 251,150     $ 94     0.15 %
Bank rewarded checking 56,073     27     0.19     53,653     26     0.19  
Savings accounts 66,885     7     0.04     62,718     6     0.04  
Money market deposit accounts 290,259     341     0.47     259,470     195     0.30  
Certificate of deposit accounts 402,686     978     0.97     380,198     844     0.89  
Total interest-bearing deposits 1,093,203     1,474     0.54     1,007,189     1,165     0.46  
Borrowed funds 60,029     364     2.43     50,011     363     2.90  
Floating rate junior subordinated debt 6,771     140     8.29     6,634     124     7.47  
Total interest-bearing liabilities 1,160,003     1,978     0.68     1,063,834     1,652     0.62  
Noninterest-bearing deposits 234,673             174,904          
Other noninterest-bearing liabilities 16,679             15,775          
Total noninterest-bearing liabilities 251,352             190,679          
Total liabilities 1,411,355             1,254,513          
Total stockholders' equity 219,718             205,021          
Total liabilities and stockholders' equity $ 1,631,073             $ 1,459,534          
Net interest income     $ 14,686             $ 11,655      
Net interest earning assets (6)     $ 316,271             $ 260,191      
Net interest rate spread (7)         3.84 %           3.40 %
Net interest margin (8)         3.98 %           3.52 %
Impact of purchase accounting on net interest margin (9)         0.23 %           0.11 %
Ratio of average interest-earning assets to average interest-bearing liabilities         127.26 %           124.46 %
                           

__________________________________

  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. Impact on net interest margin when excluding accretion income and average accretable discounts.
  10. Annualized.

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

  Fiscal Year to Date
  3/31/2018   3/31/2017
  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 $ 126,376     $ 847     1.34 %   $ 102,451     $ 324     0.63 %
Certificates of deposit held at other financial institutions 6,367     46     1.43     12,630     81     1.29  
FHLB common stock and other equity securities 4,055     104     5.13     3,377     80     4.71  
Taxable investment securities 180,920     2,060     2.28     195,409     2,200     2.25  
Nontaxable investment securities (1) 1,060     7     1.24     1,593     9     1.15  
Restricted securities 279     6     4.51     279     5     3.76  
Loans receivable (1)(2)(3)(4) 1,158,732     28,740     4.96     1,004,386     23,391     4.66  
Accretion and amortization of acquired loan discounts (5)     1,134     0.20         1,082     0.21  
Total interest-earning assets 1,477,789     32,944     4.46     1,320,125     27,172     4.12  
Total noninterest-earning assets 155,679             135,883          
Total assets $ 1,633,468             $ 1,456,008          
Liabilities and Equity:                      
Interest-bearing liabilities:                      
Interest bearing checking $ 277,214     $ 248     0.18 %   $ 251,110     $ 180     0.14 %
Bank rewarded checking 54,614     54     0.20     52,692     52     0.20  
Savings accounts 66,527     13     0.04     62,434     12     0.04  
Money market deposit accounts 288,447     647     0.45     257,379     389     0.30  
Certificate of deposit accounts 408,901     1,976     0.97     380,584     1,691     0.89  
Total interest-bearing deposits 1,095,703     2,938     0.54     1,004,199     2,324     0.46  
Borrowed funds 60,025     734     2.45     50,006     750     3.00  
Floating rate junior subordinated debt 6,753     278     8.23     6,616     244     7.36  
Total interest-bearing liabilities 1,162,481     3,950     0.68     1,060,821     3,318     0.63  
Noninterest-bearing deposits 235,290             173,561          
Other noninterest-bearing liabilities 17,343             15,459          
Total noninterest-bearing liabilities 252,633             189,020          
Total liabilities 1,415,114             1,249,841          
Total stockholders' equity 218,354             206,167          
Total liabilities and stockholders' equity $ 1,633,468             $ 1,456,008          
Net interest income     $ 28,994             $ 23,854      
Net interest earning assets (6)     $ 315,308             $ 259,304      
Net interest rate spread (7)         3.78 %           3.49 %
Net interest margin (8)         3.92 %           3.61 %
Impact of purchase accounting on net interest margin (9)         0.16 %           0.17 %
Ratio of average interest-earning assets to average interest-bearing liabilities         127.12 %           124.44 %
                           

__________________________________

  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. Impact on net interest margin when excluding accretion income and average accretable discounts.
  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 tangible book value per share, tangible common equity ratio, and return on average tangible equity, in its analysis of the Company's performance. Tangible book value per share excludes the following from book value per share: the balance of goodwill and other intangible assets. Tangible common equity ratio excludes the following from total equity to total assets: the balance of goodwill and other intangible assets in both total equity and total assets. Return on average tangible equity excludes the following from return on average equity: the average 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
  3/31/2018   12/31/2017   9/30/2017   6/30/2017   3/31/2017
Tangible Book Value Per Share                  
Book value per share $ 14.64     $ 14.42     $ 14.17     $ 14.03     $ 13.84  
Effect to adjust for goodwill and other intangible assets (2.81 )   (2.83 )   (2.84 )   (2.11 )   (2.14 )
Tangible book value per share (Non-GAAP) $ 11.83     $ 11.59     $ 11.33     $ 11.92     $ 11.70  
                   
Tangible Common Equity Ratio                  
Total equity to total assets 13.40 %   13.27 %   13.06 %   14.33 %   14.04 %
Effect to adjust for goodwill and other intangible assets (2.29 )   (2.31 )   (2.34 )   (1.90 )   (1.90 )
Tangible common equity ratio (Non-GAAP) 11.11 %   10.96 %   10.72 %   12.43 %   12.14 %
                   
Return On Average Tangible Equity                  
Return on average equity 9.56 %   8.10 %   4.77 %   6.65 %   6.40 %
Effect to adjust for goodwill and other intangible assets 2.30     2.00     0.95     1.19     1.18  
Return on average tangible equity (Non-GAAP) 11.86 %   10.10 %   5.72 %   7.84 %   7.58 %
                             


  For the Six Months Ended
  3/31/2018   3/31/2017
Tangible Book Value Per Share      
Book value per share $ 14.64     $ 13.84  
Effect to adjust for goodwill and other intangible assets (2.81 )   (2.14 )
Tangible book value per share (Non-GAAP) $ 11.83     $ 11.70  
       
Tangible Common Equity Ratio      
Total equity to total assets 13.40 %   14.04 %
Effect to adjust for goodwill and other intangible assets (2.29 )   (1.90 )
Tangible common equity ratio (Non-GAAP) 11.11 %   12.14 %
       
Return On Average Tangible Equity      
Return on average equity 8.84 %   8.11 %
Effect to adjust for goodwill and other intangible assets 2.15     1.51  
Return on average tangible equity (Non-GAAP) 10.99 %   9.62 %
           

 

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