<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, 1999
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 #0-21466
JEFFERSON SAVINGS BANCORP, INC.
- ------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 43-1625841
- ----------------------------- ---------------------------
(State or other jurisdiction (I.R.S. Employer ID Number)
of incorporation or organization)
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, 1999
- ---------------------------- -------------------------------
Common Stock, Par Value $.01 10,055,112 shares
1
<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. Quantitative and Qualitative
Disclosures About Market Risk 25
PART II OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Changes in Securities and Use
of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Submission of Matters to a Vote of
Security Holders 26
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 29
2
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1999 1998
------ ---- ----
<C> <S> <S>
Cash $ 7,735,351 7,602,268
Interest-bearing deposits 8,858,508 11,271,419
--------------- -------------
Cash and cash equivalents 16,593,859 18,873,687
Investment securities available for sale, at fair value
(amortized cost of $104,510,374 and $154,058,689 at
June 30, 1999 and December 31, 1998, respectively) 102,435,137 154,610,594
Mortgage-backed securities available for sale, at fair
value (amortized cost of $125,260,078 and $32,492,371
at June 30, 1999 and December 31, 1998, respectively) 121,576,113 32,363,687
Loans receivable, net 1,215,225,833 1,118,489,946
Investment in real estate, net 795,468 2,880,759
Stock in Federal Home Loan Banks 17,491,600 11,881,400
Office properties and equipment, net 11,628,785 10,528,413
Deferred tax asset 986,253 --
Excess cost over fair value of net assets acquired 20,984,006 22,141,345
Accrued income and other assets 17,911,702 11,689,680
--------------- -------------
$ 1,525,628,756 1,383,459,511
=============== =============
Liabilities and Stockholders' Equity
------------------------------------
Savings deposits $ 1,007,246,856 1,038,176,484
Borrowed money 377,219,272 209,515,534
Deferred tax liability -- 1,467,000
Advance payments by borrowers for taxes and insurance 8,046,771 2,963,938
Accrued expenses and other liabilities 8,923,667 7,497,854
--------------- -------------
Total liabilities 1,401,436,566 1,259,620,810
--------------- -------------
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 10,098,373 shares at June 30, 1999
and December 31, 1998, respectively 100,984 100,984
Additional paid-in capital 64,741,103 65,404,131
Retained earnings, subject to certain restrictions 67,353,590 63,957,771
Accumulated other comprehensive income (loss) (3,455,202) 254,221
Unamortized restricted stock awards (70,909) (74,243)
Unearned ESOP shares (4,210,957) (4,684,142)
Treasury stock, at cost: 22,361 shares and 73,240
shares at June 30, 1999 and December 31, 1998,
respectively (266,419) (1,120,021)
--------------- -------------
Total stockholders' equity 124,192,190 123,838,701
--------------- -------------
$ 1,525,628,756 1,383,459,511
=============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Income
Three and six months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
------------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans receivable $ 22,999,539 17,963,169 44,114,052 36,564,279
Mortgage-backed securities 1,835,314 998,039 2,672,880 2,239,442
Investment securities 1,739,058 2,737,729 4,008,602 5,093,354
Interest-bearing deposits and federal funds sold 208,943 593,838 549,512 913,615
Stock in Federal Home Loan Banks 262,577 172,486 462,125 436,360
------------ ---------- ---------- ----------
Total interest and dividend income 27,045,431 22,465,261 51,807,171 45,247,050
------------ ---------- ---------- ----------
Interest expense:
Savings deposits 11,982,982 13,227,945 24,276,168 26,333,963
Borrowed money 4,587,183 927,357 7,597,742 1,857,718
------------ ---------- ---------- ----------
Total interest expense 16,570,165 14,155,302 31,873,910 28,191,681
------------ ---------- ---------- ----------
Net interest income 10,475,266 8,309,959 19,933,261 17,055,369
Provision for losses on loans -- (1,200,000) -- (1,200,000)
------------ ---------- ---------- ----------
Net interest income after
provision for losses on loans 10,475,266 9,509,959 19,933,261 18,255,369
------------ ---------- ---------- ----------
Noninterest income:
Servicing and other loan fees 172,191 230,087 335,098 494,058
Fees for other services to customers 333,037 262,340 578,662 496,111
Gain on sales of investment securities, net 19,985 -- 19,985 --
Gain on sales of mortgage-backed securities, net -- 48,166 36,990 48,166
Gain on sales of loans receivable, net 198,100 452,104 445,463 1,080,710
Real estate operations, net (69,555) 128,700 (167,495) 164,192
Other 96,766 4,892 268,531 155,964
------------ ---------- ---------- ----------
Total noninterest income 750,524 1,126,289 1,517,234 2,439,201
------------ ---------- ---------- ----------
Noninterest expense:
General and administrative:
Compensation and employee benefits 3,409,807 3,860,568 6,493,695 7,180,533
Occupancy 809,280 810,670 1,583,299 1,560,144
Advertising 730,285 156,695 859,427 262,654
Federal insurance premiums 152,046 239,914 313,222 489,565
Legal, examination, and other professional fees 657,632 504,378 1,093,149 825,363
Other 1,159,841 1,081,169 2,242,846 2,152,569
------------ ---------- ---------- ----------
Total general and administrative 6,918,891 6,653,394 12,585,638 12,470,828
Amortization of excess cost over fair value
of net assets acquired 447,789 452,728 897,224 903,644
------------ ---------- ---------- ----------
Total noninterest expense 7,366,680 7,106,122 13,482,862 13,374,472
------------ ---------- ---------- ----------
Income before income taxes 3,859,110 3,530,126 7,967,633 7,320,098
Income tax expense 1,567,000 1,710,000 3,247,000 3,303,500
------------ ---------- ---------- ----------
Net income $ 2,292,110 1,820,126 4,720,633 4,016,598
============ ========== ========== ==========
Earnings per share, basic $ .24 .19 .50 .43
============ ========== ========== ==========
Earnings per share, diluted $ .24 .18 .49 .41
============ ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity and
Comprehensive Income
Six months ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Accumulated Unamortized
Common stock Additional other restricted
-------------- paid-in Retained comprehensive stock
Shares Dollars capital earnings income (loss) awards
------ --------- -------- -------- ------------- -------
<C> <S> <S> <S> <S> <S> <S>
Balance at December 31, 1998 10,098,373 $ 100,984 $ 65,404,131 $ 63,957,771 $ 254,221 $ (74,243)
Comprehensive income:
Net income -- -- -- 4,720,633 -- --
Other comprehensive
income, net of
reclassification
adjustment -- -- -- -- (3,709,423) --
Total comprehensive income
Dividends paid ($.14 per share) -- -- -- (1,324,814) -- --
Stock issued in dividend
reinvestment and stock -- -- (11,705) -- -- --
purchase plan
Amortization of restricted
stock awards -- -- 5,667 -- -- 3,334
Amortization of ESOP shares -- -- 363,566 -- -- --
Stock options exercised -- -- (1,155,556) -- -- --
Purchase of treasury stock -- -- -- -- -- --
Tax benefit of non-incentive
stock options exercised -- -- 135,000 -- -- --
---------- --------- ------------ ------------ --------- ---------
Balance at June 30, 1999 10,098,373 $ 100,984 $ 64,741,103 $ 67,353,590 $ (3,455,202) $ (70,909)
========== ========= ============ ============ ============ =========
<CAPTION>
<CAPTION>
Unearned Treasury stock Total
ESOP ------------------ stockholders'
shares Shares Dollars equity
------ --------- -------- ------
<S> <S> <S> <S> <S>
Balance at December 31, 1998 $ (4,684,142) (73,240) $ (1,120,021) $ 123,838,701
Net income -- -- -- 4,720,633
Other comprehensive
income, net of
reclassification
adjustment -- -- -- (3,709,423)
----------
Total comprehensive income 1,011,210
Dividends paid ($.14 per share) -- -- -- (1,324,814)
Stock issued in dividend
reinvestment and stock
purchase plan -- 5,272 72,623 60,918
Amortization of restricted
stock awards -- -- -- 9,001
Amortization of ESOP shares 473,185 -- -- 836,751
Stock options exercised -- 124,807 1,780,823 625,267
Purchase of treasury stock -- (79,200) (999,844) (999,844)
Tax benefit of non-incentive
stock options exercised -- -- -- 135,000
------------ -------- ------------ -------------
Balance at June 30, 1999 $ (4,210,957) (22,361) $ (266,419) $ 124,192,190
============ ======== =========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,720,633 4,016,598
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,684,221 3,333,518
Provision for losses on loans -- (1,200,000)
Net gain on sales of assets (585,247) (1,337,726)
Loans originated for sale (32,312,564) (47,389,331)
Sale of loans originated for sale 34,251,895 47,179,847
Deferred income taxes (2,453,253) (131,300)
Stock dividend from Federal Home Loan Banks (53,100) (96,500)
Other, net (1,682,451) 3,218,138
------------ -----------
Net cash provided by operating activities 4,570,134 7,593,244
------------ -----------
Cash flows from investing activities:
Principal repayments on:
Loans receivable 288,067,153 226,647,919
Mortgage-backed securities 4,110,458 18,506,458
Proceeds from maturity of investment securities 69,095,000 56,020,000
Proceeds from sale of:
Loans receivable -- 22,276,757
Mortgage-backed securities available for sale 4,676,186 45,347,468
Investment securities available for sale 5,010,938 --
Proceeds from redemption of Federal Home Loan Bank stock 3,046,900 8,924,400
Cash invested in:
Loans receivable - originated (230,184,574) (120,417,588)
Loans receivable - purchased (156,514,353) (126,002,841)
Mortgage-backed securities (101,591,817) --
Investment securities (24,481,996) (129,970,313)
Stock in Federal Home Loan Banks (8,604,000) --
Proceeds from sale of real estate 2,133,345 3,310,792
Other, net (1,767,117) (672,727)
------------ -----------
Net cash (used in) provided by investing
activities (147,003,878) 3,970,325
------------ -----------
Cash flows from financing activities:
Increase (decrease) in savings deposits, net (30,994,180) 1,055,167
Increase (decrease) in borrowed money 167,703,738 (3,609,986)
Increase in advance payments by borrowers for taxes
and insurance 5,082,833 4,981,731
Dividends paid (1,324,814) (1,300,371)
Other, net (313,661) 194,913
------------ -----------
Net cash provided by financing
activities 140,153,916 1,321,454
------------ -----------
Increase (decrease) in cash and
cash equivalents (2,279,828) 12,885,023
Cash and cash equivalents at beginning of period 18,873,687 31,582,998
------------ -----------
Cash and cash equivalents at end of period $ 16,593,859 44,468,021
============ ===========
Supplemental disclosures of cash flow information:
Interest paid $ 31,983,200 28,265,879
Income taxes paid 3,851,585 3,514,559
Noncash investing activities:
Additions to real estate acquired in settlement
of loans or through foreclosure 282,263 4,403,383
Loans originated to finance the sale of real estate 126,400 1,047,500
Noncash financing activity - interest credited
to savings deposits 18,210,730 19,459,924
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999
(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 comprehensive income, 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, 1999 and 1998, respectively.
Operating results for the three and six months ended
June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999.
(2) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial
statements include the accounts of Jefferson Savings Bancorp,
Inc. ("the Company") and its wholly owned subsidiary, Jefferson
Heritage Bank ("Jefferson Heritage" or "the Bank"). On December
31, 1998, the Company merged First Federal Savings Bank of North
Texas into Jefferson Savings and Loan Association, F.A.
("Jefferson Savings") and now operates as a single business
segment. On January 20, 1999, Jefferson Savings changed its
name to Jefferson Heritage Bank. Jefferson Heritage's wholly
owned subsidiaries are Jefferson Heritage Mortgage Company,
Jefferson Financial, Inc., Jefferson Financial Corporation and
First Service Corporation, Inc. All significant intercompany
items have been eliminated.
(3) Earnings Per Share
The following table reconciles the numerators and
denominators for basic and diluted earnings per share for the
three-month and six-month periods ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended June 30,
1999 1998
---- ----
<S> <C> <C>
Numerator:
Net income (basic and diluted earnings per share) $ 2,292,110 1,820,126
=========== =========
Denominator:
Average shares outstanding (basic earnings per share) 9,510,394 9,338,831
Effect of dilutive stock options 199,298 532,563
----------- ---------
Average shares outstanding after assumed
conversions (diluted earnings per share) 9,709,692 9,871,394
=========== =========
</TABLE>
7
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1999 1998
---- ----
<S> <C> <C>
Numerator:
Net income (basic and diluted earnings per share) $4,720,633 4,016,598
========== =========
Denominator:
Average shares outstanding (basic earnings per share) 9,488,791 9,319,902
Effect of dilutive stock options 227,742 522,360
---------- ---------
Average shares outstanding after assumed
conversions (diluted earnings per share) 9,716,533 9,842,262
========== =========
</TABLE>
Only employee stock ownership plan shares that have been
allocated or committed to be released are considered outstanding
for earnings per share calculations.
(4) COMPREHENSIVE INCOME
Comprehensive income for the three-month and
six-month periods ended June 30, 1999 and 1998 is summarized as
follows:
<TABLE>
<CAPTION>
Three months ended June 30,
1999 1998
---- ----
<S> <C> <C>
Net income $ 2,292,110 1,820,126
Other comprehensive income (loss):
Realized and unrealized holding gain (loss)
arising during the period, net of tax (3,167,497) (153,412)
Less: reclassification adjustment for realized
gain (loss) included in net income, net of tax 11,991 28,900
---------- ---------
Total other comprehensive income (loss) (3,179,488) (182,312)
---------- ---------
Total comprehensive income $ (887,378) 1,637,814
=========== =========
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30,
1999 1998
---- ----
<S> <C> <C>
Net income $ 4,720,633 4,016,598
Other comprehensive income (loss):
Realized and unrealized holding gain (loss)
arising during the period, net of tax (3,675,238) (91,176)
Less: reclassification adjustment for realized
gain (loss) included in net income, net of tax 34,185 28,900
---------- ---------
Total other comprehensive income (loss) (3,709,423) (120,076)
---------- ---------
Total comprehensive income $ 1,011,210 3,896,522
=========== =========
</TABLE>
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 financial condition and the
results of operations of the Company as of and for the three and
six months ended June 30, 1999.
FINANCIAL CONDITION
The Company's primary strategy is to continue building its
core retail banking business, which is the origination of loans
funded by savings deposits. The Company has targeted new loan
markets to provide another source of loan production. It
recently formed Jefferson Heritage Mortgage Company, a wholly
owned subsidiary of Jefferson Heritage. The mortgage company
will initially penetrate markets outside the Bank's primary
lending areas with the production of permanent mortgage and
higher yielding construction loans. The targeted secondary
markets include El Paso, Austin, Nashville, Phoenix, Tucson, Las
Vegas, and Oklahoma City. The Company has also developed new
financial products designed to attract noninterest bearing
deposits and increase fee income.
The Company's total assets increased $142.2 million, or
10.3%, to $1.53 billion at June 30, 1999 from $1.38 billion at
December 31, 1998. Loans receivable increased $96.7 million, or
8.6%, to $1.22 billion at June 30, 1999 from $1.12 billion at
December 31, 1998.
The Company supplements asset growth with the purchase of
investment and mortgage-backed securities. It chooses between
these two types of investments depending on the instruments'
interest rate risk characteristics and the yields available in
the market. Mortgage-backed securities increased $89.2 million,
or 275.7%, to $121.6 million at June 30, 1999 from $32.4 million
at December 31, 1998. Investment securities decreased $52.2
million, or 33.7%, to $102.4 million at June 30, 1999 from
$154.6 million at December 31, 1998. The increase in
mortgage-backed securities was funded by the decrease in
investment securities and advances from the Federal Home Loan
Bank ("FHLB") of Des Moines and was undertaken as part of the
Company's strategy to better leverage its capital.
The Company has substantial borrowing capacity with the
FHLB and generally chooses between savings deposits and
borrowings, depending on their relative costs, when funding its
investing activities. Savings deposits decreased $30.9 million,
or 3.0%, from $1.04 billion at December 31, 1998 to $1.01
billion at June 30, 1999. Borrowed money increased $167.7
million, or 80.0%, from $209.5 million at December 31, 1998 to
$377.2 million at June 30, 1999.
Stockholders' equity increased $353,000, or .3%, to $124.2
million at June 30, 1999 from $123.8 million at December 31,
1998. The ratio of stockholders' equity to assets declined to
8.14% at June 30, 1999 compared to 8.95% at December 31, 1998
consistent with management's plan to better leverage
stockholders' equity. The Company's book value per share at
June 30, 1999 was $13.01 compared to $13.13 at December 31,
1998. Unearned ESOP shares of 528,237 and 591,503 were excluded
in calculating book value per share at June 30, 1999 and
December 31, 1998, respectively. The Company's board of
directors approved, on September 3, 1998, the repurchase of up
to 300,000 shares of its common stock in the open market. The
Company repurchased 79,200 shares during the first six months of
1999 and 63,600 shares remain to be purchased under the current
program. There were 10,076,012 common shares outstanding at
June 30, 1999.
9
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND COSTS
The following table sets forth certain information relating
to the Company's average interest-earning assets and
interest-bearing liabilities including the average yield on such
assets and the average cost of such liabilities for the periods
indicated. Such yields and costs are derived by dividing
annualized income or expense by the average three-month and
six-month average balances of assets or liabilities, respective-
ly, for the periods indicated. During 1999 the method used to
calculate average balances was changed from average month-end
balances during 1998 to average daily balances during 1999. The
use of average daily balances during the 1998 periods would not
have resulted in a material difference in the information
presented. During the periods indicated, nonaccrual loans are
included in loans receivable.
10
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
<TABLE>
<CAPTION>
Three month period ended June 30,
-------------------------------------------------------------------
1999 1998
------------- ------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 1,195,771 $23,000 7.69% $ 902,586 $ 17,963 7.96%
Mortgage-backed securities 120,895 1,835 6.07 60,078 998 6.64
Investment securities 110,069 1,739 6.32 173,676 2,738 6.31
Other interest-earning assets 32,826 472 5.75 48,039 766 6.38
----------- ------- ---------- --------
Total interest-earning assets 1,459,561 27,046 7.41 1,184,379 22,465 7.59
Noninterest-earning assets 56,489 ------ 58,537 ------
----------- ----------
Total assets $ 1,516,051 $1,242,916
=========== ==========
Interest-bearing liabilities:
Savings deposits:
Passbook and statement savings,
NOW and money market accounts $ 247,147 $ 1,839 2.98 $ 232,259 $ 1,848 3.18
Certificates of deposit 767,901 10,144 5.28 809,388 11,380 5.62
----------- ------- ---------- --------
Total savings deposits 1,015,048 11,983 4.72 1,041,647 13,228 5.08
Borrowed money 353,444 4,587 5.19 62,614 927 5.92
----------- ------- ---------- --------
Total interest-bearing
liabilities 1,368,492 16,570 4.84 1,104,261 14,155 5.13
------ ------
Noninterest-bearing liabilities 21,782 18,631
----------- ----------
Total liabilities 1,390,274 1,122,892
Stockholders' equity 125,777 120,024
----------- ----------
Total liabilities and
stockholders' equity $1,516,051 $1,242,916
========== ==========
Net interest income $10,476 $8,310
======= ======
Interest rate spread 2.57% 2.46%
==== ====
Net interest margin 2.87% 2.81%
Ratio of average interest-earning assets ==== ====
to average interest-bearing liabilities 106.65% 107.26%
====== ======
<CAPTION>
<CAPTION>
Six month period ended June 30,
-------------------------------------------------------------------
1999 1998
------------- ------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 1,154,156 $44,114 7.64% $ 910,120 $ 36,564 8.04%
Mortgage-backed securities 88,484 2,673 6.04 70,000 2,239 6.40
Investment securities 126,531 4,009 6.34 158,400 5,093 6.43
Other interest-earning assets 38,551 1,012 5.25 44,269 1,351 6.10
----------- ------- ---------- --------
Total interest-earning assets 1,407,722 51,807 7.36 1,182,788 45,247 7.65
Noninterest-earning assets 55,247 ------ 59,402 ------
----------- ----------
Total assets $ 1,462,969 1,242,191
=========== ==========
Interest-bearing liabilities:
Savings deposits:
Passbook and statement savings,
NOW and money market accounts $ 243,864 $ 3,640 2.98 $ 231,843 $ 3,680 3.17%
Certificates of deposit 776,735 20,637 5.31 809,798 22,654 5.59
---------- ------- ---------- --------
Total savings deposits 1,020,599 24,276 4.76 1,041,641 26,334 5.06
Borrowed money 297,790 7,598 5.10 64,242 1,858 5.78
---------- ------- ---------- --------
Total interest-bearing
liabilities 1,318,389 31,874 4.84 1,105,883 28,192 5.10
------ ------
Noninterest-bearing liabilities 19,150 17,588
---------- ----------
Total liabilities 1,337,538 1,123,471
Stockholders' equity 125,431 118,720
---------- ----------
Total liabilities and
stockholders' equity $1,462,969 $1,242,191
========== ==========
Net interest income $ 19,933 $ 17,055
======== ========
Interest rate spread 2.53% 2.55%
==== ====
Net interest margin 2.83% 2.88%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 106.78% 106.95%
====== ======
</TABLE>
11
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following table allocates the period-to-period changes
in the Company's various categories of interest income and
expense between changes due to changes in volume (calculated by
multiplying the change in average volumes of the related
interest-earning asset or interest-bearing liability category by
the prior year's rate) and changes due to changes in rate
(change in rate multiplied by the prior year's volume). Changes
due to changes in rate/volume (changes in rate multiplied by
changes in volume) have been allocated proportionately between
changes in volume and changes in rate.
<TABLE>
<CAPTION>
Three and six month periods ended June 30, 1999 and 1998
---------------------------------------------------------
Three months of 1999 vs. 1998 Six months of 1999 vs. 1998
------------------------------ -----------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------ -----------------------------
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income:
Loans receivable $ 4,928 $ 109 $ 5,037 $12,411 $(4,861) $ 7,550
Mortgage-backed securities 810 27 837 711 (337) 434
Investment securities (906) (93) (999) (1,011) (74) (1,085)
Other interest-earning assets (215) (79) (294) (163) (176) (339)
------- ------ ------- ------- ------- -------
Total interest and dividend income 4,617 (36) 4,581 12,008 (5,448) 6,560
------- ------ ------- ------- ------- -------
Interest expense:
Savings deposits:
Passbook and statement savings,
NOW, and money market accounts 36 (45) (9) 390 (431) (41)
Certificates of deposit (553) (683) (1,236) (904) (1,113) (2,017)
------- ------ ------- ------- ------- -------
Total savings deposits (517) (728) (1,245) (514) (1,544) (2,058)
Borrowed money 3,640 20 3,660 6,407 (667) 5,740
------- ------ ------- ------- ------- -------
Total interest expense 3,123 (708) 2,415 5,893 (2,211) 3,682
------- ------ ------- ------- ------- -------
Change in net interest income $ 1,494 $ 672 $ 2,166 $ 6,115 $(3,237) $ 2,878
======= ====== ======= ======= ======= =======
</TABLE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999
NET INCOME. Net income for the second quarter of 1999
increased to $2.3 million compared to $1.8 million for the
second quarter of 1998. Basic and diluted earnings per share
increased to $0.24 and $0.24, respectively for the second
quarter of 1999 compared to $0.19 and $0.18, respectively for
the comparable period a year ago. Annualized return on average
equity and annualized return on average assets for the second
quarter of 1999 were 7.29% and 0.60%, respectively compared to
6.09% and 0.59%, respectively for the second quarter of 1998.
NET INTEREST INCOME. Net interest income for the second
quarter of 1999 increased $2.2 million, or 26.1%, to $10.5
million compared to $8.3 million for the second quarter of 1998.
The increase was the result of an increase in the average
balance of net interest-earning assets and an increase in the
Company's interest rate spread from 2.47% for the quarter ended
June 30, 1998 to 2.57% for the quarter ended June 30, 1999. The
growth in net interest-earning assets was primarily the result
of strong growth in loans receivable. The increase in the
interest rate spread was the result of a 29 basis point decrease
in the average cost of interest-bearing liabilities partially
offset by a 19 basis point decrease in the average yield on
interest-earning assets.
12
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTEREST AND DIVIDEND INCOME. Total interest and dividend
income increased $4.6 million, or 20.4%, from $22.5 million for
the second quarter of 1998 to $27.0 million for the second
quarter of 1999. The increase resulted from an increase in the
average balance of interest-earning assets from $1.18 billion
for the second quarter of 1998 to $1.46 billion for the second
quarter of 1999 partially offset by a decline in the average
yield on interest earning assets from 7.60% to 7.41% during the
same periods.
Interest income on loans receivable increased $5.0 million,
or 28.0%, as the result of a $294.6 million increase in the
average balance of loans receivable between the comparable
periods partially offset by a decrease in the average yield from
7.97% for the second quarter of 1998 to 7.69% for the second
quarter of 1999. Loan originations grew 49%, to approximately
$137 million for the second quarter of 1999 compared to
approximately $92 million for the comparable period in 1998.
The Company experienced an increase in construction loan
activity in its Dallas market and in its new market areas of
Austin, El Paso, and Phoenix. In addition, the Company
experienced an increase in commercial real estate lending in its
St. Louis market. As expected in the current rate environment,
the Company continued to experience significant loan repayments,
which totaled approximately $145 million for the second quarter
of 1999 compared to approximately $122 million for the second
quarter of 1998. Refinancings continued to erode the Company's
higher yielding loans resulting in a shift in the Company's loan
portfolio into lower margin loans. The Company continued to
supplement its loan origination activity with loan purchases to
help offset the effect of this high repayment activity. Loan
purchases totaled $58 million for the second quarter of 1999
compared to $89 million for the second quarter of 1998.
Combined interest income on all other interest-earning
assets decreased $456,000, or 10.1%, mainly as the result of a
$18.2 million decrease in the combined average balance. Funds
from repayments, sales, and maturities were reinvested in higher
yielding loans receivable.
INTEREST EXPENSE. Interest expense increased $2.4 million,
or 17.1%, from $14.2 million for the second quarter of 1998 to
$16.6 million for the second quarter of 1999 due to an increase
in interest expense on borrowed money partially offset by a
decline in interest expense on savings deposits. Interest
expense on borrowed money increased $3.7 million mainly as the
result of a $290.4 million increase in the average balance as
the Company used borrowed money to fund asset growth. Interest
expense on savings deposits decreased $1.2 million as the result
of a decrease in the average cost from 5.08% for the second
quarter on 1998 to 4.72% for the second quarter of 1998 combined
with a $25.6 million decrease in the average balance.
PROVISION FOR LOSSES ON LOANS. The allowance for losses on
loans is maintained at a level considered adequate to absorb
potential loan losses determined on the basis of management's
continuing review and evaluation of the loan portfolio and its
judgement as to the impact of economic conditions on the
portfolio. The evaluation by management includes consideration
of past loan loss experiences and trends, changes in the
composition of the loan portfolio, the current volume and
condition of loans outstanding and the probability of collecting
all amounts due. Based on this evaluation, no provision for
13
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
losses on loans was recorded during the six months ended June
30, 1999. The Company recaptured $1.2 million of loan loss
reserves during the six months ended June 30, 1998 by recording
a credit to the provision for losses on loans. At June 30,
1999, the allowance for losses on loans was $6.6 million, which
represented .55% of net loans receivable compared to $6.7
million, or .60% of net loans receivable at December 31, 1998.
Loan charge-offs declined to $22,000 for the first six months of
1999 compared to $250,000 for the first six months of 1998. At
June 30, 1999, the ratio of nonaccruing loans to net loans
receivable was .63% compared to .33% at December 31, 1998. The
increase in the ratio was due to a $3.2 million increase in
nonaccruing loans partially offset by a $96.7 million, or 8.6%,
increase in net loans receivable.
NONINTEREST INCOME. Total noninterest income decreased
$922,000, or 37.8%, from $2.4 million for the six months ended
June 30, 1998 to $1.5 million for the six months ended June 30,
1999 primarily due to lower gains on sale of loans and real
estate operations and reduced servicing and other loan fees,
partially offset by increases in other noninterest income and
fees for other services to customers. Gain on sale of loans
decreased $635,000, or 58.8%, from $1.1 million for the six
months ended June 30, 1998 to $445,000 for the six months ended
June 30, 1999. Loan sales declined from $69.5 million to $34.3
million during the same periods as the result of a decline in
the demand for the Company's thirty-year, fixed-rate loan
products which the Company sells at the time of origination to
limit its exposure to interest rate risk. Real estate
operations decreased $332,000 primarily due to $171,000 in
write-downs on three foreclosed properties during the six months
ended June 30, 1999 compared to gains of $208,000 during the six
months ended June 30, 1998. Servicing and other fees decreased
$159,000, or 32.2%, primarily due to a $65,000 decrease in loan
conversion fee income and a $44,000 increase in expense related
to the amortization of capitalized mortgage servicing rights.
Other noninterest income increased $113,000 primarily due to a
$54,000 increase in commissions related to check processing.
Fees for other services to customers increased $83,000, or
16.6%, primarily due to a $81,000 increase in commissions
related to the sale of financial services.
14
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
NONINTEREST EXPENSE. Noninterest expense increased
$108,000, or .8%, from $13.4 million for the six months ended
June 30, 1998 to $13.5 million for the six months ended June 30,
1999 primarily due to increases in advertising and legal,
examination and other professional fees, partially offset by
decreases in compensation and employee benefits and federal
deposit insurance premiums. Advertising increased $597,000 due
primarily to approximately $600,000 of nonrecurring expenses
associated with the Bank's recent name change. Legal, examina-
tion and other professional fees increased $268,000 due
primarily to approximately $200,000 of nonrecurring expenses
related to the agreement reached with several of the Company's
major shareholders regarding the election of directors at its
June 21, 1999 annual meeting. Compensation and employee
benefits decreased $687,000 primarily due to a $1.1 million
reduction in expense related to the Company's employee stock
ownership plan ("ESOP"), a $143,000 increase in compensation
deferred under SFAS No. 91, which relates to direct salary
expense allocated to loans originated and a $86,000 reduction in
medical expenses related to the Company's change in medical
insurance programs. ESOP expense is based on the average market
value of the Company's stock which decreased approximately 51.8%
between the respective periods. This activity was partially
offset by a $478,000 increase in salary expense and a $305,000
increase in retail incentives and loan commissions. Federal
deposit insurance premiums decreased $176,000, or 36.0%, from
$490,000 for the six months ended June 30, 1998 to $313,000 for
the six months ended June 30, 1999 due to a decrease in the
balance of savings deposits and a reduction in the premium rate
from 0.091% to 0.061% effective January 1, 1999.
INCOME TAX EXPENSE. The Company provides for state and
federal income tax expense based upon earnings before income
taxes. 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. The effective tax rate
for the six months ended June 30, 1999 was 36.6% compared to
40.2% for the like period in 1998. The effective tax rates for
1999 and 1998 differ from the statutory tax rate of 35.0%
primarily due to the nondeductibility of the amortization of
excess cost over fair values of net assets acquired and the
excess of market value over cost of ESOP shares amortized.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999
NET INCOME. Net income for the six months ended June 30,
1999 increased to $4.7 million compared to $4.0 million for the
six months ended June 30, 1998. Basic and diluted earnings per
share increased to $0.50 and $0.49, respectively for the six
months ended June 30, 1999 compared to $0.43 and $0.41,
respectively for the comparable period a year ago. Annualized
return on average equity and annualized return on average assets
for the six months ended June 30, 1999 were 7.53% and 0.65%,
respectively compared to 6.77% and 0.65%, respectively for the
six months ended June 30, 1998.
NET INTEREST INCOME. Net interest income for the six
months ended June 30, 1999 increased $2.9 million, or 16.9%, to
$19.9 million compared to $17.1 million for the six months ended
June 30, 1998. The increase was the result of an increase in
the average balance of net interest-earning assets partially
offset by a decrease in the Company's interest rate spread from
2.55% for the six months ended June 30, 1998 to 2.53% for the
six months ended June 30, 1999. The growth in net
interest-earning assets was primarily the result of strong
growth in loans receivable. The decrease in the interest rate
spread was primarily the result of a 29 basis point decrease in
the average yield on interest-earning assets partially offset by
a 26 basis point decrease in the average cost of savings
deposits and borrowed money.
15
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTEREST AND DIVIDEND INCOME. Total interest and dividend
income increased $6.6 million, or 14.5%, from $45.2 million for
the six months ended June 30, 1998 to $51.8 million for the six
months ended June 30, 1999. The increase resulted from an
increase in the average balance of interest-earning assets from
$1.18 billion for the six months ended June 30, 1998 to $1.41
billion for the six months ended June 30, 1999 partially offset
by a decline in the average yield on interest earning assets
from 7.65% to 7.36% during the same periods.
Interest income on loans receivable increased $7.5 million,
or 20.6%, as the result of a $244.0 million increase in the
average balance of loans receivable between the comparable
periods partially offset by a decrease in the average yield from
8.04% for the six months ended June 30, 1998 to 7.64% for the
six months ended June 30, 1999. Loan originations grew 56%, to
approximately $262 million for the six months ended June 30,
1999 compared to approximately $168 million for the comparable
period in 1998. The Company experienced an increase in
construction loan activity in its Dallas market and in its new
market areas of Austin, El Paso, and Phoenix. In addition, the
Company experienced an increase in commercial real estate
lending in its St. Louis market. As expected in the current
rate environment, the Company continued to experience
significant loan repayments, which totaled approximately $288
million for the six months ended June 30, 1999 compared to
approximately $227 million for the six months ended June 30,
1998. The 1999 repayment activity equates to an annualized
repayment rate of approximately 52% of the portfolio balance at
December 31, 1998. Refinancings continued to erode the
Company's higher yielding loans resulting in a shift in the
Company's loan portfolio into lower margin loans. The Company
continued to supplement its loan origination activity with loan
purchases to help offset the effect of this high repayment
activity. Loan purchases totaled $157 million for the six
months ended June 30, 1999 compared to $126 million for the six
months ended June 30, 1998.
Combined interest income on all other interest-earning
assets decreased $990,000, or 11.4%, mainly as the result of a
$19.1 million decrease in the combined average balance. Funds
from repayments, sales, and maturities were reinvested in higher
yielding loans receivable.
INTEREST EXPENSE. Interest expense increased $3.7 million,
or 13.1%, from $28.2 million for the six months ended June 30,
1998 to $31.9 million for the six months ended June 30, 1999 due
to an increase in interest expense on borrowed money partially
offset by a decline in interest expense on savings deposits.
Interest expense on borrowed money increased $5.7 million as the
result of a $233.5 million increase in the average balance
partially offset by a decrease in the average cost from 5.78%
for the second quarter on 1998 to 5.10% for the six months ended
June 30, 1998. Interest expense on savings deposits decreased
$2.1 million as the result of a decrease in the average cost
from 5.06% for the six months ended June 30, 1998 to 4.76% for
the six months ended June 30, 1999 combined with a $21.0 million
decrease in the average balance.
PROVISION FOR LOSSES ON LOANS. The allowance for losses on
loans is maintained at a level considered adequate to absorb
potential loan losses determined on the basis of management's
continuing review and evaluation of the loan portfolio and its
judgement as to the impact of economic conditions on
16
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
the portfolio. The evaluation by management includes
consideration of past loan loss experiences and trends, changes
in the composition of the loan portfolio, the current volume and
condition of loans outstanding and the probability of collecting
all amounts due. Based on this evaluation, no provision for
losses on loans was recorded during the six months ended June
30, 1999. The Company recaptured $1.2 million of loan loss
reserves during the six months ended June 30, 1998 by recording
a credit to the provision for losses on loans. At June 30,
1999, the allowance for losses on loans was $6.6 million, which
represented .55% of net loans receivable compared to $6.7
million, or .60% of net loans receivable at December 31, 1998.
Loan charge-offs declined to $22,000 for the first six months of
1999 compared to $250,000 for the first six months of 1998. At
June 30, 1999, the ratio of nonaccruing loans to net loans
receivable was .63% compared to .33% at December 31, 1998. The
increase in the ratio was due to a $3.2 million increase in
nonaccruing loans partially offset by a $96.7 million, or 8.6%,
increase in net loans receivable.
NONINTEREST INCOME. Total noninterest income decreased
$922,000, or 37.8%, from $2.4 million for the six months ended
June 30, 1998 to $1.5 million for the six months ended June 30,
1999 primarily due to lower gains on sale of loans and real
estate operations and reduced servicing and other loan fees,
partially offset by increases in other noninterest income and
fees for other services to customers. Gain on sale of loans
decreased $635,000, or 58.8%, from $1.1 million for the six
months ended June 30, 1998 to $445,000 for the six months ended
June 30, 1999. Loan sales declined from $69.5 million to $34.3
million during the same periods as the result of a decline in
the demand for the Company's thirty-year, fixed-rate loan
products which the Company sells at the time of origination to
limit its exposure to interest rate risk. Real estate
operations decreased $332,000 primarily due to $171,000 in
write-downs on three foreclosed properties during the six months
ended June 30, 1999 compared to gains of $208,000 during the six
months ended June 30, 1998. Servicing and other fees decreased
$159,000, or 32.2%, primarily due to a $65,000 decrease in loan
conversion fee income and a $44,000 increase in expense related
to the amortization of capitalized mortgage servicing rights.
Other noninterest income increased $113,000 primarily due to a
$54,000 increase in commissions related to check processing.
Fees for other services to customers increased $83,000, or
16.6%, primarily due to a $81,000 increase in commissions
related to the sale of financial services.
NONINTEREST EXPENSE. Noninterest expense increased
$108,000, or .8%, from $13.4 million for the six months ended
June 30, 1998 to $13.5 million for the six months ended June 30,
1999 primarily due to increases in advertising and legal,
examination and other professional fees, partially offset by
decreases in compensation and employee benefits and federal
deposit insurance premiums. Advertising increased $597,000 due
primarily to approximately $600,000 of nonrecurring expenses
associated with the Bank's recent name change. Legal, examina-
tion and other professional fees increased $268,000 due pri-
marily to approximately $200,000 of nonrecurring expenses
related to the agreement reached with several of the Company's
major shareholders regarding the election of directors at its
June 21, 1999 annual meeting. Compensation and employee
benefits decreased $687,000 primarily due to a $1.1 million
reduction in expense related to the Company's employee stock
ownership plan ("ESOP"), a $143,000 increase in compensation
deferred under SFAS No. 91, which relates to direct salary
expense allocated to loans originated and a $86,000 reduction in
medical expenses related to the Company's change in medical
insurance programs. ESOP expense is based on the average market
value of the
17
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Company's stock which decreased approximately 51.8% between the
respective periods. This activity was partially offset by a
$478,000 increase in salary expense and a $305,000 increase in
retail incentives and loan commissions. Federal deposit
insurance premiums decreased $176,000, or 36.0%, from $490,000
for the six months ended June 30, 1998 to $313,000 for the six
months ended June 30, 1999 due to a decrease in the balance of
savings deposits and a reduction in the premium rate from 0.091%
to 0.061% effective January 1, 1999.
INCOME TAX EXPENSE. The Company provides for state and
federal income tax expense based upon earnings before income
taxes. 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. The effective tax rate
for the six months ended June 30, 1999 was 36.6% compared to
40.2% for the like period in 1998. The effective tax rates for
1999 and 1998 differ from the statutory tax rate of 35.0%
primarily due to the nondeductibility of the amortization of
excess cost over fair values of net assets acquired and the
excess of market value over cost of ESOP shares amortized.
NONPERFORMING ASSETS
Summarized below are nonperforming assets at June 30, 1999 and
December 31, 1998
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
(dollars in thousands)
<S> <C> <C>
Restructured loans $ 1,003 1,245
------- -----
Nonaccruing loans:
Residential real estate $ 3,451 1,740
Commercial real estate 3,101 121
Construction 1,032 1,766
Commercial -- --
Consumer 80 82
------- -----
Total nonaccruing loans 7,664 3,709
Applicable allowance for losses (808) (30)
------- -----
Nonaccruing loans, net 6,856 3,679
------- -----
Foreclosed real estate, net 795 2,881
------- -----
Nonperforming assets, net $ 8,654 7,804
======= =====
Nonperforming assets, net as a
percentage of total assets 0.57% 0.56%
==== ====
</TABLE>
Total nonperforming assets increased $850,000 ($1.3 million
prior to the increase in applicable allowance for losses on
nonperforming assets) from $7.8 million at December 31, 1998 to
$8.7 million at
18
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
June 30, 1999 primarily as the result of a $3.0 million increase
in nonaccruing commercial real estate loans and a $1.7 million
increase in nonaccruing residential real estate loans. This was
partially offset by a $733,000 decrease in nonaccruing construc-
tion loans and a $2.1 million decrease in foreclosed assets.
The increase in nonaccruing commercial real estate loans was
primarily due to a $2.3 million loan secured by a retail
shopping center in St. Louis, Missouri. The increase in
nonaccruing residential loans was due to the net addition of
nineteen single-family permanent loans classified as nonaccrual
during the first six months of 1999. The decrease in foreclosed
real estate was primarily due to the sale of approximately $2.7
million in foreclosed real estate during the six-month period
ending June 30, 1999 partially offset by four foreclosures for
$282,000 during the same period.
At June 30, 1999, the Company had four loans totaling
$94,000 that were more than 90 days past the maturity date
stated in the note with regard to principal repayment. The
Company has continued collecting interest payments on the loans
which were greater than 90 days past due and still accruing
interest. Loans are generally 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 believes it is
probable that they will be unable to collect principal and
interest under the contractual terms of the loans, were $7.7
million and $6.2 million at June 30, 1999 and December 31, 1998,
respectively. At June 30, 1999 $2.3 million of impaired loans
had specific reserves of $808,000 and the remaining impaired
loans of $5.4 million had no specific reserves. At December 31,
1998 $62,000 of impaired loans had specific reserves of $30,000
and the remaining impaired loans of $6.1 million had no specific
reserves. The increase in impaired loans was primarily due to a
$3.2 million increase in nonaccrual loans during the first six
months of 1999.
Activity in the allowance for loan losses is summarized as
follows:
<TABLE>
<CAPTION>
Six months ended June 30,
1999 1998
---- ----
<S> <C> <C>
Balance at beginning of period $ 6,659,294 8,182,268
Provision charged to expense -- (1,200,000)
Recoveries 344 4,239
Charge-offs (21,754) (250,489)
----------- ---------
Balance at end of period $ 6,637,884 6,736,018
=========== =========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has no business other than that of
the Jefferson Heritage. The Company is dependent on future
earnings, dividends from Jefferson Heritage, or borrowings for
sources of funds. Jefferson Heritage is subject to certain
regulatory limitations with respect to the payment of dividends
to
19
<PAGE>
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
the Company.
The capital regulations of the OTS require thrift
institutions to maintain tangible capital equal to 1.5% of total
adjusted assets, a minimum 3% leverage (core capital) ratio, and
an 8% risk-based capital ratio. The risk-based capital
requirement is calculated based on the credit risk presented by
both on-balance-sheet assets and off-balance-sheet commitments
and obligations. Assets are assigned a credit-risk weighting
based upon their relative risk ranging from 0% for assets backed
by the full faith and credit of the United States or that pose
no credit risk to the institution to 100% for assets such as
delinquent or repossessed assets. As of June 30, 1999,
Jefferson Heritage met all OTS capital requirements.
Jefferson Heritage is also subject to the capital based
framework for prompt corrective action. To be categorized as
well capitalized, an institution must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table below. For purposes of this regulation, Tier
I capital has the same definition as core capital. As of June
30, 1999, Jefferson Heritage was considered well capitalized.
Following are the actual and required capital amounts and
ratios of Jefferson Heritage as of June 30, 1999:
<TABLE>
<CAPTION>
Prompt Corrective
action requirements -
Actual Requirements well capitalized
----------------- ------------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Tangible capital: (1) $ 98,590,306 6.53% $ 22,652,567 1.50% NA
Core capital: (1) 98,590,306 6.53% 45,305,134 3.00% $75,508,557 5.00%
Risk-based capital: (2) 103,963,458 10.73% 77,502,309 8.00% 96,877,886 10.00%
Tier I capital: (2) 98,590,306 10.18% NA 58,126,732 6.00%
<FN>
(1) To adjusted total assets
(2) To risk-weighted assets
</FN>
</TABLE>
Jefferson Heritage is 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 4% of the sum of net withdrawable
deposits and borrowings due within one year. Jefferson Heritage
has consistently maintained liquidity in excess of required
amounts. Jefferson Heritage's liquidity ratio was 18.03% and
18.42% at June 30, 1999 and December 31, 1998, 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, Jefferson Heritage has
substantial borrowing capacity with the Federal Home
20
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<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Loan Bank and the ability to borrow against it's investment
portfolio.
The principal uses of funds by the Company include the
origination and purchase of loans secured by real estate and the
purchase of investment securities and mortgage-backed
securities.
Cash flows used by investing activities totaled $147.0
million during the first six months of 1999. Cash flows from
these investing activities, which consisted primarily of $292.2
million in principal repayments on loans and mortgage-backed
securities, $69.1 million in proceeds from maturity of invest-
ment securities and $9.7 million in sales of investment
securities and mortgage-backed securities, and were used pri-
marily to fund the Company's investing activities of originating
and purchasing loans and purchasing mortgage-backed securities
during the six months ended June 30, 1999 and to increase
liquidity.
The Company anticipates that it will have sufficient funds
available to meet its current commitments. At June 30, 1999,
the Company had commitments to originate loans totaling $50.0
million, to purchase residential mortgages of $5.2 million, to
purchase mortgage-backed securities of $2.9 million, to purchase
investment securities of $2.0 million and to sell loans of $4.9
million. Certificates of deposit which are scheduled to mature
in one year or less at June 30, 1999 totaled $625.5 million.
Management believes that a significant portion of such deposits
will remain with the Company. In addition, at June 30, 1999,
Jefferson Heritage has an available line of credit with the FHLB
of Des Moines totaling $25.0 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 Derivative Instruments and Hedging
Activities. In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities",
which establishes standards for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 requires an
entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure
those instruments at fair value. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and
21
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<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 33, an Amendment of FASB Statement No. 133", which
defers the effective date of SFAS 133 from fiscal years
beginning after June 15, 1999 to fiscal years beginning after
June 15, 2000. Earlier application of SFAS No. 133, as amended,
is encouraged but should not be applied retroactively to
financial statements of prior periods. The Company is currently
evaluating the requirements and impact of SFAS No. 133, as
amended.
YEAR 2000 COMPLIANCE
The Company is subject to risks associated with the "Year
2000" issue, a term which refers to uncertainties about the
ability of various date processing hardware and software systems
to interpret dates correctly after the beginning of the Year
2000. The Company began working on its Year 2000 plan in 1997
and formed a Project Committee ("Committee") that reports
monthly to the Board of Directors. The Committee has formulated
a Comprehensive Year 2000 Plan ("Plan") which follows guidelines
outlined by the Federal Financial Institutions Examination
Council ("FFIEC"). The FFIEC requires all banks to develop a
plan that includes five phases relating to awareness,
assessment, renovation, validation and implementation. The Plan
establishes a timetable and summarizes each major phase of the
project and the estimated costs to renovate and test systems in
preparation for the Year 2000.
The awareness phase included a Company-wide campaign to
communicate the problem and the potential ramifications to the
organization. Concurrent with this phase, the committee began
the assessment phase, which included the inventorying of systems
that may be impacted. The business use of each inventoried item
was then analyzed and prioritized in varying degrees from
critical to non-critical, based upon the perceived adverse
effect on the financial condition of the Company in the event of
a loss or interruption in the use of each system. The
renovation, validation and implementation phases consist of
testing the individual systems and replacing or reconfiguring
systems that are not Year 2000 compliant. The Company has
completed the awareness and assessment phases of the project.
The Company has identified its most critically important
system as its on-line account processing system which the
Company maintains on its own mainframe computer using third
party vendor application software. The Company has extensively
tested the ability of the mainframe computer to handle the Year
2000 date change under a variety of circumstances and believes
that its mainframe hardware and software, as currently
configured, will not be adversely affected by the Year 2000
problem. The Company has identified various other less critical
internal data-processing and software systems that could
potentially be affected by the Year 2000 problem. These consist
primarily of desk-top personal computers and the word-processing
and other software used on them. These systems have been tested
and have either been found to be Year 2000 ready or replaced
with systems that are Year 2000 ready. In the normal course of
business, the Company continually upgrades its computer systems
and software. These upgrades are tested as they are installed.
To date, the primary expense involved in the implementation
of the Company's Year 2000 Plan has been management and staff
time which the Company estimates to have been approximately
2,600 hours through June 30, 1999. To the extent that any
modifications to third party vendor software have been required,
these modifications have been made by the vendors without any
direct additional cost to
22
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<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
the Company. The costs of equipment upgrades have either not
been material or involved equipment that had already reached the
end of its useful life and was due for replacement in any event.
As part of its Year 2000 Plan, the Company has been
identifying and assessing the Year 2000 risks posed by third
parties including customers and other entities whose operations
may affect the Company's business. In this regard, the Company
has been working to increase the Year 2000 awareness of its loan
customers through mailings and other communications. The
Company has surveyed its larger commercial loan customers as to
their Year 2000 readiness and considers Year 2000 exposure in
underwriting commercial loans. The majority of the Company's
loan customers, however, are either individuals or small
businesses which are not highly dependent on information
technology in their day-to-day operations and are therefore not
considered to pose a direct Year 2000 risk. Although the
Company's loan customers may be collaterally affected by the
Year 2000 problems of others (such as the failure of their
employers to make timely salary payments), the Company believes
that its portfolio is sufficiently diversified that such
failures will not have a material impact on operations.
In its day-to-day operations, the Company also deals with a
number of other third parties whose Year 2000 readiness may
affect the Company's operations. These third parties include
FNMA and FHLMC to which it sells mortgage loans, various
mortgage banks from which it purchases mortgage loans, credit
bureaus, the FHLBs and a variety of other third parties.
Pursuant to its Year 2000 Plan, the Company has corresponded
with each of these entities and received assurances as to their
Year 2000 readiness. When feasible, the Company has
participated in testing of all automated links to these
entities. On the basis of these inquires and testing, the
Company does not believe that Year 2000 issues related to these
entities will have a material impact on the Company operations.
The Plan also includes provisions which address the Year
2000 compliance of environmental systems, which include items
such as security systems and heating and air conditioning
systems. No significant business risks have been revealed
regarding these types of systems. Additional investigating is
scheduled for the third quarter of 1999.
Concurrent with the development and execution of the Plan
is the evolution of the Company's Year 2000 Contingency Plan
("Contingency Plan"). The Contingency Plan addresses a wide
variety of issues including: failure of a system during Year
2000 testing, failure of electrical, telecommunications, or
water systems, failure of a system during the century date
change and liquidity plan. Special consideration has been given
to the weekend of the century date change. The Contingency Plan
is intended to be a changing document based on the ongoing
results of the project and is updated on a regular basis.
The risks associated with the Year 2000 issue can be
grouped into two categories. The first is the risk that one or
more of the Company's internal systems will be adversely
affected by the century date change. On the basis of its
testing and preparation, the Company believes that the risk of a
failure in a critical system is low. Accordingly, the Company
believes that its primary internal risk is a failure in a less
critical environment that will not materially disrupt
operations.
23
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The second risk category consists of external risks which
are largely outside of the Company's control. The Company would
be most seriously affected if Year 2000 failures of others
caused basic services such as electrical power, telecommunica-
tions or government agencies to be disrupted. Although the
preparation of such providers has been reviewed, there can be no
assurance that Year 2000 failures of third parties will not have
a material adverse impact on the Company.
24
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<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Company does not believe that its exposure to market
risk has materially changed from the levels reported at December
31, 1998 in its Annual Report on Form 10-K. The Company's
principal market risk continues to consist of its exposure to
changes in interest rates. During the six months ended June 30,
1999, declining long-term interest rates have resulted in the
prepayment or conversion to fixed rates of certain
adjustable-rate residential mortgages. In order to maintain its
rate sensitivity position, the Company has sold the resulting
fixed-rate loans on the secondary market and invested the
proceeds from these sales and from prepayments in additional
adjustable-rate mortgages or in other rate-sensitive investment
and mortgage backed securities. The decline in interest rates
has benefited the net portfolio value of its assets, which are
measured, by the present value of the expected cash flows from
its assets, liabilities and off balance sheet contracts. The
Company continues to monitor changes in the interest rate
environment and adjust its asset/liability mix as necessary.
25
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
On August 10, 1999, a suit was filed in the United
States District Court for the Southern District of
Illinois under the caption West v. Hofman, et al.
alleging that certain officers and directors of the
Company and others issued false and misleading
statements and failed to disclose material facts
concerning the Company's operations, earnings, merger
and/or sale. The suit seeks class action status
for all persons who purchased the Company's common
stock between January 1, 1998 and April 14, 1999.
The Company has not reviewed the suit and is
unable to assess its impact on the Company at this
time.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On June 21, 1999, the Company held its Annual Meeting
of Stockholders at which the following matters were
voted on:
Proposal I - Election of Directors
---------------------
Nominee For Withheld
------- --- --------
Lloyd D. Doerflinger 8,926,114 239,529
Gary L. Holland 9,030,072 135,571
Brad Barkau 8,977,167 188,476
There were no abstentions or broker nonvotes.
The terms of office of Directors David V. McCay, William
C. Canfield, Forrest W. Miller and Edward G. Throop,
continued after the Annual Meeting. For information
regarding the terms of the agreement between the Company
and certain shareholders regarding the solicitation of
proxies at the 1999 Annual Meeting, see the section
captioned "The Shareholder Agreement" in the Company's
definitive proxy materials for the 1999 Annual
Meeting of Stockholders.
Proposal II - Ratification of Appointment of Auditors
---------------------------------------
For the ratification of KPMG LLP as independent auditors
for the year ending December 31, 1999:
For Against Abstain
--- ------- -------
9,040,582 91,566 33,495
In addition, there were no broker nonvotes.
26
<PAGE>
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following is a list of exhibits filed
as part of this Quarterly Report on Form 10-Q:
NO. DESCRIPTION
-----------
3.1 Certificate of Incorporation *
3.2 Bylaws
4.1 Specimen Stock Certificate **
4.2 Rights Agreement, dated August 17, 1994,
between Jefferson Savings Bancorp, Inc.
and Boatmen's Trust Company ***
10.1 Jefferson Savings Bancorp, Inc. 1993 Stock
Option and Incentive Plan *
10.2 Jefferson Savings Bancorp, Inc. Management
Recognition Plan "A" *
10.3 Jefferson Savings Bancorp, Inc. Management
Recognition Plan "B" *
10.4 Jefferson Savings Bancorp, Inc. Management
Recognition Plan "C" *
10.5 Jefferson Savings Bancorp, Inc. Management
Recognition Plan "D" *
10.6 Jefferson Savings Bancorp, Inc. Directors'
Retirement Plan ****
10.7 Employment Agreement between Jefferson Savings
Bancorp, Inc., Jefferson Savings and Loan
Association and David V. McCay *
10.8 Supplemental Retirement Agreement between
Jefferson Savings and Loan Association and
David V. McCay **
10.9 Form of Director's Deferred Compensation
Agreement *
10.10 Jefferson Savings Bancorp, Inc. Incentive
Bonus Program
10.11 Employment Agreement between Jefferson Savings
Bancorp, Inc. and Joe L. Williams
10.12 Sixth Amendment to Employment Agreement,
dated May 20, 1998, between Jefferson
Savings Bancorp, Inc., Jefferson Savings
and Loan Association and David V. McCay. *****
10.13 First Amendment to Jefferson Savings and
Loan Association Supplemental Retirement
Agreement, dated May 20, 1998, by and
between Jefferson Savings and Loan
Association and David V. McCay. *****
10.14 Amendment No. 2 to Jefferson Savings
Bancorp, Inc. 1993 Stock Option and
Incentive Plan, dated May 20, 1998. *****
10.15 Trust Agreement for Jefferson Savings and
Loan Association Supplemental Retirement
Agreement, dated May 20, 1998, by and
between Jefferson Savings and Loan
Association and Mercantile Bank, N.A. *****
10.16 Shareholder Agreement, dated May 5, 1999,
by and among Jefferson Savings Bancorp,
Inc., Gary L. Holland, The Gary Holland
Trust, Brad Barkau, William Drake, Mary K.
Drake, The Mary K. Drake Family Limited
Partnership, The William K. Drake Defined
Benefit Plan, Contango Limited Partnership,
Howard Watson, Susan M. Watson and Intrepid,
Ltd. ******
27 Financial Data Schedule (EDGAR only)
27
<PAGE>
_______________
* Incorporated by reference from Registration Statement on
Form S-1 filed December 23, 1992 (File No. 33-56324).
** Incorporated by reference from Registration Statement on
Form 8-A filed March 30, 1993 (File No. 0-21466).
*** Incorporated by reference from Registration Statement on
Form 8-A filed August 19, 1994 (File No. 0-21466).
**** Incorporated by reference from Pre-Effective Amendment
No. 2 to Registration Statement on Form S-1 filed
February 10, 1993 (File No. 33-56324).
***** Incorporated by reference from Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
****** Incorporated by reference from Quarterly Report on Form
10-Q for the quarter ended March 31, 1999.
(b) Reports on Form 8-K. The Registrant did not file
any Current Reports on Form 8-K during the quarter ending June
30, 1999.
28
<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 13, 1999 Paul J. Milano
----------------------------------
Paul J. Milano
Senior Vice President and Chief
Financial Officer
(Duly Authorized Representative
and Principal Financial Officer)
29
<PAGE>
BYLAWS
OF
JEFFERSON SAVINGS BANCORP, INC.
ARTICLE I
PRINCIPAL EXECUTIVE OFFICE
The principal executive office of Jefferson Savings
Bancorp, Inc. (the "Corporation") shall be at 14915 Manchester
Road, Ballwin, Missouri. The Corporation may also have offices
at such other places within or without the State of Missouri as
the board of directors shall from time to time determine.
ARTICLE II
Stockholders
SECTION 1. Place of Meetings. All annual and special
meetings of stockholders shall be held at the principal
executive office of the Corporation or at such other place
within or without the State of Delaware as the board of
directors may determine and as designated in the notice of such
meeting.
SECTION 2. Annual Meeting. A meeting of the stockholders
of the Corporation for the election of directors and for the
transaction of any other business of the Corporation shall be
held annually at such date and time as the board of directors
may determine.
SECTION 3. Special Meetings. Special meetings of the
stockholders for any purpose or purposes may be called at any
time by the board of directors or by a committee of the board of
directors in accordance with the provisions of the Corporation's
Certificate of Incorporation.
SECTION 4. Conduct of Meetings. Annual and special
meetings shall be conducted in accordance with these Bylaws or
as otherwise prescribed by the board of directors. The chairman
or the chief executive officer of the Corporation shall preside
at such meetings.
SECTION 5. Notice of Meeting. Written notice stating the
place, day and hour of the meeting and the purpose or purposes
for which the meeting is called shall be mailed by the secretary
or the officer performing his duties, not less than ten days nor
more than fifty days before the meeting to each stockholder of
record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United
States mail, addressed to the stockholder at his address as it
appears on the stock transfer books or records of the Corpora-
tion as of the record date prescribed in Section 6, with postage
thereon prepaid. If a stockholder be present at a meeting, or
in writing waive notice thereof before or after the meeting,
notice of the meeting to such stockholder shall be unnecessary.
When any stockholders' meeting, either annual or special, is
adjourned for thirty days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting.
It shall not be necessary to give any notice of the time and
place of any meeting adjourned for less than thirty days or of
the business to be transacted at such adjourned meeting, other
than an announcement at the meeting at which such adjournment
is taken.
SECTION 6. Fixing of Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any
meeting of stockholders, or any adjournment thereof, or stock-
holders entitled to receive payment of any dividend, or in order
to make a determination of stockholders for any other proper
purpose, the board of directors shall fix in advance a date as
the record date for any such determination of stockholders.
Such date in any case shall be not more than sixty days, and in
case of a meeting of stockholders, not less than ten days prior
to the date on which the
<PAGE>
<PAGE>
particular action, requiring such determination of stockholders,
is to be taken. When a determination of stockholders entitled
to vote at any meeting of stockholders has been made as provided
in this section, such determination shall apply to any
adjournment thereof.
SECTION 7. Voting Lists. The officer or agent having
charge of the stock transfer books for shares of the Corporation
shall make, at least ten days before each meeting of stock-
holders, a complete record of the stockholders entitled to vote
at such meeting or any adjournment thereof, with the address of
and the number of shares held by each. The record, for a period
of ten days before such meeting, shall be kept on file at the
principal office of the Corporation, whether within or outside
the State of Missouri, and shall be subject to inspection by any
stockholder for any purpose germane to the meeting at any time
during usual business hours. Such record shall also be produced
and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder for any purpose
germane to the meeting during the whole time of the meeting.
The original stock transfer books shall be prima facie evidence
as to who are the stockholders entitled to examine such record
or transfer books or to vote at any meeting of stockholders.
SECTION 8. Quorum. One-third of the outstanding shares of
the Corporation entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of stockholders.
If less than one-third of the outstanding shares are represented
at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have
been transacted at the meeting as originally notified. The
stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the with-
drawal of enough stockholders to leave less than a quorum.
SECTION 9. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the stock-
holder or by his duly authorized attorney in fact. Proxies
solicited on behalf of the management shall be voted as directed
by the stockholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy
shall be valid after eleven months from the date of its execu-
tion unless otherwise provided in the proxy.
SECTION 10. Voting. At each election for directors every
stockholder entitled to vote at such election shall be entitled
to one vote for each share of stock held. Unless otherwise
provided by the Certificate of Incorporation, by statute, or by
these Bylaws, a majority of those votes cast by stockholders at
a lawful meeting shall be sufficient to pass on a transaction or
matter, except in the election of directors, which election
shall be determined by a plurality of the votes of the shares
present in person or by proxy at the meeting and entitled to
vote on the election of directors.
SECTION 11. Voting of Shares in the Name of Two or More
Persons. When ownership of stock stands in the name of two or
more persons, in the absence of written directions to the
Corporation to the contrary, at any meeting of the stockholders
of the Corporation any one or more of such stockholders may
cast, in person or by proxy, all votes to which such ownership
is entitled. In the event an attempt is made to cast conflict-
ing votes, in person or by proxy, by the several persons in
whose name shares of stock stand, the vote or votes to which
these persons are entitled shall be cast as directed by a
majority of those holding such stock and present in person or by
proxy at such meeting, but no votes shall be cast for such stock
if a majority cannot agree.
SECTION 12. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by any
officer, agent or proxy as the bylaws of such corporation may
prescribe, or, in the absence of such provision, as the board of
directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by
him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the
name of a receiver may be voted by such receiver, and shares
held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority
to do so is contained in an appropriate order of the court or
other public authority by which such receiver was appointed.
2
<PAGE>
<PAGE>
A stockholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the
name of the pledgee and thereafter the pledgee shall be entitled
to vote the shares so transferred.
Neither treasury shares of its own stock held by the
Corporation, nor shares held by another corporation, if a
majority of the shares entitled to vote for the election of
directors of such other corporation are held by the Corporation,
shall be voted at any meeting or counted in determining the
total number of outstanding shares at any given time for pur-
poses of any meeting.
SECTION 13. Inspectors of Election. In advance of any
meeting of stockholders, the chairman of the board or the board
of directors may appoint any persons, other than nominees for
office, as inspectors of election to act at such meeting or any
adjournment thereof. The number of inspectors shall be either
one or three. If the board of directors so appoints either one
or three inspectors, that appointment shall not be altered at
the meeting. If inspectors of election are not so appointed,
the chairman of the board may make such appointment at the
meeting. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by
appointment in advance of the meeting or at the meeting by the
chairman of the board or the president.
Unless otherwise prescribed by applicable law, the duties
of such inspectors shall include: determining the number of
shares of stock and the voting power of each share, the shares
of stock represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies; receiving
votes, ballots or consents; hearing and determining all
challenges and questions in any way arising in connection with
the right to vote; counting and tabulating all votes or con-
sents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all stockholders.
SECTION 14. Nominating Committee. The board of directors
or a committee appointed by the board of directors shall act as
a nominating committee for selecting the management nominees for
election as directors. Except in the case of a nominee substi-
tuted as a result of the death or other incapacity of a manage-
ment nominee, the nominating committee shall deliver written
nominations to the secretary at least twenty days prior to the
date of the annual meeting. Provided such committee makes such
nominations, no nominations for directors except those made by
the nominating committee shall be voted upon at the annual
meeting unless other nominations by stockholders are made in
writing and delivered to the secretary of the Corporation in
accordance with the provisions of the Corporation's Certificate
of Incorporation.
SECTION 15. New Business. Any new business to be taken up
at the annual meeting shall be stated in writing and filed with
the secretary of the Corporation in accordance with the provi-
sions of the Corporation's Certificate of Incorporation. This
provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, direc-
tors and committees, but in connection with such reports no new
business shall be acted upon at such annual meeting unless
stated and filed as provided in the Corporation's Certificate of
Incorporation.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of
the Corporation shall be under the direction of its board of
directors. The chairman shall preside at all meetings of the
board of directors.
SECTION 2. Number, Term and Election. The board of
directors shall consist of seven members and shall be divided
into three classes as nearly equal in number as possible. The
members of each class shall be elected for a term of three years
and until their successors are elected or qualified. The board
of directors shall be classified in accordance with the provi-
sions of the Corporation's Certificate of Incorporation.
3
<PAGE>
<PAGE>
SECTION 3. Regular Meetings. A regular meeting of the
board of directors shall be held at such time and place as shall
be determined by resolution of the board of directors without
other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the
board of directors may be called by or at the request of the
chairman, the chief executive officer or one-third of the direc-
tors. The person calling the special meetings of the board of
directors may fix any place as the place for holding any special
meeting of the board of directors called by such persons.
Members of the board of directors may participate in
special meetings by means of conference telephone or similar
communications equipment by which all persons participating in
the meeting can hear each other. Such participation shall
constitute presence in person.
SECTION 5. Notice. Written notice of any special meeting
shall be given to each director at least two days previous
thereto delivered personally or by telegram or at least seven
days previous thereto delivered by mail at the address at which
the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid if mailed or when
delivered to the telegraph company if sent by telegram. Any
director may waive notice of any meeting by a writing filed with
the secretary. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the board of
directors need be specified in the notice or waiver of notice of
such meeting.
SECTION 6. Quorum. A majority of the number of directors
fixed by Section 2 shall constitute a quorum for the transaction
of business at any meeting of the board of directors, but if
less than such majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time.
Notice of any adjourned meeting shall be given in the same
manner as prescribed by Section 5 of this Article III.
SECTION 7. Manner of Acting. The act of the majority of
the directors present at a meeting at which a quorum is present
shall be the act of the board of directors, unless a greater
number is prescribed by these Bylaws, the Certificate of
Incorporation, or the General Corporation Law of the State of
Delaware.
SECTION 8. Action Without a Meeting. Any action required
or permitted to be taken by the board of directors at a meeting
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the direc-
tors.
SECTION 9. Resignation. Any director may resign at any
time by sending a written notice of such resignation to the home
office of the Corporation addressed to the chairman. Unless
otherwise specified therein such resignation shall take effect
upon receipt thereof by the chairman.
SECTION 10. Vacancies. Any vacancy occurring in the board
of directors shall be filled in accordance with the provisions
of the Corporation's Certificate of Incorporation. Any direc-
torship to be filled by reason of an increase in the number of
directors may be filled by the affirmative vote of two-thirds of
the directors then in office or by election at an annual meeting
or at a special meeting of the stockholders held for that
purpose. The term of such director shall be in accordance with
the provisions of the Corporation's Certificate of Incorporation.
SECTION 11. Removal of Directors. Any director or the
entire board of directors may be removed only in accordance with
the provisions of the Corporation's Certificate of Incorporation.
SECTION 12. Compensation. Directors, as such, may receive
compensation for service on the board of directors. Members of
either standing or special committees may be allowed such com-
pensation as the board of directors may determine.
4
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SECTION 13. Age Limitation. No person shall be eligible
for election to the board of directors if such person is then
more than 70 years of age.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees,
as they may determine to be necessary or appropriate for the
conduct of the business of the Corporation, and may prescribe
the duties, constitution and procedures thereof. Each committee
shall consist of one or more directors of the Corporation
appointed by the chairman. The chairman may designate one or
more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee.
The chairman shall have power at any time to change the
members of, to fill vacancies in, and to discharge any committee
of the board. Any member of any such committee may resign at
any time by giving notice to the Corporation; provided, however,
that notice to the board, the chairman of the board, the chief
executive officer, the chairman of such committee, or the
secretary shall be deemed to constitute notice to the Corpora-
tion. Such resignation shall take effect upon receipt of such
notice or at any later time specified therein; and, unless
otherwise specified therein, acceptance of such resignation
shall not be necessary to make it effective. Any member of any
such committee may be removed at any time, either with or
without cause, by the affirmative vote of a majority of the
authorized number of directors at any meeting of the board
called for that purpose.
ARTICLE V
OFFICERS
SECTION 1. Positions. The officers of the Corporation
shall be a chairman, a president, one or more vice presidents, a
secretary and a treasurer, each of whom shall be elected by the
board of directors. The board of directors may designate one or
more vice presidents as executive vice president or senior vice
president. The board of directors may also elect or authorize
the appointment of such other officers as the business of the
Corporation may require. The officers shall have such authority
and perform such duties as the board of directors may from time
to time authorize or determine. In the absence of action by the
board of directors, the officers shall have such powers and
duties as generally pertain to their respective offices.
SECTION 2. Election and Term of Office. The officers of
the Corporation shall be elected annually by the board of
directors at the first meeting of the board of directors held
after each annual meeting of the stockholders. If the election
of officers is not held at such meeting, such election shall be
held as soon thereafter as possible. Each officer shall hold
office until his successor shall have been duly elected and
qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided. Election
or appointment of an officer, employee or agent shall not of
itself create contract rights. The board of directors may
authorize the Corporation to enter into an employment contract
with any officer in accordance with state law; but no such
contract shall impair the right of the board of directors to
remove any officer at any time in accordance with Section 3 of
this Article V.
SECTION 3. Removal. Any officer may be removed by vote of
two-thirds of the board of directors whenever, in its judgment,
the best interests of the Corporation will be served thereby,
but such removal, other than for cause, shall be without
prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may
be filled by the board of directors for the unexpired portion of
the term.
5
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<PAGE>
SECTION 5. Remuneration. The remuneration of the officers
shall be fixed from time to time by the board of directors, and
no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the
Corporation.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. To the extent permitted by
applicable law, and except as otherwise prescribed by the
Corporation's Certificate of Incorporation or these Bylaws with
respect to certificates for shares, the board of directors or
the executive committee may authorize any officer, employee, or
agent of the Corporation to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the
Corporation. Such authority may be general or confined to
specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf
of the Corporation and no evidence of indebtedness shall be
issued in its name unless authorized by the board of directors.
Such authority may be general or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or
other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the Corporation shall be
signed by one or more officers, employees or agents of the
Corporation in such manner, including in facsimile form, as
shall from time to time be determined by resolution of the board
of directors.
SECTION 4. Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the
credit of the Corporation in any of its duly authorized deposi-
tories as the board of directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. The shares of the
Corporation shall be represented by certificates signed by the
chairman of the board of directors or the president or a vice
president and by the treasurer or an assistant treasurer or the
secretary or an assistant secretary of the Corporation, and may
be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures upon a certificate may be
facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the Corporation
itself or an employee of the Corporation. If any officer who
has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before the
certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer at the date of its
issue.
SECTION 2. Form of Share Certificates. All certificates
representing shares issued by the Corporation shall set forth
upon the face or back that the Corporation will furnish to any
stockholder upon request and without charge a full statement of
the designations, preferences, limitations, and relative rights
of the shares of each class authorized to be issued, the varia-
tions in the relative rights and preferences between the shares
of each such series so far as the same have been fixed and
determined, and the authority of the board of directors to fix
and determine the relative rights and preferences of subsequent
series.
Each certificate representing shares shall state upon the
face thereof: That the Corporation is organized under the laws
of the State of Delaware; the name of the person to whom issued;
the number and class of shares, the designation of the series,
if any, which such certificate represents; the par value of each
share represented by such certificate, or a statement that the
shares are without par value. Other matters in regard to the
form of the certificates shall be determined by the board of
directors.
6
<PAGE>
<PAGE>
SECTION 3. Payment for Shares. No certificate shall be
issued for any share until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration
for the issuance of shares shall be paid in accordance with the
provisions of the Corporation's Certificate of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of
capital stock of the Corporation shall be made only on its stock
transfer books. Authority for such transfer shall be given only
the holder of record thereof or by his legal representative, who
shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed
and filed with the Corporation. Such transfer shall be made
only on surrender for cancellation of the certificate for such
shares. The person in whose name shares of capital stock stand
on the books of the Corporation shall be deemed by the Corpora-
tion to be the owner thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may
direct a new certificate to be issued in place of any certifi-
cate theretofore issued by the Corporation alleged to have been
lost, stolen, or destroyed, upon the making of an affidavit of
that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a
new certificate, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen, or destroyed certificate, or his
legal representative, to give the Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged
to have been lost, stolen, or destroyed.
ARTICLE VIII
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the last
day of December of each year. The Corporation shall be subject
to an annual audit as of the end of its fiscal year by indepen-
dent public accountants appointed by and responsible to the
board of directors.
ARTICLE IX
DIVIDENDS
Dividends upon the stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be
declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in
property or in the Corporation's own stock.
ARTICLE X
CORPORATION SEAL
The corporate seal of the Corporation shall be in such form
as the board of directors shall prescribe.
ARTICLE XI
AMENDMENTS
In accordance with the Corporation's Certificate of
Incorporation, these Bylaws may be repealed, altered, amended or
rescinded by the stockholders of the Corporation only by vote of
not less than 80% of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a
meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting). In
addition, the board of directors may
7
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<PAGE>
repeal, alter, amend or rescind these Bylaws by vote of
two-thirds of the board of directors at a legal meeting held in
accordance with the provisions of these Bylaws.
8
<PAGE>
JEFFERSON SAVINGS BANCORP, INC.
INCENTIVE BONUS PROGRAM
Eligibility for Incentive Bonus Program:
1. David McCay, COB & CEO, 60% of base salary if 100%
of the EPS objective is achieved.
2. Joe Williams, President & COO, 50% of base salary if
100% of the EPS objective is achieved.
3. Senior Vice Presidents, Division Heads, 40% of base
salary if 100% of the EPS objective is achieved.
4. Other Senior Vice Presidents 30% of base salary if
100% of the EPS objective is achieved.
5. Vice Presidents not receiving commissions or
overrides, 20% of base salary if 100% of the EPS
objective is achieved.
6. EPS objective determined annually by the Board of
Directors at the recommendation of the outside
directors of the Employee Compensation and Benefits
Committee.
7. All eligible Incentive Bonus participants must be
employed when the annual bonus is paid.
8. Eligible participants in the Incentive Bonus Program
must have completed one full year of employment to
receive the maximum bonus consideration.
9. Those eligible participants, without one full year
of service, that are hired between January 1 and June
30 are eligible for 50% of the maximum bonus
consideration.
10. No consideration will be given for the payment of an
incentive bonus unless, at least, 90% of the EPS
objective is achieved.
11. Annual Incentive Bonuses will be considered for
payment after the Company's outside auditors have
signed off on the Company's annual EPS.
12. EPS targets are net of all expenses including bonus
accruals and are rounded to the nearest cent.
<PAGE>
<PAGE>
Payment scale:
Total % of
Achieved of Target EPS Target Bonus
150% 200%
140% 160%
130% 140%
120% 125%
110% 115%
100% 100%
95% 50%
90% 40%
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted
from consolidated financial statements and notes thereto to
Jefferson Savings Bancorp, Inc. at and for six months ended June
30, 1999 and is qualified in its entirety by reference to such
financial statements.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 7,735,351
<INT-BEARING-DEPOSITS> 8,858,508
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 224,011,250
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,215,225,833
<ALLOWANCE> 6,637,884
<TOTAL-ASSETS> 1,525,628,756
<DEPOSITS> 1,007,246,856
<SHORT-TERM> 377,219,272
<LIABILITIES-OTHER> 16,970,438
<LONG-TERM> 0
0
0
<COMMON> 100,984
<OTHER-SE> 124,091,206
<TOTAL-LIABILITIES-AND-EQUITY> 1,525,628,756
<INTEREST-LOAN> 44,114,052
<INTEREST-INVEST> 6,681,482
<INTEREST-OTHER> 1,011,637
<INTEREST-TOTAL> 51,807,171
<INTEREST-DEPOSIT> 24,276,168
<INTEREST-EXPENSE> 31,873,910
<INTEREST-INCOME-NET> 19,933,261
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 56,975
<EXPENSE-OTHER> 13,482,862
<INCOME-PRETAX> 7,967,633
<INCOME-PRE-EXTRAORDINARY> 4,720,633
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,720,633
<EPS-BASIC> 0.50
<EPS-DILUTED> 0.49
<YIELD-ACTUAL> 2.83
<LOANS-NON> 6,856,000
<LOANS-PAST> 94,000
<LOANS-TROUBLED> 1,003,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,659,294
<CHARGE-OFFS> 21,754
<RECOVERIES> 344
<ALLOWANCE-CLOSE> 6,637,884
<ALLOWANCE-DOMESTIC> 4,476,879
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,161,005
</TABLE>
