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EXHIBIT 99.1
PRESS RELEASE FOR IMMEDIATE RELEASE
Contact: Anderson L. Smith, President and CEO
Telephone: 423-586-8421
JEFFERSON FEDERAL BANK
REPORTS QUARTERLY AND YEAR END EARNINGS
NET INCOME INCREASED 48.1% FOR THE
YEAR ENDED JUNE 30, 2003
Morristown, Tennessee -- (July 25, 2003)-- Jefferson Bancshares, Inc. (Nasdaq:
JFBI-News), the holding company for Jefferson Federal Bank, today reported net
income of $3.6 million for the year ended June 30, 2003, representing an
increase of 48.1% from net income of $2.4 million for the year ended June 30,
2002. On a diluted per share basis, earnings increased to $1.91 for fiscal 2003
from $1.29 for fiscal 2002. The resulting return on average assets was 1.32% and
the return on average stockholders' equity was 10.25% for the current year. Net
income for the three month period ended June 30, 2003 was $830,000, or $0.44 on
a diluted per share basis, compared to $771,000, or $0.40 on a diluted per share
basis for the same period in 2002.
On July 1, 2003, Jefferson Federal Bank completed its conversion from
the mutual holding company structure to the stock holding company structure and
became the wholly owned subsidiary of Jefferson Bancshares, Inc. As a result,
this earnings release relates to the financial condition and results of
operations of Jefferson Federal Bank, who, until July 1, 2003, was known as
"Jefferson Federal Savings and Loan Association of Morristown." All per share
and stockholders' equity references reported in this release relate to Jefferson
Federal Savings and Loan Association of Morristown and its subsidiaries and not
to Jefferson Bancshares. Prior to July 1, 2003, Jefferson Federal Savings and
Loan Association of Morristown's shares of common stock were quoted on the Pink
Sheets under the symbol "JFSZ.PK."
Net interest income for fiscal 2003 increased $1.6 million, or 17.9%,
to $10.7 million as a result of an improvement in the interest rate spread,
which increased to 3.66% for 2003 compared to 3.02% for 2002 and an improvement
in the net interest margin, which increased to 4.10% for 2003 compared to 3.53%
for 2002. Interest income decreased $2.1 million, or 10.9%, to $17.3 million for
2003 due to lower market interest rates and changes in the volume and
composition of interest-earning assets. The average yield on interest earning
assets declined 91 basis points to 6.59% for 2003. Interest expense decreased
$3.7 million, or 36.5%, to $6.5 million for the year as the average balance of
deposits declined 2.8%, and the average rate paid declined 157 basis points to
2.91%. The decline in the average rate paid was the result of lower market rates
and changes in the deposit mix. For the three month period ended June 30, 2003,
net interest income decreased $39,000, or 1.5%, to $2.6 million due to a decline
in the interest rate spread and the net interest margin. The interest rate
spread decreased 49 basis points to 3.21% while the net interest margin
decreased 36 basis points to 3.75% for the three month period ended June 30,
2003.
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Commenting on the Company's financial performance, President and Chief
Executive Officer Anderson L. Smith stated, "We are very pleased with the Bank's
results of operations for fiscal year 2003. We believe that our performance is
reflective of a sound business strategy that will serve us well as a public
company in the years to come."
The provision for loan losses decreased $434,000, or 35.5%, to $787,000
for the year ended June 30, 2003. Net charge-offs for 2003 were $642,000
compared to $734,000 for 2002. There were no additions to the allowance for loan
losses in the fourth quarter.
Noninterest income decreased $42,000, or 4.1%, to $979,000 for the year
ended June 30, 2003, primarily as a result of a decrease in net gains on sale of
investments. For the three month period ended June 30, 2003, noninterest income
was $218,000, a decrease of 38.6% compared to the same period in 2002 as a
result of a decline in net gains on the sale of REO.
Noninterest expense increased $203,000, or 4%, to $5.3 million for the
year ended June 30, 2003 as a result of an increase in compensation expense and
REO expense, and increases in various other expense categories. Compensation and
benefits expense increased $100,000, or 4.3%, primarily as a result of increased
salary and benefit expenses. REO expense increased $68,000, or 23.9%, as a
result of higher levels of foreclosure. For the three month period ended June
30, 2003, noninterest expense remained level at $1.4 million.
Total assets at June 30, 2003 were $363.6 million compared to $267.3
million at June 30, 2002. The growth in total assets was primarily the result of
the pending stock offering of Jefferson Bancshares, which was completed on July
1, 2003. At June 30, 2003, orders received in the subscription and community
offering totaled in excess of $105.0 million. Approximately $39.1 million of
unfilled orders was returned to subscribers. The conversion is discussed in
greater detail below.
Net loans decreased $10.0 million, or 5.3%, to $180.0 million at June
30, 2003. Commercial loans increased $5.7 million, or 73.6%, to $13.5 million as
a result of management's strategy to emphasize this type of lending. Mortgage
loans decreased $14.8 million, or 8.3%, to $164.1 million at June 30, 2003 due
to heavy refinancing activity in the low interest rate environment and due to
tightened underwriting standards introduced by management. Loan originations for
the fourth quarter of 2003 were $12.3 million compared to $9.0 million for the
same period in 2002.
Stockholders' equity increased $3.7 million, or 11.3%, as a result of
net income of $3.6 million for the twelve month period and a gain in the market
value of securities available-for-sale, net of tax, of $898,000.
Jefferson Federal Bank is a federally chartered stock savings and loan
association headquartered in Morristown, Tennessee. Jefferson Federal is a
community oriented financial institution offering traditional financial services
within its local communities through its main office and two drive through
facilities in Morristown. On July 1, 2003, Jefferson Federal completed a plan of
conversion through which Jefferson Federal reorganized from the mutual holding
company structure to the stock holding company structure. In connection with the
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closing of the conversion, Jefferson Federal Savings and Loan Association of
Morristown changed its name to Jefferson Federal Bank. Jefferson Bancshares,
Inc., the new holding company for Jefferson Federal Bank, announced July 1, 2003
that it had sold 6,612,500 shares at $10.00 per share, representing an offering
amount of $66,125,000 (the "adjusted maximum" of the offering range). Jefferson
Bancshares also exchanged approximately 1,389,000 shares of its common stock for
all of the outstanding shares of Jefferson Federal Savings and Loan Association
common stock (other than shares held by Jefferson Bancshares, M.H.C.),
representing an exchange ratio of 4.2661 for each share of Jefferson Federal
outstanding at the time.
As part of the conversion, Jefferson Bancshares also formed the
Jefferson Federal Charitable Foundation, which was funded with $250,000 and
375,000 shares of Jefferson Bancshares common stock. Jefferson Charitable
Foundation will make grants and donations to non-profit and community groups and
projects located within Jefferson Federal's market area. Total shares of
Jefferson Bancshares common stock outstanding after the conversion, the exchange
and contribution to the charitable foundation is approximately 8,376,000 shares.
On July 2, 2003, shares of Jefferson Bancshares, Inc. began trading on the
Nasdaq National Market under the ticker symbol "JFBI". Financial highlights of
the Company are attached.
This news release may contain forward-looking statements, which can be
identified by the use of words such as "believes", "expects", "anticipates",
"estimates" or similar expressions. Such forward-looking statements and all
other statements that are not historic facts, are subject to risks and
uncertainties which could cause actual results to differ materially from those
currently anticipated due to a number of factors. These factors include, but are
not limited to, general economic conditions, changes in the interest rate
environment, legislative or regulatory changes that may adversely affect our
business, changes in accounting policies and practices, changes in competition
and demand for financial services, adverse changes in the securities markets,
and changes in the quality or composition of the Company's loan or investment
portfolios. Should one or more of these risks materialize, actual results may
vary from those anticipated, estimated, or projected. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date of this press release.
Specific factors that could cause future results to vary from current
management expectations may be detailed, from time to time in the Company's
filings with the Securities and Exchange Commission, which are available through
the SEC's at www.sec.gov.
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JEFFERSON FEDERAL BANK
At June 30,
2003 2002
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Financial Condition Data:
Total assets $ 363,602 $ 267,340
Loans receivable, net 180,010 190,032
Cash and cash equivalents,
and interest-bearing deposits 96,543 6,983
Investment securities 76,400 60,215
Borrowings 2,000 2,000
Deposits 324,247 231,849
Stockholders' equity $ 36,625 $ 32,901
Three Months
Ended June 30, Year Ended June 30,
2003 2002 2003 2002
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Operating Data:
Interest income $ 4,093 $ 4,715 $ 17,259 $ 19,380
Interest expense 1,447 2,030 6,518 10,267
Net interest income 2,646 2,685 10,741 9,113
Provision for loan losses - 434 787 1,221
Net interest income after
provision for loan losses 2,646 2,251 9,954 7,892
Noninterest income 218 355 979 1,021
Noninterest expense 1,397 1,419 5,272 5,069
Earnings before income taxes 1,467 1,187 5,661 3,844
Total income taxes 637 416 2,068 1,418
Net earnings $ 830 $ 771 $ 3,593 $ 2,426
Per Share Data:
Earnings per share, basic $0.44 $0.40 $1.92 $1.30
Earnings per share, diluted $0.44 $0.40 $1.91 $1.29
Dividends per share $0.33 $0.33 $0.70 $0.70
Three Months
Ended June 30, Year Ended June 30,
2003 2002 2003 2002
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Allowance for Loan Losses:
Allowance at beginning of period $ 2,879 $ 2,449 $ 2,696 $ 2,209
Provision for loan losses - 308 787 1,221
Recoveries 81 148 435 682
Charge-offs (119) (209) (1,077) (1,416)
Net Charge-offs (38) (61) (642) (734)
Allowance at end of period $ 2,841 $ 2,696 $ 2,841 $ 2,696
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At June 30,
2003 2002
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Nonperforming Assets:
Nonaccrual loans:
Real estate $ 1,739 $ 1,935
Commercial business - -
Consumer 17 133
Total 1,756 2,068
Real Estate owned 1,227 978
Other nonperforming assets 16 66
Total nonperforming assets $ 2,999 $ 3,112
At June 30,
2003 2002
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Performance Ratios:
Return on average assets 1.32% 0.91%
Return on average equity 10.25% 7.68%
Interest rate spread 3.66% 3.02%
Net interest margin 4.10% 3.53%
Noninterest expense to average assets 1.94% 1.90%
Efficiency ratio 45.30% 50.73%
Average interest-earning assets to
average interest-bearing liabilities 117.67% 112.77%
Capital Ratios:
Tangible capital 9.75% 12.00%
Core capital 9.75% 12.00%
Risk-based capital 21.06% 21.10%
Dividend payout ratio 36.46% 53.79%
Average equity to average assets 12.90% 11.87%
Asset Quality Ratios:
Allowance for loan losses as a
percent of total gross loans 1.54% 1.37%
Allowance for loan losses as a
percent of nonperforming loans 161.79% 130.40%
Net charge-offs to average outstanding
loans during the period 0.34% 0.38%
Nonperforming loans as a percent
of total loans 0.95% 1.09%
Nonperforming assets as a percent
of total assets 0.82% 1.16%