JEFFERSON BANCSHARES, INC. ANNOUNCES EARNINGS FOR THE
QUARTER ENDED SEPTEMBER 30, 2006
Morristown, Tennessee -- (October 27, 2006) - Jefferson Bancshares, Inc.
(Nasdaq: JFBI), the holding company for Jefferson Federal Bank, announced net
income of $290,000, or $0.05 per diluted share, for the quarter ended September
30, 2006 compared to net income of $785,000, or $0.12 per diluted share, for the
quarter ended September 30, 2005. The decline in net income for the three-month
period ended September 30, 2006 was primarily the result of a decrease in net
interest income and noninterest income combined with an increase in noninterest
expense. The increase in noninterest expense was attributable to the staffing
and operational costs of two new full-service offices and our future branch
office scheduled to open in 2007. Return on average assets and return on average
equity for the quarter ended September 30, 2006 were 0.35% and 1.55%,
respectively, compared to 1.05% and 3.87% for the corresponding 2005 period.
Anderson L. Smith, President and Chief Executive Officer, commented, "The
interest rate environment continues to be challenging for financial institutions
and competition for loans and deposits is very intense. Despite this difficult
environment, we have achieved strong loan and deposit growth during the quarter
while maintaining positive trends in asset quality. Our recent additions of the
Merchants-Greene office in Hamblen County and our Farragut office in Knox County
have allowed us to expand our customer base, and construction on our second
Knoxville office is underway with an estimated completion date of mid 2007.
While our recent expansion efforts have adversely affected our current earnings,
we feel that we are positioning the Company for future growth and building the
value of our franchise."
Net interest income decreased $65,000 to $2.7 million for the quarter ended
September 30, 2006 from the corresponding quarter in 2005. The interest rate
spread and net interest margin for the quarter ended September 30, 2006 were
2.86% and 3.65%, respectively, compared to 3.38% and 4.06% for the corresponding
2005 period. Interest income increased $940,000, or 22.4%, to $5.1 million for
the three-month period ended September 30, 2006 due to growth in average earning
assets and an increase in short-term interest rates. The average yield earned on
interest-earning assets increased 77 basis points to 6.82% for the three months
ended September 30, 2006. Interest expense increased $1.0 million, or 72.8%, to
$2.4 million for the quarter ended September 30, 2006 as a result of an increase
in the volume and rate paid on interest-bearing liabilities. The average rate
paid on interest-bearing liabilities increased 129 basis points to 3.95% for the
three months ended September 30, 2006.
Noninterest income decreased $69,000, or 15.1%, to $387,000 for the quarter
ended September 30, 2006 compared to the corresponding 2005 period due to a
combination of factors including decreases in mortgage origination income,
service charges and gain on sale of foreclosed property more than offsetting a
decrease in loss on sale of investment securities.
Noninterest expense increased $591,000, or 28.5%, to $2.7 million for the
three-month period ended September 30, 2006 compared to the corresponding 2005
period due to a combination of factors including increases in expenses for
compensation and benefits, occupancy, advertising and equipment and data
processing. Compensation and benefits expense increased $262,000, or 20.5%, to
$1.5 million for the three-month period ended September 30, 2006 primarily due
to staff additions for our branch offices in Hamblen and Knox Counties and our
future branch office in Knox County that is anticipated to open in 2007. There
were 95 full-time employees at September 30, 2006 compared to 81 full-time
employees at September 30, 2005. Increases in advertising, occupancy, equipment
and data processing expenses were also the result of our recent expansion
activities.
Nonperforming assets totaled $271,000, or 0.08% of total assets at September 30,
2006, compared to $480,000, or 0.16% of total assets at September 30, 2005 due
to a decline in repossessed assets. Net charge-offs for the quarter ended
September 30, 2006 were $28,000, or 0.04% of average loans, compared to $12,000,
or 0.02% of average loans for the quarter ended September 30, 2005. The
allowance for loan losses was $2.1 million, or 0.80% of total gross loans, at
September 30, 2006 compared to $2.3 million, or 1.05% of total gross loans, at
September 30, 2005. There were no additions to the allowance for loan losses for
either three-month period.
Total assets at September 30, 2006 were $331.4 million compared to $327.1
million at June 30, 2006. During the quarter ended September 30, 2006, net loans
receivable increased $10.9 million, or 4.3%, to $265.0 million, primarily due to
growth in real estate loans. Total deposits increased $9.3 million, or 4.7%,
during the quarter to $208.1 million at September 30, 2006 as a result of
marketing efforts and promotions associated with the opening of our two new
full-service offices. The increase in deposits has provided funding for loan
growth and reduced our reliance on Federal Home Loan Bank advances during the
quarter ended September 30, 2006. Federal Home Loan Bank advances were $47.9
million at September 30, 2006, a decrease of $4.5 million compared to $52.4
million at June 30, 2006.
Total equity decreased $101,000, to $74.4 million at September 30, 2006 due
primarily to the repurchase of shares in the amount of $633,000. Stock
repurchases for the three months ended September 30, 2006 totaled 47,351 shares
at an average cost of $13.38 per share. On February 24, 2006, the Company
announced its third stock repurchase program in which up to 690,261 shares, or
10% of the Company's outstanding common stock, may be repurchased. At September
30, 2006, 526,923 shares remained eligible for repurchase under the current
stock repurchase program. The Company paid a $0.06 per share dividend to
shareholders during the quarter ended September 30, 2006 totaling $396,000.
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 press release, as well as other written communications made from time to
time by the Company and its subsidiaries and oral communications made from time
to time by authorized officers of the Company, may contain statements relating
to the future results of the Company (including certain projections and business
trends) that are considered "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995 (the "PSLRA"). Such
forward-looking statements may be identified by the use of such words as
"believe," "expect," "anticipate," "should," "planned," "estimated," "intend"
and "potential." For these statements, the Company claims the protection of the
safe harbor for forward-looking statements contained in the PSLRA.
The Company cautions you that a number of important factors could cause actual
results to differ materially from those currently anticipated in any
forward-looking statement. Such factors include, but are not limited to:
prevailing economic and geopolitical conditions; changes in interest rates, loan
demand, real estate values and competition; changes in accounting principles,
policies and guidelines; changes in any applicable law, rule, regulation or
practice with respect to tax or legal issues; and other economic, competitive,
governmental, regulatory and technological factors affecting the Company's
operations, pricing, products and services and other factors that may be
described in the Company's annual report on Form 10-K and quarterly reports on
Form 10-Q as filed with the Securities and Exchange Commission. The
forward-looking statements are made as of the date of this release, and, except
as may be required by applicable law or regulation, the Company assumes no
obligation to update the forward-looking statements or to update the reasons why
actual results could differ from those projected in the forward-looking
statements.
JEFFERSON BANCSHARES, INC.
AT AT
SEPTEMBER 30, 2006 JUNE 30, 2006
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(Dollars in thousands)
FINANCIAL CONDITION DATA:
Total assets $ 331,398 $ 327,137
Loans receivable, net 265,033 254,127
Cash and cash equivalents, and
interest-bearing deposits 8,760 11,956
Investment securities 31,271 31,845
Deposits 208,130 198,843
Borrowings 47,900 52,400
Stockholders' equity 74,442 74,543
THREE MONTHS ENDED SEPTEMBER 30,
2006 2005
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(Dollars in thousands, except per share data)
OPERATING DATA:
Interest income $ 5,134 $ 4,194
Interest expense 2,385 1,380
Net interest income 2,749 2,814
Provision for loan losses - -
Net interest income after
provision for loan losses 2,749 2,814
Noninterest income 387 456
Noninterest expense 2,666 2,075
Earnings before income taxes 470 1,195
Total income taxes 180 410
Net earnings 290 785
SHARE DATA:
Earnings per share, basic $ 0.05 $ 0.12
Earnings per share, diluted $ 0.05 $ 0.12
Dividends per share $ 0.06 $ 0.06
Weighted average shares:
Basic 6,041,551 6,620,320
Diluted 6,049,466 6,633,489
THREE MONTHS ENDED SEPTEMBER 30,
2006 2005
------------------------------- --------------------
(Dollars in thousands)
ALLOWANCE FOR LOAN LOSSES:
Allowance at beginning of period $ 2,172 $ 2,293
Provision for loan losses - -
Recoveries 25 36
Charge-offs (53) (48)
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Net charge-offs (28) (12)
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Allowance at end of period $ 2,144 $ 2,281
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Net charge-offs to average outstanding
loans during the period, annualized 0.04% 0.02%
AT AT AT
SEPTEMBER 30, 2006 JUNE 30, 2006 SEPTEMBER 30, 2005
------------------------------- -------------------- ------------------------
(Dollars in thousands)
NONPERFORMING ASSETS:
Nonaccrual loans:
Real estate $ 138 $ 296 $ 221
Commercial business 50 49 -
Consumer 17 - -
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Total 205 345 221
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Real estate owned 66 74 259
Other nonperforming assets - 16 -
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Total nonperforming assets $ 271 $ 435 $ 480
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THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2006 JUNE 30, 2006
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PERFORMANCE RATIOS:
Return on average assets 0.35% 0.75%
Return on average equity 1.55% 2.99%
Interest rate spread 2.86% 3.16%
Net interest margin 3.65% 3.89%
Efficiency ratio 85.03% 69.97%
Average interest-earning assets to
average interest-bearing liabilities 124.88% 130.28%
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percent of total gross loans 0.80% 0.85%
Allowance for loan losses as a
percent of nonperforming loans 1045.85% 629.57%
Nonperforming loans as a percent
of total loans 0.08% 0.13%
Nonperforming assets as a percent
of total assets 0.08% 0.13%
Contacts:
Jefferson Bancshares, Inc.
Anderson L. Smith 423-586-8421
Jane P. Hutton 423-586-8421