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 March 31, 2004

¨	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 ¨ No x

As of April 30, 2004, the registrant had 19,823,905 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 3,965,981 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) March 31, 2004 and September 30, 2003	Page 1

	Consolidated Statements of Income (Unaudited) – Three and Six months ended March 31, 2004 and 2003	Page 2

	Consolidated Statements of Cash Flows (Unaudited) – Six months ended March 31, 2004 and 2003	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 40

Item 4.	Controls and Procedures	Page 41

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	Page 42

Item 2.	Changes in Securities and Use of Proceeds	Page 42

Item 3.	Defaults Upon Senior Securities	Page 42

Item 4.	Submission of Matters to a Vote of Security Holders	Page 42

Item 5.	Other Information	Page 42

Item 6.	Exhibits and Reports on Form 8-K	Page 42

	Signatures	Page 43

	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

March 31, 2004 and September 30, 2003

(unaudited)


	March 31, 2004			September 30, 2003
Assets
Cash and amounts due from depository institutions	$	8,927,970		9,926,321
Interest-bearing deposits in other financial institutions		2,193,789		1,994,168

Cash and cash equivalents		11,121,759		11,920,489

Loans held for sale, market value of $2,826,701 and $2,058,892 at March 31, 2004 and September 30, 2003, respectively		2,805,564		2,026,261
Freddie Mac common stock		272,886,730		242,904,000
Mortgage-backed securities and collateralized mortgage obligations available for sale		374,084,194		394,432,288
Other investment securities available for sale		20,374,656		21,628,603
Federal Home Loan Bank stock		10,811,300		13,610,000

Loans receivable		310,651,303		299,877,198
Unamortized loan origination fees, net		(685,911	)	(544,202	)
Allowance for loan losses		(6,519,787	)	(6,779,576	)

Loans receivable, net		303,445,605		292,553,420

Real estate owned		798,755		683,577
Accrued interest and dividends receivable		2,676,732		3,200,112
Premises and equipment, net		9,463,976		9,382,894
Intangible assets, net of amortization		6,055,304		6,168,074
Other assets		1,432,390		1,985,645

Total assets	$	1,015,956,965		1,000,495,363

Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	291,001,112		279,385,708
Borrowings		358,167,100		388,441,220
Advance payments by borrowers for taxes and insurance		858,198		1,191,597
Deferred income taxes		100,858,850		88,196,330
Other liabilities		12,133,322		12,921,426

Total liabilities		763,018,582		770,136,281

Stockholders’ Equity:
Common stock, $0.01 par value; 19,823,205 and 19,822,405 shares issued at March 31, 2004 and September 30, 2003, respectively; 19,570,476 and 19,569,676 shares outstanding at March 31, 2004 and September 30, 2003, respectively		198,232		198,224
Additional paid-in capital		37,878,245		37,491,011
Treasury stock, at cost; 252,729 shares at March 31, 2004 and September 30, 2003		(7,836,234	)	(7,836,234	)
Unearned compensation - ESOP		(2,454,940	)	(2,624,940	)
Retained earnings		61,070,606		59,190,493
Accumulated other comprehensive income:
Net unrealized holding gains on securities available for sale		164,082,474		143,940,528

Total stockholders’ equity		252,938,383		230,359,082

Total liabilities and stockholders’ equity	$	1,015,956,965		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 and Six Months Ended March 31, 2004 and 2003

(unaudited)


	Three Months Ended March 31, 2004		Three Months Ended March 31, 2003		Six Months Ended March 31, 2004	Six Months Ended March 31, 2003
Interest and dividend income:
Loans receivable	$	4,439,902	4,028,171		8,895,341	7,847,658
Mortgage-backed securities and collateralized mortgage obligations		3,384,421	2,879,942		6,981,780	6,314,293
Equity securities		1,491,615	1,360,228		2,813,138	2,558,498
Debt securities		102,982	87,960		183,785	193,706
Interest-bearing deposits in other financial institutions		23,783	27,383		38,058	52,283

Total interest and dividend income		9,442,703	8,383,684		18,912,102	16,966,438

Interest expense:
Deposits		1,174,647	1,410,296		2,418,502	2,791,114
Borrowings		2,848,817	3,301,059		5,898,016	6,941,179

Total interest expense		4,023,464	4,711,355		8,316,518	9,732,293

Net interest income		5,419,239	3,672,329		10,595,584	7,234,145
Provision for loan losses		—	—		30,000	—

Net interest income after provision for loan losses		5,419,239	3,672,329		10,565,584	7,234,145

Noninterest income:
Gain on sale of loans and servicing released loan fees		309,963	643,150		552,116	1,231,748
Service charges on deposit accounts		672,522	356,294		1,235,370	758,035
Gain on sale of Freddie Mac common stock		592,280	—		1,125,022	—
Gain on sale of mortgage-backed securities, collateralized mortgage obligations, and other investments		34,435	—		77,472	102,839
Loan servicing fees		57,732	78,515		89,699	139,407
Equity in loss of limited partnership		—	(61,031	)	—	(106,746	)
Brokerage commissions		58,885	106,228		127,882	168,708
Other		118,481	5,019		183,835	8,765

Total noninterest income		1,844,298	1,128,175		3,391,396	2,302,756

Noninterest expenses:
Salaries and employee benefits		2,504,589	2,603,228		5,051,366	5,065,227
Occupancy		620,546	564,258		1,280,421	1,069,295
Legal and professional		238,941	300,225		504,314	613,672
Marketing		247,743	231,186		438,164	392,490
Furniture and equipment		134,408	178,534		257,514	328,181
Postage, office supplies, and printing		94,437	175,764		220,309	291,090
Federal insurance premiums and other regulatory fees		56,122	53,525		109,977	104,059
Net cost of operations of real estate owned		43,025	42,561		51,375	40,998
Deposit premium amortization expense		55,226	19,088		112,770	19,088
Other		287,752	431,543		656,138	849,168

Total noninterest expenses		4,282,789	4,599,912		8,682,348	8,773,268

Income before income taxes		2,980,748	200,592		5,274,632	763,633
Income tax expense		775,033	36,283		1,353,166	100,673

Net income	$	2,205,715	164,309		3,921,466	662,960

Basic and diluted net income per share	$	0.11	0.01		0.20	0.03

Weighted average number of common shares outstanding		19,427,475	19,538,136		19,418,770	19,532,500

Weighted average number of common and common equivalent shares outstanding		19,478,094	19,545,123		19,456,818	19,534,833

See accompanying notes to the unaudited consolidated financial statements.

CHARTER FINANCIAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended March 31, 2004 and 2003

(unaudited)


	Six Months Ended March 31, 2004			Six Months Ended March 31, 2003
Cash flows from operating activities:
Net income	$	3,921,466		662,960
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		30,000		—
Depreciation and amortization		481,385		370,789
Allocation of ESOP common stock		171,977		171,664
Gain on sale of premises and equipment		—		(5	)
Equity in loss of limited partnership		—		106,746
Amortization of premiums and discounts, net		363,569		1,982,520
Gain on sale of loans		(552,116	)	(1,231,748	)
Proceeds from sale of loans

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