SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ TO ___.
- --------------------------------------------------------------------------------
COMMISSION FILE NUMBER 0-6848
JEFFERSON BANCORP, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-1284885
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
301 ARTHUR GODFREY ROAD
MIAMI BEACH, FLORIDA 33140
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(305) 534-8341
- --------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ___
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT OCTOBER 31, 1995
----- -------------------------------
1 - COMMON STOCK, $1.00 PAR VALUE, OF A SINGLE CLASS 3,665,042
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FOLLOWING FINANCIAL STATE-
MENTS ARE FILED AS PART OF THIS
REPORT:
PAGES IN QUARTERLY REPORT
AS OF SEPTEMBER 30, 1995 TO
SECURITIES AND EXCHANGE
COMMISSION
CONSOLIDATED BALANCE SHEETS 3-4
STATEMENTS OF CONSOLIDATED INCOME 5
STATEMENT OF CONSOLIDATED STOCK-
HOLDERS' EQUITY 6
STATEMENTS OF CONSOLIDATED
CASH FLOWS 7
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS 8-10
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11-21
PART II. OTHER INFORMATION
ITEM 6(a) EXHIBITS FILED
NONE
(b) REPORTS ON FORM 8-K
NO REPORTS ON FORM 8-K HAVE BEEN
FILED DURING THE QUARTER FOR
WHICH THIS REPORT IS FILED
SIGNATURES 22
<PAGE>
PART I. FINANCIAL INFORMATION
----------------------
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 DECEMBER 31, 1994
(Unaudited)
------------------ -----------------
<S> <C> <C>
ASSETS
- -------
CASH AND DEMAND BALANCES DUE FROM BANKS $11,966,120 $14,542,225
------------------ -----------------
INVESTMENT SECURITIES
- ---------------------
U.S. GOVERNMENT AGENCY - 1,491,135
OBLIGATIONS OF STATES AND POLITICAL
SUBDIVISIONS (NON-TAXABLE) 109,192 124,302
OTHER SECURITIES 1,139,349 1,139,349
------------------ -----------------
TOTAL INVESTMENT SECURITIES (APPROXIMATE
MARKET VALUE 1995-$1,261,000;
1994-$2,796,000) 1,248,541 2,754,786
------------------ -----------------
SECURITIES AVAILABLE FOR SALE
- -----------------------------
U.S. TREASURY SECURITIES 9,910,937 9,313,125
SECURITIES OF OTHER U.S. GOVERNMENT AGENCIES 130,125,557 102,059,332
OBLIGATIONS OF STATES AND POLITICAL
SUBDIVISIONS (NON-TAXABLE) 5,676,051 7,416,948
COLLATERALIZED MORTGAGE OBLIGATIONS 1,752,826 2,341,048
------------------ -----------------
TOTAL SECURITIES AVAILABLE FOR SALE
(AT MARKET VALUE) 147,465,371 121,130,453
------------------ -----------------
FEDERAL FUNDS SOLD AND OTHER
SHORT-TERM INVESTMENTS 2,200,000 200,000
------------------ -----------------
LOANS 233,196,726 203,476,490
LESS: UNEARNED INCOME 2,233,103 2,109,361
ALLOWANCE FOR CREDIT LOSSES 2,452,395 3,151,691
------------------ -----------------
TOTAL LOANS, NET 228,511,228 198,215,438
- ---------------- ------------------ -----------------
LOANS HELD FOR SALE 998,707 830,237
------------------ -----------------
PREMISES AND EQUIPMENT, NET 6,142,147 5,920,469
------------------ -----------------
OTHER REAL ESTATE OWNED 5,089,184 5,600,219
------------------ -----------------
OTHER ASSETS 19,015,090 15,081,953
------------------ -----------------
TOTAL ASSETS $422,636,388 $364,275,780
- -------------- ================== =================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY SEPTEMBER 30, 1995 DECEMBER 31, 1994
- ------------------------------------ (Unaudited)
------------------ -----------------
<S> <C> <C>
DEPOSITS:
- ---------
DEMAND (NON-INTEREST-BEARING) $46,007,995 $49,375,688
SAVINGS 28,389,731 32,572,061
INTEREST-PAYING CHECKING 68,464,103 70,096,042
MONEY MARKET ACCOUNTS 39,470,260 40,936,942
CERTIFICATES AND PUBLIC FUNDS 183,536,608 113,888,669
------------------ -----------------
TOTAL DEPOSITS 365,868,697 306,869,402
--------------
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD
UNDER AGREEMENTS TO REPURCHASE 17,246,035 25,844,770
DEFERRED GAIN ON SALE OF BUILDINGS 33,175 37,265
OTHER LIABILITIES 4,436,785 2,154,050
------------------ -----------------
TOTAL LIABILITIES 387,584,692 334,905,487
------------------ -----------------
COMMITMENTS AND CONTINGENT LIABILITIES
- --------------------------------------
STOCKHOLDERS' EQUITY:
- ---------------------
COMMON STOCK, $1.00 PAR VALUE, 10,000,000
SHARES AUTHORIZED; ISSUED - SEPTEMBER 30,
1995-3,866,080; DECEMBER 31, 1994-3,853,591
SHARES 3,866,080 3,853,591
CAPITAL SURPLUS 28,195,862 28,106,726
RETAINED EARNINGS 8,843,958 8,811,612
TREASURY STOCK, AT COST-SEPTEMBER 30,1995-
246,859 SHARES; DECEMBER 31, 1994-246,859
SHARES (2,401,204) (2,401,204)
DEFERRED COMPENSATION (535,088) (840,323)
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE (NET OF APPLICABLE
INCOME TAXES) (2,917,912) (8,160,109)
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 35,051,696 29,370,293
--------------------------- ------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $422,636,388 $364,275,780
------------------------------------------ ================== =================
BOOK VALUE PER COMMON SHARE EXCLUDING
UNREALIZED GAINS (LOSS) ON SECURITIES
AVAILABLE FOR SALE $10.49 $10.41
================== =================
BOOK VALUE PER COMMON SHARE $9.68 $8.14
================== =================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES FOR THE QUARTER ENDED FOR THE NINE MONTHS ENDED
STATEMENTS OF CONSOLIDATED INCOME SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
INTEREST AND FEES ON LOANS $5,658,054 $4,285,027 $16,343,892 $12,375,859
INVESTMENTS AND SECURITIES HELD FOR SALE:
U.S. TREASURY SECURITIES 124,347 124,932 369,472 380,047
SECURITIES OF OTHER U.S. GOVERNMENT AGENCIES 1,870,984 1,625,701 5,201,410 4,408,537
OBLIGATIONS OF STATES AND POLITICAL
SUBDIVISIONS-NON-TAXABLE 64,685 240,641 246,906 1,013,823
COLLATERIZED MORTGAGE OBLIGATIONS AND
OTHER SECURITIES 49,081 60,259 153,868 119,860
FEDERAL FUNDS SOLD AND OTHER SHORT-TERM
INVESTMENTS 165,206 29,656 351,744 200,724
---------- ---------- ----------- -----------
TOTAL INTEREST INCOME 7,932,357 6,366,216 22,667,292 18,498,850
---------- ---------- ----------- -----------
INTEREST EXPENSE:
DEPOSITS:
SAVINGS 194,260 235,852 607,970 742,523
INTEREST-PAYING CHECKING 298,794 307,955 888,066 949,215
MONEY MARKET ACCOUNTS 235,702 221,626 684,456 718,835
CERTIFICATES AND PUBLIC FUNDS 2,860,294 1,014,000 6,871,211 2,352,158
SHORT-TERM BORROWINGS 158,315 155,412 775,117 459,072
---------- ---------- ----------- -----------
TOTAL INTEREST EXPENSE 3,747,365 1,934,845 9,826,820 5,221,803
---------- ---------- ----------- -----------
NET INTEREST INCOME 4,184,992 4,431,371 12,840,472 13,277,047
PROVISION FOR CREDIT LOSSES 0 75,000 150,000 525,000
---------- ---------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 4,184,992 4,356,371 12,690,472 12,752,047
---------- ---------- ----------- -----------
OTHER INCOME:
TRUST INCOME 335,896 239,987 1,017,394 831,235
SERVICE CHARGES, COMMISSIONS AND FEES 303,219 330,887 936,164 938,364
GAIN ON SALE OF SECURITIES AVAILABLE FOR SALE,
NET 0 180,063 323,985 1,546,964
OTHER OPERATING INCOME 98,575 (579) 439,081 122,274
---------- ---------- ----------- -----------
TOTAL OTHER INCOME 737,690 750,358 2,716,624 3,438,837
---------- ---------- ----------- -----------
OPEATING EXPENSES:
SALARIES AND EMPLOYEE BENEFITS 2,175,381 2,342,677 6,721,933 6,922,890
OCCUPANCY EXPENSE, NET 771,865 714,525 2,301,109 1,768,559
OTHER OPERATING EXPENSES 1,346,167 1,519,749 4,387,044 4,481,886
---------- ---------- ----------- -----------
TOTAL OPERATING EXPENSES 4,293,413 4,576,951 13,410,086 13,173,335
---------- ---------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 629,269 529,778 1,997,010 3,017,549
PROVISION FOR INCOME TAXES 186,200 109,200 608,700 682,800
---------- ---------- ----------- -----------
NET INCOME $443,069 $420,578 $1,388,310 $2,334,749
========== ========== =========== ===========
EARNINGS PER COMMON SHARE:
AVERAGE NUMBER OF SHARES OUTSTANDING 3,831,395 3,464,995 3,798,591 3,470,826
========== ========== =========== ===========
NET INCOME PER SHARE $0.12 $0.12 $0.37 $0.67
========== ========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
NET UNREALIZED
GAINS (LOSSES)
ON SECURITIES
COMMON CAPITAL RETAINED TREASURY DEFERRED AVAILABLE
STOCK SURPLUS EARNINGS STOCK COMPENSATION FOR SALE
---------- ----------- ---------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $3,853,591 $28,106,726 $8,811,612 ($2,401,204) ($840,323) ($8,160,109)
NET INCOME - - 1,388,310 - - -
$.125 PER SHARE CASH DIVIDEND - - (451,764) - - -
$.125 PER SHARE CASH DIVIDEND - - (452,100) - - -
$.125 PER SHARE CASH DIVIDEND - - (452,100) - - -
EXERCISE OF STOCK OPTIONS (12,489 SHARES) 12,489 89,136 - - - -
AMORTIZATION OF DEFERRED COMPENSATION - - - - 305,235 -
CHANGE IN NET UNREALIZED GAINS/(LOSSES)
ON AVAILABLE-FOR-SALE SECURITIES - - - - - 5,242,196
---------- ----------- ---------- ------------ ---------- ------------
BALANCE, SEPTEMBER 30, 1995 $3,866,080 $28,195,862 $8,843,958 ($2,401,204) ($535,088) ($2,917,913)
========== =========== ========== ============ ========== ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 1994
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $1,388,310 $2,334,749
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 615,123 544,588
GAIN ON SALE OF BUILDINGS (4,090) (362,667)
LOSSES AND WRITE-DOWN ON SALE OF OTHER REAL ESTATE OWNED 138,562 26,114
GAIN ON SALE OF OTHER REAL ESTATE OWNED (51,674) (128,465)
PROVISION FOR CREDIT LOSSES 150,000 525,000
PREMIUM AMORTIZATION AND DISCOUNT ACCRETION, NET 113,819 112,865
NET GAIN ON SALE OF SECURITIES AVAILABLE FOR SALE (323,985) (1,546,964)
AMORTIZATION OF DEFERRED COMPENSATION 305,235 272,520
SALE OF SECURITIES AVAILABLE FOR SALE 30,120,655 68,383,417
PROCEEDS FROM MATURITIES AND PAYDOWNS OF
SECURITIES AVAILABLE FOR SALE 20,664,272 7,968,306
PURCHASE OF SECURITIES AVAILABLE FOR SALE (66,375,465) (75,567,482)
ORIGINATION OF LOANS HELD FOR SALE (18,845,676) (37,780,611)
DISPOSITION OF LOANS HELD FOR SALE 18,677,206 44,230,048
DECREASE (INCREASE) IN OTHER ASSETS (9,268,201) 4,777,523
INCREASE IN OTHER LIABILITIES 2,282,735 1,595,161
----------- -----------
NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES (20,413,174) 15,384,102
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
NET (INCREASE) DECREASE IN LOANS (30,445,790) (17,654,180)
PURCHASES OF INVESTMENT SECURITIES - (1,728,869)
PROCEEDS FROM MATURITIES OF INVESTMENT SECURITIES 1,506,245 -
NET (INCREASE) DECREASE IN FEDERAL FUNDS SOLD AND
INTEREST-EARNING DEPOSITS IN OTHER FINANCIAL INSTITUTIONS (2,000,000) 3,400,000
DISPOSITION OF OTHER REAL ESTATE OWNED 836,842 943,408
ACQUISITION OF OTHER REAL ESTATE OWNED (412,695) (850,598)
PURCHASES OF PREMISES AND EQUIPMENT (793,754) (1,710,262)
----------- -----------
NET CASH (USED) / PROVIDED BY INVESTING ACTIVITIES (31,309,152) (17,600,501)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN DEPOSITS 58,999,295 (7,868,598)
NET (DECREASE) INCREASE IN FEDERAL FUNDS PURCHASED AND
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (8,598,735) 6,443,620
NET INCREASE IN FEDERAL RESERVE BANK BORROWINGS - 6,000,000
PAYMENT OF CASH DIVIDENDS (1,355,964) (1,305,109)
PURCHASE OF TREASURY STOCK - (573,871)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 101,625 426,260
----------- -----------
NET CASH PROVIDED / (USED) BY FINANCING ACTIVITIES: 49,146,221 3,122,302
----------- -----------
NET (DECREASE) INCREASE IN CASH AND DEMAND BALANCES
DUE FROM BANKS (2,576,105) 905,903
CASH AND DEMAND BALANCES DUE FROM BANKS AT BEGINNING OF YEAR 14,542,225 13,540,868
----------- -----------
CASH AND DEMAND BALANCES DUE FROM BANKS AT SEPTEMBER 30, $11,966,120 $14,446,771
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
INTEREST PAID $8,033,068 $4,567,000
=========== ===========
INCOME TAX PAYMENTS $405,000 $445,000
=========== ===========
</TABLE>
(UNAUDITED)
7
<PAGE>
ITEM 1. JEFFERSON BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(A) SIGNIFICANT ACCOUNTING POLICIES - The accounting policies followed for
quarterly reporting purposes are the same as those disclosed in the 1994 Annual
Report to Stockholders of Jefferson Bancorp, Inc. (the "Company"). In the
opinion of management, the accompanying consolidated financial statements
reflect all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the information provided. These statements
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote statements have been omitted pursuant to such rules and regulations.
Although the Company believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that these financial
statements be read in conjunction with the Company's audited 1994 consolidated
financial statements and the notes thereto.
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan,"
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan
Income Recognition and Disclosures." The Statement requires that impaired loans
be measured based on the present value of expected future cash flows discounted
at the loan's effective interest rate or, as a practical matter, at the loan's
observable market value or fair value of the collateral if the loan is
collateral dependent. Adoption of this Statement did not have a material impact
on the Company's consolidated financial position or results of operations.
(B) RESTRICTED STOCK, STOCK OPTION AND NON-QUALIFIED OPTION PLANS
RESTRICTED STOCK PLAN - On September 1, 1989, the Company adopted a restricted
stock plan (the "Restricted Plan") whereby an aggregate of not more than 300,000
shares of common stock were made available for awards to certain key executives.
The number of shares awarded to the eligible executives are based on the execu
tive's salary and length of time employed by the Company. The stock issued in
connection with the Restricted Plan vests on the third anniversary of the date
of grant. Deferred compensation, a contra-equity account, is recorded for the
fair market value of any shares of common stock awarded under the Restricted
Plan and is then amortized as compensation expense over the vesting period. At
September 30, 1995, 68,654 shares were available for future awards.
STOCK OPTION PLANS - Under various stock option plans approved by the Board of
Directors, options may be granted to key employees of the Company and its
subsidiaries, including officers and directors who are also employees, to
purchase an aggregate of 585,328 shares of the common stock of the Company. At
September 30, 1995, the total number of stock options available for future
grants were 88,231 shares. Options under these plans are granted at a price of
not less than the fair market value of the shares on the date granted. No charge
is made to income with respect to stock options.
8
<PAGE>
The following table presents additional information concerning the activity in
these stock option plans:
<TABLE>
<CAPTION>
OPTION PRICE
-----------------------------
NUMBER OF AVERAGE
SHARES PER SHARE AGGREGATE
<S> <C> <C> <C>
Options outstanding:
January 1, 1992 289,006 $8.64 $2,496,805
Grants 30,000 8.38 251,400
3% stock dividend 9,570 - -
------- ----------
Options outstanding:
December 31, 1992 328,576 8.37 2,748,205
Grants 25,000 9.90 247,500
3% stock dividend 750 - -
Exercised (28,623) 8.37 (239,548)
Rescissions (30,044) 8.25 (247,800)
------- ----------
Options outstanding:
December 31, 1993 295,659 8.49 2,508,357
Grants 88,000 10.16 893,813
3% stock dividend 2,640 - -
Exercised (28,224) 7.64 (215,546)
Recision (29,802) 7.83 (233,330)
------- ----------
Options outstanding:
December 31, 1994 328,273 9.00 2,953,294
Grants 1,000 13.25 13,250
Exercised (12,489) 8.14 (101,628)
------- ----------
Options outstanding:
September 30, 1995 316,784 9.04 $2,864,916
======= ==========
Options exercisable at
December 31, 1994 309,348
=======
September 30, 1995 315,534
=======
</TABLE>
NON-EMPLOYEE DIRECTORS OPTION PLAN:
On June 20, 1994, with all non-employee directors abstaining and subject to
stockholder approval, the Board of Directors granted to non-employee directors
non-qualified options to purchase 27,500 (28,325 after restatement for 3% stock
dividend) shares of the common stock of the Company at a price of $10.125 per
share ($9.83 after restatement for 3% stock dividend), the fair market value of
the shares on that date. The grants were presented to the stockholders of the
Company for their consideration at the annual meeting held April 25, 1995 and
ratified by the holders of 88% of the total shares outstanding.
9
<PAGE>
<TABLE>
<CAPTION>
OPTION PRICE
-----------------------------
NUMBER OF AVERAGE
SHARES PER SHARE AGGREGATE
<S> <C> <C> <C>
Options outstanding:
January 1, 1992
Grants 110,000 $7.75 $ 852,500
3% stock dividend 3,300 - -
------- ----------
Options outstanding:
December 31, 1992 113,300 7.53 852,500
Grants 27,500 10.00 275,000
3% stock dividend 825 - -
------- ----------
Options outstanding:
December 31, 1993 141,625 7.97 1,127,500
Grants 27,500 10.13 278,438
3% stock dividend 825 -
Exercised (29,200) 7.53 (219,713)
------- ----------
Options outstanding:
December 31, 1994
and September 30, 1995 140,750 8.43 $1,186,225
======= ==========
Options exercisable at:
December 31, 1994 140,750
=======
September 30, 1995 140,750
=======
</TABLE>
(C) DEATH AND DISABILITY, SEVERANCE AND RETIREMENT PLANS
Effective May 1, 1989, the Company adopted a death and disability plan that
provides for cash payments in the event of the death or permanent disability of
directors who are not employees of the Company and certain senior officers of
the Company. The death and disability plan is substantially funded through life
insurance policies.
Also, effective May 1, 1989, the Company adopted an unfunded severance plan that
provided for cash payments to certain senior officers of the Company in the
event that their employment was voluntarily or involuntarily terminated at any
time during a one-year period following a change in control, as defined by the
Company.
Effective January 1, 1994, the Company amended the severance plan to provide for
cash payments to directors and senior officers upon a change in control, whether
or not their employment is terminated as a result thereof, or upon their
retirement. During the first nine months ended September 30, 1995, the Company
accrued approximately $463,995 of benefits. It is the Company's intent that
benefits under the amended severance plan and benefits under the death and
disability plan be mutually exclusive and not duplicative.
(D) RECLASSIFICATION: Certain amounts in the prior period in the
consolidated financial statements have been reclassified for comparative
purposes.
10
<PAGE>
(E) OTHER REAL ESTATE OWNED: Property acquired by foreclosure or deed in
lieu of foreclosure is recorded at the lower of cost or estimated fair value at
the time the loan is foreclosed or deemed foreclosed in substance. Upon
classification as other real estate owned, the excess of the recorded investment
over the fair value of the collateral, if any, is charged to the allowance for
credit losses.
Once properties are classified as other real estate owned, such properties are
carried at the lower of cost or fair value minus estimated costs to sell. Net
expenses incurred in maintaining properties, subsequent write-downs due to
changes in market values, and gains or losses upon disposition are included in
other operating expenses. Expenditures to complete or improve properties are
capitalized only if reasonably expected to be recovered; otherwise, they are
expensed as incurred.
The amounts the Company could ultimately recover from property acquired by
foreclosure or deed in lieu of foreclosure could differ materially from the
amounts used in arriving at the net carrying value of the assets because of
future market factors beyond the Company's control or changes in the Company's
strategy for recovering its investment.
(F) GOODWILL: In 1987, the Company acquired Broward Bancorp, a Florida bank
holding company. Broward Bancorp's sole banking subsidiary, which was known as
Broward Bank, has become a subsidiary of the Company and has been renamed
Jefferson Bank. The purchase price and costs of this acquisition exceeded the
fair market value of the net assets by approximately $1,134,000. This excess is
being amortized over a period of 20 years using the straight line method and is
included in "other assets" in the Company's consolidated balance sheets. The
accumulated amortization through September 30, 1995 totalled $529,000.
.
(G) INCOME TAXES: Deferred taxes are provided for timing differences
between income reported for financial reporting and for income tax purposes. The
Company files consolidated income tax returns.
The Company provides for deferred taxes under the liability method. Under such
method, deferred taxes are adjusted for tax rate changes as they occur. Deferred
income tax assets and liabilities are computed annually for differences between
the financial statements and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
The consolidated earnings of Jefferson Bancorp, Inc. and subsidiaries
(collectively, the "Company") reflect principally the operations of the banking
subsidiaries, Jefferson Bank of Florida ("Jefferson Florida"), and Jefferson
Bank ("Jefferson Broward").
Earnings are comprised of net interest income and other income. Net interest
income, or the difference between total interest income from earning assets and
total interest expense from key liabilities, for any given period is determined
by the average volume of interest-earning assets (mainly loans, loans held for
sale, investment securities, securities available for sale, and federal funds
sold), the average yield earned on such assets, the average volume of deposits
and borrowings on which interest is paid, the average rate of interest paid on
such deposits and borrowings and the average volume of demand deposits upon
which no interest is paid.
Other income is comprised of service charges on deposit accounts, fees and
commissions for various banking services and trust department income. Earnings
from these functions are affected chiefly by the volume of activity and the
level of fees charged. Other income also includes net gains recognized from the
sale of investment securities, loans and fixed assets.
12
<PAGE>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
Management's discussion and analysis of
financial condition and results of operations - (continued)
<TABLE>
<CAPTION>
NET INTEREST INCOME, AVERAGE BALANCES QUARTER ENDED SEPT. 30, 1995 QUARTER ENDED SEPT. 30, 1994
AND AVERAGE RATES
(IN THOUSANDS) AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans and loans held for sale:
Real estate, commercial and financial and
government guaranteed loans (1) $219,310 $5,228 9.46% $171,823 $4,010 9.26%
Installment loans, net of unearned income 12,184 302 9.91% 6,976 173 9.90%
Investment securities and securities available
for sale:
U.S. Treasury securities 10,201 125 4.86% 10,248 125 4.84%
Securities of other U.S. Government agencies 132,840 1,870 5.63% 113,432 1,626 5.73%
Obligations of states and political subdivisions
(non-taxable) (2) 5,336 99 7.44% 17,485 364 8.33%
Collateralized mortgage obligations and
other securities 3,161 49 6.20% 4,170 74 7.08%
Federal funds sold and other short-term investments 11,123 165 5.89% 2,691 30 4.38%
-------- ------ -------- ------
Total interest-earning assets (2) $394,154 7,838 7.89% $326,826 6,401 7.77%
======== ------ ======== ------
KEY LIABILITIES:
Deposits:
Savings 30,106 194 2.56% 34,782 236 2.69%
Interest-paying checking 70,205 299 1.69% 73,228 308 1.67%
Money market 43,327 236 2.16% 40,718 222 2.16%
Certificates 142,313 2,214 6.17% 74,544 700 3.73%
Public funds 40,704 646 6.30% 23,834 314 5.23%
-------- ------ -------- ------
Total deposits 326,656 3,589 4.36% 247,106 1,780 2.86%
Borrowings 18,370 158 3.41% 20,565 155 2.99%
-------- ------ -------- ------
Total interest-bearing liabilities 345,025 3,747 4.31% 267,670 1,935 2.87%
-------- ------ -------- ------
Total noninterest-bearing liabilities 48,693 48,665
-------- --------
$393,718 $316,335
======== ========
Net interest income/spread (2) $4,091 3.58% $4,466 4.90%
====== ======
Net interest income as a percent of total
average interest-earning assets (2) 4.12% 5.42%
<FN>
(1) Average balances include nonaccrual loans and interest income includes fees on loans of approximately
$66,000 and $124,000 for quarters ended 1995 and 1994, respectively.
(2) Interest income includes the effects of taxable-equivalent adjustment, using a 34% tax rate to adjust
interest on tax-exempt securities to taxable-equivalent basis.
</FN>
</TABLE>
13
<PAGE>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
Management's discussion and analysis of
financial condition and results of operations - (continued)
<TABLE>
<CAPTION>
NET INTEREST INCOME, NINE MONTHS ENDED SEPT. 30, 1995 NINE MONTHS ENDED SEPT. 30, 1994 YEAR ENDED SEPT. 30, 1994
AVERAGE BALANCES AND
AVERAGE RATES AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
(IN THOUSANDS) BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans and loans held
for sale:
Real estate, commercial and
financial and government
guaranteed loans (1) $208,184 14,752 9.47% $167,268 11,341 9.07% $171,275 $15,700 9.17%
Installment loans, net of
unearned income 10,711 781 9.72% 6,339 474 9.97% 6,701 664 9.91%
Investment securities and
securities available
for sale:
U.S. Treasury securities 10,213 370 4.84% 10,389 380 4.89% 10,351 504 4.87%
Securities of other U.S.
Government agencies 124,983 5,201 5.55% 104,858 4,409 5.61% 107,534 6,033 5.61%
Obligations of states and
political subdivisions
(non-taxable) (2) 6,575 374 7.59% 23,859 1,536 8.58% 20,023 1,708 8.53%
Collateralized mortgage
obligations and other
securities 3,349 155 6.17% 4,919 120 3.25% 4,640 172 3.70%
Federal funds sold and
other short-term
investments 8,365 352 5.63% 8,492 201 3.16% 6,734 220 3.26%
-------- ------- -------- ------- -------- -------
Total interest-earning
assets (2) $372,380 21,985 7.89% $326,124 18,461 7.57% $327,258 25,001 7.64%
======== ------- ======== ------- ======== -------
KEY LIABILITIES:
Deposits:
Savings 30,809 608 2.64% 38,722 743 2.56% 37,417 968 2.59%
Interest-paying checking 70,613 888 1.68% 75,902 949 1.67% 75,126 1,257 1.67%
Money market 41,391 685 2.21% 44,391 719 2.16% 43,402 944 2.17%
Certificates 119,463 5,319 5.95% 75,855 1,936 3.41% 76,727 2,821 3.68%
Public funds 34,515 1,552 6.01% 11,108 416 5.01% 14,786 767 5.19%
-------- ------- -------- ------- -------- -------
Total deposits 296,791 9,052 4.08% 245,978 4,763 2.59% 247,458 6,757 2.73%
Borrowings 26,635 775 3.89% 21,390 459 2.87% 21,930 676 3.08%
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities 323,426 9,827 4.06% 267,368 5,222 2.61% 269,388 7,433 2.76%
-------- ------- -------- ------- -------- -------
Total noninterest-
bearing liabilities 49,079 50,556 49,751
-------- -------- --------
$372,505 $317,924 $319,139
======== ======== ========
Net interest
income/spread (2) $12,158 3.83% $13,239 4.96% $17,568 4.88%
======= ======= =======
Net interest income as a
percent of total average
interest-earning
assets (2) 4.37% 5.43% 5.37%
<FN>
(1) Average balances include nonaccrual loans and interest income includes fees on loans of approximately
$507,000 and $336,000 for the nine months ended September 30, 1995 and 1994, and $493,000 for the year
ended December 31, 1994, respectively.
(2) Interest income includes the effects of taxable-equivalent adjustment, using a 34 % tax rate to adjust
interest on tax-exempt securities to taxable-equivalent basis.
</FN>
</TABLE>
14
<PAGE>
MATERIAL CHANGES IN FINANCIAL CONDITION
As shown in the Net Interest Income analysis on pages 13 and 14, the total
average daily balance of the Company's consolidated interest-earning assets for
the nine months ended September 30, 1995 increased by $45,122,000, or 14%, from
the total average daily balance for the year ended December 31, 1994. The
primary cause of the growth in average interest-earning assets in the first nine
months of 1995 was the increase in the Company's loans. The average balance of
such loans increased by $40,919,000, or 23%. At the same time, the average daily
balance of the Company's portfolio of securities of other U.S. Government
agencies increased by $17,449,000, or 16%. The increase in the Company's
portfolio of loans and securities of other U.S. Government agencies in the first
nine months of 1995 was accomplished by the use of proceeds of the sale of
securities held for sale, and by the growth in the average balance of
certificates of deposits, public funds and borrowings. The total average daily
balance of the Company's key liabilities for the nine months ended September 30,
1995, was $372,505,000 as compared to $319,139,000 for the year ended December
31, 1994, an increase of $53,366,000, or 17%. The primary cause of the growth in
the average balance of key liabilities was the increase in the average daily
balance of certificates of deposit, which increased by $43,736,000, or 58%,
public funds deposits, which increased by $19,729,000, or 133%, and borrowings
(federal funds purchased and securities sold under agreements to repurchase),
which increased by $4,705,000, or 21%. At the same time, the average daily
balance of savings deposits decreased by $6,608,000, or 18%; interest-paying
checking deposits decreased by $4,513,000, or 6%, money market deposits
decreased by $2,011,000, or 5%, and demand deposits decreased by $672,000, or
1%.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Consolidated net income for the nine months ended September 30, 1995 was
$1,388,310 compared to $2,334,749 for the comparable period in 1994. Per-share
net income for the nine months ended September 30, 1995 was $.37 compared to
$.67 for the comparable period in 1994. The decline in consolidated net income
for the nine months ended September 30, 1995 was primarily due to a decrease of
$1,222,979 in gains from security transactions. The gains from security
transactions during the first nine months of 1995 were $323,985 as compared to
$1,546,964 in the comparable period in 1994. The other contributing factor for
lower net income in the first nine months of 1995 was an increase of $532,550,
or 30%, in occupancy expense. Occupancy expense in the first nine months of 1994
included gains of $361,303 on sale of buildings, which completed its
amortization period in 1994. Occupancy expense in the first nine months of 1995
had no such gain.
Consolidated net income for the quarter ended September 30, 1995 was $443,069
compared to $420,578 for the comparable period in 1994, an increase of 5%. Per
share net income for the quarter ended September 30, 1995 was $.12, compared to
$.12 for the comparable period in 1994. The increase in consolidated net income
was primarily due to the $283,538 decrease in total operating expenses.
15
<PAGE>
NET INTEREST INCOME
The Company's net interest income (on a fully taxable equivalent basis inclusive
of loan service charge income) for the first nine months of 1995 was $1,081,000
lower than the comparable period in 1994, a decrease of 8%. A primary reason for
this decrease was a decline in the net interest spread, or the spread between
the average rates earned on interest-earning assets and the average rates paid
on interest-bearing liabilities, during the nine months ended September 30,
1995. The Company's net interest income on the same basis for the quarter ended
September 30, 1995 was $375,000 lower than the comparable period in 1994, a
decrease of 8%. A primary reason for this decrease was a decline in the net
interest spread during the quarter ended September 30, 1995.
In the first nine months of 1995, the net interest spread decreased by 113 basis
points from the comparable period in 1994, or 23%. This decrease was caused by a
change in the average cost of funds on total interest-bearing liabilities, which
increased to 4.06% for the nine months ended September 30, 1995 from 2.61% for
the comparable period in 1994. The higher average rate earned on average total
interest-earning assets mitigated to some extent the impact of the increase in
the average cost of funds. The average rate earned on interest-earning assets
increased from 7.57% for the nine months ended September 30, 1994 to 7.89% for
the comparable period in 1995. The spread for the quarter ended September 30,
1995 decreased by 132 basis points from the comparable period in 1994, or 27%.
This decrease was caused by the higher cost of funds on average total
interest-bearing liabilities; although the average rate earned on
interest-earning assets increased to 7.89% for the quarter ended September 30,
1995 from 7.77% for the comparable period in 1994, the interest spread was lower
because the average rate paid on interest-bearing liabilities increased to 4.31%
from 2.87%.
PROVISION FOR CREDIT LOSSES
The provision for credit losses represents the expense which, based on
management's review and evaluation of the Company's consolidated portfolio, is
required to maintain the reserve for credit losses at an appropriate level.
Although it is impossible to predict future credit losses accurately, the
adequacy of the reserve for credit losses is determined by management through
the ongoing evaluation of various factors influencing potential loss exposure.
These factors include the collectibility of individual credits, credit loss
trends, and concentrations within the loan portfolio in light of the present
economic and regulatory environment. Changes in economic factors which influence
potential loss exposure are also considered in management's evaluation when the
likelihood of such changes can be reasonably determined. In the first nine
months of 1995, the provision for credit losses amounted to $150,000 versus
$525,000 in the comparable period of 1994. In the quarter ended September 30,
1995, this expense amounted to none versus $75,000 in the comparable period of
1994.
It is management's policy to charge off loans when there appears to be little
likelihood of recovery. Management considers the allowance for credit losses to
be adequate to cover estimated losses inherent in the Company's consolidated
loan portfolio.
16
<PAGE>
OTHER OPERATING INCOME
Other income for the first nine months of 1995 totaled $2,716,624 as compared to
$3,438,837 for the first nine months of 1994, a decrease of 21%. Other income
for the quarter ended September 30, 1995 was $737,690 as compared to $750,358
for the quarter ended September 30, 1994, a decrease of 2%. Trust income
increased for the nine- and three-month periods because of an increase in estate
fees.
Gain on sale of securities available for sale for the first nine months of 1995
was $323,985 as compared to $1,546,964 for the comparable period in 1994 and
none for the quarter ended September 30, 1995 as compared to $180,063 for the
comparable period of 1994. The portfolio of securities available for sale is
managed with the primary objective of maintaining an appropriate level of
liquidity, and to control interest rate risk.
Other operating income increased for the nine- and three-month periods ended
September 30, 1995 because of the interest income earned on the executive life
insurance plan of $329,445 and $109,815, respectively, as compared to no such
gains for the comparable periods in 1994.
OPERATING EXPENSES
Total operating expenses for the first nine months of 1995 were $13,410,086 as
compared to $13,173,335 for the first nine months of 1994, an increase of 2%.
The operating expenses for the quarter ended September 30, 1995 were $4,293,413
as compared to $4,576,951 for the quarter ended September 30, 1994, a decrease
of 6%. Personnel expenses decreased for the nine- and three-month periods ended
September 30, 1995 primarily due to normal attrition in staff. The occupancy
expenses increased for the nine- and three-month periods ended September 30,
1995 because of non-availability of gain on the sale of buildings, which
completed its amortization period in 1994. Other operating expenses were
$4,387,044 for the nine-month period and $1,346,167 for the quarter ended
September 30, 1995, decreases of 2% and 11%, respectively, over comparable
periods in 1994. These decreases were due mainly to a reduction in regulatory
assessments to $378,182 for the nine months ended September 30, 1995 and $4,474
for the quarter ended September 30, 1995 as compared to $593,788 and $183,929,
respectively, for the comparable periods in 1994.
ASSET/LIABILITY MANAGEMENT
The primary objective of asset and liability management is to structure the
balance sheet appropriately in order to maximize net interest income while
maintaining acceptable levels of liquidity and interest-rate risk. The policies
and guidelines for managing balance sheet and off-balance sheet activities are
formulated and monitored by the Company's Asset and Liability Committee
("ALCO").
INTEREST-SENSITIVITY
Interest-sensitivity management is concerned with optimizing the effects of
interest rate changes on net interest income. Interest-sensitivity is measured
by gaps defined as the difference between interest-sensitive assets and
interest-sensitive liabilities within any specific time frame. For example, a
negative, or liability-sensitive, gap occurs when interest-sensitive liabilities
exceed interest-sensitive assets. This generally indicates that net interest
income will improve if interest rates fall. The opposite would be true in the
case of a positive or asset-sensitive gap.
Interest-sensitivity analysis is valuable tool in assessing the potential impact
of interest rate changes on net interest income. The Company's
interest-sensitivity position is closely monitored by ALCO, which regularly
examines and evaluates the potential impact of varying scenarios of market
interest rates and balance sheet composition. Other factors, however, such as
changes in balance sheet mix and interest rate spread relationships, also play a
vital role in maximizing net interest income.
17
<PAGE>
On September 30, 1995, the Company was liability-sensitive (rate-sensitive
liabilities in excess of rate-sensitive assets) with respect to rate-sensitive
assets and rate -sensitive liabilities with maturities of 3 months to five
years, with a negative cumulative interest rate sensitivity gap as a percentage
of total interest-sensitive earning assets of 13.54 percent. This means that the
Company's interest-sensitive liabilities reprice faster than its
interest-sensitive assets.
The Company's interest-sensitivity position at September 30, 1995, is presented
below:
<TABLE>
<CAPTION>
Interest Rate Sensitivity Analysis
(Dollars in thousands)
0-3 3-12 1-5 OVER
SEPTEMBER 30, 1995 MONTHS MONTHS YEARS 5-YEARS TOTAL
- ------------------ ------ ------ ----- ------- -----
<S> <C> <C> <C> <C> <C>
Investment securities and
securities available
for sale $ 23,119 $ 2,997 $ 62,847 $ 59,752 $148,715
Federal funds sold and other
short-term investments 2,200 -- -- -- 2,200
Loans and loans held for sale 91,993 32,584 66,894 40,492 231,963
-------- -------- -------- -------- --------
Earning assets 117,312 35,581 129,741 100,244 382,878
Deposits:
Interest-paying checking* -- -- 68,464 -- 68,464
Money market 39,470 -- -- -- 39,470
Savings -- -- 28,390 -- 28,390
Certificates of deposit
and public funds 9,636 111,963 59,301 2,637 183,537
Federal funds purchased
and other short-term
borrowings 17,246 -- -- -- 17,246
-------- -------- -------- -------- --------
Interest-bearing liabilities 66,352 111,963 156,155 2,637 337,107
-------- -------- -------- -------- --------
Interest-sensitivity gap $ 50,960 $(76,382) $(26,414) $ 97,607 $ 45,771
======== ======== ======== ======== ========
Cumulative gap $ 50,960 $(25,422) $(51,836) $ 45,771
======== ======== ======== ========
Cumulative gap to total
earning assets (%) 13.31 (6.64) (13.54) 11.95
===== ===== ====== =====
<FN>
Loans are stated net of unearned income.
Non-earning assets and non-interest bearing liabilities have been excluded from
analysis.
* It has been our experience that through a variety of interest rate scenarios,
interest-paying checking and savings accounts have not materially increased or
decreased as a result of interest rate changes. It is for this reason that the
Company has felt comfortable classifying its deposit accounts as 1-5 year
liabilities.
</FN>
</TABLE>
18
<PAGE>
RISK ELEMENTS
NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The table below presents an analysis of consolidated risk elements of the
Company classified as follows: (a) non-accrual loans; (b) 90-day loans; and (c)
troubled debt restructurings as defined in Statement of Financial Accounting
Standards No. 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructurings."
<TABLE>
<CAPTION>
(In Thousands)
9/30/95 06/30/95 03/31/95 12/31/94
------- -------- -------- --------
<S> <C> <C> <C> <C>
(a) Non-accrual loans $ 2,652 $ 3,176 $ 3,785 $ 4,265
(b) 90-day loans 656 146 63 1,050
(c) Troubled debt restructurings NONE NONE NONE NONE
(d) Other Real Estate Owned 5,125 5,103 5,609 5,600
</TABLE>
Non-accrual loans decreased $524,000 in the quarter ended September 30, 1995 due
primarily to two loans totalling $1,761,000. One loan for $241,000 was paid in
full. With respect to a second loan for $1,520,000, $35,000 was paid, $385,000
was charged off, and $1,100,000 was in process of being restructured.
Ninety-day loans increased by $510,000 in the quarter ended September 30, 1995
due primarily to three loans totalling $496,000. One loan for $220,000 is a slow
pay residential real estate loan. A payment was made in October and the loan is
now 60 days past due. A second loan for $175,000 is in the process of being
restructured by the SBA (the loan represents purchase of the guaranteed portion
only). A third loan for $101,000 has become current.
Potential problem loans were as follows at the dates set forth:
<TABLE>
<CAPTION>
9/30/95 6/30/95 03/31/95 12/31/94
------- ------- -------- --------
<S> <C> <C> <C> <C>
$ 175 $ 175 $ 240 $ 403
</TABLE>
At September 30, 1995 the non-accrual loans were broken down as follows:
<TABLE>
<S> <C> <C>
Residential Real Estate $ 673 25%
Commercial Real Estate 1,790 68%
Commercial - Secured 154 6%
Commercial - Unsecured 6 -%
Installment Loans 29 1%
-------
$ 2,652
=======
</TABLE>
There is one major concentration within the non-accruing portfolio: a commercial
real estate loan which comprises 41% of total non-accruing loans. This borrower
has reorganized after Chapter XI bankruptcy. The loan is real estate secured.
The loan has been restructured which resulted in a charge-off of $385,000. The
charge-off was fully covered by reserves. The loan is classified substandard.
There are four major concentrations within the classified loans: the above
non-accrual loan, which comprises 23% of total classified loans. A second loan
which comprises 24% of total classified loans is fully secured with real estate.
This loan is classified substandard due to it being a workout loan and its only
source of repayment is the sale or refinance of the real estate. However, the
loan is current and accruing. A third loan, which comprises 11% of total
classified loans, is secured with a combination of collateral including real
estate and marketable securities. This loan is classified substandard due to
chronic slowness caused by cash flow problems of the borrower. However, the loan
is current and accruing. A fourth loan comprises 10% of total classified loans
and is secured with residential real estate. This loan is classified substandard
due to chronic slowness caused by cash flow problems of the borrower. The loan
is current and accruing.
At September 30, 1995 there are no loans classified as loss.
19
<PAGE>
Other real estate owned remained relatively unchanged during the quarter ended
September 30, 1995.
The Company adopted SFAS 114, as amended by SFAS 118, effective January 1, 1995.
This did not have a material impact on the Company's results of operations or on
its financial position, including the level of the reserve for possible credit
losses. Instead, it resulted only in a reallocation of the existing reserve of
possible credit losses. At September 30, 1995, the recorded investment in loans
that was considered impaired under SFAS 114 was $1,100,000. These loans required
a SFAS 114 reserve for possible credit losses of $110,000. These loans were on a
non-accrual status as of September 30, 1995.
LIQUIDITY MANAGEMENT
In order for the Company's banking subsidiaries to satisfy the requirements of
depositors wanting to withdraw funds and to meet the credit needs of borrowers,
the banking subsidiaries must maintain certain levels of liquidity. Asset and
liability management strategy is designed to achieve the maintenance of an
adequate level of liquidity and the management of the interest-rate sensitive
structure of the balance sheet. The basic objective of interest-rate sensitive
management is the protection of net interest income from sharp fluctuations
caused by changes in the market. The management of liquidity and interest-rate
sensitivity are closely related as both are affected by maturities of assets and
the source of funds.
Liquidity and interest-rate sensitive positions are closely monitored by ALCO,
which regularly examines and evaluates the potential impact of varying scenarios
of market interest rates, balance sheet compositions and funding source
requirements.
Liquidity of the Company's banking subsidiaries is provided in part through the
cash flow generated by transactions in the ordinary course of business. Loan
repayments and maturing assets furnish additional cash flow sources. Liquidity
is also provided by the acquisition of new deposits, as well as by the ability
to raise funds in a variety of money markets. Liquidity is also provided by
securities available for sale. As of September 30, 1995, securities available
for sale amounted to $147,465,000.
CAPITAL RESOURCES
The Company has continued to maintain a strong capital base during 1995. At
September 30, 1995 the Company's total and Tier 1 risk-based capital ratios (as
more fully described below) were 12.36% and 13.24%, respectively. The Company's
leverage ratio was 8.51% at September 30, 1995. These ratios were well above the
minimum capital requirements established by government agencies.
The Company and its banking subsidiaries are subject to a minimum Tier 1 capital
to risk-rated assets ratio of 4% and total capital (Tier 1 plus Tier 2) to
risk-rated asset ratio of 8%. The Federal Reserve Board has also established
additional capital adequacy guidelines referred to as the Tier 1 leverage ratio
that measures the ratio of Tier 1 capital to average assets. The most highly
rated bank holding companies will be required to maintain a Tier 1 leverage
ratio of 3%. The required ratio will be based on the Board's assessment of the
individual bank holding company's asset quality, earnings performance, interest
rate risk and liquidity. The FDIC Improvement Act of 1991 ("FDICIA") requires
the establishment of a capital-based supervisory system of prompt corrective
action of all depository institutions. The Board's regulations under FDICIA
define "well capitalized" institutions as those whose capital ratios equal or
exceed the following minimum ratios: Tier 1 capital ratio of 6%, total
risk-based ratio of 10%, and Tier 1 leverage ratio of 5%.
As of September 30, 1995, the Company's Tier 1 capital, total risk-based capital
and Tier 1 leverage ratios were 12.36%, 13.24%, and 8.51%, respectively. These
ratios, as well as the corresponding ratios of the Company's banking
subsidiaries, are well above industry averages.
20
<PAGE>
Stockholders' equity and book value per share (not including unrealized losses
on securities available-for-sale) as of September 30, 1995 increased to
$37,969,608 and $10.49, respectively, from $37,182,596 and $10.44 per share as
of September 30, 1994. These figures are net of dividends in the amounts of
$1,355,964 and $1,305,109 in 1995 and 1994, respectively. Stockholders' equity
and book value per share (including unrealized losses on securities available
for sale, net of applicable income taxes) as of September 30, 1995 were
$35,051,696 and $9.68,as compared to $32,313,653 and $9.07 as of September 30,
1994. It should be recognized that unrealized gains and losses on
available-for-sale securities are not included in the statement of consolidated
income until they are sold. All per-share figures for 1994 have been
retroactively adjusted to reflect the three-percent stock dividend distributed
in December 1994.
As of September 30, 1995, the Company had no material commitments for capital
expenditures.
21
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JEFFERSON BANCORP, INC.
NOVEMBER 13, 1995 /s/ BARTON S. GOLDBERG
- --------------------------- -----------------------------------
Secretary-Treasurer (Principal
Financial Officer and Director)
NOVEMBER 13, 1995 /s/ SYED F. ZAFAR
- --------------------------- -----------------------------------
Senior Vice President & Comptroller
(Principal Accounting Officer)
22
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000053316
<NAME> JEFFERSON BANCORP, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 11,966,120
<INT-BEARING-DEPOSITS> 319,860,702
<FED-FUNDS-SOLD> 2,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 147,465,371
<INVESTMENTS-CARRYING> 1,248,541
<INVESTMENTS-MARKET> 1,261,000
<LOANS> 228,511,228
<ALLOWANCE> 2,452,395
<TOTAL-ASSETS> 422,636,388
<DEPOSITS> 365,868,697
<SHORT-TERM> 17,246,035
<LIABILITIES-OTHER> 4,469,960
<LONG-TERM> 0
<COMMON> 3,866,080
0
0
<OTHER-SE> 31,185,616
<TOTAL-LIABILITIES-AND-EQUITY> 422,636,388
<INTEREST-LOAN> 16,343,892
<INTEREST-INVEST> 5,971,656
<INTEREST-OTHER> 351,744
<INTEREST-TOTAL> 22,667,292
<INTEREST-DEPOSIT> 9,051,703
<INTEREST-EXPENSE> 9,826,820
<INTEREST-INCOME-NET> 12,690,472
<LOAN-LOSSES> 150,000
<SECURITIES-GAINS> 323,985
<EXPENSE-OTHER> 13,410,086
<INCOME-PRETAX> 1,997,010
<INCOME-PRE-EXTRAORDINARY> 1,997,010
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,388,310
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
<YIELD-ACTUAL> 7.89
<LOANS-NON> 2,652,000
<LOANS-PAST> 656,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 175,000
<ALLOWANCE-OPEN> 3,151,691
<CHARGE-OFFS> 1,110,033
<RECOVERIES> 272,251
<ALLOWANCE-CLOSE> 2,452,395
<ALLOWANCE-DOMESTIC> 1,888,339
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 564,056
</TABLE>
