• Basic and diluted EPS of $0.24 and $0.23, respectively
  • 11.0% increase in quarterly bankcard fees year over year
  • $24.9 million growth in loans in quarter
  • Continued strong asset quality
  • Signed merger agreement with Resurgens Bancorp expected to close in Q4
  • Fourth consecutive quarterly dividend increase

WEST POINT, Ga., July 25, 2017 (GLOBE NEWSWIRE) -- Charter Financial Corporation (the "Company") (NASDAQ:CHFN) today reported net income of $3.5 million for the quarter ended June 30, 2017, or $0.24 and $0.23 per basic and diluted share, respectively, compared with net income of $1.3 million, or $0.09 per basic and diluted share for the quarter ended June 30, 2016.

Net income for the current-year quarter increased $2.2 million over the prior-year quarter. A driving factor was an increase of $305,000, or 9.8%, in deposit and bankcard fees during the current-year quarter. The 2016 third quarter included $3.5 million in merger costs from the acquisition of CBS Financial Corporation ("CBS").

Net income for the nine months ended June 30, 2017 was $11.9 million, or $0.83 and $0.78 per basic and diluted share, respectively, compared with net income of $8.1 million, or $0.56 and $0.53 per basic and diluted share, respectively, for the nine months ended June 30, 2016.

The Company's board of directors has declared an increased quarterly cash dividend of $0.07 per share, the fourth consecutive increase after a $0.05 per share dividend was announced in the previous 14 quarters. The dividend is payable on August 24, 2017, to stockholders of record as of August 10, 2017.

On June 1, 2017, the Company announced its merger agreement with Resurgens Bancorp ("Resurgens"), in which it intends to acquire Resurgens and its wholly-owned subsidiary, Resurgens Bank. The transaction is expected to close late in the fourth quarter of fiscal 2017. The transaction is projected to bring in $167.0 million of total assets, $135.0 million of gross loans and $138.0 million of total deposits to the Company's books upon closing.

"The Resurgens acquisition is another progression in our long term shareholder value plan," said Chairman and CEO Robert L. Johnson. "It is remarkable to reflect that we entered the new century as a sleepy, small town mutual and now we are fully stockholder owned, have broadened our base into thriving markets, leveraged most of the excess capital generated in our stock conversion and are now trading on earnings rather than book value."

Quarterly Operating Results

Quarterly earnings for the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016 were positively impacted by:
  • An increase in deposit and bankcard fee income of $305,000, or 9.8%.
  • A decrease in total noninterest expense of $4.0 million, or 26.3%, largely due to $3.5 million of merger costs associated with the CBS acquisition in the prior-year quarter.
  • Interest on interest-bearing deposits in other financial institutions and taxable investment securities increased $190,000  and $114,000, respectively. Interest-bearing deposits saw a 57 basis point increase in yield, while the Company's yield on taxable investment securities increased six basis points.
  • A decrease in interest expense on FHLB borrowings of $142,000, or 30.3%, due to the Company renegotiating both of its existing advances in May 2016 and March 2017.

Quarterly earnings for the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016 were negatively impacted by:
  • A decrease in loans receivable income of $287,000, or 2.3%, to $12.3 million for the 2017 third quarter as compared to $12.6 million for the same period in 2016, driven entirely by a decline of $1.1 million, or 86.5%, in accretion of acquired loan discounts. Loans receivable income excluding accretion increased $818,000, or 7.2%, to $12.1 million during the quarter.
  • An increase in interest expense on deposits of $205,000, or 21.0%, due to higher balances as well as an increase of four basis points in the Company's cost of deposits.
  • An increase in income tax expense of $1.5 million to $2.0 million for the current-year quarter, compared to $527,000 in the prior-year period attributable to increased net income as well as a higher effective tax rate.

"Our strong earnings continue to show the value of our expansion into the North Atlanta market," Mr. Johnson continued. "We had our best-ever quarter of deposit and bankcard fees, and grew our loan portfolio as well as our loans receivable income excluding purchase discount accretion. We believe we will be able to continue this growth as we expand into the DeKalb County market with the Resurgens merger."

Financial Condition

Total assets increased $41.7 million to $1.5 billion at June 30, 2017, from $1.4 billion at September 30, 2016, largely attributable to a $28.3 million increase in cash and cash equivalents. The increase in cash was largely the result of increased deposits and sales and paydowns of investment securities, offset in part by growth in loans. Net loans grew $38.1 million, or 3.8%, to $1.0 billion at June 30, 2017, from $994.1 million at September 30, 2016. Loans increased $24.9 million during the current quarter.

Total deposits increased $32.4 million to $1.2 billion during the nine months ended June 30, 2017. Transaction and certificate of deposit accounts increased $32.8 million and $4.1 million, respectively, while money market accounts decreased $6.1 million from September 30, 2016.

From September 30, 2016 to June 30, 2017, total stockholders' equity increased $8.9 million to $212.1 million from $203.1 million due primarily to $11.9 million of net income, partially offset by a $2.5 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 $14.03 while tangible book value per share increased from $11.36 to $11.92, both due to the Company's retention of earnings.

Net Interest Income and Net Interest Margin

Net interest income decreased $95,000 to $12.0 million for the third quarter of fiscal 2017, compared with $12.1 million for the prior-year period. Total interest income declined $7,000. The decrease was primarily attributable to a $287,000 decline in loans receivable income, which was the result of a $1.1 million decrease in accretion of acquired loan discounts. Loans receivable income, excluding accretion of acquired loan discounts, increased $818,000 to $12.1 million during the current quarter from $11.3 million during the prior-year quarter. The Company also experienced increases of $190,000 in interest on interest bearing deposits in other financial institutions and $114,000 in interest on taxable investment securities during the current-year quarter. Total interest expense increased $88,000 to $1.6 million for the current quarter, largely due to increased balances of higher-costing deposits from CBS. These increases were offset in part by a $142,000 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.

The Company's net interest margin, excluding the effects of purchase accounting, increased to 3.55% for the quarter ended June 30, 2017, from 3.53% for the quarter ended June 30, 2016. Net interest margin was 3.60% for the third quarter of fiscal 2017, compared to 3.97% for the third quarter of fiscal 2016. The decrease was largely due to the aforementioned significant decline in accretion income. Net interest margin was also impacted negatively by the Company's higher balances in lower-yielding Federal Reserve deposits and slightly higher interest expense on its own deposits.

"We are seeing steady growth in our net interest income and net interest margin excluding the effects of purchase accounting," Mr. Johnson continued. "Accretion of purchase discounts was high in the three quarters following the April 2016 closing of the Community Bank of the South deal from high volumes of loan renewals, construction loan maturities and some payoffs. The substantial decline of accretion income this quarter was nearly offset by net interest income growth in our loan portfolio."

Net interest income for the nine months ended June 30, 2017, increased $5.9 million, or 19.7%, to $35.8 million, compared to $30.0 million for the prior-year period. Interest income increased $6.8 million to $40.8 million due to increased loan balances as a result of the CBS acquisition early in the third quarter of fiscal 2016, as well as a $447,000 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 $7.9 million, while net purchase discount accretion decreased $2.0 million.

The Company currently expects to realize remaining loan discount accretion of $64,000 next quarter related to its 2011 acquisition of the First National Bank of Florida under purchase accounting rules. The Company has $1.8 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 provisions for loan losses of $0 and $(900,000) in the three and nine month periods ended June 30, 2017, respectively, due to the continued positive credit quality trends of its loan portfolio and net recoveries of previously charged-off loans. A provision of $(100,000) was recorded in the three and nine month periods ended June 30, 2016, respectively.

Noninterest Income and Expense

Noninterest income decreased $63,000 to $4.6 million in the fiscal 2017 third quarter from $4.7 million during the fiscal 2016 third quarter. The decrease was primarily due to a $259,000 gain on the settlement of life insurance during the prior-year quarter, which was recognized in other noninterest income, as well as a $59,000 decrease in gain on sale of loans due to reduced activity. The current-year quarter included increases in core components of $305,000 in bankcard fee and other deposit fee income and $22,000 in brokerage commissions. Bankcard fees increased $143,000, or 11.0%, compared to the prior-year period, due mainly to the Company's marketing efforts for signature debit card transactions.

Noninterest expense for the quarter ended June 30, 2017, decreased $4.0 million to $11.1 million, compared with $15.1 million for the prior-year quarter, due largely to $3.5 million of merger costs from the CBS acquisition in the prior-year quarter, which were largely concentrated in severance costs, occupancy, data processing and legal and professional fees. Other noninterest expense also fell $501,000 due largely to a $325,000 write-down on assets available for sale during the prior-year period. Net cost of operations of real estate owned increased $94,000.

Noninterest income for the nine months ended June 30, 2017, decreased $1.9 million to $14.2 million, compared with $16.0 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 $835,000, gains on the sale of loans of $507,000, gains on investment securities available for sale of $199,000 and brokerage commissions of $124,000 during the current-year period.

Noninterest expense for the nine months ended June 30, 2017 decreased $1.9 million to $32.1 million compared with $34.0 million for the prior-year period due to $4.0 million of acquisition-related expenses during the nine months ended June 30, 2016, as well as a $302,000 increase in the benefit of operations of real estate owned due to large gains on sales early in the Company's current fiscal year. These were partly offset by increases in ongoing operational costs in salaries, occupancy and data processing as a result of the CBS acquisition, as well as a $163,000 increase in core deposit intangible expense, also related to the CBS acquisition.

Asset Quality

Nonperforming assets at June 30, 2017 were at 0.26% 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 586.83% of nonperforming loans at June 30, 2017, compared to 1.03% and 277.66%, respectively, at September 30, 2016. Not included in the allowance is $1.8 million in yield and credit discounts on the CBS-acquired loans. At June 30, 2017, the allowance for loan losses was 1.22% of legacy loans, compared to 1.35% at September 30, 2016. The Company recorded net loan recoveries of $296,000 and $1.3 million in its allowance for loan losses for the three and nine months ended June 30, 2017, respectively, compared with net loan recoveries of $367,000 and $729,000 for the same periods in the prior year.

"Our historically conservative lending practices gave us the flexibility to work through problem assets, both legacy and acquired, during the recent economic downturn," Mr. Johnson said. "As we've come out of it and seen economic improvement, our loan portfolio quality, measured by our credit metrics, has improved commensurately, demonstrating superior asset quality."

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. No shares were repurchased during the second or third quarter.

Mr. Johnson concluded, "Our strong capital position has again allowed us to seek out accretive growth opportunities and improve our markets, this time with the planned acquisition of Resurgens. We are very pleased to partner with their team to continue our expansion into the Metro Atlanta market. We are building long-term shareholder value through earnings growth arising out of entry and growth in thriving markets on our I-85 driven geography and continued leverage of our capital and operating infrastructure."

About Charter Financial Corporation

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

Forward-Looking Statements

This release may contain "forward-looking statements" within the meaning of the federal securities laws. These statements may be identified by use of such words as "believe," "expect," "anticipate," "should," "well-positioned," "planned," "intend," "strive," "probably," "focused on," "estimated," "working on," "continue to," "seek," "leverage," "building," and "potential." Examples of forward-looking statements include, but are not limited to, statements regarding future growth, profitability, expense reduction, improvements in income and margins, increasing stockholder value, and estimates with respect to our financial condition and results of operation and business that are subject to various factors that could cause actual results to differ materially from these estimates. These factors include but are not limited to the Company's inability to implement its business strategy; general and local economic conditions; changes in interest rates, deposit flows, demand for mortgages and other loans, real estate values, and competition; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating an increase in borrowing to fund loans and investments; the changing exposure to credit risk; the inability to identify suitable future acquisition targets; the potential inability to effectively manage the new businesses and lending teams that transitioned from Community Bank of the South; the potential inability to consummate the acquisition of Resurgens; 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)
 
  June 30, 2017   September 30, 2016 (1)
Assets
Cash and amounts due from depository institutions $ 25,227,855     $ 14,472,867  
Interest-earning deposits in other financial institutions 94,916,159     77,376,632  
Cash and cash equivalents 120,144,014     91,849,499  
Loans held for sale, fair value of $2,064,880 and $2,991,756 2,029,228     2,941,982  
Certificates of deposit held at other financial institutions 7,767,710     14,496,410  
Investment securities available for sale 187,654,517     206,336,287  
Federal Home Loan Bank stock 3,484,600     3,361,800  
Restricted securities, at cost 279,000     279,000  
Loans receivable 1,044,141,434     1,005,702,737  
Unamortized loan origination fees, net (1,233,347 )   (1,278,830 )
Allowance for loan losses (10,800,257 )   (10,371,416 )
Loans receivable, net 1,032,107,830     994,052,491  
Other real estate owned 1,937,613     2,706,461  
Accrued interest and dividends receivable 3,574,445     3,442,051  
Premises and equipment, net 28,363,881     28,078,591  
Goodwill 29,793,756     29,793,756  
Other intangible assets, net of amortization 2,218,706     2,639,608  
Cash surrender value of life insurance 50,153,948     49,268,973  
Deferred income taxes 5,651,703     4,366,522  
Other assets 4,960,815     4,775,805  
Total assets $ 1,480,121,766     $ 1,438,389,236  
Liabilities and Stockholders' Equity
Liabilities:      
Deposits $ 1,194,253,739     $ 1,161,843,586  
Long-term borrowings 50,000,000     50,000,000  
Floating rate junior subordinated debt 6,690,372     6,587,549  
Advance payments by borrowers for taxes and insurance 2,392,561     2,298,513  
Other liabilities 14,704,845     14,510,052  
Total liabilities 1,268,041,517     1,235,239,700  
Stockholders' equity:      
Common stock, $0.01 par value; 15,112,432 shares issued and outstanding at June 30, 2017 and 15,031,076 shares issued and outstanding at September 30, 2016 151,124     150,311  
Preferred stock, $0.01 par value; 50,000,000 shares authorized at June 30, 2017 and September 30, 2016      
Additional paid-in capital 85,339,406     83,651,623  
Unearned compensation - ESOP (4,673,761 )   (5,106,169 )
Retained earnings 132,654,363     123,349,890  
Accumulated other comprehensive (loss) income (1,390,883 )   1,103,881  
Total stockholders' equity 212,080,249     203,149,536  
   Total liabilities and stockholders' equity $ 1,480,121,766     $ 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  June 30,   Nine Months Ended  June 30,
  2017   2016   2017   2016
Interest income:              
Loans receivable $ 12,276,095     $ 12,563,466     $ 36,749,414     $ 30,868,429  
Taxable investment securities 1,036,572     922,435     3,236,212     2,803,482  
Nontaxable investment securities 4,571     6,702     13,714     6,702  
Federal Home Loan Bank stock 39,913     38,416     119,432     113,493  
Interest-earning deposits in other financial institutions 235,928     46,374     560,055     112,812  
Certificates of deposit held at other financial institutions 30,953     54,452     112,357     54,452  
Restricted securities 2,855     2,503     8,107     2,503  
Total interest income 13,626,887     13,634,348     40,799,291     33,961,873  
Interest expense:              
Deposits 1,182,649     977,520     3,506,425     2,335,171  
Borrowings 327,790     470,219     1,077,644     1,568,470  
Floating rate junior subordinated debt 129,051     103,771     373,473     103,771  
Total interest expense 1,639,490     1,551,510     4,957,542     4,007,412  
   Net interest income 11,987,397     12,082,838     35,841,749     29,954,461  
Provision for loan losses     (100,000 )   (900,000 )   (100,000 )
   Net interest income after provision for loan losses 11,987,397     12,182,838     36,741,749     30,054,461  
Noninterest income:              
Service charges on deposit accounts 1,972,205     1,810,166     5,560,729     5,182,869  
Bankcard fees 1,443,151     1,299,988     4,092,195     3,634,995  
Gain on investment securities available for sale     12,920     247,780     48,885  
Bank owned life insurance 305,709     327,304     884,976     892,828  
Gain on sale of loans 542,762     602,178     1,816,848     1,309,784  
Brokerage commissions 185,674     163,912     576,237     452,057  
Recoveries on acquired loans previously covered under FDIC loss share agreements         250,000     3,625,000  
Other 189,996     486,462     739,733     899,955  
Total noninterest income 4,639,497     4,702,930     14,168,498     16,046,373  
Noninterest expenses:              
Salaries and employee benefits 6,530,408     8,470,498     18,742,656     19,020,827  
Occupancy 1,156,618     1,534,222     3,699,807     3,741,652  
Data processing 1,091,208     1,654,015     3,004,137     3,523,867  
Legal and professional 384,240     793,489     1,055,985     1,851,892  
Marketing 383,890     500,377     1,152,357     1,169,040  
Federal insurance premiums and other regulatory fees 198,350     185,333     561,106     619,213  
Net cost (benefit) of operations of real estate owned 18,079     (75,897 )   (327,365 )   (25,732 )
Furniture and equipment 202,259     301,137     604,696     630,859  
Postage, office supplies and printing 224,073     236,704     717,775     592,086  
Core deposit intangible amortization expense 117,806     172,706     420,902     257,845  
Other 790,204     1,291,259     2,504,298     2,663,095  
Total noninterest expenses 11,097,135     15,063,843     32,136,354     34,044,644  
Income before income taxes 5,529,759     1,821,925     18,773,893     12,056,190  
Income tax expense 2,015,909     526,690     6,897,581     4,003,588  
   Net income $ 3,513,850     $ 1,295,235     $ 11,876,312     $ 8,052,602  
Basic net income per share $ 0.24     $ 0.09     $ 0.83     $ 0.56  
Diluted net income per share $ 0.23     $ 0.09     $ 0.78     $ 0.53  
Weighted average number of common shares outstanding 14,353,082     14,184,675     14,293,859     14,433,345  
Weighted average number of common and potential common shares outstanding 15,256,623     14,841,814     15,197,400     15,090,484  

 
Charter Financial Corporation Supplemental Financial Data (unaudited) in thousands except per share data
 
  Quarter to Date     Year to Date
  6/30/2017   3/31/2017   12/31/2016   9/30/2016 (1)   6/30/2016     6/30/2017   6/30/2016
                             
Consolidated balance sheet data:                            
Total assets $ 1,480,122     $ 1,484,796     $ 1,461,667     $ 1,438,389     $ 1,427,851       $ 1,480,122     $ 1,427,851  
Cash and cash equivalents 120,144     140,285     131,849     91,849     106,108       120,144     106,108  
Loans receivable, net 1,032,108     1,007,552     990,635     994,052     993,786       1,032,108     993,786  
Other real estate owned 1,938     1,957     2,161     2,706     3,181       1,938     3,181  
Securities available for sale 187,655     191,483     196,279     206,336     169,737       187,655     169,737  
Transaction accounts 510,810     513,294     481,841     478,028     472,123       510,810     472,123  
Total deposits 1,194,254     1,201,731     1,186,347     1,161,844     1,155,245       1,194,254     1,155,245  
Borrowings 56,690     56,656     56,622     56,588     56,553       56,690     56,553  
Total stockholders' equity 212,080     208,413     205,500     203,150     199,800       212,080     199,800  
                             
Consolidated earnings summary:                            
Interest income $ 13,626     $ 13,307     $ 13,866     $ 13,822     $ 13,635       $ 40,799     $ 33,962  
Interest expense 1,639     1,652     1,666     1,622     1,552       4,957     4,008  
Net interest income 11,987     11,655     12,200     12,200     12,083       35,842     29,954  
Provision for loan losses     (150 )   (750 )   (150 )   (100 )     (900 )   (100 )
Net interest income after provision for loan losses 11,987     11,805     12,950     12,350     12,183       36,742     30,054  
Noninterest income 4,639     4,546     4,983     4,918     4,703       14,168     16,046  
Noninterest expense 11,096     10,750     10,290     11,354     15,064       32,136     34,043  
Income tax expense 2,016     2,284     2,597     2,103     527       6,898     4,004  
Net income $ 3,514     $ 3,317     $ 5,046     $ 3,811     $ 1,295       $ 11,876     $ 8,053  
                             
Per share data:                            
Earnings per share - basic $ 0.24     $ 0.23     $ 0.36     $ 0.27     $ 0.09       $ 0.83     $ 0.56  
Earnings per share - fully diluted $ 0.23     $ 0.22     $ 0.33     $ 0.26     $ 0.09       $ 0.78     $ 0.53  
Cash dividends per share $ 0.065     $ 0.060     $ 0.055     $ 0.050     $ 0.050       $ 0.180     $ 0.150  
                             
Weighted average basic shares 14,353     14,322     14,207     14,186     14,185       14,294     14,433  
Weighted average diluted shares 15,257     15,340     15,065     14,798     14,842       15,197     15,090  
Total shares outstanding 15,112     15,061     15,031     15,031     15,031       15,112     15,031  
                             
Book value per share $ 14.03     $ 13.84     $ 13.67     $ 13.52     $ 13.29       $ 14.03     $ 13.29  
Tangible book value per share (2) $ 11.92     $ 11.70     $ 11.52     $ 11.36     $ 11.11       $ 11.92     $ 11.11  

__________________________________
(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
  6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016     6/30/2017   6/30/2016
                             
Loans receivable:                            
1-4 family residential real estate $ 222,904     $ 223,216     $ 223,609     $ 236,940     $ 234,346       $ 222,904     $ 234,346  
Commercial real estate 624,926     608,206     595,207     595,157     586,082       624,926     586,082  
Commercial 79,695     73,119     73,182     71,865     64,700       79,695     64,700  
Real estate construction 75,941     77,332     79,136     80,500     104,389       75,941     104,389  
Consumer and other 40,675     37,300     31,212     21,241     15,638       40,675     15,638  
Total loans receivable $ 1,044,141     $ 1,019,173     $ 1,002,346     $ 1,005,703     $ 1,005,155       $ 1,044,141     $ 1,005,155  
                             
Allowance for loan losses:                            
Balance at beginning of period $ 10,505     $ 10,499     $ 10,371     $ 10,118     $ 9,850       $ 10,371     $ 9,489  
Charge-offs (73 )   (103 )   (50 )   (1 )   (7 )     (226 )   (227 )
Recoveries 368     259     928     404     375       1,555     956  
Provision     (150 )   (750 )   (150 )   (100 )     (900 )   (100 )
Balance at end of period $ 10,800     $ 10,505     $ 10,499     $ 10,371     $ 10,118       $ 10,800     $ 10,118  
                             
Nonperforming assets: (1)                            
Nonaccrual loans $ 1,549     $ 1,610     $ 1,527     $ 3,735     $ 3,371       $ 1,549     $ 3,371  
Loans delinquent 90 days or greater and still accruing 291         238               291      
Total nonperforming loans 1,840     1,610     1,765     3,735     3,371       1,840     3,371  
Other real estate owned 1,938     1,957     2,161     2,706     3,181       1,938     3,181  
Total nonperforming assets $ 3,778     $ 3,567     $ 3,926     $ 6,441     $ 6,552       $ 3,778     $ 6,552  
                             
Troubled debt restructuring:                            
Troubled debt restructurings - accruing $ 5,007     $ 5,073     $ 4,761     $ 4,585     $ 4,999       $ 5,007     $ 4,999  
Troubled debt restructurings - nonaccrual 107     137     192     1,760     1,716       107     1,716  
Total troubled debt restructurings $ 5,114     $ 5,210     $ 4,953     $ 6,345     $ 6,715       $ 5,114     $ 6,715  

__________________________________
(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
  6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016     6/30/2017   6/30/2016
                             
Return on equity (annualized) 6.65 %   6.40 %   9.84 %   7.55 %   2.61 %     7.62 %   5.34 %
Return on assets (annualized) 0.96 %   0.91 %   1.39 %   1.07 %   0.38 %     1.08 %   0.95 %
Net interest margin (annualized) 3.60 %   3.52 %   3.71 %   3.82 %   3.97 %     3.61 %   3.91 %
Net interest margin, excluding the effects of purchase accounting (1) 3.55 %   3.41 %   3.48 %   3.47 %   3.53 %     3.48 %   3.47 %
Holding company tier 1 leverage ratio (2) 13.08 %   12.92 %   12.83 %   12.68 %   12.60 %     13.08 %   12.60 %
Holding company total risk-based capital ratio (2) 17.98 %   17.93 %   17.38 %   16.74 %   15.93 %     17.98 %   15.93 %
Bank tier 1 leverage ratio (2) (3) 12.06 %   11.84 %   11.70 %   11.51 %   11.32 %     12.06 %   11.32 %
Bank total risk-based capital ratio (2) 16.67 %   16.53 %   15.91 %   15.26 %   14.99 %     16.67 %   14.99 %
Effective tax rate 36.46 %   40.78 %   33.98 %   35.56 %   28.91 %     36.74 %   33.21 %
Yield on loans 4.79 %   4.74 %   5.01 %   5.07 %   5.20 %     4.84 %   5.19 %
Cost of deposits 0.47 %   0.46 %   0.46 %   0.46 %   0.43 %     0.47 %   0.42 %
                                           
Asset quality ratios: (4)                                          
Allowance for loan losses as a % of total loans (5) 1.04 %   1.04 %   1.05 %   1.03 %   1.00 %     1.04 %   1.00 %
Allowance for loan losses as a % of nonperforming loans 586.83 %   652.47 %   594.81 %   277.66 %   300.10 %     586.83 %   300.10 %
Nonperforming assets as a % of total loans and OREO 0.36 %   0.35 %   0.39 %   0.64 %   0.65 %     0.36 %   0.65 %
Nonperforming assets as a % of total assets 0.26 %   0.24 %   0.27 %   0.45 %   0.46 %     0.26 %   0.46 %
Net charge-offs (recoveries) as a % of average loans (annualized) (0.12 )%   (0.06 )%   (0.35 )%   (0.16 )%   (0.15 )%     (0.17 )%   (0.12 )%

__________________________________
(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 $2.0 million, $2.2 million, $2.9 million, $3.8 million, and $4.7 million for the quarters ended June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 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 June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 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) Excluding former CBS loans totaling $154.0 million, $166.5 million, $191.9 million, $236.4 million and $264.7 million at June 30, 2017, 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 1.22%, 1.24%, 1.30%, 1.35% and 1.37% of all other loans at June 30, 2017, 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
  6/30/2017   6/30/2016
  AverageBalance   Interest   AverageYield/Cost (10)   AverageBalance   Interest   AverageYield/Cost (10)
Assets:                      
Interest-earning assets:                      
Interest-earning deposits in other financial institutions $ 102,944     $ 236     0.92 %   $ 54,423     $ 47     0.35 %
Certificates of deposit held at other financial institutions 9,021     31     1.37     19,404     54     1.12  
FHLB common stock and other equity securities 3,485     40     4.58     3,442     38     4.46  
Taxable investment securities 188,138     1,037     2.20     172,065     922     2.14  
Nontaxable investment securities (1) 1,579     5     1.16     2,409     7     1.11  
Restricted securities 279     3     4.09     236     3     4.24  
Loans receivable (1)(2)(3)(4) 1,025,454     12,103     4.72     966,375     11,285     4.67  
Accretion, net, of acquired loan discounts (5)     173     0.07         1,278     0.53  
Total interest-earning assets 1,330,900     13,628     4.10     1,218,354     13,634     4.48  
Total noninterest-earning assets 139,050             145,454          
Total assets $ 1,469,950             $ 1,363,808          
Liabilities and Equity:                      
Interest-bearing liabilities:                      
Interest bearing checking $ 254,983     $ 104     0.16 %   $ 229,650     $ 72     0.12 %
Bank rewarded checking 54,845     27     0.20     50,188     25     0.20  
Savings accounts 65,036     6     0.04     61,364     9     0.06  
Money market deposit accounts 240,561     178     0.30     228,316     178     0.31  
Certificate of deposit accounts 381,863     868     0.91     349,773     694     0.79  
Total interest-bearing deposits 997,288     1,183     0.47     919,291     978     0.43  
Borrowed funds 50,000     328     2.62     53,101     470     3.54  
Floating rate junior subordinated debt 6,668     129     7.74     5,516     104     7.53  
Total interest-bearing liabilities 1,053,956     1,640     0.62     977,908     1,552     0.63  
Noninterest-bearing deposits 187,354             171,913          
Other noninterest-bearing liabilities 17,345             15,390          
Total noninterest-bearing liabilities 204,699             187,303          
  Total liabilities 1,258,655             1,165,211          
  Total stockholders' equity 211,295             198,597          
    Total liabilities and stockholders' equity $ 1,469,950             $ 1,363,808          
      Net interest income     $ 11,988             $ 12,082      
      Net interest earning assets (6)     $ 276,944             $ 240,446      
Net interest rate spread (7)         3.48 %           3.84 %
Net interest margin (8)         3.60 %           3.97 %
Net interest margin, excluding the effects of purchase accounting (9)         3.55 %           3.53 %
Ratio of average interest-earning assets to average interest-bearing liabilities         126.28 %           124.59 %

__________________________________
(1) Tax exempt or tax-advantaged securities and loans are shown at their contractual yields and are not shown at a tax equivalent yield.
(2) Includes net loan fees deferred and accreted pursuant to applicable accounting requirements.
(3) Interest income on loans is interest income as recorded in the income statement and does not include interest income on nonaccrual loans.
(4) Interest income on loans excludes discount accretion.
(5) Accretion of accretable purchase discount on loans acquired.
(6) Net interest-earning assets represent total average interest-earning assets less total average interest-bearing liabilities.
(7) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(8) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(9) 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 $2.0 million and $4.7 million for the quarters ended June 30, 2017 and June 30, 2016, respectively.
(10) Annualized.

 
Charter Financial Corporation Average Balances, Interest Rates and Yields (unaudited) dollars in thousands
 
  Fiscal Year to Date
  6/30/2017   6/30/2016
  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 $ 102,615     $ 560     0.73 %   $ 41,580     $ 113     0.36 %
Certificates of deposit held at other financial institutions 11,427     112     1.31     6,444     54     1.13  
FHLB common stock and other equity securities 3,413     119     4.67     3,175     113     4.77  
Taxable investment securities 192,986     3,236     2.24     175,776     2,803     2.13  
Nontaxable investment securities (1) 1,588     14     1.15     800     7     1.12  
Restricted securities 279     8     3.87     78     3     4.28  
Loans receivable (1)(2)(3)(4) 1,011,408     35,495     4.68     792,607     27,588     4.64  
Accretion and amortization of acquired loan discounts (5)     1,255     0.17         3,280     0.55  
Total interest-earning assets 1,323,716     40,799     4.11     1,020,460     33,961     4.44  
Total noninterest-earning assets 136,939             112,802          
Total assets $ 1,460,655             $ 1,133,262          
Liabilities and Equity:                      
Interest-bearing liabilities:                      
Interest bearing checking $ 252,401     $ 283     0.15 %   $ 196,187     $ 182     0.12 %
Bank rewarded checking 53,409     78     0.19     48,577     73     0.20  
Savings accounts 63,302     19     0.04     54,871     16     0.04  
Money market deposit accounts 251,773     567     0.30     167,194     342     0.27  
Certificate of deposit accounts 381,010     2,559     0.90     271,776     1,722     0.84  
Total interest-bearing deposits 1,001,895     3,506     0.47     738,605     2,335     0.42  
Borrowed funds 50,004     1,078     2.87     51,577     1,568     4.05  
Floating rate junior subordinated debt 6,634     373     7.51     1,833     104     7.55  
Total interest-bearing liabilities 1,058,533     4,957     0.62     792,015     4,007     0.67  
Noninterest-bearing deposits 178,159             127,130          
Other noninterest-bearing liabilities 16,087             13,172          
Total noninterest-bearing liabilities 194,246             140,302          
Total liabilities 1,252,779             932,317          
Total stockholders' equity 207,876             200,945          
  Total liabilities and stockholders' equity $ 1,460,655             $ 1,133,262          
    Net interest income     $ 35,842             $ 29,954      
    Net interest earning assets (6)     $ 265,183             $ 228,445      
Net interest rate spread (7)         3.49 %           3.77 %
Net interest margin (8)         3.61 %           3.91 %
Net interest margin, excluding the effects of purchase accounting (9)         3.48 %           3.47 %
Ratio of average interest-earning assets to average interest-bearing liabilities         125.05 %           128.84 %

__________________________________
(1) Tax exempt or tax-advantaged securities and loans are shown at their contractual yields and are not shown at a tax equivalent yield.
(2) Includes net loan fees deferred and accreted pursuant to applicable accounting requirements.
(3) Interest income on loans is interest income as recorded in the income statement and does not include interest income on nonaccrual loans.
(4) Interest income on loans excludes discount accretion.
(5) Accretion of accretable purchase discount on loans acquired.
(6) Net interest-earning assets represent total average interest-earning assets less total average interest-bearing liabilities.
(7) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(8) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(9) 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 $2.4 million and $3.2 million for the nine months ended June 30, 2017 and June 30, 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
  6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016
Loans Receivable Income Excluding Accretion                  
Loans receivable income $ 12,276,095     $ 11,903,416     $ 12,569,903     $ 12,680,420     $ 12,563,466  
Net purchase discount accretion 173,014     358,031     724,109     1,090,886     1,278,040  
Loans receivable income excluding accretion (Non-GAAP) $ 12,103,081     $ 11,545,385     $ 11,845,794     $ 11,589,534     $ 11,285,426  
                   
Net Interest Margin Excluding the Effects of Purchase Accounting                  
Net Interest Margin 3.60 %   3.52 %   3.71 %   3.82 %   3.97 %
Effect to adjust for net purchase discount accretion (0.05 )   (0.11 )   (0.23 )   (0.35 )   (0.44 )
Net interest margin excluding the effects of purchase accounting (Non-GAAP) 3.55 %   3.41 %   3.48 %   3.47 %   3.53 %
                   
Tangible Book Value Per Share                  
Book value per share $ 14.03     $ 13.84     $ 13.67     $ 13.52     $ 13.29  
Effect to adjust for goodwill and other intangible assets (2.11 )   (2.14 )   (2.15 )   (2.16 )   (2.18 )
Tangible book value per share (Non-GAAP) $ 11.92     $ 11.7     $ 11.52     $ 11.36     $ 11.11  

  For the Six Months Ended
  6/30/2017   6/30/2016
Loans Receivable Income Excluding Accretion      
Loans receivable income $ 36,749,414     $ 30,868,429  
Net purchase discount accretion 1,255,154     3,280,201  
Loans receivable income excluding accretion (Non-GAAP) $ 35,494,260     $ 27,588,228  
       
Net Interest Margin Excluding the Effects of Purchase Accounting      
Net Interest Margin 3.61 %   3.91 %
Effect to adjust for net purchase discount accretion (0.13 )   (0.44 )
Net interest margin excluding the effects of purchase accounting (Non-GAAP) 3.48 %   3.47 %
               
Tangible Book Value Per Share              
Book value per share $ 14.03     $ 13.29  
Effect to adjust for goodwill and other intangible assets (2.11 )   (2.18 )
Tangible book value per share (Non-GAAP) $ 11.92     $ 11.11  

 
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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