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

West Point, Georgia, UNITED STATES


  • 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

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 institutions156,546,379  126,882,924 
Cash and cash equivalents179,401,216  152,338,389 
Loans held for sale, fair value of $2,934,511 and $1,998,9882,895,620  1,961,185 
Certificates of deposit held at other financial institutions5,027,920  7,514,630 
Investment securities available for sale174,536,308  183,789,821 
Federal Home Loan Bank stock4,075,200  4,054,400 
Restricted securities, at cost279,000  279,000 
Loans receivable1,163,964,177  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, net1,151,885,465  1,149,276,182 
Other real estate owned302,736  1,437,345 
Accrued interest and dividends receivable4,321,617  4,197,708 
Premises and equipment, net29,125,704  29,578,513 
Goodwill39,347,378  39,347,378 
Other intangible assets, net of amortization3,233,331  3,614,833 
Cash surrender value of life insurance54,207,205  53,516,317 
Deferred income taxes3,771,457  5,970,282 
Other assets1,505,525  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 borrowings3,007,550   
Long-term borrowings57,007,550  60,023,100 
Floating rate junior subordinated debt6,793,195  6,724,646 
Advance payments by borrowers for taxes and insurance1,904,707  2,956,441 
Other liabilities14,354,882  17,112,581 
Total liabilities1,432,328,714  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, 2017151,376  151,159 
Preferred stock, $0.01 par value; 50,000,000 shares authorized at March 31, 2018 and September 30, 2017   
Additional paid-in capital86,807,092  85,651,391 
Unearned compensation – ESOP(4,192,308) (4,673,761)
Retained earnings141,832,263  134,207,368 
Accumulated other comprehensive loss(3,011,455) (1,137,652)
Total stockholders’ equity221,586,968  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 securities995,891  1,103,740  2,059,974  2,199,640 
Nontaxable investment securities3,274  4,571  6,548  9,143 
Federal Home Loan Bank stock52,732  40,309  103,930  79,519 
Interest-earning deposits in other financial institutions485,917  213,310  847,193  324,127 
Certificates of deposit held at other financial institutions20,529  38,775  45,635  81,404 
Restricted securities3,231  2,679  6,298  5,252 
Total interest income16,664,323  13,306,800  32,944,154  27,172,404 
Interest expense:       
Deposits1,474,290  1,165,459  2,937,587  2,323,776 
Borrowings363,464  362,880  735,040  749,855 
Floating rate junior subordinated debt140,387  123,631  277,867  244,422 
Total interest expense1,978,141  1,651,970  3,950,494  3,318,053 
Net interest income14,686,182  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 losses15,036,182  11,804,830  29,343,660  24,754,351 
Noninterest income:       
Service charges on deposit accounts1,982,838  1,700,713  4,096,369  3,588,524 
Bankcard fees1,542,258  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 insurance368,803  246,915  690,888  579,266 
Gain on sale of loans457,314  542,824  1,076,523  1,274,086 
Brokerage commissions163,160  224,567  335,537  390,563 
Recoveries on acquired loans previously covered under FDIC-assisted acquisitions      250,000 
Other448,710  216,671  886,612  588,265 
Total noninterest income4,963,083  4,546,156  10,354,541  9,529,001 
Noninterest expenses:       
Salaries and employee benefits7,022,241  6,078,575  14,031,032  12,212,248 
Occupancy1,605,185  1,219,866  3,083,003  2,543,189 
Data processing1,425,378  1,003,974  2,578,106  1,912,929 
Legal and professional218,830  387,590  485,224  671,745 
Marketing477,395  411,943  806,532  768,467 
Federal insurance premiums and other regulatory fees307,643  197,261  495,956  362,756 
Net cost (benefit) of operations of real estate owned628  13,827  (48,974) (345,443)
Furniture and equipment305,920  228,383  545,904  402,437 
Postage, office supplies and printing224,797  223,317  456,516  493,702 
Core deposit intangible amortization expense190,751  149,435  381,502  303,097 
Other957,074  835,540  1,792,383  1,714,092 
Total noninterest expenses12,735,842  10,749,711  24,607,184  21,039,219 
Income before income taxes7,263,423  5,601,275  15,091,017  13,244,133 
Income tax expense2,013,914  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 outstanding14,521,387  14,322,290  14,464,281  14,264,248 
Weighted average number of common and potential common shares outstanding15,371,827  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 equivalents179,401  163,143  152,338  120,144  140,285   179,401  140,285 
Loans receivable, net1,151,885  1,151,314  1,149,276  1,032,108  1,007,552   1,151,885  1,007,552 
Other real estate owned303  1,244  1,437  1,938  1,957   303  1,957 
Securities available for sale174,536  180,205  183,790  187,655  191,483   174,536  191,483 
Transaction accounts595,216  574,682  567,213  510,810  513,294   595,216  513,294 
Total deposits1,349,261  1,343,997  1,339,143  1,194,254  1,201,731   1,349,261  1,201,731 
Borrowings66,808  66,778  66,748  56,690  56,656   66,808  56,656 
Total stockholders’ equity221,587  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 expense1,978  1,973  1,762  1,639  1,652   3,950  3,318 
Net interest income14,686  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 losses15,036  14,307  13,300  11,987  11,805   29,344  24,754 
Noninterest income4,963  5,391  5,070  4,639  4,546   10,355  9,529 
Noninterest expense12,735  11,870  14,386  11,096  10,750   24,607  21,039 
Income tax expense2,014  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 shares14,521  14,408  14,384  14,353  14,322   14,464  14,264 
Weighted average diluted shares15,372  15,236  15,241  15,257  15,340   15,293  15,282 
Total shares outstanding15,138  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 estate682,151  698,906  697,071  624,926  608,206   682,151  608,206 
Commercial106,099  106,669  103,673  79,695  73,119   106,099  73,119 
Real estate construction91,739  94,142  88,792  75,941  77,332   91,739  77,332 
Consumer and other37,462  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)
Recoveries580  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 accruing119  332  46  291     119   
Total nonperforming loans1,423  1,932  1,707  1,840  1,610   1,423  1,610 
Other real estate owned303  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 - nonaccrual175  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 loans5.21% 5.10% 5.04% 4.79% 4.74%  5.16% 4.87%
Cost of deposits0.54% 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 loans780.63% 575.09% 649.13% 586.83% 652.47%  780.63% 652.47%
Nonperforming assets as a % of total loans and OREO0.15% 0.27% 0.27% 0.36% 0.35%  0.15% 0.35%
Nonperforming assets as a % of total assets0.10% 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 institutions5,729  21  1.43  11,893  39  1.30 
FHLB common stock and other equity securities4,056  53  5.20  3,393  40  4.75 
Taxable investment securities179,824  996  2.22  195,694  1,104  2.26 
Nontaxable investment securities (1)1,055  3  1.24  1,588  5  1.15 
Restricted securities279  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 assets1,476,274  16,664  4.52  1,324,025  13,307  4.02 
Total noninterest-earning assets154,799      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 checking56,073  27  0.19  53,653  26  0.19 
Savings accounts66,885  7  0.04  62,718  6  0.04 
Money market deposit accounts290,259  341  0.47  259,470  195  0.30 
Certificate of deposit accounts402,686  978  0.97  380,198  844  0.89 
Total interest-bearing deposits1,093,203  1,474  0.54  1,007,189  1,165  0.46 
Borrowed funds60,029  364  2.43  50,011  363  2.90 
Floating rate junior subordinated debt6,771  140  8.29  6,634  124  7.47 
Total interest-bearing liabilities1,160,003  1,978  0.68  1,063,834  1,652  0.62 
Noninterest-bearing deposits234,673      174,904     
Other noninterest-bearing liabilities16,679      15,775     
Total noninterest-bearing liabilities251,352      190,679     
Total liabilities1,411,355      1,254,513     
Total stockholders' equity219,718      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 institutions6,367  46  1.43  12,630  81  1.29 
FHLB common stock and other equity securities4,055  104  5.13  3,377  80  4.71 
Taxable investment securities180,920  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 securities279  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 assets1,477,789  32,944  4.46  1,320,125  27,172  4.12 
Total noninterest-earning assets155,679      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 checking54,614  54  0.20  52,692  52  0.20 
Savings accounts66,527  13  0.04  62,434  12  0.04 
Money market deposit accounts288,447  647  0.45  257,379  389  0.30 
Certificate of deposit accounts408,901  1,976  0.97  380,584  1,691  0.89 
Total interest-bearing deposits1,095,703  2,938  0.54  1,004,199  2,324  0.46 
Borrowed funds60,025  734  2.45  50,006  750  3.00 
Floating rate junior subordinated debt6,753  278  8.23  6,616  244  7.36 
Total interest-bearing liabilities1,162,481  3,950  0.68  1,060,821  3,318  0.63 
Noninterest-bearing deposits235,290      173,561     
Other noninterest-bearing liabilities17,343      15,459     
Total noninterest-bearing liabilities252,633      189,020     
Total liabilities1,415,114      1,249,841     
Total stockholders' equity218,354      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 assets13.40% 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 equity9.56% 8.10% 4.77% 6.65% 6.40%
Effect to adjust for goodwill and other intangible assets2.30  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 assets13.40% 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 equity8.84% 8.11%
Effect to adjust for goodwill and other intangible assets2.15  1.51 
Return on average tangible equity (Non-GAAP)10.99% 9.62%