SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File Number: 0-19212
JEFFERSONVILLE BANCORP
(Exact name of Registrant as specified in its charter)
New York 22-2385448
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
P. O. Box 398, Jeffersonville, New York 12748
(Address of principal executive offices)
Registrant's telephone number, including area code: (914) 482-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
NONE NONE
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $0.50 Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months (or for such shorter period that the Registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendement to
this Form 10-K. [X]
Indicate the number of shares outstanding in each of the issuer's classes of
common stock:
Class of Common Stock Number of Shares Outstanding as of March 28, 1997
$0.50 Par Value 1,182,794
The aggregate market value of the Registrant's common stock (based upon the
average bid and asked prices on March 28, 1996) held by non-affiliates was
approximately $26,021,000.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to shareholders for the fiscal
year ended December 31, 1996.
(2) Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on April 29, 1997.
JEFFERSONVILLE BANCORP
INDEX TO FORM 10-K
PART I
PAGE
Item1. Business:
a) General development of business.......................1
b) Financial information about segments..................1
c) Narrative description of business...................1-4
d) Statistical information.............................5-8
Item2. Properties.................................................9
Item3. Legal Proceedings.........................................10
Item4. Submission of Matters to a Vote of Security Holders.......10
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.......................................10
Item6. Selected Financial Data...................................10
Item7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................10-11
Item8. Financial Statements and Supplementary Data...............11
Item9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....................11
PART III
Item10. Directors and Executive Officers of the Registrant .......11
Item11. Executive Compensation....................................11
Item12. Security Ownership of Certain Beneficial
Owners and Management.....................................11
Item13. Certain Relationships and Related Transactions............11
PART IV
Item14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K................................12-13
Signatures................................................14
Part I
Item 1. BUSINESS
(a) General Development of Business
Jeffersonville Bancorp (the "Company") was organized as a New York
Corporation on January 12, 1982, for the purpose of becoming a registered
bank holding company under the Bank Holding Company Act of 1956, as
amended (the "BHC" Act"). Effective June 30, 1982, the Company became the
registered bank holding company for The First National Bank of
Jeffersonville, a bank chartered in 1913 and organized under the national
banking laws of the United States (the "Bank").
(b) Financial Information About Segments
The Company is engaged in the business of managing or controlling its
subsidiary bank and such other business related to banking as may be
authorized under the BHC Act. See consolidated financial statements and
notes to the consolidated financial statements contained in the Annual
Report to the Stockholders for 1996, which are incorporated herein by
reference.
(c) 1. Narrative Description of Business
The First National Bank of Jeffersonville
The Bank was organized in 1913 and became a subsidiary of the Company on
June 30, 1982.
The Bank is an independently owned bank based in Sullivan County, New
York. In addition to its main office and operations center in
Jeffersonville, the Bank has seven additional branch office locations in
Eldred, Liberty, Loch Sheldrake, Monticello, Livingston Manor, Narrowsburg
and Callicoon. The Bank is a full service institution employing
approximately 100 people and serves all of Sullivan County, New York as
well as some areas of adjacent counties in New York and Pennsylvania.
Throughout Sullivan County there are 31 branches of commercial banks,
savings banks, savings and loan associations and other financial
organizations.
The Bank is a full service commercial bank that provides a wide range of
banking services for its customers. Some of the major services that it
offers include checking accounts, negotiable order of withdrawal ("NOW"
and "Super NOW") accounts, individual retirement accounts ("IRAs"),
savings and other time deposits of various types, and business, real
estate, personal use, home improvement, automobile, and a variety of other
loans, although the portfolio is concentrated geographically within
Sullivan County.
The Bank does not have a single depositor or a small group of related
depositors whose loss would have a material adverse effect upon the
business of the Bank. The Bank does not have a major loan concentration in
any individual industry.
Compliance with federal, state and local provisions which have been
enacted or adopted regulating the discharge of materials into the
environment, is not expected to have any material effect whatever upon the
capital expenditures, earnings and competitive positions of the Bank.
Supervision and Regulation
The banking industry is highly regulated. Statutory and regulatory
controls increase a bank holding company's costs of doing business and
severely limit the activities in which it may engage. Areas subject to
regulation and supervision by the bank regulatory agencies include:
dividends; expansion of locations; acquisitions and mergers; interest
rates paid on and reserves against deposits; terms, amounts and interest
rates charged to various types of borrowers; and investments. The bank
regulatory agencies have broad discretion to issue cease and desist orders
if they determine the Company or its subsidiaries are engaging in "unsafe
or unsound banking practices". In addition, the federal bank regulatory
authorities are empowered to impose substantial civil money penalties for
violations of certain federal banking statutes and regulations.
The Company, as a bank holding company, is subject to regulation under the
BHC Act, and is registered with the Board of Governors of the Federal
Reserve System (the "Board"). Under the BHC Act, bank holding companies,
including the Company, are not permitted, with certain exceptions, to
acquire direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank and are prohibited from
engaging in any business other than that of banking, managing and
controlling banks or furnishing services to its subsidiary banks, except
that they may, upon application, engage in, and may own shares of
companies engaged in, certain businesses found by the Board to be so
closely related to banking " as to be a proper incident thereto" if the
Board determines that such acquisition will be beneficial to the public.
The BHC Act requires prior approval by the Board of the acquisition by the
Company of more than 5% of the voting stock of any additional bank and in
effect permits only the acquisition of banks located in New York and in
states where laws specifically permit acquisitions of banks by
out-of-state bank holding companies. Statewide branching is permitted in
New York. Nation wide branch banking will occur in 1997 and if New York
State elects to accept it, we will potentially face competition from out
of state financial institutions. The BHC Act does not place territorial
restrictions on the activities of non-bank subsidiaries of bank holding
companies.
The Company is required by the BHC Act to file annual reports of its
operations with the Board and is subject to examinations by the Board.
Under Section 106 of the 1970 amendments to the BHC Act and the
regulations of the Board, bank holding companies and their subsidiaries
are prohibited from engaging in certain tie-in arrangements in connection
with any extension of credit or provision of any property or service.
Regulations of the Board under the Federal Reserve Act require that
reserves be maintained by the Company's bank subsidiary to the extent that
the proceeds of any of the Company's promissory notes, acknowledgments of
advance, due bills or similar obligations, with a maturity of less than
four years, are used to supply or to maintain the availability of funds
(other than capital) to the bank subsidiary, except any obligation that,
had it been issued directly by the bank subsidiary, would not constitute a
deposit.
The Bank is an "affiliate" of the Company, and as a subsidiary of the
Company, within the meaning of Section 23A of the Federal Reserve Act, it
may not, subject to certain limited exceptions set forth in such Section,
make loans or extensions of credit to, or investments in the securities of
the Company, or take such securities as collateral for loans to any
borrower. A bank subsidiary is also subject to the collateral security
requirements specified in such Section for any loans or extensions of
credit permitted by the exceptions. The Company and its banking subsidiary
are also subject to certain restrictions with respect to engaging in the
business of issuing, underwriting, public sale, floatation or distribution
of securities.
The subsidiary bank is subject to the supervision of, and to regular
examinations by, the Office of the Comptroller of the Currency of the
United States (the "OCC"). In addition, the subsidiary bank is subject to
examination by the Federal Deposit Insurance Corporation (the "FDIC"). The
Financial Institutions Reform, Recovery and Enforcement Act and the
Federal Deposit Insurance Corporation Improvement Act are laws, now
enacted, that have made or will make changes in financial institutions
including regulatory oversight and reporting issues.
The Company is also subject to the regulations and reporting requirements
of the Federal securities laws, the Securities and Exchange Commission,
and the Federal Reserve Bank.
The impact of the usury laws upon the operation of the Company and its
subsidiary varies from time to time depending on a number of factors,
including conditions in the money markets, the cost and availability of
funds, and prevailing interest rates.
From time to time, various bills are introduced in the United States
Congress and the New York State Legislature which could result in
additional regulation of the business of the Company and its subsidiary,
or further increase retail banking through consumer protection laws, at
significant expense to financial institutions. Passage of various
proposals before the State and Federal legislatures could have a material
effect upon the earnings of the Company and its subsidiary. Some proposals
would have a favorable effect; many would have an unfavorable effect.
References under this caption, "Supervision and Regulation," to applicable
statutes are brief summaries of portions thereof which do not purpose to
be complete and which are qualified in their entirety by reference to such
statutes.
Monetary Policy and Economic Conditions
The earnings of the Company and its subsidiary are affected by the
policies of regulatory authorities, including the Federal Reserve System.
Federal Reserve System monetary policies have had a significant effect on
the operating results of commercial banks in the past and are expected to
continue to do so in the future. Because of the changing conditions in the
national economy and in the money markets, as a result of actions by
monetary and fiscal authorities, interest rates, credit availability and
deposit levels may change due to circumstances beyond the control of the
Company or its subsidiary.
(c)(1)(I) Principal products and services rendered by segments.
Banking.
(c)(1)(II) Description of new products or segments.
Not applicable.
(c)(1)(III) Source and availability of raw materials
Not applicable.
(c)(1)(IV) Importance of patents, trademarks, licenses, etc.
Not applicable.
(c)(1)(V) Seasonality of business.
Not applicable.
(c)(1)(VI) Working capital requirements related to inventory.
Not applicable.
(c)(1)(VII) Concentration of customers.
The business of the Company and its subsidiary is not dependent on a
single customer, nor on a small group of customers in a specialized
industry.
(c)(1)(VIII) Backlog of customers.
Not applicable.
(c)(1)(IX) Government contracts.
Not applicable.
(c)(1)(X) Competition
The Bank faces strong competition for local business in the
communities it serves from other financial institutions.
For most of the services which the Bank performs, there is
increasing competition from financial institutions other than
commercial banks due to the relaxation of regulatory restrictions.
Money market funds actively compete with banks for deposits. Savings
banks, savings and loan associations and credit institutions, as
well as consumer finance companies, insurance companies and pension
trusts are important competitors. Competition for loans is also a
factor the Bank faces in maintaining profitability.
(c)(1)(XI) Research and development.
Not applicable.
(c)(1)(XII) Cost of compliance with environmental regulations.
Not applicable.
(c)(1)(XIII) Number of persons employed.
At December 31, 1996, there were 102 persons employed by the Company
and its subsidiary.
(d) Statistical Information.
The following tables set forth, on a consolidated basis, certain
statistical information concerning the Company and its subsidiary.
The tables should be read in conjunction with the consolidated
financial statements and notes thereto, contained in the 1996 Annual
Report to Stockholders and incorporated herein by reference.
<TABLE>
LOAN PORTFOLIO
DECEMBER 31, 1996
Maturities and Sensitivities of Loans to Changes in Interest Rates
<CAPTION>
After One Year
One Year Through After Five
or Less Five Years Years Total
------- ---------- ----- -----
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 5,149,000 $ 4,292,000 $ 1,061,000 $10,502,000
Real estate - construction ........... 1,525,000 111,000 -- 1,636,000
--------- ------- ---------
----------- ...........
Total ......................... $ 6,674,000 $ 4,403,000 $ 1,061,000 $12,138,000
=========== =========== =========== ===========
Interest sensitivity of
loans:
Predetermined rate ................... $ 3,837,000 $ 4,403,000 $ 1,061,000 $ 9,301,000
Variable rate ........................ 2,837,000 -- -- 2,837,000
--------- ---------
Total ................................ $ 6,674,000 $ 4,403,000 $ 1,061,000 $12,138,000
=========== =========== =========== ===========
</TABLE>
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
Analysis of the Allowance for Loan Losses, 1996 and 1995
1996 1995
Balance at beginning of period $ $
1,629,000 1,592,000
Charge-offs:
Commercial, financial and 58,000 182,000
agriculture
Real estate - construction - -
Real estate - mortgage 71,000 34,000
Installment loans to
individuals 217,000 168,000
------- -------
Total charge-offs 346,000 384,000
------- -------
Recoveries:
Commercial, financial and 23,000 34,000
agricultural
Real estate - construction - -
Real estate - mortgage 32,000 98,000
Installment loans to
individuals 83,000 129,000
------ -------
Total recoveries 138,000 261,000
------- -------
Net charge offs 208,000 123,000
------- -------
Additions charged to operations 290,000 160,000
------- -------
Balance at end of period $1,711,000 $1,629,000
========== ==========
Ratio of net charge-offs during
the period to average
loans outstanding during .
the period .18% .11%
=== ===
DEPOSITS
Maturity Schedule of Time Deposits $100,000 or More, December 31, 1996
Due three months or less ............ $ 3,460,000
Over three months through six months 2,874,000
Over six months through twelve months 1,638,000
Over twelve months ................... 2,563,000
---------
$10,535,000
===========
<TABLE>
SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES ANALYSIS*
ANALYSIS BY TYPE AND BY PERIOD TO MATURITY
DECEMBER 31, 1996
<CAPTION>
UNDER 1 YEAR 1-5 YEARS 5-10 YEARS AFTER 10 YEARS
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury ............ $ 100,000 6.04% $ -- -- $ -- -- $ -- -- $ 100,000
U.S. Goverment ...........
Agency ................. 14,923,000 6.37 11,212,000 6.11 7,511,000 6.38 -- -- 33,646,000
Municipal
Securities -
Tax Exempt (1) ........... 2,206,000 5.74 15,915,000 5.29 10,486,000 5.25 1,857,000 5.29 30,464,000
Municipal
Securities -
Taxable .................. 281,000 6.72 75,000 6.58 -- -- -- -- 356,000
Mortgage Backed
Securities and
Collateralized
Mortgage
Obligations
other than US
Government Agencies ...... 853,000 8.09 1,194,000 8.04 -- -- -- -- 2,047,000
-----------
Other Securities ........ 573,000 7.75 509,000 10.00 -- -- -- -- 1,082,000
------- ---- ------- ----- ---------
$18,936,000 6.42% $28,905,000 5.81% $17,997,000 5.71%$ $1,857,000 5.29% $67,695,000
=========== ==== =========== ==== =========== ==== =========== ==== ===========
</TABLE>
(*) The analysis shown above combines the Company's Securities Available for
Sale portfolio and the Investment Securities portfolio. All securities are
included above at their historical amortized cost.
(1) Yields on tax exempt securities have not been stated on tax equivalent
basis.
<PAGE>
INTEREST RATE RISK
Management of interest rate risk involves continual monitoring of the relative
sensitivity of asset and liability portfolios to changes in rate due to
maturities or repricing. Interest rate sensitivity is a function of the
repricing of assets and liabilities through maturity and interest rate changes.
The objective is to maintain an appropriate balance between income growth and
the risks associated with maximizing income through the mismatch of the timing
of interest rate changes between assets and liabilities. Perfectly matching this
funding can eliminate interest rate risk, but net interest income is not always
enhanced. One measure of interest rate risk, the so-called "gap", is illustrated
in the report below as of December 31, 1996. This table measures the incremental
and cumulative gap, or difference, between assets and liabilities subject to
repricing during the periods indicated. The figures presented are stated on the
basis of "contractual gap" which measures the stated repricing and maturity of
assets and liabilities. The data presented indicates that rate sensitive assets
are generally subject to repricing sooner than rate sensitive liabilities.
Management retains the ability to change, or not change, interest rates on
certain deposit products as general market rates change in the future, and is
also in the position to liquidate a portion of its securities available for sale
should conditions warrant such action.
<TABLE>
NON-RATE
0-3 MONTHS 3-12 MONTHS 1-5 YEARS OVER 5 SENSITIVE TOTAL
YEARS
<S> <C> <C> <C> <C> <C> <C>
Loans $8,326,000 $24,173,000 $74,561,000 $8,545,000 ---- $115,605,000
Federal Fund Sold 1,300,000 - - - -- 1,300,000
Taxable Securities (1) 7,974,000 8,825,000 12,518,000 7,914,000 - 37,231,000
Non Taxable 521,000 1,616,000 16,387,000 11,940,000 -- 30,464,000
------- --------- ---------- ---------- ----------
Total Interest $18,121,000 $34,614,000 $103,466,000 $28,399,000 - $184,600,000
=========== =========== ============ =========== ============
NOW and Super Now
Accounts (2) - - - - 26,541,000 26,541,000
Savings and Insured - - - - 53,665,000 53,665,000
Money Markets (2)
Time Deposits (3) 9,966,000 34,992,000 25,351,000 371,000 - 70,680,000
Short Term Debt (1) 529,000 - - - - 529,000
-- ------- -------
.
Total Interest 10,495,000 34,992,000 25,351,000 371,000 80,206,000 151,415;000
========== ========== ========== ======= ========== ==========
Gap 7,626,000 (378,000) 78,115,000 28,028,000 (80,206,000) 33,185,000
Cumulative Gap 7,626,000 7,248,000 85,363,000 13,391,000 33,185,000
Cumulative Gap as a
Percentage of 4.13% 3.93% 46.24% 61.43% 17.98%
Total Interest
Earning Assets
</TABLE>
(1) Based on anticipated maturity. Includes Securities Available for Sale and
Investment Securities, both shown at their historical amortized cost.
(2) Historical base of stable core deposits lack rate sensitivity based on
experience and analysis of deposit growth trends in various rate environments.
(3) Fixed rate deposits and deposits with fixed pricing intervals are included
in the period of contractual maturity.
(4) Based on contractual maturity.
<PAGE>
Item 2. PROPERTIES
In addition to the main office of the Company and the Bank in
Jeffersonville, New York, the Bank has seven branch locations and an
operations center. Set forth is a description of the offices of the
Company and the Bank.
Main Office
The main office of the Bank is located at Main Street, Jeffersonville, New
York, 12748. The premises occupied by the Bank consists of approximately
6,700 total square feet of office space in a two-story office building,
and parking is provided for approximately 30 cars. The Bank owns the
building and underlying land.
Eldred Branch
The Eldred Branch of the Bank is located at 561 Route 55, Eldred, New
York. The premises consists of approximately 2,016 total square feet of
office space in a 1-story office building, and parking is provided for
approximately 17 cars. The Bank owns the building and underlying land.
Liberty Branch
The Liberty Branch of the Bank is located at Church Street and Darby Lane,
Liberty, New York. The premises consists of approximately 4,320 total
square feet of office space in a two-story office building, and parking is
provided for approximately 30 cars. The Bank leases the space from the
Company. The lease commenced on January 1, 1989, and terminates on
December 1, 2003. The lease payments are $9,500 per month.
Loch Sheldrake Branch
The Loch Sheldrake Branch of the Bank is located on Route 52, Loch
Sheldrake, New York. The premises consists of approximately 1,440 total
square feet of office space, and parking is provided for approximately 11
cars. The Bank leases the space from the Company. The lease commenced on
September 7, 1994 and terminates on August 7, 2009. The lease payments are
$9,600 per year.
Monticello Branch
The Monticello Branch of the Bank is located at 15 Forestburgh Road,
Monticello, New York. The premises consists of approximately 2,500 square
feet of office space and parking is provided for approximately 25 cars.
The Bank leases the space from the Company. The lease commenced on October
1, 1992 and terminates September 1, 2007. The lease payments are $2,550
per month.
Operations Center
The Operations Center is located on Main Street, Jeffersonville, New York.
The premises consists of approximately 10,788 square feet in a two-story
office building, and parking is provided for approximately 30 cars. The
Bank leases the space from the Company. The lease commenced on May 1, 1984
and terminates on April 30, 1999. The lease payments are $4,950 per month.
Supermarket Branches
The Bank leases space in Pecks Supermarkets in Livingston Manor,
Narrowsburg and Callicoon, New York. The branch facilities occupy
between 650 and 800 square feet each and the leases payments from
approximately $7,500 to $10,500 per year.
Item 3. LEGAL PROCEEDINGS
The Company and its subsidiary are not parties to any material legal
proceedings which may have a material adverse effect on its results of
operations or financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Part II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock was inactively traded on a local basis,
during 1996 and 1995. In January 1997, the Company announced that
trading in its common stock commenced on the Over-The -Counter market.
The following table shows the range of sales prices known to
management for each quarter during the two most recent years and
dividends declared per share:
1996
High Low Dividends Per Share
First Quarter $ 21.00 $ 21.00 $.00
Second Quarter $ 21.00 $ 21.00 $.32
Third Quarter $ 21.00 $ 21.00 $.00
Fourth Quarter $ 21.25 $ 21.00 $.33
1995
High Low Dividends Per Share
First Quarter $ 24.00 $ 21.00 $.00
Second Quarter $ 21.00 $ 19.00 $.30
Third Quarter $ 23.00 $ 20.00 $.00
Fourth Quarter $ 22.00 $ 20.00 $.30
The approximate number of stockholders of the Company's common stock at March
28, 1997 is 674.
Item 6. SELECTED FINANCIAL DATA
This item is omitted pursuant to paragraph (2) of General Instruction
"G" - Information to be Incorporated by Reference. See "Selected
Financial Information" included in the Annual Report to Stockholders
for 1996, which is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This item is omitted pursuant to paragraph (2) of General Instruction
"G" - Information to be Incorporated by Reference. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included in the Annual Report to the Stockholders for
1996, which is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This item is omitted pursuant to paragraph (2) of General Instruction
"G" - Information to be Incorporated by Reference. See consolidated
financial statements and notes to the consolidated financial
statements, included in the Annual Report to Stockholders for 1996,
which are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change in accountants within the 24 months prior to
December 31, 1996, and there has not been any reported disagreements
on any matter of accounting principles and practices or financial
statement disclosure which would have led to a change in accountants.
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This item is omitted pursuant to paragraph (3) of General Instruction
"G" - Information to be Incorporated by Reference. See Nomination of
Directors and Election of Directors on pages 1 and 2 of the proxy
statement, which are incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
This item is omitted pursuant to paragraph (3) of General Instruction "G"
- Information to be Incorporated by Reference. See Remuneration of
Management and Others on page 6-7 of the proxy statement, which is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF MANAGEMENT
This item is omitted pursuant to paragraph (3) of General Instruction
"G" - Information to be Incorporated by Reference. See Security
Ownership of Certain Beneficial Owners and of Management on page 3-4
of the proxy statement, which is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This item is omitted pursuant to paragraph (3) of General Instruction
"G" - Information to be Incorporated by Reference. See Director and
Executive Officer information, transactions with Management, and
Remuneration of Management and Others on pages 8-9 of the proxy
statement, which are incorporated herein by reference.
<PAGE>
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Consolidated financial statements and schedules of the Company and
Subsidiary
The following consolidated financial statements of the Registrant and its
subsidiary are incorporated herein by reference from the 1996 Annual
Report to Stockholders of the Company; page number references are to the
Annual Report.
Page
Consolidated Balance Sheets - December 31, 1996 and 199517
Consolidated Statements of Income
Years Ended December 31, 1996, 1995 and 1994.........18
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1996, 1995 and 1994.........19
Consolidated Statements of Cash Flows
Three Years Ended December 31, 1996..................20
Notes to Consolidated Financial Statements.............21-44
Independent Auditors' Report............................45
(a) 2.All schedules are omitted since the required information is either not
applicable, not required or contained in the respective consolidated
financial statements or in the notes thereto.
(a) 3. Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Exhibits not indicated below are omitted because the information is not
applicable or is contained elsewhere within this report.
3.1 Certificate of Incorporation of the Company
(Incorporation by Reference to Exhibit 3.1, 3.2, 3.3 and 3.4 to
Form 8 Registration Statement, effective June 29, 1991)
3.2 The Bylaws of the Company
(Incorporated by Reference to Exhibit 3.5 and 3.6 to Form 8
Registration Statement, effective June 29, 1991)
4.1 Instruments defining the Rights of Security Holders.
(Incorporated by Reference to Exhibit 4 to Form 8
Registration Statement, effective June 29, 1991)
11.1 Computation of Income Per Share (Reference is made to the Annual
Report of the Company included elsewhere in this report.)
13.1 The Annual Report of the Company is filed herewith.
21.1 Subsidiaries of the Registrant - as Discussed in Section I, Item
I, Description of Business; The Company owns 100% of the Equity
Securities of the Bank.
b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the quarter
ended December 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: 3-28-97 By:
Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
Chairman of the Board and 3-28-97
Arthur E. Keesler President-Director
Principal Accounting Officer 3-28-97
K. Dwayne Rhodes and Principal Financial Officer
Director 3-28-97
John K. Gempler
Director 3-28-97
Edward T. Sykes
Director 3-28-97
Raymond Walter
Director 3-28-97
Earle A. Wilde
Director 3-28-97
James F. Roche
Director 3-28-97
Frederick W.V. Schadt
Director 3-28-97
John W. Galligan
1996 Annual Report
Jeffersonville Bancorp
To Our Stockholders and Customers
Jeffersonville Bancorp enjoyed another profitable year in 1996, albeit
marginally less than 1995. There were primarily three factors contributing to
our decreased earnings during 1996. We increased our provision for loan losses
by $130,000 over the prior year. We felt this increase was warranted in order to
maintain an adequate allowance for loan losses which is necessary in our current
adverse economic climate. Salaries and wages increased by $297,000 and occupancy
and equipment expense increased by $113,000 mainly due to our branch expansion
into Pecks Markets. These expenses will eventually be offset by revenues from
the increased deposit and loan volume we expect to generate in the new branches.
The third factor was an increase in other real estate owned expense of $99,000.
We continue to experience foreclosures and related expenses at unprecedented
rates. Until there is a recovery from the local economic recession we are
experiencing, we can expect this expense to continue at an unacceptable level.
The new branch offices at Pecks Markets in Narrowsburg and Livingston Manor have
met and exceeded our expectations. The supermarket branch in Callicoon opened in
mid-February. We anticipate that these locations will provide us with an
opportunity for continued growth in our market area. Touch-tone banking will
become a reality in early 1997. This 24-hour telephone banking service will
provide our customers with access to account information at their convenience.
This service will not take the place of personal contact, but will rather be
another way for us to serve our customers. We still feel very strongly that our
competitive edge is in the personal touch and we will continue with that
philosophy. The Banks home page was recently launched on the world wide web. The
sites internet address is http://www.jeffbank.com. The site provides visitors
with a wide range of information about the bank in an intuitive, point and click
environment. Site visitors are provided a comprehensive array of rates for all
lending and investment instruments. E-mail can be addressed to
[email protected]. We are confident our customers will benefit from our
internet presence immediately and will continue to benefit as we expand our
on-line capabilities. During 1996, your Board of Directors authorized the
repurchase and retirement of 50,000 shares of stock as a continuation of the
repurchase program initiated in 1995. During the upcoming year, your Board of
Directors has authorized up to $1 million for the repurchase of additional
shares in the open market. As a further effort to increase market price and
provide liquidity, Jeffersonville Bancorp stock has recently been listed on the
Over-the-Counter Bulletin Board under the symbol JFBC. We believe that the
current market price of Jeffersonville Bancorp stock does not fully reflect the
value of your company and we will strive to address this issue during the coming
year. If you have questions with regard to this report, please contact us. Your
comments, questions, and suggestions are always welcome. Thank you for your
continued support.
Arthur E. Keesler, President
Jeffersonville Bancorp
Raymond L. Walter, President
First National Bank of Jeffersonville
Jeffersonville Bancorp Board of Directors
Arthur E. Keesler
Gibson McKean
Lawrence H. Cooke
John K. Gempler
Edward T. Sykes
Frederick W. V. Schadt, Jr.
Raymond L. Walter
John W. Galligan
James F. Roche
Gilbert E. Weiss
Earl A. Wilde
Douglas A. Heinle
Solomon Katzoff
<TABLE>
Selected Financial Information
Five-Year Summary
<CAPTION>
1996 1995 1994 1993 1992
Results of Operations
<S> <C> <C> <C> <C> <C>
Net interest income ............................... $ 8,666,000 $ 8,581,000 $ 9,245,000 $ 9,340,000 $ 9,088,000
Provision for loan losses ......................... 290,000 160,000 427,000 405,000 1,263,000
Net income ........................................ 2,145,000 2,424,000 2,460,000 2,983,000 2,484,000
Financial Condition
Total assets ...................................... $196,113,000 $188,469,000 $188,118,000 $175,245,000 $168,589,000
Deposits .......................................... 172,930,000 164,184,000 165,531,000 155,251,000 151,147,000
Loans, net ........................................ 115,605,000 109,288,000 101,414,000 97,076,000 92,353,000
Stockholders equity ............................... 20,975,000 20,928,000 17,782,000 18,023,000 15,684,000
Average Balances
Total assets ...................................... $198,134,000 $193,568,000 $194,114,000 $177,896,000 $162,038,000
Deposits .......................................... 173,139,000 169,209,000 165,368,000 158,766,000 144,657,000
Gross loans ....................................... 113,981,000 107,567,000 100,517,000 96,680,000 93,430,000
Stockholders equity ............................... 20,751,000 19,871,000 18,483,000 16,973,000 14,837,000
Financial Ratios
Net income toaverage total assets ................. 1.08% 1.25% 1.27% 1.68% 1.53%
Net income to averagestockholders equity .......... 10.34% 12.20% 13.31% 17.57% 16.74%
Average stockholders equity to average total assets 10.47% 10.27% 9.52% 9.54% 9.16%
Per Share Data
Income per share .................................. $ 1.79 $ 1.93 $ 1.91 $ 2.32 $ 1.93
Dividends per share ............................... .65 .60 .55 .50 .45
Dividends per share tonet income per share ........ 36.3% 31.1% 28.8% 21.6% 23.3%
Book value at year end ............................ $ 17.73 $ 16.99 $ 13.80 $ 13.99 $ 12.17
Total dividends paid .............................. 775,000 755,000 709,000 644,000 581,000
Average number ofshares outstanding ............... 1,200,519 1,252,900 1,288,330 1,288,330 1,288,330
Shares outstandingat year end ..................... 1,182,794 1,231,550 1,288,330 1,288,330 1,288,330
</TABLE>
Managements Discussion and Analysis of Financial Condition
and Results of Operations
The following is a discussion of the factors which significantly affected the
consolidated results of operations and financial condition of Jeffersonville
Bancorp (the Company) and its wholly-owned subsidiary, The First National Bank
of Jeffersonville (the Bank). For purposes of this discussion, the Company
refers to both the Bank and Company together, as the Bank is the Companys only
subsidiary. This discussion should be read in conjunction with the consolidated
financial statements and notes thereto, statistical disclosures and other
financial information appearing elsewhere in this annual report.
General
The Company is a one-bank holding company founded in 1982 and headquartered in
Jeffersonville, New York. The Company owns 100% of the outstanding shares of the
Banks common stock and derives substantially all of its income from the Banks
operations. The Bank is a commercial bank chartered in 1913 serving Sullivan
County, New York with offices in Jeffersonville, Eldred, Liberty, Loch
Sheldrake, Monticello, Livingston Manor, Narrowsburg and Callicoon. The Companys
mission is to serve the community banking needs of its borrowers and depositors,
predominantly individual customers, small businesses, and local municipal
governments. The Company is in tune with local customer needs and provides
quality service with a personal touch. This discussion and analysis of financial
results should be reviewed with the Companys philosophy in mind.
Local Economy
Following the trend of recent years, the local economy continued to falter in
1996. Loan demand weakened as businesses and consumers were either cautious
about additional debt or already overextended. Residential mortgage borrowers
tried to stay current on their loans despite unemployment, increased tax burden
and the shut down of some county businesses. The Company will continue to seek
opportunities to provide fresh capital for the local economy, while adhering to
prudent loan underwriting standards. Management of the Company does not
anticipate any improvement in the local economy in the short term.
Financial Condition
Total average assets in 1996 increased $4,566,000 over 1995 to $198,134,000, an
increase of 2.4% compared to a .3% decrease between 1995 at $193,568,000 and
1994 at $194,114,000. Average assets increased in 1996 as deposit growth was
channeled into loans that met underwriting criteria. Total average securities
(including securities available for sale and investment securities held to
maturity) decreased $731,000 or 1.0% in 1996 to $71,604,000 compared to an 11.2%
decrease in the prior year. The average investment portfolios were $72,335,000
and $81,486,000 for 1995 and 1994, respectively. The decrease in the portfolios
was used to fund growth in the loan portfolio. Investment in tax exempt
securities was reduced to lessen the impact of the alternative minimum tax. See
notes 3 and 4 to the consolidated financial statements for period end balances
of securities available for sale and investment securities. Average interest
bearing deposits in 1996 increased $1,503,000 to reach $150,071,000, an increase
of 1.0% compared to a 1.7% increase between 1995 at $148,568,000 and 1994 at
$146,014,000. The increase in the interest rate paid on large savings accounts
in 1996 resulted in an increase in savings accounts as funds flowed from other
sources. During 1995 a new savings certificate product, the Escalator Account,
was introduced. This account is written with an 18-month term, but the depositor
has the option during the deposit term to increase the interest rate one time to
match market rates. The Escalator Account has proven to be a very popular
product, growing to $15,800,000 at year end 1996 from $6,000,000 in 1995. In
1996, average demand accounts increased 11.8% over 1995, after increasing 6.6%
in 1995 above the 1994 level. The Company offers these accounts on an extremely
competitive basis and continues to attract a pool of low cost funds for
reinvestment in the community.
Loans
In 1996, average loans increased $6,414,000 reaching $113,981,000 up from
$107,567,000 and $100,517,000 in 1995 and 1994, respectively. This increase was
acceptable considering the current condition of the local economy. As in prior
years, average residential and commercial real estate loans made up a major
portion of the loan portfolio at 74.6% of total loans in 1996, an increase of
2.2% over 1995. Home Equity Loans were introduced in 1996 and rapidly increased
to $4,331,000 at year end. Additional growth is anticipated in Home Equity Loans
during 1997. Average commercial and consumer loans showed net growth of 10.1% in
1996. The overall portfolio is structured in accordance with managements belief
that loans secured by residential and commercial real estate result in lower
loan loss levels, because of the value of the underlying collateral.
Provision for Loan Losses
The provision for loan losses for 1996 was $290,000 compared to $160,000 in 1995
and $427,000 in 1994. The increase in 1996 reflects higher net charge-offs
(primarily on consumer loans), as well as an increase in loan delinquencies.
<TABLE>
Net (Charge-offs) Recoveries by Loan Category for Years Ended December 31,
1996,1995 and 1994
<CAPTION>
1996 1995 1994
Loan Category
<S> <C> <C> <C>
Residential Mortgages ................ Charge-off $ (71,000) $ (34,000) $(163,000)
Recovery $32,000 $70,000 -
Commercial Mortgages ................. Charge-off -- -- (175,000)
Recovery -- 28,000 --
Commercial Loans ..................... Charge-off (58,000) (182,000) (55,000)
Recovery 23,000 34,000 14,000
Consumer Loans ...................... Charge-off (167,000) (120,000) (181,000)
Recovery 65,000 118,000 75,000
Other Loans .......................... Charge-off (50,000) (48,000) (60,000)
Recovery 18,000 11,000 12,000
------ ------ ------
$(208,000) $(123,000) $(533,000)
========= ========= =========
</TABLE>
The overall loan loss percentage was .18% of outstanding loans in 1996 compared
to .11% in 1995 and .52% in 1994, reflecting a manageable pattern of loss
attributable to prudent underwriting standards and effective collection
policies. Net charge-offs on both residential and commercial mortgages were
relatively low in 1996 considering the significance of these categories to the
total loan portfolio. The net charge-off on commercial loans was $35,000 in 1996
or .38% of average commercial loans outstanding, a substantial decrease compared
to 1.94% for 1995. This favorable trend may not continue unless the local
economy improves. Consumer loan charge-offs increased in 1996 as borrowers
struggled to make both ends meet in a unfavorable economy. Loan loss levels are
manageable despite the local business climate. Other loan and credit card net
charge-offs of $32,000 in 1996 represents 1.70% of average outstanding loans in
this category which reflects the higher credit risk inherent in these types of
loans. Interest rates are higher for this loan category to help compensate for
this risk. The Company manages asset quality with an intensive review process
that includes careful analysis of credit applications and both internal and
external loan review of existing outstanding loans and delinquencies. It strives
to identify potential non-performing loans early, take charge-offs promptly
based on a realistic assessment of probable losses, and maintain reserves that
are adequate based on the inherent risk of loss in the loan portfolio. The
allowance for loan losses was $1,711,000 at December 31, 1996 compared to
$1,629,000 and $1,592,000 at December 31, 1995 and 1994, respectively. The
following table shows the distribution of the allowance for loan losses and the
percentage that each loan type represents compared to total loans outstanding.
Distribution of Allowance for
Loan Losses at
December 31, 1996
Allowance Percentage of Loan Balance by
Balance Total Allowance Type to Total Loans1
Loan Type
Residential Mortgages ..... $610,000 35.7% 61.0%
Commercial Mortgages ...... 250,000 14.6 16.1
Commercial Loans .......... 384,000 22.4 8.1
Consumer Loans ............ 319,000 18.6 13.5
Other Loans ............... 148,000 8.7 1.3
------- --- ---
$1,711,000 100.0% 100.0%
========== ===== =====
Distribution of Allowance for Loan Losses at December 31, 1995
Allowance Percentage of Loan Balance by
Balance Total Allowance Type to Total Loans1
Loan Type
Residential Mortgages $608,000 37.3% 62.0%
Commercial Mortgages 322,000 19.8 16.1
Commercial Loans .... 199,000 12.2 6.6
Consumer Loans ...... 330,000 20.3 13.9
Other Loans ......... 170,000 10.4 1.4
------- ---- ---
1,629,000 100.0% 100.0%
========= ===== =====
1 Percentage relationship between average loans outstanding by type compared to
total average loans outstanding.
Of the $1,711,000 total allowance for loan losses at December 31, 1996, $573,000
or 33.5% has been specifically allocated to classified loans and the remainder
is a general allocation. The specific allocation at December 31, 1995 was
$502,000 or 30.8%. Future charge-offs will continue to be dependent on the local
economy. Management believes that the allowance for loan losses is adequate;
however, various regulatory agencies, as an integral part of their examination
process, periodically review the adequacy of the Companys allowance for loan
losses. Such agencies may require the Company to recognize additions to the
allowance based on their judgments about information available to them at the
time of their examination which may not be currently available to management.
Nonaccrual and Past Due Loans
Under the Companys nonaccrual policy, a loan is placed on nonaccrual status when
collectability of principal or interest is doubtful, or when either principal or
interest is 90 days or more past due and the loan is not well secured and in the
process of collection. Interest payments received on nonaccrual loans are
applied as a reduction of the principal balance when concern exists as to the
ultimate collection of principal. A distribution of nonaccrual loans and loans
90 days past due and still accruing interest is shown on the following table.
<TABLE>
December 31, 1996
<CAPTION>
Nonaccrual 90 Days Total Percentage 1 Percentage 2
Delinquent
Still Accruing
Loan Type
<S> <C> <C> <C> <C> <C>
Residential Mortgages $ 856,000 $1,047,000 $ 1,903,000 2.8% 47.7%
Commercial Mortgages 1,021,000 299,000 1,320,000 8.4 33.0
Commercial Loans .... 695,000 4,000 699,000 7.0 17.5
Consumer Loans ...... 73,000 73,000 .4 1.8
------ ------ -------- -- ---
Total ............... $2,572,000 $1,423,000 $ 3,995,000 3.3% 100.0%
========== ========== ================ === =====
December 31, 1995
Nonaccrual 90 Days Total Percentage1 Percentage2
Delinquent
Still Accruing
Loan Type
Residential Mortgages $ 973,000 $552,000 $ 1,525,000 2.3% 45.7%
Commercial Mortgages 1,502,000 265,000 1,767,000 11.1 52.9
Consumer Loans ...... 46,000 46,000 1.4
--------- -------- --------- --- -----
Total ............... $2,475,000 $863,000 $ 3,338,000 2.9% 100.0%
========== ======== =============== === =====
1 Percentage of gross loans outstanding for each loan type.
2 Percentage of total nonaccrual and 90 day past due loans.
</TABLE>
The increase in total nonaccrual and past due loans is due to increases in
nonaccrual and delinquent residential mortgage loans and commercial loans. The
increase in residential mortgage loans occurred despite the borrowers doing
their utmost to repay their loans to protect their homes in a difficult economic
environment. The increase in commercial loans is also a reflection of the weak
local economy. The majority of the nonaccrual and past due loans are secured
loans and, as such, management anticipates there will be limited risk of loss in
their ultimate resolution. As of December 31, 1996, management believes all
significant potential problem loans have been identified in the tables above.
Restructured Loans
Loans are renegotiated in a troubled debt restructuring when the Company
determines that it will ultimately receive greater economic value under the new
terms than through foreclosure, liquidation, or bankruptcy. Candidates for
renegotiation must meet specific guidelines. Guidelines consider the borrowers
ability to enhance the value of the property, the collateral, the ability of the
guarantor, if any, to perform, and the economic value of the renegotiated loan
relative to foreclosure and other options. Restructured loans, which are
performing in accordance with their new terms, and therefore, are not included
in nonaccrual loans, amounted to $481,000 at December 31, 1996 compared to
$841,000 at December 31, 1995. This decrease is primarily the result of placing
certain restructured loans on nonaccrual during the year. All restructured loans
at December 31, 1996 and December 31, 1995 were secured by real estate.
Other Real Estate Owned
Other real estate owned represents properties acquired through foreclosure and
loans classified as in-substance foreclosures. In accordance with SFAS No. 114,
a loan is classified as an in-substance foreclosure when the Company has taken
possession of the collateral regardless of whether formal foreclosure
proceedings have taken place. Other real estate owned is recorded on an
individual-asset basis at the lower of (1) fair value less estimated costs to
sell or (2) cost (defined as the fair value at initial foreclosure). When a
property is acquired or classified as in-substance foreclosure, the excess of
the loan balance over the fair value of the property is charged to the allowance
for loan losses. Subsequent write downs to reflect further declines in fair
value are included in other operating expense. The following are the changes in
other real estate owned during the last two years:
Years Ended December 31, 1996 and 1995
1996 1995
Beginning Balance $ 549,000 $ 495,000
Additions ....... 814,000 582,000
Sales ........... (501,000) (470,000)
Write downs ..... (31,000) (58,000)
------- -------
Ending Balance .. $ 831,000 $ 549,000
========= =========
Liquidity
Liquidity is the ability to provide sufficient cash flow to meet financial
commitments and to fund additional loan demand or withdrawal of existing
deposits. The Companys primary sources of liquidity are: its deposit base;
repayments and maturities on loans; short-term assets such as federal funds
sold; and maturities and sales of securities available for sale. These sources
are available in amounts sufficient to provide liquidity to meet the Companys
ongoing funding requirements. The Company is a member of the Federal Home Loan
Bank. This membership enhances liquidity as it makes a revolving line of credit
of $19,466,000 available to meet unforeseen liquidity demands. Additionally, the
Company maintains a correspondent bank line of credit of $4,400,000. In 1996,
cash generated from operating activities amounted to $3,384,000 and cash
generated from financing activities amounted to $5,579,000. These amounts were
more than offset by a use of cash in investing activities of $12,978,000,
resulting in a net decrease in cash and cash equivalents of $4,015,000. See the
Consolidated Statements of Cash Flows for additional information.
Capital Adequacy
One of managements primary objectives is to maintain a strong capital position
to merit the confidence of depositors, the investing public, bank regulators and
shareholders. A strong capital position should help the Company withstand
unforeseen adverse developments and take advantage of profitable investment
opportunities when they arise. Stockholders equity increased $47,000 or .2% in
1996 following an increase of 17.7% in the prior year. In 1996, the Company
offered to repurchase and retire 50,000 common shares utilizing open-market and
privately-negotiated purchases. By December 31, 1996, 49,672 shares were
acquired at $21.00 per share, reducing stockholders equity by $1,043,000. In
1997, the Board of Directors authorized that $1,000,000 be made available to
purchase and retire additional shares on the open market. Management believes
that the repurchase of Company stock represents an excellent use of excess
capital. In December 1996, the Company reissued 916 shares of treasury stock at
$21.00 per share for reinvestment under the Dividend Reinvestment Plan. The
Company retained $1,370,000 from 1996 earnings, while the after-tax adjustment
for the change in the net unrealized gain (loss) on securities available for
sale reduced capital by $299,000. In accordance with regulatory guidance, the
capital adjustment related to the fair value of securities available for sale is
not considered as part of the computation of regulatory capital ratios. Under
the Federal Reserve Banks risk-based capital rules, the Companys Tier I
risk-based capital was 19.3% and total risk-based capital was 20.6% of
risk-weighted assets. These risk-based capital ratios are well above the minimal
requirements of 4% for Tier I capital and 8% for total capital. The Companys
leverage ratio (Tier I capital to average assets) of 10.4% is well above the 4%
minimum requirement. The following table shows the Companys actual capital
measurements compared to the minimum regulatory requirements.
Years Ended December 31, 1996 and 1995
1996 1995
Tier I capital
Stockholders equity, excluding the after-tax net
unrealized gain on securities available for sale .$ 20,653,000 $ 20,307,000
Tier II capital
Allowance for loan losses1 .................... 1,343,000 1,283,000
- --------- ---------
Total risk-based capital $21,996,000 $21,590,000
=========== ===========
Risk-weighted assets2 $107,056,000 $102,315,000
= ============ ============
Average assets ...................................$198,134,000 $193,568,000
============ ============
Ratios
Tier I risk-based capital (minimum 4%) 19.3% 19.9%
Total risk-based capital (minimum 8%) 20.6% 21.1%
Leverage (minimum4%) ............................. 10.4% 10.5%
1 The allowance for loan losses is limited to 1.25% of risk-weighted assets for
the purpose of this calculation. 2 Risk-weighted assetshave been reduced for
excess allowance for loan losses excluded from total risk-based capital.
Results of Operations
Net Income
Net income for 1996 of $2,145,000 was down 11.5% from the 1995 earnings of
$2,424,000, after a 1.5% decrease in 1995 compared to 1994 earnings of
$2,460,000. These decreases were due to the interaction of a number of factors
including increasing pressure on net interest margin, the operating costs
associated with the two new supermarket branches and increased loan loss
provisions and other costs associated with problem loans and other real estate
owned. The most significant impact on net income in 1996 was the increase in
salary and wage expense of $297,000, an increase of 11.9%. The increase is the
result of maintaining a competitive salary structure and new hires for the
supermarket branches. Occupancy and equipment expense increased $113,000, or
12.1%, in 1996 primarily due to a new computer mainframe and the supermarket
branch openings. Continued local economic problems caused other real estate
owned expenses to increase in 1996 by $99,000, or 53.8%.
Interest Income and Interest Expense
Throughout this part of the discussion, net interest income and its components
are expressed on a tax equivalent basis which means that, where appropriate, tax
exempt income is shown as if it were earned on a fully taxable basis. The
largest source of income for the Company is net interest income, which
represents interest earned on loans, securities and short-term investments, less
interest paid on deposits and other interest bearing liabilities. Net interest
income of $9,505,000 for 1996 resulted in an increase of .8% from $9,429,000 for
1995. Interest income for 1996 was $15,783,000 compared to $15,716,000 in 1995
and $15,645,000 in 1994. The increase in 1996 is the result of an increase in
interest on loans substantially offset by decreases in interest on securities
and federal funds sold. An overall decrease in average yield on earning assets
of thirteen basis points was experienced in 1996. In the current rate
environment, yields should stabilize as new investments are acquired at average
portfolio rates. Loan demand weakened in 1996, reflecting current conditions in
the local economy. In 1997, increases in funding will be allocated first to meet
loan demand, as necessary, and then to the investment portfolios. Interest
expense in 1996 decreased $9,000 or .1% over 1995, contrasted to a 14.7%
increase, amounting to $807,000, from 1994 to 1995. Like rates on earning
assets, the cost of funding is also closely tied to market rates. During 1996,
deposit rates declined slightly. A new competitive 18-month savings certificate,
with one interest escalation during its term, continues to attract new deposits.
Net interest margin at 5.07% in 1996 declined from 5.13% in 1995 and 5.51% in
1994. It is the Companys intention to reverse the deterioration in its net
interest margin in 1997. The effect of the new supermarket branches and new loan
products should help the Company improve its net interest income.
Operating Income and Operating Expense
Operating income primarily consists of service charges, commissions and fees for
various banking services, and securities gains and losses. Operating income in
1996 increased 13.9% or $129,000 over 1995, largely due to a net gain on
security transactions of $95,000 in 1996 compared to a net gain of $33,000 in
1995. Operating income in 1995 increased $275,000 over the prior year, primarily
from a net security gain of $33,000 compared to a net loss of $166,000 in 1994.
Operating expense increased by $608,000 or 9.95% in 1996, compared to increases
of .03% in 1995 and 5.0% in 1994. Salary and wage expense combined with employee
benefit expense increased 10.8% to $3,628,000 in 1996 compared to $3,275,000 in
1995, which increased 7.7% over $3,040,000 in 1994. Occupancy and equipment
expense increased 12.1% to reach $1,049,000 in 1996, up from $936,000 in 1995
and $915,000 in 1994. This increase reflects the Companys commitment to upgrade
facilities and services, which continued in 1996 with the addition of two
supermarket branches and a new computer mainframe. Net other real estate owned
expense increased 53.8% to $283,000 in 1996 from $184,000 in 1995, after
declining from $272,000 in 1994. Only an upturn in the local economy will
reverse the recent trend of increasing foreclosure activity and associated
costs. In the interim, however, the Company will continue to enforce
underwriting and appraisal standards to minimize future losses and will continue
to make every effort to liquidate foreclosed property in a fashion that will
minimize loss. Other operating expense at $1,761,000 in 1996 increased by
$43,000 or 2.5% from 1995. This increase is primarily due to the start-up costs
of the two new supermarket branches. The federal deposit insurance premium
decreased from $363,000 in 1994 to $190,000 in 1995 and to $2,000 in 1996. Based
on current assessment rates, the Company expects to incur no premium expense for
1997.
Accounting Pronouncement
The Company will adopt Statement of Financial Accounting Standards (SFAS) No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, effective January 1, 1997. Among other things,
the statement establishes standards for distinguishing transfers of financial
assets that should be accounted for as sales from those that should be accounted
for as secured borrowings. SFAS No. 125 has limited applicability to the
Companys current activities and, accordingly, management anticipates that
adoption of the statement will not have a material impact on financial condition
or results of operations. See note 17 to the consolidated financial statements
for a further discussion of SFAS No. 125.
Inflation
The Companys operating results generally reflect the effects of inflation as
interest rates, loan demand and deposit levels adjust to inflation and impact
net interest income. Management can best counter the effect of inflation over
the long term by managing net interest income and controlling expenses. The most
significant item not reflecting the effects of inflation is depreciation
expense, as it is determined based on the historical cost of the assets.
<TABLE>
Distribution of Assets, Liabilities, & Stockholders Equity:Interest Rates &
Interest Differential
<CAPTION>
Consolidated Average
Balance Sheet
1996
Average Percentage of Interest Average
Balance Total Assets Earned/Paid Yield/Rate
Assets
Investment securities and
securities available for sale
<S> <C> <C> <C> <C>
Taxable securities ............. $ 41,732,000 21.06% $ 2,699,000 6.47%
Tax-exempt securities .......... 29,872,000 15.08 2,468,000 8.26
---------- ----- ---------
TOTAL SECURITIES ............... 71,604,000 36.14 5,167,000 7.22
---------- ----- ---------
Short-term investments ......... 1,838,000 0.92 104,000 5.66
Loans, net of unearned discount:
Real estate mortgages 85,010,000 42.90 7,431,000 8.74
Home equity loans .............. 1,973,000 1.00 148,000 7.50
Time and demand loans .......... 9,108,000 4.60 900,000 9.88
Installment loans .............. 16,024,000 8.09 1,798,000 11.22
Other loans .................... 1,866,000 0.94 235,000 12.59
--------- ---- -------
TOTAL LOANS2 ................... 113,981,000 57.53 10,512,000 9.22
- ----------- ----- ----------
TOTAL INTEREST-
EARNING ASSETS ................. 187,423,000 94.59 15,783,000 8.42
----------- ----- ---------- ----
Allowance for loan losses ...... (1,619,000) (0.82)
Cash and due from banks ........ 6,017,000 3.04
Premises and equipment, net .... 2,395,000 1.21
Other assets ................... 3,637,000 1.84
Net unrealized gain on
securities available for sale .. 281,000 0.14
------- ----
TOTAL ASSETS ................... $ 198,134,000 100.00%
============= ======
Liabilities and
Stockholders Equity
NOW and Super NOW deposits ..... $ 28,395,000 14.33% $ 862,000 3.04%
Savings and insured money
market deposits ................ 55,670,000 28.10 1,810,000 3.25
Time deposits .................. 66,006,000 33.31 3,485,000 5.28
TOTAL INTEREST-
BEARING DEPOSITS ............... 150,071,000 75.74 6,157,000 4.10
Federal funds purchased
and other short-term debt ...... 1,096,000 0.55 63,000 5.75
Long-term debt ................. 1,133,000 0.57 58,000 5.12
TOTAL INTEREST-
BEARING LIABILITIES ............ 152,300,000 76.87 6,278,000 4.12
Demand deposits 23,068,000 ..... 11.64
Other liabilities .............. 2,015,000 1.02
TOTAL LIABILITIES .............. 177,383,000 89.53
Stockholders equity ............ 20,751,000 10.47
---------- -----
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY ............ $ 198,134,000 100.00%
============= ======
Net interest income ............ $ 9,505,000
Net interest spread ............ 4.30%
Net interest margin3 ........... 5.07%
</TABLE>
1 Yields are calculated on a tax equivalent basis.
2 For purpose of this schedule, interest on nonaccruing loans has been included
only to the extent reflected in the consolidated income statement. However, the
nonaccrual loan balances are included in the average amount outstanding. 3
Computed by dividing net interest income by total interest-earning assets.
<TABLE>
Consolidated Average
Balance Sheet
1995
<CAPTION>
Average Percentage of Interest Average
Balance Total Assets Earned/Paid Yield/Rate
Assets
Investment securities and
securities available for sale
<S> <C> <C> <C> <C>
Taxable securities ................. $ 43,098,000 22.27% $ 2,847,000 6.61%
Tax-exempt securities1 29,237,000 15.10 2,495,000 8.53
- ---------- ----- ---------
TOTAL SECURITIES ................... 72,335,000 37.37 5,342,000 7.39
---------- ----- ---------
Short-term investments ............. 3,899,000 2.01 225,000 5.77
Loans, net of unearned discount:
Real estate mortgages 83,176,000 ... 42.97 7,427,000 8.93
Time and demand loans .............. 8,416,000 4.35 848,000 10.08
Installment loans .................. 14,437,000 7.46 1,668,000 11.55
Other loans ........................ 1,538,000 0.79 206,000 13.39
--------- ---- -------
TOTAL LOANS2 ....................... 107,567,000 55.57 10,149,000 9.44
- ----------- ----- ----------
TOTAL INTEREST-
EARNING ASSETS ..................... 183,801,000 94.95 15,716,000 8.55
----------- ----- ----------
Allowance for loan losses (1,679,000) (0.87)
Cash and due from banks 6,086,000 3.14
Premises and equipment, net ........ 2,247,000 1.16
Other assets ....................... 3,581,000 1.85
Net unrealized loss on
securities available for sale ...... (468,000) (0.24)
-------- -----
TOTAL ASSETS ....................... $ 193,568,000 100.00%
============= ======
Liabilities and
Stockholders Equity
NOW and Super NOW deposits ......... $ 30,081,000 15.54% $901,000 3.00%
Savings and insured money
market deposits .................... 52,931,000 27.34 1,646,000 3.11
Time deposits ...................... 65,556,000 33.87 3,602,000 5.49
---------- ----- ---------
BEARING DEPOSITS ................... 148,568,000 76.75 6,149,000 4.14
----------- ----- ---------
Federal funds purchased
and other short-term debt .......... 370,000 0.19 19,000 5.14
Long-term debt ..................... 2,718,000 1.40 119,000 4.38
--------- ---- -------
TOTAL INTEREST-
BEARING LIABILITIES ................ 151,656,000 78.35 6,287,000 4.15
----------- ----- ---------
Demand deposits .................... 20,641,000 10.66
Other liabilities .................. 1,400,000 0.72
--------- ----
TOTAL LIABILITIES .................. 173,697,000 89.73
Stockholders equity ................ 19,871,000 10.27
---------- -----
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY ................ $ 193,568,000 100.00%
============= ======
Net interest income ................ $ 9,429,000
Net interest spread ................ 4.40%
Net interest margin3 ............... 5.13%
</TABLE>
1 Yields are calculated on a tax equivalent basis.
2 For purpose of this schedule, interest on nonaccruing loans has been included
only to the extent reflected in the consolidated income statement. However, the
nonaccrual loan balances are included in the average amount outstanding. 3
Computed by dividing net interest income by total interest-earning assets.
<TABLE>
Consolidated Average
Balance Sheet
1994
<CAPTION>
Average Percentage of Interest Average
Balance Total Assets Earned/Paid Yield/Rate
Assets
Interest-bearing deposits
<S> <C> <C> <C> <C>
with banks ...................... $ 826,000 0.43% $ 39,000 4.72%
Investment securities
and securities available for sale
Taxable securities .............. 50,527,000 26.03 3,126,000 6.19
Tax-exempt securities1 .......... 30,959,000 15.95 2,705,000 8.74
- ---------- ----- ---------
TOTAL SECURITIES ................ 81,486,000 41.98 5,831,000 7.16
---------- ----- ---------
Short-term investments .......... 1,620,000 0.83 70,000 4.32
Loans, net of unearned discount:
Real estate mortgage ............ 78,370,000 40.37 7,281,000 9.29
Time and demand loans ........... 7,321,000 3.77 698,000 9.53
Installment loans ............... 13,436,000 6.92 1,524,000 11.34
Other loans ..................... 1,390,000 .72 202,000 14.53
--------- --- -------
TOTAL LOANS2 .................... 100,517,000 51.78 9,705,000 9.66
- ----------- ----- ---------
TOTAL INTEREST-
EARNING ASSETS .................. 184,449,000 95.02 15,645,000 8.48
Allowance for loan losses ....... (1,645,000) (0.85)
Cash and due from banks ......... 6,264,000 3.23
Premises and equipment, net ..... 2,077,000 1.07
Other assets .................... 4,079,000 2.10
Net unrealized loss on
securities available for sale ... (1,110,000) (0.57)
---------- -----
TOTAL ASSETS .................... $ 194,114,000 100.00%
============= ======
Liabilities and
Stockholders Equity
NOW and Super NOW deposits ...... $ 32,622,000 16.80% $ 925,000 2.84%
Savings and insured money
market deposits ................. 65,626,000 33.81 1,972,000 3.00
Time deposits ................... 47,766,000 24.61 2,176,000 4.56
---------- ----- ---------
TOTAL INTEREST-
BEARING DEPOSITS ................ 146,014,000 75.22 5,073,000 3.47
----------- ----- ---------
Federal funds purchased
and other short-term debt ....... 4,544,000 2.34 201,000 4.42
Long-term debt .................. 4,437,000 2.29 206,000 4.64
--------- ---- -------
TOTAL INTEREST-
BEARING LIABILITIES ............. 154,995,000 79.85 5,480,000 3.54
----------- ----- ---------
Demand deposits ................. 19,354,000 9.97
Other liabilities ............... 1,282,000 0.66
--------- ----
TOTAL LIABILITIES ............... 175,631,000 90.48
Stockholders equity ............. 18,483,000 9.52
---------- ----
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY ............. $ 194,114,000 100.00%
============= ======
Net interest income ............. $10,165,000
===========
Net interest spread ............. 4.94%
====
Net interest margin3 ............
</TABLE>
=
1 Yields are calculated on a tax equivalent basis.
2 For purpose of this schedule, interest on nonaccruing loans has been included
only to the extent reflected in the consolidated income statement. However, the
nonaccrual loan balances are included in the average amount outstanding. 3
Computed by dividing net interest income by total interest-earning assets.
Volume and Rate Analysis The following schedule sets forth, for each major
category of interest earning assets and interest bearing liabilities, the dollar
amount of interest income (calculated on a tax equivalent basis) and interest
expense, and changes therein for 1996 as compared to 1995, and 1995 as compared
to 1994. The changes in interest income and expense attributable to both rate
and volume have been allocated to rate on a consistent basis.
<TABLE>
1996 Compared to 1995 1995 Compared to 1994
Increase (Decrease) Due to Change In Increase (Decrease) Due to Change In
------------------------------------ ------------------------------------
<CAPTION>
Volume Rate Total Volume Rate Total
Interest Income Due from
banks time deposits $ --- $ $ $ (39,000) $ $ (39,000)
Investment securities
and securities
available for sale .............. (54,000) (121,000) (175,000) (652,000) 163,000 (489,000)
Federal funds sold ............... (119,000) (2,000) (121,000) 98,000 57,000 155,000
Loans ............................ 605,000 (242,000) 363,000 729,000 (285,000) 444,000
------- -------- ------- ------- ------- -------
TOTAL INTEREST
INCOME ........................... 432,000 (365,000) 67,000 136,000 65,000 71,000
------- -------- ------ ------- ------ -------
Interest Expense
<S> <C> <C> <C> <C> <C> <C>
NOW and Super
NOW deposits ..................... (51,000) 12,000 (39,000) (71,000) 47,000 (24,000)
Savings and insured
money market deposits ............ 85,000 79,000 164,000 (385,000) 59,000 (326,000)
Time deposits .................... 25,000 (142,000) (117,000) 813,000 613,000 1,426,000
Federal funds sold and
other short-term debt ............ 37,000 7,000 44,000 (185,000) 3,000 (182,000)
Long-term debt ................... (70,000) 9,000 (61,000) (80,000) (7,000) (87,000)
------- ----- ------- ------- ------ ---------
TOTAL INTEREST
EXPENSE .......................... 26,000 (35,000) (9,000) 92,000 715,000 807,000
------ ------- ------ ------ ------- -------
NET INTEREST
INCOME ........................... $ 406,000 $(330,000) $ 76,000 $ 44,000 $(780,000) $(736,000)
========= ========= ========= ========= ========= =========
</TABLE>
Managements Statement of Responsibility
The consolidated financialstatements and related information in the 1996 Annual
Report were prepared in conformity with generally accepted accounting
principles. Management is responsible for the integrity and objectivity of the
consolidated financial statements and related information. Accordingly, it
maintains an extensive system of internal controls and accounting policies and
procedures to provide reasonable assurance of the accountability and
safeguarding of the Companys assets and of the accuracy of financial
information. These procedures include management evaluations of asset quality
and the impact of economic events, organizational arrangements that provide an
appropriate division of responsibility, and a program of internal audits to
evaluate independently the extent of ongoing compliance with the Companys
adopted policies and procedures. The responsibility of the Companys independent
public accountants, KPMG Peat Marwick LLP, is limited to the expression of an
opinion as to the fair presentation of the consolidated financial statements
based on their audit conducted in accordance with generally accepted auditing
standards. The Board of Directors, through its Examining Committee, is
responsible for insuring that both management and the independent public
accountants fulfill their respective responsibilities with regard to the
consolidated financial statements. The Examining Committee, which is comprised
entirely of directors who are not officers or employees of the Company, meets
periodically with management, the internal auditor and the independent public
accountants. The internal auditor and independent public accountants have full
and free access to and meet with the Examining Committee, without management
being present, to discuss financial reporting and other relevant matters. The
consolidated financial statements have not been reviewed or confirmed for
accuracy or relevance by the Office of the Comptroller of the Currency. Arthur
E. Keesler PresidentJeffersonville Bancorp Raymond L. Walter PresidentFirst
National Bank of Jeffersonville K. Dwayne Rhodes TreasurerJeffersonville Bancorp
<TABLE>
Consolidated Balance Sheets
December 31, 1996 and 1995
<CAPTION>
1996 1995
---- ----
Assets
<S> <C> <C> <C>
Cash and due from banks (note 2) .................... $ 4,723,000 $ 5,938,000
Federal funds sold .................................. 1,300,000 4,100,000
--------- ---------
Cash and cash equivalents ........................... 6,023,000 10,038,000
Securities available for sale, at fair value (note 3) 64,842,000 61,614,000
Investment securities, estimated fair value of
$3,518,000 in 1996 and $1,898,000 in 1995 (note 4) .. 3,401,000 1,782,000
Loans, less allowance for loan losses of $1,711,000
in 1996 and $1,629,000 in 1995 (note 5) ............. 115,605,000 109,288,000
Accrued interest receivable ......................... 1,168,000 1,180,000
Premises and equipment, net (note 6) ................ 2,602,000 2,205,000
Federal Home Loan Bank stock ........................ 717,000 736,000
Other real estate owned (note 7) .................... 831,000 549,000
Other assets ........................................ 924,000 1,077,000
------- ---------
Total Assets ........................................ $ 196,113,000 $188,469,000
============= ============
Liabilities and Stockholders Equity
Liabilities:
Deposits:
Demand deposits (non-interest bearing) .............. $ 22,044,000 $ 20,879,000
Now and Super NOW accounts .......................... 26,541,000 28,457,000
Savings and insured money market deposits ........... 53,665,000 51,563,000
Time deposits (note 8) .............................. 70,680,000 63,285,000
- ---------- ----------
Total deposits ...................................... 172,930,000 164,184,000
Short-term debt 529,000 197,000
Federal Home Loan Bank advance (note 9) ............. 1,700,000 ---
Accrued expenses and other liabilities .............. 1,679,000 1,460,000
--------- ---------
Total liabilities ................................... 175,138,000 167,541,000
----------- -----------
Commitments and contingent liabilities (note 15) Stockholders equity (note 12):
Series A preferred stock, no par value;
2,000,000 shares authorized; none issued
Common stock; $0.50 par value; 2,250,000 shares authorized; 1,234,778 shares
issued and 1,182,794 outstanding at December 31, 1996; 1,284,450 shares issued
and 1,231,550 outstanding
at December 31, 1995 ................................ 617,000 642,000
Paid-in capital 447,000 1,450,000
Treasury stock, 51,984 shares in 1996
and 52,900 shares in 1995 ........................... (206,000) (210,000)
Undivided profits ................................... 19,795,000 18,425,000
Net unrealized gain on securities
available for sale, net of tax ...................... 322,000 621,000
------- -------
Total stockholders equity ........................... 20,975,000 20,928,000
---------- ----------
Total liabilities and stockholders equity ........... $ 196,113,000 $188,469,000
============= ============
See accompanying notes to consolidated financial statements.
</TABLE>
Consolidated Statements of Income
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Interest Income
Loan interest and fees .............. $10,512,000 $10,149,000 $ 9,705,000
Securities:
Taxable ............................. 2,699,000 2,847,000 3,165,000
Non-taxable ......................... 1,629,000 1,647,000 1,785,000
Federal funds sold .................. 104,000 225,000 70,000
------- ------- ------
Total interest income ............... 14,944,000 14,868,000 14,725,000
---------- ---------- ----------
Interest Expense
Deposits ............................ 6,157,000 6,149,000 5,073,000
Federal funds purchased
and other short-term debt ........... 63,000 19,000 201,000
Federal Home Loan Bank advance
and other long-term debt ............ 58,000 119,000 206,000
------ ------- -------
Total interest expense .............. 6,278,000 6,287,000 5,480,000
--------- --------- ---------
Net interest income ................. 8,666,000 8,581,000 9,245,000
Provision for loan losses (note 5) .. 290,000 160,000 427,000
- ------- ------- -------
Net interest income after
provision for loan losses ........... 8,376,000 8,421,000 8,818,000
--------- --------- ---------
Operating Income
Service charges ..................... 651,000 619,000 529,000
Net security gains (losses) (note 3) 95,000 33,000 (166,000)
Other non-interest income ........... 313,000 278,000 292,000
------- ------- -------
Total OPERATING INCOME .............. 1,059,000 930,000 655,000
--------- ------- -------
Operating Expenses
Salaries and wages .................. 2,794,000 2,497,000 2,308,000
Employee benefits (note 14) ......... 834,000 778,000 732,000
Occupancy and equipment expenses .... 1,049,000 936,000 915,000
Other real estate owned expenses, net 283,000 184,000 272,000
Other operating expense (note 11) ... 1,761,000 1,718,000 1,884,000
-- --------- --------- ---------
Total OPERATING EXPENSES ............ 6,721,000 6,113,000 6,111,000
--------- --------- ---------
Income before income taxes .......... 2,714,000 3,238,000 3,362,000
Income taxes (note 10) .............. 569,000 814,000 902,000
Net income .......................... $ 2,145,000 $ 2,424,000 $ 2,460,000
=========== =========== ============
Net income per common share ......... $ 1.79 $ 1.93 $ 1.91
=========== =========== ============
Average common shares outstanding ... 1,200,519 1,252,900 1,288,330
========= ========= =========
See accompanying notes to consolidated financial statements.
<TABLE>
Consolidated Statements of Changes
in Stockholders Equity
Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
Common Paid-in Treasury Undivided Net Total
Stock Capital Stock Profits Unrealized Stockholders
Gain (Loss) Equity
on Securities
Balance at
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1993 ....... $ 672,000 $ 2,569,000 $ (223,000) $ 15,005,000 $ -- $18,023,000
Net income .............. -- -- -- 2,460,000 -- 2,460,000
Unrealized gain on
securities available
for sale, net of tax,
as of January 1, 1994 ... -- -- -- -- 1,535,000 1,535,000
Change in net
unrealized gain
(loss) during the year .. -- -- -- -- (3,527,000) (3,527,000)
Cash dividends
($0.55 per share) ....... -- -- -- (709,000) -- (709,000)
- ------ ------ ------- ------ ------- ----------- ------------
Balance at
December 31, 1994 ....... 672,000 2,569,000 (223,000) 16,756,000 (1,992,000) 17,782,000
Net income .............. -- -- -- 2,424,000 -- 2,424,000
Change in unrealized
gain (loss) on securities
available for sale,
net of tax .............. -- -- -- -- 2,613,000 2,613,000
Cash dividends
($0.60 per share) ....... -- -- -- (755,000) -- (755,000)
Purchases and
retirements of
common stock ............ (30,000) (1,170,000) -- -- -- (1,200,000)
Treasury stock sold ..... -- 51,000 13,000 -- -- 64,000
------ ------ ------ ------- ------- --------
Balance at
December 31, 1995 ....... 642,000 1,450,000 (210,000) 18,425,000 621,000 20,928,000
Net income .............. -- -- -- 2,145,000 -- 2,145,000
Change in unrealized
gain on securities
available for sale,
net of tax .............. -- -- -- -- (299,000) (299,000)
Cash dividends
($0.65 per share) ....... -- -- -- (775,000) -- (775,000)
Purchases and
retirements
of common stock (25,000) (1,018,000) -- -- -- (1,043,000)
Treasury stock sold ..... -- 15,000 4,000 -- -- 19,000
-------- ---------- --------- ---------- -------- ----------
Balance at
December 31, 1996 ....... $ 617,000 $ 447,000 $ (206,000) $ 19,795,000 $ 322,000 $20,975,000
=== ==== =========== =========== ============ ============ ============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
---- ---- ----
Operating Activities
<S> <C> <C> <C>
Net income .................................................. $ 2,145,000 $ 2,424,000 $ 2,460,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses ................................... 290,000 160,000 427,000
Write down of other real estate owned ....................... 31,000 58,000 120,000
Depreciation and amortization ............................... 423,000 368,000 341,000
Deferred income tax (benefit) expense ....................... (102,000) (94,000) 264,000
Net security (gains) losses ................................. (95,000) (33,000) 166,000
Decrease (increase) in accrued interest receivable .......... 12,000 192,000
Decrease (increase) in other assets ......................... 461,000 (376,000)
Increase (decrease) in accrued expenses and other liabilities 219,000 984,000 (1,000)
------- ------- ------
Net cash provided by operating activities ................... 3,384,000 3,663,000 3,356,000
--------- --------- ---------
Investing Activities Proceeds from maturities and calls:
Securities available for sale ............................... 10,873,000 18,412,000 15,615,000
Investment securities 983,000 773,000 228,000
Proceeds from sales of securities available for sale ........ 3,812,000 18,496,000 16,116,000
Purchases:
Securities available for sale ............................... (18,323,000) (24,353,000) (40,839,000)
Investment securities ....................................... (2,602,000) (644,000) (188,000)
Net increase in loans ....................................... (7,421,000) (8,616,000) (5,533,000)
Redemption (purchase) of Federal Home Loan Bank stock ....... 19,000 (36,000) 156,000
Net purchases of premises and equipment ..................... (820,000) (415,000) (608,000)
Proceeds from sales of other real estate owned .............. 501,000 470,000 929,000
------- ------- -------
Net cash (used in) provided by investing activities ......... (12,978,000) 4,087,000 (14,124,000)
----------- --------- -----------
Financing Activities
Net increase (decrease) in deposits ......................... 8,746,000 (1,347,000) 10,280,000
Net increase (decrease) in short-term debt .................. 332,000 37,000
Proceeds from long-term debt ................................ 5,400,000
Repayments of long-term debt ................................ (1,700,000) (1,700,000) (2,602,000)
Cash dividends paid ......................................... (775,000) (755,000) (709,000)
Purchases and retirements of common stock ................... (1,043,000) (1,200,000)
Proceeds from sales of treasury stock ....................... 19,000 64,000
------ ------
Net cash provided by (used in) financing activities ......... 5,579,000 (5,236,000) 12,406,000
--------- ---------- ----------
Net (DECREASE) INCREASE in cash and cash equivalents ........ (4,015,000) 2,514,000 1,638,000
Cash and cash equivalents at beginning of year .............. 10,038,000 7,524,000 5,886,000
---------- --------- ---------
Cash and cash equivalents at end of year .................... $ 6,023,000 $ 10,038,000 $ 7,524,000
============ ============ ============
Supplemental Disclosures
Cash paid for:
Interest ........................................... $ 6,153,000 $ 6,314,000 $ 5,370,000
Income taxes ....................................... $ 728,000 $ 462,000 $ 873,000
============ =========== ===========
Transfer of loans to other real estate owned ....... $ 814,000 $ 582,000 $ 136,000
============ =========== ===========
Transfer of investment securities to securities
available for sale upon adoption of Statement
of Financial Accounting Standards No. 115 .......... $ $ $64,132,000
=== =========================================
Unrealized net gain on securities available for sale
upon adoption of Statement of Financial Accounting
Standards No. 115, net of taxes of $1,062,000 ...... $ $ $ 1,535,000
==== ========== =========================================
Change in net unrealized gain or loss on securities
available for sale, net of tax $(299,000) $ 2,613,000 $(3,527,000)
========= =========== ===========
Deferred tax effect of change in net unrealized
gain or loss on securities available for sale ...... $ 206,000 $(1,819,000) $ 2,440,000
========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting
Policies
Basis of Presentation
The consolidated financial statements of Jeffersonville Bancorp (the Parent
Company) include its wholly owned subsidiary, The First National Bank of
Jeffersonville (the Bank). Collectively, these entities are referred to herein
as the Company. All significant intercompany transactions have been eliminated
in consolidation. The Parent Company is a bank holding company whose principal
activity is the ownership of all outstanding shares of the Banks stock. The Bank
is a commercial bank providing community banking services to individuals, small
businesses and local municipal governments in Sullivan County, New York. The
consolidated financial statements have been prepared, in all material respects,
in conformity with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Material estimates that are particularly susceptible to near-term
change include the allowance for loan losses and the valuation of other real
estate owned, which are described below. Actual results could differ from these
estimates. For purposes of the consolidated statements of cash flows, the
Company considers Federal funds sold, if any, to be cash equivalents.
Reclassifications are made to prior years consolidated financial statements
whenever necessary to conform to the current years presentation.
Securities
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity Securities, on
January 1, 1994. Management determines the appropriate classification of
securities at the time of purchase. If management has the positive intent and
ability to hold debt securities to maturity, they are classified as investment
securities held to maturity and are stated at amortized cost. If securities are
purchased for the purpose of selling them in the near term, they are classified
as trading securities and are reported at fair value with unrealized gains and
losses reflected in current earnings. All other debt and marketable equity
securities are classified as securities available for sale and are reported at
fair value, with net unrealized gains or losses reported, net of income taxes,
as a separate component of stockholders equity. Non-marketable equity securities
are carried at cost. At December 31, 1996 and 1995, the Company had no trading
securities. Gains and losses on sales of securities are based on the net
proceeds and the amortized cost of the securities sold, using the specific
identification method. The amortization of premium and accretion of discount on
debt securities is calculated using the level-yield interest method over the
period to the earlier of the call date or maturity date. Unrealized losses on
securities that reflect a decline in value which is other than temporary, if
any, are charged to income.
Loans
Loans are stated at unpaid principal balances, less unearned discounts and
the allowance for loan losses. Unearned discounts on installment loans are
accreted into income using a method which approximates the level-yield interest
method. Interest income is recognized on the accrual basis of accounting. When,
in the opinion of management, the collection of interest is in doubt, the loan
is classified as non-accrual. Generally, loans past due more than 90 days are
classified as non-accrual. Thereafter, no interest is recognized as income until
received in cash or until such time as the borrower demonstrates the ability to
make scheduled payments of interest and principal.
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged-off against the allowance when
management believes that the collectability of all or a portion of the principal
is unlikely. Recoveries of loans previously charged-off are credited to the
allowance when realized. Effective January 1, 1995, the Company prospectively
adopted SFAS No. 114, Accounting by Creditors for Impairment of a Loan, as
amended by SFAS No. 118. Under SFAS No. 114, a loan is considered to be impaired
when, based on current information and events, it is probable that the creditor
will be unable to collect all principal and interest contractually due.
Creditors are permitted to measure impaired loans based on (i) the present value
of expected future cash flows discounted at the loans effective interest rate,
(ii) the loans observable market price or (iii) the fair value of the collateral
if the loan is collateral dependent. If the approach used results in a
measurement that is less than an impaired loans recorded investment, an
impairment loss is recognized as part of the allowance for loan losses. The
allowance for loan losses is maintained at a level deemed adequate by management
based on an evaluation of such factors as economic conditions in the Companys
market area, past loan loss experience, the financial condition of individual
borrowers, and underlying collateral values based on independent appraisals.
While management uses available information to recognize losses on loans, future
additions to the allowance for loan losses may be necessary based on changes in
economic conditions, particularly in Sullivan County. In addition, Federal
regulatory agencies, as an integral part of their examination process,
periodically review the Companys allowance for loan losses and may require the
Company to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination, which may not be
currently available to management.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided over the estimated
useful lives of the assets using straight-line or accelerated methods.
Federal Home Loan Bank Stock
As a member institution of the Federal Home Loan Bank (FHLB), the Bank is
required to hold a certain amount of FHLB stock. This stock is considered to be
a non-marketable equity security and, accordingly, is carried at cost since
there is no readily available market value.
Other Real Estate Owned
Other real estate owned consists of properties acquired through foreclosure
and loans classified as in-substance foreclosures. In accordance with SFAS No.
114, a loan is classified as an in-substance foreclosure when the Company has
taken possession of the collateral regardless of whether formal foreclosure
proceedings have taken place. Other real estate owned is stated on an
individual-asset basis at the lower of (i) fair value less estimated costs to
sell or (ii) cost (defined as the fair value at initial foreclosure). When a
property is acquired or a loan is classified as an in-substance foreclosure, the
excess of the loan balance over the fair value of the property is charged to the
allowance for loan losses. If necessary, subsequent write downs to reflect
further declines in fair value are included in other operating expense. Fair
value estimates are based on independent appraisals and other available
information. While management estimates real estate owned losses using the best
available information, such as independent appraisals, future write downs may be
necessary based on changes in real estate market conditions, particularly in
Sullivan County, and the results of regulatory examinations.
Income Taxes
In accordance with the asset and liability method of SFAS No. 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets are reduced by a valuation allowance when management
determines that it is more likely than not that all or a portion of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Income Per Common Share
Income per share is computed based upon the weighted average number of
common shares outstanding during the year.
2. Cash and Due From Banks
The Bank is required to maintain certain reserves in the form of vault cash
and/or deposits with the Federal Reserve Bank. The amount of this reserve
requirement, which is included in cash and due from banks, was approximately
$1,000,000 and $1,260,000 at December 31, 1996 and 1995, respectively.
3. Securities Available for Sale
The amortized cost and estimated fair values of securities available for
sale at December 31, 1996 and 1995 are as follows:
<TABLE>
December 31, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities ........ $ 100,000 $ --- $ --- $ 100,000
U.S. Government agency securities 15,400,000 --- (170,000) 15,230,000
Obligations of states and
political subdivisions 27,419,000 954,000 (73,000) 28,300,000
Corporate debt securities ....... 509,000 --- (8,000) 501,000
Mortgage-backed
securities and collateralized
mortgage obligations ............ 20,293,000 41,000 (187,000) 20,147,000
---------- ------ -------- ----------
Total debt securities ........... 63,721,000 995,000 (438,000) 64,278,000
Equity securities ............... 573,000 --- (9,000) 564,000
------- ------ -------
$64,294,000 $ 995,000 $ (447,000) $64,842,000
=========== ============ ============ ===========
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Government agency securities $10,148,000 $ 13,000 $ (27,000) $ 10,134,000
Obligations of states and
political subdivisions 25,845,000 1,148,000 (54,000) 26,939,000
Corporate debt securities ....... 1,511,000 13,000 -- 1,524,000
Mortgage-backed
securities and collateralized
mortgage obligations ............ 22,984,000 142,000 (173,000) 22,953,000
---------- ------- -------- ----------
Total debt securities ........... 60,488,000 1,316,000 (254,000) 61,550,000
Equity securities ............... 73,000 -- (9,000) 64,000
------ ------ ------
$60,561,000 $ 1,316,000 $ (263,000) $61,614,000
=========== =========== ============ ===========
</TABLE>
The net unrealized gain on available for sale securities was $548,000 ($322,000
after taxes) at December 31, 1996 and $1,053,000 ($621,000 after taxes) at
December 31, 1995. Changes in unrealized holding gains and losses during 1996,
1995 and 1994 resulted in pre-tax increases (decreases) in stockholders equity
of ($505,000), $4,423,000 and ($5,967,000), respectively. These gains and losses
will continue to fluctuate based on changes in the portfolio and market
conditions. Proceeds from sales of securities available for sale during 1996,
1995 and 1994 were $3,812,000, $18,496,000 and $16,116,000, respectively. Gross
gains and gross losses realized on these transactions were as follows:
1996 1995 1994
Gross realized gains $ 96,000 $ 380,000 $ 155,000
Gross realized losses (1,000) (347,000) (321,000)
------ -------- --------
$ 95,000 $ 33,000 $(166,000)
======== ========= =========
The amortized cost and estimated fair value of debt securities available for
sale at December 31, 1996, by remaining period to contractual maturity, are
shown in the following table. Actual maturities will differ from contractual
maturities because of security prepayments and the right of certain issuers to
call or prepay their obligations.
Amortized Estimated
Cost Fair Value
Within one year $17,733,000 $17,622,000
One to five years ......... 26,768,000 27,165,000
Five to ten years ......... 17,429,000 17,654,000
Over ten years ............ 1,791,000 1,837,000
--------- ---------
$63,721,000 $64,278,000
=========== ===========
Substantially all mortgage-backed securities and collateralized mortgage
obligations are securities guaranteed by Freddie Mac or Fannie Mae (U.S.
government-sponsored entities). Securities available for sale with an estimated
fair value of $30,167,000 at December 31, 1996 were pledged to secure public
funds on deposit and for other purposes required by law
4. Investment Securities
The amortized cost and estimated fair values of investment securities as of
December 31, 1996 and 1995 are as follows:
December 31, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Obligations of states and
political subdivisions $3,401,000 $ 118,000 $(1,000) $3,518,000
========== ========= ======= ==========
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Obligations of states and
political subdivisions $1,782,000 $ 119,000 $(3,000) $1,898,000
========== ========= ======= ==========
The amortized cost and estimated fair value of these securities at December 31,
1996, by remaining period to contractual maturity, are shown in the table below.
Actual maturities will differ from contractual maturities because certain
issuers have the right to call or prepay their obligations.
Amortized Estimated
Cost Fair Value
Within one year $ 630,000 $ 649,000
One to five years 2,137,000 2,211,000
Five to ten years 568,000 584,000
Over ten years 66,000 74,000
------ ------
$3,401,000 $3,518,000
========== ==========
There were no sales of investment securities in 1996, 1995 or 1994
5. Loans Receivable
The major classifications of loans are as follows at December 31:
1996 1995
Real estate loans:
Residential .............. $ 67,577,000 $ 67,567,000
Commercial ............... 15,689,000 15,860,000
Farm land ................ 1,560,000 1,732,000
Construction ............. 1,636,000 703,000
Home equity .............. 4,331,000 ---
--------- ----------
90,793,000 85,862,000
---------- ----------
Other loans:
Commercial loans ......... 9,960,000 8,006,000
Consumer installment loans 17,846,000 16,023,000
Other consumer loans ..... 1,567,000 4,442,000
Agricultural loans ....... 542,000 435,000
------- -------
29,915,000 28,906,000
---------- ----------
Total loans .............. 120,708,000 114,768,000
Less:
Unearned discounts ....... 3,392,000 3,851,000
Allowance for loan losses 1,711,000 1,629,000
--------- ---------
TOTAL LOANS, net ......... $115,605,000 $109,288,000
============ ============
The Company originates residential and commercial real estate loans, as well as
commercial, agricultural and consumer loans, to borrowers in Sullivan County,
New York. A substantial portion of the loan portfolio is secured by real estate
properties located in that area. The ability of the Companys borrowers to make
principal and interest payments is dependent upon, among other things, the level
of overall economic activity and the real estate market conditions prevailing
within the Companys concentrated lending area. Non-performing loans are
summarized as follows at December 31:
1996 1995 1994
Non-accrual loans ............ $2,572,000 $2,475,000 $2,476,000
Restructured loans ........... 481,000 841,000 388,000
Loans past due 90 days or more
and still accruing interest .. 1,423,000 863,000 1,054,000
--------- ------- ---------
Total non-performing loans ... $4,476,000 $4,179,000 $3,918,000
========== ========== ==========
Non-performing loans
as a percentage of total loans 3.7% 3.6% 3.7%
=== === ===
The effects of non-accrual and restructured loans on interest income were as
follows for the years ended December 31:
1996 1995 1994
Interest contractually due at
original rates .................... $ 280,000 $ 402,000 $ 275,000
Interest income recognized ...... (200,000) (192,000) (44,000)
-------- -------- -------
Interest income not recognized .. $ 80,000 $ 210,000 $ 231,000
========= ========= =========
Changes in the allowance for loan losses are summarized as follows for the years
ended December 31:
1996 1995 1994
Balance at beginning of the year .. $ 1,629,000 $ 1,592,000 $ 1,698,000
Provision for loan losses ......... 290,000 160,000 427,000
Loans charged-off ................. (346,000) (384,000) (634,000)
Recoveries ........................ 138,000 261,000 101,000
------- ------- -------
Balance at end of the year ........ $ 1,711,000 $ 1,629,000 $ 1,592,000
=========== =========== ===========
The adoption of SFAS No. 114, effective January 1, 1995, did not have a
significant effect on the Companys consolidated financial statements. SFAS No.
114 applies to loans that are individually evaluated for collectability in
accordance with the Companys ongoing loan review procedures (principally
commercial mortgage loans and commercial loans). As of December 31, 1996 and
1995, the recorded investment in loans that are considered to be impaired under
SFAS No. 114 totaled $1,922,000 and $1,838,000, respectively. There was no
allowance for loan impairment under SFAS No. 114 at either date, primarily due
to prior charge-offs and the adequacy of collateral values on these loans.
During 1996 and 1995, the average recorded investment in impaired loans was
$1,668,000 and $1,634,000, respectively. Interest income of $146,000 and $83,000
was recognized on impaired loans during 1996 and 1995, respectively, using a
cash-basis method of accounting.
6. Premises and Equipment
The major classifications of premises and equipment are as follows at December
31:
1996 1995
Land ............................................... $ 376,000 $ 294,000
Buildings .......................................... 2,112,000 2,112,000
Furniture and fixtures ............................. 399,000 377,000
Equipment .......................................... 3,150,000 2,597,000
Building and leasehold improvements ................ 387,000 293,000
Construction in progress ........................... 69,000 ---
------
6,493,000 5,673,000
--------- ---------
Less accumulated depreciation and amortization ..... 3,891,000 3,468,000
--------- ---------
$2,602,000 $2,205,000
========== ==========
Depreciation and amortization expense was $423,000, $368,000 and $341,000 in
1996, 1995 and 1994, respectively.
7. Other Real Estate Owned
At December 31,1996, real estate owned represented fifteen foreclosed
properties. Property distribution consisted of three commercial, three vacant
land and nine one- to four- family properties. At December 31, 1995, real estate
owned represented thirteen foreclosed properties. Property distribution
consisted of one commercial, three vacant land and nine one- to four- family
properties.
8. Time Deposits
The approximate amount of contractual maturities of time deposit accounts at
December 31, 1996 are as follows:
Within one year ....................................... $44,958,000
One to two years ...................................... 16,653,000
Two to three years .................................... 4,507,000
Three to four years ................................... 2,597,000
Over four years ....................................... 1,965,000
---------
$70,680,000
===========
Individual time deposits of $100,000 or more totaled $10,535,000 at December 31,
1996 and $4,271,000 at December 31, 1995. Interest expense related to time
deposits over $100,000 was $422,000, $344,000 and $198,000 for 1996, 1995 and
1994, respectively.
9. Federal Home Loan Bank Advance FHLB borrowings of$1,700,000 at December 31,
1995 represented the remaining balance of a long-term variable-rate advance with
an interest rate of 4.6% at year-end 1995. This advance was fully repaid during
1996.
10. Income Taxes The components of income tax expense are as follows for
the years ended December 31:
1996 1995 1994
Current tax expense:
Federal ........................ $470,000 $622,000 $415,000
State ........................... 201,000 286,000 223,000
Deferred tax (benefit)expense (102,000) (94,000) 264,000
-------- ------- -------
$569,000 $814,000 $902,000
======== ======== ========
The reasons for the differences between income tax expense and the amount
computed by applying the statutory Federal tax rate of 34% to income before
income taxes are as follows:
1996 1995 1994
Tax at statutory rate ................. $ 923,000 $ 1,101,000 $ 1,143,000
State taxes, net of Federal tax benefit 123,000 168,000 147,000
Tax-exempt interest ................... (554,000) (560,000) (576,000)
Interest expense allocated
to tax-exempt securities .............. 63,000 74,000 67,000
Tax assessment ........................ -- 21,000 64,000
Other adjustments ..................... 14,000 10,000 57,000
------ ------ ------
Income tax expense .................... $ 569,000 $ 814,000 $ 902,000
=========== =========== ===========
The tax effects of temporary differences and tax credits that give rise to
deferred tax assets and liabilities at December 31 are presented below:
1996 1995
Deferred tax assets:
Allowance for loan losses in
excess of tax bad debt reserve ................... $ 467,000 $ 388,000
Interest on non-accrual loans .................... 155,000 99,000
Alternative minimum tax credit ................... 64,000 75,000
------ ------
Total deferred tax assets ........................ 686,000 562,000
------- -------
Deferred tax liabilities:
Prepaid expenses ................................. (173,000) (149,000)
Other taxable temporary differences .............. (61,000) (63,000)
------- -------
Total deferred tax liabilities ................... (234,000) (212,000)
-------- --------
Net deferred tax asset ........................... 452,000 350,000
Deferred tax liability for unrealized gain on
securities recognized in stockholders equity ..... (226,000) (432,000)
-------- --------
Net deferred tax asset (liability) ............... $ 226,000 $ (82,000)
========= =========
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Based upon managements consideration of historical
and anticipated future pre-tax income, as well as the reversal period for the
items giving rise to the deferred tax assets, a valuation allowance was not
considered necessary at December 31, 1996 and 1995.
11. Other Operating Expenses
The major components of other operating expenses are as follows for the years
ended December 31:
1996 1995 1994
Stationery and supplies $ 206,000 $ 198,000 $ 161,000
Director expenses ....................... 254,000 237,000 231,000
ATM and credit card processing fees ..... 178,000 157,000 22,000
Federal deposit insurance premium ....... 2,000 190,000 363,000
Other expenses .......................... 1,121,000 936,000 1,107,000
--------- ------- ---------
$1,761,000 $1,718,000 $1,884,000
========== ========== ==========
12. Stockholders Equity
Regulatory Capital Requirements
National banks are required to maintain minimum levels of regulatory capital in
accordance with regulations of the Office of the Comptroller of the Currency
(OCC). The Federal Reserve Board (FRB) imposes similar requirements for
consolidated capital of bank holding companies. The OCC and FRB regulations
require a minimum leverage ratio of Tier I capital to total adjusted assets of
4.0%, and minimum ratios of Tier I and total capital to risk-weighted assets of
4.0% and 8.0%, respectively. Under its prompt corrective action regulations, the
OCC is required to take certain supervisory actions (and may take additional
discretionary actions) with respect to an undercapitalized bank. Such actions
could have a direct material effect on a banks financial statements. The
regulations establish a framework for the classification of banks into five
categories: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. Generally, a
bank is considered well capitalized if it has a leverage (Tier I) capital ratio
of at least 5.0%; a Tier I risk-based capital ratio of at least 6.0%; and a
total risk-based capital ratio of at least 10.0%. The foregoing capital ratios
are based in part on specific quantitative measures of assets, liabilities and
certain off-balance-sheet items as calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative
judgments by the regulators about capital components, risk weightings and other
factors. Management believes that, as of December 31, 1996, the Bank and the
Parent Company met all capital adequacy requirements to which they are subject.
Further, the most recent OCC notification categorized the Bank as a
well-capitalized bank under the prompt corrective action regulations. There have
been no conditions or events since that notification that management believes
have changed the Banks capital classification. The following is a summary of the
actual capital amounts and ratios as of December 31, 1996 for the Bank and the
Parent Company (consolidated), compared to the required ratios for minimum
capital adequacy and for classification as well-capitalized:
<TABLE>
Required Ratios
---------------
Actual Minimum Capital Classification as
------
Amount Ratio Adequacy Well Capitalized
------ ----- -------- ----------------
(Dollars in thousands)
Bank
<S> <C> <C> <C> <C>
Leverage (Tier I) capital ............................. $18,782 9.4% 4.0% 5.0%
Risk-based capital:
Tier I ................................................ 18,782 17.8 4.0 6.0
Total ................................................. 20,105 19.1 8.0 10.0
Consolidated
Leverage (Tier I) capital ............................. $20,653 10.4% 4.0%
Risk-based capital:
Tier I ................................................ 20,653 19.3 4.0
Total ................................................. 21,996 20.6 8.0
</TABLE>
Dividend Restrictions
Dividends paid by the Bank are the primary source of funds available to the
Parent Company for payment of dividends to its stockholders and for other
working capital needs. Applicable Federal statutes, regulations and guidelines
impose restrictions on the amount of dividends that may be declared by the Bank.
Under these restrictions, the dividends declared and paid by the Bank to the
Parent Company may not exceed the total amount of the Banks net profit retained
in the current year plus its retained net profits, as defined, from the two
preceding years. As of December 31, 1996, this total amount was approximately
$1,250,000.
Preferred Stock Purchase Rights
On July 9, 1996, the Board of Directors declared a dividend distribution of one
purchase right (Right) for each outstanding share of Parent Company common stock
(Common Stock), to stockholders of record at the close of business on July 9,
1996. The Rights have a 10-year term. The Rights become exercisable (i) 10 days
following a public announcement that a person or group has acquired, or obtained
the right to acquire, beneficial ownership of 20% or more of the outstanding
shares of Common Stock, or (ii) 10 days following the commencement of a tender
offer or exchange offer that, if successful, would result in an acquiring person
or group beneficially owning 30% or more of the outstanding Common Stock (unless
such tender or exchange offer is predicated upon the redemption of the Rights).
When the Rights become exercisable, a holder is entitled to purchase one
one-hundredth of a share, subject to adjustment, of Series A Preferred Stock of
the Parent Company or, upon the occurrence of certain events described below,
Common Stock of the Parent Company or common stock of an entity that acquires
the Company. The purchase price per one one-hundredth of a share of Series A
Preferred Stock (Purchase Price) will equal the Board of Directors judgment as
to the long-term investment value of one share of Common Stock at the end of the
10-year term of the Rights. Upon the occurrence of certain events (including
certain acquisitions of more than 20% of the Common Stock by a person or group),
each holder of an unexercised Right will be entitled to receive Common Stock
having a value equal to twice the Purchase Price of the Right. Upon the
occurrence of certain other events (including acquisition of the Parent Company
in a merger or other business combination in which the Parent Company is not the
surviving corporation), each holder of an unexercised Right will be entitled to
receive common stock of the acquiring person having a value equal to twice the
Purchase Price of the Right. The Parent Company may redeem the Rights (to the
extent not exercised) at any time, in whole but not in part, at a price of $0.01
per Right.
13. Related Party Transactions
Certain directors and executive officers of the Company, as well as certain
affiliates of these directors and officers, have engaged in loan transactions
with the Company. Such loans were made in the ordinary course of business at the
Companys normal terms, including interest rates and collateral requirements, and
do not represent more than normal risk of collection. Outstanding loans to these
related parties are summarized as follows at December 31:
1996 1995
Executive officers (non-director) .............. $136,000 $148,000
Directors 720,000 746,000
------- -------
$856,000 $894,000
======== ========
Total advances to these directors and officers during the years 1996 and 1995
were $577,000 and $410,000, respectively. Total payments made on these loans
were $615,000 in 1996 and $425,000 in 1995. These directors and officers had
unused lines of credit with the Company of $539,000 at December 31, 1996.
14.Employee Benefit Plans
Pension Plan
The Company has a non-contributory defined benefit pension plan covering
substantially all of its employees. The benefits are based on years of service
and the employees average compensation during the five consecutive years in the
last ten years of employment affording the highest such average. The Companys
funding policy is to contribute annually an amount sufficient to satisfy the
minimum funding requirements of ERISA, but not greater than the maximum amount
that can be deducted for Federal income tax purposes. Contributions are intended
to provide not only for benefits attributed to service to date, but also for
benefits expected to be earned in the future. The following is a reconciliation
of the plans funded status and the amounts recognized in the consolidated
balance sheets at December 31: 1996 1995 Accumulated benefit obligation,
including vested benefits of $1,948,000 in 1996 and $1,819,000 in 1995
............ $(1,958,000) $(1,829,000) ========== ==== ========== ====
=========== ===========
<TABLE>
<S> <C> <C>
Projected benefit obligation for service rendered to date $(2,605,000) $(2,407,000)
Plan assets at fair value, primarily listed stocks and
U.S. Government securities .............................. 2,139,000 2,006,000
--------- ---------
Projected benefit obligation in excess of plan assets ... (466,000) (401,000)
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions . 797,000 840,000
Unrecognized prior service cost ......................... (49,000) (53,000)
Unrecognized net transition obligation being recognized
over 19.5 years ......................................... (40,000) (44,000)
---- ------- -------
Prepaid pension costs ................................... $ 242,000 $ 342,000
=========== ===========
</TABLE>
Net pension expense included the following components:
1996 1995 1994
Service cost (benefits earned during the year) $ 112,000 $ 90,000 $ 124,000
Interest cost on projected benefit obligation 172,000 157,000 138,000
Return on plan assets ........................ (195,000) (205,000) (150,000)
Net amortization and deferral ................ 60,000 72,000 19,000
------ ------ ------
Net pension expense .......................... $ 149,000 $ 114,000 $ 131,000
========= ========= =========
Significant assumptions used in determining the actuarial present value of the
projected benefit obligation at December 31, 1996, 1995 and 1994 are as follows:
1 1996 1995 1994
Weighted average discount rate .......... 7.25% 7.25% 8.00%
Increase in future compensation ......... 5.00% 5.00% 5.00%
The expected long-term rate of return on plan assets was 8.50% for 1996, 1995
and 1994.
Other Postretirement Benefits
The Company also sponsors postretirement medical and life insurance benefit
plans for retirees in the pension plan. Effective in 1993, employees must retire
after age 60 with at least 10 years of service to be eligible for medical
benefits. The plans are non-contributory except that the retiree must pay the
full cost of spouse medical coverage. Both of the plans are unfunded. Beginning
in 1995, medical benefits are provided under the Aetna plan, which manages
healthcare expenses by setting reasonable fee limits on claims. Previously,
benefits were provided under the New York State Bankers Association plan, which
was an indemnity plan. Life insurance is provided in the amount of $20,000
($10,000 if final-year compensation as an active employee is less than $30,000).
The Company accounts for the cost of these postretirement benefits in accordance
with SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than
Pensions. Accordingly, the cost of these benefits is recognized on an accrual
basis as employees perform services to earn the benefits. The Company adopted
SFAS No. 106 as of January 1, 1993 and elected to amortize the accumulated
benefit obligation at that date (transition obligation) into expense over the
allowed period of 20 years. The following is a reconciliation of the plans
unfunded benefit obligations and the amounts recognized in the consolidated
balance sheets at December 31:
1996 1995
Accumulated postretirement benefit obligation:
Retirees ........................................... $(207,000) $(211,000)
Fully-eligible active plan participants ............ (52,000) (49,000)
Other active plan participant ...................... s (341,000) (286,000)
-------- --------
(600,000) (546,000)
Unrecognized transition obligation ................. 294,000 312,000
Unrecognized net gain .............................. (149,000) (146,000)
-------- --------
Accrued postretirement benefit cost ................ $(455,000) $(380,000)
========= =========
Net postretirement benefit expense included the following components:
1996 1995 1994
Service cost (benefits earned during the year) $ 34,000 $ 52,000 $ 61,000
Interest cost on accumulated benefit obligation 39,000 59,000 58,000
Net amortization and deferral ................. 14,000 24,000 43,000
------ ------ ------
Net postretirement benefit expense ............ $ 87,000 $135,000 $162,000
======== ======== ========
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.25%, 7.25% and 8.00% at December 31, 1996, 1995 and 1994,
respectively. For measurement purposes at December 31, 1996, a 9.00% annual rate
of increase in the per capita cost of covered health care benefits was assumed
for medical coverage in 1997; the rate was assumed to decrease gradually to
4.00% by 2001 and to remain at that level thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported. Increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of December 31,
1996 by approximately $91,000 and the aggregate of the service and interest cost
components of the net postretirement benefit expense by approximately $13,000
.
Tax-Deferred Savings Plan
The Company maintains a qualified 401(k) plan for all employees, which permits
tax-deferred employee contributions up to 15% of salary and provides for
matching contributions by the Company. Beginning in 1996, the Company matches
100% of employee contributions up to 4% of the employees salary and 25% of the
next 2% of the employees salary. The Company continues to match 25% of employee
contributions beyond 6% of the employees salary until the total matching
contribution reaches $1,500 or 15%. For 1995 and 1994, the Company contributed a
maximum of fifty cents for each dollar contributed by each participating
employee, up to a maximum of $1,500 per employee. The Company contributed
approximately $93,000 in 1996, $53,000 in 1995 and $48,000 in 1994.
15. Commitments and Contingent Liabilities
Legal Proceedings
The Parent Company and the Bank are, from time to time, defendants in legal
proceedings relating to the conduct of their business. In the best judgment of
management, the consolidated financial position of the Company will not be
affected materially by the outcome of any pending legal proceedings.
Off-Balance-Sheet Financial Instruments
The Company is a party to certain financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These are limited to commitments to extend credit and standby letters
of credit which involve, to varying degrees, elements of credit risk in excess
of the amounts recognized in the consolidated balance sheets. The contract
amounts of these instruments reflect the extent of the Companys involvement in
particular classes of financial instruments. The Companys maximum exposure to
credit loss in the event of non-performance by the other party to these
instruments represents the contract amounts, assuming that they are fully funded
at a later date and any collateral proves to be worthless. The Company uses the
same credit policies in making commitments as it does for on-balance-sheet
extensions of credit. Contract amounts of financial instruments that represent
agreements to extend credit are as follows at December 31: 1996 1995 Loan
origination commitments and unused lines of credit:
Mortgage loans ......................... $ 1,468,000 $ 2,914,000
Commercial loan ........................ 4,512,000 3,106,000
Credit card lines ...................... 2,544,000 2,675,000
Home equity lines ...................... 1,730,000 --
Other revolving credit ................. 1,265,000 1,083,000
--------- ---------
11,519,000 9,778,000
Standby letters of credit .............. 140,000 234,000
------- -------
$11,659,000 $10,012,000
=========== ===========
These agreements to extend credit have been granted to customers within the
Companys lending area described in note 5 and relate primarily to fixed-rate
loans. Loan origination commitments and lines of credit are agreements to lend
to a customer as long as there is no violation of any condition established in
the contract. These agreements generally have fixed expiration dates or other
termination clauses and may require payment of a fee by the customer. Since
commitments and lines of credit may expire without being fully drawn upon, the
total contract amounts do not necessarily represent future cash requirements.
The Company evaluates each customers creditworthiness on a case-by-case basis.
The amount of collateral, if any, required by the Company upon the extension of
credit is based on managements credit evaluation of the customer. Mortgage
commitments are secured by a first lien on real estate. Collateral on extensions
of credit for commercial loans varies but may include accounts receivable,
equipment, inventory, livestock and income-producing commercial property.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. These guarantees are
primarily issued to support borrowing arrangements. The credit risk involved in
issuing standby letters of credit is essentially the same as that involved in
extending loan facilities to customers.
Lines of Credit
The Company is a member of the FHLB and had an unused line of credit of
$19,466,000 at December 31, 1996. The Company also had an unused line of credit
with an unrelated financial institution for $4,400,000 at December 31, 1996.
16.Fair Values of Financial Instruments
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
that the Company disclose estimated fair values for its on- and
off-balance-sheet financial instruments. SFAS No. 107 defines fair value as the
amount at which the financial instrument could be exchanged in a current
transaction between parties other than in a forced or liquidation sale. Fair
value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Companys entire holding of a particular financial instrument, nor
do they reflect possible tax ramifications or transaction costs. Because no
market exists for a significant portion of the Companys financial instruments,
fair value estimates are based on judgments regarding future expected net cash
flows, current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment, and therefore cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates. Fair value estimates are based on existing on- and off-balance
sheet financial instruments without attempting to estimate the value of
anticipated future business or the value of non-financial assets and liabilities
such as premises and equipment. In addition, there are significant intangible
assets that are not included in these fair value estimates, such as the value of
core deposits and the Companys branch network. The following is a summary of the
net carrying values and estimated fair values of the Companys financial assets
and liabilities (none of which were held for trading purposes) at December 31,
1996 and 1995:
December 31, 1996
Net Carrying Estimated
Value Fair Value
Financial Assets:
Cash and cash equivalents .................... $ 6,023,000 $ 6,023,000
Securities available for sale .............. 64,482,000 64,482,000
Investment securities ....................... 3,401,000 3,518,000
Loans ........................................ 115,605,000 116,992,000
Accrued interest receivable ................. 1,168,000 1,168,000
Federal Home Loan Bank stock ................. 717,000 717,000
Financial Liabilities:
Demand deposits (non-interest bearing) ..... 22,044,000 22,044,000
Interest-bearing deposits .................... 150,886,000 151,043,000
Short-term debt ............................. 529,000 529,000
Accrued interest payable ...................... 601,000 601,000
December 31, 1995
Net Carrying Estimated
Value Fair Value
Financial Assets:
Cash and cash equivalents ............... $ 10,038,000 $ 10,038,000
Securities available for sale ........ 61,614,000 61,614,000
Investment securities .................. 1,782,000 1,898,000
Loans ................................... 109,288,000 109,514,000
Accrued interest receivable ............. 1,180,000 1,180,000
Federal Home Loan Bank stock ........... 736,000 736,000
Financial Liabilities:
Demand deposits (non-interest bearing) 20,879,000 20,879,000
Interest-bearing deposits 143,305,000 143,474,000
Short-term debt ........................ 197,000 197,000
Federal Home Loan Bank advance .......... 1,700,000 1,706,000
Accrued interest payable ............... 476,000 476,000
The specific estimation methods and assumptions used can have a substantial
impact on the estimated fair values. The following is a summary of the
significant methods and assumptions used by the Company to estimate the fair
values shown in the preceding table:
Securities
The carrying values for securities maturing within 90 days approximate fair
values because there is little interest rate or credit risk associated with
these instruments. The fair values of longer-term securities are estimated based
on bid prices published in financial newspapers or bid quotations received from
securities dealers. The fair values of certain state and municipal securities
are not readily available through market sources; accordingly, fair value
estimates are based on quoted market prices of similar instruments, adjusted for
any significant differences between the quoted instruments and the instruments
being valued.
Loans
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, consumer, real
estate and other loans. Each loan category is further segregated into fixed and
adjustable rate interest terms and by performing and nonperforming categories.
The fair values of performing loans are calculated by discounting scheduled cash
flows through estimated maturity using estimated market discount rates that
reflect the credit and interest rate risks inherent in the loans. Estimated
maturities are based on contractual terms and repricing opportunities.
The fair values of nonperforming loans are based on recent external
appraisals and discounted cash flow analyses. Estimated cash flows are
discounted using a rate commensurate with the risk associated with the estimated
cash flows. Assumptions regarding credit risk, cash flows and discount rates are
judgementally determined using available market information and specific
borrower information.
Deposit Liabilities
The fair values of deposits with no stated maturity (such as
non-interest-bearing demand deposits and savings, NOW, money market and
interest-bearing checking accounts), equal the amounts payable on demand. The
fair values of time deposits are based on the discounted value of contractual
cash flows (but are not less than the net amount at which depositors could
settle their accounts). The discount rates are estimated based on the rates
currently offered for time deposits with similar remaining maturities.
Federal Home Loan Bank Advance
The fair value was estimated by discounting scheduled cash flows through
the remaining repricing dates using current market rates.
Other Financial Instruments
The fair values of cash and cash equivalents, Federal Home Loan Bank stock,
accrued interest receivable, accrued interest payable and short-term debt
approximated their carrying values at December 31, 1996 and 1995. The fair
values of the agreements to extend credit described in note 15 are estimated
based on the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed rate loan commitments, fair
value estimates also consider the difference between current market interest
rates and the committed rates. At December 31, 1996 and 1995, the fair values of
these financial instruments approximated the related carrying values which were
not significant.
17. Recent Accounting Standard
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. Transactions within the scope of SFAS No. 125 include loan
securitizations, sales of partial interests in financial assets, repurchase
agreements, securities lending, pledges of collateral, loan syndications and
participations, sales of receivables with recourse, servicing of mortgage and
other loans, and in-substance defeasances of debt.
SFAS No. 125 applies a financial-components approach that focuses on the
entitys control over a financial asset to determine the proper accounting for
financial asset transfers. Under that approach, after financial assets are
transferred, an entity recognizes in the balance sheet all assets it controls
and all liabilities it has incurred. The entity would remove from the balance
sheet those assets it no longer controls and liabilities it has satisfied. If
the entity has surrendered control over the transferred assets, based on
criteria set forth in SFAS No. 125, the transaction is accounted for as a sale.
If any of these criteria are not met, the transfer is accounted for as a secured
borrowing. SFAS No. 125 also requires recognition of servicing assets when loans
are sold or securitized with servicing retained. SFAS No. 125 has limited
applicability to the Companys current activities. However, as required, the
Company will apply SFAS No. 125 to affected transactions entered into on or
after January 1, 1997. Management anticipates that the implementation of SFAS
No. 125 will not have a material impact on the Companys consolidated financial
condition or results of operations.
18. Condensed Parent Company Financial Statements
The following are the condensed parent company only financial statements for
Jeffersonville Bancorp:
Balance Sheets (Parent Company Only) As of
December 31, 1996 1995
Assets
Cash ............................................. $ 155,000 $ 152,000
Securities available for sale, at fair value .... 523,000 23,000
Investment in subsidiary ....................... 19,112,000 19,568,000
Premises and equipment, net ...................... 1,324,000 1,297,000
--------- ---------
Total assets ..................................... $21,114,000 $21,040,000
=========== ===========
Liabilities and Stockholders Equity
Liabilities ...................................... $ 139,000 $ 112,000
Stockholders Equity .............................. 20,975,000 20,928,000
---------- ----------
Total liabilities and stockholders equity ........ $21,114,000 $21,040,000
=========== ===========
Statements of Income
(Parent Company Only)
For Years Ended December 31, ........ 1996 1995 1994
Dividend income from subsidiary bank $ 2,253,000 $ 2,090,000 $ 1,262,000
Interest expense on long-term debt .. -- -- 20,000
---------- --------- --------
Net interest income ................. 2,253,000 2,090,000 1,242,000
--------- --------- ---------
Operating Income
Rental income from subsidiary ....... 246,000 209,000 210,000
------- ------- -------
Other Expenses
Occupancy and equipment ............. 62,000 53,000 52,000
Other operating expense ............. 101,000 41,000 44,000
------- ------ ------
163,000 94,000 96,000
------- ------ ------
Income before income taxes and
undistributed income of subsidiary .. 2,336,000 2,205,000 1,356,000
Income tax expense .................. 34,000 47,000 38,000
------ ------ ------
Income before undistributed
income of subsidiary ................ 2,302,000 2,158,000 1,318,000
Equity in undistributed
income of subsidiary ................ (157,000) 266,000 1,142,000
-------- ------- ---------
Net income .......................... $ 2,145,000 $ 2,424,000 $ 2,460,000
=========== =========== ===========
<TABLE>
Statements
of Cash Flow (Parent Company Only)
For Years Ended December 31, 1996 1995 1994
<CAPTION>
Operating Activities
<S> <C> <C> <C>
Net income ............................... $ 2,145,000 $ 2,424,000 $ 2,460,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed income
of subsidiary bank ....................... 157,000 (266,000) (1,142,000)
Depreciation and amortization ............ 63,000 53,000 52,000
Increase in liabilities .................. 27,000 9,000 1,000
------ ----- -----
Net cash provided
by operating activities .................. 2,392,000 2,220,000 1,371,000
--------- --------- ---------
Investing Activities
Purchase of securities available for sale (500,000) -- --
Purchase of premises and equipment ....... (90,000) (245,000) (65,000)
------- -------- -------
Net cash used in investing activities .... (590,000) (245,000) (65,000)
-------- -------- -------
Financing Activities
Cash dividends paid ...................... (775,000) (755,000) (709,000)
Purchases and retirements of common stock (1,043,000) (1,200,000) --
Proceeds from sales of treasury stock .... 19,000 64,000 --
Repayment of long-term debt .............. --- --- (602,000)
---------- --------- --------
Net cash used in financing activities .... (1,799,000) (1,891,000) (1,311,000)
---------- ---------- ----------
Net increase (decrease) in cash .......... 3,000 84,000 (5,000)
Cash at beginning of year ................ 152,000 68,000 73,000
------- ------ ------
Cash at end of year ...................... $ 155,000 $ 152,000 $ 68,000
=========== =========== ===========
Cash paid for:
Interest ................................. $ -- $ -- $ 20,000
Income taxes (due to subsidiary) ......... $ 34,000 $ 47,000 $ 38,000
=========== =========== ===========
</TABLE>
19. Summary of Unaudited Quarterly Financial Information The following is a
condensed summary of quarterly results of operations for 1996 and 1995: 1996
<TABLE>
March 31 June 30 September 30 December 31 Total
<S> <C> <C> <C> <C> <C>
Interest income ......... $ 3,657,000 $ 3,752,000 $ 3,727,000 $ 3,808,000 $ 14,944,000
Interest expense ........ (1,536,000) (1,557,000) (1,573,000) (1,612,000) (6,278,000)
---------- ---------- ---------- ---------- ----------
Net interest income ..... 2,121,000 2,195,000 2,154,000 2,196,000 8,666,000
Provision for loan losses -- (60,000) (60,000) (170,000) (290,000)
Operating income ........ 220,000 310,000 211,000 318,000 1,059,000
Operating expenses ...... (1,518,000) (1,737,000) (1,680,000) (1,786,000) (6,721,000)
---------- ---------- ---------- ---------- ----------
Income before taxes ..... 823,000 708,000 625,000 558,000 2,714,000
Income taxes ............ (201,000) (119,000) (130,000) (119,000) (569,000)
-------- -------- -------- -------- --------
Net income .............. $ 622,000 $ 589,000 $ 495,000 $ 439,000 $ 2,145,000
============ ============ ============ ============ ============
Income per share ........ $ 0.51 $ 0.49 $ 0.42 $ 0.37 $ 1.79
============ ============ ============ ============ ============
1995
March 31 June 30 September 30 December 31 Total
Interest income ......... $ 3,698,000 $ 3,740,000 $ 3,712,000 $ 3,718,000 $ 14,868,000
Interest expense ........ (1,542,000) (1,595,000) (1,591,000) (1,559,000) (6,287,000)
Net interest income ..... 2,156,000 2,145,000 2,121,000 2,159,000 8,581,000
Provision for loan losses (40,000) -- (60,000) (60,000) (160,000)
Operating income ........ 193,000 287,000 165,000 285,000 930,000
Operating expenses ...... (1,526,000) (1,550,000) (1,441,000) (1,596,000) (6,113,000)
Income before taxes ..... 783,000 882,000 785,000 788,000 3,238,000
Income taxes ............ (153,000) (243,000) (238,000) (180,000) (814,000)
Net income .............. $ 630,000 $ 639,000 $ 547,000 $ 608,000 $ 2,424,000
Income per share ........ $ 0.49 $ 0.51 $ 0.44 $ 0.49 $ 1.93
</TABLE>
Independent Auditors Report
KPMG Peat Marwick LLP
Certified Public Accountants
The Board of Directors and Stockholders
Jeffersonville Bancorp:
We have audited the accompanying consolidated balance sheets of Jeffersonville
Bancorp and subsidiary (the Company) as of December 31, 1996 and 1995, and the
related consolidated statements of income, changes in stockholders equity, and
cash flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Jeffersonville Bancorp and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1996 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Albany, New York
February 7, 1997
Jeffersonville Bancorp
Board of Directors
Arthur E. Keesler
Chairman of the Board
Retired Chief Executive Officer
First National Bank of Jeffersonville
Jeffersonville, New York
Honorable Lawrence H. Cooke
Chief Judge of the State of New York
Retired
John W. Galligan
Owner
John Galligan, Land Surveyor
Monticello, New York
Surveyor
John K. Gempler
Secretary of the Board
Secretary/Treasurer
Callicoon Co-op Insurance Company
Jeffersonville, New York
Insurance Company
Douglas A. Heinle
OwnerGeneral Store
Heinles Store
Cochecton Center, New York
Retail Sales
Solomon Katzoff
President
Katzoff Realty, Inc.
Jeffersonville, New York
Real Estate Sales
Gibson McKean
President
McKean Real Estate, Inc.
Barryville, New York
Real Estate Sales
James F. Roche
President
Roches Garage Inc.
Callicoon, New York
Automobile Dealer
Frederick W. V. Schadt
Schadt and Schadt
Jeffersonville, New York
Attorneys
Edward T. Sykes
President
Mike Preis Inc.
Callicoon, New York
Insurance Agency
Raymond L. Walter
President
First National Bank of Jeffersonville
Jeffersonville, New York
Gilbert E. Weiss
Retired Chief Executive Officer
First National Bank of Jeffersonville
Jeffersonville, New York
Earl A. Wilde
Retired
Sullivan County Cooperative Extension
Liberty, New York
Officers
Arthur E. Keesler President
Raymond L. Walter Vice President
John K. Gempler Secretary
K. Dwayne Rhodes Treasurer
The First National Bank of Jeffersonville
Officers
Arthur E. Keesler Chairman of the Board Raymond L. Walter President and
Chief Executive Officer K. Dwayne Rhodes Executive Vice President and Cashier
John M. Riley Senior Vice PresidentLoans Theodore Bertot Auditor Charles E.
Burnett Controller June B. Tegeler Vice President and Branch Manager Claire
Pecsi Vice PresidentHuman Resources Tatiana Hahn Vice President Susan A.
Bodenstein Assistant Vice PresidentOperations Jacqueline M. Gieger Operations
Manager Pearl L. Gain Assistant CashierAccounting Rhonda Decker Branch Manager
Raymond W. Browne Branch Manager Tanja McKerrell Branch Manager Kathleen Beseth
Branch Manager Edith Houghtaling Assistant Branch Manager Janet Siano Assistant
Branch Manager Gladys Manzolillo Assistant Branch Manager Stacey Stephenson
Assistant Branch Manager Sandra S. Sipple Sales Manager Lorraine Lilholt Sales
Manager Beth Schumacher Sales Manager Loreen Gebelein Mortgage Administrator
Andrew McKean Credit Administrator
Staff
Melissa Adams Terri Bagailuk Catherine Baim Geri Bennett Dawn Berst Renae
Bishop Alexandra Brinsford Jerilynn Brock Michelle Brockner Erin Brown Nancy
Brown MaryPaige Lang-Clouse Dawn Coney Nancy Crumley Lydia DAntoni Robin Darwin
Cindy DeLuca Susan DeVito Denise Diehl Barbara Donnelly Linda Fisk Deborah
Forsblom JoAnne Girardi Dwayne Gorton Nina Gorton Troy Gorton Cynthia Gregson
Christine Gruber Justine Hageman Barbara Hahl Eugene Hahn Tiffany Hammett Alisa
Horan Florance Horecky Martha Huebsch Heidi Hulse Betty Johaneman Helen
Karkkainen Jean Kelly Jessica Kenyon Lauren Kickuth Trishia Kinney Minnie Knox
Patricia Leonardo Dana LeRoy Shirley Lindsley Michele Lupardo Merrily Lynch
Linda Mall JoAnn Malley Diane McGrath Jonathan McGruder Kathryn Miller Tina
Millis Ruth Mootz Carol Muhlig Deborah Muzuruk Gale Myers Lorraine Niemann Kelli
Pagan Bruce Pecsi, Jr. Barbara Pietrucha Alice Reisen Antonia Renzulli Andrew
Richardson Damaris Rios Sandra Ross John Rudy Sheri Rutledge Kristine
Scardefield Barbara Walter Valerie Walter Jayne Wartell Carol Welton Jean Wood
Luz Young
Corporate Information
Corporate Headquarters
Jeffersonville Bancorp
300 Main Street
P.O. Box 398
Jeffersonville, New York 12748
Tel. (914) 482-4000
http://www.jeffbank.com
Description of Business
Jeffersonville Bancorp is a one-bank holding company formed in June 1982, under
the laws of the State of New York. Its subsidiary is The First National Bank of
Jeffersonville, which serves Sullivan County, New York and surrounding
communities in Southeastern, New York through eight offices. A full-service
commercial bank, it provides a broad range of financial products, including
demand and time deposits, mortgage, consumer, commercial and agricultural loans
Annual Meeting
The Annual Meeting of stockholders will be held on Tuesday, April 29, 1997 at
3:00 p.m., in the Companys Board Room at Jeffersonville, New York.
Annual Report on Form 10-K
Upon written request, Company management will provide, without charge, a copy of
the Companys annual report on Form 10-K filed with the Securities and Exchange
Commission. Requests for this information should be submitted to the Companys
Treasurer at the above address.
Stock Information
In January 1997, the Company announced that trading in its common stock
commenced on the Over-The-Counter market under the symbol JFBC. Ryan Beck &
Company of West Orange, New Jersey is the primary market maker (contact Andrew
Lieb at 800-342-2325). In January 1997, the Companys stock traded for $21.00 to
$22.00 per share. During 1996, the Companys Board of Directors declared two cash
dividends, in June for $0.32 per share and December for $0.33 per share.
Jeffersonville Bancorp
P.O. Box 398
Jeffersonville, New York 12748
http://www.jeffbank.com
JEFFERSONVILLE BANCORP
300 Main Street
Jeffersonville, New York 12748
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1997
Dear Stockholder:
Notice is hereby given that the Annual Meeting of the Stockholders of
Jeffersonville Bancorp (the "Company") will be held in the Company's Board Room
at The First National Bank of Jeffersonville (the "Bank") Main Street,
Jeffersonville, New York at 3:00 p.m., Jeffersonville, New York Time, on April
29, 1997 for the following purposes:
(1) To elect five directors to the Board of Directors; and (2)
To ratify the appointment of KPMG Peat Marwick LLP as
independent auditors for the Company for its year ending December 31, 1997.
(3) To transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
Only those holders of record of common stock of the Company, par value
$0.50 per share (the "Common Stock"), at the close of business on April 1, 1997
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
You are cordially invited and urged to attend the Annual Meeting in person,
but if you are unable to do so, please date, sign and promptly return the
enclosed proxy in the enclosed, self-addressed stamped envelope. If you attend
the Annual Meeting and desire to revoke your proxy and vote in person, you may
do so, In any event, a proxy may be revoked at any time before it is exercised.
By Order of the Board of Directors
Arthur E. Keesler, President
Jeffersonville, New York
April 1, 1997
<PAGE>
JEFFERSONVILLE BANCORP
300 Main Street
Jeffersonville, New York 12748
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1997
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Jeffersonville Bancorp, a New York corporation, for use at the
Annual Meeting of Stockholders (the "Annual Meeting"), to be held on April 29,
1997 at 3:00 p.m., Jeffersonville, New York time, at The First National Bank of
Jeffersonville, Main Street, Jeffersonville, New York, and any adjournment
thereof. The purposes of the Annual meeting are (a) to elect five directors to
the Board of Directors of the Company (b) to ratify KPMG Peat Marwick LLP as
independent auditors, for the Company for its year ending December 31, 1997 and
to transact such other business as may properly come before the Annual Meeting
or any adjournment thereof.
Solicitation of proxies may be made in person or by mail, telephone or
telegraph, by directors, officers and regular employees of the Company. The
Company may also request banking institutions, brokerage firms, custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of Common Stock held of record by such persons, and the Company will
reimburse the forwarding expenses. The cost of solicitation of proxies will be
paid by the Company. This Proxy Statement was first mailed to stockholders on or
about April 1, 1997.
The Company has its principal executive offices at Main Street,
Jeffersonville, New York 12748; telephone (914) 482-4000.
<PAGE>
TABLE OF CONTENTS
Page
New Business............................................................1
Nomination of Directors.................................................1
Quorum and Voting.......................................................1
Action to be Taken Under Proxy..........................................2
Election of Directors...................................................2
Ratification of Appointment of Auditors.................................2
Security Ownership of Certain Beneficial Owners and Management.........3-4
Directors and Executive Officer Information.............................5
Committees of the Board of Directors....................................5
Remuneration of Management and Others..................................6-7
Report of the Personnel Committee......................................7-8
Transactions with Management............................................8
Comparative Stock Performance Graph....................................8-9
Other Matters...........................................................9
Documents Incorporated by Reference.....................................9
<PAGE>
The Company was organized as a New York corporation on January 12, 1982 for
the purpose of becoming a registered bank holding company under the Bank Holding
Company Act of 1956, as amended. Effective June 30, 1982, the Company became the
registered bank holding company for the Bank which was chartered in 1913 and
organized under the National Banking Laws of the United States.
The Company does not pay any compensation to directors or officers and the
compensation payments and benefit plans described in this proxy are paid by the
Bank. The same members make up the Board of Directors of both the Company and
the Bank.
NEW BUSINESS
At an annual meeting of stockholders, only such new business shall be
conducted and only proposals with respect to such new business shall be
considered or acted upon, as shall have been brought before such meeting by or
at the direction of the Board of Directors or by any stockholder of the Company
who gives timely notice in writing to the Secretary of the Company as set forth
in Section 2.13 of the Company's Bylaws. For new business to be properly brought
before an annual meeting of stockholders by a stockholder, the stockholder must
deliver notice to, or mailed and received at, the Company's principal executive
office not less than 120 calendar days in advance of the date of the Company's
proxy statement sent to stockholders in connection with the previous year's
annual meeting of stockholders, except that, if no annual meeting was held in
the previous year or the date of the annual meeting has been changed by more
than 30 calendar days from the date contemplated at the time of the previous
year's proxy statement, such notice shall be received by the Company in a
reasonable time before the solicitation is made. A stockholder's notice must be
addressed to the Secretary of the Company. A stockholder's notice to the
Secretary shall set forth, as to each matter of business the stockholder
proposes to bring before the meeting, (i) a brief description of the matter
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (ii) the name and address as they appear on the
Company's books, of the stockholder proposing such proposal; (iii) the class and
number of shares of the Company's stock that are beneficially owned by the
stockholder on the date of such stockholder notice and by any other stockholders
known by such stockholder to be supporting such proposal on the date of such
stockholder notice; and (iv) any financial interest of the stockholder in such
proposal.
NOMINATION OF DIRECTORS
Nomination of candidates for election as directors at any annual meeting of
stockholders may be made by the Board of Directors or by any stockholder
entitled to vote at such annual meeting. Only persons nominated in accordance
with the procedures set forth in Section 2.12 of the Company's Bylaws shall be
eligible for election as directors at an annual meeting.
Nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company as set forth in Section 2.12 of the Company's Bylaws. To be
timely, a stockholder's notice shall be delivered to, or mailed and received at,
the principal executive offices of the Company no later than December 2, 1996.
QUORUM AND VOTING
At the close of business on April 1, 1997, the Company had issued and
outstanding 1,182,794 shares of Common Stock. Only holders of record of Common
Stock at the close of business on April 1, 1997, are entitled to notice of and
vote on matters to come before the Annual Meeting or any adjournment thereof.
The presence in person or by proxy of the holders of a majority of
outstanding shares of common stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting or any adjournment
thereof. The record holders the Common Stock are entitled to one vote in person
or by proxy in respect to each such share on each matter to come before the
Annual Meeting.
ACTION TO BE TAKEN UNDER PROXY
Each proxy unless stockholder otherwise indicates therein, will be voted
"FOR" the election of the five persons named in the Proxy Statement as the Board
of Directors' nominees for election to the Board of Directors and "FOR" the
ratification of KPMG Peat Marwick LLP as independent auditors. In each case
where the stockholder appropriately specified how the proxy is to be voted, it
will be voted in accordance with his or her specification. Stockholders may
designate a person or persons other than those named in the enclosed proxy to
vote their shares at the Annual Meeting or any adjournment thereof. As to any
other matter of business which may be brought before the Annual Meeting or any
adjournment thereof, a vote may be cast pursuant to the accompanying proxy in
accordance with the judgment of the persons voting the same, but the Board does
not know of any such other matters of business. Any stockholder has the power to
revoke his or her proxy at any time, insofar as it has not been exercised, by
written notice or subsequently dated proxy sent to K. Dwayne Rhodes at the
Company, Main Street, Jeffersonville, New York 12748, or by oral revocation
given by the stockholder in person at the Annual Meeting or any adjournment
thereof.
ELECTION OF DIRECTORS
Pursuant to the Company Bylaws, the Board of Directors has, by resolution,
fixed the number of directors at 13. The Board is divided into three classes (I,
II, III), and each director typically serves a three-year term. A director will
initially serve less than three years if the term of office for the Class in
which he is elected expires prior to the director's third year in service. In
this case, the director will stand for reelection with the other Class members
for a full three-year term.
The terms of office of Class II directors expires in 1997. The five Class
II directors have been nominated to serve for three-year terms as members of
Class II. The Board of Directors has nominated to serve as directors John W.
Galligan, Solomon Katzoff, Arthur E. Keesler, Raymond L. Walter and Earle A.
Wilde for Class II directorship. There are no shareholder nominees for Class II
directors. All nominees are currently members of the Board. It is intended that
the persons named in the proxies solicited by the Board will vote for the
election of the named nominees. If any nominee is unable to serve, the shares
represented by all valid proxies will be voted for the election of such
substitute as the Board of Directors may recommend or the Board of Directors may
determine to decrease the size of the Board to eliminate the vacancy at any
time. The Board knows of no reason why any nominee might be unable to serve if
elected.
The Board of Directors recommends that shareholders vote "For" the approval
of the five nominees to the Board of Directors, after consideration of the
information contained herein. Your appointed proxies will vote your shares "For"
the four nominees unless you instruct otherwise in the proxy form.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP as
independent auditor of the Company for the fiscal year ending December 31, 1997,
subject to ratification of such appointment by the stockholders. Representatives
of KPMG Peat Marwick LLP are expected to be present at the Annual Meeting and
are expected to make a statement if they desire to do so and/or be available to
respond to appropriate questions.
The Board of Directors recommends that stockholders vote "For" the
ratification of KPMG Peat Marwick LLP as independent auditors.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The name and address, position, age, number of shares owned and principal
occupation of the executive officers, directors and 5% stockholders of the
Company as of March 13, 1997, are as follows:
<TABLE>
Shares of
Common Owned Principal Occupation if
Name and Position (class) Age Stock owned Percentage not with the Company
--------- ---------------- --- ----------- ---------- --------------------
Address
<S> <C> <C> <C>
Arthur E. President and 65 16,000.000 1.35 Board Chairman of
Keesler Director (II) The Company
Callicoon Director since 1982
Center
NY, 12724
Raymond L. Vice President 50 6,088.543 0.52 President of the Bank
Walter and Director (II)
Box 159 Director since 1994
Yulan
NY, 12792
John K. Secretary and 54 14,563.198 1.23 Corporate Secretary
Gempler Director (I) Insurance Company
Box 323 Director since 1982
Kenoza Lake
NY 12750
K. Dwayne Treasurer 59 684.464 0.06 Executive Vice
Rhodes President and
Box 197 Cashier of the Bank
Cochecton
NY, 12726
Hon. Director (I) 83 5,470.000 0.46 Attorney
Lawrence Director since 1985
H. Cooke
Monticello
NY, 12701
John W. Director (II) 60 6,145.000 0.52 Land Surveyor
Galligan Director since 1982
P.O. Box 71
Monticello
NY, 12701
Douglas A. Director (III) 67 15,758.152 1.33 Merchant
Heinle Director since 1982
Cochecton
Center
NY, 12727
Solomon Director (II) 71 18,895.000 1.60 Real Estate Broker
Katzoff Director since 1982
Lake
Huntington
NY, 12752
Gibson E. Director (I) 62 22,766.281 1.93 Real Estate Broker
McKean Director since 1982
Highland
Lake
NY, 12743
James F. Director (III) 63 24,600 2.08 Automobile Dealer
Roche Director since 1982
Callicoon
NY, 12723
Frederick Director (III) 52 9,200.000 0.78 Attorney
W.V. Director since 1992
Schadt
Jeffersonville
NY, 12748
Edward T. Director (I) 52 17,412.463 1.47 Insurance Broker
Sykes Director since 1982
Callicoon
NY, 12723
Gilbert E. Director (III) 74 40,000.000 3.38 Retired
Weiss Director since 1982
RD1 Box
1374
Beach Lake
PA, 18405
Earle A. Director (II) 68 16,095.143 1.36 Agricultural Consultant
Wilde Director since 1982
10 Liberty
Street
Liberty
NY, 12754
</TABLE>
(1) Included in this number are 5,000 shares owned jointly by Mr. Keesler and
his wife Jane Keesler 3,500 shares owned by Jane Keesler.
(2) Included in this number are 850 shares owned jointly by Mr. Gempler and his
wife Lorraine Gempler.
(3) Included in this number are 2,248.152 shares owned by Mr. Heinle's wife
Eleanor Heinle, 50 shares owned by Eleanor Heinle custodian for Brianne
Elizabeth Heinle, 50 shares owned by Eleanor Heinle custodian for Kristen
Danielle Heinle and 50 shares owned by Eleanor Heinle custodian for Amber Lee
Heinle.
(4) Included in this number is 3,475 shares owned by Mr. Katzoff's wife Gertrude
Katzoff.
(5) Included in this number is 1,150.102 shares owned by Mr. Sykes' wife Joyce
Sykes.
(6) These shares are registered in the name of Gilbert Weiss and Eleanor Weiss
Family Trust.
(7) Included in this number is 3,500 shares owned by Mr. Wilde's wife Elizabeth
J. Wilde.
(8) Included in this number are 560 shares owned jointly by Mr. Walter and his
wife Nancy Walter and 928.543 shares owned by Raymond L Walter custodian for
Janelle D. Walter.
There are no beneficial owners who own 5% or more of the outstanding common
stock.
<PAGE>
DIRECTOR AND EXECUTIVE OFFICER INFORMATION
Each director and executive officer has served with or been employed by the
Company and/or the Bank continuously for the past five years, except Frederick
W.V. Schadt, Jr. who was elected by the Board of Directors in December 1992 to
fill the unexpired term of his father, Frederick W.V. Schadt, Sr.
No director or executive officer sits on the board of directors of any
corporation with a class of securities registered with the Securities and
Exchanges Commission pursuant to Section 12 of the Securities Exchange Act of
1934, as amended, subject to the requirements of Section 15 (d) of such act, or
any company registered under the Investment Company Act of 1940, as amended.
There are no family relationships among or between any of the directors or
executive officers of the Company.
All reported requirements of Section 16 (a) of the Exchange Act were met.
COMMITTEES OF THE
BOARD OF DIRECTORS
The following Bank Board Committees are described below.
The Board of Directors has a standing Examining Committee on which board
membership is rotated annually. It was composed of Messrs. Gempler (Chairman),
Sykes, Heinle and McKean on December 31, 1996. The function of the Examining
Committee is to institute, oversee and assist the internal and external bank
auditors. The Audit Committee had four regularly scheduled meetings during 1996.
The Board of Directors does not have a standing Nominating Committee.
Nominations are made by resolution at a Board of Directors meeting.
The Board of Directors has a standing Salary and Personnel Committee on
which board membership is rotated annually. It was composed of Messrs. Wilde
(Chairman), Katzoff, Schadt and Roche on December 31, 1996. The function of the
Salary and Personnel Committee is to review the compensation and benefits of the
directors, officers and executive officers of the Company. The Salary and
Personnel Committee had eight regularly scheduled meetings during 1996.
The Board of Directors has a standing Loan Committee on which board
membership is rotated monthly. It was composed of Messrs. Walter (chairman),
Galligan, Heinle and Schadt on December 31, 1996. The function of this committee
is to review loan applications for new credit extensions. The Loan Committee had
38 scheduled meetings during 1996.
The Strategic Planning Committee of the Board of Directors is also rotated
annually. It was composed of Messrs. Weiss (chairman), Cooke and Galligan on
December 31, 1996. The function of this committee is to look ahead to prepare
for future trends and changes. They also serve as the Data Processing Committee
reviewing future changes and enhancements in the bank's data processing
applications. This committee had four meetings during 1996.
The Board of Directors has a Building Committee that meets on an ad hoc
basis. Members are appointed for specific meetings as called by the Board
Chairman or President.
The Company had 12 regularly scheduled Board meetings during 1996. Each
director has attended at least 75% of the of the Board of Directors meetings.
The Bank had 15 regularly scheduled meetings during 1996. Each director has
attended at least 75% of the of the Board of Directors meetings.
<TABLE>
REMUNERATION OF MANAGEMENT AND OTHERS
EXECUTIVE COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Restricted All other
Profit Other Annual Stock Options LTIP Compen-
Name and Salary Sharing Compensation Award (s) SARs Payouts sations
Principal Position Years ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond L. Walter 1996 151,563 29,006 13,500 0 0 0 0
President 1995 134,147 23,258 11,800 0 0 0 0
1994 110,923 19,006 11,500 0 0 0 0
K. Dwayne 1996 114,487 18,410 10,300 0 0 0 0
Rhodes 1995 106,696 17,702 9,800 0 0 0 0
Exec. Vice President 1994 107,665 17,702 9,400 0 0 0 0
</TABLE>
The Bank pays members of its Board of Directors an honorarium of (i) $500
per meeting of the Board attended, with two absences per year also paid, (ii)
$750 per month to members who served on the Loan Committee through June 1996 and
$400 per meeting for the rest of the year and (iii) $400 per meeting attended
for members who serve on each of the Examining Committee, Personnel Committee
and Strategic Planning Committee. The Chairman of the Board is paid $60,000
annual fee in addition to regular meeting fees. The Board Secretary is paid $500
per meeting in addition to regular meeting and committee fees. The Company pays
no honorariums to its Board of Directors.
Employee Benefit Plans
Tax-Deferred Savings Plan
The Company maintains a qualified 401K plan for all employees, which
permits tax-deferred employee contributions up to 15% of salary and provides for
matching contributions by the Company: Beginning in 1996, the Company matches
100% of employee contributions up to 4% of the employee's salary and 25% of the
next 2% of the employee's salary. The Company continues to match 25% of employee
contributions beyond 6% of the employee's salary until the total matching
contribution reaches $1,500 or 15%. For 1995 and 1994, the Company contributed a
maximum of fifty cents for each dollar contributed by each participating
employee, up to a maximum of $1,500 per employee. The Company contributed
approximately $93,000 in 1996, $53,000 in 1995 and $48,000 in 1994. During 1996
the bank contributed $7,556 and $5,657 for Messrs. Walter and Rhodes,
respectively which amounts are including in the executive compensation table.
Pension Plan
The Bank has a defined benefit pension plan (using of the New York State
Bankers Retirement Plan Protoype) (the "Pension Plan") covering substantially
all of its employees. The benefits are based on years of service and the
employee's average compensation during the five consecutive years in the last 10
years of employment affording the highest such average. All W-2 compensation
paid by the Bank to its employees up to $150,000 per year is covered by the
Pension Plan, but this limitation of $150,000 may be higher due to increases in
the Consumer Price Index. Participants in the Pension Plan may choose the
following benefit option: one-sum payment, automatic joint and survivor annuity,
life annuity with 120 stipulated payments, or full cash refund annuity. The
Bank's funding policy is to contribute annually the maximum amount that can be
deducted for Federal income tax purposes. Contributions are intended to provide
not only benefits attributed to service to date but also for those expected to
be earned in the future.
The following table sets forth the estimated annual benefits payable upon
retirement to persons who have earned the specified average annual compensation
and who have completed the specified years of creditable service:
Annual Years of Creditable Service
Average
Compensation 15 20 25 30 35 40
$ 25,000 $ 3,955 $ 5,274 $ 6,592 $ 7,575 $ 9,229 $ 10,479
$ 50,000 9,580 12,774 15,967 19,161 22,354 24,854
-
$ 75,000 15,205 20,274 25,342 30,411 35,479 39,229
$ 100,000 20,830 27,774 34,717 41,661 48,604 53,604
$ 150,000 32,080 42,774 53,467 64,161 74,854 82,354
$ 200,000 43,330 57,774 72,217 86,661 101,104 111,104
The single plan maximum benefit limit under Internal Revenue Code Section
415 as of January 1, 1995 is $120,000 ($110,880 under the Normal Form of Payment
for a Single Participant). The maximum annual compensation allowed under a
qualified plan is $150,000 for 1996. The benefits above were computed assuming
that (i) the normal form of payment to a single participant is used and (ii) the
employee turns 65 in December 1996.
The estimated creditable years of service until retirement for Messrs.
Walter, and Rhodes (the two executive officers in the proceeding Compensation
Table, who participate in the Pension Plan) are 36 and 31 respectively.
Profit Sharing Plan
The Bank has a profit sharing plan (the "Profit Sharing Plan") in which all
employees of the Bank with one complete year of service as of November 30 may
participate for that fiscal year. Employees with less than one year of service
are eligible for 1/12 of their normal share for each month of service. A profit
sharing percentage is developed for each employee of the Bank ranging firm 7% to
17% of base salary, as determined by the Personnel Evaluation Committee of three
senior members of management. The profit sharing percentage for all senior
management is 17% of base salary except for Messr. Walter at 20%. During 1996,
the Bank paid Messrs. Walter and Rhodes $29,006 and $18,410 respectively,
pursuant to the Profit-Sharing Plan, which amounts are included in the
proceeding Cash Compensation Table.
REPORT OF THE PERSONNEL COMMITTEE DATED FEBRUARY 6, 1996
This Committee established policies relating to the compensation of employees,
officers and executive officers. All decisions by the Personnel Committee are
ratified by the Board of Directors
Compensation levels for officers and executive officers from March 1, 1996
through February 28,1997 were fixed by the Board of Directors on February 27,
1996 based on recommendations of the Committee. The compensation to be paid to
the executive officers in 1996 was, on the average, approximately 5.0% above
that paid in 1995.
The compensation recommended and approved for executive officers is intended to
further the earnings and financial strength of the Company through the focus of
attention on efficient and productive operations in an increasingly competitive
environment. To achieve this goal, the Company's Executive Compensation Policy
integrates annual base compensation with profit sharing based on corporate
performance and individual initiatives. In evaluating annual executive
compensation, the Committee examines net income, earnings per share, return on
equity, asset growth, and total return to shareholders.
The Bank's management performed well in 1995-96, despite the difficult
economic conditions.
In making its recommendations for executive officer compensation, including
that for the Chief Executive Officer, the Committee considers a number of
factors, including an appraisal of the officer's performance, the earnings
performance of the Company, and information supplied by a regionally recognized
compensation consulting firm.
Early in 1993, Arthur E. Keesler announced his intention to retire as
president and CEO of The Bank, and remain as Chairman of the Board. Mr. Keesler
also retained his designation as Chairman of the Board and President of The
Company. In the summer of the 1993, The Board of Directors designated Raymond L.
Walter to succeed Mr. Keesler in February 1994. Mr. Walter, employed by The Bank
since 1973, was Executive Vice President and Senior Loan Officer at the time of
his appointment as President and CEO.
The base compensation of the Chief Executive Officer, Raymond L. Walter,
was increased in 1996 by $8,216 over 1995 and a base increase from 1994 to 1995
of $25,012. There was an increase in the profit sharing percentage from 17% to
20% in 1996.
The Committee based its recommendation largely on Mr. Walter's performance
as President in 1994-96, as well as past performance as Executive Vice President
and believe he has shown the ability to effectively administer the Company and
respond successfully to a changing business environment.
Earle A. Wilde, Chairman
James F. Roche
Solomon Katzoff
Frederick W.V. Schadt
TRANSACTIONS WITH MANAGEMENT
In the ordinary course of its banking business, the Bank has had and
anticipates it will continue to have transactions with various of its executive
officers, directors and their associates, including corporations in which such
directors own a beneficial interest. To the extent such transactions consisted
of extensions of credit of any material amount, such transactions have been made
in the ordinary course of the Bank's business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other Bank customers, and do not involve more than
the normal risk of collectability or other unfavorable features.
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph on the following page sets forth the cumulative total shareholder
return on the Company's Common Stock for the last five fiscal years, assuming
the investment of $100 on December 31, 1991 and the reinvestment of all
dividends since that date to December 31, 1996. The graph also contains for
comparison purposes the S & P 500 Index and the NASDAQ OTC Bank Index. The Data
used was obtained from published sources and is believed to be accurate.
[GRAPHIC OMITTED]
<TABLE>
------------- ---------- --------- ---------- ---------- ----------
91 92 93 94 95 96
------------- ---------- --------- ---------- ---------- ----------
- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jeffersonville Bancorp 100 128 154 143 131 137
NASDAQ OTC Bank Index 100 146 166 165 246 326
S & P 500 100 108 118 120 165 203
- -------------------------------------- ------------- ---------- --------- ---------- ---------- ----------
</TABLE>
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Annual Meeting, it
is intended that the proxies in the accompanying form will be voted in respect
thereof in accordance with the judgment of those voting the proxies.
DOCUMENTS INCORPORATED BY REFERENCE
1. Item 7 Form 10-K, Management's Discussion and Analysis of Financial Condition
and Results of Operations. 2. Jeffersonville Bancorp's 1996 Annual Report to
Stockholders.
A copy of the Company's Annual Report on Form 10-K for the year ended December
31, 1996 will be supplied to stockholders without charge on or after March 31,
1997, upon written request directed to K. Dwayne Rhodes, Main Street,
Jeffersonville, New York 12748.
BY THE ORDER OF THE BOARD OF DIRECTORS
Arthur E. Keesler
President
Jeffersonville Bancorp
P.O. Box 398
Jeffersonville, New York 12748
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF JEFFERSONVILLE BANCORP
The undersigned hereby appoints, Jesse P. Brown, Salvatore Princiotta, and
Barbara Hahn with full power of substitution and resubstitution, proxies of the
undersigned, with all of the powers that the undersigned would possess if
personally present to cast all the votes which the undersigned would be entitled
to vote at the Annual Meeting of Stockholders ("Annual Meeting") of
Jeffersonville Bancorp to be held on Tuesday, April 29,1997 at The First
National Bank of Jeffersonville, Main Street, Jeffersonville, New York
commencing at 3:00 p.m., Jeffersonville, New York time, and any and all
adjournments thereof, including (without limiting the generality of the
foregoing) to vote and act as indicated on the reverse side.
In their discretion, the proxies are authorized to vote upon such business
as may properly come before the Annual Meeting. This Proxy will be voted at the
Annual Meeting or any adjournment thereof in accordance with the instructions
set forth on the reverse, or in the event no instructions are set forth, this
Proxy will be voted FOR each of the nominees for director and FOR the
ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors. 1. ELECTION OF DIRECTORS FOR the nominees listed below
a. Nominees to serve three-year terms (Except as indicated to the contrary)
expiring at 2000 Annual Meeting
WITHHOLD AUTHORITY to vote for the nominees listed below.
John W. Galligan,Solomon Katzoff,Arthur E. Keesler,Raymond L. Walter,and Earle
A. Wilde instruction: To withhold authority for an individual nominee(s), write
the name(s) here:
(Continued, and to
be completed, dated and signed on the reverse side.)
<PAGE>
2. Proposal to ratify the appointment of the firm of KPMG Peat Marwick LLP as
independent auditors of Jeffersonville Bancorp for the fiscal year ending
December 31, 1997.
FOR AGAINST ABSTAIN
3. In their discretion, the proxies to vote upon such other business as may
properly come before the Annual Meeting.
IMPORTANT: Please date this
proxy and sign exactly as
your name appears to the
left. If shares are held by
joint tenants, both should
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give title
as such. If a corporation,
please sign in full
corporate name by president
of or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
Date: , 1997
Signed:
Please complete, sign, date and return promptly this Proxy in the enclosed
stamped, addressed return envelope
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted fron the
Jeffersonville Bancorp 1996 Annual Report and is qualified in ite
entirety by reference to such financial statements
</LEGEND>
<CIK> 0000874495
<NAME> Jeffersonville Bancorp
<MULTIPLIER> 1000
<CURRENCY> U S DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 4723
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 64842
<INVESTMENTS-CARRYING> 3401
<INVESTMENTS-MARKET> 3518
<LOANS> 115605
<ALLOWANCE> 1711
<TOTAL-ASSETS> 196113
<DEPOSITS> 172930
<SHORT-TERM> 529
<LIABILITIES-OTHER> 1679
<LONG-TERM> 0
0
0
<COMMON> 617
<OTHER-SE> 20358
<TOTAL-LIABILITIES-AND-EQUITY> 196113
<INTEREST-LOAN> 10512
<INTEREST-INVEST> 4328
<INTEREST-OTHER> 104
<INTEREST-TOTAL> 14944
<INTEREST-DEPOSIT> 6157
<INTEREST-EXPENSE> 6278
<INTEREST-INCOME-NET> 8666
<LOAN-LOSSES> 290
<SECURITIES-GAINS> 95
<EXPENSE-OTHER> 6721
<INCOME-PRETAX> 2714
<INCOME-PRE-EXTRAORDINARY> 2714
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2145
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.79
<YIELD-ACTUAL> 7.95
<LOANS-NON> 2572
<LOANS-PAST> 1423
<LOANS-TROUBLED> 481
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1629
<CHARGE-OFFS> 346
<RECOVERIES> 138
<ALLOWANCE-CLOSE> 1711
<ALLOWANCE-DOMESTIC> 1711
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
