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, 2000 Commission File Number: 0-19212
JEFFERSONVILLE BANCORP
(Exact name of Registrant as specified in its charter)
New York 22-2385448
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
P. O. Box 398, Jeffersonville, New York 12748
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 482-4000
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 May 2, 2000
$0.50 par value 1,524,129
INDEX TO FORM 10-Q
Page
Part 1
Item 1 Consolidated Interim Financial Statements (Unaudited)
Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999 1
Consolidated Statements of Income for the Three
Months Ended March 31, 2000 and 1999 2
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 3-4
Notes to Consolidated Interim Financial Statements 5-7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-16
Item 3 Quantitative and Qualitative Disclosures about Market Risk 16-18
Part 2
Item 1 Legal Proceedings NONE
Item 2 Changes in Securities and Use of Proceeds 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 19
Jeffersonville Bancorp and Subsidiary
Consolidated Balance Sheets
March 31, December 31, Dollar Change % Change
2000 1999
(Unaudited)
ASSETS
Cash and due from banks $ 13,102,000 $ 9,104,000 $3,998,000 43.91%
Securities available for sale, at fair value 87,365,000 88,847,000 (1,482,000) -1.67%
Securities held to maturity, estimated fair value of $4,769,000
in 2000 and $3,755,000 in 1999 6,045,000 4,730,000 1,315,000 27.80%
Loans, net of allowance for loan losses of $2,367,000
in 2000 and $2,336,000 in 1999 139,952,000 137,925,000 2,027,000 1.47%
Accrued interest receivable 2,025,000 1,726,000 299,000 17.32%
Premises and equipment, net 3,003,000 2,984,000 19,000 0.64%
Federal Home Loan Bank stock 1,628,000 1,628,000 0 0.00%
Other real estate owned 832,000 693,000 139,000 20.06%
Cash surrender value of bank-owned life insurance 6,685,000 6,265,000 420,000 6.70%
Other assets 3,359,000 3,058,000 301,000 9.84%
TOTAL ASSETS $263,996,000 $256,960,000 $7,036,000 2.74%
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand deposits (non-interest bearing) $ 34,510,000 $ 33,278,000 $1,232,000 3.70%
NOW and super NOW accounts 32,783,000 28,092,000 4,691,000 16.70%
Savings and insured money market deposits 61,880,000 58,382,000 3,498,000 5.99%
Time deposits 84,609,000 81,851,000 2,758,000 3.37%
TOTAL DEPOSITS 213,782,000 201,603,000 12,179,000 6.04%
Federal Home Loan Bank borrowings 20,000,000 20,000,000 0 0.00%
Short-term debt 6,026,000 11,981,000 (5,955,000) -49.70%
Accrued expenses and other liabilities 1,951,000 1,375,000 576,000 41.89%
TOTAL LIABILITIES 241,759,000 234,959,000 6,800,000 2.89%
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
authorized ; 1,593,948 shares and 1,596,978 shares
issued at March 31, 2000 and December 31,
1999, respectively 797,000 798,000 (1,000) -0.13%
Paid-in capital 8,170,000 8,232,000 (62,000) -0.75%
Treasury stock, at cost; 68,619 shares at March 31, 2000
and 68,619 shares at December 31, 1999 (206,000) (206,000)
Retained earnings 15,978,000 15,500,000 478,000 3.08%
Accumulated other comprehensive income(loss) (2,502,000) (2,323,000) (179,000) 7.71%
TOTAL STOCKHOLDERS' EQUITY 22,237,000 22,001,000 236,000 1.07%
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $263,996,000 $256,960,000 $7,036,000 2.74%
See accompanying notes to unaudited consolidated interim financial statements.
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited)
For the Three Months
Ended March 31,
2000 1999
INTEREST INCOME
Loan interest and fees $3,146,000 $3,023,000
Securities:
Taxable 1,189,000 1,161,000
Non-taxable 328,000 299,000
Federal funds sold 15,000 8,000
TOTAL INTEREST INCOME 4,678,000 4,491,000
INTEREST EXPENSE
Deposits 1,653,000 1,620,000
Federal Home Loan Bank borrowings 291,000 282,000
Other 39,000 18,000
TOTAL INTEREST EXPENSE 1,983,000 1,920,000
NET INTEREST INCOME 2,695,000 2,571,000
Provision for loan losses 75,000 75,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,620,000 2,496,000
NON-INTEREST INCOME
Service charges 314,000 226,000
Increase in cash surrender value
of bank-owned life insurance 86,000 87,000
Net security gains 0 7,000
Other non-interest income 157,000 107,000
TOTAL NON-INTEREST INCOME 557,000 427,000
NON-INTEREST EXPENSES
Salaries and wages 817,000 742,000
Employee benefits 388,000 303,000
Occupancy and equipment expenses 345,000 293,000
Other real estate owned expenses, net 78,000 53,000
Other non-interest expenses 550,000 499,000
TOTAL NON-INTEREST EXPENSES 2,178,000 1,890,000
Income before income taxes 999,000 1,033,000
Income taxes (247,000) (285,000)
NET INCOME $ 752,000 $ 748,000
Basic earnings per common share $ 0.49 $ 0.49
Average common shares outstanding 1,526,230 1,538,207
See accompanying notes to unaudited consolidated interim financial statements.
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months
Ended March 31,
2000 1999
OPERATING ACTIVITIES
Net income $ 752,000 $ 748,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for loan losses 75,000 75,000
Write down of other real estate owned 5,000 0
Gain on sales of other real estate owned (9,000) (30,000)
Depreciation and amortization 125,000 124,000
Net increase in cash surrender value
of bank-owned life insurance (70,000) (84,000)
Net security gains 0 (7,000)
Increase in accrued interest receivable (299,000) (370,000)
Increase in other assets (177,000) (232,000)
Increase(decrease) in accrued
expenses and other liabilities 576,000 (128,000)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 978,000 96,000
INVESTING ACTIVITIES
Proceeds from maturities and calls:
Securities available for sale 1,179,000 2,980,000
Securities held to maturity 265,000 238,000
Proceeds from sales of securities
available for sale 0 4,600,000
Purchases:
Securities available for sale 0 (10,720,000)
Securities held to maturity (1,580,000) (443,000)
Disbursements for loan originations, net of
principal collections (2,304,000) (6,895,000)
Purchase of bank-owned life insurance (350,000) 0
Purchases of Federal Home Loan Bank stock 0 (40,000)
Net purchases of premises and equipment (144,000) (110,000)
Proceeds from sales of other real estate owned 67,000 197,000
NET CASH USED IN
INVESTING ACTIVITIES (2,867,000) (10,193,000)
FINANCING ACTIVITIES
Net increase in deposits 12,179,000 6,908,000
Increase(decrease) in short-term debt (5,955,000) 2,887,000
Cash dividends paid (274,000) (223,000)
Purchases and retirements of common stock (63,000) (213,000)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 5,887,000 9,359,000
NET INCREASE(DECREASE) IN
CASH AND CASH EQUIVALENTS 3,998,000 (738,000)
Cash and cash equivalents at beginning of period 9,104,000 8,203,000
Cash and cash equivalents at end of period $13,102,000 $ 7,465,000
(Continued) (Continued)
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Cash Flows, Continued
(Unaudited)
For the Three Months
Ended March 31,
2000 1999
Supplemental imformation:
Cash paid for:
Interest $ 1,986,000 $ 1,900,000
Income taxes 65,000 276,000
Transfer of loans to other real estate owned 202,000 227,000
See accompanying notes to unaudited consolidated interim financial statements.
JEFFERSONVILLE BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
A. Financial Statement Presentation
In the opinion of Management of Jeffersonville Bancorp (the "Company"),
the accompanying unaudited consolidated interim financial statements contain
all adjustments necessary to present the financial position as of March 31,
2000 and December 31, 1999, and the results of operations and cash flows for
the three month periods ended March 31, 2000 and 1999. All adjustments are
normal and recurring. The accompanying unaudited consolidated interim
financial statements should be read in conjunction with the Company's
consolidated year-end financial statements, including notes thereto, which
are included in the 1999 Annual Report.
B. Earnings per Share
Basic earnings per share amounts were calculated for the three month
periods ended March 31, 2000 and 1999 based on weighted average common shares
outstanding of 1,526,230 and 1,538,207, respectively. There were no dilutive
securities during either period.
C. Comprehensive Income
Comprehensive income includes the reported net income adjusted for
certain items that are 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 and the net change during the
period in net unrealized gains and losses on securities available for sale.
The Company's accumulated other comprehensive income represents the net
unrealized gains and losses on securities available for sale at the balance
sheet date.
Comprehensive income for the three-month periods ended March 31, 2000
and 1999 was $573,000 and $498,000, respectively. The following summarizes
the components of the Company's other comprehensive income (loss) for each
period:
Three Months Ended March 31, 2000:
Net unrealized holding losses arising during the period,
net of tax (pre-tax amount of $303,000) ($179,000)
Reclassification adjustment for net gains realized in net
income during the period, net of tax (pre-tax amount of $0) 0
Other comprehensive loss (pre-tax amount of $303,000) $ (179,000)
Three Months Ended March 31, 1999:
Net unrealized holding losses arising during the period,
net of tax (pre-tax amount of $420,000) $(246,000)
Reclassification adjustment for net gains realized in net
income during the period, net of tax (pre-tax amount of $7,000) (4,000)
Other comprehensive loss (pre-tax amount of $427,000) $ (250,000)
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133. "Accounting for Derivative Instruments and Hedging Activities",
which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. During the second quarter for 1999,
the FASB issued SFAS No. 137. "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133" which deferred the effective date of SFAS No. 133 by one year from
fiscal quarters of fiscal years beginning after June 15, 1999 to fiscal
quarters of fiscal years beginning after June 15, 2000. Management is
currently evaluating the impact of this Statement on the Company's
consolidated financial statements.
Item 2: Management's Discussion and Analysis of Financial Conditions and
Results of Operations
A. Overview - Financial Condition
In addition to historical information, this report includes certain
forward-looking statements with respect to the financial condition, results
of operations and business of the Parent Company and the Bank based on
current management expectations. The Company's ability to predict results or
the effect of future plans and strategies is inherently uncertain and actual
results, performance or achievements could differ materially from those
management expectations. Factors that could cause future results to vary from
current management expectations include, but are not limited to, general
economic conditions, legislative and regulatory changes, monetary and fiscal
policies of the federal government, changes in tax policies, rates and
regulations, changes in interest rates, deposit flows, the cost of funds,
demand for loan products, demand for financial services, competition, changes
in the quality or composition of the Bank's loan and securities portfolios,
changes in accounting principles, and other economic, competitive,
governmental, and technological factors affecting the Company's operations,
markets, products, services and prices.
During the period from December 31, 1999 to March 31, 2000, total assets
increased $7,036,000 or 2.7%. Short-term debt (primarily Federal Home Loan
Bank borrowings) decreased 6,000,000 from $11,400,000 at December 31, 1999.
The funds were originally borrowed to enhance liquidity, eliminating the need
to sell higher yielding securities. Securities available for sale decreased
through maturities by $1,482,000 or 1.67%. Net loans increased from
$137,925,000 at year end 1999 to $139,952,000 at March 31, 2000, an increase
of $2,027,000 or 1.47%. Loan demand was modest during the first quarter.
Deposits increased from $201,603,000 at December 31, 1999 to
$213,782,000 at March 31, 2000, an increase of $12,179,000 or 6.0%. Growth
occurred in all deposit categories. Demand deposits increased from
$33,278,000 at December 31, 1999 to $34,510,000 at March 31, 2000, an
increase of $1,232,000 or 3.7%. These lower cost deposits are an important
offset to the cost of higher priced funds, and allowed the repayment of short
term borrowings.
Total stockholders' equity increased $236,000 or 1.07% from $22,001,000
at December 31, 1999 to $22,237,000 at March 31, 2000. This increase was the
result of net income of $752,000, less a decrease of $179,000 in accumulated
other comprehensive income, cash dividends of $274,000, and purchases and
retirements of common stock for $63,000.
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 $75,000 for the three
months ended March 31, 2000 compared to $75,000 for the three months ended
March 31, 1999. Total charge offs for the 2000 three month period were
$91,000 compared to $101,000 for the same period in the prior year, while
recoveries increased from $38,000 for the 1999 period to $47,000 for the 2000
period. The amounts represent a net charge-off of $44,000 in the first
quarter of 2000 verses a net charge-off of $63,000 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 for loan losses is adequate.
Changes in the allowance for loan losses are summarized as follows for the
periods ended March 31:
March 31, December 31,
2000 1999
Balance at beginning of period $2,336,000 $2,310,000
Provision for loan losses 75,000 300,000
Loans charged off (91,000) (445,000)
Recoveries 47,000 171,000
Balance at end of period $2,367,000 $2,336,000
Net (charge-offs) as a percentage
of average outstanding loans (0.12%) (0.20%)
Allowance for loan losses to:
Total loans 1.66% 1.67%
Total non-performing loans 89.1% 123.6%
C. Non Accrual and Past Due Loans
Non-performing loans are summarized as follows at March 31:
March 31, December 31,
2000 1999
Non-accrual loans $ 919,000 $ 790,000
Loans past due 90 days or more and still accruing interest 1,737,000 1,100,000
Total non-performing loans $2,656,000 $1,890,000
Non-performing loans as a percentage of total loans 1.9% 1.3%
As of March 31, 2000 and 1999, the recorded investment in loans
considered to be impaired under Statement of Financial Accounting Standards
("SFAS") No.114 totaled $670,000 and $714,000, 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
In January 2000, the Board of Directors allocated $1,000,000 for the
repurchase and retirement of common stock on the open market. The cost of
repurchased shares through March 31, 2000 totalled $63,000.
Under the Federal Reserve Bank's risk-based capital rules, the Company's
Tier I risk-based capital was 16.7% and total risk-based capital was 17.9% of
risk-weighted assets at March 31, 2000. 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 9.6% at March 31, 2000 is well above the 4.0% minimum
regulatory requirement.
The following table shows the Company's actual capital measurements compared
to the minimum regulatory requirements at March 31, 2000.
TIER I CAPITAL
Stockholders' equity, excluding the after-tax
net unrealized loss on securities available for sale $ 24,738,000
TIER II CAPITAL
Allowance for loan losses 1 1,859,000
Total risk-based capital $ 26,597,000
Risk-weighted assets 2 $148,215,000
Average assets $258,491,000
RATIOS
Tier I risk-based capital (minimum 4.0%) 16.7%
Total risk-based capital (minimum 8.0%) 17.9%
Leverage (minimum 4.0%) 9.6%
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
E. Result of Operations
Net income for the first three months of 2000 increased by $4,000 to
$752,000 compared to $748,000 for the same period in 1999. Increases of
$138,000 in net interest income and $167,000 in non-interest income were
partially offset by an increase of $288,000 in non-interest expenses. The
Company's annualized return on average assets was 1.2% in the current quarter
compared to 1.2% in the same period last year. The return on average
stockholders' equity was 13.8% and 12.7% for the first three months of 2000
and 1999, respectively.
Tax equivalent interest income increased $72,000 or 4.5% in the first
three months of 2000 compared to the same period in 1999. The yield on
investment securities increased 19 basis points from 6.59% in 1999 to 6.78%
in 2000. The yield on the total loan portfolio decreased by 5 basis in the
quarter ended March 31, 2000 compared to the first quarter of 1999.
Commercial Loan and Home Equity rates increased slightly. The average yield
on real estate mortgage loans, the major portion of the loan portfolio,
decreased 4 basis points to 8.47% from 8.51% for the three month period. The
overall yield on interest earning assets increased 6 basis points from 7.96%
for the three months ended March 31, 1999 to 8.02% for the same period in
2000. The increase in interest income on earning assets for the first quarter
resulted from an increase in average earning assets. The total average
balance for earning assets was $241,735,000 for the three month period ended
March 31, 2000 compared to $233,316,000 for the same three month period in
1999, an increase of $8,419,000 or 3.6%. An increase in loans of $6,406,000
accounted for 76.1% of this increase.
The yield on interest bearing liabilities remained static for the three
month period ended March 31, 1999 as compared to the same period in 2000. The
overall net interest margin increased 7 basis points from 4.67% in the first
quarter of 1999 to 4.74% in the first quarter of 2000. Other non-interest
income increased by $20,000 due to the introduction of the new debit card
program last year.
Non-interest expenses were $2,178,000 for the first three months of 2000
compared to $1,890,000 for the same period in 1999, an increase of $288,000
or 15.0%. This increase reflects a $160,000 increase in compensation and
benefits costs, primarily due to higher employee benefit costs and salary
adjustments related to the addition of the Wurtsboro and Wal*Mart branches .
Similarly other categories of non-interest expense increased by $128,000 for
the three months ended March 31, 2000 resulting from the additional two new
branches.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss from adverse changes in market prices
and interest rates. The subsidiary Bank's market risk arises primarily from
interest rate risk inherent in its lending and deposit taking activities.
Although the subsidiary Bank manages other risks, as in credit and liquidity
risk, in the normal course of its business, management considers interest
rate risk to be its most significant market risk and could potentially have
the largest material effect on the subsidiary Bank's financial condition and
results of operation. The subsidiary Bank does not currently have a trading
portfolio or use derivative to manage market and interest rate risk.
The subsidiary Bank's interest rate risk management is the
responsibility of the Asset/Liability Management Committee (ALCO), which
reports to the Board of Directors. The Committee, comprised of senior
management, has developed policies to measures, manage and monitor interest
rate risk. Interest rate risk arises from a variety of factors, including
differences in the timing between the contractual maturity or repricing of
the subsidiary Bank's assets and liabilities. For example, the subsidiary
Bank's net interest income is affected by changes in the level of market
interest rates as the repricing characteristics of its loans and other assets
do not necessarily match those of its deposits, other borrowings and capital.
In managing exposure, the subsidiary Bank uses interest rate sensitivity
models that measure both net gap exposure and earnings at risk. The ALCO
monitors the volatility of its net interest income by managing the
relationship of interest rate sensitive assets to interest rate sensitive
liabilities. The committee utilizes a simulation model to analyze net income
sensitivity to movements in interest rates. The simulation model projects net
interest income based on both an immediate rise or fall in interest rates of
300 basis point shock over a twelve month period. The model is based on the
actual maturity and repricing characteristics of interest rate assets and
liabilities. The model incorporates assumptions regarding the impact of
changing interest rates on the repayment rate of certain assets and
liabilities.
Another tool used to measure interest rate sensitivity is the cumulative
gap analysis. The cumulative gap represents the net position of assets and
liabilities subject to repricing in specified time periods. Deposit accounts
without specified maturity dates are modeled based on historical run-off
characteristics of these products in periods of rising rates. At March 31,
200 the Company had a negative one year cumulative gap position.
The cumulative gap analysis is merely a snapshot a particular date and
does not fully reflect that certain assets and liabilities may have similar
repricing periods but may in fact reprice at different times within the
period and at differing rate levels. Management, therefore, uses the interest
rate sensitivity gap only as a general indicator of the potential effects of
interest rate changes of net interest income. Management believes that the gap
analysis is a useful tool only when used in conjunction with its simulation
model and other tools for analyzing and managing interest rate risk.
As of March 31, 2000 the subsidiary Bank was in a liability sensitive
position, which means that more liabilities are scheduled to mature or
reprice within the next year than assets. The cumulative interest rate
sensitivity gap as of March 31, 2000 was1.47% of total assets
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
______________________
John M. Riley
Treasurer
May 11,2000