Charter Financial Reports Second Quarter Fiscal 2010 Net Income of $6.5 Million

WEST POINT, Ga., May 3 /PRNewswire-FirstCall/ -- Charter Financial Corporation (OTC Bulletin Board: CHFN) today reported second quarter fiscal 2010 net income of $6.5 million, or $0.35 per share, basic and diluted, compared with $473,000, or $0.03 per share, basic and diluted, for the same quarter of fiscal 2009.  The higher net income was primarily attributable to the purchase gain on the assets and liabilities acquired in the FDIC–assisted acquisition of McIntosh Commercial Bank.

The Company's total assets rose to $1.2 billion at March 31, 2010 versus $936.9 million at September 30, 2009, and $797.3 million at March 31, 2009.  Loans outstanding increased to $677.7 million, with $213.8 million covered by FDIC loss sharing at March 31 2010.  This compared with loans outstanding of $552.6 million at September 30, 2009 and $449.0 million at March 31, 2009.   The company downstreamed $7.0 million of capital to CharterBank to facilitate the acquisition of the assets and liabilities of McIntosh Commercial Bank.

The quarter ended March 31, 2010 included $15.6 million in purchase gain or "negative goodwill" relating to the FDIC-assisted acquisition of the assets and liabilities of McIntosh Commercial Bank.  The quarter also included approximately $700,000 in  costs relating to the acquisition and integration of the acquired assets and liabilities. Other than these items, the acquisition had very little impact on the income statement since the acquisition was completed on March 26, 2010, which was five days from the end of the quarter.  In addition to the purchase gain of $15.6 million recognized in the current quarter, the purchase accounting also included $18.8 million in net purchase discount expected to be accreted into income over the next several years.  

Total interest income increased to $11.0 million for the quarter ended March 31, 2010 compared with $9.2 million for the same quarter last year. Interest expense was slightly lower at $5.3 million for the quarter ended March 31, 2010 compared to $5.4 million for the prior year's corresponding quarter. The combination of higher interest income and lower interest expense resulted in an increase in net interest income to $5.7 million for the quarter ended March 31, 2010 from $3.8 million for the prior year's quarter.  The net interest margin rose to 2.80% for the quarter ended March 31, 2010 versus 2.08% for the comparable quarter the prior year.  Lower deposit costs and accretion of purchase discounts from the FDIC–assisted acquisition of Neighborhood Community Bank of June 2009 contributed to the improved net interest margin.

"These extensions of our banking franchise into Carrollton and Bremen, Georgia and the previous expansion to Newnan and Peachtree City, Georgia, are good for our business.  These market extensions give us a nice base in the Southwestern quarter of the Atlanta MSA that is adjacent to our legacy markets along the I-85 corridor," said Robert L. Johnson, Chairman and CEO.  "The added market area allows us to promote our brand to a larger population. Our brand is attractive to core deposit customers and growth in our core deposit base adds funding stability and builds our franchise long term."

The Company had net charge-offs of $1.6 million for the quarter ended March 31, 2010 compared with $1.4 million in the same quarter a year ago.  A loan loss provision of $3.0 million was recorded for the quarter ended March 31, 2010.  This provision brings the allowance for loan losses to 2.39% of non-covered loans at March 31, 2010 compared to 1.99% of non-covered loans at March 31, 2009 and 1.97% of non-covered loans at September 30, 2009.

During the quarter ended March 31, 2010, the Company recorded $3.4 million in other- than-temporary impairment ("OTTI") charges.  Of the impairment charges, $1.0 million was the Company's entire investment in an unrelated de novo bank.  The remaining $2.4 million related to the Company's investment in private-label mortgage securities.   Bloomberg recently issued a new analytic tool for private-label mortgage securities that assumes a slower national recovery in housing than the Company had been using, so the Company modified its assumptions, resulting in the OTTI charge on these mortgage securities.

Total deposits amounted to $906.5 million at March 31, 2010 compared with $597.6 million at September 30, 2009.  The McIntosh acquisition was the primary contributor to the increased deposits.  The Bank's borrowings decreased to $212.2 million at March 31, 2010 from $227.0 million at September 30, 2009 due to our focus on decreasing wholesale funding.  The Company had total shareholders' equity of $110.7 million at March 31, 2010 compared with $98.3 million at September 30, 2009.  

Mr. Johnson concluded, "CharterBank is well capitalized with core regulatory capital of 8.27% and  risk based capital of 16.53%.  The bank continues to record quarterly profits in economically difficult times.  Our loan portfolio is sound and troubled credits are reserved.  We cover an attractive geographic region and expect more opportunities to acquire banks from the FDIC in the future.  To continue with this strategy we recently announced our intention to raise additional capital through an incremental stock offering."  

About Charter Financial Corporation

Charter Financial Corporation is a savings and loan holding company and the parent company of CharterBank, a growing full-service community bank and a federal savings institution. Charter Financial Corporation and subsidiary CharterBank are in a mutual holding company structure. CharterBank is headquartered in West Point, Georgia, and operates 16 branches in West Central Georgia and East Central Alabama. CharterBank's deposits are insured by the Federal Deposit Insurance Corporation.

Forward-Looking Statements

This release may contain "forward-looking statements" that may be identified by use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." Examples of forward-looking statements include, but are not limited to, 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 general and local economic conditions; changes in interest rates, deposit flows, demand for mortgages and other loans, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products, and services. 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. 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.

SOURCE Charter Financial Corporation