CHARTER FINANCIAL CORP/GA - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 000-33071

Charter Financial Corporation
(Exact name of registrant as specified in its charter)

United States		58-2659667
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

600 Third Avenue, West Point, Georgia 31833
(Address of principal executive offices)
(Zip Code)
(706) 645-1391
(Registrant’s telephone number including area code)
NA
(Former name, former address and former fiscal year, if changed from last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.

Yes x

No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities and Exchange Act).

Yes x

No o

As of April 30, 2003, the registrant had 19,822,405 shares of common stock, $0.01 par value, outstanding. Of such shares outstanding, 15,857,924 shares were held by First Charter, MHC, the registrant’s mutual holding company and 3,964,481 shares were held by the public and directors, officers and employees of the registrant.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

		Page


Item 1.	Financial Statements of Charter Financial Corporation

	Consolidated Statements of Financial Condition (Unaudited) March 31, 2003 and September 30, 2002	1

	Consolidated Statements of Income (Unaudited) – Three and Six months ended March 31, 2003 and 2002	2

	Consolidated Statements of Cash Flows (Unaudited) – Six months ended March 31, 2003 and 2002	3

	Notes to Unaudited Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	28

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 2.	Changes in Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Submission of Matters to a Vote of Security Holders	29

Item 5.	Other Information	30

Item 6.	Exhibits and Reports on Form 8-K	30

	Signatures	31

	Certifications	32

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” which may be identified by the 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 which 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 of our forward-looking statements in this Quarterly Report on Form 10-Q 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. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

CHARTER FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

March 31, 2003 and September 30, 2002

(unaudited)

	March 31, 2003			September 30, 2002

Assets
Cash and amounts due from depository institutions	$	10,874,466			7,990,832
Interest-bearing deposits in other financial institutions		3,001,078			2,127,305

Cash and cash equivalents		13,875,544			10,118,137

Loans held for sale, market value of $8,420,465 and $8,582,332 at March 31, 2003 and September 30, 2002, respectively		8,296,262			8,437,409
Freddie Mac common stock		247,180,500			260,214,500
Mortgage-backed securities and collateralized mortgage obligations available for sale		403,098,188			455,940,470
Other investment securities available for sale		9,015,802			12,058,565
Federal Home Loan Bank stock		12,912,500			14,365,000
Loans receivable		267,025,219			214,006,327
Less:
Unamortized loan origination fees, net		(274,792	)		(173,319	)
Allowance for loan losses		(7,301,917	)		(5,179,048	)

Loans receivable, net		259,448,510			208,653,960

Real estate owned		800,523			669,618
Accrued interest and dividends receivable		3,139,395			3,264,921
Premises and equipment, net		8,430,772			6,243,345
Intangibles, net of amortization		6,282,135			—
Other assets		1,660,880			2,597,509

Total assets	$	974,141,011			982,563,434

Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	277,482,367			210,746,322
Borrowings		351,493,000			410,963,000
Advance payments by borrowers for taxes and insurance		910,399			1,356,720
Deferred income taxes		91,487,882			96,040,343
Other liabilities		15,983,250			14,291,483

Total liabilities		737,356,898			733,397,868

Stockholders’ Equity:
Common stock - $0.01 par value; 19,822,405 shares issued at March 31, 2003 and September 30, 2002; 19,623,826 and 19,821,405 shares outstanding at March 31, 2003 and September 30, 2002, respectively		198,224			198,224
Treasury stock, at cost; 198,579 and 1,000 shares at March 31, 2003 and September 30, 2002, respectively		(6,080,510	)		(29,930	)
Additional paid-in capital		37,560,488			37,476,396
Unearned compensation		(2,624,940	)		(2,664,539	)
Retained earnings		58,155,187			58,224,724
Accumulated other comprehensive income – net unrealized holding gains on securities available for sale		149,575,664			155,960,691

Total stockholders’ equity		236,784,113			249,165,566

Total liabilities and stockholders’ equity	$	974,141,011			982,563,434

See accompanying notes to the unaudited consolidated financial statements.

CHARTER FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

For the Three and Six Months Ended March 31, 2003 and 2002
(unaudited)

	Three Months Ended March 31, 2003			Three Months Ended March 31, 2002		Six Months Ended March 31, 2003			Six Months Ended March 31, 2002

Interest and dividend income:
Debt securities	$	87,960			170,336		193,108			249,070
Equity securities		1,360,228			1,245,115		2,558,498			2,366,805
Mortgage-backed securities and collateralized mortgage obligations		2,879,942			3,155,429		6,314,293			6,908,673
Loans receivable		4,028,171			4,271,831		7,847,658			8,827,207
Interest-bearing deposits in other financial institutions		27,752			17,912		53,227			51,340

Total interest and dividend income		8,384,053			8,860,623		16,966,784			18,403,095

Interest expense:
Deposits		1,410,665			1,734,699		2,791,460			3,771,138
Borrowings		3,301,059			3,596,669		6,941,179			7,278,664

Total interest expense		4,711,724			5,331,368		9,732,639			11,049,802

Net interest income		3,672,329			3,529,255		7,234,145			7,353,293
Provision for loan losses		—			25,000		—			175,000

Net interest income after provision for loan losses		3,672,329			3,504,255		7,234,145			7,178,293

Noninterest income:
Loan servicing fees		78,515			89,414		139,407			170,229
Service charges on deposit accounts		276,592			169,746		604,548			348,438
Gain on sale of loans and servicing released loan fees		643,150			437,567		1,231,748			966,647
Gain on sale of mortgage-backed securities, collateralized mortgage obligations, and other investments		—			15,278		102,839			459,718
Equity in earnings (loss) of limited partnership		(61,031	)		268,112		(106,746	)		173,455
Other		150,875			58,925		256,863			151,858

Total noninterest income		1,088,101			1,039,042		2,228,659			2,270,345

Noninterest expenses:
Salaries and employee benefits		2,603,228			1,844,289		5,065,227			4,074,481
Occupancy		565,240			504,594		1,070,605			986,847
Furniture and equipment		178,534			121,061		328,181			232,570
Federal insurance premiums and other regulatory fees		53,525			49,990		104,059			103,428
Marketing		231,186			234,101

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