CHARTER FINANCIAL CORP/GA - 10-Q Quarterly Report

UNITED STATES

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 December 31, 2003

¨	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)

(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 ¨

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

Yes x No ¨

As of January 31, 2004, 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

Item 1.	Financial Statements of Charter Financial Corporation

	Consolidated Statements of Financial Condition (Unaudited) December 31, 2003 and September 30, 2003	Page 1

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

	Consolidated Statements of Cash Flows (Unaudited) – Three months ended December 31, 2003 and 2002	Page 3

	Notes to Unaudited Consolidated Financial Statements	Page 4

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 31

Item 4.	Controls and Procedures	Page 31

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	Page 32

Item 2.	Changes in Securities and Use of Proceeds	Page 32

Item 3.	Defaults Upon Senior Securities	Page 32

Item 4.	Submission of Matters to a Vote of Security Holders	Page 32

Item 5.	Other Information	Page 32

Item 6.	Exhibits and Reports on Form 8-K	Page 32

	Signatures	Page 33

	Certifications

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;

•

the ability of our customers to make loan payments;

•

the performance of Freddie Mac common stock price and the level of dividends received;

•

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

December 31, 2003 and September 30, 2003

(unaudited)


	December 31, 2003			September 30, 2003
Assets
Cash and amounts due from depository institutions	$	10,626,635		9,926,321
Interest-bearing deposits in other financial institutions		2,738,842		1,994,168

Cash and cash equivalents		13,365,477		11,920,489

Loans held for sale, market value of $751,226 and $2,058,892 at December 31, 2003 and September 30, 2003, respectively		723,115		2,026,261
Freddie Mac common stock		270,050,760		242,904,000
Mortgage-backed securities and collateralized mortgage obligations available for sale		409,454,156		394,432,288
Other investment securities available for sale		3,938,280		21,628,603
Federal Home Loan Bank stock		12,628,800		13,610,000
Loans receivable		307,065,966		299,877,198
Unamortized loan origination fees, net		(616,039	)	(544,202	)
Allowance for loan losses		(6,742,193	)	(6,779,576	)

Loans receivable, net		299,707,734		292,553,420

Real estate owned		668,962		683,577
Accrued interest and dividends receivable		2,846,505		3,200,112
Premises and equipment, net		9,574,767		9,382,894
Intangible assets, net of amortization		6,110,530		6,168,074
Other assets		1,646,701		1,985,645

Total assets	$	1,030,715,787		1,000,495,363

Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	271,319,189		279,385,708
Borrowings		399,242,000		388,441,220
Advance payments by borrowers for taxes and insurance		594,048		1,191,597
Deferred income taxes		99,108,931		88,196,330
Other liabilities		11,708,241		12,921,426

Total liabilities		781,972,409		770,136,281

Stockholders’ Equity:
Common stock, $0.01 par value; 19,822,405 shares issued at December 31, 2003 and September 30, 2003; 19,569,676 shares outstanding at December 31, 2003 and September 30, 2003		198,224		198,224
Additional paid-in capital		37,491,011		37,491,011
Treasury stock, at cost; 252,729 shares at December 31, 2003 and September 30, 2003		(7,836,234	)	(7,836,234	)
Unearned compensation - ESOP		(2,624,940	)	(2,624,940	)
Retained earnings		60,216,393		59,190,493
Accumulated other comprehensive income:
Net unrealized holding gains on securities available for sale		161,298,924		143,940,528

Total stockholders’ equity		248,743,378		230,359,082

Total liabilities and stockholders’ equity	$	1,030,715,787		1,000,495,363

See accompanying notes to the unaudited consolidated financial statements.

CHARTER FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

For the Three Months Ended December 31, 2003 and 2002

(unaudited)


	Three Months Ended December 31, 2003		Three Months Ended December 31, 2002
Interest and dividend income:
Loans receivable	$	4,455,439	3,819,487
Mortgage-backed securities and collateralized mortgage obligations		3,597,359	3,434,351
Equity securities		1,321,523	1,198,270
Debt securities		80,803	105,746
Interest-bearing deposits in other financial institutions		14,275	24,900

Total interest and dividend income		9,469,399	8,582,754

Interest expense:
Deposits		1,243,855	1,380,818
Borrowings		3,049,199	3,640,120

Total interest expense		4,293,054	5,020,938

Net interest income		5,176,345	3,561,816
Provision for loan losses		30,000	—

Net interest income after provision for loan losses		5,146,345	3,561,816

Noninterest income:
Gain on sale of loans and servicing released loan fees		242,153	588,598
Service charges on deposit accounts		447,515	327,956
Gain on sale of Freddie Mac common stock		532,742	—
Gain on sale of mortgage-backed securities, collateralized mortgage obligations, and other investments		43,038	102,839
Loan servicing fees		31,968	60,892
Equity in loss of limited partnership		—	(45,715	)
Brokerage commissions		68,997	62,480
Other		180,685	43,508

Total noninterest income		1,547,098	1,140,558

Noninterest expenses:
Salaries and employee benefits		2,546,777	2,461,999
Occupancy		659,875	505,037
Legal and professional		265,373	313,447
Marketing		190,420	161,304
Furniture and equipment		123,107	149,647
Postage, office supplies, and printing		125,872	115,326
Federal insurance premiums and other regulatory fees		53,856	50,534
Net cost (gain) of operations of real estate owned		8,349	(1,563	)
Deposit premium amortization expense		57,543	—
Other		368,387	383,602

Total noninterest expenses		4,399,559	4,139,333

Income before income taxes		2,293,884	563,041
Income tax expense		578,133	64,390

Net income	$	1,715,751	498,651

Basic and diluted net income per share	$	0.09	0.03

Weighted average number of common shares outstanding		19,410,011	19,549,986

Weighted average number of common and common equivalent shares outstanding		19,436,193	19,683,263

See accompanying notes to the unaudited consolidated financial statements.

CHARTER FINANCIAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended December 31, 2003 and 2002

(unaudited)


	Three Months Ended December 31, 2003			Three Months Ended December 31, 2002
Cash flows from operating activities:
Net income	$	1,715,751		498,651
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		30,000		—
Depreciation and amortization		238,278		176,039
Allocation of ESOP common stock		103,542		127,063
Deferred income tax benefit		(51,018	)	—
Gain on sale of premises and equipment		—		(454	)
Equity in loss of limited partnership		—		45,715
Amortization of premiums and discounts, net		216,655		977,273
Gain on sale of loans		(242,153	)	(588,598	)
Proceeds from sale of loans		8,474,263		24,610,828
Originations and purchases of loans held for sale		(6,928,964	)	(24,022,230	)
Gain on sale of Freddie Mac common stock		(532,742	)	—
Gain on sales of mortgage-backed securities, collateralized mortgage obligations, and other investments		(43,038	)	(102,839	)
Provision for loss on real estate owned		4,350		—
(Gain) loss on sales of real estate owned		(7,830	)	2,377
Changes in assets and liabilities:
Decrease in accrued interest and dividends receivable		353,607		349,542
Decrease in other assets		305,036		379,846
Decrease in other liabilities		(1,265,716	)	(408,920	)

Net cash provided by operating activities		2,370,021		2,044,293

Cash flows from investing activities:
Proceeds from sale of mortgage-backed securities and collateralized mortgage obligations available for sale		45,623,663		7,403,679
Principal collections on mortgage-backed securities and collateralized mortgage obligations available for sale		59,966,379		168,101,886
Purchases of mortgage-backed securities and collateralized mortgage obligations available for sale		(119,509,948	)	(126,402,239	)
Proceeds from sale of other investment securities available for sale		10,519,236		—
Principal collections on other investment securities available for sale		—		7,073
Proceeds from sale of Freddie Mac common stock		552,494		—
Proceeds from maturities of other securities available for sale		7,000,000		—
Purchase of FHLB stock		(2,315,000	)	(2,937,500	)
Proceeds from redemption of FHLB stock		3,296,200		4,040,000
Net (increase) decrease in loans receivable, exclusive of loan sales		(7,226,247	)	5,987,367
Proceeds from sale of real estate owned		60,030		185,832
Purchases of premises and equipment, net of dispositions		(338,701	)	(166,603	)

Net cash (used in) provided by investing activities		(2,371,894	)	56,219,495

Cash flows from financing activities:
Purchase of common stock for treasury		—

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