Charter Financial Announces First Quarter Fiscal 2018 Earnings of $4.4 Million

West Point, Georgia, UNITED STATES

  • Basic and diluted EPS of $0.31 and $0.29 for the quarter, respectively
  • Strong first full quarter with Resurgens as Charter expands in Metro Atlanta
  • Highest-ever quarter for deposit and bankcard fees, 12.7% growth over the same quarter in 2017
  • Estimated revaluation adjustment of deferred tax asset of $1.4 million due to Tax Cuts and Jobs Act

WEST POINT, Ga., Jan. 26, 2018 (GLOBE NEWSWIRE) -- Charter Financial Corporation (the “Company”) (NASDAQ:CHFN) today reported net income of $4.4 million for the quarter ended December 31, 2017, or $0.31 and $0.29 per basic and diluted share, respectively, compared with net income of $5.0 million, or $0.36 and $0.33 per basic and diluted share, respectively, for the quarter ended December 31, 2016.

Net income for the current-year quarter decreased $649,000 from the prior-year quarter. The difference was attributable to a $1.4 million charge to income tax expense as a result of the revaluation of our deferred tax asset, offset in part by $2.2 million of growth in loans receivable interest income, due largely to the Company's first full quarter with the newly acquired Resurgens Bancorp ("Resurgens"). The Company's return on equity for the current year quarter was 8.10%, 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 10.10%, as compared to 8.18% for the fiscal year ended September 30, 2017. Revenue increased 7.2% to $19.7 million for the quarter ended December 31, 2017 compared to $18.4 million for the quarter ended September 30, 2017, while noninterest expense declined 17.5% to $11.9 million at December 31, 2017 from $14.4 million at September 30, 2017.

"We had an excellent first quarter with strong revenue growth, aided by our first full quarter with Resurgens," said Chairman and CEO Robert L. Johnson. "We also saw improvement in our noninterest expense when compared to the September 2017 quarter, as we had $1.9 million of merger-related costs last quarter and only $309,000 of deal costs during the current quarter. We had our best-ever quarter of deposit and bankcard fees, continued growth in our net interest margin, and had first-quarter loan growth for the first time in three years, though we still have work to do on growing our portfolio. We had the benefit of several one-time positive items, which were more than offset by the revaluation of our deferred tax asset. We're also beginning to see the benefit of the Resurgens acquisition, as our efficiency ratio improved to 60.26%."

Core system conversion of the Resurgens acquisition is expected to be completed in February 2018, and no further deal costs are expected after that time.

Tax Cuts and Jobs Act

On December 22, 2017, President Donald Trump signed into law the Tax Cuts and Jobs Act, the tax reform bill (the "Tax Act"). Under the Tax Act, federal corporate tax rates were cut to 21% from 35%. The Company's net deferred tax assets, which totaled $6.0 million at September 30, 2017, were calculated using the previous statutory rate of 35%. Because of the change, the Company revalued the net deferred tax asset and recorded an estimated expense of $1.4 million, or approximately $0.10 and $0.09 per basic and diluted share, respectively, as an addition to income tax expense at December 31, 2017. The Company is utilizing the measurement period approach to revalue its deferred tax asset, so the amount may change prior to fiscal year end at September 30, 2018.

In spite of the one-time charge, the Company expects to realize significant savings as a result of the tax rate changes from the Tax Act. Management's calculations estimate that the new rate would have reduced the Company's income tax expense $3.0 million during the previous fiscal year under full implementation of the 21% rate. Due to the Company's fiscal year, our income taxes will be calculated at a blended 24.5% federal statutory rate for the current fiscal year and 21% for future fiscal years. The new, blended tax rate is expected to reduce income tax expense by approximately $2.5 million as compared to the prior rate during the current year, with greater reductions in future years when the new rate is fully implemented. The rate change reduced expense $742,000, or $0.05 per basic and diluted share, in regular tax accruals during the current quarter.

"We are very excited about the opportunities the new tax law will give us," Mr. Johnson said. "We feel the savings provided by the new, lower corporate tax rate will give us far greater ability to provide value for all our stakeholders, principally, our customers, in the long term."

Quarterly Operating Results

Quarterly earnings for the first quarter of fiscal 2018 compared with the first quarter of fiscal 2017 were positively impacted by:

  • An increase in loans receivable income of $2.2 million, or 17.5%, to $14.8 million for the 2018 first quarter, compared with $12.6 million for the same quarter in 2017, as a result of our first full quarter with Resurgens.
  • An increase in deposit and bankcard fee income of $403,000, or 12.7%.
  • Interest on interest-bearing deposits in other financial institutions increased $250,000 due to our increased cash balances and the Federal Reserve's rate increases.
  • One-time items including a $266,000 gain on the sale of assets available for sale and $215,000 in incentive payments from our bankcard vendor, both included in other income.

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

  • A $1.4 million additional charge to income tax as the result of the revaluation of our deferred tax asset due to the new Tax Act.
  • Nonrecurring deal costs from the Resurgens acquisition of $309,000, largely concentrated in severance costs. No deal costs were recorded in the same period in 2017.
  • An increase in interest expense on deposits of $305,000, or 26.3%, due to higher balances as well as an increase of seven basis points in the Company's cost of deposits due to higher-costing deposits from Resurgens assumed in September 2017, adding to our already increased legacy deposit rates. The Company's cost of deposits increased three basis points from the quarter ended September 30, 2017.
  • Salaries and employee benefits increased $875,000, or 14.3%, and data processing increased $244,000, due to Resurgens transaction costs as well as increased ongoing operating costs as a result of the acquisition.

Financial Condition

Total assets increased $3.5 million from September 30, 2017 to $1.6 billion at December 31, 2017, largely attributable to loan and deposit growth. Net loans grew $2.0 million, or 0.2%, to $1.2 billion at December 31, 2017, driven by $3.4 million of growth in our Atlanta markets.

"We are very pleased with our asset growth during the first quarter of fiscal 2018," Mr. Johnson said. "Over the past several fiscal years, the first quarter has been a challenge for us in growing our loan portfolio, so we are excited to see an increase there, even if a small one. As we continue to integrate our new Resurgens team we expect to use our capital and market base to further expand the loan portfolio."

Total deposits increased $4.9 million to $1.3 billion during the three months ended December 31, 2017, largely due to growth in our money market accounts of $13.1 million. Transaction accounts increased $7.5 million from September 30, 2017, while retail certificates of deposit decreased $14.8 million.

From September 30, 2017 to December 31, 2017, total stockholders' equity increased $4.0 million to $218.2 million due primarily to $4.4 million of net income. Book value per share increased to $14.42 at December 31, 2017 from $14.17 at September 30, 2017 due to the Company's retention of earnings, while tangible book value per share, a non-GAAP financial measure (see Reconciliation of Non-GAAP Measures for further information) increased to $11.59 from $11.33.

Net Interest Income and Net Interest Margin

Net interest income increased $2.1 million to $14.3 million for the first quarter of fiscal 2018, compared with $12.2 million for the prior-year period. Total interest income increased $2.4 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 $2.2 million to $14.8 million during the current quarter from $12.6 million during the prior-year quarter. The Company also experienced an increase of $250,000 in interest income on interest-bearing deposits in other financial institutions during the current-year quarter due to higher cash balances and the Federal Reserve's interest rate increases. Total interest expense increased $306,000 to $2.0 million for the current quarter, with approximately $100,000 due to increased deposit balances and the remainder to higher rates. A portion of the rate increase was attributable to increased interest rates on our money market accounts and certificates of deposit, while the remainder was tied to higher-costing deposits from the Resurgens acquisition.

"We've benefited from the rate increases from the Federal Reserve, both in our prime-based loans receivable income and our interest-bearing overnight deposits," Mr. Johnson said. "Thus far we've been able to keep our deposit rates low, despite a slight uptick in the last two quarters. Our mix of deposits from our non-metro legacy markets with relatively stable deposit costs and our more recently acquired Metro Atlanta deposits provide a nice blend of growth potential and rate stability.  "

Net interest margin was 3.87% for the first quarter of fiscal 2018, compared to 3.71% for the first quarter of fiscal 2017. The impact of purchase accounting on the Company's net interest margin was 0.10% for the quarter ended December 31, 2017, compared to 0.23% for the quarter ended December 31, 2016 as our accretion income has dropped while legacy loans receivable income has increased. 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. While the Company will use some of the benefits of the Tax Act to increase rates on deposits, we are relatively well-positioned to protect net interest margin due to our high liquidity and moderate level of loans to deposits.

At December 31, 2017, the Company had $3.7 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 no provision for loan losses in the quarter ended December 31, 2017, due to the continued positive credit quality trends of its loan portfolio and net recoveries of previously charged-off loans. A negative provision of $750,000 was recorded in the quarter ended December 31, 2016.

Noninterest Income and Expense

Noninterest income increased $409,000 to $5.4 million in the fiscal 2018 first quarter compared to $5.0 million in the same period of 2017. The increase was primarily due to a $403,000, or 12.7%, increase in deposit and bankcard fees, reflecting the continued success of the Company's signature debit card transaction marketing and deposit growth, a $215,000 gain on incentive rebates from our debit card vendor, and a nonrecurring $266,000 gain on the sale of assets available for sale. These increases were offset in part by a $112,000 decrease in gain on sale of loans due to reduced mortgage sale activity. The Company also recorded $250,000 of recoveries on loans formerly covered under loss share agreements during the prior year quarter, while no such gain was recorded for the three months ended December 31, 2017.

Noninterest expense for the quarter ended December 31, 2017, increased $1.6 million to $11.9 million, compared with $10.3 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 $875,000, or 14.3%, to $7.0 million during the current quarter, while occupancy and data processing increased $154,000 and $244,000, or 11.7% and 26.8%, over the prior-year quarter. The Company also recorded $309,000 of merger costs from the Resurgens acquisition, which were largely concentrated in severance costs. Net benefit of operations of real estate owned decreased $310,000 due to reduced sales activity in the current quarter as the balance of real estate owned has fallen to minimal levels.

Asset Quality

Nonperforming assets at December 31, 2017 were at 0.19% of total assets, unchanged from September 30, 2017. The allowance for loan losses was at 0.96% of total loans and 575.09% of nonperforming loans at December 31, 2017, compared to 0.96% and 649.13%, respectively, at September 30, 2017. Not included in the allowance at December 31, 2017 was $3.7 million in yield and credit discounts on the CBS- and Resurgens-acquired loans. At December 31, 2017, the allowance for loan losses was 1.19% of legacy loans, compared to 1.22% at September 30, 2017. The Company recorded net loan recoveries of $36,000 in its allowance for loan losses for the quarter ended December 31, 2017, compared with net loan recoveries of $878,000 for the same period in the prior year.

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 14,364 shares for cash proceeds of $263,000 during the quarter ended December 31, 2017 to satisfy tax withholding obligations for restricted stock awards of certain  officers, not as part of its publicly announced repurchase program.

During the quarter ended December 31, 2017, the Company paid a $0.075 per-share dividend. The Company announced on January 23, 2018 it would pay a dividend of $0.08 per share on February 27, 2018 to shareholders of record as of February 13, 2018. This will be the sixth consecutive quarterly dividend increase. The Company's equity as a percent of total assets stood at 13.27% at December 31, 2017, as compared to 13.06% at September 30, 2017, while the Company's tangible common equity ratio, a non-GAAP measure, was 10.96% at December 31, 2017, up from 10.72% at September 30, 2017.

Mr. Johnson concluded, “Charter Financial continues to be in great position to capitalize on our long term goals, and the new tax bill should only help us achieve these goals. Asset quality remains strong, and our new teams in Cobb and DeKalb Counties are positioned to perform well as we expand into the Metro Atlanta market. We still have plenty of capacity to use our capital to expand the balance sheet, either through acquisitions or legacy loan growth. Our capital position remains strong and the increase in the dividend is evidence of the board's confidence in our promising outlook for 2018 and beyond."

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 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.

Robert L. Johnson, Chairman & CEO Dresner Corporate Services
Curt Kollar, CFO Steve Carr
706-645-1391 312-780-7211 or  

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

 December 31, 2017 September 30, 2017 (1)
Cash and amounts due from depository institutions$30,039,650  $25,455,465 
Interest-earning deposits in other financial institutions133,103,757  126,882,924 
Cash and cash equivalents163,143,407  152,338,389 
Loans held for sale, fair value of $1,255,793 and $1,998,9881,227,642  1,961,185 
Certificates of deposit held at other financial institutions6,028,670  7,514,630 
Investment securities available for sale180,204,970  183,789,821 
Federal Home Loan Bank stock4,054,400  4,054,400 
Restricted securities, at cost279,000  279,000 
Loans receivable1,163,447,715  1,161,519,752 
Unamortized loan origination fees, net(1,020,158) (1,165,148)
Allowance for loan losses(11,113,945) (11,078,422)
Loans receivable, net1,151,313,612  1,149,276,182 
Other real estate owned1,244,367  1,437,345 
Accrued interest and dividends receivable4,632,342  4,197,708 
Premises and equipment, net29,312,694  29,578,513 
Goodwill39,347,378  39,347,378 
Other intangible assets, net of amortization3,424,082  3,614,833 
Cash surrender value of life insurance53,838,402  53,516,317 
Deferred income taxes3,366,683  5,970,282 
Other assets2,254,893  3,282,577 
Total assets$1,643,672,542  $1,640,158,560 
Liabilities and Stockholders’ Equity
Deposits$1,343,997,345  $1,339,143,287 
Short-term borrowings3,009,550   
Long-term borrowings57,009,550  60,023,100 
Floating rate junior subordinated debt6,758,921  6,724,646 
Advance payments by borrowers for taxes and insurance1,279,972  2,956,441 
Other liabilities13,430,494  17,112,581 
Total liabilities1,425,485,832  1,425,960,055 
Stockholders’ equity:   
Common stock, $0.01 par value; 15,132,320 shares issued and outstanding at December 31, 2017 and 15,115,883 shares issued and outstanding at September 30, 2017151,323  151,159 
Preferred stock, $0.01 par value; 50,000,000 shares authorized at December 31, 2017 and September 30, 2017   
Additional paid-in capital86,384,212  85,651,391 
Unearned compensation – ESOP(4,192,308) (4,673,761)
Retained earnings137,525,408  134,207,368 
Accumulated other comprehensive loss(1,681,925) (1,137,652)
Total stockholders’ equity218,186,710  214,198,505 
Total liabilities and stockholders’ equity$1,643,672,542  $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
 December 31,
 2017 2016
Interest income:   
Loans receivable$14,771,827  $12,569,903 
Taxable investment securities1,064,082  1,095,900 
Nontaxable investment securities3,274  4,571 
Federal Home Loan Bank stock51,199  39,210 
Interest-earning deposits in other financial institutions361,276  110,817 
Certificates of deposit held at other financial institutions25,106  42,629 
Restricted securities3,067  2,573 
Total interest income16,279,831  13,865,603 
Interest expense:   
Deposits1,463,297  1,158,316 
Borrowings371,575  386,975 
Floating rate junior subordinated debt137,480  120,792 
Total interest expense1,972,352  1,666,083 
Net interest income14,307,479  12,199,520 
Provision for loan losses  (750,000)
Net interest income after provision for loan losses14,307,479  12,949,520 
Noninterest income:   
Service charges on deposit accounts2,113,531  1,887,810 
Bankcard fees1,459,473  1,282,358 
Gain on investment securities available for sale1,074   
Bank owned life insurance322,085  332,352 
Gain on sale of loans619,209  731,262 
Brokerage commissions172,377  165,996 
Recoveries on acquired loans previously covered under FDIC-assisted acquisitions  250,000 
Other703,709  333,067 
Total noninterest income5,391,458  4,982,845 
Noninterest expenses:   
Salaries and employee benefits7,008,791  6,133,673 
Occupancy1,477,818  1,323,323 
Data processing1,152,728  908,955 
Legal and professional266,394  284,156 
Marketing329,137  356,524 
Federal insurance premiums and other regulatory fees188,314  165,495 
Net benefit of operations of real estate owned(49,602) (359,270)
Furniture and equipment239,984  174,055 
Postage, office supplies and printing231,718  270,385 
Core deposit intangible amortization expense190,751  153,662 
Other835,310  878,549 
Total noninterest expenses11,871,343  10,289,507 
Income before income taxes7,827,594  7,642,858 
Income tax expense3,430,591  2,597,191 
Net income$4,397,003  $5,045,667 
Basic net income per share$0.31  $0.36 
Diluted net income per share$0.29  $0.33 
Weighted average number of common shares outstanding14,408,416  14,207,468 
Weighted average number of common and potential common shares outstanding15,233,282  15,064,879 

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

 Quarter to Date  Year to Date
 12/31/2017 9/30/2017 (1) 6/30/2017 3/31/2017 12/31/2016  12/31/2017 12/31/2016
Consolidated balance sheet data:              
Total assets$1,643,673  $1,640,159  $1,480,122  $1,484,796  $1,461,667   $1,643,673  $1,461,667 
Cash and cash equivalents163,143  152,338  120,144  140,285  131,849   163,143  131,849 
Loans receivable, net1,151,314  1,149,276  1,032,108  1,007,552  990,635   1,151,314  990,635 
Other real estate owned1,244  1,437  1,938  1,957  2,161   1,244  2,161 
Securities available for sale180,205  183,790  187,655  191,483  196,279   180,205  196,279 
Transaction accounts574,682  567,213  510,810  513,294  481,841   574,682  481,841 
Total deposits1,343,997  1,339,143  1,194,254  1,201,731  1,186,347   1,343,997  1,186,347 
Borrowings66,778  66,748  56,690  56,656  56,622   66,778  56,622 
Total stockholders’ equity218,187  214,199  212,080  208,413  205,500   218,187  205,500 
Consolidated earnings summary:              
Interest income$16,280  $15,062  $13,626  $13,307  $13,866   $16,280  $13,866 
Interest expense1,973  1,762  1,639  1,652  1,666   1,973  1,666 
Net interest income14,307  13,300  11,987  11,655  12,200   14,307  12,200 
Provision for loan losses      (150) (750)    (750)
Net interest income after provision for loan losses14,307  13,300  11,987  11,805  12,950   14,307  12,950 
Noninterest income5,391  5,070  4,639  4,546  4,983   5,391  4,983 
Noninterest expense11,870  14,386  11,096  10,750  10,290   11,870  10,290 
Income tax expense3,431  1,424  2,016  2,284  2,597   3,431  2,597 
Net income$4,397  $2,560  $3,514  $3,317  $5,046   $4,397  $5,046 
Per share data:              
Earnings per share – basic$0.31  $0.18  $0.24  $0.23  $0.36   $0.31  $0.36 
Earnings per share – fully diluted$0.29  $0.17  $0.23  $0.22  $0.33   $0.29  $0.33 
Cash dividends per share$0.075  $0.070  $0.065  $0.060  $0.055   $0.075  $0.060 
Weighted average basic shares14,408  14,384  14,353  14,322  14,207   14,408  14,207 
Weighted average diluted shares15,233  15,241  15,257  15,340  15,065   15,233  15,065 
Total shares outstanding15,132  15,116  15,112  15,061  15,031   15,132  15,031 
Book value per share$14.42  $14.17  $14.03  $13.84  $13.67   $14.42  $13.67 
Tangible book value per share (2)$11.59  $11.33  $11.92  $11.70  $11.52   $11.59  $11.52 


  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
 12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016  12/31/2017 12/31/2016
Loans receivable:              
1-4 family residential real estate$224,829  $232,040  $222,904  $223,216  $223,609   $224,829  $223,609 
Commercial real estate698,906  697,071  624,926  608,206  595,207   698,906  595,207 
Commercial106,669  103,673  79,695  73,119  73,182   106,669  73,182 
Real estate construction94,142  88,792  75,941  77,332  79,136   94,142  79,136 
Consumer and other38,902  39,944  40,675  37,300  31,212   38,902  31,212 
Total loans receivable$1,163,448  $1,161,520  $1,044,141  $1,019,173  $1,002,346   $1,163,448  $1,002,346 
Allowance for loan losses:              
Balance at beginning of period$11,078  $10,800  $10,505  $10,499  $10,371   $11,078  $10,371 
Charge-offs(267) (76) (73) (103) (50)  (267) (50)
Recoveries303  354  368  259  928   303  928 
Provision      (150) (750)    (750)
Balance at end of period$11,114  $11,078  $10,800  $10,505  $10,499   $11,114  $10,499 
Nonperforming assets: (1)              
Nonaccrual loans$1,600  $1,661  $1,549  $1,610  $1,527   $1,600  $1,527 
Loans delinquent 90 days or greater and still accruing332  46  291    238   332  238 
Total nonperforming loans1,932  1,707  1,840  1,610  1,765   1,932  1,765 
Other real estate owned1,244  1,437  1,938  1,957  2,161   1,244  2,161 
Total nonperforming assets$3,177  $3,144  $3,778  $3,567  $3,925   $3,176  $3,925 
Troubled debt restructuring:              
Troubled debt restructurings - accruing$4,368  $4,951  $5,007  $5,073  $4,761   $4,368  $4,761 
Troubled debt restructurings - nonaccrual90  92  107  137  192   90  192 
Total troubled debt restructurings$4,458  $5,043  $5,114  $5,210  $4,953   $4,458  $4,953 


  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
 12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016  12/31/2017 12/31/2016
Return on equity (annualized)8.10% 4.77% 6.65% 6.40% 9.84%  8.10% 9.84%
Return on tangible equity (annualized) (1)10.10% 5.72% 7.84% 7.58% 11.69%  10.10% 11.69%
Return on assets (annualized)1.08% 0.67% 0.96% 0.91% 1.39%  1.08% 1.39%
Net interest margin (annualized)3.87% 3.85% 3.60% 3.52% 3.71%  3.87% 3.71%
Impact of purchase accounting on net interest margin (2)0.10% 0.14% 0.05% 0.11% 0.23%  0.10% 0.23%
Holding company tier 1 leverage ratio (3)11.55% 12.05% 13.08% 12.92% 12.83%  11.55% 12.83%
Holding company total risk-based capital ratio (3)15.90% 15.79% 17.98% 17.93% 17.38%  15.90% 17.38%
Bank tier 1 leverage ratio (3) (4)10.57% 10.96% 12.06% 11.84% 11.70%  10.57% 11.70%
Bank total risk-based capital ratio (3)14.61% 14.45% 16.67% 16.53% 15.91%  14.61% 15.91%
Effective tax rate (5)43.83% 35.75% 36.46% 40.78% 33.98%  43.83% 33.98%
Yield on loans5.10% 5.04% 4.79% 4.74% 5.01%  5.10% 5.01%
Cost of deposits0.53% 0.50% 0.47% 0.46% 0.46%  0.53% 0.46%
Asset quality ratios: (6)              
Allowance for loan losses as a % of total loans (7)0.96% 0.96% 1.04% 1.04% 1.05%  0.96% 1.05%
Allowance for loan losses as a % of nonperforming loans575.09% 649.13% 586.83% 652.47% 594.81%  575.09% 594.81%
Nonperforming assets as a % of total loans and OREO0.27% 0.27% 0.36% 0.35% 0.39%  0.27% 0.39%
Nonperforming assets as a % of total assets0.19% 0.19% 0.26% 0.24% 0.27%  0.19% 0.27%
Net charge-offs (recoveries) as a % of average loans (annualized)(0.01)% (0.10)% (0.12)% (0.06)% (0.35)%  (0.01)% (0.35)%


  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 an additional charge to income tax expense of $1.4 million, the Company's effective tax rate for the three months ended December 31, 2017 was 25.7%.
  6. Ratios for the three months ended December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 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.
  7. Excluding former CBS and Resurgens loans totaling $224.8 million, $254.2 million, $154.0 million, $166.5 million, and $191.9 million at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, respectively, which were recorded at acquisition date fair value, the allowance approximated 1.19%, 1.22%, 1.22%, 1.24%, and 1.30% of all other loans at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, respectively.

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

 Quarter to Date
 12/31/2017 12/31/2016
 Average Balance Interest Average Yield/Cost (10) Average Balance Interest Average Yield/Cost (10)
Interest-earning assets:           
Interest-earning deposits in other financial institutions$126,831  $361  1.14% $99,268  $111  0.45%
Certificates of deposit held at other financial institutions6,991  25  1.44  13,351  43  1.28 
FHLB common stock and other equity securities4,054  51  5.05  3,362  39  4.67 
Taxable investment securities181,992  1,064  2.34  195,131  1,096  2.25 
Nontaxable investment securities (1)1,065  3  1.23  1,597  5  1.14 
Restricted securities279  3  4.40  279  3  3.69 
Loans receivable (1)(2)(3)(4)1,158,058  14,437  4.99  1,003,322  11,846  4.72 
Accretion, net, of acquired loan discounts (5)  335  0.12    723  0.29 
Total interest-earning assets1,479,270  16,280  4.40  1,316,310  13,866  4.21 
Total noninterest-earning assets156,540      134,605     
Total assets$1,635,810      $1,450,915     
Liabilities and Equity:           
Interest-bearing liabilities:           
Interest bearing checking$277,130  $127  0.18% $251,070  $86  0.14%
Bank rewarded checking53,186  27  0.20  51,752  26  0.20 
Savings accounts66,177  7  0.04  62,157  6  0.04 
Money market deposit accounts286,673  305  0.43  255,332  194  0.30 
Certificate of deposit accounts414,981  998  0.96  380,962  846  0.89 
Total interest-bearing deposits1,098,147  1,464  0.53  1,001,273  1,158  0.46 
Borrowed funds60,022  372  2.48  50,000  387  3.10 
Floating rate junior subordinated debt6,736  137  8.16  6,599  121  7.32 
Total interest-bearing liabilities1,164,905  1,973  0.68  1,057,872  1,666  0.63 
Noninterest-bearing deposits235,894      172,247     
Other noninterest-bearing liabilities17,991      15,775     
Total noninterest-bearing liabilities253,885      188,022     
Total liabilities1,418,790      1,245,894     
Total stockholders' equity217,020      205,021     
Total liabilities and stockholders' equity$1,635,810      $1,450,915     
Net interest income  $14,307      $12,200   
Net interest earning assets (6)  $314,365      $258,438   
Net interest rate spread (7)    3.72%     3.58%
Net interest margin (8)    3.87%     3.71%
Impact of purchase accounting on net interest margin (9)    0.10%     0.23%
Ratio of average interest-earning assets to average interest-bearing liabilities    126.99%     124.43%


  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
 12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Tangible Book Value Per Share         
Book value per share$14.42  $14.17  $14.03  $13.84  $13.67 
Effect to adjust for goodwill and other intangible assets(2.83) (2.84) (2.11) (2.14) (2.15)
Tangible book value per share (Non-GAAP)$11.59  $11.33  $11.92  $11.70  $11.52 
Tangible Common Equity Ratio         
Total equity to total assets13.27% 13.06% 14.33% 14.04% 14.06%
Effect to adjust for goodwill and other intangible assets(2.31) (2.34) (1.90) (1.90) (1.94)
Tangible common equity ratio (Non-GAAP)10.96% 10.72% 12.43% 12.14% 12.12%
Return On Average Tangible Equity         
Return on average equity8.10% 4.77% 6.65% 6.40% 9.84%
Effect to adjust for goodwill and other intangible assets2.00  0.95  1.19  1.18  1.85 
Return on average tangible equity (Non-GAAP)10.10% 5.72% 7.84% 7.58% 11.69%