<Page>1
JEFFERSON BANCSHARES, INC. ANNOUNCES EARNINGS FOR THE
THREE AND SIX MONTHS ENDED DECEMBER 31, 2009
Morristown, Tennessee -- (January 29, 2010) - Jefferson Bancshares, Inc.
(Nasdaq: JFBI), the holding company for Jefferson Federal Bank, announced a net
loss for the quarter ended December 31, 2009 of $415,000, or ($0.07) per diluted
share, compared to net earnings of $790,000, or $0.13 per diluted share, for the
quarter ended December 31, 2008. The decrease in net earnings for the three
months ended December 31, 2009 was due primarily to provision for loan losses of
$1.5 million compared to $150,000 for the comparable period in 2008. The
increase in the provision for loan losses was due to an increase in
non-performing assets and continued deterioration in local and national economic
conditions. For the six months ended December 31, 2009, net earnings were
$69,000, or $.01 per diluted share, compared to net earnings of $1.3 million, or
$0.22 per diluted share, for the six months ended December 31, 2008. The
decrease in net earnings for the six months ended December 31, 2009 was due
primarily to provision for loan losses of $1.8 million compared to $310,000 for
the comparable period in 2008.
Anderson L. Smith, President and Chief Executive Officer commented, "Like many
of our peers, our earnings have been negatively impacted by higher loan loss
provisions and historically low interest rates. We have strengthened the
allowance for loan losses in response to continued weakness in the economy and
deterioration in asset quality. We are proactive in identifying the risk within
our loan portfolio and in managing problem loans. In response to the increase in
loan loss provision, we have increased our efforts to lower our funding costs
and operating expenses."
The net interest margin was 3.11% for the quarter ended December 31, 2009
compared to 3.25% for the same period in 2008. The yield on interest-earning
assets declined 46 basis points to 5.28% for the quarter ended December 31, 2009
compared to 5.74% for the same period in 2008 due primarily to reductions in
market interest rates. The yield on assets was also impacted in the current
quarter by higher levels of non-performing assets. The cost of interest-bearing
liabilities declined 44 basis points to 2.32% for the quarter ended December 31,
2009 compared to 2.76% for the same period in 2008 primarily due to lower market
interest rates and a change in the mix of deposits.
At December 31, 2009, total assets were $670.6 million compared to $662.7
million at June 30, 2009. Investment securities increased $20.9 million, or
57.1%, to $57.4 million at December 31, 2009 compared to $36.5 million at June
30, 2009, due primarily to purchases of federal agency securities. Net loans
decreased $38.4 million to $459.7 million at December 31, 2009, compared to
$498.1 million at June 30, 2009, due primarily to lower loan demand combined
with both residential and commercial loan payoffs during the period.
Total deposits increased $8.3 million to $490.5 million at December 31, 2009
compared to $482.2 million at June 30, 2009 due to increases in transaction
accounts which more than offset planned runoff of higher costing time deposits.
Transaction accounts increased $45.8 million, or 21.8%, to $255.9 million while
time deposits decreased $37.5 million to $234.6 million at December 31, 2009
<Page>2
compared to June 30, 2009. The average cost of interest-bearing deposits for the
three month period ended December 31, 2009 was 2.02% compared to 2.50% for the
corresponding period in 2008. Total Federal Home Loan Bank advances were
virtually unchanged at $90.1 million at December 31, 2009 compared to $90.3
million at June 30, 2009.
Total stockholders' equity increased $803,000 to $80.3 million at December 31,
2009 compared to $79.5 million at June 30, 2009. Unrealized gains and losses,
net of taxes, in the available-for-sale investment portfolio are reflected as an
adjustment to stockholders' equity. At December 31, 2009, the adjustment to
stockholders' equity was a net unrealized gain of $873,000 compared to a net
unrealized gain of $150,000 at June 30, 2009. As of December 31, 2009 the
Company had 6,703,911 common shares outstanding with a book value of $11.98 per
common share. The Bank continues to be well-capitalized under regulatory
requirements.
Nonperforming assets totaled $23.8 million, or 3.55% of total assets at December
31, 2009, compared to $9.5 million, or 1.43% of total assets at June 30, 2009
and $4.8 million, or 0.72% of total assets at December 31, 2008. Nonaccrual
loans totaled $18.9 million at December 31, 2009 compared to $6.0 million at
June 30, 2009 and $3.8 million at December 31, 2008. The increase in nonaccrual
loans is primarily due to an increase in both nonaccrual commercial and
residential real estate loans. Foreclosed real estate amounted to $4.3 million
at December 31, 2009 compared to $3.3 million at June 30, 2009 and $1.0 million
at December 31, 2008. Net charge-offs for the six months ended December 31, 2009
were $1.4 million, or 0.56% of average loans on an annualized basis, compared to
$31,000, or 0.02% of average loans on an annualized basis, for the same period
in 2008. The allowance for loan losses was $5.2 million, or 1.11% of total
loans, at December 31, 2009 compared to $4.7 million, or 0.94% of total loans,
at June 30, 2009 and $4.7 million, or 0.91% of total loans, at December 31,
2008. The provision for loan losses totaled $1.8 million for the six months
ended December 31, 2009, compared to $310,000 for the comparable 2008 period.
The increase in the provision for loan losses was primarily the result of the
increase in nonperforming assets and continued deterioration in local and
national economic conditions.
Jefferson Bancshares, Inc. is the holding company for Jefferson Federal Bank, a
Tennessee-chartered savings bank headquartered in Morristown, Tennessee.
Jefferson Federal is a community oriented financial institution offering
traditional financial services with offices in Hamblen, Knox, Washington and
Sullivan Counties, Tennessee. 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"
<Page>3
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.
Contacts:
Jefferson Bancshares, Inc.
Anderson L. Smith, President and Chief Executive Officer 423-586-8421
Jane P. Hutton, Chief Financial Officer 423-586-8421
<Page>4
JEFFERSON BANCSHARES, INC.
<Table>
<Caption>
AT AT
DEC. 31, 2009 JUNE 30, 2009
------------- -------------
(Dollars in thousands)
FINANCIAL CONDITION DATA:
Total assets $670,590 $662,655
Loans receivable, net 459,678 498,107
Cash and cash equivalents, and
interest-bearing deposits 69,181 44,108
Investment securities 57,395 36,544
Deposits 490,514 482,167
Total borrowings 90,072 90,309
Stockholders' equity $ 80,308 $ 79,505
</Table>
<Table>
<Caption>
THREE MONTHS ENDED DEC. 31, SIX MONTHS ENDED DEC. 31,
2009 2008 2009 2008
---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
OPERATING DATA:
Interest income $ 7,555 $ 7,072 $ 15,500 $ 11,740
Interest expense 3,105 3,081 6,355 4,762
Net interest income 4,450 3,991 9,145 6,978
Provision for loan losses 1,509 150 1,809 310
Net interest income after
provision for loan losses 2,941 3,841 7,336 6,668
Noninterest income 804 629 1,702 1,023
Noninterest expense 4,345 3,535 8,946 5,874
Earnings before income taxes (600) 935 92 1,817
Total income taxes (185) 145 23 494
Net earnings (415) 790 69 1,323
SHARE DATA:
Earnings per share, basic ($0.07) $0.13 $0.01 $0.22
Earnings per share, diluted ($0.07) $0.13 $0.01 $0.22
Book value per common share $11.98 $11.59 $11.98 $11.59
Tangible book value
Weighted average shares:
Basic 6,215,304 6,091,206 6,215,909 5,879,310
Diluted 6,215,304 6,091,206 6,215,909 5,879,310
</Table>
<Table>
<Caption>
THREE MONTHS ENDED DEC. 31, SIX MONTHS ENDED DEC. 31,
2009 2008 2009 2008
---------- ---------- ---------- ----------
(Dollars in thousands)
ALLOWANCE FOR LOAN LOSSES:
Allowance at beginning of period $ 4,595 $ 1,958 $ 4,722 $ 1,836
Allowance of acquired bank 0 2,577 0 2,577
Provision for loan losses 1,509 150 1,809 310
Recoveries 23 31 48 41
Charge-offs (947) (24) (1,399) (72)
---------- ---------- ---------- ----------
Net Charge-offs (924) 7 (1,351) (31)
---------- ---------- ---------- ----------
Allowance at end of period $ 5,180 $ 4,692 $ 5,180 $ 4,692
========== ========== ========== ==========
Net charge-offs to average outstanding
loans during the period, annualized 0.78% 0.00% 0.56% 0.02%
</Table>
<Page>5
<Table>
<Caption>
AT AT AT
DEC. 31, 2009 JUNE 30, 2009 DEC. 31, 2008
------------- ------------- -------------
(Dollars in thousands)
NONPERFORMING ASSETS:
Nonperforming loans $18,931 $6,031 $3,752
Nonperforming investments 579 - -
Real estate owned 4,282 3,328 1,012
Other nonperforming assets 1 106 5
------------- ------------- -------------
Total nonperforming assets $23,793 $9,465 $4,769
============= ============= =============
</Table>
<Table>
<Caption>
Three Months Ended Year Ended
Dec. 31, 2009 June 30, 2009
------------------- -------------
PERFORMANCE RATIOS:
Return on average assets (0.25%) 0.48%
Return on average equity (2.04%) 3.40%
Interest rate spread 2.96% 3.17%
Net interest margin 3.11% 3.42%
Efficiency ratio 82.89% 76.57%
Average interest-earning assets to
average interest-bearing liabilities 107.18% 110.52%
ASSET QUALITY RATIOS:
Allowance for loan losses as a
percent of total gross loans 1.11% 0.94%
Allowance for loan losses as a
percent of nonperforming loans 27.36% 78.30%
Nonperforming loans as a percent of total loans 4.07% 1.20%
Nonperforming assets as a percent of total assets 3.55% 1.43%
</Table>