Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1998 Commission File Number: 0-19212
JEFFERSONVILLE BANCORP
----------------------
(Exact name of Registrant as specified in its charter)
New York 22-2385448
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(State or other jurisdiction of (I.R.S. Employer identification no.)
incorporation or organization)
P. O. Box 398, Jeffersonville, New York 12748
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 482-4000
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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 proceeding 12 months (or for such shorter period that the Registrant was
required to file such report(s)), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
Class of Common Stock as of April 23, 1998
--------------------- --------------------
$0.50 par value 1,415,255
INDEX TO FORM 10-Q
Page
Part 1
Item 1 Consolidated Interim Financial Statements (Unaudited)
Consolidated Balance Sheets at
March 31, 1998 and December 31, 1997 1
Consolidated Statements of Income for the Three
Months ended March 31, 1998 and 1997 2
Consolidated Statements of Cash Flows for the Three
Months ended March 31, 1998 and 1997 3-4
Notes to Consolidated Interim Financial Statements 5-6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-11
Part 2
Item 1 Legal Proceedings NONE
Item 2 Changes in Securities NONE
Item 3 Defaults upon Senior Securities NONE
Item 4 Submission of Matters to a Vote of Security Holders NONE
Item 5 Other Information NONE
Item 6 Exhibits and Reports on Form 8-K NONE
Signatures 12
Jeffersonville Bancorp and Subsidiary
Consolidated Balance Sheets
March 31, December 31,
1998 1997
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(Unaudited)
ASSETS
Cash and due from banks $ 6,901,000 $ 5,563,000
Federal funds sold 8,000,000 1,600,000
-------------- ------------
CASH AND CASH EQUIVALENTS 14,901,000 7,163,000
Securities available for sale, at fair value 69,469,000 70,793,000
Investment securities, estimated fair value of $3,607,000
in 1998 and $3,821,000 in 1997 3,510,000 3,738,000
Loans, less allowance for loan losses of $2,044,000
in 1998 and $1,862,000 in 1997 127,767,000 125,793,000
Accrued interest receivable 1,441,000 1,291,000
Premises and equipment, net 2,529,000 2,609,000
Federal Home Loan Bank stock 787,000 753,000
Other real estate owned 568,000 301,000
Other assets 1,758,000 1,218,000
--------- ---------
TOTAL ASSETS $ 222,730,000 $ 213,659,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand deposits (non-interest bearing) $ 25,524,000 $ 23,545,000
NOW and super NOW deposits 27,624,000 27,973,000
Savings and insured money market deposits 53,593,000 54,513,000
Time deposits 81,018,000 73,129,000
-------------- ------------------
TOTAL DEPOSITS 187,759,000 179,160,000
Federal Home Loan Bank advances 10,000,000 10,000,000
Short-term debt 268,000 404,000
Accrued expenses and other liabilities 2,070,000 1,919,000
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TOTAL LIABILITIES 200,097,000 191,483,000
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Stockholders' equity:
Series A preferred stock, no par value:
2,000,000 shares authorized, none issued - -
Common stock, $0.50 par value; 2,225,000 shares
issued ; 1,481,636 shares and 1,234,711 shares
outstanding at March 31, 1998 and December 31,
1997, respectively 741,000 617,000
Paid-in capital 6,002,000 446,000
Treasury stock, at cost, 62,381 shares and 51,965 shares held
at March 31, 1998 and December 31, 1997, respectively (206,000) (206,000)
Retained earnings 15,596,000 20,766,000
Accumulated other comprehensive income 500,000 553,000
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TOTAL STOCKHOLDERS' EQUITY 22,633,000 22,176,000
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 222,730,000 $ 213,659,000
============= =============
See accompanying notes to unaudited consolidated interim financial statements.
1
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited)
For the Three Months
Ended March 31
1998 1997
---- ----
INTEREST INCOME
Loan interest and fees $ 2,917,000 $ 2,683,000
Securities:
Taxable 843,000 640,000
Non-taxable 295,000 398,000
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TOTAL INTEREST INCOME 4,102,000 3,749,000
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INTEREST EXPENSE
Deposits 1,649,000 1,581,000
Federal Home Loan Bank advances 136,000 23,000
Other 8,000 6,000
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TOTAL INTEREST EXPENSE 1,793,000 1,610,000
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NET INTEREST INCOME 2,309,000 2,139,000
Provision for loan losses 150,000 90,000
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,159,000 2,049,000
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NON-INTEREST INCOME
Service charges 195,000 171,000
Net security gains (losses) 11,000 (4,000)
Other non-interest income 96,000 98,000
--------------- ------------
302,000 265,000
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NON-INTEREST EXPENSES
Salaries and wages 715,000 676,000
Employee benefits 254,000 197,000
Occupancy and equipment expenses 269,000 291,000
Other real estate owned expenses, net 95,000 103,000
Other non-interest expenses 441,000 425,000
--------------- ------------
1,774,000 1,692,000
--------------- ------------
Income before income taxes 687,000 622,000
Income taxes (177,000) (121,000)
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NET INCOME 510,000 501,000
=============== =============
Basic earnings per common share (1) 0.36 0.35
=============== =============
Average common shares outstanding (1) 1,419,260 1,419,295
=============== =============
(1) Share and per share data has been adjusted for the effect of the 20% stock
dividend distributed in February 1998.
See accompanying notes to unaudited consolidated interim financial statements.
2
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
For the three months
ended March 31,
1998 1997
---- ----
OPERATING ACTIVITIES
Net income $ 510,000 $ 501,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 150,000 90,000
Write down of other real estate owned 31,000 54,000
Depreciation and amortization 124,000 88,000
Net security (gains) losses (11,000) 4,000
Increase in accrued interest receivable (150,000) (287,000)
Increase in other assets (540,000) (44,000)
Increase (decrease) in accrued expenses
and other liabilities 187,000 (126,000)
------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 301,000 280,000
------------------------------
INVESTING ACTIVITIES Proceeds from maturities and calls :
Securities available for sale 15,696,000 1,836,000
Investment securities 299,000 197,000
Purchases:
Securities available for sale (14,450,000) (9,580,000)
Investment securities (71,000) (399,000)
Dispursements for loan originations,net of
principal collections (2,444,000) (4,126,000)
Purchases of Federal Home Loan Bank stock (34,000) (36,000)
Net purchases of premises and equipment (44,000) (83,000)
Proceeds from sale of other real estate owned 22,000 -
------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,026,000) (12,191,000)
------------------------------
FINANCING ACTIVITIES
Net increase in deposits 8,599,000 4,321,000
Net (decrease) increase in short-term debt (136,000) 2,909,000
Proceeds from Federal Home Loan Bank advances - 5,000,000
------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 8,463,000 12,230,000
------------------------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 7,738,000 319,000
Cash and cash equivalents at beginning of period 7,163,000 6,023,000
------------------------------
Cash and cash equivalents at end of period $ 14,901,000 $ 6,342,000
==============================
3
continued
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Cash Flows,Continued
(Unaudited)
For the three months
ended March 31,
1998 1997
SUPPLEMENTAL INFORMATION
Cash paid for:
Interest $ 1,566,000 $ 1,605,000
====================================
Income taxes $ 135,000 $ 99,000
====================================
Transfers of loans to other real estate owned $ 320,000 $ 116,000
====================================
Change in net unrealized gain on
securities available for sale,net of tax $ (53,000) $ (423,000)
====================================
Deferred tax effect of change in net unrealized
gain on securities available for sale $ (37,000) $ (291,000)
====================================
See accompanying notes to unaudited consolidated interim financial statements
4
JEFFERSONVILLE BANCORP
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
A. Financial Statement Presentation
In the opinion of Management of Jeffersonville Bancorp, the
accompanying unaudited consolidated interim financial statements
contain all adjustments necessary to present the financial
position as of March 31, 1998 and December 31, 1997, the results
of operations for three month periods ended March 31, 1998 and
1997, and cash flows for the three month periods ended March 31,
1998 and 1997. All adjustments are normal and recurring. The
accompanying unaudited consolidated interim financial statements
should be read in conjunction with Jeffersonville Bancorp's
consolidated year-end financial statements, including notes
thereto, which are included in Jeffersonville Bancorp's 1997
Annual Report.
B. Earnings per share
Earnings per share was calculated for the three month periods
ended March 31, 1998 and 1997 based on weighted average shares
outstanding of 1,419,260 and 1,419,295, respectively, which have
been adjusted for the 20% stock dividend (see note C below).
C. Stock Dividend
On January 14, 1998, the Company announced a 20% stock
dividend payable on February 10, 1998 to common stockholders of
record as of January 27, 1998. Under the terms of the dividend,
stockholders received a dividend of one share of common stock for
every five shares owned as of the record date, plus cash in lieu
of any fractional shares. A total of 246,406 common shares were
issued in connection with the stock dividend. The fair value of
the shares issued ($5.7 million) was charged to retained earnings,
with a corresponding combined increase in common stock and paid-in
capital
5
D. Comprehensive Income
On January 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Sandards (SFAS) No. 130, "Reporting
Comprehensive Income." 'This Statement establishes standards for
reporting and display of comprehensive income and its components.
Comprehensive income includes the reported net income of a company
adjusted for items that are currently accounted for as direct entries
to equity, such as unrealized gains and losses on securities
available for sale, foreign currency items and minimum pension
liability adjustments. For the Company, comprehensive income
represents net income, currently plus the net change during the
period in net unrealized gains or losses on securities available for
sale. The Company's accumulated other comprehensive income represents
the net unrealized gains or losses on securities available for sale.
Comprehensive income for the three-month periods ended March 31, 1998
and 1997 was $457,000 and $78,000, respectively. The following
summarizes the components of other comprehensive income for each
period:
Three Months Ended March 31, 1997:
Net unrealized holding losses arising during the period net of
tax (pre-tax amount of $708,000)
$ (425,000)
Reclassification adjustment for net losses realized in net income
2,000
-----
Other comprehensive income $ (423,000)
==========
Three Months Ended March 31, 1998:
Net unrealized holding losses arising during the period, 1998,
net of tax (pre-tax amount of $77,000) $ (46,000)
Reclassification adjustment for net gains realized in net income
during the the period, net of tax (pre-tax amount of $(11,000)) (7,000)
------
Other comprehensive income - three months ended March 31, 1998 $ (53,000)
===========
E. New Accounting Pronouncement
In February 1998, the Financial Accounting Standards Board
issued SFAS No.132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," which amends the disclosure
requirements of SFAS No. 87, "Employers' Accounting for Pensions,"
SFAS No.88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination
Benefits," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS No. 132
standardizes the disclosure requirements of SFAS No. 87 and No.
106 to the extent practicable and recommends a parallel format for
presenting information about pensions and other postretirement
benefits. This Statement is applicable to all entities and
addresses disclosure only. The Statement does not change any of
the measurement or recognition provisions provided for in SFAS No
87, No. 88 or No. 106. This Statement is effective for fiscal
years beginning after December 15, 1997. Management anticipates
providing the required disclosures in the December 31, 1998
consolidated financial statements.
6
Item 2: Management's Discussion and Analysis of Financial Conditions and
Results of Operations
A. Overview - Financial Conditions
During the period from December 31, 1997 to March 31, 1998,
total assets increased $9,071,000 or 4.25%. Federal funds sold
increased $6,400,000 as increased deposit funds were available
after loan demand was satisfied. The funds were deployed in
federal funds sold to enhance liquidity, while receiving a
satisfactory return. Securities available for sale decreased
$1,324,000 or 1.87%, as all maturing securities were not replaced.
Net loans increased from $125,793,000 at year end 1997 to
$127,767,000 at March 31, 1998, an increase of $1,974,000 or
1.57%. While loan demand was seasonally low, real estate mortgage
loans and home equity loans continue to increase at a moderate
pace.
Deposits increased from $179,160,000 at December 31, 1997 to
$187,759,000 at March 31, 1998, an increase of $8,599,000 or
4.80%. Growth occurred in time deposits as funds flowed from
savings accounts to benefit from higher rates. The 18 month
Escalator, an account that allows one rate modification during its
term, continues to be a popular option. Demand deposits increased
from $23,545,000 at December 31, 1997 to $25,524,000 at March 31,
1998, an increase of $1,979,000 or 8.41%. Inflow of these lower
cost deposits is important to offset the cost of the higher priced
funds.
Total stockholders' equity of $22,176,000 at December 31, 1997
and $22,633,000 at March 31, 1998 increased $457,000 or 2.06%.
This increase was the result of net current earnings of $510,000
less a decrease of $53,000 in the net unrealized gain on
securities available for sale, net of tax.
7
B. Provision for Loan Losses
The provision for loan losses reflects management's assessment
of the risk inherent in the loan portfolio, the general state of
the economy and past loan experience. The provision for loan
losses was $150,000 for the three months ended March 31, 1998
compared to $90,000 for the three months ended March 31, 1997.
Total charge offs for the 1998 three month period were $50,000
compared to $116,000 for the same period in the prior year, while
recoveries increased from $15,000 for the period ending in 1997 to
$82,000 for the same period in 1998. The amounts represent a net
recovery of $32,000 in the first quarter of 1998 verses a net loss
of $101,000 for the same period in the prior year. Based on
management's analysis of the loan portfolio, management believes
the current level of the allowance is adequate.
Changes in the allowance for loan losses are summarized as follows
for the periods ended March 31: 1998 1997
Balance at beginning of period $ 1,862,000 $ 1,711,000
Provision for loan losses 150,000 90,000
Loans charged off (50,000) (116,000)
Recoveries 82,000 15,000
------------ ------------
Balance at end of period $ 2,044,000 $ 1,700,000
============== ==============
Net recoveries charge-offs
as a percentageof average
outstanding loans 0.02% 0.08%
Allowance for loan losses to:
Total loans 1.57% 1.46%
==== ====
Total Non-performing loans 62.8% 36.3%
==== ====
8
C. Non Accrual and Past Due Loans
Non-performing loans are summarized as follows at March 31:
1998 1997
Non-accrual loans $ 2,478,000 $ 3,189,000
Loans past due 90 days or more and
still accruing interest 776,000 917,000
Restructured loans
- 1,016,000
------------ ------------
Total non-performing loans $ 3,254,000 $ 5,122,000
============ ============
Non-performing loans as a
percentage of total loans 2.50% 4.20%
==== ====
The effects of non-accrual and restructured loans on interest income
were as follows for the three months ended March 31, 1998:
Interest contractually due at original rates $ 58,000
Interest income recognized 26,000
---------
Interest income not recognized $ 32,000
=========
As of March 31, 1998 and 1997, the recorded investment in
loans considered to be impaired under SFAS No.114 totaled $714,000
and $1,704,000, respectively. There was no allowance for loan
impairment under SFAS No.114 at either date, primarily due to
prior charge offs and the adequacy of collateral values on these
loans.
D. Capital
On January 14, 1998, the Company announced a 20% stock
dividend payable on February 10, 1998 to common stockholders of
record as of January 27, 1998. Under the terms of the dividend,
stockholders received a dividend of one share of common stock for
every five shares owned as of the record date, plus cash in lieu
of any fractional shares. A total of 246,406 common shares were
issued in connection with the stock dividend.
In January 1998, the board of directors allocated $1,000,000
for the repurchase and retirement of common stock on the open
market. No shares have been repurchased as of March 31, 1998 from
this allocation.
Under the Federal Reserve Bank's risk-based capital rules, the
Company's Tier I risk-based capital was 17.7% and total risk-based
capital was 19.0% of risk-weighted assets at March 31, 1998. These
risk-based capital ratios are well above the minimum regulatory
requirements of 4.0% for Tier I capital and 8.0% for total
capital. The Company's leverage ratio (Tier I capital to average
assets) of 10.2% at March 31, 1998 is well above the 4.0% minimum
regulatory requirement
9
The following table shows the Company's actual capital
measurements compared to the minimum regulatory requirements at
March 31, 1998.
TIER I CAPITAL
Stockholders' equity, excluding the after-tax net unrealized
gain on securities available for sale $ 22,133,000
TIER II CAPITAL
Allowance for loan losses1 1,569,000
- ---------
Total risk-based capital $ 23,702,000
===============
Risk-weighted assets2 $ 125,077,000
= ===============
Average assets $ 217,010,000
===============
RATIOS
Tier I risk-based capital (minimum 4.0%) 17.7%
Total risk-based capital (minimum 8.0%) 19.0%
Leverage (minimum 4.0%) 10.2%
1 The allowance for loan losses is limited to 1.25% of
risk-weighted assets for the purpose of this calculation. 2
Risk-weighted assets have been reduced for excess allowance for
loan losses excluded from total risk-based
capital
10
E. Result of Operations
Net income for the first three months of 1998 was $510,000
compared to $501,000 for the same period in 1997. The Company's
annualized return on average assets was 0.94% compared to 0.99% in
the same period last year. The return on average stockholders'
equity was 9.11% and 9.51% for the first three months of 1998 and
1997, respectively.
Tax equivalent interest income increased $311,000 or 7.9% in
the first three months of 1998 compared to the same period in
1997. The yield on investment securities decreased 2 basis points
from 7.04% in 1997 to 7.02% in 1998.
Commercial loan and installment loan rates increased slightly.
The average yield on real estate mortgage loans, the major portion
of the loan portfolio, also increased 11 basis points to 9.07%
from 8.96% for the three month period. The overall yield on
interest earning assets was up 5 basis points from 8.22% for the
three months ended March 31, 1997 to 8.27% for the same period in
1998. The increase in interest income on earning assets was also
enhanced by an increase in average earning assets. The total
average balance for earning assets was $205,622,000 for the three
month period ended March 31, 1998 compared to $191,873,000 for the
same three month period in 1997.
The yield on interest bearing liabilities increased from 4.12%
for the three month period ended March 31, 1997 to 4.28% for the
same period in 1998. The overall net interest margin decreased 7
basis points from 4.86% in the first quarter of 1997 to 4.79% in
the first quarter of 1998.
Non-Interest Income and Expense
Non-Interest income for the first three months of 1998
increased $37,000 or 14.0% compared to the same period in 1997.
Changes in service charge policies accounted for most of the
increase.
Non-Interest expenses were $1,774,000 for the first three
months of 1998 compared to $1,692,000 for the same period in 1997,
an increase of $82,000 or 4.85%. This increase reflects a $96,000
increase in compensation and benefits costs, primarily due to
higher employee benefit cost and salary adjustments for the
existing staff to maintain the Company's competitive position.
Other categories of non-interest expense decreased by $14,000 for
the three months ended March 31, 1998.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JEFFERSONVILLE BANCORP
Date: 4/30/98
/s/
---------------------
K. Dwayne Rhodes
Treasurer and Chief Accounting Officer
12