1
JEFFERSON BANCSHARES ANNOUNCES SECOND QUARTER RESULTS
Morristown, Tennessee -- (January 28, 2005) - Jefferson Bancshares, Inc.
(Nasdaq: JFBI), the holding company for Jefferson Federal Bank, reported net
income of $882,000, or $0.12 per diluted share, for the quarter ended December
31, 2004 compared to net income of $966,000, or $0.11 per diluted share, for the
same period in 2003. For the six month period ended December 31, 2004, the
Company recorded net income of $1.8 million compared to a net loss of $625,000
for the comparable period in 2003. The net loss for the six month period in 2003
was due to the nonrecurring expense associated with the $4.0 million
contribution to the Jefferson Federal Charitable Foundation which was formed in
connection with the Company's conversion and was funded with $250,000 and
375,000 shares of Jefferson Bancshares common stock. This stock and cash
contribution was recorded as an expense of $4.0 million, or approximately $2.5
million after income taxes.
Net interest income decreased $13,000, or 0.5%, to $2.8 million for the quarter
ended December 31, 2004. The net interest margin increased 18 basis points to
3.84% for the quarter ended December 31, 2004. Interest income decreased
$165,000, or 4.1%, to $3.9 million for the current three month period primarily
due to a decline in the volume of investment securities. The decline in
investment securities was due to the deployment of conversion proceeds primarily
into stock repurchases, bank owned life insurance, and other higher-yielding
assets. The average balance of interest earning assets decreased $16.4 million
to $289.9 million due primarily to a decline in the volume of investment
securities, while the average yield on interest earning assets increased 7 basis
points to 5.38%. Interest expense decreased $152,000, or 12.0%, to $1.1 million
for the quarter ended December 31, 2004 as the average balance of
interest-bearing liabilities decreased $5.8 million to $207.1 million, and the
average rate paid declined 23 basis points to 2.15%. The interest rate spread
was 3.23% and 2.93% for the quarters ended December 31, 2004 and 2003,
respectively. For the six months ended December 31, 2004, net interest income
decreased $33,000 to $5.6 million due primarily to a decrease in the volume of
interest-earning assets. For the six months ended December 31, 2004, the
interest rate spread and net interest margin was 3.20% and 3.81%, respectively,
compared to 2.94% and 3.66% for the same period in 2003.
Noninterest income decreased $54,000 to $198,000 for the three months and
decreased $24,000 to $462,000 for the six months ended December 31, 2004 as a
result of a decrease in net gain on foreclosed real estate, a decrease in net
gain on sale of investments, and a decrease in service fees and other revenues.
The increase in the cash surrender value of bank owned life insurance amounted
to $54,000 for the three months and $108,000 for the six months ended December
31, 2004.
Noninterest expense increased $53,000, or 3.5%, to $1.6 million for the three
month period ended December 31, 2004, primarily due to an increase in
compensation expense. Compensation expense increased $191,000, or 26.8%, to
$905,000 for the current three month period. This increase reflects the expense
related to stock awards made pursuant to the Company's 2004 Stock Incentive Plan
combined with normal salary increases and
2
additional staff. Noninterest expense for the three months ended December 31,
2004 included approximately $38,000 of operating expense associated with the new
loan production office that opened in Knoxville, Tennessee on January 1, 2005.
For the six month period ended December 31, 2004, noninterest expense totaled
$3.2 million compared to $7.1 million for the same period in 2003. The $3.9
million decrease was primarily attributable to the nonrecurring expense
associated with the $4.0 million contribution to the Jefferson Federal
Charitable Foundation during the six months ended December 31, 2003.
Nonperforming assets totaled $2.8 million at December 31, 2004, compared to $1.6
million at June 30, 2004 and $2.0 million at December 31, 2003. The increase in
nonperforming assets reflects an increase in foreclosed property and nonaccrual
loans resulting from one borrowing relationship. There were no additions to the
allowance for loan losses for either period. The allowance for loan losses was
$2.4 million, or 1.20% of total gross loans, at December 31, 2004 compared to
$2.6 million, or 1.38% of total gross loans, at December 31, 2003. Net
charge-offs amounted to $84,000 and $91,000 for the three and six month period
ended December 31, 2004 compared to $109,000 and $259,000 for the comparable
periods in 2003.
Total assets at December 31, 2004 were $303.0 million compared to $305.5 million
at June 30, 2004. Total loans increased $9.4 million, or 5.0%, to $196.0 million
at December 31, 2004, compared to $186.6 million at June 30, 2004. Investment
securities decreased $23.1 million, or 24.3%, to $72.0 million at December 31
2004, compared to $95.0 million at June 30, 2004. The decrease in investment
securities was due primarily to the deployment of conversion proceeds into stock
repurchases and higher yielding assets. Total deposits decreased $3.0 million to
$202.0 million at December 31 2004. The continuing decline in the average
balance of certificates of deposit reflects our emphasis on attracting lower
cost deposits.
Total equity decreased by $5.2 million to $88.2 million at December 31, 2004 due
to a combination of factors, including the repurchase of shares in the amount of
$7.6 million and dividend payments of $795,000 more than offsetting net income
of $1.8 million.
Return on average assets for the six months ended December 31, 2004 was 1.19%
compared to 0.44% for the year ended June 30, 2004. Return on average equity was
4.02% for the six months ended December 31, 2004 compared to 1.46% for the year
ended June 30, 2004. The improvement in the return on average equity was
impacted by stock repurchases during the current six month period. As of
December 31, 2004, the Company had repurchased 573,196 of the 838,552 shares
authorized under the Stock Repurchase Program.
Jefferson Bancshares, Inc. is the holding company for Jefferson Federal Bank, a
federally chartered stock thrift institution 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 and a lending office
in Knoxville, Tennessee. More
3
information about Jefferson Bancshares and Jefferson Federal Bank can be found
at its website: www.jeffersonfederal.com.
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
website at www.sec.gov.
-----------
4
JEFFERSON BANCSHARES, INC.
AT AT
DEC. 31, 2004 JUNE 30, 2004
-------------- -------------
FINANCIAL CONDITION DATA:
Total assets $ 302,954 $ 305,474
Loans receivable, net 195,962 186,601
Cash and cash equivalents, and
interest-bearing deposits 17,615 6,411
Investment securities 71,953 95,005
Deposits 201,952 204,933
Borrowings 12,000 6,000
Stockholders' equity $ 88,150 $ 93,383
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
2004 2003 2004 2003
------------ -------------- -------------- ------------
OPERATING DATA:
Interest income $ 3,898 $ 4,063 $ 7,786 $ 8,205
Interest expense 1,112 1,264 2,207 2,593
Net interest income 2,786 2,799 5,579 5,612
Provision for loan losses - - - -
Net interest income after
provision for loan losses 2,786 2,799 5,579 5,612
Noninterest income 198 252 462 486
Noninterest expense 1,567 1,514 3,164 7,062
Earnings before income taxes 1,417 1,537 2,877 (964)
Total income taxes 535 571 1,043 (339)
Net earnings $ 882 $ 966 $ 1,834 $ (625)
SHARE DATA:
Earnings per share, basic $ 0.12 $ 0.12 $ 0.24 $ (0.07)
Earnings per share, diluted $ 0.12 $ 0.11 $ 0.24 $ (0.07)
Dividends per share $ 0.05 $ 0.04 $ 0.10 $ 0.08
Weighted average shares:
Basic 7,383,907 8,382,286 7,569,166 8,378,837
Diluted 7,406,857 8,426,876 7,588,474 8,421,943
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
2004 2003 2004 2003
---------- ---------- ---------- ----------
ALLOWANCE FOR LOAN LOSSES:
Allowance at beginning of period $ 2,472 $ 2,691 $ 2,479 $ 2,841
Provision for loan losses - - - -
Recoveries 74 102 186 174
Charge-offs (158) (211) (277) (433)
------- ------- ------- -------
Net Charge-offs (84) (109) (91) (259)
------- ------- ------- -------
Allowance at end of period $ 2,388 $ 2,582 $ 2,388 $ 2,582
======= ======= ======= =======
Net charge-offs to average outstanding
loans during the period, annualized 0.17% 0.24% 0.09% 0.28%
5
AT AT AT
DEC. 31, 2004 JUNE 30, 2004 DEC. 31, 2003
--------------- --------------- ---------------
NONPERFORMING ASSETS:
Nonaccrual loans:
Real estate $ 793 $ 1,047 $ 1,184
Commercial business 613 15 -
Consumer 23 21 5
------- ------- -------
Total 1,429 1,083 1,189
------- ------- -------
Real estate owned 1,332 552 846
Other nonperforming assets 35 - 1
------- ------- -------
Total nonperforming assets $ 2,796 $ 1,635 $ 2,036
======= ======= =======
SIX
MONTHS ENDED YEAR ENDED
DEC. 31, 2004 JUNE 30, 2004
------------- -------------
PERFORMANCE RATIOS:
Return on average assets 1.19% 0.44%
Return on average equity 4.02% 1.46%
Interest rate spread 3.20% 3.08%
Net interest margin 3.81% 3.76%
Efficiency ratio 52.01% 83.21% (1)
Average interest-earning assets to
average interest-bearing liabilities 140.44% 143.13%
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percent of total gross loans 1.20% 1.31%
Allowance for loan losses as a
percent of nonperforming loans 167.11% 228.90%
Nonperforming loans as a percent
of total loans 0.73% 0.58%
Nonperforming assets as a percent
of total assets 0.92% 0.54%
(1) Excluding the $4.0 million contribution to the Charitable Foundation, the
efficiency ratio for the year ended June 30, 2004 would be 50.78%.
- ----------------------
Contacts:
Jefferson Bancshares, Inc., Morristown
Anderson L. Smith, 423-586-8421
or
Jane P. Hutton, 423-586-8421