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, 2005 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, 2005
--------------------- ----------------------------
$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, 2005 and December 31, 2004 1
Consolidated Statements of Income for the Three
Months Ended March 31, 2005 and 2004 2
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2005 and 2004 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 16
Item 2 Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities 16
Item 3 Defaults upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 17
ITEM 1. CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Jeffersonville Bancorp and Subsidiary
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2005 2004
------------- -------------
ASSETS
Cash and due from banks $ 11,551,000 $ 14,040,000
Federal funds sold 6,750,000 -
------------- -------------
Total cash and cash equivalents 18,301,000 14,040,000
Securities available for sale, at fair value 92,933,000 100,705,000
Securities held to maturity, estimated fair value of $5,720,000
at March 31, 2005 and $5,998,000 at December 31, 2004 5,713,000 5,957,000
Loans, net of allowance for loan losses of $3,640,000 at
March 31, 2005 and $3,645,000 at December 31, 2004 227,261,000 220,591,000
Accrued interest receivable 2,226,000 2,085,000
Premises and equipment, net 2,896,000 2,869,000
Federal Home Loan Bank stock 2,009,000 2,175,000
Cash surrender value of bank-owned life insurance 12,870,000 12,747,000
Other assets 3,309,000 2,698,000
------------- -------------
TOTAL ASSETS $ 367,518,000 $ 363,867,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand deposits $ 62,032,000 $ 65,208,000
NOW and super NOW accounts 40,467,000 36,594,000
Savings and insured money market deposits 89,941,000 87,115,000
Time deposits 111,130,000 104,177,000
------------- -------------
TOTAL DEPOSITS 303,570,000 293,094,000
Federal Home Loan Bank borrowings 18,500,000 18,500,000
Short-term debt 400,000 8,424,000
Accrued expenses and other liabilities 5,330,000 4,203,000
------------- -------------
TOTAL LIABILITIES 327,800,000 324,221,000
------------- -------------
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, 2005
and at December 31, 2004 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, 2005
and at December 31, 2004 (1,108,000) (1,108,000)
Retained earnings 33,259,000 32,342,000
Accumulated other comprehensive loss (1,300,000) (455,000)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 39,718,000 39,646,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 367,518,000 $ 363,867,000
============= =============
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,
-------------------------------------
2005 2004
----------- -----------
INTEREST INCOME
Loan interest and fees $ 4,096,000 $ 3,680,000
Securities:
Taxable 676,000 946,000
Non-taxable 479,000 509,000
Federal funds sold 11,000 2,000
----------- -----------
TOTAL INTEREST INCOME 5,262,000 5,137,000
----------- -----------
INTEREST EXPENSE
Deposits 841,000 689,000
Federal Home Loan Bank borrowings 233,000 296,000
Other interest expense 14,000 5,000
----------- -----------
TOTAL INTEREST EXPENSE 1,088,000 990,000
----------- -----------
NET INTEREST INCOME 4,174,000 4,147,000
Provision for loan losses 60,000 90,000
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,114,000 4,057,000
----------- -----------
NONINTEREST INCOME
Service charges 468,000 541,000
Increase in cash surrender value
of bank-owned life insurance 123,000 119,000
Net security gains 5,000 -
Other real estate owned income, net 107,000 9,000
Other non-interest income 246,000 200,000
----------- -----------
TOTAL NON-INTEREST INCOME 949,000 869,000
----------- -----------
NON-INTEREST EXPENSES
Salaries and employee benefits 2,044,000 1,645,000
Occupancy and equipment expenses 481,000 450,000
Other non-interest expenses 724,000 698,000
----------- -----------
TOTAL NON-INTEREST EXPENSES 3,249,000 2,793,000
----------- -----------
Income before income tax expense 1,814,000 2,133,000
Income tax expense 454,000 573,000
----------- -----------
NET INCOME $ 1,360,000 $ 1,560,000
=========== ===========
Basic earnings per common share $ 0.31 $ 0.35
=========== ===========
Average common shares outstanding 4,434,000 4,434,000
=========== ===========
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,
----------------------------------
2005 2004
------------ ------------
OPERATING ACTIVITIES
Net income $ 1,360,000 $ 1,560,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 60,000 90,000
Depreciation and amortization 136,000 153,000
Net increase in cash surrender value
of bank-owned life insurance (123,000) (119,000)
Gain on sale of other real estate owned (124,000) -
Net security gains (5,000) -
(Increase) decrease in accrued interest receivable (141,000) 362,000
Decrease (increase) in other assets 237,000 (472,000)
Increase in accrued expenses and other liabilities 1,127,000 820,000
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,527,000 2,394,000
------------ ------------
INVESTING ACTIVITIES
Proceeds from maturities and calls:
Securities available for sale 4,037,000 8,047,000
Securities held to maturity 244,000 250,000
Proceeds from sales of securities available for sale 4,731,000 -
Purchases:
Securities available for sale (2,684,000) (4,700,000)
Securities held to maturity - (143,000)
Disbursements for loan originations, net of
principal collections (6,730,000) (6,856,000)
Net redemption (purchase) of Federal Home Loan Bank stock 166,000 (50,000)
Proceeds from sale of other real estate owned 124,000 -
Net purchases of premises and equipment (163,000) (165,000)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (275,000) (3,617,000)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 10,476,000 6,792,000
Net decrease in short-term debt (8,024,000) (5,253,000)
Cash dividends paid (443,000) (399,000)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,009,000 1,140,000
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 4,261,000 (83,000)
Cash and cash equivalents at beginning of period 14,040,000 15,992,000
------------ ------------
Cash and cash equivalents at end of period $ 18,301,000 $ 15,909,000
============ ============
Supplemental information:
Cash paid for:
Interest $ 1,068,000 $ 997,000
Income taxes 119,000 253,000
See accompanying notes to unaudited consolidated interim financial
statements.
3
JEFFERSONVILLE BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
March 31, 2005
(Unaudited)
A. Financial Statement Presentation
The accompanying unaudited interim consolidated financial statements
include the accounts of Jeffersonville Bancorp and its wholly owned
subsidiary, The First National Bank of Jeffersonville (collectively,
Jefferson Bancorp 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, 2005 and December
31, 2004, the results of operations for the three month periods ended March
31, 2005 and 2004, and the cash flows for the three month periods ended March
31, 2005 and 2004. Certain reclassifications have been made in order to
conform with the current years presentation. All adjustments are normal and
recurring. First quarter results are not indicative of full year results. 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 2004 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, 2005 and 2004 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 $0.31 for the quarter ended March 31, 2005,
as compared to $0.35 per share for the same period in 2004.
C. Comprehensive Income
Three Months Ended March 31, 2005
Net Income $1,360,000
Net unrealized holding losses
arising during the period,
net of tax (pre-tax amount of $1,446,000) (842,000)
Reclassification adjustment for net losses
realized in net income during the period,
net of tax (pre-tax amount of $5,000) (3,000)
----------
Other comprehensive loss (845,000)
----------
Total comprehensive income $ 515,000
==========
4
Three Months Ended March 31, 2004
Net Income $1,560,000
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
----------
Total comprehensive income $2,246,000
==========
D. New Accounting Pronouncements
In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) became law in the United States. The Act
introduced a prescription drug benefit under Medicare as well as a federal
subsidy to sponsors of retiree health care benefit plans that provide a
benefit that is at least actuarially equivalent to Medicare Part D under the
Act. In accordance with FASB Staff Position FAS 106-1, "Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003," the Company has elected to defer
recognition of the effects of the specific authoritative guidance on the
accounting for the federal subsidy, which was issued in January 2005, but the
Company anticipates that, in order to make the plan actuarially equivalent,
it will make minor changes to its non-pension postretirement plan.
Accordingly, the measures of the accumulated non-pension postretirement
benefit obligation and net periodic non-pension postretirement benefit cost
do not reflect any amount associated with the subsidy.
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 a
postretirement medical and life insurance benefit plan 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:
5
Pension benefits Postretirement benefits
--------------------------- -------------------------
2005 2004 2005 2004
--------- --------- -------- ---------
Service cost $ 74,000 $ 67,000 $ 41,000 $ 61,000
Interest cost 102,000 94,000 44,000 52,000
Expected return on plan assets (92,000) (80,000) - -
Amortization of prior service cost 7,000 6,000 (11,000) -
Amortization of transition (asset) obligation (1,000) (1,000) - 4,000
Recognized net actuarial loss 34,000 33,000 14,000 15,000
--------- --------- -------- ---------
Net periodic benefit cost $ 124,000 $ 119,000 $ 88,000 $ 132,000
========= ========= ======== =========
The Company previously disclosed in its consolidated financial
statements for the year ended December 31, 2004, that it expected to
contribute $341,000 to its pension plan and $73,000 to its other
postretirement benefits plan in 2005. As of March 31, 2005, no contributions
have been made to the pension plan and $15,000 of contributions have been
made to the other postretirement benefits plan.
F. 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 $1,436,000 at March 31, 2005 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, 2005 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 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 Company'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, 2004 to March 31, 2005, total assets
increased $3,651,000 or 1.0%. Decreases in securities available for sale,
securities held to maturity and Federal Home Loan Bank stock were offset by
increases in cash and cash equivalents, net loans, accrued interest
receivable and the cash surrender value of bank-owned life insurance.
Securities available for sale decreased from $100,705,000 at year end 2004 to
$92,933,000 at March 31, 2005, a decrease of $7,772,000 or 7.7%. Net loans
increased from $220,591,000 at year end 2004 to $227,261,000 at March 31,
2005, an increase of $6,670,000 or 3.0%.
Deposits increased from $293,094,000 at December 31, 2004 to
$303,570,000 at March 31, 2005, an increase of $10,476,000 or 3.6%. Demand
deposits decreased from $65,208,000 at December 31, 2004 to $62,032,000 at
March 31, 2005, a decrease of $3,176,000 or 4.9%. These lower cost deposits
are an important offset to the cost of higher priced funds. Time deposits
increased $6,953,000 or 6.7% to $111,130,000 at March 31, 2005 from December
31, 2004. NOW and super NOW accounts increased from $36,594,000 at December
31, 2004 by $3,873,000 or 10.6%, to $40,467,000 at March 31, 2005. Savings
deposits increased from $87,115,000 at December 31, 2004 to $89,941,000 at
March 31, 2005, an increase of $2,826,000 or 3.2%. Non deposit liabilities
decreased from $31,127,000 at December 31, 2004 to $24,230,000 at March 31,
2005, a decrease of $6,897,000 or 22.2%, largely due to a $8,024,000 decrease
in short-term debt to $400,000 at March 31, 2005.
Total stockholders' equity increased $72,000 or 0.2% from $39,646,000 at
December 31, 2004 to $39,718,000 at March 31, 2005. This increase was the
result of net income of $1,360,000 less cash dividends of $443,000 and a
$845,000 increase in accumulated other comprehensive loss.
7
Loan Portfolio Composition:
March 31, 2005 December 31, 2004
------------------------- -------------------------
Amount Percent Amount Percent
------------- ------- ------------- -------
REAL ESTATE LOANS
Residential $ 85,502,000 36.9% $ 83,340,000 37.0%
Commercial 76,340,000 32.9% 75,357,000 33.4%
Home equity 21,013,000 9.0% 21,127,000 9.4%
Farm land 3,702,000 1.6% 3,727,000 1.7%
Construction 5,036,000 2.2% 4,524,000 2.0%
------------- ----- ------------- -----
191,593,000 82.7% 188,075,000 83.5%
------------- ----- ------------- -----
OTHER LOANS
Commercial loans 25,498,000 11.0% 21,317,000 9.5%
Consumer installment loans 13,254,000 5.7% 14,116,000 6.3%
Other consumer loans 1,158,000 0.5% 1,345,000 0.6%
Agriculture loans 282,000 0.1% 338,000 0.1%
------------- ----- ------------- -----
40,192,000 17.3% 37,116,000 16.5%
------------- ----- ------------- -----
Total loans 231,785,000 100.0% 225,191,000 100.0%
------------- ===== ------------- =====
Unearned income (884,000) (955,000)
Allowance for loan losses (3,640,000) (3,645,000)
------------- -------------
TOTAL LOANS, NET $ 227,261,000 $ 220,591,000
============= =============
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 $60,000 for the three months ended March 31, 2005 compared to
$90,000 for the three months ended March 31, 2004. Total charge-offs for the
three month period ended March 31, 2005 were $115,000 compared to $194,000
for the same period in the prior year, while recoveries increased from
$34,000 for the 2004 period to $50,000 for the 2005 period. The amounts
represent net charge-offs of $65,000 in the first quarter of 2005 versus net
charge-offs of $160,000 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:
2005 2004
----------- -----------
Balance at beginning of period $ 3,645,000 $ 3,569,000
Provision for loan losses 60,000 90,000
Loans charged-off (115,000) (194,000)
Recoveries 50,000 34,000
----------- -----------
Balance at end of period $ 3,640,000 $ 3,499,000
=========== ===========
Annualized net charge-offs
as a percentage of
average outstanding loans 0.11% 0.32%
Allowance for loan losses to:
Total loans 1.57% 1.72%
Total nonperforming loans 174.1% 233.6%
C. Nonaccrual 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.
Nonperforming loans are summarized
as follows at March 31:
Nonaccrual loans $ 1,709,000 $ 1,028,000
Loans past due 90 days or more
and still accruing interest 382,000 470,000
----------- -----------
Total nonperforming loans $ 2,091,000 $ 1,498,000
=========== ===========
Nonperforming loans as a percentage
of total loans 0.90% 0.74%
=========== ===========
As of March 31, 2005 and 2004, the recorded investment in loans
considered to be impaired under Statement of Financial Accounting Standards
("SFAS") No.114 totaled $1,360,000 and $660,000, 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, 2005. 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 11.1% at March 31, 2005 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, 2005.
TIER I CAPITAL
Stockholders' equity, excluding
accumulated other comprehensive loss $ 40,806,000
TIER II CAPITAL
Allowance for loan losses (1) 2,967,000
-------------
Total risk-based capital $ 43,773,000
-------------
Risk-weighted assets (2) $ 239,221,000
-------------
Average assets $ 366,162,000
-------------
RATIOS
Tier I risk-based capital (minimum 4.0%) 17.1%
Total risk-based capital (minimum 8.0%) 18.3%
Leverage (minimum 4.0%) 11.1%
(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, 2005 Year to Date
(Fully Taxable Equivalent)
%
AVERAGE OF INTEREST AVERAGE
CONSOLIDATED AVERAGE BALANCE SHEET BALANCE ASSETS EARNED/PAID YIELD/RATE
------------- ------ ----------- ----------
ASSETS
Investment securities (1)
Taxable securities $ 56,941,000 15.55% $ 676,000 4.75%
Tax exempt securities 48,023,000 13.12% 726,000 6.05%
------------- ------ ----------- -----
TOTAL SECURITIES 104,964,000 28.67% 1,402,000 5.34%
------------- ------ ----------- -----
Federal funds sold 1,760,000 0.48% 11,000 2.50%
Loans, net of unearned income
Real estate mortgages 163,584,000 44.68% 2,846,000 6.96%
Home equity loans 20,830,000 5.69% 310,000 5.95%
Time and demand loans 23,804,000 6.50% 428,000 7.19%
Installment loans 17,101,000 4.67% 436,000 10.20%
Other loans 2,541,000 0.69% 76,000 11.96%
------------- ------ ----------- -----
TOTAL LOANS (2) 227,860,000 62.23% 4,096,000 7.19%
------------- ------ ----------- -----
TOTAL INTEREST EARNING ASSETS 334,584,000 91.38% 5,509,000 6.59%
------------- ------ ----------- -----
Reserve for loan losses (3,631,000) (0.99%)
Unrealized gains and losses on portfolio, net 522,000 0.14%
Cash and due from banks 13,200,000 3.60%
Premises and equipment, net 2,876,000 0.79%
Cash surrender value of bank-owned life insurance 12,792,000 3.49%
Other assets 5,819,000 1.59%
------------- ------
TOTAL ASSETS $ 366,162,000 100.00%
============= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and super NOW accounts $ 40,510,000 11.06% 25,000 0.25%
Savings and insured money market deposits 85,430,000 23.33% 171,000 0.80%
Time deposits 107,852,000 29.45% 645,000 2.40%
------------- ------ ----------- -----
TOTAL INTEREST BEARING DEPOSITS 233,792,000 63.85% 841,000 1.44%
Federal funds purchased and other short-term debt 2,081,000 0.57% 14,000 2.69%
Long-term debt 18,500,000 5.05% 233,000 5.04%
------------- ------ ----------- -----
TOTAL INTEREST BEARING LIABILITIES 254,373,000 69.47% 1,088,000 1.71%
------------- ------ ----------- -----
Demand deposits 65,371,000 17.85%
Other liabilities 6,222,000 1.70%
------------- ------
TOTAL LIABILITIES 325,966,000 89.02%
STOCKHOLDERS' EQUITY 40,196,000 10.98%
------------- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 366,162,000 100.00%
============= ======
NET INTEREST INCOME $ 4,421,000
===========
NET INTEREST SPREAD 4.88%
=====
NET INTEREST MARGIN (3) 5.29%
=====
(1) Yields on securities available for sale are based on amortized costs.
(2) 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.
(3) Computed by dividing net interest income by average interest earning
assets.
11
Consolidated Average Balance Sheet as of March 31, 2004 Year to Date
(Fully Taxable Equivalent)
%
AVERAGE OF INTEREST AVERAGE
CONSOLIDATED AVERAGE BALANCE SHEET BALANCE ASSETS EARNED/PAID YIELD/RATE
------------- ------ ----------- ----------
ASSETS
Investment securities (1)
Taxable securities $ 70,835,000 20.15% $ 946,000 5.34%
Tax exempt securities 50,139,000 14.27% 771,000 6.15%
------------- ------ ----------- -----
TOTAL SECURITIES 120,974,000 34.42% 1,717,000 5.68%
------------- ------ ----------- -----
Federal funds sold 672,000 0.19% 2,000 1.19%
Loans, net of unearned income
Real estate mortgages 145,168,000 41.30% 2,619,000 7.22%
Home equity loans 18,385,000 5.23% 285,000 6.20%
Time and demand loans 17,063,000 4.86% 267,000 6.26%
Installment loans 16,986,000 4.83% 431,000 10.15%
Other loans 2,949,000 0.84% 78,000 10.58%
------------- ------ ----------- -----
TOTAL LOANS (2) 200,551,000 57.06% 3,680,000 7.34%
------------- ------ ----------- -----
TOTAL INTEREST EARNING ASSETS 322,197,000 91.67% 5,399,000 6.70%
------------- ------ ----------- -----
Reserve for loan losses (3,486,000) (0.99)%
Unrealized gains and losses on portfolio, net 1,502,000 0.43%
Cash and due from banks 12,856,000 3.66%
Premises and equipment, net 3,064,000 0.87%
Cash surrender value of bank-owned life insurance 12,317,000 3.50%
Other assets 3,029,000 0.86%
------------- ------
TOTAL ASSETS $ 351,479,000 100.00%
============= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and super NOW accounts $ 42,442,000 12.08% 32,000 0.30%
Savings and insured money market deposits 79,837,000 22.71% 120,000 0.60%
Time deposits 102,322,000 29.11% 537,000 2.10%
------------- ------ ----------- -----
TOTAL INTEREST BEARING DEPOSITS 224,601,000 63.90% 689,000 1.23%
Federal funds purchased and other short-term debt 2,041,000 0.58% 5,000 0.98%
Long-term debt 27,000,000 7.68% 296,000 4.39%
------------- ------ ----------- -----
TOTAL INTEREST BEARING LIABILITIES 253,642,000 72.16% 990,000 1.56%
------------- ------ ----------- -----
Demand deposits 58,017,000 16.51%
Other liabilities 3,089,000 0.88%
------------- ------
TOTAL LIABILITIES 314,748,000 89.55%
STOCKHOLDERS' EQUITY 36,731,000 10.45%
------------- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 351,479,000 100.00%
============= ======
NET INTEREST INCOME $ 4,409,000
===========
NET INTEREST SPREAD 5.14%
=====
NET INTEREST MARGIN (3) 5.47%
=====
(1) Yields on securities available for sale are based on amortized costs.
(2) 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.
(3) Computed by dividing net interest income by average interest earning
assets.
12
E. Result of Operations
Net income for the first three months of 2005 decreased by $200,000 to
$1,360,000 compared to $1,560,000 for the same period in 2004. This overall
decrease was primarily due to an increase of $456,000 in other operating
expenses which was partially offset by an $80,000 increase in other
non-interest income, a $27,000 increase in net interest income and a decrease
of $30,000 in provision for loan losses. The Company's annualized return on
average assets was 1.5% in the current quarter compared to 1.7% in the same
period last year. The annualized return on average stockholders' equity was
13.5% and 17.0% for the first three months of 2005 and 2004, respectively.
Tax equivalent interest income increased $110,000 or 2.0% in the first
three months of 2005 compared to the same period in 2004, primarily due to
an increase in average earning assets partially offset by a decrease in asset
yields. The yield on investment securities decreased 34 basis points from
5.68% in 2004 to 5.34% in 2005 as the result of turnover of the securities
portfolio, where securities have been purchased at yields lower than the
replaced securities. The yield on the total loan portfolio decreased by 15
basis points in the quarter ended March 31, 2005 compared to the first
quarter of 2004. Several loan category rates decreased. The average yield on
real estate mortgage loans, the major portion of the loan portfolio,
decreased 26 basis points for the three month period primarily due to the
origination of fixed rate loans at lower interest rates. The overall yield on
interest earning assets decreased 11 basis points from 6.70% for the three
months ended March 31, 2004 to 6.59% for the same period in 2005. The total
average balance for earning assets was $334,584,000 for the three month
period ended March 31, 2005 compared to $322,197,000 for the same three month
period in 2004, an increase of $12,387,000 or 3.8%. An increase in average
loans of $27,309,000 offset partially by a decrease in average securities of
$16,010,000 accounted for the change.
The increasing interest rate environment, caused the Company to re-price
its deposits which resulted in a 15 basis point increase in the yield on
interest bearing liabilities for the three month period ended March 31, 2005
as compared to the same period in 2004. The overall net interest margin
decreased 18 basis points from 5.47% in the first quarter of 2004 to 5.29% in
the first quarter of 2005.
The provision for loan losses was $60,000 for the three months ended
March 31, 2005, a decrease of $30,000 compared to $90,000 for the three
months ended March 31, 2004. This decrease was principally due to a decrease
in net charge-offs.
Non-interest income was $949,000 for the first three months of 2005
compared to $869,000 for the same period in 2004, an increase of $80,000 or
9.2%. This increase was primarily due to net gains on the sale of other real
estate owned which increased $98,000 over 2004 as a result of the last
remaining condominium units of Grandview Palace being sold. Other
non-interest income increased $46,000 due to an increase in ATM fees which
was offset by a decrease in service charges of $73,000 which were a result of
a decrease in fees from in-sufficient funds and return checks.
13
Non-interest expenses were $3,249,000 for the first three months of 2005
compared to $2,793,000 for the same period in 2004, an increase of $456,000
or 16.3%. This increase reflects a $399,000 increase in salaries and employee
benefits costs due to normal salary increases and increased costs for SERP
and health care benefits. All other expense categories combined increased by
$57,000.
Income tax expense was $454,000 was for the three month period ended
March 31, 2005 compared to $573,000 for the corresponding period in 2004, a
decrease of $119,000 or 20.8%. The Company's effective tax rates were 25.0%
and 26.9% for the three month periods ended March 31, 2005 and 2004,
respectively. This decrease was primarily due to a larger portion of income
before taxes being generated by 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. 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.
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, 2004. 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. Unregistered Sales of Equity Securities and Use of Proceeds
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
Item 5. Other Information
None
Item 6. 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
16
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
----------------------
(Registrant)
/s/ Raymond Walter
-------------------------------------
Raymond Walter
President and Chief Executive Officer
/s/ Charles E. Burnett
-------------------------------------
Charles E. Burnett
Chief Financial Officer and Treasurer
May 13, 2005
17