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 June 30, 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 August 4, 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) June 30, 2004 and September 30, 2003	1

	Consolidated Statements of Income (Unaudited) – Three and Nine months ended June 30, 2004 and 2003	2

	Consolidated Statements of Cash Flows (Unaudited) – Nine months ended June 30, 2004 and 2003	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	41

Item 4.	Controls and Procedures	41

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	42

Item 2.	Changes in Securities and Use of Proceeds	42

Item 3.	Defaults upon Senior Securities	42

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

Item 5.	Other Information	42

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

	Signatures	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

June 30, 2004 and September 30, 2003

(unaudited)


	June 30, 2004			September 30, 2003
Assets
Cash and amounts due from depository institutions	$	10,414,932		9,926,321
Interest-bearing deposits in other financial institutions		11,190,359		1,994,168

Cash and cash equivalents		21,605,291		11,920,489

Loans held for sale, market value of $1,280,841 and $2,058,892 at June 30, 2004 and September 30, 2003, respectively		1,269,486		2,026,261
Freddie Mac common stock		292,477,650		242,904,000
Mortgage-backed securities and collateralized mortgage obligations available for sale		383,636,466		394,432,288
Other investment securities available for sale		21,877,409		21,628,603
Federal Home Loan Bank stock		13,535,000		13,610,000
Loans receivable		318,984,288		299,877,198
Unamortized loan origination fees, net		(756,279	)	(544,202	)
Allowance for loan losses		(6,637,655	)	(6,779,576	)

Loans receivable, net		311,590,354		292,553,420

Real estate owned		278,586		683,577
Accrued interest and dividends receivable		3,050,395		3,200,112
Premises and equipment, net		10,870,185		9,382,894
Intangible assets, net of amortization		6,004,712		6,168,074
Other assets		1,536,899		1,985,645

Total assets	$	1,067,732,433		1,000,495,363

Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	293,002,847		279,385,708
Borrowings		392,969,000		388,441,220
Advance payments by borrowers for taxes and insurance		1,075,601		1,191,597
Deferred income taxes		105,289,891		88,196,330
Other liabilities		14,382,801		12,921,426

Total liabilities		806,720,140		770,136,281

Stockholders’ Equity:
Common stock, $0.01 par value; 19,823,905 and 19,822,405 shares issued at June 30, 2004 and September 30, 2003, respectively; 19,571,176 and 19,569,676 shares outstanding at June 30, 2004 and September 30, 2003, respectively		198,239		198,224
Additional paid-in capital		37,898,720		37,491,011
Treasury stock, at cost; 252,729 shares at June 30, 2004 and September 30, 2003		(7,836,234	)	(7,836,234	)
Unearned compensation - ESOP		(2,454,940	)	(2,624,940	)
Retained earnings		62,075,695		59,190,493
Accumulated other comprehensive income:
Net unrealized holding gains on securities available for sale		171,130,813		143,940,528

Total stockholders’ equity		261,012,293		230,359,082

Total liabilities and stockholders’ equity	$	1,067,732,433		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 Nine Months Ended June 30, 2004 and 2003

(unaudited)


	Three Months Ended June 30, 2004		Three Months Ended June 30, 2003		Nine Months Ended June 30, 2004	Nine Months Ended June 30, 2003
Interest and dividend income:
Loans receivable	$	4,517,108	4,352,473		13,412,449	12,200,131
Mortgage-backed securities and collateralized mortgage obligations		3,492,205	2,705,386		10,473,986	9,019,679
Equity securities		1,492,535	1,363,959		4,305,673	3,922,457
Debt securities		149,313	93,203		333,098	286,909
Interest-bearing deposits in other financial institutions		10,968	29,950		49,025	82,233

Total interest and dividend income		9,662,129	8,544,971		28,574,231	25,511,409

Interest expense:
Deposits		1,166,005	1,464,855		3,584,507	4,255,969
Borrowings		3,036,058	3,129,198		8,934,074	10,070,377

Total interest expense		4,202,063	4,594,053		12,518,581	14,326,346

Net interest income		5,460,066	3,950,918		16,055,650	11,185,063
Provision for loan losses		—	—		30,000	—

Net interest income after provision for loan losses		5,460,066	3,950,918		16,025,650	11,185,063

Noninterest income:
Gain on sale of loans and servicing released loan fees		345,153	886,087		897,269	2,117,835
Service charges on deposit accounts		624,986	463,488		1,860,357	1,221,523
Gain on sale of Freddie Mac common stock		—	—		1,125,022	—
Gain on sale of mortgage-backed securities, collateralized mortgage obligations, and other investments		37,787	4,199		115,259	107,038
Loan servicing fees		56,587	(11,473	)	146,287	127,934
Equity in loss of limited partnership		—	—		—	(106,746	)
Brokerage commissions		61,029	89,992		188,911	258,700
Other		3,939	35,520		187,771	44,285

Total noninterest income		1,129,481	1,467,813		4,520,876	3,770,569

Noninterest expenses:
Salaries and employee benefits		2,482,222	2,845,347		7,533,588	7,910,574
Occupancy		535,289	565,329		1,815,710	1,634,623
Legal and professional		170,382	300,550		674,696	914,221
Marketing		195,997	197,071		634,160	589,561
Furniture and equipment		154,480	158,754		411,994	486,935
Postage, office supplies, and printing		120,581	145,779		340,890	436,870
Federal insurance premiums and other regulatory fees		55,797	52,074		165,775	156,133
Net cost of operations of real estate owned		15,027	91,600		66,402	132,598
Deposit premium amortization expense		50,593	56,518		163,362	75,606
Other		332,466	381,741		988,604	1,230,910

Total noninterest expenses		4,112,834	4,794,763		12,795,181	13,568,031

Income before income taxes		2,476,713	623,968		7,751,345	1,387,601
Income tax expense		604,685	80,188		1,957,851	180,861

Net income	$	1,872,028	543,780		5,793,494	1,206,740

Basic and diluted net income per share	$	0.10	0.03		0.30	0.06

Weighted average number of common shares outstanding		19,428,466	19,439,329		19,421,990	19,501,443

Weighted average number of common and common equivalent shares outstanding		19,455,679	19,444,406		19,456,345	19,504,675

See accompanying notes to unaudited consolidated financial statements.

CHARTER FINANCIAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended June 30, 2004 and 2003

(unaudited)


	Nine Months Ended June 30, 2004			Nine Months Ended June 30, 2003
Cash flows from operating activities:
Net income	$	5,793,494		1,206,740
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		30,000		—
Depreciation and amortization		718,835		714,226
Allocation of ESOP common stock		221,700		257,603
Gain on sale of premises and equipment		(2,500	)	(5	)
Equity in loss of limited partnership		—		106,746

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents