• Basic and diluted EPS of $0.23 and $0.22, respectively
  • $3.0 million improvement in net interest income over same quarter in fiscal 2016
  • 14.9% increase in bankcard fees year over year
  • $16.9 million growth in loans in quarter
  • Nonperforming assets at 0.24% of total assets

WEST POINT, Ga., April 27, 2017 (GLOBE NEWSWIRE) -- Charter Financial Corporation (the "Company") (NASDAQ:CHFN) today reported net income of $3.3 million for the quarter ended March 31, 2017, or $0.23 and $0.22 per basic and diluted share, respectively, compared with net income of $2.1 million, or $0.15 and $0.14 per basic and diluted share, respectively, for the quarter ended March 31, 2016.

Net income for the current-year quarter increased $1.2 million over the prior-year quarter. Driving factors were increases in loan interest income and deposit fee income from the acquisition of Community Bank of the South ("CBS") and a negative provision of $150,000, resulting from continued net recoveries. These increases were partially offset by an increase of $847,000 in noninterest expense, largely attributable to increased ongoing operational costs post-acquisition.

Net income for the six months ended March 31, 2017 was $8.4 million, or $0.59 and $0.55 per basic and diluted share, respectively, compared with net income of $6.8 million, or $0.46 and $0.44 per basic and diluted share, respectively, for the six months ended March 31, 2016.

Quarterly Operating Results

Chairman and CEO Robert L. Johnson said, "We delivered strong earnings to our shareholders in the second quarter due in part to excellent returns from our CBS acquisition as well as the continued growth of our bankcard fee program. Though we know we still have room for improvement, our efficiency ratio of 66.35%, compared to 75.23% in the prior-year quarter, shows we've made significant progress in leveraging our operational structure. Sequentially, the first quarter of fiscal 2017 had numerous one-time items which benefited our results, and our second quarter was impacted negatively by typical seasonal items, such as deposit fees and mortgage activity, making it a challenge to compare quarters."

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

  • An increase in loan interest income of $3.0 million, or 34.3%, and an increase in loan interest income excluding accretion of acquired loan discounts of $3.5 million, or 43.8%, both largely due to the acquisition of CBS.
  • A negative provision of $150,000 related to continued net recoveries of $156,000 during the quarter, and positive asset quality, versus no such provision in the same period last year.
  • An increase in deposit and bankcard fee income of $258,000, or 9.2%.
  • A gain on investment securities available for sale of $248,000, compared to no such gains in the second quarter of fiscal 2016.
  • An increase in brokerage commissions and gain on sale of loans of $78,000 and $183,000, respectively, compared to the prior-year period.
  • A decrease in legal and professional fees and data processing of $291,000, or 42.9%, and $41,000, or 4.0%, respectively, largely due to acquisition expenses during the prior-year period.

Quarterly earnings for the second quarter of fiscal 2017 compared with the second quarter of fiscal 2016 were negatively impacted by:
  • An increase in interest expense on deposits of $473,000, or 68.4%, due to higher balances from both legacy accounts and those assumed in the CBS acquisition.
  • An increase in salaries and employee benefits of $791,000, or 15.0%, due to higher payroll related to the CBS acquisition.
  • The absence of recoveries on loans formerly covered by FDIC loss sharing agreements in the current-year quarter, compared to $750,000 of such recoveries in the second quarter of fiscal 2016.
  • An increase in income tax expense of $1.2 million, or 104.4%, to $2.3 million at March 31, 2017, compared to $1.1 million in the prior-year period attributable to increased net income as our tax-advantaged investments and state tax credits have remained stable, leading to a higher effective tax rate.

Financial Condition

Total assets increased $46.4 million to $1.5 billion at March 31, 2017, from $1.4 billion at September 30, 2016, largely attributable to a $48.4 million increase in cash and cash equivalents, driven by increased deposits and paydowns and sales of investment securities available for sale. Net loans grew $13.5 million, or 1.4%, to $1.0 billion at March 31, 2017, from $994.1 million at September 30, 2016. Loans increased $16.9 million during the current quarter after falling $3.5 million in the first quarter.

"We are pleased with our strong loan and checking account growth in the second quarter," Mr. Johnson continued. "As we continue to leverage our footprint in Metro Atlanta, including the recent opening of our Buckhead branch, we believe we can provide solid net interest income with a low risk profile, as we've done in our legacy markets."

Total deposits increased $39.9 million to $1.2 billion during the six months ended March 31, 2017. Transaction and certificate of deposit accounts increased $35.3 million and $4.1 million, respectively, while money market accounts decreased $478,000 from September 30, 2016.

From September 30, 2016 to March 31, 2017, total stockholders' equity increased $5.3 million to $208.4 million from $203.1 million due primarily to $8.4 million of net income, partially offset by a $2.8 million decrease in accumulated other comprehensive income on the Company's portfolio of investment securities available for sale. The decrease in accumulated other comprehensive income was driven by market interest rate changes since the November presidential election. Book value per share increased to $13.84 while tangible book value per share increased from $11.36 to $11.70, both due to the Company's retention of earnings.

Net Interest Income and Net Interest Margin

Net interest income increased to $11.7 million for the second quarter of fiscal 2017, compared with $8.7 million for the prior-year period. Year over year, interest income improved $3.4 million due to a $3.5 million increase in loan interest income, excluding accretion of acquired loan discounts. The change was largely due to higher average balances from the acquisition of CBS completed in the third quarter of fiscal 2016, offset by a $475,000 decrease in net purchase discount accretion. Total interest expense increased $414,000 to $1.7 million for the current quarter, largely due to increased balances of higher-costing deposits from CBS, as well as $124,000 of interest expense on the Company's subordinated debentures assumed in the CBS acquisition. These increases were offset partially by a $182,000 decline in interest expense on FHLB borrowings due to a restructuring of one of the Company's $25.0 million advances in March of 2017 from an interest rate of 4.30% to 3.43%, as well as the replacement of the Company's other $25.0 million advance with a new, substantially lower-costing advance in May of 2016.

Net interest margin was 3.52% for the second quarter of fiscal 2017, compared to 3.72% for the second quarter of fiscal 2016. The decrease was largely due to higher interest expense as a result of higher customer deposit balances, including greater-costing acquired CBS deposits and legacy growth, as well as a continued reduction in accretion income. Net interest margin was also impacted negatively by our higher balances in lower-yielding Federal Reserve deposits. The Company's net interest margin, excluding the effects of purchase accounting, increased to 3.41% for the quarter ended March 31, 2017, from 3.36% for the quarter ended March 31, 2016.

Net interest income for the six months ended March 31, 2017, increased $6.0 million, or 33.5%, to $23.9 million, compared to $17.9 million for the prior-year period. Interest income increased $6.8 million to $27.2 million due to increased loan balances as a result of the CBS acquisition, as well as a $258,000 increase in interest bearing deposits in other financial institutions, primarily the result of increased cash balances and the Federal Reserve's increases of interest rates. Loan interest income, excluding accretion of acquired loan discounts, increased $7.1 million, while net purchase discount accretion decreased $920,000.

The Company currently expects to realize remaining loan discount accretion of $139,000 over the next two quarters related to its 2011 acquisition of the First National Bank of Florida under purchase accounting rules. The Company has $1.9 million of remaining loan discount accretion related to the CBS acquisition, which will be accreted over the life of the loans acquired.

Provision for Loan Losses

The Company recorded negative provisions for loan losses of $150,000 and $900,000 in the three and six month periods ended March 31, 2017, respectively, due to the continued positive credit quality trends of its loan portfolio and net recoveries of previously charged-off loans. No provision was recorded in the three and six month periods ended March 31, 2016.

Noninterest Income and Expense

Noninterest income increased $33,000 to $4.5 million in the fiscal 2017 second quarter from the fiscal 2016 second quarter. The current-year quarter included increases in core components of $258,000 in bankcard fee and other deposit fee income and $183,000 in gains on sale of loans, as well as $78,000 in brokerage commissions. Bankcard fees increased $178,000, or 14.9%, compared to the prior-year period, due mainly to the Company's marketing efforts for signature debit card transactions. The Company also recognized a gain of $248,000 on the sale of investment securities available for sale. These increases were partially offset by $750,000 in recoveries on loans formerly covered by loss sharing agreements in the prior-year period. No such recoveries were recorded in the current quarter.

Noninterest expense for the quarter ended March 31, 2017, increased $847,000 to $10.7 million, compared with $9.9 million for the prior-year quarter, due in part to increases of $791,000 in salaries and employee benefits and $70,000 in occupancy, both of which were attributable to higher ongoing operational costs from the CBS acquisition, as well as a $113,000 increase in core deposit intangible amortization expense. These increases were partially offset by reductions of $291,000 and $41,000 in legal and professional fees and data processing, both of which were related to deal costs in preparation for the CBS acquisition in the prior year.

"We were able to achieve significant cost saving through the CBS integration," Mr. Johnson continued. "Along with our improved efficiency ratio, we've seen a decline of nearly $900,000 in noninterest expense since the third quarter of fiscal 2016, net of $3.5 million of deal costs recorded in that quarter, our first with CBS on the books."

Noninterest income for the six months ended March 31, 2017, decreased $1.8 million to $9.5 million, compared with $11.3 million for the prior-year period. In the fiscal 2017 period, the Company recorded $250,000 of recoveries on loans formerly covered by FDIC loss sharing agreements, compared to $3.6 million of such recoveries in the prior-year period. The decrease in recoveries was partially offset by increased service charge and bankcard fees of $530,000, gains on the sale of loans of $566,000, gains on investment securities available for sale of $212,000 and brokerage commissions of $102,000 during the current-year period.

Noninterest expense for the six months ended March 31, 2017 increased $2.0 million to $21.0 million compared with $19.0 million for the prior-year period due to increases of $1.7 million, $336,000, and $218,000 in salaries, occupancy and core deposit intangible amortization expense, respectively, in the current-year period, all of which were attributable to ongoing operational costs from the acquisition of CBS. These increases were offset in part by reductions of $396,000 and $387,000 in the net cost of operations of real estate owned and legal and professional fees, respectively, compared to the prior-year period.

Asset Quality

Nonperforming assets at March 31, 2017 were at 0.24% of total assets, down from 0.45% at September 30, 2016, due to payoffs of two long-standing, high-balance, non-performing loans and continued positive asset quality trends. The allowance for loan losses was at 1.04% of total loans and 652.47% of nonperforming loans at March 31, 2017, compared to 1.03% and 277.66%, respectively, at September 30, 2016. Not included in the allowance is $1.9 million in yield and credit discounts on the CBS-acquired loans. At March 31, 2017, the allowance for loan losses was 1.24% of legacy loans, compared to 1.35% at September 30, 2016. The Company recorded net loan recoveries of $156,000 and $1.0 million in its allowance for loan losses for the three and six months ended March 31, 2017, respectively, compared with net loan recoveries of $155,000 and $361,000 for the same periods in the prior year.

Capital Management

From the first quarter of fiscal 2014 through the first quarter of fiscal 2017, the Company has repurchased 8.1 million shares, or 35.6%, of its common stock, for $91.9 million. The Company repurchased no shares during the quarter ended March 31, 2017. On April 25, 2017, the Company announced an increased dividend of $0.065 per share, the third consecutive quarterly increase after a $0.05 per share dividend was announced in the previous 14 quarters.

Mr. Johnson concluded, "Our stock buybacks, acquisitions and historically conservative lending practices have provided us with a robust balance sheet with superior asset quality. With nonperforming assets at 0.24% of total assets, tangible book value per share of $11.70, and a year-to-date return on assets of 1.15%, we are well positioned for continued quality returns for the last half of fiscal 2017. We will also continue to seek out growth opportunities, including potential strategic acquisitions that could be additive to our existing franchise and strongly accretive to our earnings. With our current market success, we are also well positioned to potentially use our stock as currency in such a transaction."

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," 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; the uncertainty in global markets resulting from the new administration; and the effects of geopolitical instability and risks such as terrorist attacks, the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes, and the effect of any damage to our reputation resulting from developments relating to any of the factors listed herein. Any or all forward-looking statements in this release and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or known or unknown risks and uncertainties. Consequently, no forward-looking statements can be guaranteed. Except as required by law, the Company disclaims any obligation to subsequently revise or update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company's filings with the Securities and Exchange Commission. The Company refers you to the section entitled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016. Copies of each filing may be obtained from the Company or the Securities and Exchange Commission.

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

Charter Financial Corporation Condensed Consolidated Statements of Financial Condition (unaudited)
 
  March 31, 2017   September 30, 2016  (1)
Assets
Cash and amounts due from depository institutions $ 18,823,967     $ 14,472,867  
Interest-earning deposits in other financial institutions 121,461,070     77,376,632  
Cash and cash equivalents 140,285,037     91,849,499  
Loans held for sale, fair value of $2,385,655 and $2,991,756 2,353,484     2,941,982  
Certificates of deposit held at other financial institutions 10,511,240     14,496,410  
Investment securities available for sale 191,482,806     206,336,287  
Federal Home Loan Bank stock 3,484,600     3,361,800  
Restricted securities, at cost 279,000     279,000  
Loans receivable 1,019,172,569     1,005,702,737  
Unamortized loan origination fees, net (1,116,362 )   (1,278,830 )
Allowance for loan losses (10,504,538 )   (10,371,416 )
Loans receivable, net 1,007,551,669     994,052,491  
Other real estate owned 1,957,194     2,706,461  
Accrued interest and dividends receivable 3,502,097     3,442,051  
Premises and equipment, net 28,397,858     28,078,591  
Goodwill 29,793,756     29,793,756  
Other intangible assets, net of amortization 2,336,512     2,639,608  
Cash surrender value of life insurance 49,848,239     49,268,973  
Deferred income taxes 5,834,565     4,366,522  
Other assets 7,178,170     4,775,805  
    Total assets $ 1,484,796,227     $ 1,438,389,236  
Liabilities and Stockholders' Equity
Liabilities:      
Deposits $ 1,201,731,475     $ 1,161,843,586  
Long-term borrowings 50,000,000     50,000,000  
Floating rate junior subordinated debt 6,656,098     6,587,549  
Advance payments by borrowers for taxes and insurance 1,809,038     2,298,513  
Other liabilities 16,186,614     14,510,052  
Total liabilities 1,276,383,225     1,235,239,700  
Stockholders' equity:      
Common stock, $0.01 par value; 15,060,616 shares issued and outstanding at March 31, 2017 and 15,031,076 shares issued and outstanding at September 30, 2016 150,606     150,311  
Preferred stock, $0.01 par value; 50,000,000 shares authorized at March 31, 2017 and September 30, 2016      
Additional paid-in capital 84,609,090     83,651,623  
Unearned compensation - ESOP (4,673,761 )   (5,106,169 )
Retained earnings 130,072,917     123,349,890  
Accumulated other comprehensive (loss) income (1,745,850 )   1,103,881  
Total stockholders' equity 208,413,002     203,149,536  
    Total liabilities and stockholders' equity $ 1,484,796,227     $ 1,438,389,236  
                                                           
(1) Financial information at September 30, 2016 has been derived from audited financial statements.

Charter Financial Corporation Condensed Consolidated Statements of Income (unaudited)
       
  Three Months Ended  March 31,   Six Months Ended  March 31,
  2017   2016   2017   2016
Interest income:              
Loans receivable $ 11,903,416     $ 8,863,437     $ 24,473,319     $ 18,304,962  
Taxable investment securities 1,103,740     934,536     2,199,640     1,881,047  
Nontaxable investment securities 4,571         9,143      
Federal Home Loan Bank stock 40,309     36,149     79,519     75,077  
Interest-earning deposits in other financial institutions 213,310     54,047     324,127     66,438  
Certificates of deposit held at other financial institutions 38,775         81,404      
Restricted securities 2,679         5,252      
Total interest income 13,306,800     9,888,169     27,172,404     20,327,524  
Interest expense:              
Deposits 1,165,459     692,218     2,323,776     1,357,652  
Borrowings 362,880     545,368     749,855     1,098,250  
Floating rate junior subordinated debt 123,631         244,422      
Total interest expense 1,651,970     1,237,586     3,318,053     2,455,902  
    Net interest income 11,654,830     8,650,583     23,854,351     17,871,622  
Provision for loan losses (150,000 )       (900,000 )    
    Net interest income after provision for loan losses 11,804,830     8,650,583     24,754,351     17,871,622  
Noninterest income:              
Service charges on deposit accounts 1,700,713     1,620,144     3,588,524     3,372,702  
Bankcard fees 1,366,686     1,189,181     2,649,045     2,335,007  
Gain on investment securities available for sale 247,780         247,780     35,965  
Bank owned life insurance 246,915     244,860     579,266     565,523  
Gain on sale of loans 542,824     359,750     1,274,086     707,606  
Brokerage commissions 224,567     146,430     390,563     288,145  
Recoveries on acquired loans previously covered under FDIC loss share agreements     750,000     250,000     3,625,000  
Other 216,671     202,538     549,737     413,495  
Total noninterest income 4,546,156     4,512,903     9,529,001     11,343,443  
Noninterest expenses:              
Salaries and employee benefits 6,078,575     5,287,339     12,212,248     10,550,328  
Occupancy 1,219,866     1,150,155     2,543,189     2,207,430  
Data processing 1,003,974     1,045,336     1,912,929     1,869,852  
Legal and professional 387,590     678,565     671,745     1,058,403  
Marketing 411,943     379,088     768,467     668,663  
Federal insurance premiums and other regulatory fees 197,261     210,038     362,756     433,881  
Net cost (benefit) of operations of real estate owned 13,827     71,408     (345,443 )   50,164  
Furniture and equipment 228,383     161,308     402,437     329,722  
Postage, office supplies and printing 223,317     170,670     493,702     355,382  
Core deposit intangible amortization expense 149,435     36,154     303,097     85,138  
Other 835,540     712,710     1,714,092     1,371,838  
Total noninterest expenses 10,749,711     9,902,771     21,039,219     18,980,801  
Income before income taxes 5,601,275     3,260,715     13,244,133     10,234,264  
Income tax expense 2,284,480     1,117,627     4,881,671     3,476,898  
    Net income $ 3,316,795     $ 2,143,088     $ 8,362,462     $ 6,757,366  
Basic net income per share $ 0.23     $ 0.15     $ 0.59     $ 0.46  
Diluted net income per share $ 0.22     $ 0.14     $ 0.55     $ 0.44  
Weighted average number of common shares outstanding 14,322,290     14,224,862     14,264,248     14,557,000  
Weighted average number of common and potential common shares outstanding 15,340,320     14,909,947     15,282,278     15,242,085  

Charter Financial Corporation Supplemental Financial Data (unaudited) in thousands except per share data
 
  Quarter to Date     Year to Date
  3/31/2017   12/31/2016   9/30/2016 (1)   6/30/2016   3/31/2016     3/31/2017   3/31/2016
                             
Consolidated balance sheet data:                            
Total assets $ 1,484,796     $ 1,461,667     $ 1,438,389     $ 1,427,851     $ 1,051,281       $ 1,484,796     $ 1,051,281  
Cash and cash equivalents 140,285     131,849     91,849     106,108     79,331       140,285     79,331  
Loans receivable, net 1,007,552     990,635     994,052     993,786     701,399       1,007,552     701,399  
Other real estate owned 1,957     2,161     2,706     3,181     2,711       1,957     2,711  
Securities available for sale 191,483     196,279     206,336     169,737     172,197       191,483     172,197  
Transaction accounts 513,294     481,841     478,028     472,123     353,834       513,294     353,834  
Total deposits 1,201,731     1,186,347     1,161,844     1,155,245     791,692       1,201,731     791,692  
Borrowings 56,656     56,622     56,588     56,553     50,000       56,656     50,000  
Total stockholders' equity 208,413     205,500     203,150     199,800     198,031       208,413     198,031  
                             
Consolidated earnings summary:                            
Interest income $ 13,307     $ 13,866     $ 13,822     $ 13,635     $ 9,888       $ 27,172     $ 20,328  
Interest expense 1,652     1,666     1,622     1,552     1,237       3,318     2,456  
Net interest income 11,655     12,200     12,200     12,083     8,651       23,854     17,872  
Provision for loan losses (150 )   (750 )   (150 )   (100 )         (900 )    
Net interest income after provision for loan losses 11,805     12,950     12,350     12,183     8,651       24,754     17,872  
Noninterest income 4,546     4,983     4,918     4,703     4,513       9,529     11,343  
Noninterest expense 10,750     10,290     11,354     15,064     9,903       21,039     18,981  
Income tax expense 2,284     2,597     2,103     527     1,118       4,882     3,477  
Net income $ 3,317     $ 5,046     $ 3,811     $ 1,295     $ 2,143       $ 8,362     $ 6,757  
                             
Per share data:                            
Earnings per share - basic $ 0.23     $ 0.36     $ 0.27     $ 0.09     $ 0.15       $ 0.59     $ 0.46  
Earnings per share - fully diluted $ 0.22     $ 0.33     $ 0.26     $ 0.09     $ 0.14       $ 0.55     $ 0.44  
Cash dividends per share $ 0.060     $ 0.055     $ 0.050     $ 0.050     $ 0.050       $ 0.115     $ 0.100  
                             
Weighted average basic shares 14,322     14,207     14,186     14,185     14,225       14,264     14,557  
Weighted average diluted shares 15,340     15,065     14,798     14,842     14,910       15,282     15,242  
Total shares outstanding 15,061     15,031     15,031     15,031     15,026       15,061     15,026  
                             
Book value per share $ 13.84     $ 13.67     $ 13.52     $ 13.29     $ 13.18       $ 13.84     $ 13.18  
Tangible book value per share (2) $ 11.70     $ 11.52     $ 11.36     $ 11.11     $ 12.89       $ 11.70     $ 12.89  
                                                                                       
(1) Financial information at and for the year ended September 30, 2016 has been derived from audited financial statements.
(2) Non-GAAP financial measure, calculated as total stockholders' equity less goodwill and other intangible assets divided by period-end shares outstanding.

Charter Financial Corporation Supplemental Information (unaudited) dollars in thousands
         
  Quarter to Date     Year to Date
  3/31/2017   12/31/2016   9/30/2016   6/30/2016   3/31/2016     3/31/2017   3/31/2016
                             
Loans receivable:                            
1-4 family residential real estate $ 223,216     $ 223,609     $ 236,940     $ 234,346     $ 190,180       $ 223,216     $ 190,180  
Commercial real estate 608,206     595,207     595,157     586,082     392,946       608,206     392,946  
Commercial 73,119     73,182     71,865     64,700     43,741       73,119     43,741  
Real estate construction 77,332     79,136     80,500     104,389     72,323       77,332     72,323  
Consumer and other 37,300     31,212     21,241     15,638     13,205       37,300     13,205  
Total loans receivable $ 1,019,173     $ 1,002,346     $ 1,005,703     $ 1,005,155     $ 712,395       $ 1,019,173     $ 712,395  
                             
Allowance for loan losses:                            
Balance at beginning of period $ 10,499     $ 10,371     $ 10,118     $ 9,850     $ 9,695       $ 10,371     $ 9,489  
Charge-offs (103 )   (50 )   (1 )   (7 )   (205 )     (152 )   (220 )
Recoveries 259     928     404     375     360       1,186     581  
Provision (150 )   (750 )   (150 )   (100 )         (900 )    
Balance at end of period $ 10,505     $ 10,499     $ 10,371     $ 10,118     $ 9,850       $ 10,505     $ 9,850  
                             
Nonperforming assets: (1)                            
Nonaccrual loans $ 1,610     $ 1,527     $ 3,735     $ 3,371     $ 2,098       $ 1,610     $ 2,098  
Loans delinquent 90 days or greater and still accruing     238             52           52  
Total nonperforming loans 1,610     1,765     3,735     3,371     2,150       1,610     2,150  
Other real estate owned 1,957     2,161     2,706     3,181     2,711       1,957     2,711  
Total nonperforming assets $ 3,567     $ 3,926     $ 6,441     $ 6,552     $ 4,861       $ 3,567     $ 4,861  
                             
Troubled debt restructuring:                            
Troubled debt restructurings - accruing $ 5,073     $ 4,761     $ 4,585     $ 4,999     $ 7,267       $ 5,073     $ 7,267  
Troubled debt restructurings - nonaccrual 137     192     1,760     1,716     332       137     332  
Total troubled debt restructurings $ 5,210     $ 4,953     $ 6,345     $ 6,715     $ 7,599       $ 5,210     $ 7,599  
                                                                                   
(1) Loans being accounted for under purchase accounting rules which have associated accretion income established at the time of acquisition remaining to recognize, that were greater than 90 days delinquent or otherwise considered nonperforming loans are excluded from this table.

Charter Financial Corporation Supplemental Information (unaudited)
         
  Quarter to Date     Year to Date
  3/31/2017   12/31/2016   9/30/2016   6/30/2016   3/31/2016     3/31/2017   3/31/2016
                             
Return on equity (annualized) 6.40 %   9.84 %   7.55 %   2.61 %   4.32 %     8.11 %   6.69 %
Return on assets (annualized) 0.91 %   1.39 %   1.07 %   0.38 %   0.83 %     1.15 %   1.33 %
Net interest margin (annualized) 3.52 %   3.71 %   3.82 %   3.97 %   3.72 %     3.61 %   3.88 %
Net interest margin, excluding the effects of purchase accounting (1) 3.41 %   3.48 %   3.47 %   3.53 %   3.36 %     3.44 %   3.43 %
Holding company tier 1 leverage ratio (2) 12.92 %   12.83 %   12.68 %   12.60 %   18.89 %     12.92 %   18.89 %
Holding company total risk-based capital ratio (2) 17.93 %   17.38 %   16.74 %   15.93 %   25.11 %     17.93 %   25.11 %
Bank tier 1 leverage ratio (2) (3) 11.84 %   11.70 %   11.51 %   11.32 %   17.13 %     11.84 %   17.13 %
Bank total risk-based capital ratio (2) 16.53 %   15.91 %   15.26 %   14.99 %   22.98 %     16.53 %   22.98 %
Effective tax rate 40.78 %   33.98 %   35.56 %   28.91 %   34.28 %     36.86 %   33.97 %
Yield on loans 4.74 %   5.01 %   5.07 %   5.20 %   5.03 %     4.87 %   5.18 %
Cost of deposits 0.46 %   0.46 %   0.46 %   0.43 %   0.42 %     0.46 %   0.42 %
                             
Asset quality ratios: (4)                            
Allowance for loan losses as a % of total loans (5) 1.04 %   1.05 %   1.03 %   1.00 %   1.38 %     1.04 %   1.38 %
Allowance for loan losses as a % of nonperforming loans 652.47 %   594.81 %   277.66 %   300.10 %   458.13 %     652.47 %   458.13 %
Nonperforming assets as a % of total loans and OREO 0.35 %   0.39 %   0.64 %   0.65 %   0.68 %     0.35 %   0.68 %
Nonperforming assets as a % of total assets 0.24 %   0.27 %   0.45 %   0.46 %   0.46 %     0.24 %   0.46 %
Net charge-offs (recoveries) as a % of average loans (annualized) (0.06 )%   (0.35 )%   (0.16 )%   (0.15 )%   (0.09 )%     (0.21 )%   (0.10 )%
                                                                   
(1) Net interest income excluding accretion and amortization of acquired loans divided by average net interest earning assets excluding average loan accretable discounts, a non-GAAP measure, in the amount of $2.2 million, $2.9 million, $3.8 million, $4.7 million, and $2.0 million for the quarters ended March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, respectively.
(2) Current period bank and holding company capital ratios are estimated as of the date of this earnings release.
(3) During the quarter ended June 30, 2016, a net downstream of capital was made between the holding company and the bank in the amount of $6.1 million as part of the Company's acquisition of CBS.
(4) Ratios for the three months ended March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016 include all assets with the exception of FAS ASC 310-30 loans that are excluded from nonperforming loans due to the ongoing recognition of accretion income established at the time of acquisition.
(5) 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 $166.5 million, $191.9 million, $236.4 million and $264.7 million at March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively, which were recorded at acquisition date fair value, the allowance approximated 1.24%, 1.30%, 1.35% and 1.37% of all other loans at March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively.

Charter Financial Corporation Average Balances, Interest Rates and Yields (unaudited) dollars in thousands
   
  Quarter to Date
  3/31/2017   3/31/2016
  Average Balance   Interest   Average Yield/Cost (10)   Average Balance   Interest   Average Yield/Cost (10)
Assets:                      
Interest-earning assets:                      
Interest-earning deposits in other financial institutions $ 105,705     $ 213     0.81 %   $ 47,144     $ 54     0.46 %
Certificates of deposit held at other financial institutions 11,893     39     1.30              
FHLB common stock and other equity securities 3,393     40     4.75     3,007     36     4.81  
Taxable investment securities 195,694     1,104     2.26     174,637     934     2.14  
Nontaxable investment securities (1) 1,588     5     1.15              
Restricted securities 279     3     3.84              
Loans receivable (1)(2)(3)(4) 1,005,473     11,545     4.59     704,452     8,031     4.56  
Accretion, net, of acquired loan discounts (5)     358     0.14         833     0.47  
Total interest-earning assets 1,324,025     13,307     4.02     929,240     9,888     4.26  
Total noninterest-earning assets 137,189             98,710          
Total assets $ 1,461,214             $ 1,027,950          
Liabilities and Equity:                      
Interest-bearing liabilities:                      
Interest bearing checking $ 251,150     $ 94     0.15 %   $ 181,581     $ 55     0.12 %
Bank rewarded checking 53,653     26     0.19     48,859     25     0.20  
Savings accounts 62,718     6     0.04     52,907     4     0.03  
Money market deposit accounts 259,470     195     0.30     142,777     89     0.25  
Certificate of deposit accounts 380,198     844     0.89     233,980     519     0.89  
Total interest-bearing deposits 1,007,189     1,165     0.46     660,104     692     0.42  
Borrowed funds 50,011     363     2.90     50,000     545     4.36  
Floating rate junior subordinated debt 6,634     124     7.45              
Total interest-bearing liabilities 1,063,834     1,652     0.62     710,104     1,237     0.70  
Noninterest-bearing deposits 174,904             106,304          
Other noninterest-bearing liabilities 15,137             13,235          
Total noninterest-bearing liabilities 190,041             119,539          
Total liabilities 1,253,875             829,643          
Total stockholders' equity 207,339             198,307          
  Total liabilities and stockholders' equity $ 1,461,214             $ 1,027,950          
    Net interest income     $ 11,655             $ 8,651      
    Net interest earning assets (6)     $ 260,191             $ 219,136      
Net interest rate spread (7)         3.40 %           3.56 %
Net interest margin (8)         3.52 %           3.72 %
Net interest margin, excluding the effects of purchase accounting (9)         3.41 %           3.36 %
Ratio of average interest-earning assets to average interest-bearing liabilities         124.46 %           130.86 %
                                                                     
(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.
(6) Net interest-earning assets represent total average interest-earning assets less total average interest-bearing liabilities.
(7) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(8) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(9) Net interest margin, excluding the effects of purchase accounting, a non-GAAP measure, represents net interest income excluding accretion and amortization of acquired loans receivable as a percentage of average net interest earning assets excluding loan accretable discounts in the amount of $2.2 million and $2.0 million for the quarters ended March 31, 2017 and March 31, 2016, respectively.
(10) Annualized.

Charter Financial Corporation Average Balances, Interest Rates and Yields (unaudited) dollars in thousands
   
  Fiscal Year to Date
  3/31/2017   3/31/2016
  Average Balance   Interest   Average Yield/Cost (10)   Average Balance   Interest   Average Yield/Cost (10)
Assets:                      
Interest-earning assets:                      
Interest-earning deposits in other financial institutions $ 102,451     $ 324     0.63 %   $ 35,192     $ 66     0.38 %
Certificates of deposit held at other financial institutions 12,630     81     1.29              
FHLB common stock and other equity securities 3,377     80     4.71     3,043     75     4.93  
Taxable investment securities 195,409     2,200     2.25     177,621     1,882     2.12  
Nontaxable investment securities (1) 1,593     9     1.15              
Restricted securities 279     5     3.76              
Loans receivable (1)(2)(3)(4) 1,004,386     23,391     4.66     706,199     16,303     4.62  
Accretion and amortization of acquired loan discounts (5)     1,082     0.21         2,002     0.57  
Total interest-earning assets 1,320,125     27,172     4.12     922,055     20,328     4.41  
Total noninterest-earning assets 135,883             96,564          
Total assets $ 1,456,008             $ 1,018,619          
Liabilities and Equity:                      
Interest-bearing liabilities:                      
Interest bearing checking $ 251,110     $ 180     0.14 %   $ 179,548     $ 110     0.12 %
Bank rewarded checking 52,692     52     0.20     47,776     48     0.20  
Savings accounts 62,434     12     0.04     51,642     8     0.03  
Money market deposit accounts 257,379     389     0.30     136,800     165     0.24  
Certificate of deposit accounts 380,584     1,691     0.89     232,990     1,027     0.88  
Total interest-bearing deposits 1,004,199     2,324     0.46     648,756     1,358     0.42  
Borrowed funds 50,006     750     3.00     50,820     1,098     4.32  
Floating rate junior subordinated debt 6,616     244     7.39              
Total interest-bearing liabilities 1,060,821     3,318     0.63     699,576     2,456     0.70  
Noninterest-bearing deposits 173,561             104,861          
Other noninterest-bearing liabilities 15,459             12,069          
Total noninterest-bearing liabilities 189,020             116,930          
Total liabilities 1,249,841             816,506          
Total stockholders' equity 206,167             202,113          
  Total liabilities and stockholders' equity $ 1,456,008             $ 1,018,619          
    Net interest income     $ 23,854             $ 17,872      
    Net interest earning assets (6)     $ 259,304             $ 222,479      
Net interest rate spread (7)         3.49 %           3.71 %
Net interest margin (8)         3.61 %           3.88 %
Net interest margin, excluding the effects of purchase accounting (9)         3.44 %           3.43 %
Ratio of average interest-earning assets to average interest-bearing liabilities         124.44 %           131.80 %
                                                                   
(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.
(6) Net interest-earning assets represent total average interest-earning assets less total average interest-bearing liabilities.
(7) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(8) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(9) Net interest margin, excluding the effects of purchase accounting, a non-GAAP measure, represents net interest income excluding accretion and amortization of acquired loans receivable as a percentage of average net interest earning assets excluding loan accretable discounts in the amount of $2.6 million and $2.5 million for the six months ended March 31, 2017 and March 31, 2016, respectively.
(10) Annualized.

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

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

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

  For the Quarters Ended
  3/31/2017   12/31/2016   9/30/2016   6/30/2016   3/31/2016
Loans Receivable Income Excluding Accretion                  
Loans receivable income $ 11,903,416     $ 12,569,903     $ 12,680,420     $ 12,563,466     $ 8,863,437  
Net purchase discount accretion 358,031     724,109     1,090,886     1,278,040     833,179  
Loans receivable income excluding accretion (Non-GAAP) $ 11,545,385     $ 11,845,794     $ 11,589,534     $ 11,285,426     $ 8,030,258  
                   
Net Interest Margin Excluding the Effects of Purchase Accounting                  
Net Interest Margin 3.52 %   3.71 %   3.82 %   3.97 %   3.72 %
Effect to adjust for net purchase discount accretion (0.11 )   (0.23 )   (0.35 )   (0.44 )   (0.36 )
Net interest margin excluding the effects of purchase accounting (Non-GAAP) 3.41 %   3.48 %   3.47 %   3.53 %   3.36 %
                   
Tangible Book Value Per Share                  
Book value per share $ 13.84     $ 13.67     $ 13.52     $ 13.29     $ 13.18  
Effect to adjust for goodwill and other intangible assets (2.14 )   (2.15 )   (2.16 )   (2.18 )   (0.29 )
Tangible book value per share (Non-GAAP) $ 11.70     $ 11.52     $ 11.36     $ 11.11     $ 12.89  

  For the Six Months Ended
  3/31/2017   3/31/2016
Loans Receivable Income Excluding Accretion      
Loans receivable income $ 24,473,319     $ 18,304,962  
Net purchase discount accretion 1,082,140     2,002,161  
Loans receivable income excluding accretion (Non-GAAP) $ 23,391,179     $ 16,302,801  
       
Net Interest Margin Excluding the Effects of Purchase Accounting      
Net Interest Margin 3.61 %   3.88 %
Effect to adjust for net purchase discount accretion (0.17 )   (0.45 )
Net interest margin excluding the effects of purchase accounting (Non-GAAP)                                                                                             3.44 %   3.43 %
       
Tangible Book Value Per Share      
Book value per share $ 13.84     $ 13.18  
Effect to adjust for goodwill and other intangible assets (2.14 )   (0.29 )
Tangible book value per share (Non-GAAP) $ 11.70     $ 12.89  
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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