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 JUNE 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 JULY 31, 1995
1 COMMON STOCK, $1.00 PAR VALUE, OF A SINGLE CLASS 3,616,792
<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 JUNE 30, 1995 TO
SECURITIES AND EXCHANGE
COMMISSION
CONSOLIDATED BALANCE SHEETS 3-4
STATEMENT OF CONSOLIDATED INCOME 5
STATEMENT OF CONSOLIDATED STOCK-
HOLDERS' EQUITY 6
STATEMENT OF CONSOLIDATED
CASH FLOWS 7
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS 8-11
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 12-21
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS 21
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. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 DECEMBER 31, 1994
(Unaudited) (Unaudited)
------------------ -----------------
<S> <C> <C>
ASSETS
------
CASH AND DEMAND BALANCES DUE FROM BANKS $13,280,860 $14,542,225
------------------ -----------------
INVESTMENT SECURITIES
---------------------
U.S. GOVERNMENT AGENCY 1,491,675 1,491,135
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS (NON-TAXABLE) 114,348 124,302
OTHER SECURITIES 1,139,349 1,139,349
------------------ -----------------
TOTAL INVESTMENT SECURITIES (APPROXIMATE MARKET VALUE
1995-$2,786,000; 1994-$2,796,000) 2,745,372 2,754,786
------------------ -----------------
SECURITIES AVAILABLE FOR SALE
---------------------
U.S. TREASURY SECURITIES 9,964,375 9,313,125
SECURITIES OF OTHER U.S. GOVERNMENT AGENCIES 126,725,027 102,059,332
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS (NON-TAXABLE) 4,530,929 7,416,948
COLLATERALIZED MORTGAGE OBLIGATIONS AND OTHER SECURITIES 1,924,152 2,341,048
------------------ -----------------
TOTAL SECURITIES AVAILABLE FOR SALE (Fair value 1995-$143,144,000
1994-$121,130,000) 143,144,483 121,130,453
------------------ -----------------
FEDERAL FUNDS SOLD AND OTHER SHORT-TERM INVESTMENTS 12,200,000 200,000
------------------ -----------------
LOANS 229,984,627 203,476,490
LESS: UNEARNED INCOME 2,278,775 2,109,361
ALLOWANCE FOR CREDIT LOSSES 2,690,614 3,151,691
------------------ -----------------
TOTAL LOANS, NET 225,015,238 198,215,438
------------------ ------------------ -----------------
LOANS HELD FOR SALE 790,775 830,237
------------------ -----------------
PREMISES AND EQUIPMENT, NET 5,691,827 5,920,469
------------------ -----------------
OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSED LOANS 5,103,188 5,600,219
------------------ -----------------
OTHER ASSETS 19,602,879 15,081,953
------------------ -----------------
TOTAL ASSETS $427,574,622 $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 JUNE 30, 1995 DECEMBER 31, 1994
------------------------------------ (Unaudited) (Unaudited)
------------------ -----------------
<S> <C> <C>
DEPOSITS
--------
DEMAND (NON-INTEREST-BEARING) $48,575,372 $49,375,688
SAVINGS 31,145,506 32,572,061
INTEREST-PAYING CHECKING 69,565,841 70,096,042
MONEY MARKET ACCOUNTS 37,778,734 40,936,942
CERTIFICATES AND PUBLIC FUNDS 181,865,117 113,888,669
------------------ -----------------
TOTAL DEPOSITS 368,930,570 306,869,402
--------------
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD
UNDER AGREEMENTS TO REPURCHASE 21,108,002 25,844,770
DEFERRED GAIN ON SALE OF BUILDINGS 34,538 37,265
OTHER LIABILITIES 3,212,720 2,154,050
------------------ -----------------
TOTAL LIABILITIES 393,285,830 334,905,487
------------------ -----------------
COMMITMENTS AND CONTINGENT LIABILITIES
--------------------------------------
STOCKHOLDERS' EQUITY:
---------------------
COMMON STOCK, $1.00 PAR VALUE, 10,000,000 SHARES
AUTHORIZED; ISSUED - JUNE 30, 1995-3,863,651;
DECEMBER 31, 1994-3,853,591 SHARES 3,863,651 3,853,591
CAPITAL SURPLUS 28,177,363 28,106,726
RETAINED EARNINGS 8,852,989 8,811,612
TREASURY STOCK, AT COST-JUNE 30, 1995-246,859 SHARES;
DECEMBER 31, 1994- 246,859 SHARES (2,401,204) (2,401,204)
DEFERRED COMPENSATION (636,833) (840,323)
NET UNREALIZED (LOSSES) GAINS ON SECURITIES AVAILABLE FOR SALE
(NET OF APPLICABLE INCOME TAXES) (3,567,174) (8,160,109)
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 34,288,792 29,370,293
-------------------------- ------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $427,574,622 $364,275,780
------------------------------------------ ================== =================
BOOK VALUE PER COMMON SHARE EXCLUDING UNREALIZED
GAINS (LOSSES) ON SECURITIES AVAILABLE FOR SALE $10.47 $10.41
================== =================
BOOK VALUE PER COMMON SHARE $9.48 $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 SIX MONTHS ENDED
STATEMENTS OF CONSOLIDATED INCOME JUNE 30, JUNE 30,
1995 1994 1995 1994
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
INTEREST AND FEES ON LOANS $5,647,260 $4,103,197 $10,685,838 $8,090,832
INVESTMENTS AND SECURITIES HELD FOR SALE:
U.S. TREASURY SECURITIES 122,280 122,851 245,125 255,115
SECURITIES OF OTHER U.S. GOVERNMENT AGENCIES 1,799,289 1,461,161 3,330,426 2,782,836
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS-
NON-TAXABLE 80,393 390,362 182,221 773,182
COLLATERIZED MORTGAGE OBLIGATIONS AND OTHER SECURITIES 50,717 63,568 104,787 59,601
FEDERAL FUNDS SOLD AND OTHER SHORT-TERM INVESTMENTS 136,290 37,926 186,538 171,068
---------- ---------- ----------- ----------
TOTAL INTEREST INCOME 7,836,229 6,179,065 14,734,935 12,132,634
---------- ---------- ----------- ----------
INTEREST EXPENSE:
DEPOSITS:
SAVINGS 204,675 253,374 413,710 506,671
INTEREST-PAYING CHECKING 301,916 313,775 589,272 641,260
MONEY MARKET ACCOUNTS 211,569 246,749 448,754 497,209
CERTIFICATES AND PUBLIC FUNDS 2,426,275 711,213 4,010,917 1,338,158
SHORT-TERM BORROWINGS 262,561 155,566 616,802 303,660
---------- ---------- ----------- ----------
TOTAL INTEREST EXPENSE 3,406,996 1,680,677 6,079,455 3,286,958
---------- ---------- ----------- ----------
NET INTEREST INCOME 4,429,233 4,498,388 8,655,480 8,845,676
PROVISION FOR CREDIT LOSSES 75,000 225,000 150,000 450,000
---------- ---------- ----------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 4,354,233 4,273,388 8,505,480 8,395,676
---------- ---------- ----------- ----------
OTHER INCOME:
TRUST INCOME 367,420 292,811 681,498 591,248
SERVICE CHARGES, COMMISSIONS AND FEES 304,732 300,084 632,945 607,477
GAIN ON SALE OF SECURITIES AVAILABLE FOR SALE, NET 323,985 78,817 323,985 1,366,901
OTHER OPERATING INCOME 187,481 60,047 340,506 122,853
---------- ---------- ----------- ----------
TOTAL OTHER INCOME 1,183,618 731,759 1,978,934 2,688,479
---------- ---------- ----------- ----------
OPERATING EXPENSES:
SALARIES AND EMPLOYEE BENEFITS 2,255,798 2,294,868 4,546,552 4,580,213
OCCUPANCY EXPENSE, NET 831,162 564,798 1,529,244 1,054,034
OTHER OPERATING EXPENSES 1,541,474 1,495,548 3,040,877 2,962,137
---------- ---------- ----------- ----------
TOTAL OPERATING EXPENSES 4,628,434 4,355,214 9,116,673 8,596,384
---------- ---------- ----------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 909,417 649,933 1,367,741 2,487,771
PROVISION FOR INCOME TAXES 283,600 36,700 422,500 573,600
---------- ---------- ----------- ----------
NET INCOME $625,817 $613,233 $945,241 $1,914,171
========== ========== =========== ==========
EARNINGS PER COMMON SHARE:
AVERAGE NUMBER OF SHARES OUTSTANDING 3,779,617 3,474,714 3,785,703 3,473,791
========== ========== =========== ==========
NET INCOME PER SHARE $0.17 $0.18 $0.25 $0.55
========== ========== =========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 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) ($8,160,104)
NET INCOME - - 945,241 - - -
$.125 PER SHARE CASH DIVIDEND - - (451,764) - - -
$.125 PER SHARE CASH DIVIDEND - - (452,100) - - -
EXERCISE OF STOCK OPTIONS 10,060 70,637 - - - -
AMORTIZATION OF DEFERRED COMPENSATION - - - - 203,490 -
CHANGE IN NET UNREALIZED
GAINS/(LOSSES) ON SECURITIES
AVAILABLE FOR SALE - - - - - 4,592,930
-------------- ------------- ------------ ------------ ------------ --------------
BALANCE, JUNE 30, 1995 $3,863,651 $28,177,363 $8,852,989 ($2,401,204) ($636,833) ($3,567,174)
============== ============= ============ ============ ============ ==============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $945,241 $1,914,171
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 403,015 350,007
GAIN ON SALE OF BUILDINGS (2,727) (361,303)
LOSSES AND WRITE-DOWN ON SALE OF OTHER REAL ESTATE OWNED - 14,500
GAIN ON SALE OF OTHER REAL ESTATE OWNED (51,674) (103,759)
PROVISION FOR CREDIT LOSSES 150,000 450,000
PREMIUM AMORTIZATION AND DISCOUNT ACCRETION, NET 116,222 106,989
NET GAIN ON SALE OF SECURITIES AVAILABLE FOR SALE (323,985) (1,366,901)
AMORTIZATION OF DEFERRED COMPENSATION 203,490 181,680
SALE OF SECURITIES AVAILABLE FOR SALE 30,120,655 61,077,794
PROCEEDS FROM MATURITIES AND PAYDOWNS OF
SECURITIES AVAILABLE FOR SALE 3,501,324 6,725,561
PURCHASE OF SECURITIES AVAILABLE FOR SALE (48,388,584) (65,245,624)
ORIGINATION OF LOANS HELD FOR SALE (9,765,701) (29,672,110)
DISPOSITION OF LOANS HELD FOR SALE 9,805,163 36,085,347
(INCREASE) DECREASE IN OTHER ASSETS (6,986,937) 3,431,716
INCREASE IN OTHER LIABILITIES 1,058,670 200,416
----------- -----------
NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES (19,215,828) 13,788,484
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
NET INCREASE IN LOANS (26,949,800) (13,320,001)
PURCHASES OF INVESTMENT SECURITIES - (1,028,920)
NET INCREASE IN FEDERAL FUNDS SOLD AND
INTEREST-EARNING DEPOSITS IN OTHER FINANCIAL INSTITUTIONS (12,000,000) (2,100,000)
DISPOSITION OF OTHER REAL ESTATE OWNED 913,568 506,341
ACQUISITION OF OTHER REAL ESTATE OWNED (364,863) (542,859)
PURCHASES OF PREMISES AND EQUIPMENT (145,675) (1,452,273)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (38,546,770) (17,937,712)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE IN DEPOSITS 62,061,168 955,509
NET (DECREASE) INCREASE IN FEDERAL FUNDS PURCHASED AND
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (4,736,768) 5,798,223
PAYMENT OF CASH DIVIDENDS (903,864) (870,589)
PURCHASE OF TREASURY STOCK - (391,617)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 80,697 355,619
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES: 56,501,233 5,847,145
----------- -----------
NET INCREASE IN CASH AND DEMAND BALANCES
DUE FROM BANKS (1,261,365) 1,697,917
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 JUNE 30, $13,280,860 $15,238,785
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
INTEREST PAID $4,994,000 $3,030,000
=========== ===========
INCOME TAX PAYMENTS $295,000 $320,000
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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.
(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
executive'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
June 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
June 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 (10,060) 8.08 (80,697)
------- ----------
Options outstanding:
June 30, 1995 319,213 9.04 $2,885,847
======= ==========
Options exercisable at
December 31, 1994 309,348
=======
June 30, 1995 299,538
=======
</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 June 30, 1995 140,750 8.43 $1,186,225
======= ==========
Options exercisable at:
December 31, 1994 140,750
=======
June 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 six months ended June 30, 1995, the Company accrued
approximately $309,330 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 AND IN-SUBSTANCE FORECLOSED LOANS: In-substance
foreclosed loans and property acquired by foreclosure or deed in lieu of
foreclosure are recorded at the lower of cost or estimated fair value at the
time the loan is foreclosed or deemed foreclosed insubstance. Loans foreclosed
insubstance consist of loans accounted for as foreclosed property even though
actual foreclosure has not occurred. 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 loans foreclosed
insubstance, and 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 June 30, 1995 totalled $ 517,000.
(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>
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
----------------------------------------
Management's discussion and analysis of
financial condition and results of operations - (continued)
QUARTER ENDED JUNE 30, 1995 QUARTER ENDED JUNE 30, 1994
NET INTEREST INCOME, AVERAGE BALANCES --------------------------------- --------------------------------
AND AVERAGE RATES AVERAGE AVERAGE AVERAGE AVERAGE
(IN THOUSANDS) 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) $210,154 $5,469 10.44% $165,500 $3,721 9.02%
Installment loans, net of unearned income 10,776 259 9.62% 6,472 159 9.85%
Investment securities and securities available for sale:
U.S. Treasury securities 10,214 122 4.79% 10,260 123 4.81%
Securities of other U.S. Government agencies 126,470 1,800 5.69% 105,404 1,461 5.54%
Obligations of states and political subdivisions
(non-taxable)(2) 6,368 122 7.67% 27,418 594 8.66%
Collateralized mortgage obligations and other securities 3,345 51 6.08% 4,730 64 5.38%
Federal funds sold and other short-term investments 9,567 137 5.73% 4,404 38 3.47%
-------- ------ -------- ------
Total interest-earning assets $376,894 7,959 8.47% $324,188 6,159 7.62%
======== ------ ======== ------
KEY LIABILITIES:
Deposits:
Savings 30,474 205 2.69% 39,482 254 2.58%
Interest-paying checking 71,063 302 1.71% 75,212 313 1.67%
Money market 39,039 212 2.18% 45,516 246 2.17%
Certificates of deposit 122,704 1,865 6.10% 74,717 618 3.32%
Public funds 36,935 562 6.10% 8,180 93 4.58%
-------- ------ -------- ------
Total deposits 300,215 3,146 4.20% 243,106 1,524 2.51%
Borrowings 26,391 263 3.99% 22,118 156 2.82%
-------- ------ -------- ------
Total interest-bearing liabilities 326,607 3,409 4.19% 265,224 1,680 2.54%
-------- ------ -------- ------
Total noninterest-bearing liabilities 50,715 49,860
-------- --------
Total key liabilities $377,322 $315,084
======== ========
Net interest income/spread $4,551 4.28% $4,479 5.08%
====== ======
Net interest income as a percent of total
average interest-earning assets 4.84% 5.54%
<FN>
(1) Average balances include nonaccrual loans and interest income includes fees on loans of approximately
$277,000 and $123,000 for quarters ended June 30, 1995 and 1994, $441,000 and $212,000 for the six months ended
June 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>
PAGE 13
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON BANCORP, INC. AND SUBSIDIARIES
----------------------------------------
Management's discussion and analysis of
financial condition and results of operations - (continued)
NET INTEREST INCOME, SIX MONTHS ENDED JUNE 30, 1995 SIX MONTHS ENDED JUNE 30, 1994 YEAR ENDED DECEMBER 31, 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 WCS $202,536 $10,032 9.99% $164,962 $7,331 8.96% $171,275 $15,700 9.17%
Installment loans, net
of unearned income 9,964 479 9.62% 6,016 301 10.02% 6,701 664 9.91%
Investment securities and
securities available
for sale:
U.S. Treasury securities 10,220 245 4.84% 10,461 255 4.92% 10,351 504 4.87%
Securities of other U.S.
Government agencies 120,963 3,331 5.51% 100,514 2,783 5.54% 107,534 6,033 5.61%
Obligations of states
and political
subdivisions
(non-taxable)(2) 7,208 275 7.63% 27,075 1,172 8.65% 20,023 1,708 8.53%
Collateralized mortgage
obligations and other
securities 3,441 105 6.09% 5,296 46 1.73% 4,640 172 3.70%
Federal funds sold and
other short-term
investments 6,572 187 5.73% 11,440 171 3.02% 6,734 220 3.26%
-------- ------- -------- ------ -------- -------
Total interest-earning
assets $360,904 14,653 8.19% $325,764 12,058 7.46% $327,258 25,001 7.64%
======== ------- ======== ------ ======== -------
KEY LIABILITIES:
Deposits:
Savings 31,157 414 2.68% 40,476 507 2.52% 37,417 968 2.59%
Interest-paying
checking 70,815 589 1.68% 77,257 641 1.67% 75,126 1,257 1.67%
Money market 40,388 449 2.24% 46,251 497 2.17% 43,402 944 2.17%
Certificates of
deposit 107,849 3,105 5.81% 76,520 1,236 3.26% 76,727 2,821 3.68%
Public funds 31,370 906 5.82% 4,651 102 4.44% 14,786 767 5.19%
-------- ------- -------- ------ -------- -------
Total deposits 281,579 5,463 3.91% 245,155 2,983 2.45% 247,458 6,757 2.73%
Borrowings 30,832 617 4.03% 21,818 304 2.81% 21,930 676 3.08%
-------- ------- -------- ------ -------- -------
Total interest-bearing
liabilities 312,411 6,080 3.92% 266,973 3,287 2.48% 269,388 7,433 2.76%
-------- ------- -------- ------ -------- -------
Total noninterest-
bearing liabilities 49,272 51,509 49,751
-------- -------- --------
Total key liabilities $361,683 $318,482 $319,139
======== ======== ========
Net interest
income/spread $8,574 4.26% $8,771 4.98% $17,568 4.88%
======= ====== =======
Net interest income as
a percent of total
average interest-
earning assets 4.79% 5.43% 5.37%
<FN>
(1) Average balances include nonaccrual loans and interest income includes fees on loans of approximately
$277,000 and $123,000 for quarters ended June 30, 1995 and 1994, $441,000 and $212,000 for the six months ended
June 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>
PAGE 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 six months ended June 30, 1995 increased by $33,646,000, or 10%, 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 six months
of 1995 was the increase in the Company's loans. The average balance of such
loans increased by $34,524,000, or 19%. At the same time, the average daily
balance of the Company's portfolio of securities of other U.S. Government
agencies increased by $13,429,000, or 12%. The increase in the Company's
portfolio of loans and securities of other U.S. Government agencies in the first
six 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 six months ended June 30, 1995,
was $361,683,000 as compared to $319,139,000 for the year ended December 31,
1994 an increase of $42,544,000, or 13%. 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 $31,122,000, or 41%, public funds
deposits, which increased by $16,584,000, or 112%, and borrowings (federal funds
purchased and securities sold under agreements to repurchase), which increased
by $8,902,000, or 41%. At the same time, the average daily balance of savings
deposits decreased by $6,290,000, or 17%; interest-paying checking deposits
decreased by $4,311,000, or 6%, money market deposits decreased by $3,014,000,
or 7%, and demand deposits decreased by $479,000, or 1%.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Consolidated net income for the six months ended June 30, 1995 was $945,241
compared to $1,914,171 for the comparable period in 1994. Per-share net income
for the six months ended June 30, 1995 was $.25 compared to $.55 for the
comparable period in 1994. The decline in consolidated net income for the six
months ended June 30, 1995 was primarily due to a decrease of $1,042,916 in
gains from security transactions. The gains from security transactions during
the first six months of 1995 was $323,985 as compared to $1,366,901 in the
comparable period in 1994. The other contributing factor for lower net income in
the first six months of 1995 was an increase of $475,210, or 45%, in occupancy
expense. Occupancy expense in the first six months of 1994 included gains of
$361,303 on sale of buildings, which completed its amortization period in 1994.
Occupancy expense in the first six months of 1995 had no such gain.
Consolidated net income for the quarter ended June 30, 1995 was $625,817
compared to $613,233 for the comparable period in 1994, an increase of 2%. Per
share net income for the quarter ended June 30, 1995 was $.17, compared to $.18
for the comparable period in 1994. The increase in consolidated net income was
primarily due to the $245,168 increase in gains from security transactions.
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 six months of 1995 was $197,000
lower than the comparable period in 1994. The Company's net interest income on
the same basis for the quarter ended June 30, 1995 was $72,000 higher than the
comparable period in 1994, an increase of 2%. A primary reason for this decrease
for the first six months of 1995 was a decrease 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. For the quarter ended June
30, 1995, a primary reason for this increase was higher loan service charge
income as compared to the comparable period in 1994. Loan service charge income
was $277,000 in the quarter ended June 30, 1995, as compared to $123,000 for the
comparable period in 1994.
In the first six months of 1995, the net interest spread decreased by 72 basis
points from the comparable period in 1994, or 14%. The spread for the quarter
ended June 30, 1995 decreased by 80 basis points from the comparable period in
1994, or 16%. This decrease was caused by a change in the average cost of funds
on total interest-bearing liabilities, which increased to 3.92% for the six
months ended June 30, 1995 and 4.19% for the quarter ended June 30, 1995 from
2.48% and 2.54%, respectively, for the comparable periods 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 7.46% for the six months ended
June 30, 1994 and 7.62% for the quarter ended June 30, 1994 to 8.19% and 8.47%,
respectively, for the comparable periods in 1995.
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 six months
of 1995, the provision for credit losses amounted to $150,000 versus $450,000 in
the comparable period of 1994. In the quarter ended June 30, 1995, this expense
amounted to $75,000 versus $225,000 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.
OTHER OPERATING INCOME
Other income for the first six months of 1995 totaled $1,978,934 as compared to
$2,688,479 for the first six months of 1994, a decrease of 26%. Other income for
the quarter ended June 30, 1995 was $1,183,618 as compared to $731,759 for the
quarter ended June 30, 1994, an increase of 62%. Trust income increased for the
six-and three-month periods because of an increase in estate fees.
16
<PAGE>
Gain on the sale of securities available for sale for the first six months of
1995 was $323,985 as compared to $1,366,901 for the comparable period in 1994
and $323,985 for the quarter ended June 30, 1995 as compared to $78,817 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 six- and three-month periods ended June
30, 1995 because of the gains on life insurance of $219,630 and $109,815,
respectively, as compared to no gains for the comparable periods in 1994.
OPERATING EXPENSES
Total operating expenses for the first six months of 1995 were $9,116,673 as
compared to $8,596,384 for the first six months of 1994, an increase of 6%. The
operating expenses for the quarter ended June 30, 1995 were $4,628,434 as
compared to $4,355,214 for the quarter ended June 30, 1994, an increase of 6%.
Personnel expenses decreased for the six-and three-month periods ended June 30,
1995 primarily due to normal attrition in the staff. The occupancy expenses
increased for the six-and three-month periods ended June 30, 1995 because of
non-availability of gain on the sale of buildings, which completed its
amortization period in 1994. Other operating expenses were $3,040,877 for the
six-month period and $1,541,474 for the quarter ended June 30, 1995, an increase
of 3% and 3%, respectively, over the comparable periods in 1994. This increase
was due mainly to advertising and promotion expenses. The advertising and
promotion expenses were in the amount of $149,550 for the six months ended June
30, 1995 and $74,775 for the quarter ended June 30, 1995 as compared to $80,500
and $36,250, 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 a 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 June 30, 1995, the Company was asset-sensitive (rate-sensitive assets in
excess of rate-sensitive liabilities) with respect to rate-sensitive assets and
rate-sensitive liabilities with maturities of 12 months or less, with a positive
cumulative interest rate sensitivity gap as a percentage of total
interest-sensitive earning assets of 7.39 percent. This means that the Company's
interest-sensitive assets reprice more slowly than its interest-sensitive
deposits.
The Company's interest-sensitivity position at June 30, 1995, is presented
below:
<TABLE>
<CAPTION>
Interest Rate Sensitivity Analysis
(Dollars in thousands)
0-3 3-12 1-5 OVER
JUNE 30, 1995 MONTHS MONTHS YEARS 5 YEARS TOTAL
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Investment securities and
securities available
for sale $ 26,226 $ 29,476 $ 39,307 $ 50,881 $ 145,890
Federal funds sold and other
short-term investments 12,200 -- -- -- 12,200
Loans and loans held for sale 89,475 31,273 59,071 48,678 228,497
--------- --------- --------- --------- ---------
Earning assets 127,901 60,749 98,378 99,559 386,587
Deposits:
Interest-paying checking* -- -- 69,566 -- 69,566
Money market 37,779 -- -- -- 37,779
Savings -- -- 31,146 -- 31,146
Certificates of deposit
and public funds 9,544 91,673 76,933 3,715 181,865
Federal funds purchased
and other short-term
borrowings 21,108 -- -- -- 21,108
--------- --------- --------- --------- ---------
Interest-bearing liabilities 68,431 91,673 177,645 3,715 341,464
--------- --------- --------- --------- ---------
Interest-sensitivity gap $ 59,470 $ (30,924) $ (79,267) $ 95,844 $ 45,123
========= ========= ========= ========= =========
Cumulative gap $ 59,470 $ 28,546 $ (50,721) $ 45,123
========= ========= ========= =========
Cumulative gap to total
earning assets (%) 15.39 7.39 (13.12) 11.67
========= ========= ========= =========
</TABLE>
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.
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"; and (d) Other Real Estate Owned.
<TABLE>
<CAPTION>
(In Thousands)
06/30/95 03/31/95 12/31/94
-------- -------- --------
<S> <C> <C> <C>
(a) Non-accrual loans $3,176 $3,785 $4,265
(b) 90-day loans 146 63 1,050
(c) Troubled debt restructurings None None None
(d) Other Real Estate Owned 5,103 5,609 5,600
</TABLE>
Non-Accrual loans declined by $609,000 in the quarter ended June 30, 1995 due
primarily to the charge off of two loans totalling $288,000. In addition, there
were reductions within the purchased loan portfolio totalling $263,000 due
primarily to one loan for $77,950 which was foreclosed and transferred to other
real estate owned.
Ninety-day loans increased by $83,000 in the quarter ended June 30, 1995. There
were no material concentrations within this increase.
Potential problem loans were as follows at the dates set forth:
<TABLE>
<CAPTION>
06/30/95 03/31/95 12/31/94
-------- -------- --------
<S> <C> <C> <C>
$ 175 $ 240 $ 403
</TABLE>
At June 30, 1995 the non-accrual loans were broken down as follows:
<TABLE>
<S> <C> <C>
Residential Real Estate $1,032 32%
Commercial Real Estate 1,916 60%
Commercial - Secured 156 5%
Commercial - Unsecured 11 -%
Installment Loans 61 2%
------
$3,176
======
</TABLE>
There is one major concentration within the balance of the non-accruing
portfolio: a commercial real estate loan which comprises 48% of total
non-accruing loans. This loan is fully secured; however, the borrower has filed
for Chapter XI bankruptcy and the loan is being handled by the legal department.
This loan is classified substandard and carries a 33% reserve.
There are four major concentrations within the classified loans: the above
non-accrual loan, which comprises 28% of total classified loans. A second loan
which comprises 21% 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/refinance of the real estate. However, the loan
is current and accruing. A third loan, which comprises 9% 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 8% of total classified loans and
is secured with 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 June 30, 1995 $29,905 is classified as loss and is fully reserved.
19
<PAGE>
Other real estate owned declined $506,000 in the quarter ended June 30, 1995 due
primarily to the sale of three properties totalling $363,000 and the write down
of one property for $126,000 based on a current valuation.
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 June 30, 1995, securities held for sale
amounted to $143,144,483.
CAPITAL RESOURCES
The Company has continued to maintain a strong capital base during 1995. At June
30, 1995, the Company's Tier 1 risk-based capital and total capital ratios (as
more fully described below) were 12.07% and 13.04%, respectively. The Company's
leverage ratio was 8.69% at June 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
defines "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 June 30, 1995, the Company's Tier 1 capital, total risk-based capital and
Tier 1 leverage ratios were 12.07%, 13.04%, and 8.69%, 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 June 30, 1995 increased to $37,855,966
and $10.47, respectively, from $37,217,311 and $10.42 per share as of June 30,
1994. These figures are net of dividends in the amounts of $903,864 and $870,589
in 1995 and 1994, respectively. Stockholders' equity and book value per share
(including unrealized losses on available-for-sale securities, net of applicable
income taxes) as of June 30, 1995 were $34,288,792 and $9.48, as compared to
$33,739,396 and $9.45 as of June 30, 1994. It should be recognized that gains
and unrealized 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 June 30, 1995, the Company had no material commitments for capital
expenditures.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The 1995 annual meeting of the stockholders of the Company was held on April 25,
1995. The table below sets forth the results of the votes taken:
<TABLE>
<CAPTION>
1. ELECTION VOTES VOTES
OF DIRECTORS VOTES FOR AGAINST WITHHELD
------------ --------- ------- --------
<S> <C> <C> <C>
Norman M. Giller 3,272,886 23 35,930
Barton S. Goldberg 3,273,179 0 35,660
Emily Vernon 3,273,001 178 35,660
</TABLE>
2. Proposal to Ratify the Grant of Stock Options to Non-Employee Directors of
the Company or its Subsidiaries.
<TABLE>
<CAPTION>
VOTES
VOTES FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C>
3,164,589 140,282 3,968
</TABLE>
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.
AUGUST 14, 1995 BARTON S. GOLDBERG
--------------------- ------------------------------
Secretary-Treasurer (Principal
Financial Officer and Director)
AUGUST 14, 1995 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 13,280,860
<INT-BEARING-DEPOSITS> 320,355,198
<FED-FUNDS-SOLD> 12,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 143,144,483
<INVESTMENTS-CARRYING> 2,745,372
<INVESTMENTS-MARKET> 2,786,000
<LOANS> 225,015,238
<ALLOWANCE> 2,690,614
<TOTAL-ASSETS> 427,574,622
<DEPOSITS> 368,930,570
<SHORT-TERM> 21,108,002
<LIABILITIES-OTHER> 3,212,720
<LONG-TERM> 0
<COMMON> 3,863,651
0
0
<OTHER-SE> 30,425,141
<TOTAL-LIABILITIES-AND-EQUITY> 427,574,622
<INTEREST-LOAN> 10,685,838
<INTEREST-INVEST> 3,862,559
<INTEREST-OTHER> 186,538
<INTEREST-TOTAL> 14,734,935
<INTEREST-DEPOSIT> 5,462,653
<INTEREST-EXPENSE> 6,079,455
<INTEREST-INCOME-NET> 8,505,480
<LOAN-LOSSES> 150,000
<SECURITIES-GAINS> 323,985
<EXPENSE-OTHER> 9,116,673
<INCOME-PRETAX> 1,367,741
<INCOME-PRE-EXTRAORDINARY> 1,367,741
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 945,241
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 8.19
<LOANS-NON> 3,176,000
<LOANS-PAST> 146,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 175,000
<ALLOWANCE-OPEN> 3,151,691
<CHARGE-OFFS> 684,982
<RECOVERIES> 73,905
<ALLOWANCE-CLOSE> 2,690,614
<ALLOWANCE-DOMESTIC> 2,292,112
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 398,502
</TABLE>
