JEFFERSON BANCSHARES, INC. ANNOUNCES EARNINGS FOR THE
QUARTER ENDED DECEMBER 31, 2006
Morristown, Tennessee -- (January 26, 2007) - Jefferson Bancshares, Inc.
(Nasdaq: JFBI), the holding company for Jefferson Federal Bank, announced net
income of $349,000, or $0.06 per diluted share, for the quarter ended December
31, 2006 compared to net income of $710,000, or $0.11 per diluted share, for the
quarter ended December 31, 2005. For the six months ended December 31, 2006, net
income was $639,000, or $0.11 per diluted share, compared to $1.5 million, or
$0.23 per diluted share, for the comparable period in 2005. The decline in net
income for both the three- and six-month periods ended December 31, 2006 was
primarily the result of a decline in noninterest income combined with an
increase in noninterest expense. The increase in noninterest expense continues
to reflect our expansion initiatives during the past year. Return on average
assets and return on average equity for the six months ended December 31, 2006
were 0.39% and 1.71%, respectively, compared to 0.99% and 3.74% for the
corresponding period in 2005.
Anderson L. Smith, President and Chief Executive Officer, commented, "We expect
2007 to be a challenging year due to the interest rate environment and continued
competitive pressures. We have executed a number of initiatives that will offer
convenience and value to our customers and we will continue to explore new
products and services that will further enhance our delivery system. Our
additions during the past year 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
resulted in increased overhead, we feel that we are positioning the Company for
future growth and building the value of our franchise. Our priorities for 2007
include achieving growth in earning assets while controlling both funding costs
and operating expenses."
Net interest income decreased $33,000, or 1.2%, to $2.8 million for the quarter
ended December 31, 2006 from the corresponding quarter in 2005. The interest
rate spread and net interest margin for the quarter ended December 31, 2006 were
2.88% and 3.69%, respectively, compared to 3.33% and 4.03% for the same period
in 2005. Interest income increased $844,000, or 19.2%, to $5.2 million for the
three-month period ended December 31, 2006 as a result of growth in the average
balance of loans and an increase in interest rates. The average yield earned on
interest-earning assets increased 65 basis points to 6.88% for the three months
ended December 31, 2006. Interest expense increased $877,000, or 56.5%, to $2.4
million for the quarter ended December 31, 2006, primarily due to an increase in
interest rates and an increase in the average balance of both deposits and
Federal Home Loan Bank ("FHLB") borrowings. The average rate paid on
interest-bearing liabilities increased 110 basis points to 4.00% for the three
months ended December 31, 2006.
For the six months ended December 31, 2006, net interest income decreased
$98,000, or 1.7%, to $5.6 million. The interest rate spread and net interest
margin for the six months ended December 31, 2006 were 2.87% and 3.67%,
respectively, compared to 3.35% and 4.04% for the same period in 2005. Interest
income increased $1.8 million, or 20.8%, to $10.4 million for the six-month
period ended December 31, 2006 primarily due to an increase of 71 basis points
in the yield on earning assets combined with growth in the average balance of
loans. Interest expense increased $1.9 million, or 64.2%, to $4.8 million for
the six months ended December 31, 2006, primarily due to an increase in interest
rates and an increase in the average balance of both deposits and FHLB advances.
The average rate paid on interest-bearing liabilities increased 119 basis points
to 3.98% for the six months ended December 31, 2006.
Noninterest income decreased $103,000, or 24.9%, to $310,000 for the three
months ended December 31, 2006 and decreased $172,000, or 19.8%, to $697,000 for
the six months ended December 31, 2006 compared to the corresponding 2005
periods. A loss on sale of investment securities totaling $30,000 was recorded
in the three-month period ended December 31, 2006 compared to none in the
corresponding 2005 period. Loss on sale of investment securities was $29,000 for
the six-month period ended December 31, 2006 compared to $44,000 in the
corresponding 2005 period. Mortgage origination fee income decreased $29,000, or
22.1%, to $102,000 for the three months ended December 31, 2006 and decreased
$65,000, or 20.5%, to $252,000 for the six-month period ended December 31, 2006
due to a lower volume of loan originations. Gains on foreclosed real estate
decreased $62,000, or 74.7%, to $21,000 for the three months ended December 31,
2006 and decreased $126,000, or 78.8%, to $34,000 for the six-month period ended
December 31, 2006.
Noninterest expense increased $452,000, or 21.7%, to $2.5 million for the
three-month period ended December 31, 2006 and increased $1.0 million, or 25.1%,
to $5.2 million for the six-month period ended December 31, 2006 compared to the
corresponding periods in 2005 due to staff additions and operating expenses
associated with our expansion initiatives. Compensation and benefits expense
increased $199,000, or 15.3%, to $1.5 million for the three-month period ended
December 31, 2006 and increased $461,000, or 17.9%, to $3.0 million for the six
months ended December 31, 2006. There were 94 full-time employees at December
31, 2006 compared to 85 full-time employees at December 31, 2005.
Nonperforming assets totaled $557,000, or 0.17% of total assets at December 31,
2006, compared to $772,000, or 0.25% of total assets at December 31, 2005.
Annualized net charge-offs for the six months ended December 31, 2006 were 0.07%
of average loans, compared to 0.05% for the same period in 2005. The allowance
for loan losses was $2.1 million, or 0.78% of total gross loans, at December 31,
2006 compared to $2.2 million, or 0.97% of total gross loans, at December 31,
2005. The provision for loan losses totaled $30,000 for both the three and six
months ended December 31, 2006 as a result of growth in the loan portfolio,
compared to no provision for the comparable periods in 2005.
Total assets at December 31, 2006 were $330.4 million compared to $327.1 million
at June 30, 2006. Net loans receivable increased $14.4 million, or 5.7%, to
$268.5 million at December 31, 2006, primarily due to growth in commercial real
estate loans. Total deposits increased $11.1 million, or 5.6%, to $209.9 million
at December 31, 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 FHLB advances
during the six months ended December 31, 2006. FHLB advances were $45.3 million
at December 31, 2006, a decrease of $7.1 million, or 13.5%, compared to $52.4
million at June 30, 2006.
Total equity decreased $317,000, to $74.2 million at December 31, 2006 due
primarily to the repurchase of shares in the amount of $1.4 million. Stock
repurchases for the three months ended December 31, 2006 totaled 57,562 shares
at an average cost of $13.10 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 December
31, 2006, 469,361 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 December 31, 2006 totaling $391,000.
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.
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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
DEC. 31, 2006 JUNE 30, 2006
-------------------- -------------------
(Dollars in thousands)
FINANCIAL CONDITION DATA:
Total assets $ 330,438 $ 327,137
Loans receivable, net 268,493 254,127
Cash and cash equivalents, and
interest-bearing deposits 8,209 11,956
Investment securities 27,422 31,845
Deposits 209,895 198,843
Borrowings 45,300 52,400
Stockholders' equity 74,226 74,543
THREE MONTHS ENDED DEC. 31, SIX MONTHS ENDED DEC. 31,
2006 2005 2006 2005
-------------------- ------------------- ------------------- -------------------
(Dollars in thousands, except per share data)
OPERATING DATA:
Interest income $ 5,236 $ 4,392 $ 10,370 $ 8,586
Interest expense 2,428 1,551 4,813 2,931
Net interest income 2,808 2,841 5,557 5,655
Provision for loan losses 30 - 30 -
Net interest income after
provision for loan losses 2,778 2,841 5,527 5,655
Noninterest income 310 413 697 869
Noninterest expense 2,539 2,087 5,205 4,162
Earnings before income taxes 549 1,167 1,019 2,362
Total income taxes 200 457 380 867
Net earnings $ 349 $ 710 $ 639 $ 1,495
SHARE DATA:
Earnings per share, basic $ 0.06 $ 0.11 $ 0.11 $ 0.23
Earnings per share, diluted $ 0.06 $ 0.11 $ 0.11 $ 0.23
Dividends per share $ 0.06 $ 0.06 $ 0.12 $ 0.12
Weighted average shares:
Basic 5,990,682 6,416,745 6,015,862 6,485,859
Diluted 5,994,138 6,434,807 6,021,572 6,508,706
THREE MONTHS ENDED DEC. 31, SIX MONTHS ENDED DEC. 31,
2006 2005 2006 2005
-------------------- ------------------- ------------------- -------------------
(Dollars in thousands)
ALLOWANCE FOR LOAN LOSSES:
Allowance at beginning of period $ 2,144 $ 2,281 $ 2,172 $ 2,293
Provision for loan losses 30 - 30 -
Recoveries 17 40 42 76
Charge-offs (83) (87) (136) (135)
-------------------- ------------------- ------------------- -------------------
Net charge-offs (66) (47) (94) (59)
-------------------- ------------------- ------------------- -------------------
Allowance at end of period $ 2,108 $ 2,234 $ 2,108 $ 2,234
==================== =================== =================== ===================
Net charge-offs to average outstanding
loans during the period, annualized 0.10% 0.08% 0.07% 0.05%
AT AT AT
DEC. 31, 2006 JUNE 30, 2006 DEC. 31, 2005
-------------------- ------------------- -------------------
(Dollars in thousands)
NONPERFORMING ASSETS:
Nonaccrual loans:
Real estate $ 317 $ 296 $ 498
Commercial business 210 49 -
Consumer - - -
-------------------- ------------------- -------------------
Total 527 345 498
-------------------- ------------------- -------------------
Real estate owned 30 74 260
Other nonperforming assets - 16 14
-------------------- ------------------- -------------------
Total nonperforming assets $ 557 $ 435 $ 772
==================== =================== ===================
SIX MONTHS ENDED YEAR ENDED
DEC. 31, 2006 JUNE 30, 2006
-------------------- -------------------
PERFORMANCE RATIOS:
Return on average assets 0.39% 0.75%
Return on average equity 1.71% 2.99%
Interest rate spread 2.87% 3.16%
Net interest margin 3.67% 3.89%
Efficiency ratio 82.84% 69.97%
Average interest-earning assets to
average interest-bearing liabilities 125.17% 130.28%
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percent of total gross loans 0.78% 0.85%
Allowance for loan losses as a
percent of nonperforming loans 400.00% 629.57%
Nonperforming loans as a percent
of total loans 0.19% 0.13%
Nonperforming assets as a percent
of total assets 0.17% 0.13%
Contact:
Jefferson Bancshares, Inc.
Anderson L. Smith, 423-586-8421
or
Jane P. Hutton, 423-586-8421