WEST POINT, Ga., July 18, 2008 /PRNewswire-FirstCall via COMTEX/ ----Charter Financial Corporation (OTC Bulletin Board: CHFN) 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 noninterest 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 chargeoffs 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. Additional information will be available at http://www.charterbank.net.

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.

Additional information is available at http://www.charterbank.net.

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.

Forward-Looking Statements

This release 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 or update 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.

 FINANCIAL TABLES FOLLOW Charter Financial Corporation
   Selected Financial Data (in thousands except share and per share data): June 30, March 31, September 30, June 30, 2008 2008
   2007 2007 Unaudited Total Assets $877,871 $905,426 $1,021,856 $1,028,646 Loans Receivable, Net 433,700 414,076 405,553 401,910
   Mortgage Securities Available for Sale 250,881 270,952 263,351 268,073 Freddie Mac Common Stock 53,710 83,999 200,782 206,532
   Other Investment Securities 30,327 36,548 31,792 31,994 Core Deposits* 184,528 188,397 203,348 206,001 Retail Deposits** 382,315
   390,284 378,498 372,662 Total Deposits 460,048 453,102 430,683 401,060 Deferred Income Taxes 14,868 29,009 72,504 74,213 Borrowings
   257,000 257,000 272,058 303,759 Realized Stockholders' Equity*** 111,270 110,474 108,186 114,700 Accumulated Other Comprehensive
   Income**** 24,815 47,413 116,886 118,939 Total Stockholders' Equity 136,085 157,887 225,072 233,639 Book Value per Share $7.08
   $8.21 $11.73 $12.19 Tangible Book Value per Share 6.80 7.93 11.44 11.90 Minority Shares Outstanding 3,550,017 3,564,622 3,136,085
   3,116,197 Total Shares Outstanding 19,225,402 19,225,402 18,994,009 19,170,765 Weighted Average Total Shares Outstanding -
   Basic 19,029,060 19,018,570 19,097,807 18,972,247 Weighted Average Total Shares Outstanding - Diluted 19,022,054 19,064,622
   19,210,548 19,158,884 * Core Deposits includes transaction accounts, money market accounts, and savings accounts. ** Retail
   Deposits includes Core Deposits, and certificates of deposits excluding brokered and wholesale. *** Includes Total Stockholders'
   Equity less Accumulated Other Comprehensive Income. **** Includes unrealized gains and losses on Freddie Mac common stock
   and other investment securities adjusted for income taxes at a tax rate of 38.6%. Charter Financial Corporation Selected Operating
   Data (in thousands except share and per share data): Three months ended Nine months ended June 30, March 31, June 30, 2008
   2007 2008 2008 2007 Unaudited Total Interest Income $11,373 $13,664 $11,942 $36,005 $41,231 Total Interest Expense 6,442 7,576
   6,812 20,552 22,414 Net Interest Income 4,931 6,088 5,130 15,453 18,817 Provision for Loan Losses 600 - 150 750 - Net Interest
   Income after Provision for Loan Losses 4,331 6,088 4,980 14,703 18,817 Noninterest Income 3,168 1,897 5,173 11,105 74,937
   Noninterest Expense 5,049 5,025 4,828 15,245 15,049 Income before Income Taxes 2,450 2,960 5,325 10,563 78,705 Income Tax
   Expense 751 846 1,451 2,970 28,821 Net Income $1,699 $2,114 $3,874 $7,593 $49,884 Earnings per Share - Basic $0.09 $0.11 $0.20
   $0.40 $2.61 Earnings per Share - Diluted 0.09 0.11 0.20 0.40 2.58 Cash Dividends per Share 0.50 0.50 0.50 1.50 1.45 Net Charge-offs
   (Recoveries) 114 (12) 285 917 45 Deposit Fees 1,207 1,192 1,248 3,766 3,297 Gain on Sale of Loans 179 372 170 609 855 Gain
   on Sale of Freddie Mac Common Stock 1,022 - 1,302 3,671 69,453 Gain on Covered Calls Related to Freddie Mac Common Stock 241
   - 1,993 1,719 300 Three months ended Nine months ended June 30, March 31, June 30, 2008 2007 2008 2008 2007 Unaudited Return
   on Equity 4.32% 3.48% 9.24% 5.49% 25.92% Return on Assets 0.75 0.81 1.70 1.08 6.18 Net Interest Margin 2.35 2.45 2.40 2.36
   2.45 Loan Loss Reserve as a % of Total Loans 1.33 1.48 1.28 1.33 1.48 Loan Loss Reserve as a % of Nonperforming Assets 53.69
   106.57 58.04 53.69 106.57 Nonperforming Assets as a % of Total Loans and REO 2.46 1.38 2.19 2.46 1.38 Net Charge-offs (annualized)
   as a % of Average Loans 0.11 0.04 0.27 0.29 0.02 Nonperforming Assets to Total Assets 1.24 0.55 1.02 1.24 0.55 Bank Core Capital
   Ratio 9.79 9.38 9.67 9.79 9.38 Dividend Payout Ratio 93.72 73.70 41.11 82.49 9.50 Effective Tax Rate 30.65 28.57 27.25 28.12
   36.62 

SOURCE Charter Financial Corporation

http://www.charterbank.net 

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