Robert Johnson's Charter Financial Reports Fiscal Third Quarter Earnings

U.S. based Charter Financial Corporation the parent company of CharterBank, a full-service community bank and a federal savings institution controlled by billionaire Robert L. Johnson, today reported third quarter fiscal 2008 net income of $1.7 million, or $0.09 per share, compared with $2.1 million, or $0.11 per share, for same quarter of the prior year. Net income for the nine months ended June 30, 2008 was $7.6 million or $0.40 per share compared with $49.9 million or $2.61 per share for the comparable period in the prior year.

The lower net income for the third quarter includes a $1.2 million decrease in net interest income, a significant portion of which was due to the reduction in Freddie Mac's cash dividends on common stock from $0.50 per share to $0.25 per share, and a $600,000 addition to the loan loss provision. These decreases were partially offset by a $1.3 million increase in non-interest income.

CharterBank's regulatory core capital, while impacted by the lower price of Freddie Mac common stock, remains strong at 9.79%, which is almost twice the well capitalized requirement of 5%. Addressing the speculation about the future capital structure of Freddie Mac, CharterBank's core capital excluding the value of Freddie Mac common stock would be 9.64%. The Company has additional capital at the holding company level that is not included in the bank capital ratio.

The Company, including holding company and bank capital, has 15.5% equity to total assets as of June 30, 2008.

"Because of our very strong capital position, our practice has been to pay out most of our net earnings, excluding gains on the sale of Freddie Mac stock but including its cash dividend payments to us, as cash dividends to our shareholders," said Robert L. Johnson, president and CEO. "We plan to continue this practice although the uncertainty of Freddie Mac's cash dividend together with our owning less Freddie Mac stock requires that we closely monitor developments and reassess the level of our future cash dividends."

In response to continuing market uncertainties subsequent to June 30, 2008, CharterBank sold one million shares of Freddie Mac common stock. Pre-tax gain of $6.5 million from that sale will be included in the company's fourth quarter income.

The Company noted that the higher net income for the nine months ended June 30, 2007 was due to the sale of one million shares of Freddie Mac stock during the first quarter of that year, which resulted in a pre-tax gain of $69.5 million ($42.6 million after tax). There was a pre-tax gain of $3.7 million on the sale of Freddie Mac stock in the first three quarters of the current year. For the third fiscal quarter 2008, the pretax gain on Freddie Mac common stock sales was $1.0 million compared with $1.3 million in fiscal second quarter 2008 and no gain in fiscal third quarter 2007.

"We continue to closely monitor our asset quality and believe that our loan loss reserves are adequate," said Johnson. "We had net loan charge-offs of $114,000 and added $600,000 to our reserve for loan losses for the quarter ended June 30, 2008 which brought the provision for loan losses for the nine months to $750,000." Net charge-offs (annualized) for the quarter were eleven basis points of loan balances as of June 30, 2008.

Discussing the Company's outlook, Johnson said: "We continue to anticipate a significant boost to the economy in our market area over the next several years from the new KIA Motors Corporation assembly plant located between West Point and LaGrange, Georgia, despite the present state of the U. S. auto market. This assembly plant is scheduled to open in the fall of 2009."

"We continue to make progress in building our retail franchise. Net loans receivable climbed to a record $433.7 million, up $19.5 million from March 31, 2008 and up $31.8 million from June 30, 2007. This performance is a real tribute to our executives and staff under current economic conditions. It tells us we are meeting our customers' needs," concluded Johnson.

Charter Financial Corporation is a savings and loan holding company and the parent company of CharterBank, a full-service community bank and a federal savings institution. Charter Financial Corporation and CharterBank are in a mutual holding company structure. Charter Financial owns 2.3 million shares of Freddie Mac common stock with a market value of $16.2 million as of July 14, 2008. CharterBank is headquartered in West Point, Georgia, and operates ten branches on the I-85 corridor from LaGrange, Georgia to Auburn, Alabama. CharterBank's deposits are insured by the Federal Deposit Insurance Corporation.

SOURCE: Charter Financial Corporation