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, 2004 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 (845) 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 by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.)
Yes No [X]
Number of Shares Outstanding
Class of Common Stock as of May 13, 2004
$0.50 par value 4,434,321
INDEX TO FORM 10-Q
Page
Part 1 FINANCIAL INFORMATION
Item 1 Consolidated Interim Financial Statements (Unaudited)
Consolidated Balance Sheets at
March 31, 2004 and December 31, 2003 1
Consolidated Statements of Income for the Three
Months Ended March 31, 2004 and 2003 2
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2004 and 2003 3
Notes to Unaudited Consolidated Interim
Financial Statements 4-6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-14
Item 3 Quantitative and Qualitative Disclosures
about Market Risk 15
Item 4 Controls & Procedures 15
Part 2 OTHER INFORMATION
Item 1 Legal Proceedings NONE
Item 2 Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity 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 17
Signatures 18
Jeffersonville Bancorp and Subsidiary
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2004 2003
------------ ------------
ASSETS
Cash and due from banks $ 15,909,000 $ 15,992,000
Securities available for sale, at fair value 113,375,000 115,564,000
Securities held to maturity, estimated fair value of $5,936
at March 31, 2004 and $5,947 at December 31, 2003 5,809,000 5,916,000
Loans, net of allowance for loan losses of $3,499
at March 31, 2004 and $3,569 at December 31, 2003 199,872,000 193,106,000
Accrued interest receivable 1,939,000 2,301,000
Premises and equipment, net 3,075,000 3,063,000
Federal Home Loan Bank stock 1,650,000 1,600,000
Other real estate owned 43,000 43,000
Cash surrender value of bank-owned life insurance 12,387,000 12,268,000
Other assets 2,351,000 2,351,000
------------ ------------
TOTAL ASSETS $356,410,000 $352,204,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand deposits (non-interest bearing) $ 58,523,000 $ 59,189,000
NOW and super NOW accounts 39,955,000 38,290,000
Savings and insured money market deposits 84,719,000 80,768,000
Time deposits 103,822,000 101,980,000
------------ ------------
TOTAL DEPOSITS 287,019,000 280,227,000
Federal Home Loan Bank borrowings 27,000,000 27,000,000
Short-term debt 268,000 5,521,000
Accrued expenses and other liabilities 4,490,000 3,670,000
------------ ------------
TOTAL LIABILITIES 318,777,000 316,418,000
------------ ------------
Stockholders' equity:
Series A preferred stock, no par value;
2,000,000 shares authorized, none issued -- --
Common stock, $0.50 par value; 11,250,000 shares
authorized ; 4,767,786 shares
issued at March 31, 2004 and December 31, 2003 2,384,000 2,384,000
Paid-in capital 6,483,000 6,483,000
Treasury stock, at cost; 333,465 shares at March 31, 2004
and December 31, 2003 (1,108,000) (1,108,000)
Retained earnings 29,108,000 27,947,000
Accumulated other comprehensive income 766,000 80,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 37,633,000 35,786,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $356,410,000 $352,204,000
============ ============
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,
2004 2003
----------- ----------
INTEREST INCOME
Loan interest and fees $ 3,680,000 $3,450,000
Securities:
Taxable 946,000 1,031,000
Non-taxable 509,000 438,000
Federal funds sold 2,000 11,000
----------- ----------
TOTAL INTEREST INCOME 5,137,000 4,930,000
----------- ----------
INTEREST EXPENSE
Deposits 689,000 732,000
Federal Home Loan Bank borrowings 296,000 323,000
Other 5,000 3,000
----------- ----------
TOTAL INTEREST EXPENSE 990,000 1,058,000
----------- ----------
NET INTEREST INCOME 4,147,000 3,872,000
Provision for loan losses 90,000 150,000
----------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,057,000 3,722,000
----------- ----------
NON-INTEREST INCOME
Service charges 541,000 486,000
Earnings from cash surrender value
of bank-owned life insurance 119,000 151,000
Net security gains -- 149,000
Other non-interest income 200,000 208,000
----------- ----------
TOTAL NON-INTEREST INCOME 860,000 994,000
----------- ----------
NON-INTEREST EXPENSES
Salaries and employee benefits 1,645,000 1,484,000
Occupancy and equipment expenses 450,000 467,000
Other real estate owned (income) expenses, net (9,000) 36,000
Other non-interest expenses 698,000 702,000
----------- ----------
TOTAL NON-INTEREST EXPENSES 2,784,000 2,689,000
----------- ----------
Income before income tax expense 2,133,000 2,027,000
Income tax expense 573,000 601,000
----------- ----------
NET INCOME $ 1,560,000 $1,426,000
=========== ==========
Basic earnings per common share $ 0.35 $ 0.32
=========== ==========
Average common shares outstanding 4,434,000 4,434,000
=========== ==========
Share and per share data has been restated for a 3 for 1 stock split in 2003.
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,
2004 2003
---------- ----------
OPERATING ACTIVITIES
Net income $1,560,000 $1,426,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for loan losses 90,000 150,000
Net gain on sales of other real estate owned -- (28,000)
Depreciation and amortization 153,000 162,000
Net earnings from cash surrender value
of bank-owned life insurance (119,000) (151,000)
Net security gains -- (149,000)
Decrease in accrued interest receivable 362,000 242,000
(Increase)decrease in other assets (472,000) 280,000
Increase in accrued
expenses and other liabilities 820,000 309,000
---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,394,000 2,241,000
---------- ----------
INVESTING ACTIVITIES
Proceeds from maturities and calls:
Securities available for sale 8,047,000 16,548,000
Securities held to maturity 250,000 418,000
Proceeds from sales of securities available for sale -- 11,900,000
Purchases :
Securities available for sale (4,700,000) (10,100,000)
Securities held to maturity (143,000) (95,000)
Disbursements for loan originations, net of
principal collections (6,856,000) (3,901,000)
Purchase of Federal Home Loan Bank stock (200,000) --
Call of Federal Home Loan Bank stock 150,000 400,000
Net purchases of premises and equipment (165,000) (102,000)
Proceeds from sales of other real estate owned -- 74,000
---------- ----------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (3,617,000) 15,142,000
---------- ----------
FINANCING ACTIVITIES
Net increase in deposits 6,792,000 1,316,000
Decrease in short-term debt (5,253,000) (6,137,000)
Cash dividends paid (399,000) (325,000)
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 1,140,000 (5,146,000)
---------- ----------
NET (DECREASE)INCREASE IN
CASH AND CASH EQUIVALENTS (83,000) 12,237,000
Cash and cash equivalents at beginning of period 15,992,000 12,874,000
---------- ----------
Cash and cash equivalents at end of period $15,909,000 $25,111,000
=========== ===========
Supplemental imformation:
Cash paid for:
Interest $ 997,000 $ 1,105,000
Income taxes 253,000 43,000
See accompanying notes to unaudited consolidated interim financial
statements.
3
JEFFERSONVILLE BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)
A. Financial Statement Presentation
The accompanying unaudited interim consolidated financial statements
include the accounts of Jeffersonville Bancorp (the "Company") and its
wholly owned subsidiary, The First National Bank of Jeffersonville
(collectively, the Company and its subsidiary are referred to herein as
the Company). In the opinion of Management of the Company, the
accompanying unaudited consolidated interim financial statements contain
all adjustments necessary to present the financial position as of March
31, 2004 and December 31, 2003, the results of operations for the three
month periods ended March 31, 2004 and 2003, and the cash flows for the
three month periods ended March 31, 2004 and 2003. All adjustments are
normal and recurring. The accompanying unaudited consolidated interim
financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X and should be read in conjunction with the
Company's consolidated year-end financial statements, including notes
thereto, which are included in the 2003 Annual Report on Form 10-K.
B. Earnings per Share
Basic earnings per share amounts were calculated for the three month
periods ended March 31, 2004 and 2003 based on weighted average common
shares outstanding of 4,434,321. There were no dilutive securities
during any of the periods. Earnings per share were $0.35 for the quarter
ended March 31, 2004, as compared to $0.32 per share for the same period
in 2003.
C. Comprehensive Income
Comprehensive income for the three-month periods ended March 31, 2004
and 2003 was $2,246,000 and $1,018,000, respectively. The following
summarizes the components of the Company's other comprehensive income
(loss) for the three-month periods:
Three Months Ended March 31, 2004
Net unrealized holding gains arising
during the period, net of tax
(pre-tax amount of $1,158,000) $ 686,000
Reclassification adjustment for net gains
realized in net income during the period,
net of tax (pre-tax amount of $0) --
----------------
Other comprehensive income $ 686,000
================
Three Months Ended March 31, 2003
Net unrealized holding losses arising
during the period, net of tax
(pre-tax amount of $541,000) $ (320,000)
Reclassification adjustment for net gains
realized in net income during the period,
net of tax (pre-tax amount of $149,000) $ (88,000)
----------------
Other comprehensive loss $ (408,000)
================
4
D. New Accounting Pronouncements
In December 2003, the FASB issued a revision to SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits
- an Amendment of FASB Statements No. 87, 88, and 106". This statement
prescribes employers' disclosures about pension plans and other
postretirement benefit plans; it does not change the measurement or
recognition of those plans. The statement retains and revises the
disclosure requirements contained in the original Statement 132. It also
requires additional disclosures about the assets, obligations, cash
flows, and net periodic benefit cost of defined benefit pension plans
and other postretirement benefit plans. This statement generally is
effective for fiscal years ending after December 15, 2003. The
interim-period disclosures required by this statement are effective for
interim periods beginning after December 15, 2003. The Company's
disclosures in the December 31, 2003 and March 31, 2004 consolidated
financial statements incorporate the requirements of the revised
Statement 132.
E. Pension and Other Postretirement Benefits
The Company has a noncontributory defined benefit pension plan covering
substantially all of its employees. The Company also sponsors
postretirement medical and life insurance benefit plans for retirees in
the pension plan. The components of the net periodic benefit cost for
these plans were as follows for the three month periods ended March 31:
Pension benefits Postretirement benefits
2004 2003 2004 2003
Service cost $ 67,000 $ 63,000 $ 61,000 $38,000
Interest cost 94,000 85,000 52,000 37,000
Expected return on plan assets (80,000) (69,000) -- --
Amortization of prior service cost 6,000 6,000 -- --
Amortization of transition (asset) obligation (1,000) (1,000) 4,000 4,000
Recognized net actuarial loss 33,000 27,000 15,000 2,000
-------- -------- -------- -------
Net periodic benefit cost $119,000 $111,000 $132,000 $81,000
======== ======== ======== =======
The Company previously disclosed in its consolidated financial
statements for the year ended December 31, 2003, that it expected to
contribute $488,000 to its pension plan and $80,000 to its other
postretirement benefits plan in 2004. As of March 31, 2004, no
contributions have been made to the pension plan and $10,000 of
contributions have been made to the other postretirement benefits plan.
5
F. Stock Split
On May 14, 2003 the Board of Directors of the Company declared a
three-for-one stock split which was distributed on June 17, 2003. All
share and per share data have been restated to reflect the split.
G. Guarantees
FASB Interpretation No. 45 (FIN No. 45), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others; an interpretation of FASB Statements No. 5, 57,
and 107 and rescission of FASB Interpretation No. 34" requires certain
disclosures and liability recognition for the fair value at issuance of
guarantees that fall within its scope. Under FIN No. 45, the Company
does not issue any guarantees that would require liability recognition
or disclosure, other than its standby letters of credit. Standby letters
of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. Standby letters of
credit generally arise in connection with lending relationships. The
credit risk involved in issuing these instruments is essentially the
same as that involved in extending loans to customers. Contingent
obligations under standby letters of credit totaled approximately
$640,000 at March 31, 2004 and represent the maximum potential future
payments the Company could be required to make. Typically, these
instruments have terms of twelve months or less and expire unused;
therefore, the total amounts do not necessarily represent future cash
requirements. Each customer is evaluated individually for
creditworthiness under the same underwriting standards used for
commitments to extend credit and on-balance sheet instruments. Company
policies governing loan collateral apply to standby letters of credit at
the time of credit extension. Loan-to-value ratios are generally
consistent with loan-to-value requirements for other commercial loans
secured by similar types of collateral. The fair value of the Company's
standby letters of credit at March 31, 2004 was insignificant.
6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward Looking Statements
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 Company and the Bank based on
current management's 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.
A. Overview - Financial Condition
During the period from December 31, 2003 to March 31, 2004, total assets
increased $4,206,000 or 1.2%. Decreases in cash and due from banks,
securities available for sale, securities held to maturity and accrued
interest receivable were offset by increases in net loans, FHLB stock
and cash surrender value of bank-owned life insurance. Securities
available for sale decreased from $115,564,000 at year end 2003 to
$113,375,000 at March 31, 2004, a decrease of $2,189,000 or 1.9%. Net
loans increased from $193,106,000 at year end 2003 to $199,872,000 at
March 31, 2004, an increase of $6,766,000 or 3.5%.
Deposits increased from $280,227,000 at December 31, 2003 to
$287,019,000 at March 31, 2004, an increase of $6,792,000 or 2.4%.
Demand deposits decreased from $59,189,000 at December 31, 2003 to
$58,523,000 at March 31, 2004, a decrease of $666,000 or 1.1%. These
lower cost deposits are an important offset to the cost of higher priced
funds. Savings deposits increased from $80,768,000 at December 31, 2003
to $84,719,000 at March 31, 2004, an increase of $3,951,000 or 4.9%.
7
Total stockholders' equity increased $1,847,000 or 5.2% from $35,786,000
at December 31, 2003 to $37,633,000 at March 31, 2004. This increase was
the result of net income of $1,560,000 less cash dividends of $399,000
and a $686,000 increase in accumulated other comprehensive income.
Loan Portfolio Composition:
March 31, 2004 December 31, 2003
Amount Percent Amount Percent
(in (in
thousands) thousands)
REAL ESTATE LOANS
Residential 79,775 39.0% 78,339 39.6%
Commercial 63,884 31.3% 59,799 30.2%
Home Equity 18,843 9.2% 18,337 9.3%
Farm Land 2,845 1.4% 2,872 1.4%
Construction 3,969 1.9% 4,102 2.1%
------- ------ -------- ------
169,316 82.8% 163,449 82.6%
------- ------ -------- ------
OTHER LOANS
Commercial Loans 18,843 9.2% 17,157 8.7%
Consumer Installment Loans 14,579 7.1% 15,350 7.7%
Other Consumer Loans 1,312 0.7% 1,488 0.8%
Agriculture 379 0.2% 403 0.2%
------- ------ -------- ------
35,113 17.2% 34,398 17.4%
------- ------ -------- ------
Total Loans 204,429 100.0% 197,847 100.0%
------- ------ -------- ------
Unearned Discounts (1,058) (1,172)
Allowance For Loan Losses (3,499) (3,569)
------- --------
Total Loans, Net 199,872 193,106
======= =======
B. Allowance for Loan Losses
The allowance for loan losses reflects management's assessment of the
risk inherent in the loan portfolio, which includes factors such as the
general state of the economy and past loan experience. The provision for
loan losses was $90,000 for the three months ended March 31, 2004
compared to $150,000 for the three months ended March 31, 2003. Total
charge offs for the three month period ended March 31, 2004 were
$194,000 compared to $96,000 for the same period in the prior year,
while recoveries decreased from $46,000 for the 2003 period to $34,000
for the 2004 period. The amounts represent net charge offs of $160,000
in the first quarter of 2004 versus net charge-offs of $50,000 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.
8
Changes in the allowance for loan losses are summarized as follows for
the three month periods ended March 31:
2004 2003
---------- ----------
Balance at beginning of period $3,569,000 $3,068,000
Provision for loan losses 90,000 150,000
Loans charged off (194,000) (96,000)
Recoveries 34,000 46,000
---------- ----------
Balance at end of period $3,499,000 $3,168,000
========== ==========
Annualized net charge offs as a
percentage of average outstanding loans 0.32% 0.11%
Allowance for loan losses to:
Total loans 1.72% 1.80%
Total non-performing loans 233.6% 143.9%
C. Non Accrual and Past Due Loans
The Company places a loan on nonaccrual status when collectability of
principal or interest is doubtful, or when either principal or interest
is 90 days or more past due and the loan is not well secured and in the
process of collection. Interest payments received on nonaccrual loans
are applied as a reduction of the principal balance when concern exists
as to the ultimate collection of principal.
Non-performing loans are summarized as follows at March 31:
2004 2003
---------- ----------
Non-accrual loans $1,028,000 $ 930,000
Loans past due 90 days or more and still accruing interest 470,000 1,272,000
---------- ----------
Total non-performing loans 1,498,000 2,202,000
---------- ----------
Non-performing loans as a percentage of total loans 0.74% 1.25%
---------- ----------
As of March 31, 2004 and 2003, the recorded investment in loans
considered to be impaired under Statement of Financial Accounting
Standards ("SFAS") No.114 totaled $660,000 and $772,000, 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.
9
D. Capital
Under the Federal Reserve Bank's risk-based capital rules, the Company's
Tier I risk-based capital was 17.1% and total risk-based capital was
18.3% of risk-weighted assets at March 31, 2004. 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 10.5% at March 31,
2004 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, 2004.
TIER I CAPITAL
Stockholders' equity, excluding accumulated
other comprehensive income $ 36,867,000
TIER II CAPITAL
Allowance for loan losses(1) 2,683,000
------------
Total risk-based capital $ 39,550,000
------------
Risk-weighted assets(2) $216,120,000
------------
Average assets $351,479,000
------------
RATIOS
Tier I risk-based capital (minimum 4.0%) 17.1%
Total risk-based capital (minimum 8.0%) 18.3%
Leverage (minimum 4.0%) 10.5%
(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
Consolidated Average Balance Sheet as of March 31, 2004 Year to Date
(Dollars in Thousands, Fully Taxable Equivalent)
AVERAGE % OF INTEREST AVERAGE
CONSOLIDATED AVERAGE BALANCE SHEET BALANCE ASSETS EARNED/PAID YIELD/RATE
ASSETS:
INVESTMENT SECURITIES <F1>
TAXABLE SECURITIES 70,835 20.15% 946 5.34%
TAX EXEMPT SECURITIES 50,139 14.27% 771 6.15%
-------- ------- ------
TOTAL SECURITIES 120,974 34.42% 1,717 5.68%
-------- ------- ------
SHORT TERM INVESTMENTS 672 0.19% 2 1.19%
LOANS(NET OF UNEARNED DISCOUNT)
REAL ESTATE MORTGAGES 145,168 41.30% 2,619 7.22%
HOME EQUITY LOANS 18,385 5.23% 285 6.20%
TIME AND DEMAND LOANS 17,063 4.86% 267 6.26%
INSTALLMENT LOANS 16,986 4.83% 431 10.15%
OTHER LOANS 2,949 0.84% 78 10.58%
-------- ------- ------
TOTAL LOANS <F3> 200,551 57.06% 3,680 7.34%
-------- ------- ------
TOTAL INTEREST EARNING ASSETS 322,197 91.67% 5,399 6.70%
-------- ------- ------
ALLOWANCE FOR LOAN LOSSES (3,486) (0.99)%
NET UNREALIZED GAINS AND LOSSES ON PORTFOLIO 1,502 0.43%
CASH AND DUE FROM BANKS(DEMAND) 12,856 3.66%
FIXED ASSETS(NET) 3,064 0.87%
BANK OWNED LIFE INSURANCE 12,317 3.50%
OTHER ASSETS 3,029 0.86%
======== =======
TOTAL ASSETS $351,479 100.00%
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
NOW AND SUPER NOW ACCOUNTS $ 42,442 12.08% 32 0.30%
SAVINGS AND INSURED MONEY MARKET 79,837 22.71% 120 0.60%
TIME DEPOSITS 102,322 29.11% 537 2.10%
-------- ------- ------
TOTAL INTEREST BEARING DEPOSITS 224,601 63.90% 689 1.23%
FEDERAL FUNDS PURCHASED AND
OTHER SHORT TERM DEBT 2,041 0.58% 5 0.98%
LONG TERM DEBT 27,000 7.68% 296 4.39%
-------- ------- ------
TOTAL INTEREST BEARING LIABILITIES 253,642 72.16% 990 1.56%
-------- ------- ------
DEMAND DEPOSITS 58,017 16.51%
OTHER LIABILITIES 3,089 0.88%
--------
TOTAL LIABILITIES 314,748 89.55%
STOCKHOLDERS EQUITY 36,731 10.45%
======== =======
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $351,479 100.00%
======== =======
------
NET INTEREST INCOME $4,409
======
NET INTEREST SPREAD 5.14%
======
NET INTEREST MARGIN <F2> 5.47%
======
<FN>
<F1> Yields on securities available for sale are based on amortized costs.
<F2> Computed by dividing net interest income by average interest earning assets.
<F3> For purpose of this schedule, interest in nonaccruing loans has been
included only to the extent reflected in the consolidated income
statement. However, the nonaccrual loan balances are included in the
average amount outstanding.
</FN>
11
Consolidated Average Balance Sheet as of March 31, 2003 Year to Date
(Dollars in Thousands, Fully taxable Equivalent)
AVERAGE % OF INTEREST AVERAGE
CONSOLIDATED AVERAGE BALANCE SHEET BALANCE ASSETS EARNED/PAID YIELD/RATE
ASSETS:
INVESTMENT SECURITIES <F1>
TAXABLE SECURITIES 75,490 23.38% 1,031 5.46%
TAX EXEMPT SECURITIES 37,977 11.76% 730 7.69%
-------- ------- ------
TOTAL SECURITIES 113,467 35.14% 1,761 6.21%
-------- ------- ------
SHORT TERM INVESTMENTS 4,711 1.46% 11 0.93%
LOANS(NET OF UNEARNED DISCOUNT)
REAL ESTATE MORTGAGES 124,711 38.63% 2,472 7.93%
HOME EQUITY LOANS 15,196 4.71% 247 6.50%
TIME AND DEMAND LOANS 14,428 4.47% 209 5.79%
INSTALLMENT LOANS 17,219 5.33% 449 10.43%
OTHER LOANS 2,655 0.82% 73 11.00%
-------- ------- ------
TOTAL LOANS <F3> 174,209 53.96% 3,450 7.92%
-------- ------- ------
TOTAL INTEREST EARNING ASSETS 292,387 90.56% 5,222 7.14%
-------- ------- ------
ALLOWANCE FOR LOAN LOSSES (3,097) (0.96)%
NET UNREALIZED GAINS AND LOSSES ON PORTFOLIO 3,205 0.99%
CASH AND DUE FROM BANKS(DEMAND) 11,842 3.67%
FIXED ASSETS(NET) 3,217 1.00%
BANK OWNED LIFE INSURANCE 11,802 3.66%
OTHER ASSETS 3,475 1.08%
======== =======
TOTAL ASSETS $322,831 100.00%
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
NOW AND SUPER NOW ACCOUNTS $ 37,990 11.77% 44 0.46%
SAVINGS AND INSURED MONEY MARKET 78,897 24.44% 145 0.74%
TIME DEPOSITS 87,506 27.11% 543 2.48%
-------- ------- ------
TOTAL INTEREST BEARING DEPOSITS 204,393 63.30% 732 1.43%
FEDERAL FUNDS PURCHASED AND
OTHER SHORT TERM DEBT 1,015 0.31% 3 1.18%
LONG TERM DEBT 30,000 9.29% 323 4.31%
-------- ------- ------
TOTAL INTEREST BEARING LIABILITIES 235,408 72.92% 1,058 1.80%
-------- ------- ------
DEMAND DEPOSITS 51,722 16.02%
OTHER LIABILITIES 3,100 0.96%
--------
TOTAL LIABILITIES 290,230 89.90%
STOCKHOLDERS EQUITY 32,601 10.10%
======== =======
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $322,831 100.00%
======== =======
------
NET INTEREST INCOME $4,164
======
NET INTEREST SPREAD 5.35%
=====
NET INTEREST MARGIN <F2> 5.70%
=====
<FN>
<F1> Yields on securities available for sale are based on amortized costs.
<F2> Computed by dividing net interest income by average interest earning assets.
<F3> For purpose of this schedule, interest in nonaccruing loans has been
included only to the extent reflected in the consolidated income
statement. However, the nonaccrual loan balances are included in the
average amount outstanding.
</FN>
12
E. Result of Operations
Net income for the first three months of 2004 increased by $134,000 to
$1,560,000 compared to $1,426,000 for the same period in 2003. This
overall increase was primarily due to an increase of $275,000 in net
interest income and a $60,000 decrease in the provision for loan losses
which was partially offset by a $134,000 decrease in the non-interest
income and an increase of $95,000 in non-interest expenses. The
Company's annualized return on average assets was 1.7% in the current
quarter compared to 1.8% in the same period last year. The annualized
return on average stockholders' equity was 17.0% and 17.5% for the first
three months of 2004 and 2003, respectively.
Tax equivalent interest income increased $177,000 or 3.4% in the first
three month's of 2004 compared to the same period in 2003, primarily due
to an increase in average earning assets partially offset by a decrease
in asset yields. The yield on investment securities decreased 53 basis
points from 6.21% in 2003 to 5.68% in 2004 in response to the decrease
in overall market interest rates. The yield on the total loan portfolio
decreased by 58 basis points in the quarter ended March 31, 2004
compared to the first quarter of 2003. Several loan category rates
decreased. The average yield on real estate mortgage loans, the major
portion of the loan portfolio, decreased 71 basis points for the three
month period primarily due to the re-pricing of variable rate loans and
the origination of fixed rate loans at lower interest rates which is
consistent with the reduction in market interest rates since the
corresponding three-month period in 2003. The overall yield on interest
earning assets decreased 44 basis points from 7.14% for the three months
ended March 31, 2003 to 6.70% for the same period in 2004. The total
average balance for earning assets was $322,197,000 for the three month
period ended March 31, 2004 compared to $292,387,000 for the same three
month period in 2003, an increase of $29,810,000 or 10.2%. An increase
in average loans of $26,342,000 accounted for the majority of this
increase.
The declining interest rate environment enabled the Company to re-price
its deposits which resulted in a 24 basis point reduction in the yield
on interest bearing liabilities for the three month period ended March
31, 2004 as compared to the same period in 2003. The overall net
interest margin decreased 23 basis points from 5.70% in the first
quarter of 2003 to 5.47% in the first quarter of 2004.
The provision for loan losses was $90,000 thousand for the three months
ended March 31, 2004, a decrease of $60,000 compared to $150,000 for the
three months ended March 31, 2003. This decrease was principally due to
improved asset quality and lower delinquency rates.
13
Non-interest income was $860,000 for the first three months of 2004
compared to $994,000 for the same period in 2003, a decrease of $134,000
or 13.5%. This decrease was primarily due to the fact that no net
security gains were realized by the Company during the first quarter of
2004. In the first three months of 2003, the Company realized $149,000
in net security gains from sales of $11,100,000 of callable agency
securities. In addition, a $32,000 decrease in earnings from the cash
surrender value of bank-owned life insurance contributed to the overall
decline in non-interest income. These decreases were partially offset by
a $55,000 increase in service charges.
Non-interest expenses were $2,784,000 for the first three months of 2004
compared to $2,689,000 for the same period in 2003, an increase of
$95,000 or 3.5%. This increase reflects a $161,000 increase in salaries
and employee benefits costs due to normal salary increases and increased
costs for health care benefits. All other expense categories combined
decreased by $66,000.
Income tax expense was $573,000 was for the three month period ended
March 31, 2004 compared to $601,000 for the corresponding period in
2003, a decrease of $28,000 or 4.7%. The Company's effective tax rates
were 26.9% and 29.6% for the three month periods ended March 31, 2004
and 2003, respectively. This decrease was primarily due to an increase
in tax-exempt securities.
F. Critical Accounting Policies
Management of the Company considers the accounting policy relating to
the allowance for loan losses to be a critical accounting policy given
the inherent uncertainty in evaluating the levels of the allowance
required to cover credit losses in the portfolio and the material effect
that such judgments can have on the results of operations. The allowance
for loan losses is maintained at a level deemed adequate by management
based on an evaluation of such factors as economic conditions in the
Company's market area, past loan loss experience, the financial
condition of individual borrowers, and underlying collateral values
based on independent appraisals. While management uses available
information to recognize losses on loans, future additions to the
allowance for loan losses may be necessary based on changes in economic
conditions and values of real estate particularly in Sullivan County. In
the event that the casino gambling proposals do not progress, collateral
underlying certain real estate loans could lose value which could lead
to future additions to the allowance for loan losses. In addition,
Federal regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for loan losses and
may require the Company to recognize additions to the allowance based on
their judgments about information available to them at the time of their
examination, which may not be currently available to management. There
are no new accounting standards that are expected to have a material
impact on the Company's consolidated financial statements.
14
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's most significant form of market risk is interest rate
risk, as the majority of the assets and liabilities are sensitive to
changes in interest rates. There have been no material changes in the
Company's interest rate risk position since December 31, 2003. Other
types of market risk, such as foreign exchange rate risk and commodity
price risk, do not arise in the normal course of the Company's business
activities.
ITEM 4. CONTROLS & PROCEDURES
The Company's management, including the Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended) (the "Exchange Act") as of the end of the
period covered by this report. Based upon that evaluation, the Company's
management, including the Chief Executive Officer and Chief Financial
Officer, concluded that, the Company's disclosure controls and
procedures are effective in timely alerting them to any material
information relating to the Company and its subsidiaries required to be
included in the Company's Exchange Act filings.
There were no significant changes made in the Company's internal
controls over financial reporting that occurred during the Company's
most recent fiscal quarters that has materially affected, or is
reasonably likely to materially affect, the Company's internal control
over financial reporting.
15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company or any of
its subsidiaries is a party or which their property is subject.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity Securities
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) Not applicable
16
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification of Chief Executive Officer pursuant
to Section 302 of Sarbanes-Oxley of 2002
31.2 Certification of Chief Financial Officer pursuant
to Section 302 of Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant
to Section 906 of Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant
to Section 906 of Sarbanes-Oxley Act of 2002
Reports on Form 8-K
Current report on Form 8-K filed with the Securities and
Exchange Commission on February 12, 2004
17
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
/s/ Raymond Walter
Raymond Walter
President and Chief Executive Officer
/s/ Charles E. Burnett
Charles E. Burnett
Chief Financial Officer and Treasurer
May 13, 2004
18