JEFFERSON BANCSHARES, INC. ANNOUNCES EARNINGS FOR THE QUARTER
AND SIX MONTHS ENDED DECEMBER 31, 2005
Morristown, Tennessee -- (January 27, 2006) - Jefferson Bancshares, Inc.
(Nasdaq: JFBI), the holding company for Jefferson Federal Bank, announced net
income of $710,000, or $0.11 per diluted share, for the quarter ended December
31, 2005 compared to net income of $882,000, or $0.12 per diluted share, for the
quarter ended December 31, 2004. For the six months ended December 31, 2005, net
income was $1.5 million, or $0.23 per diluted share, compared to $1.8 million,
or $0.24 per diluted share, for the comparable period in 2004. The decline in
net income for both the three and six month period ended December 31, 2005 was
the result of an increase in noninterest expense, partially offset by an
increase in net interest income and noninterest income. The increase in
noninterest expense was the result of our expansion activities, as well as our
adoption of Financial Accounting Standards Board's ("FASB") Statement 123R,
which requires the expensing of stock options. Annualized return on average
assets and return on average equity for the six months ended December 31, 2005
was .99% and 3.74%, respectively, compared to 1.19% and 4.02% for the
corresponding period in 2004.
Anderson L. Smith, President and CEO, commented, "We remain focused on our
expansion initiatives in both Morristown and Knoxville, Tennessee and the
opportunity to enhance long-term value for our shareholders. The first year
performance of our Knoxville operation has been consistent with our expectations
and we look forward to expanding our presence in Knoxville. We are pleased that
our investment in new facilities and human resources, combined with the
additional expense of regulatory and Sarbanes-Oxley compliance, has had a
minimal impact on earnings per share. We are encouraged by the significant
growth in our loan portfolio and modest improvement in net interest income.
Although the increase in short-term interest rates has improved the yield on
earning assets, our cost of funds has also been affected by the increase in
rates."
Net interest income increased $55,000 to $2.8 million for the quarter ended
December 31, 2005 from the corresponding quarter in 2004. The interest rate
spread and net interest margin for the quarter ended December 31, 2005 were
3.33% and 4.03%, respectively, compared to 3.23% and 3.84% for the same period
in 2004. Interest income increased $494,000, or 12.7%, to $4.4 million for the
three-month period ended December 31, 2005 primarily due to an increase in short
term interest rates in addition to changes in the asset mix. Interest expense
increased $439,000, or 39.5%, to $1.6 million for the quarter ended December 31,
2005, primarily due to an increase in deposit rates and an increase in Federal
Home Loan Bank borrowings. The average rate paid on interest-bearing liabilities
increased 75 basis points to 2.90% for the three months ended December 31, 2005.
For the six months ended December 31, 2005, net interest income increased
$76,000, or 1.4%, to $5.7 million. The interest rate spread and net interest
margin for the six months ended December 31, 2005 were 3.35% and 4.04%,
respectively, compared to 3.20% and 3.81% for the same period in 2004. Interest
income increased $800,000, or 10.3%, to $8.6 million for the six-month period
ended December 31, 2005 primarily due to an increase of 82 basis points in the
yield on earning assets combined with changes in the asset mix. Interest expense
increased $724,000, or 32.8%, to $2.9 million for the six months ended December
31, 2005, primarily due to an increase in deposit rates and an increase in
Federal Home Loan Bank ("FHLB") borrowings.
Noninterest income increased $197,000, or 91.2%, to $413,000 for the quarter
ended December 31, 2005 from the corresponding 2004 quarter. Mortgage
origination fee income accounted for the largest increase in noninterest income
with $131,000 for the current three-month period and no comparable income from
mortgage originations in 2004. Gain on sale of foreclosed property was $83,000
for the three months ended December 31, 2005 compared to $5,000 for the same
period in 2004. For the six months ended December 31, 2005, noninterest income
increased $408,000, or 80.8%, to $913,000. Mortgage origination fee income
accounted for the largest increase in noninterest income with $317,000 for the
current six-month period and no comparable income from mortgage originations in
2004. Gain on sale of foreclosed property was $160,000 for the six months ended
December 31, 2005 compared to $33,000 for the same period in 2004.
Noninterest expense increased $502,000, or 31.7%, to $2.1 million for the
three-month period ended December 31, 2005, primarily due to an increase in
compensation and benefits expense. Compensation and benefits expense increased
$394,000, or 43.5%, to $1.3 million for the three-month period ended December
31, 2005, primarily due to staff additions for the lending office in Knoxville,
Tennessee which opened on January 1, 2005, and staff additions for our future
branch office in Morristown, Tennessee and two future branch offices in
Knoxville, Tennessee which are anticipated to open during 2006. On July 1, 2005,
we adopted FASB Statement No.123R, "Share-Based Payment" which requires the
expensing of stock options at fair value. Accordingly, for the three months
ended December 31, 2005, compensation and benefits expense included $66,000
related to the expensing of stock options. For the six months ended December 31,
2005, noninterest expense increased $1.0 million, or 31.2%, to $4.2 million due
primarily to an increase in compensation and benefits expense. Compensation and
benefits expense increased $736,000, or 39.9%, to $2.6 million for the six
months ended December 31, 2005 due to staff additions and stock option
expensing. Compensation and benefits expense related to stock option expense
totaled $133,000 for the six months ended December 31, 2005. There were 85
full-time employees at December 31, 2005 compared to 68 full-time employees at
December 31, 2004.
Nonperforming assets totaled $772,000, or 0.25% of total assets at December 31,
2005, compared to $1.3 million, or 0.45% of total assets at June 30, 2005.
Annualized net charge-offs for the six months ended December 31, 2005 were .05%
of average loans, compared to .09% for the same period in 2004. The allowance
for loan losses was $2.2 million, or 0.97% of total gross loans, at December 31,
2005 compared to $2.3 million, or 1.09% of total gross loans, at June 30, 2005.
There were no additions to the allowance for loan losses for either period.
Total assets at December 31, 2005 were $306.1 million compared to $295.0 million
at June 30, 2005. During the six months ended December 31, 2005, net loans
receivable increased $19.2 million, or 9.2%, to $227.7 million, due to growth in
real estate and consumer loans. Investment securities decreased $6.6 million, or
12.3%, to $46.8 million at December 31, 2005, compared to $53.4 million at June
30, 2005 due primarily to sales of investment securities. Proceeds from the sale
of investment securities were used to fund stock repurchases and to fund growth
in the loan portfolio. Total deposits increased $494,000 to $195.2 million at
December 31, 2005 as a result of a $3.5 million increase in transaction
accounts, more than offsetting a $3.0 million decrease in certificates of
deposit. Transaction accounts represented 39.5% of total deposits at December
31, 2005 compared to 37.8% at June 30, 2005 and 33.4% at December 31, 2004.
Total equity decreased $4.1 million, or 5.0%, to $77.9 million at December 31,
2005 due to a combination of factors, including the repurchase of shares in the
amount of $5.2 million and dividend payments of $843,000, more than offsetting
net income of $1.5 million. Stock repurchases for the three months ended
December 31, 2005 totaled 257,223 shares at an average cost of $13.32 per share.
An additional 176,068 shares remain eligible for repurchase under the current
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 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. Additionally, other risks and uncertainties may be described in the
Company's quarterly reports on Form 10-Q and its annual report on Form 10-K,
each filed with the Securities and Exchange Commission, which are available
through the SEC's website at www.sec.gov. 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. The Company assumes no obligation to update any forward-looking
statements.
JEFFERSON BANCSHARES, INC.
AT AT
DEC. 31, 2005 JUNE 30, 2005
-------------------- -------------------
(Dollars in thousands)
FINANCIAL CONDITION DATA:
Total assets $ 306,098 $ 295,041
Loans receivable, net 227,668 208,438
Cash and cash equivalents, and
interest-bearing deposits 9,615 11,027
Investment securities 46,792 53,366
Deposits 195,200 194,706
Borrowings 32,000 17,000
Stockholders' equity 77,912 82,028
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
2005 2004 2005 2004
-------------------- ------------------- -------------------- -------------------
(Dollars in thousands, except per share data)
OPERATING DATA:
Interest income $ 4,392 $ 3,898 $ 8,586 $ 7,786
Interest expense 1,551 1,112 2,931 2,207
Net interest income 2,841 2,786 5,655 5,579
Provision for loan losses - - - -
Net interest income after
provision for loan losses 2,841 2,786 5,655 5,579
Noninterest income 413 216 913 505
Noninterest expense 2,087 1,585 4,206 3,207
Earnings before income taxes 1,167 1,417 2,362 2,877
Total income taxes 457 535 867 1,043
Net earnings 710 882 1,495 1,834
SHARE DATA:
Earnings per share, basic $ 0.11 $ 0.12 $ 0.23 $ 0.24
Earnings per share, diluted $ 0.11 $ 0.12 $ 0.23 $ 0.24
Dividends per share $ 0.06 $ 0.05 $ 0.12 $ 0.10
Weighted average shares:
Basic 6,416,745 7,383,907 6,485,859 7,569,166
Diluted 6,434,807 7,406,857 6,508,706 7,588,474
THREE MONTHS ENDED DEC. 31, SIX MONTHS ENDED DEC. 31,
2005 2004 2005 2004
-------------------- ------------------- -------------------- -------------------
(Dollars in thousands)
ALLOWANCE FOR LOAN LOSSES:
Allowance at beginning of period $ 2,281 $ 2,472 $ 2,293 $ 2,479
-------------------- ------------------- -------------------- -------------------
Provision for loan losses - - - -
Recoveries 40 74 76 186
Charge-offs (87) (158) (135) (277)
-------------------- ------------------- -------------------- -------------------
Net Charge-offs (47) (84) (59) (91)
-------------------- ------------------- -------------------- -------------------
Allowance at end of period $ 2,234 $ 2,388 $ 2,234 $ 2,388
==================== =================== ==================== ===================
Net charge-offs to average outstanding
loans during the period, annualized 0.08% 0.17% 0.05% 0.09%
AT AT AT
DEC. 31, 2005 JUNE 30, 2005 DEC. 31, 2004
--------------------- --------------------- --------------------
(Dollars in thousands)
NONPERFORMING ASSETS:
Nonaccrual loans:
Real estate $ 498 $ 426 $ 793
Commercial business - - 613
Consumer - - 23
--------------------- --------------------- --------------------
Total 498 426 1,429
--------------------- --------------------- --------------------
Real estate owned 260 914 1,332
Other nonperforming assets 14 - 35
--------------------- --------------------- --------------------
Total nonperforming assets $ 772 $ 1,340 $ 2,796
===================== ===================== ====================
SIX
MONTHS ENDED YEAR ENDED
DEC. 31, 2005 JUNE 30, 2005
--------------------- ---------------------
PERFORMANCE RATIOS:
Return on average assets 0.99% 1.14%
Return on average equity 3.74% 3.92%
Interest rate spread 3.35% 3.24%
Net interest margin 4.04% 3.88%
Efficiency ratio 63.37% 57.17%
Average interest-earning assets to
average interest-bearing liabilities 132.88% 139.49%
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percent of total gross loans 0.97% 1.09%
Allowance for loan losses as a
percent of nonperforming loans 448.59% 538.26%
Nonperforming loans as a percent
of total loans 0.22% 0.20%
Nonperforming assets as a percent
of total assets 0.25% 0.45%
Contacts:
Jefferson Bancshares, Inc.
Anderson L. Smith 423-586-8421
Jane P. Hutton 423-586-8421