JEFFERSON BANCSHARES, INC. ANNOUNCES EARNINGS FOR THE
QUARTER AND YEAR ENDED JUNE 30, 2006
Morristown, Tennessee -- (July 28, 2006) - Jefferson Bancshares, Inc. (Nasdaq:
JFBI), the holding company for Jefferson Federal Bank, announced net income of
$359,000, or $0.06 per diluted share, for the quarter ended June 30, 2006
compared to net income of $754,000, or $0.11 per diluted share, for the quarter
ended June 30, 2005. For the year ended June 30, 2006, net income was $2.3
million, or $0.37 per diluted share, compared to $3.5 million, or $0.47 per
diluted share, for the comparable period in 2005. The decline in net income for
the three-month period ended June 30, 2006 was primarily the result of a loss on
sale of investment securities, combined with an increase in noninterest expense.
During the quarter ended June 30, 2006, investment securities were sold in
response to liquidity and funding objectives. The increase in noninterest
expense was the result of our expansion activities, as well as our adoption of
Financial Accounting Standards Board ("FASB") Statement 123R, which requires the
expensing of stock options. The decline in net income for the year ended June
30, 2006 was primarily the result of an increase in noninterest expense,
partially offset by an increase in noninterest income. Return on average assets
and return on average equity for the year ended June 30, 2006 were 0.75% and
2.99%, respectively, compared to 1.14% and 3.92% for the corresponding 2005
period.
Anderson L. Smith, President and CEO, commented, "With the completion and
opening of two new offices in Hamblen and Knox counties, we look forward to the
prospects of developing new customer relationships, and the asset growth and
profitability planned for each location. We are pleased with the early results
from both locations. Our second Knox county location is now underway with an
anticipated completion toward the middle of the second quarter in 2007.
Improvements in asset quality coupled with strong growth in earning assets
continue to provide excellent support for our expansion activities."
Net interest income increased $37,000 to $2.8 million for the quarter ended June
30, 2006 from the corresponding quarter in 2005. The interest rate spread and
net interest margin for the quarter ended June 30, 2006 were 2.95% and 3.71%,
respectively, compared to 3.22% and 3.89% for the corresponding period in 2005.
Interest income increased $907,000, or 22.7%, to $4.9 million for the
three-month period ended June 30, 2006 primarily due to growth in average
earning assets and an increase in short-term interest rates. The average yield
earned on interest-earning assets increased 87 basis points to 6.58% for the
three months ended June 30, 2006. Interest expense increased $870,000, or 68.6%,
to $2.1 million for the quarter ended June 30, 2006, primarily as a result of an
increase in deposit rates and an increase in Federal Home Loan Bank ("FHLB")
borrowings. The average rate paid on interest-bearing liabilities increased 115
basis points to 3.63% for the three months ended June 30, 2006. For the year
ended June 30, 2006, net interest income increased $17,000, to $11.2 million.
The interest rate spread and net interest margin for the year ended June 30,
2006 were 3.16% and 3.89%, respectively, compared to 3.24% and 3.88% for the
corresponding period in 2005. Interest income increased $2.3 million, or 14.7%,
to $18.1 million for the year ended June 30, 2006 primarily due to an increase
in the yield on average earning assets combined with changes in the asset mix.
Interest expense increased $2.3 million, or 49.5%, to $6.9 million for the year
ended June 30, 2006, primarily as a result of an increase in deposit rates and
an increase in FHLB borrowings.
As a result of continued improvement in asset quality, the provision for loan
losses for the quarter and year ended 2006 was a recovery of $68,000, compared
to no provision for fiscal 2005. Nonperforming assets totaled $435,000, or 0.13%
of total assets at June 30, 2006, compared to $1.3 million, or 0.45% of total
assets at June 30, 2005. Net charge-offs for fiscal 2006 were 0.02% of average
loans, compared to 0.09% for fiscal 2005. The allowance for loan losses was $2.2
million, or 0.85% of total gross loans, at June 30, 2006 compared to $2.3
million, or 1.09% of total gross loans, at June 30, 2005. For the three months
ended June 30, 2006, the Bank recorded a net recovery of $49,000 compared to net
charge-offs of $45,000 for the comparable period in 2005. For the year ended
June 30, 2006, net charge-offs were $53,000 compared to $186,000 for 2005.
Noninterest income decreased $222,000, or 53.5%, to $193,000 for the quarter
ended June 30, 2006 due to a $168,000 loss from sale of investment securities
compared to a $88,000 gain on sale of investment securities for the comparable
period in 2005. For the year ended June 30, 2006, noninterest income increased
$171,000, or 14.2%, to $1.4 million. Included in noninterest income for the year
ended June 30, 2006 was a $258,000 loss on sale of investment securities
compared to a $45,000 gain on sale of investment securities for fiscal 2005.
Security sales during fiscal 2006 generated liquidity to reduce the level of
short-term borrowings and to fund loan growth and treasury stock repurchases.
Mortgage origination fee income accounted for the largest increase in
noninterest income with $132,000 and $578,000 for the quarter and year ended
June 30, 2006, respectively, compared to $82,000 and $122,000 for the comparable
periods in 2005.
Noninterest expense increased $551,000, or 28.2%, to $2.5 million for the
three-month period ended June 30, 2006, primarily due to an increase in
compensation and benefits expense. Compensation and benefits expense increased
$354,000, or 30.5%, to $1.5 million for the three-month period ended June 30,
2006, primarily due to staff additions for our new branch offices in Hamblen and
Knox counties and our future branch office in Knox county that is anticipated to
open in 2007. 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 June 30, 2006, compensation and benefits
expense included $66,000 related to the expensing of stock options. For the year
ended June 30, 2006, noninterest expense increased $1.9 million, or 27.3%, to
$9.0 million due primarily to an increase in compensation and benefits expense.
Compensation and benefits expense increased $1.5 million, or 36.9%, to $5.6
million for the year ended June 30, 2006 due to staff additions and stock option
expensing. Compensation and benefits expense related to stock option expense
totaled $265,000 for the year ended June 30, 2006. There were 98 full-time
employees at June 30, 2006 compared to 77 full-time employees at June 30, 2005.
Total assets at June 30, 2006 were $327.1 million compared to $295.0 million at
June 30, 2005. During the year ended June 30, 2006, net loans receivable
increased $45.7 million, or 21.9%, to $254.1 million, due to growth in real
estate and consumer loans. Investment securities decreased $21.5 million, or
40.3%, to $31.8 million at June 30, 2006, compared to $53.4 million at June 30,
2005 due primarily to sales of investment securities. Total deposits increased
$4.1 million, to $198.8 million at June 30, 2006 as a result of a $3.5 million
increase in certificates of deposit. FHLB advances were $52.4 million at June
30, 2006, an increase of $35.4 million, compared to $17.0 million at June 30,
2005. We utilize advances from the FHLB as a funding source for loan growth and
to manage daily liquidity needs.
Total equity decreased $7.5 million, or 9.1%, to $74.5 million at June 30, 2006
due to a combination of factors, including the repurchase of shares in the
amount of $9.1 million and dividend payments of $1.8 million, more than
offsetting net income of $2.3 million. Stock repurchases for the three months
ended June 30, 2006 totaled 81,360 shares at an average cost of $13.22 per
share. On February 24, 2006, the Company announced its third stock repurchase
program in which 690,261 shares, or 10% of the Company's outstanding common
stock, may be repurchased. At June 30, 2006, 574,274 shares remained 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 with offices in Hamblen and Knox County.
The Company's stock is listed on the NASDAQ Global Market under the symbol JFBI.
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
JUNE 30, 2006 JUNE 30, 2005
-------------------- -------------------
(Dollars in thousands)
FINANCIAL CONDITION DATA:
Total assets $ 327,137 $ 295,041
Loans receivable, net 254,127 208,438
Cash and cash equivalents, and
interest-bearing deposits 11,956 11,027
Investment securities 31,845 53,366
Deposits 198,843 194,706
Borrowings 52,400 17,000
Stockholders' equity 74,543 82,028
THREE MONTHS ENDED JUNE 30, TWELVE MONTHS ENDED JUNE 30,
2006 2005 2006 2005
-------------------- ------------------- ------------------- ------------------
(Dollars in thousands, except per share data)
OPERATING DATA:
Interest income $ 4,901 $ 3,994 $ 18,092 $ 15,779
Interest expense 2,138 1,268 6,935 4,639
Net interest income 2,763 2,726 11,157 11,140
Provision (Recovery) for loan losses (68) - (68) -
Net interest income after
provision for loan losses 2,831 2,726 11,225 11,140
Noninterest income 193 415 1,375 1,204
Noninterest expense 2,502 1,951 8,950 7,031
Earnings before income taxes 522 1,190 3,650 5,313
Total income taxes 163 436 1,320 1,863
Net earnings 359 $ 754 2,330 $ 3,450
SHARE DATA:
Earnings per share, basic $ 0.06 $ 0.11 $ 0.37 $ 0.47
Earnings per share, diluted $ 0.06 $ 0.11 $ 0.37 $ 0.47
Dividends per share $ 0.085 $ 0.10 $ 0.265 $ 0.25
Weighted average shares:
Basic 6,115,760 6,929,559 6,345,549 7,265,831
Diluted 6,125,096 6,940,069 6,361,624 7,282,327
YEAR ENDED JUNE 30,
2006 2005
-------------------- -------------------
(Dollars in thousands)
ALLOWANCE FOR LOAN LOSSES:
Allowance at beginning of period $ 2,293 $ 2,479
Provision (recovery) for loan losses (68) -
Recoveries 193 254
Charge-offs (246) (440)
-------------------- -------------------
Net Charge-offs (53) (186)
-------------------- -------------------
Allowance at end of period $ 2,172 $ 2,293
==================== ===================
Net charge-offs to average outstanding
loans during the period, annualized 0.02% 0.09%
AT AT
JUNE 30, 2006 JUNE 30, 2005
-------------------- -------------------
(Dollars in thousands)
NONPERFORMING ASSETS:
Nonaccrual loans:
Real estate $ 296 $ 426
Commercial business 49 -
Consumer - -
-------------------- -------------------
Total 345 426
-------------------- -------------------
Real estate owned 74 914
Other nonperforming assets 16 -
-------------------- -------------------
Total nonperforming assets $ 435 $ 1,340
==================== ===================
YEAR ENDED YEAR ENDED
JUNE 30, 2006 JUNE 30, 2005
-------------------- -------------------
PERFORMANCE RATIOS:
Return on average assets 0.75% 1.14%
Return on average equity 2.99% 3.92%
Interest rate spread 3.16% 3.24%
Net interest margin 3.89% 3.88%
Efficiency ratio 69.97% 57.17%
Average interest-earning assets to
average interest-bearing liabilities 130.28% 139.49%
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percent of total gross loans 0.85% 1.09%
Allowance for loan losses as a
percent of nonperforming loans 629.57% 538.26%
Nonperforming loans as a percent
of total loans 0.13% 0.20%
Nonperforming assets as a percent
of total assets 0.13% 0.45%
Contacts:
Jefferson Bancshares, Inc.
Anderson L. Smith, 423-586-8421
or
Jane P. Hutton 423-586-8421