<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _______
Commission File Number: #0-21466
JEFFERSON SAVINGS BANCORP, INC.
_________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Delaware 43-1625841
- ----------------------- -------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
14915 Manchester Road, Ballwin, Missouri 63011
- ----------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(314) 227-3000
--------------
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 preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- ------
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Class Outstanding at July 31, 1997
- -----------------------------------------------------------------
Common Stock, Par Value $.01 5,005,204 shares
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
INDEX to Form 10-Q
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated Balance Sheets 3
- Consolidated Statements of Income 4
- Consolidated Statement of Stockholders'
Equity 5
- Consolidated Statements of Cash Flows 6
- Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantative and Qualitative Disclosure About
Market Risk 17
PART II OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of
Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
2<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Cash $ 8,779,173 7,359,389
Interest-bearing deposits 14,453,050 11,531,105
Federal funds sold 3,765,000 4,815,000
Investment securities available for sale, at
fair value (amortized cost of $140,527,245
and $84,838,744 at June 30, 1997 and
December 31, 1996, respectively) 141,113,883 85,701,772
Mortgage-backed securities available for sale,
at fair value (amortized cost of $86,569,673 and
$95,982,081 at June 30, 1997 and December 31,
1996, respectively) 85,660,563 95,203,312
Loans receivable, net 971,034,471 885,405,062
Investment in real estate, net 4,104,536 4,460,202
Stock in Federal Home Loan Banks 16,634,900 15,768,700
Office properties and equipment, net 11,510,468 9,667,851
Excess of cost over fair value of net assets acquired 24,731,369 19,746,106
Accrued income and other assets 10,233,306 8,420,576
--------------- -------------
$ 1,292,020,719 1,148,079,075
=============== =============
Liabilities and Stockholders' Equity
------------------------------------
Savings deposits $ 1,076,094,080 947,068,672
Borrowed money 87,201,984 97,682,127
Deferred tax liability 801,500 1,324,000
Advance payments by borrowers for taxes
and insurance 9,192,854 2,884,424
Accrued expenses and other liabilities 8,424,511 9,200,939
--------------- -------------
Total liabilities 1,181,714,929 1,058,160,162
--------------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock ($.01 par value): Authorized
5,000,000 shares; none issued - -
Common stock ($.01 par value): Authorized
20,000,000 shares; issued 5,017,999 and
4,470,049 shares at June 30, 1997 and
December 31, 1996, respectively 50,180 44,700
Additional paid-in capital 62,073,018 45,771,841
Retained earnings, subject to certain
restrictions 55,137,080 50,759,048
Unrealized gain (loss) on assets available for
sale, net (193,471) 50,259
Unamortized restricted stock awards (239,814) (359,477)
Unearned ESOP shares (6,316,687) (5,345,412)
Treasury stock, at cost: 12,795 shares and
62,703 shares at June 30, 1997 and
December 31, 1996, respectively (204,516) (1,002,046)
--------------- -------------
Total stockholders' equity 110,305,790 89,918,913
--------------- -------------
$ 1,292,020,719 1,148,079,075
=============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
3<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
Three and six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
---------------------- ----------------------
1997 1996 1997 1996
------ ------ ------- ---------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans receivable $20,511,880 15,902,163 39,551,060 31,694,747
Mortgage-backed securities 1,514,059 3,274,159 3,065,566 6,802,964
Investment securities 2,536,443 527,858 4,167,676 1,276,863
Interest-bearing demand deposits and
federal funds sold 199,124 192,230 421,108 361,139
Stock in Federal Home Loan Banks 280,898 259,388 548,736 530,066
------------ ---------- ---------- ----------
Total interest and dividend
income 25,042,404 20,155,798 47,754,146 40,665,779
------------ ---------- ---------- ----------
Interest expense:
Savings deposits 13,574,988 10,968,090 25,981,678 22,193,254
Borrowed money 1,370,613 2,094,736 2,753,960 4,346,450
------------ ---------- ---------- ----------
Total interest expense 14,945,601 13,062,826 28,735,638 26,539,704
------------ ---------- ---------- ----------
Net interest income 10,096,803 7,092,972 19,018,508 14,126,075
Provision for losses on loans 606,000 165,000 912,000 330,000
------------ ---------- ---------- ----------
Net interest income after
provision for losses on
loans 9,490,803 6,927,972 18,106,508 13,796,075
------------ ---------- ---------- ----------
Noninterest income:
Servicing and other loan fees 191,395 136,557 416,354 379,694
Fees for other services to customers 277,270 115,713 502,518 243,162
Gain on sale of mortgage-backed
securities, net - 126,759 - 634,372
Gain on sale of loans receivable, net 81,730 71,982 139,466 221,328
Gain on real estate operations, net 89,262 48,252 133,406 416,302
Other 134,945 181,181 266,285 392,542
------------ ---------- ---------- ----------
Total noninterest income 774,602 680,444 1,458,029 2,287,400
------------ ---------- ---------- ----------
Noninterest expense:
General and administrative:
Compensation and employee benefits 3,005,592 2,571,284 5,722,105 5,112,975
Occupancy 688,943 477,206 1,320,348 1,010,667
Advertising 221,360 147,784 367,925 270,553
Federal insurance premiums 241,382 503,742 349,106 1,007,139
Legal, examination, and other
professional fees 286,348 292,172 524,414 677,773
Other 1,048,794 716,461 1,910,830 1,609,567
------------ ---------- ---------- ----------
Total general and administrative 5,492,419 4,708,649 10,194,728 9,688,674
Amortization of excess cost over fair
value of net assets acquired 450,062 250,043 804,151 500,085
------------ ---------- ---------- ----------
Total noninterest expense 5,942,481 4,958,692 10,998,879 10,188,759
------------ ---------- ---------- ----------
Income before income taxes 4,322,924 2,649,724 8,565,658 5,894,716
Income tax expense 1,652,000 1,033,000 3,274,000 2,287,500
------------ ---------- ---------- ----------
Net income $ 2,670,924 1,616,724 5,291,658 3,607,216
============ ========== ========== ==========
Earnings per share $.56 .41 1.15 .91
==== === ==== ===
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Six months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional gain (loss) on
------------------- paid-in Retained assets available
Shares Dollars capital earnings for sale, net
------ ------- ---------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 4,407,346 $44,700 45,771,841 50,759,048 50,259
Net income - - - 5,291,658 -
Dividends paid ($.20 per share) - - - (913,626) -
Release of ESOP shares in lieu
of cash dividend on allocated
ESOP shares - - 5,645 - -
Stock issued in dividend
reinvestment and stock
purchase plan 3,075 - 38,182 - -
Amortization of restricted
stock awards - - - - -
Tax benefit of restricted
stock awards vested - - 162,000 - -
Amortization of ESOP shares - - 416,717 - -
Change in unrealized gain
(loss) on assets available for
sale, net - - - - (243,730)
Stock issued to acquire
L&B Financial 547,950 5,480 15,271,367 - -
Stock issued to ESOP - - - - -
Stock purchased by ESOP 32,284 - 412,269 - -
Stock options exercised 14,549 - (87,003) - -
Tax benefit of non-incentive
stock options exercised - - 82,000 - -
--------- ------- ---------- ---------- ----------
Balance at June 30, 1997 5,005,204 $50,180 62,073,018 55,137,080 (193,471)
========= ======= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Unamortized Total
restricted Unearned Treasury Stockholders'
stock awards ESOP shares Stock equity
------------ ----------- ------ -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 (359,477) (5,345,412) (1,002,046) 89,918,913
Net income - - - 5,291,658
Dividends paid ($.20 per share) - - - (913,626)
Release of ESOP shares in lieu
of cash dividend on allocated
ESOP shares - 10,661 - 16,306
Stock issued in dividend
reinvestment and stock
purchase plan - - 49,139 87,321
Amortization of restricted
stock awards 119,663 - - 119,663
Tax benefit of restricted
stock awards - - - 162,000
Amortization of ESOP shares - 363,709 - 780,426
Change in unrealized gain
(loss) on assets available
for sale, net - - - (243,730)
Stock issued to acquire
L&B Financial - - - 15,276,847
Stock issued to ESOP - (672,884) - (672,884)
Stock purchased by ESOP - (672,761) 515,928 255,406
Stock options exercised - - 232,493 145,490
Tax benefit of non-incentive
stock options exercised - - - 82,000
--------- ---------- ----------- -----------
Balance at June 30, 1997 (239,814) (6,316,687) (204,516) 110,305,790
========= ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.<
5<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,291,658 3,607,216
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,322,713 1,501,743
Provision for losses on loans 912,000 330,000
Net gain on sales of assets (424,028) (1,373,041)
Loans originated for sale (10,033,996) (23,700,534)
Sale of loans originated for sale 10,710,361 24,804,686
Deferred income taxes (265,000) (1,039,000)
Stock dividend from Federal Home Loan Banks (104,000) (65,000)
Other, net (716,315) (5,656,500)
------------ -----------
Net cash provided by (used in) operating
activities 6,693,393 (1,590,430)
------------ -----------
Cash flows from investing activities:
Principal repayments on:
Loans receivable 190,142,656 140,468,393
Mortgage-backed securities 9,719,549 12,754,358
Proceeds from maturity of investment securities 4,530,000 21,250,000
Proceeds from sale of:
Loans receivable 1,524,996 5,183,367
Mortgage-backed securities available for sale 44,578,236 86,352,031
Investment securities available for sale 11,084,317 -
Cash invested in:
Loans receivable originated (201,629,350) (160,253,873)
Loans receivable purchased (7,967,850) (3,997,700)
Mortgage-backed securities - (29,836,277)
Investment securities (58,957,815) (59,000,000)
Proceeds from sale of real estate 2,515,440 1,819,571
Cash paid for acquisitions (15,266,182) -
Cash and cash equivalents from acquisitions 8,296,533 -
Other, net (905,838) 530,773
------------ -----------
Net cash provided by (used in) investing
activities (12,335,308) 15,270,643
------------ -----------
Cash flows from financing activities:
Increase in savings deposits, net 24,084,680 5,590,692
Decrease in borrowed money, net (20,480,143) (24,536,741)
Increase in advance payments by borrowers for
taxes and insurance 5,754,514 5,016,977
Dividends paid (913,626) (598,677)
Other, net 488,219 80,000
------------ -----------
Net cash provided by (used in) financing
activities 8,933,644 (14,447,749)
------------ -----------
Increase (decrease) in cash and cash
equivalents 3,291,729 (767,536)
Cash and cash equivalents at beginning of period 23,705,494 20,690,764
------------ -----------
Cash and cash equivalents at end of period $ 26,997,223 19,923,228
============ ===========
Supplemental disclosures of cash flow information:
Interest paid $ 29,192,653 26,711,430
Income taxes paid 2,887,288 1,695,384
Noncash investing activities:
Stock issued for acquisitions 15,276,847 -
Additions to real estate acquired in settlement
of loans or through foreclosure 1,991,448 974,904
Loans originated to finance the sale of real
estate - 60,026
Noncash financing activity - interest credited 19,521,425 16,094,413
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-Q and,
therefore, do not include all information and notes necessary for
a complete presentation of financial position, results of
operations, changes in stockholders' equity, and cash flows in
conformity with generally accepted accounting principles.
However, all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary for
a fair presentation of the unaudited consolidated financial
statements have been included in the results of operations for
the three and six months ended June 30, 1997 and 1996,
respectively.
Operating results for the three and six months ended June 30,
1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
(2) Principles of Consolidation
---------------------------
The accompanying unaudited consolidated financial statements
include the accounts of Jefferson Savings Bancorp, Inc. (the
Company) and its wholly owned subsidiaries, Jefferson Savings and
Loan Association, F.A. (the Association) and First Federal
Savings Bank of North Texas (First Federal or the Bank). The
Association's wholly owned subsidiaries are J.S. Services, Inc.,
J.S. Services of Florida, Inc., JS&L Realty, Inc., and Jefferson
Financial Corporation. The Bank's wholly owned subsidiaries are
First Service Corporation, Inc. and North Texas Financial
Services, Inc. All significant intercompany items have been
eliminated.
(3) Business Combinations
---------------------
On December 30, 1996, the Company completed its acquisition of
Texas Heritage Savings Association/Banc in Rowlett, Texas (Texas
Heritage) in exchange for $5.1 million in cash and 223,151 shares
of the Company's common stock. Texas Heritage's total assets
were $71.8 million, consisting primarily of loans receivable of
$56.0 million and mortgage-backed and investment securities of
$7.3 million; Texas Heritage's total deposits were $64.7 million.
As a result of the Texas Heritage acquisition, the Company added
four branches in the suburban Dallas counties of Dallas, Rockwall
and Tarrant. The acquisition, which was funded by common stock,
available cash and borrowings, was accounted for using the
purchase method. Under the purchase method of accounting, the
results of operations of Texas Heritage are included in the
Company's results of operations only since the date of its
acquisition. The excess cost over fair value of net assets
acquired was approximately $6.3 million. Upon completion of the
acquisition, Texas Heritage was merged into First Federal.
The Company's acquisition of L&B Financial, Inc. in Sulphur
Springs, Texas (L&B Financial) was completed on February 28,
1997. The Company acquired L&B Financial for a combination of
$15.3 million in cash and 547,950 shares of the Company's common
stock. L&B Financial's total assets were $140.8 million,
consisting primarily of loans receivable of $70.4 million and
mortgage-backed and investment securities of $57.3 million; L&B
Financial's total deposits were $104.9 million. As a result of
the L&B Financial acquisition, the Company added six branches in
the northeast Texas counties of Bowie, Camp, Franklin, Hopkins
Morris and Titus. The acquisition was accounted for using the
purchase method. Under the purchase method of accounting, the
results of operations of L&B Financial are included in the
Company's results of operations only since the date of its
acquisition. The excess
7<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
of cost over fair value of net assets acquired was $5.9 million.
Upon completion of the acquisition, L&B Financial was merged into
First Federal.
The following unaudited information presents pro forma results of
operations of the Company for the three and six months ended June
30, 1997, compared with the same period in 1996, assuming the
acquisitions of Texas Heritage and L&B Financial had taken place
on January 1, 1996.
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
---------------- ----------------
1997 1996 1997 1996
------------------ ----------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net interest income $10,097 8,867 19,649 17,597
Net income 2,671 1,961 4,775 4,209
======= ===== ====== ======
Earnings per share $ .56 .41 1.00 .89
======= ===== ====== ======
</TABLE>
(4) Earnings Per Share
------------------
Earnings per share are based upon the weighted average number of
common shares and common stock equivalents, if dilutive,
outstanding during the period. The only common stock equivalents
are stock options. The weighted average number of common stock
equivalents is calculated using the treasury stock method.
Common shares held by the Company's Employee Stock Ownership Plan
(ESOP) that have not been committed to be released are excluded
from the computation of weighted average common shares
outstanding during the period.
Earnings per share for the second quarter have been computed
based upon net income for the three months ended June 30, 1997
and 1996, using 4,803,258 and 3,978,771 weighted average common
shares and common stock equivalents outstanding, respectively.
Year-to-date earnings per share for 1997 and 1996 have been
computed based upon net income for the six months ended June 30,
1997 and 1996, using 4,621,074 and 3,970,123 weighted average
common shares and common stock equivalents outstanding,
respectively.
8<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion reviews the results of operations and
the financial condition of the Company as of and for the three
and six months ended June 30, 1997.
RESULTS of OPERATIONS
NET INCOME
Net income increased $1,054,000, to $2,671,000, or $.56 per
share, for the three months ended June 30, 1997 from $1,617,000,
or $.41 per share, for the three months ended June 30, 1996. The
significant increase in net income was primarily the result of an
increase in net interest income partially offset by an increase
in noninterest expense and an increase in provision for losses on
loans. Annualized return on average equity and annualized return
on average assets for the quarter were 9.87% and 0.82%,
respectively compared to 7.92% and 0.58%, respectively during the
comparable 1996 quarter. Weighted average shares outstanding for
the second quarter of 1997 were 4,594,171 compared to 3,762,801
for the second quarter of 1996.
Net income increased $1,684,000, to $5,292,000, or $1.15 per
share, for the six months ended June 30, 1997 from $3,607,000, or
$.91 per share, for the six months ended June 30, 1996. The
significant increase in net income for the six month period was
primarily the result of an increase in net interest income
partially offset by a decrease in noninterest income, an increase
in noninterest expense and an increase in provision for losses on
loans. Annualized return on average equity and annualized return
on average assets were 10.29% and 0.84%, respectively, for the
first six months of 1997 compared to 8.87% and 0.64% for the
first six months of 1996. Weighted average shares outstanding
for the six months ended June 30, 1997 were 4,413,894 compared to
3,755,716 for the six months ended June 30, 1996.
NET INTEREST INCOME
Net interest income for the second quarter of 1997 increased $3.0
million, or 42.4%, to $10.1 million compared to $7.1 million for
the second quarter of 1996. The increase in net interest income
was the result of an improved interest rate spread which
increased to 2.98% for the quarter ended June 30, 1997 from 2.32%for the
quarter ended June 30, 1996. The Company's net interest
margin increased to 3.27% from 2.61% during the same periods.
The improvement in the interest rate spread was primarily due to
an increase in the average yield on interest-earning assets to
8.10% for the second quarter of 1997 from 7.43% for the second
quarter of 1996. The average balance of interest-earning assets
increased $151.0 million, or 13.9%, to $1.24 billion for the
quarter ended June 30, 1997 from $1.09 billion for the quarter
ended June 30, 1996.
Net interest income for the six months ended June 30, 1997
increased $4.9 million, or 34.6%, to $19.0 million compared to
$14.1 million for the six months ended June 30, 1996. The
increase in net interest income was the result of an improved
interest rate spread which increased to 2.90% for the six months
ended June 30, 1997 from 2.30% for the six months ended June 30,
1996. The Company's net interest margin increased to 3.18% from
2.59% during the same periods. The improvement in the interest
rate spread was primarily due to an increase in the average yield
on interest-earning assets to 7.97% for the first six months of
1997 from 7.45% for the first six months of 1996. The average
balance of interest-earning assets increased $106.3 million, or
9.7%, to $1.20 billion for the six months ended June 30, 1997
from $1.09 billion for the six months ended June 30, 1996.
9<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The increases in the average yield on interest-earning assets
were caused by a shift in a portion of the Company's interest-
earning assets from lower yielding mortgage-backed securities to
higher yielding loans receivable and investment securities.
During 1996 the Company sold a large portion of its mortgage-
backed securities portfolio and used a large portion of the
proceeds to fund higher yielding loan originations. A
significant contributor to the increase in loan portfolio yields
for the most recent periods has been the Company's construction
and development lending through its Texas subsidiary. Because
the Company has determined to reduce its level of higher margin
development lending in Texas, the Company may not experience
similar increases in loan portfolio yields in future periods.
Also contributing to the increase in the interest rate spread was
the upward adjustment of the rates on the Company's existing
adjustable-rate loan portfolio. The increases in the average
balance of interest-earning assets were primarily the result of
the Texas Heritage and L&B Financial acquisitions.
Loans originated and purchased totaled approximately $220 million
for the six months ended June 30, 1997 compared to $188 million
for the comparable period in 1996. Principal repayments for the
first six months of 1997 were approximately $190 million compared
to $140 million during the first six months of 1996.
PROVISION FOR LOSSES ON LOANS
The provision for losses on loans for the second quarter of 1997
was $606,000 compared to $165,000 for the like period in 1996 and
$912,000 for the first six months of 1997 compared to $330,000
for the like period in 1996. The increased provision for losses
reflects management's decision to increase the level of loss
reserves in its Texas subsidiary as a result of increased lending
activity in that region. Loan charge-offs totaled $342,000 for
the six months ended June 30, 1997 compared to $11,000 for the
six months ended June 30, 1996. At June 30, 1997, the allowance
for losses on loans was $8.3 million, which represented .85% of
net loans receivable compared to $6.5 million, or .74% of net
loans receivable at December 31, 1996. The ratio of nonaccruing
loans to net loans receivable was .17% at June 30, 1997 and at
December 31, 1996. Management considers many factors in
determining the necessary levels of loan loss reserves, including
a detailed analysis of specific loans in the portfolio, known and
inherent risk in the portfolio, estimated value of the underlying
collateral, assessment of general trends in the real estate
market, and current and prospective economic conditions.
NONINTEREST INCOME
Total noninterest income increased $94,000, or 13.8%, to $775,000
for the quarter ended June 30, 1997 from $680,000 for the quarter
ended June 30, 1996. The increase was primarily the result of a
$162,000 increase in fees for other services to customers and a
$55,000 increase in servicing and other loan fees, partially
offset by a $127,000 decrease in gain on sale of mortgage-backed
securities. The increase in fees for services to customers and
servicing and other loan fees was due primarily to the
acquisitions of Texas Heritage and L&B Financial. The decrease
in gain on sale of mortgage-backed securities resulted from the
absence of such sales during 1997.
Total noninterest income decreased $829,000, or 36.3%, to
$1,458,000 for the six months ended June 30, 1997 from $2,287,000
for the six months ended June 30, 1996. The decrease was
primarily the result of a $634,000 decrease in gain on sale of
mortgage-backed securities, a $283,000 decrease in gain on real
estate operations, a $127,000 decrease in other noninterest
income, and a $82,000 decrease in gain on sale of loans,
partially offset by a $259,000 increase in fees for other
services to customers. The decrease in the gain
10<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
on sale of mortgage-backed securities resulted from the absence
of sales activity during 1997. The decrease in the gain on real
estate operations was largely attributable to a $324,000 profit
on the sale of real estate held for investment during the first
six months of 1996 and the decrease in other noninterest income
was due primarily to a $74,000 profit on the sale of assets owned
by the Company's subsidiary, J.S. Services of Florida, Inc.
during the six months ended June 30, 1996. No such gains
occurred during the like period in 1997. The decrease in gain on
sale of loans receivable was the result of a decline in loan
sales from $30.0 million for the six months ended June 30, 1996
to $12.2 million for the six months ended June 30, 1997. The
gain on sale of loans represents origination and other fees
retained by the Company in connection with the sale of fixed-rate
loans to institutional investors generally on an individual loan
basis. The increase in fees for services to customers was due
primarily to the acquisitions of Texas Heritage and L&B
Financial.
NONINTEREST EXPENSE
Noninterest expense increased $984,000, or 19.8%, to $5.9 million
for the quarter ended June 30, 1997 from $5.0 million for the
quarter ended June 30, 1996. The increase was due primarily to a
$434,000 increase in compensation and employee benefits, a
$332,000 increase in other noninterest expense, a $212,000
increase in occupancy expense, a $200,000 increase in
amortization of excess cost over fair value of net assets
acquired, and a $74,000 increase in advertising expense,
partially offset by a $262,000 decrease in federal insurance
premiums. The increase in compensation and employee benefits was
due primarily to salary increases and the acquisitions of Texas
Heritage and L&B Financial. The increases in other noninterest
expense, occupancy expense, amortization of excess cost over fair
value of net assets acquired, and advertising expense were
primarily the result of the acquisitions of Texas Heritage and
L&B Financial. The decrease in federal insurance premiums was
the result of lower assessment rates following the 1996
legislation to recapitalize the Savings Association Insurance
Fund.
Noninterest expense increased $810,000, or 7.9%, to $11.0 million
for the six months ended June 30, 1997 from $10.2 million for the
six months ended June 30, 1996. The increase was due primarily
to a $609,000 increase in compensation and employee benefits, a
$310,000 increase in occupancy expense, a $304,000 increase in
amortization of excess cost over fair value of net assets
acquired, and a $301,000 increase in other noninterest expense,
partially offset by a $658,000 decrease in federal insurance
premiums and a $153,000 decrease in legal, examination and other
professional fees. The increase in compensation and employee
benefits was due primarily to salary increases and the
acquisitions of Texas Heritage and L&B Financial. The increases
in occupancy expense, amortization of excess cost over fair value
of net assets acquired, and noninterest expenses were primarily
the result of the acquisitions of Texas Heritage and L&B
Financial. The decrease in federal insurance premiums was the
result of lower assessment rates following the 1996 legislation
to recapitalize the Savings Association Insurance Fund. The
decrease in legal, examination and other professional fees was
primarily the result of additional legal and professional fees
paid in connection with income tax planning and legal expenses
associated with the Company's acquisition activities during the
first six months of 1996. No such expenses occurred during the
like period in 1997.
11<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
INCOME TAX EXPENSE
The Company provides for state and federal income tax expense
based upon earnings before income taxes. The effective tax rate
prior to the non deductible amortization of excess cost over fair
value of net assets acquired for the three months ended June 30,
1997 was 38.2% compared to 39.0% for the like period in 1996.
Under the asset and liability method of accounting for income
taxes, the Company establishes deferred tax assets and
liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when
such amounts are realized or settled.
FINANCIAL CONDITION
The Company's total assets increased $143.9 million, or 12.5%,
from $1,148.1 million at December 31, 1996 to $1,292.0 million at
June 30, 1997. This increase was due principally to a $85.6
million increase in net loans receivable, and a $55.4 million
increase in investment securities. The acquisition of L&B
Financial contributed $70.4 million to net loans receivable and
$57.3 million to investment and mortgage-backed securities.
The Company's savings deposits increased $129.0 million, or
13.6%, from $947.1 million at December 31, 1996 to $1,076.1
million at June 30, 1997. The acquisition of L&B Financial
brought in $104.9 million in new deposits.
Total stockholders' equity increased by $20.4 million, or 22.7%,
to $110.3 million at June 30, 1997 from $89.9 million at December
31, 1996. The Company's ratio of stockholders' equity to assets
increased to 8.54% at June 30, 1997 from 7.83% at December 31,
1996. The increase in stockholders' equity is primarily the
result of shares issued in the acquisition of L&B Financial. The
Company's book value per share at June 30, 1997 was $23.96
compared to $22.34 at December 31, 1996. Unearned ESOP shares of
402,012 and 382,538 were excluded in calculating book value per
share at June 30, 1997 and December 31, 1996, respectively.
12<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
NONPERFORMING ASSETS
Summarized below are nonperforming assets at June 30, 1997 and
December 31, 1996.
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------- -----------
(dollars in thousands)
<S> <C> <C>
Restructured loans (1) $ 176 179
------- -----
Nonaccruing loans:
Residential real estate $ 1,348 1,169
Commercial real estate - -
Construction 296 11
Commercial - 74
Consumer 54 232
------- -----
Total nonaccruing loans 1,698 1,486
Applicable allowance for losses (89) (43)
------- -----
Nonaccruing loans, net 1,609 1,443
------- -----
Foreclosed real estate, net 4,105 4,460
------- -----
Nonperforming assets, net $ 5,890 6,082
======= =====
Nonperforming assets, net as a
percentage of total assets 0.46% 0.53%
==== ====
</TABLE>
(1) Not included in restructured loans is a loan secured by
commercial real estate. Management determined that this
loan should not be considered a nonperforming asset since
the borrower has been current in meeting restructured terms
since the date of restructuring, the restructured loan
provides for principal amortization, and the loan has an
interest rate and other features that are at least
equivalent to market terms. The unpaid balance of this
loan was approximately $3,072,000 and $3,084,000 at June
30, 1997 and December 31, 1996.
Total nonperforming assets decreased $193,000 from $6.1 million
at December 31, 1996 to $5.9 million at June 30, 1997 primarily
as the result of a $356,000 decrease in foreclosed assets,
partially offset by a $166,000 increase in nonaccruing loans.
Loans are placed on nonaccrual status when either principal or
interest is more than 90 days past due or at such time when
management concludes that payment in full is not likely,
whichever is sooner. Any subsequent interest payments received
are recorded as interest income in the period received.
Impaired loans, which are represented by loans on nonaccrual
status and loans where management has some doubt about the
collectability of principal and interest under the contractual
terms of the loans, were $5.1 million and $3.2 million at June
30, 1997 and December 31, 1996, respectively. At June 30, 1997
$338,000 of impaired loans had specific reserves of $109,000 and
the remaining impaired loans of $4.8 million had no specific
reserves. At December 31, 1996 $388,000 of impaired loans had
specific reserves of $80,000 and the remaining impaired loans of
$2.8 million had no specific reserves.
13<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has no business other than that of the
Association and the Bank. The Company is dependent on future
earnings, dividends from the Association and the Bank, or
borrowings for sources of funds. The Association and the Bank
are subject to certain regulatory limitations with respect to the
payment of dividends to the Company.
The Association and the Bank meet all existing regulatory capital
requirements. Capital ratios at June 30, 1997, as computed under
OTS capital standards, are as follows:
<TABLE>
<CAPTION>
Association Bank
-----------------------------------------------
Percent of Percent of
Amount Assets (2) Amount Assets (2)
------ ---------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Tangible capital $ 48,941 7.03% $ 35,340 6.16%
Tangible capital requirement 10,436 1.50 8,603 1.50
-------- ---- -------- ----
Excess $ 38,505 5.53% $ 26,737 4.66%
======== ==== ======== ====
Core capital $ 48,941 7.03% $ 35,340 6.16%
Core capital requirement 20,871 3.00 17,207 3.00
-------- ---- -------- ----
Excess $ 28,069 4.03% $ 18,133 3.16%
======== ==== ======== ====
Total capital (i.e., core and
supplementary capital) $ 50,711 13.20% $ 40,208 10.37%
Risk-based capital requirement 30,744 8.00 31,032 8.00
-------- ---- -------- ----
Excess $ 19,967 5.20% $ 9,176 2.37%
======== ==== ======== ====
</TABLE>
(2) Based upon adjusted total assets for purposes of the
tangible and core capital requirements, and risk-weighted assets
for purposes of the risk-based capital requirement.
The Association and the Bank are required by federal regulations
to maintain specified levels of liquid assets, consisting of cash
and eligible investments. The current level of liquidity
required by the OTS is 5% of the sum of net withdrawable deposits
and borrowings due within one year. The Association and the Bank
have consistently maintained liquidity in excess of required
amounts. The Association's liquidity ratios were 5.86% and 5.57%
at June 30, 1997 and December 31, 1996, respectively. The Bank's
liquidity ratios were 8.12% and 6.40% at June 30, 1997 and
December 31, 1996, respectively.
The Company's primary sources of funds are deposits, principal
and interest payments on loans and mortgage-backed securities,
proceeds from maturing investment securities and cash flows from
operations. In addition, the Association and the Bank have
substantial borrowing authority with the Federal Home Loan Banks
and the ability to borrow against their investment portfolio.
The principal uses of funds by the Company include the
origination of loans secured by real estate and the purchase of
investment securities and mortgage-backed securities.
The Company's primary source of cash for investing and operating
activities has been principal repayments on loans and mortgage-
backed securities, proceeds from the sale of investment and
mortgage-backed securities, proceeds from maturing investment
securities, and increases in savings deposits. Cash flows from
financing activities provided
14<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
$8.9 million in funds during the first six months of 1997. Cash
flows from financing activities consisted primarily of
$24.1 million in increased savings deposits, offset partially by
a reduction in borrowed money of $20.1 million. Cash flows from
these financing activities and investing activities, which
consisted primarily of $199.9 million in principal repayments on
loans and mortgage-backed securities, and $55.7 million in sales
of investment and mortgage-backed securities, were used primarily
to fund the Company's investing activities of originating loans
and purchasing investment securities during the six months ended
June 30, 1997.
The Company anticipates that it will have sufficient funds
available to meet its current commitments. At June 30, 1997, the
Company had commitments to originate loans of $25.6 million, to
purchase residential adjustable-rate mortgages of $1.9 million,
and to sell loans of $5.0 million. Certificates of deposit which
are scheduled to mature in one year or less at June 30, 1997
totaled $543.2 million. Management believes that a significant
portion of such deposits will remain with the Company. In
addition, at June 30, 1997, the Association has an available line
of credit with the FHLB of Des Moines totaling $42.8 million and
the Bank has an available line of credit with the FHLB of Dallas
totaling $11.5 million.
IMPACT OF INFLATION AND CHANGING PRICES
The unaudited consolidated financial statements and related data
presented herein have been prepared in accordance with generally
accepted accounting principles, which require the measurement of
financial position and results of operations in the measurements
of historical dollars without considering changes in the relative
purchasing power of money over time because of inflation. Unlike
most industrial companies, virtually all of the assets and
liabilities of the Company are monetary in nature. As a result,
interest rates have a more significant impact on the Company's
performance than the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or
in the same magnitude as the prices of goods and services. In
the present interest rate environment, the liquidity, maturity
structure, and quality of the Company's assets and liabilities
are important factors in the maintenance of acceptable
performance levels.
IMPACT OF NEW ACCOUNTING STANDARDS
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINQUISHMENTS OF LIABILITIES
On January 1, 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinquishment of
Liabilities", which provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. The statement also
requires that a liability can be derecognized if and only if
either (a) the debtor pays the creditor and is relieved of its
obligation for the liability or (b) the debtor is legally
released from the liability either judicially or by the creditor.
The Statement provides implementation guidance for assessing
isolation of transferred assets and for accounting for transfers
of partial interests, servicing of financial assets,
securitizations, transfers of sales-type and direct financing
lease receivables, securities lending transactions, repurchase
transactions including "dollar rolls", "wash sales", loan
syndications and participations, risk participation in banker's
acceptances, factoring arrangements, transfers of receivables
with recourse, and extinguishments of liabilities. The adoption
of SFAS No. 125 did not have a material effect on the Company's
financial statements.
15<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings per
Share", which establishes standards for computing and presenting
earnings per share (EPS). SFAS No. 128 simplifies existing
standards for computing EPS and makes them comparable to
international standards. It replaces the presentation of primary
EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and
requires a reconciliation of the components of basic and diluted
EPS. Basic EPS excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock
that then shared in the earnings of the Company. SFAS No. 128 is
effective for financial statements issued for periods ending
after December 31, 1997, including interim periods, and requires
restatement of all prior-period EPS data presented. The adoption
of SFAS No. 128 is not expected to have a material impact on the
Company's financial statements.
DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE
In February 1997, the FASB issued SFAS 129 which establishes
standards for disclosing information about an entity's capital
structure. SFAS 129 is effective for financial statements for
periods ending after December 15, 1997. Since SFAS 129 is a
disclosure requirement there will be no impact on the Company's
financial statements.
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS 130 which establishes
standards for reporting and display of comprehensive income and
its components (revenue, expenses, gains, and losses) in a full
set of general-purpose financial statements. SFAS 130 is
effective for fiscal years beginning after December 15, 1997.
SFAS 130 is a reporting and disclosure requirement and.
therefore, will have no impact on the Company's financial
statements.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION
In June 1997, the FASB issued SFAS 131 which establishes
standards for the way that public enterprises report information
about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim reports issued to shareholders.
SFAS 131 is effective for financial statements for periods
beginning after December 15, 1997. Since SFAS 131 was only
recently issued, the Company has not yet determined the impact of
adopting SFAS 131. However, since SFAS 131 is a disclosure
requirement there will be no effect on the Company's financial
position or results of operations
16<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Quantitative and Qualitative Disclosures
About Market Risk
Item is not applicable.
17<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On May 6, 1997, the Company held its Annual Meeting of
Stockholders at which the following matters were voted
on:
Proposal I -- Election of Directors
---------------------
Nominee For Withheld
-------- ----- --------
Edward G. Throop 4,382,313 99,861
========= ======
There were no absentions or broker nonvotes.
The terms of office of Directors David V. McCay,
Forrest W. Miller,Jr., Frank C. Bick, William W.
Canfield and Lloyd D. Doeflinger continued after
the Annual Meeting.
Proposal II -- Ratification of Appointment of
Auditors
------------------------------
For the ratification of KPMG Peat Marwick LLP as
independent auditors for the year ending December
31, 1997:
For Against Abstain
----- ---------- --------
4,443,403 35,007 3,763
========= ====== =====
In addition, there were no broker nonvotes.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K:
On June 10, 1997, the Company filed a Current Report
on Form 8-K reporting under Item 5 its reallocation
of $2.6 million in loan loss allowances from its
Missouri subsidiary to its Texas subsidiary. No
financial statements were filed as part of this
report.
18<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
JEFFERSON SAVINGS BANCORP, INC.
Registrant
Date: August 14, 1997 By: /s/ Paul J. Milano
-----------------------------
Paul J. Milano
Senior Vice President and
Chief Financial Officer
(Duly Authorized
Representative and
Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted
from consolidated financial statements and notes thereto of
Jefferson Savings Bancorp, Inc. at and for the six months ended
June 30, 1997 and is qualified in its entirety by reference to
such financial statements. Dollar amounts (other than per share
data) is in thousands.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,779
<INT-BEARING-DEPOSITS> 14,453
<FED-FUNDS-SOLD> 3,765
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 236,774
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 979,289
<ALLOWANCE> 8,255
<TOTAL-ASSETS> 1,292,021
<DEPOSITS> 1,076,094
<SHORT-TERM> 87,202
<LIABILITIES-OTHER> 18,419
<LONG-TERM> 0
0
0
<COMMON> 50
<OTHER-SE> 110,256
<TOTAL-LIABILITIES-AND-EQUITY> 1,292,021
<INTEREST-LOAN> 39,551
<INTEREST-INVEST> 7,233
<INTEREST-OTHER> 970
<INTEREST-TOTAL> 47,754
<INTEREST-DEPOSIT> 25,982
<INTEREST-EXPENSE> 28,735
<INTEREST-INCOME-NET> 19,019
<LOAN-LOSSES> 912
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 10,999
<INCOME-PRETAX> 8,566
<INCOME-PRE-EXTRAORDINARY> 8,566
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,292
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
<YIELD-ACTUAL> 3.18
<LOANS-NON> 1,609
<LOANS-PAST> 0
<LOANS-TROUBLED> 176
<LOANS-PROBLEM> 3,207
<ALLOWANCE-OPEN> 6,529
<CHARGE-OFFS> 342
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 8,255
<ALLOWANCE-DOMESTIC> 6,963
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,292
</TABLE>
