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, 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 x No ¨

As of January 28, 2005, the registrant had 19,830,705 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 3,972,781 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, 2004 and September 30, 2004	Page 1

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

	Consolidated Statements of Cash Flows (Unaudited) – Three months ended December 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 8

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 32

Item 4.	Controls and Procedures	Page 32

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	Page 33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 33

Item 3.	Defaults Upon Senior Securities	Page 33

Item 4.	Submission of Matters to a Vote of Security Holders	Page 33

Item 5.	Other Information	Page 33

Item 6.	Exhibits	Page 33

	Signatures	Page 34

	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, 2004 and September 30, 2004

(unaudited)


	December 31, 2004			September 30, 2004
Assets

Cash and amounts due from depository institutions	$	10,695,661		10,128,105
Interest-bearing deposits in other financial institutions		2,691,198		2,243,124

Cash and cash equivalents		13,386,859		12,371,229

Loans held for sale, market value of $1,351,007 and $2,125,463 at December 31, 2004 and September 30, 2004, respectively		1,335,634		2,077,510
Freddie Mac common stock		336,624,750		300,430,200
Mortgage-backed securities and collateralized mortgage obligations available for sale		405,834,733		378,356,607
Other investment securities available for sale		13,902,781		22,156,750
Federal Home Loan Bank stock		15,852,600		14,842,500

Loans receivable		324,437,915		323,546,874
Unamortized loan origination fees, net		(778,236	)	(773,461	)
Allowance for loan losses		(6,409,690	)	(6,622,597	)

Loans receivable, net		317,249,989		316,150,816

Real estate owned		606,685		452,671
Accrued interest and dividends receivable		3,122,253		3,004,224
Premises and equipment, net		11,900,735		11,195,770
Intangible assets, net of amortization		5,903,526		5,954,119
Other assets		1,507,894		1,208,622

Total assets	$	1,127,228,439		1,068,201,018

Liabilities and Stockholders’ Equity

Liabilities:
Deposits	$	270,240,977		279,574,709
Borrowings		422,598,000		392,789,000
Advance payments by borrowers for taxes and insurance		540,995		1,189,587
Deferred income taxes		125,844,292		111,602,661
Other liabilities		17,778,019		10,544,824

Total liabilities		837,002,283		795,700,781

Stockholders’ Equity:
Common stock, $0.01 par value; 19,825,805 and 19,823,905 shares issued at December 31, 2004 and September 30, 2004, respectively; 19,598,774 and 19,596,874 shares outstanding at December 31, 2004 and September 30, 2004, respectively		198,258		198,239
Additional paid-in capital		37,887,150		37,831,575
Treasury stock, at cost; 227,031 and 227,031 shares at December 31, 2004 and September 30, 2004		(7,059,824	)	(7,059,824	)
Unearned compensation - ESOP		(2,454,940	)	(2,454,940	)
Retained earnings		58,642,653		63,626,113
Accumulated other comprehensive income:
Net unrealized holding gains on securities available for sale		203,012,859		180,359,074

Total stockholders’ equity		290,226,156		272,500,237

Total liabilities and stockholders’ equity	$	1,127,228,439		1,068,201,018

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, 2004 and 2003

(unaudited)


	Three Months Ended December 31, 2004			Three Months Ended December 31, 2003
Interest and dividend income:
Loans receivable	$	4,939,800		4,455,439
Mortgage-backed securities and collateralized mortgage obligations		4,080,860		3,597,359
Equity securities		1,521,896		1,321,523
Debt securities		117,171		80,803
Interest-bearing deposits in other financial institutions		19,635		14,275

Total interest and dividend income		10,679,362		9,469,399

Interest expense:
Deposits		1,300,029		1,243,855
Borrowings		3,739,715		3,049,199

Total interest expense		5,039,744		4,293,054

Net interest income		5,639,618		5,176,345
Provision for loan losses		—		30,000


Net interest income after provision for loan losses		5,639,618		5,146,345

Noninterest income:
Gain on sale of loans and servicing released loan fees		233,001		242,153
Service charges on deposit accounts		670,472		562,848
Gain on sale of Freddie Mac common stock		2,576,777		532,742
Gain on sale of mortgage-backed securities, collateralized mortgage obligations, and other investments		22,340		43,038
Loan servicing fees		61,599		31,968
(Loss) Gain on operations of covered call program		(365,829	)	59,231
Brokerage commissions		90,994		68,997
Other		2,749		6,121

Total noninterest income		3,292,103		1,547,098

Noninterest expenses:
Salaries and employee benefits		2,789,994		2,546,777
Occupancy		692,102		659,875
Legal and professional		236,894		265,373
Marketing		171,042		190,420
Furniture and equipment		195,128		123,107
Postage, office supplies, and printing		117,692		125,872
Federal insurance premiums and other regulatory fees		56,100		53,856
Net (income) cost of operations of real estate owned		(2,995	)	8,349
Deposit premium amortization expense		50,593		57,543
Other		294,417		368,387

Total noninterest expenses		4,600,967		4,399,559

Income before income taxes		4,330,754		2,293,884

Income tax expense		1,406,638		578,133

Net income	$	2,924,116		1,715,751

Basic and diluted net income per share	$	0.15		0.09

Weighted average number of common shares outstanding		19,506,259		19,410,159

Weighted average number of common and common equivalent shares outstanding		19,578,844		19,436,341

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 30, 2004 and 2003

(unaudited)


	Three Months Ended December 31, 2004			Three Months Ended December 31, 2003
Cash flows from operating activities:
Net income	$	2,924,116		1,715,751
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		—		30,000
Depreciation and amortization		233,290		238,278
Allocation of ESOP common stock		88,039		103,542
Deferred income tax (benefit)		—		(51,018	)
Amortization of premiums and discounts, net		105,432		216,655
Gain on sale of loans		(233,001	)	(242,153	)
Proceeds from sale of loans		8,417,361		8,474,263
Originations and purchases of loans held for sale		(7,442,484	)	(6,928,964	)
Gain on sale of Freddie Mac common stock		(2,576,777	)	(532,742	)
Gain on sales of mortgage-backed securities, collateralized mortgage obligations, and other investments		(22,340	)	(43,038	)
Provision for credit for allowance in other real estate owned		(8,701	)	(3,480	)
Changes in assets and liabilities:
(Increase) decrease in accrued interest and dividends receivable		(118,029	)	353,607
(Increase) decrease in other assets		(319,096	)	305,036
Increase (decrease) in other liabilities		(762,420	)	(1,955,567	)

Net cash provided by operating activities		285,390		1,680,170

Cash flows from investing activities:
Proceeds from sales of mortgage-backed securities and collateralized mortgage obligations available for sale		4,717,289		45,623,663
Principal collections on mortgage-backed securities and collateralized mortgage obligations available for sale		40,346,869		59,966,379
Purchases of mortgage-backed securities and collateralized mortgage obligations available for sale		(72,008,189	)	(119,509,948	)
Proceeds from sale of other investment securities available for sale		8,300,000		10,519,236
Proceeds from sale of Freddie Mac common stock		2,614,425		552,494
Proceeds from maturities of other securities available for sale		—		7,000,000
Purchase of FHLB stock		(3,698,600	)	(2,315,000	)
Proceeds from redemption of FHLB stock		2,688,500		3,296,200
Net (increase) decrease in loans receivable, exclusive of loan sales		(1,509,892	)	(7,226,247	)
Proceeds from sale of real estate owned		265,406		60,030
Purchases of premises and equipment, net of dispositions		(867,839	)	(338,701	)

Net cash used in investing activities		(19,152,031	)	(2,371,894	)

Cash flows from financing activities:
Stock options exercised		55,594		—
Net decrease in deposits		(9,333,731	)	(8,066,519	)
Proceeds from Federal Home Loan Bank advances		121,650,000		225,175,000
Principal payments on advances from Federal Home Loan Bank		(101,800,000	)	(243,700,000	)
Proceeds from other borrowings		414,681,000		454,983,900
Principal payments on other borrowings		(404,722,000	)	(425,658,120

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents