Charter Financial Announces Fiscal 2016 Earnings Of $11.9 Million

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

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

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

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

Quarterly Operating Results

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

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

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

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

Financial Condition

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

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

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

Net Interest Income and Net Interest Margin

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

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

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

Provision for Loan Losses

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

Noninterest Income and Expense

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

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

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

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

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

Asset Quality

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

Capital Management

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

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

About Charter Financial Corporation

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

Forward-Looking Statements

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

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

Charter Financial Corporation Condensed Consolidated Statements of Financial Condition (unaudited)
  September 30, 2016   September 30, 2015  (1)
Assets
Cash and amounts due from depository institutions $ 14,472,867     $ 9,921,822  
Interest-earning deposits in other financial institutions 77,376,632     20,421,403  
Cash and cash equivalents 91,849,499     30,343,225  
Loans held for sale, fair value of $2,991,756 and $1,444,042 2,941,982     1,406,902  
Certificates of deposit held at other financial institutions 14,496,410      
Investment securities available for sale 206,336,287     184,404,089  
Federal Home Loan Bank stock 3,361,800     3,515,600  
Restricted securities, at cost 279,000      
Loans receivable 1,005,702,737     725,673,178  
Unamortized loan origination fees, net (1,278,830 )   (1,423,456 )
Allowance for loan losses (10,371,416 )   (9,488,512 )
Loans receivable, net 994,052,491     714,761,210  
Other real estate owned 2,706,461     3,410,538  
Accrued interest and dividends receivable 3,442,051     2,668,406  
Premises and equipment, net 28,078,591     19,660,012  
Goodwill 29,793,756     4,325,282  
Other intangible assets, net of amortization 2,639,608     157,226  
Cash surrender value of life insurance 49,268,973     48,423,510  
Deferred income taxes 5,416,625     5,674,095  
Other assets 8,349,888     8,329,239  
Total assets $ 1,443,013,422     $ 1,027,079,334  
Liabilities and Stockholders' Equity
Liabilities:      
Deposits $ 1,161,843,586     $ 738,855,076  
Federal Home Loan Bank advances 50,000,000     62,000,000  
Floating rate junior subordinated debt 6,587,549      
Advance payments by borrowers for taxes and insurance 2,298,513     1,745,753  
Other liabilities 19,134,238     19,547,895  
Total liabilities 1,239,863,886     822,148,724  
Stockholders' equity:      
Common stock, $0.01 par value; 15,031,076 shares issued and outstanding at September 30, 2016 and 16,027,654 shares issued and outstanding at September 30, 2015 150,311     160,277  
Preferred stock, $0.01 par value; 50,000,000 shares authorized at September 30, 2016 and September 30, 2015      
Additional paid-in capital 83,651,623     95,355,054  
Unearned compensation - ESOP (5,106,169 )   (5,551,193 )
Retained earnings 123,349,890     114,362,386  
Accumulated other comprehensive income 1,103,881     604,086  
Total stockholders' equity 203,149,536     204,930,610  
Total liabilities and stockholders' equity $ 1,443,013,422     $ 1,027,079,334  
               

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

Charter Financial Corporation Condensed Consolidated Statements of Income (unaudited)
  Three Months Ended  September 30,   Twelve Months Ended  September 30,
  2016   2015   2016   2015
Interest income:              
Loans receivable $ 12,680,420     $ 9,542,999     $ 43,548,848     $ 36,375,782  
Taxable investment securities 938,603     934,694     3,742,085     3,655,493  
Nontaxable investment securities 4,955         11,657     12,417  
Federal Home Loan Bank stock 40,778     33,945     154,272     142,947  
Interest-earning deposits in other financial institutions 103,924     7,973     216,736     93,432  
Certificates of deposit held at other financial institutions 50,999         105,451      
Restricted securities 2,510         5,013      
Amortization of FDIC loss share receivable             (2,387,205 )
Total interest income 13,822,189     10,519,611     47,784,062     37,892,866  
Interest expense:              
Deposits 1,117,586     663,474     3,452,758     2,727,372  
Borrowings 386,975     559,800     1,955,445     2,285,550  
Floating rate junior subordinated debt 117,801         221,571      
Total interest expense 1,622,362     1,223,274     5,629,774     5,012,922  
Net interest income 12,199,827     9,296,337     42,154,288     32,879,944  
Provision for loan losses (150,000 )       (250,000 )    
Net interest income after provision for loan losses 12,349,827     9,296,337     42,404,288     32,879,944  
Noninterest income:              
Service charges on deposit accounts 1,860,824     1,690,972     7,043,693     6,449,248  
Bankcard fees 1,318,650     1,075,541     4,953,645     4,032,421  
Gain (loss) on investment securities available for sale         48,885     (27,209 )
Bank owned life insurance 332,594     320,565     1,225,422     1,245,382  
Gain on sale of loans and loan servicing release fees 808,228     458,699     2,118,012     1,612,335  
Brokerage commissions 198,670     164,987     650,727     732,336  
Recoveries on acquired loans previously covered under FDIC loss share agreements         3,625,000      
FDIC receivable for loss sharing agreements impairment     (2,529,134 )       (2,434,903 )
Other 398,791     314,535     1,298,746     719,620  
Total noninterest income 4,917,757     1,496,165     20,964,130     12,329,230  
Noninterest expenses:              
Salaries and employee benefits 6,634,984     5,585,634     25,655,810     20,712,215  
Occupancy 1,397,882     1,109,286     5,139,533     4,380,783  
Data processing 903,769     799,864     4,427,636     2,931,736  
Legal and professional 462,627     404,274     2,314,519     1,382,300  
Marketing 421,130     464,496     1,590,171     1,639,943  
Federal insurance premiums and other regulatory fees 239,912     191,337     859,125     755,872  
Net (benefit) cost of operations of real estate owned (309,222 )   (19,011 )   (334,954 )   35,562  
Furniture and equipment 239,817     278,160     870,675     881,465  
Postage, office supplies and printing 276,588     186,055     868,674     872,837  
Core deposit intangible amortization expense 157,773     60,045     415,617     266,451  
Other 928,310     922,206     3,591,408     2,972,536  
Total noninterest expenses 11,353,570     9,982,346     45,398,214     36,831,700  
Income before income taxes 5,914,014     810,156     17,970,204     8,377,474  
Income tax expense 2,103,296     257,463     6,106,884     2,805,312  
Net income $ 3,810,718     $ 552,693     $ 11,863,320     $ 5,572,162  
Basic net income per share $ 0.27     $ 0.04     $ 0.83     $ 0.35  
Diluted net income per share $ 0.26     $ 0.04     $ 0.79     $ 0.34  
Weighted average number of common shares outstanding 14,185,824     15,299,717     14,371,126     15,717,421  
Weighted average number of common and potential common shares outstanding 14,798,042     15,982,127     14,983,344     16,399,831  
                       

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

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

Charter Financial Corporation Supplemental Information (unaudited) dollars in thousands
  Quarter to Date     Year to Date
  9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015     9/30/2016   9/30/2015
                             
Loans receivable:                            
1-4 family residential real estate $ 236,940     $ 234,346     $ 190,180     $ 182,297     $ 188,044       $ 236,940     $ 188,044  
Commercial real estate 595,157     586,082     392,946     396,023     416,576       595,157     416,576  
Commercial 71,865     64,700     43,741     39,836     37,444       71,865     37,444  
Real estate construction 80,500     104,389     72,323     61,816     77,217       80,500     77,217  
Consumer and other 21,241     15,638     13,205     10,715     6,392       21,241     6,392  
Total loans receivable (1) $ 1,005,703     $ 1,005,155     $ 712,395     $ 690,687     $ 725,673       $ 1,005,703     $ 725,673  
                             
Allowance for loan losses:                            
Balance at beginning of period $ 10,118     $ 9,850     $ 9,695     $ 9,489     $ 9,433       $ 9,489     $ 9,471  
Charge-offs (1 )   (7 )   (205 )   (15 )   (263 )     (228 )   (529 )
Recoveries 404     375     360     221     319       1,360     547  
Provision (150 )   (100 )                 (250 )    
Balance at end of period $ 10,371     $ 10,118     $ 9,850     $ 9,695     $ 9,489       $ 10,371     $ 9,489  
                             
Nonperforming assets: (2)                            
Nonaccrual loans $ 3,735     $ 3,371     $ 2,098     $ 2,463     $ 4,114       $ 3,735     $ 4,114  
Loans delinquent 90 days or greater and still accruing         52     14     14           14  
Total nonperforming loans 3,735     3,371     2,150     2,477     4,128       3,735     4,128  
Other real estate owned (3) 2,706     3,181     2,711     3,165     3,411       2,706     3,411  
Total nonperforming assets $ 6,441     $ 6,552     $ 4,861     $ 5,642     $ 7,539       $ 6,441     $ 7,539  
                             
Troubled debt restructuring:                            
Troubled debt restructurings - accruing $ 4,585     $ 4,999     $ 7,267     $ 7,265     $ 6,046       $ 4,585     $ 6,046  
Troubled debt restructurings - nonaccrual 1,760     1,716     332     317     1,607       1,760     1,607  
Total troubled debt restructurings $ 6,345     $ 6,715     $ 7,599     $ 7,582     $ 7,653       $ 6,345     $ 7,653  
                                                         

__________________________________

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

Charter Financial Corporation Supplemental Information (unaudited)
  Quarter to Date     Year to Date
  9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015     9/30/2016   9/30/2015
                             
Return on equity (annualized) 7.55 %   2.61 %   4.32 %   8.97 %   1.06 %     5.90 %   2.62 %
Return on assets (annualized) 1.07 %   0.38 %   0.83 %   1.83 %   0.22 %     0.98 %   0.56 %
Net interest margin (annualized) 3.82 %   3.97 %   3.72 %   4.03 %   4.05 %     3.89 %   3.67 %
Net interest margin, excluding the effects of purchase accounting (1) 3.47 %   3.53 %   3.36 %   3.51 %   3.37 %     3.47 %   3.26 %
Bank tier 1 leverage ratio (2) 11.51 %   11.32 %   17.13 %   17.19 %   16.04 %     11.51 %   16.04 %
Bank total risk-based capital ratio 15.26 %   14.99 %   22.98 %   23.23 %   21.71 %     15.26 %   21.71 %
Effective tax rate 35.56 %   28.91 %   34.28 %   33.83 %   31.78 %     33.98 %   33.49 %
Yield on loans 5.07 %   5.20 %   5.03 %   5.33 %   5.40 %     5.15 %   5.13 %
Cost of deposits 0.46 %   0.43 %   0.42 %   0.42 %   0.42 %     0.43 %   0.44 %
                             
Asset quality ratios: (3)                            
Allowance for loan losses as a % of total loans (4) 1.03 %   1.00 %   1.38 %   1.40 %   1.30 %     1.03 %   1.30 %
Allowance for loan losses as a % of nonperforming loans 277.66 %   300.10 %   458.13 %   391.42 %   229.85 %     277.66 %   229.85 %
Nonperforming assets as a % of total loans and OREO 0.64 %   0.65 %   0.68 %   0.81 %   1.04 %     0.64 %   1.04 %
Nonperforming assets as a % of total assets 0.45 %   0.46 %   0.46 %   0.56 %   0.73 %     0.45 %   0.73 %
Net charge-offs (recoveries) as a % of average loans (annualized) (0.16 )%   (0.15 )%   (0.09 )%   (0.12 )%   (0.15 )%     (0.13 )%   %
                                           

__________________________________

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

Charter Financial Corporation Average Balances, Interest Rates and Yields (unaudited) dollars in thousands
  Quarter to Date
  9/30/2016   9/30/2015
  Average Balance   Interest   Average Yield/Cost (10)   Average Balance   Interest   Average Yield/Cost (10)
Assets:                      
Interest-earning assets:                      
Interest-earning deposits in other financial institutions $ 85,687     $ 104     0.49 %   $ 21,165     $ 8     0.15 %
Certificates of deposit held at other financial institutions 16,395     51     1.24              
FHLB common stock and other equity securities 3,362     41     4.85     3,387     34     4.01  
Taxable investment securities 169,555     939     2.21     187,117     934     2.00  
Nontaxable investment securities (1) 1,607     5     1.23              
Restricted securities 279     3     3.60              
Loans receivable (1)(2)(3)(4) 1,001,096     11,590     4.63     706,724     8,009     4.53  
Accretion and amortization of acquired loan discounts (5)     1,090     0.43         1,534     0.86  
Total interest-earning assets 1,277,981     13,823     4.33     918,393     10,519     4.58  
Total noninterest-earning assets 148,359             98,994          
Total assets $ 1,426,340             $ 1,017,387          
Liabilities and Equity:                      
Interest-bearing liabilities:                      
Interest bearing checking $ 239,141     $ 97     0.15 %   $ 178,538     $ 57     0.13 %
Bank rewarded checking 50,566     24     0.19     46,915     23     0.20  
Savings accounts 63,196     7     0.04     51,300     3     0.02  
Money market deposit accounts 241,286     180     0.30     126,889     69     0.22  
Certificate of deposit accounts 373,197     810     0.87     232,738     511     0.88  
Total interest-bearing deposits 967,386     1,118     0.46     636,380     663     0.42  
Borrowed funds 50,000     387     3.10     58,773     560     3.81  
Floating rate junior subordinated debt 6,564     118     7.18              
Total interest-bearing liabilities 1,023,950     1,623     0.63     695,153     1,223     0.70  
Noninterest-bearing deposits 180,015             100,544          
Other noninterest-bearing liabilities 20,605             13,379          
Total noninterest-bearing liabilities 200,620             113,923          
Total liabilities 1,224,570             809,076          
Total stockholders' equity 201,770             208,311          
Total liabilities and stockholders' equity $ 1,426,340             $ 1,017,387          
Net interest income     $ 12,200             $ 9,296      
Net interest earning assets (6)     $ 254,031             $ 223,240      
Net interest rate spread (7)         3.70 %           3.88 %
Net interest margin (8)         3.82 %           4.05 %
Net interest margin, excluding the effects of purchase accounting (9)         3.47 %           3.37 %
Ratio of average interest-earning assets to average interest-bearing liabilities         124.81 %           132.11 %
                           

__________________________________

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

Charter Financial Corporation Average Balances, Interest Rates and Yields (unaudited) dollars in thousands
  Fiscal Year to Date
  9/30/2016   9/30/2015
  Average Balance   Interest   Average Yield/Cost (10)   Average Balance   Interest   Average Yield/Cost (10)
Assets:                      
Interest-earning assets:                      
Interest-earning deposits in other financial institutions $ 52,667     $ 217     0.41 %   $ 42,836     $ 93     0.22 %
Certificates of deposit held at other financial institutions 8,946     105     1.18              
FHLB common stock and other equity securities 3,222     154     4.79     3,304     143     4.33  
Taxable investment securities 173,888     3,742     2.15     183,956     3,656     1.99  
Nontaxable investment securities (1) 997     12     1.17     2,988     12     0.42  
Restricted securities 129     5     3.89              
Loans receivable (1)(2)(3)(4) 845,014     39,178     4.64     662,283     30,431     4.59  
Accretion and amortization of acquired loan discounts (5)     4,371     0.52         3,558     0.53  
Total interest-earning assets 1,084,863     47,784     4.40     895,367     37,893     4.23  
Total noninterest-earning assets 122,069             105,145          
Total assets $ 1,206,932             $ 1,000,512          
Liabilities and Equity:                      
Interest-bearing liabilities:                      
Interest bearing checking $ 206,985     $ 278     0.13 %   $ 171,792     $ 214     0.12 %
Bank rewarded checking 49,077     97     0.20     48,272     100     0.21  
Savings accounts 56,963     23     0.04     49,782     10     0.02  
Money market deposit accounts 185,818     522     0.28     125,151     265     0.21  
Certificate of deposit accounts 297,270     2,533     0.85     227,917     2,138     0.94  
Total interest-bearing deposits 796,113     3,453     0.43     622,914     2,727     0.44  
Borrowed funds 51,181     1,955     3.82     54,513     2,286     4.19  
Floating rate junior subordinated debt 3,022     222     7.33              
Total interest-bearing liabilities 850,316     5,630     0.66     677,427     5,013     0.74  
Noninterest-bearing deposits 140,423             98,340          
Other noninterest-bearing liabilities 15,040             12,203          
Total noninterest-bearing liabilities 155,463             110,543          
Total liabilities 1,005,779             787,970          
Total stockholders' equity 201,153             212,542          
Total liabilities and stockholders' equity $ 1,206,932             $ 1,000,512          
Net interest income     $ 42,154             $ 32,880      
Net interest earning assets (6)     $ 234,547             $ 217,940      
Net interest rate spread (7)         3.74 %           3.49 %
Net interest margin (8)         3.89 %           3.67 %
Net interest margin, excluding the effects of purchase accounting (9)         3.47 %           3.26 %
Ratio of average interest-earning assets to average interest-bearing liabilities         127.58 %           132.17 %
                           

__________________________________

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

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

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

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

  For the Quarters Ended
  9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015
Loans Receivable Income Excluding Accretion and Amortization of Loss Share Receivable                  
Loans receivable income $ 12,680,420     $ 12,563,466     $ 8,863,437     $ 9,441,525     $ 9,542,999  
Loan purchase discount accretion 1,090,886     1,278,040     833,179     1,168,982     1,533,850  
Amortization of FDIC loss share receivable                  
Net purchase discount accretion and amortization 1,090,886     1,278,040     833,179     1,168,982     1,533,850  
Loans receivable income excluding accretion and amortization of loss share receivable (Non-GAAP) $ 11,589,534     $ 11,285,426     $ 8,030,258     $ 8,272,543     $ 8,009,149  
                   
Net Interest Margin Excluding the Effects of Purchase Accounting                  
Net Interest Margin 3.82 %   3.97 %   3.72 %   4.03 %   4.05 %
Effect to adjust for net purchase discount accretion and amortization (0.35 )   (0.44 )   (0.36 )   (0.52 )   (0.68 )
Net interest margin excluding the effects of purchase accounting (Non-GAAP) 3.47 %   3.53 %   3.36 %   3.51 %   3.37 %
                   
Tangible Book Value Per Share                  
Book value per share $ 13.52     $ 13.29     $ 13.18     $ 13.03     $ 12.79  
Effect to adjust for goodwill and other intangible assets (2.16 )   (2.18 )   (0.29 )   (0.30 )   (0.31 )
Tangible book value per share (Non-GAAP) $ 11.36     $ 11.11     $ 12.89     $ 12.73     $ 12.48  
                                       

  For the Years Ended
  9/30/2016   9/30/2015
Loans Receivable Income Excluding Accretion and Amortization of Loss Share Receivable      
Loans receivable income $ 43,548,848     $ 36,375,782  
Loan purchase discount accretion 4,371,087     5,945,442  
Amortization of FDIC loss share receivable     (2,387,205 )
Net purchase discount accretion and amortization 4,371,087     3,558,237  
Loans receivable income excluding accretion and amortization of loss share receivable (Non-GAAP) $ 39,177,761     $ 32,817,545  
       
Net Interest Margin Excluding the Effects of Purchase Accounting      
Net Interest Margin 3.89 %   3.67 %
Effect to adjust for net purchase discount accretion and amortization (0.42 )   (0.41 )
Net interest margin excluding the effects of purchase accounting (Non-GAAP) 3.47 %   3.26 %
       
Tangible Book Value Per Share      
Book value per share $ 13.52     $ 12.79  
Effect to adjust for goodwill and other intangible assets (2.16 )   (0.31 )
Tangible book value per share (Non-GAAP) $ 11.36     $ 12.48  
               

 
Contact:Robert L. Johnson, Chairman & CEOCurt Kollar, CFO706-645-1391bjohnson@charterbank.net orckollar@charterbank.netDresner Corporate ServicesSteve Carr312-780-7211scarr@dresnerco.com

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