Charter Financial Corporation (NASDAQ: CHFN) has been quietly progressing during these dark days for many other community banks. It has remained profitable while integrating two FDIC-assisted acquisitions in the past two years. Neighborhood Community Bank was purchased in June 2009 and McIntosh Commercial Bank in March 2010. It also sold an additional $34.2 million worth of shares, approximately one-third of its common stock, to the public that was previously owned by its mutual holding company and again listed on NASDAQ. Partly, it is also getting a boost in its home marketing area from the opening and operation of a large new Kia Motors plant in West Point, Georgia.

Robert L. Johnson, Chairman and CEO, said, "Our FDIC-assisted acquisitions continue to progress well. We have received $98.4 million in reimbursement for losses under the loss sharing agreements. We have a FDIC receivable of $71.7 million based on estimated future loss-share claims. The acquired assets will take some time to work out and safely reinvest. We remain upbeat about the results and continuing opportunities to build our retail franchise through FDIC-assisted acquisitions. We are also optimistic about future opportunities to invest the cash that results from these acquisitions."

The Company's total assets amounted to $1.1 billion at December 31, 2010 down slightly from $1.2 billion at September 30, 2010 but up from $944.7 million at December 31, 2009. Loans outstanding were $584.0 million at December 31, 2010, of which $136.4 million, or 23.4%, were covered by FDIC loss sharing. This compared with loans outstanding of $599.4 million at September 30, 2010 and $564.1 million at December 31, 2009.

The net interest margin rose to 3.98% for the first quarter of fiscal 2011, compared with 3.05% for the same quarter the year before. Higher interest income on loans and the accretion of purchase discounts from the acquisitions contributed to the improved net interest margin. The increase in net interest income was partially offset by increased levels of nonperforming loans (primarily loans covered by loss sharing) as well as reduced legacy loan balances. Net interest income was inhibited by conservative levels of cash accumulated late in the past year, largely from acquired assets and lack of attractive reinvestment options including low securities yields and low demand from credit worthy loan applicants.

The Company had net charge-offs of $571,000 for the quarter ended December 31, 2010 compared with $166,000 for the same quarter the year before. The Company recorded a loan loss provision of $800,000 on non-covered loans for quarter ended December 31, 2010, the same as the $800,000 loan loss provision for the same quarter the year before. This provision increased the allowance for loan losses to 2.19% of non-covered loans at December 31, 2010 compared with 2.03% of non-covered loans at December 31, 2009. Nonperforming assets not covered by loss sharing were $22.7 million at December 31, 2010, up slightly from $21.4 million at September 30, 2010 but down from $24.2 million at June 30, 2010.

Noninterest expense increased to $9.4 million for the quarter ended December 31, 2010, compared with $6.1 million for the quarter ended December 31, 2009 and $9.1 million for the quarter ended September 30, 2010. The majority of the increase from a year ago was attributed to the Company's FDIC-assisted acquisitions, including the costs associated with acquiring, integrating and operating the additional branches as well as resolving the acquired problem assets. The increase from the quarter ended September 30, 2010 to the quarter ended December 31, 2010 included an $810,000 prepayment penalty for the early retirement of a borrowing from the FHLB. The Company has also incurred costs adding staff and infrastructure to prepare for additional acquisitions.

Total deposits amounted to $762.4 million at December 31, 2010 compared with $614.7 million at December 31, 2009. The McIntosh Commercial Bank acquisition and implementation of the Company's new Rewards checking program were the primary contributors to the increased deposits. Borrowings decreased to $152.0 million at December 31, 2010 from $217.0 million at December 31, 2009, due to the Company's continued focus on decreasing wholesale funding.

The Company had sharply higher total stockholders' equity of $134.9 million at December 31, 2010 compared with $101.0 million at December 31, 2009. The higher equity is due to a combination of the incremental stock offering completed in September 2010 and earnings.

Mr. Johnson concluded, "CharterBank is well capitalized with core regulatory capital of 11.41% and this ratio was improved from 10.21% at September 30, 2010 through a combination of earnings and reduction in wholesale funding. We reduced borrowings by $60.0 million and wholesale deposits by $28.2 million since September 30, 2010. The Bank continues to be profitable in difficult economic times. Our loan portfolio is sound and we are working through and reserving for troubled credits. Our network of 14 branches services an attractive geographic region. We are well positioned with capital and expect more opportunities to acquire banks from the FDIC and to expand our footprint in the future."

About the Company:
Charter Financial Corporation is a savings and loan holding company and the parent company of CharterBank, a growing full-service community bank. Charter Financial Corporation and subsidiary, CharterBank, are in the mutual holding company structure. CharterBank is headquartered in West Point, Georgia, and operates branches in West Central Georgia and East Central Alabama. CharterBank's deposits are insured by the Federal Deposit Insurance Corporation.

This website may contain "forward-looking statements" that may be identified by 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 that 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 forward-looking statements in this release 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. The Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

The Investor Relations Company, which serves as investor relations counsel to Charter Financial Corporation, is acting on its behalf in issuing this information. The information contained herein is not guaranteed as to accuracy or completeness, is furnished for information purposes only and is not to be construed as an offer to buy or sell securities.