FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended Commission file number 0-22850
June 30, 1996
JeffBanks, Inc.
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2189480
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1609 Walnut Street
Philadelphia, PA 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code 215-564-5040
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
Number of Shares of Common Stock Outstanding at June 30, 1996: 3,957,198
<PAGE>
JeffBanks, Inc.
Consolidated Balance Sheet
UNAUDITED
June 30, December 31,
1996 1995
Assets: (in thousands)
Cash and cash equivalents:
Cash and due from banks ....................... $ 31,831 $ 53,309
Federal funds sold ............................ 36,325 37,575
--------- ---------
68,156 90,884
Investment securities available for sale .......... 151,679 141,873
Investment securities held to maturity ............ 1,047 3,889
Mortgages held for sale ........................... 499 484
Loans, net ........................................ 685,976 659,272
Premises and equipment, net ....................... 12,764 12,880
Accrued interest receivable ....................... 6,333 6,004
Other real estate owned ........................... 3,573 3,751
Goodwill .......................................... 8,663 8,978
Other assets ...................................... 12,171 10,991
--------- ---------
Total assets .................................. $ 950,861 $ 939,006
========= =========
Liabilities and shareholders' equity:
Deposits:
Demand (non-interest bearing) ................. $ 115,347 $ 145,064
Savings and money market ...................... 240,314 245,234
Time deposits ................................. 265,969 265,866
Time deposits, $100,000 and over .............. 81,500 68,803
--------- ---------
703,130 724,967
Securities sold under repurchase agreements ....... 83,778 46,549
FHLB advances ..................................... 45,000 75,000
Subordinated notes and debentures ................. 32,000 9,000
Accrued interest payable .......................... 8,037 6,216
Other liabilities ................................. 3,009 3,963
--------- ---------
Total liabilities ............................. 874,954 865,695
--------- ---------
Shareholders' equity:
Common Stock - authorized, 10,000,000 shares of
$1 par value; issued and outstanding 3,957,198
and 3,946,776 shares, respectively ........... 3,957 3,947
Additional paid-in capital .................... 53,687 53,470
Retained earnings ............................. 18,694 15,427
Net unrealized gain (loss) on investment
securities available for sale ................ (431) 467
--------- ---------
Total shareholders' equity .................... 75,907 73,311
--------- ---------
Total liabilities and shareholders' equity .... $ 950,861 $ 939,006
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Statements of Income
UNAUDITED
Six Months Three Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Loans including fees ....................... $31,044 $26,184 $15,608 $13,645
Investment securities ...................... 4,474 2,143 2,318 1,081
Federal funds sold ......................... 1,024 915 509 593
------- ------- ------- -------
36,542 29,242 18,435 15,319
------- ------- ------- -------
Interest expense:
Time deposits, $100,000 and over ........... 2,280 1,715 1,150 949
Other deposits ............................. 10,944 8,836 5,510 4,662
FHLB advances .............................. 1,286 1,039 477 696
Subordinated notes and debentures .......... 964 428 717 214
Securities sold under repurchase agreements 1,062 385 645 231
------- ------- ------- -------
16,536 12,403 8,499 6,752
------- ------- ------- -------
Net interest income .................... 20,006 16,839 9,936 8,567
Provision for credit losses ..................... 1,329 1,155 705 615
------- ------- ------- -------
Net interest income after provision
for credit losses ..................... 18,677 15,684 9,231 7,952
------- ------- ------- -------
Non-interest income:
Service fees on deposit accounts ........... 1,494 1,291 777 666
Mortgage servicing fees .................... 417 449 206 234
Gain on sales of residential mortgages and
capitalized mortgage servicing rights .... 225 125 105 82
Gain on sales of investment securities ..... 78 155 78 35
Merchant and consumer credit card fees ..... 750 534 429 247
Other ...................................... 400 433 210 153
------- ------- ------- -------
3,364 2,987 1,805 1,417
------- ------- ------- -------
Non-interest expense:
Salaries and employee benefits ............. 6,952 5,813 3,530 2,890
Occupancy expense .......................... 1,592 1,499 785 728
Depreciation ............................... 768 758 383 369
FDIC expense ............................... 11 675 5 338
Data processing expense .................... 587 544 289 289
Legal and auditing ......................... 454 365 217 204
Stationery, printing and supplies .......... 398 313 219 171
Shares tax ................................. 317 228 159 120
Advertising ................................ 615 339 283 175
Other real estate owned maintenance expense 97 231 45 135
Loss on sale and write-downs of other
real estate owned ......................... 32 30
Amortization of intangibles ................ 623 253 313 151
Merchant and consumer credit card expense .. 637 414 352 212
Other ...................................... 2,012 1,947 1,084 851
------- ------- ------- -------
15,095 13,409 7,664 6,633
------- ------- ------- -------
Income before income taxes ...................... 6,946 5,262 3,372 2,736
Income taxes .................................... 2,511 1,781 1,216 927
------- ------- ------- -------
Net income ............................. $ 4,435 $ 3,481 $ 2,156 $ 1,809
======= ======= ======= =======
Per share data:
Net income applicable to common stock * ......... $ 4,435 $ 2,828 $ 2,156 $ 1,484
Average number of common shares and equivalents * 4,025 2,957 4,028 2,960
Net income per common share - primary ........... $ 1.10 $ 0.96 $ 0.54 $ 0.50
Net income per common share - fully diluted ..... $ 1.10 $ 0.90 $ 0.54 $ 0.47
<FN>
* In the fourth quarter of 1995 all outstanding preferred was converted stock into common stock.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Statement of Changes in Shareholders' Equity
UNAUDITED
Net unrealized
gain (loss)
on securities
Common Additional Retained available
Stock paid-in-capital earnings for sale Total
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ... $ 3,947 $ 53,470 $ 15,427 $ 467 $ 73,311
Net income ..................... -- -- 4,435 -- 4,435
Issuance of common stock for ... --
401(K) plan ................... 7 189 -- -- 196
Costs to establish a dividend .. --
reinvestment plan ............. -- (26) -- -- (26)
Issuance of common stock for
dividend reinvestment plan .... 3 54 -- -- 57
Cash dividends on common stock . -- -- (1,168) -- (1,168)
Change in net unrealized loss on --
securities available for sale . -- -- -- (898) (898)
------------ ------------ ------------ ------------ ------------
Balance at June 30, 1996 ....... $ 3,957 $ 53,687 $ 18,694 $ (431) $ 75,907
============ ============ ============ ============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Statement of Changes in Shareholders' Equity
UNAUDITED
Net unrealized
gain (loss)
on securities
Common Preferred Additional Retained available
Stock Stock paid-in-capital earnings for sale Total
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 ..... $ 2,734 $ 186 $ 47,714 $ 15,001 $ (1,259) $ 64,376
Net income ....................... -- -- -- 3,481 -- 3,481
Conversion of preferred stock .... 8 (6) (2) -- -- --
Issuance of common stock for
401(K) plan ..................... 5 -- 94 -- -- 99
Costs to acquire minority interest
in JBNJ ......................... -- -- (15) -- -- (15)
Cash dividends on preferred stock
12% -- -- -- (120) -- (120)
11% -- -- -- (107) -- (107)
9.5% -- -- -- (285) -- (285)
8% -- -- -- (140) -- (140)
Cash dividends on common stock ... -- -- -- (688) -- (688)
Change in net unrealized loss on
securities available for sale ... -- -- -- -- 1,177 1,177
---------- ---------- ---------- ---------- ---------- ----------
Balance at June 30, 1995 ......... $ 2,747 $ 180 $ 47,791 $ 17,142 $ (82) $ 67,778
========== ========== ========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Statements of Cash Flows
UNAUDITED
Six Months Ended June 30,
1996 1995
(in thousands)
<S> <C> <C>
Operating activities:
Net income ......................................................... $ 4,435 $ 3,481
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization ...................................... 1,719 1,333
Provision for credit losses ........................................ 1,329 1,155
Gain on sales of investment securities ............................. (78) (155)
Mortgage loans originated for sale ................................. (12,496) (7,179)
Mortgage loan sales ................................................ 12,481 7,214
Increase in interest receivable .................................... (329) (137)
Increase in interest payable ....................................... 1,821 1,559
Increase in other assets ........................................... (1,025) (1,537)
Decrease in other liabilities ...................................... (954) (575)
-------- --------
Net cash provided by operating activities ....................... 6,903 5,159
-------- --------
Investing activities:
Proceeds from sales of investment securities available for sale .... 2,752 17,095
Proceeds from maturities of investment securities available for sale 45,037 11,660
Proceeds from maturities of investment securities held to maturity . 2,839 4,018
Proceeds from sales of other real estate owned ..................... 1,525 2,109
Purchase of investment securities available for sale ............... (59,203) (51,409)
Net increase in loans .............................................. (29,380) (36,931)
Purchase of premises and equipment ................................. (652) (1,130)
-------- --------
Net cash used in investing activities ........................... (37,082) (54,588)
-------- --------
Financing activities:
Net (decrease) increase in deposits ................................ (21,837) 2,230
Net increase in repurchase agreements .............................. 37,229 11,565
Net proceeds from issuance of common stock ......................... 227 85
Net (decrease) increase in FHLB advances ........................... (30,000) 10,000
Proceeds from issuance of subordinated notes ....................... 23,000
Dividends paid on preferred stock .................................. -- (653)
Dividends paid on common stock ..................................... (1,168) (688)
-------- --------
Net cash provided by (used in) financing activities ............. 7,451 22,539
-------- --------
Net decrease in cash and cash equivalents .............................. (22,728) (26,890)
Cash and cash equivalents at beginning of year ......................... 90,884 98,037
-------- --------
Cash and cash equivalents at end of period ............................. $ 68,156 $ 71,147
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
Note 1 - Allowance for Credit Losses:
Changes in the allowance for credit losses are as follows:
Six months ended June 30,
1996 1995
(in thousands)
Balance, beginning of period .. $ 14,032 $ 7,727
Provision charged to operations 1,329 1,155
Loans charged off ............. (2,371) (1,410)
Recoveries .................... 176 79
-------- --------
Balance, end of period ........ $ 13,166 $ 7,551
======== ========
The balances of impaired loans were $12,514,000 and $8,083,000
respectively, at June 30, 1996 and 1995. The allowance for credit losses
associated with impaired loans was $3,748,000 and $2,088,000, respectively, at
those dates. Total cash collected on impaired loans during the first six months
of 1996 and 1995, respectively was $869,000 and $814,000, all of which was
credited to the principal balance outstanding on such loans. Interest which
would have been accrued on impaired loans during those respective periods was
$596,000 and $376,000. No related interest income was recognized during the
period.
Note 2 - Investment Securities:
The carrying value and approximate market value of investment securities
at June 30, 1996, are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Approximate Carrying
cost gains losses market value value
(in thousands)
<S> <C> <C> <C> <C> <C>
Available for Sale:
U.S. treasury securities ...... $ 57,840 $ 5 $ 173 $ 57,672 $ 57,672
Federal agency obligations .... 84,482 31 543 83,970 83,970
State and municipal obligations 4,282 42 15 4,309 4,309
Other securities .............. 5,728 -- -- 5,728 5,728
---------- ---------- ---------- ---------- ----------
Total ......................... $ 152,332 $ 78 $ 731 $ 151,679 $ 151,679
========== ========== ========== ========== ==========
Held to Maturity:
Federal agency obligations .... $ 357 $ -- $ -- $ 357 $ 357
State and municipal obligations 690 8 -- 698 690
---------- ---------- ---------- ---------- ----------
Total ......................... $ 1,047 $ 8 $ -- $ 1,055 $ 1,047
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
Note 3:
The unaudited interim financial statements furnished reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. All such adjustments
are of a normal recurring nature, except as discussed in these notes.
Note 4:
Primary earnings per common share are calculated by dividing net income
applicable to common stock by the weighted average number of common shares and
stock option common share equivalents outstanding during the period. Fully
diluted earnings per share give effect to the increase in average shares that
would be outstanding, and the increase in net income applicable to common stock
that would result, from the assumed conversion of the Company's dilutive
convertible preferred stock. On October 6, 1995 all outstanding preferred stock
was called for redemption, and was converted into common stock.
Note 5:
On March 25, 1996, JBI issued $23,000,000 of 8.75% subordinated notes,
maturing April 1, 2006, and callable after April 1, 2001.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net income. Net income for JeffBanks, Inc. (JBI) amounted to $4.4 million for
the six months ended June 30, 1996 as compared to $3.5 million for the six
months ended June 30, 1995. The increase between the two periods reflected a
significant increase in net interest income.
Net Interest Income and Average Balances. Net interest income was $20 million
for the first six months of 1996, compared to $16.8 million for the first six
months of 1995, an increase of $3.2 million or 19%. Yields on interest earning
assets decreased to 8.37% for the first six months of 1996 from 8.57% in the
prior year period, a difference of .20%. The decrease reflected reductions in
commercial loan rates tied to the prime rate, which decreased between the two
periods. However, the cost of interest bearing liabilities increased to 4.50% in
1996 from 4.42% in 1995, a difference of .08%. The increase reflected the impact
of the $23 million of subordinated notes issued in 1996, and the maintenance of
deposit yields which were comparable to the prior year. Accordingly, the net
yield on JBI's interest earning assets decreased to 4.58% in 1996 as compared to
4.93% in the comparable prior year period, a difference of .35%.
Average balances for demand, savings and money market deposits increased
to $364.1 million in 1996 compared to $313.7 million in the comparable 1995
period, an increase of $50.4 million or 16%. Average balances for time deposits
increased to $348.6 million for the first six months of 1996, compared to $280.2
million for the comparable year period, an increase of $68.4 million or 24%.
In the first six months of 1996, average interest earning assets totaled
$872.8 million, an increase of $189.5 million or 28% over the 1995 comparable
period. Reflected in that net increase was a $110.2 million or 19% increase in
average loans to $679.5 million. In the first six months of 1996, average
interest bearing liabilities totaled $734.4 million, an increase of $173.3
million or 31% over 1995.
Reflected in the increased average balances are amounts resulting from the
August 4, 1995 acquisition of Constitution Bank (Constitution).
Non-Interest Income. Total non-interest income for the first six months of 1996
was $3.4 million compared to $3.0 million for the first six months of 1995, an
increase of $377,000 or 13%. Service fees on deposit accounts for 1996 amounted
to $1.5 million, an increase of $203,000 or 16% over the comparable prior year
period. The increase in service fees on deposit accounts resulted primarily from
growth in core deposit accounts from which most of the fees are generated,
including accounts acquired in the acquisition of Constitution. Gain on sales of
residential mortgages increased to $225,000 in 1996, an increase of $100,000 or
80% over 1995. The increase was due primarily to increased volume. Merchant and
consumer credit card fees increased to $750,000 in 1996. Increases reflected in
this total were offset by increases in merchant and consumer credit card expense
and reflected higher volume.
Non-Interest Expense. Total non-interest expense for the first six months of
1996, was $15.1 million, compared to $13.4 million for the comparable prior year
period, an increase of $1.7 million or 13%. Salaries and employee benefits
amounted to $7 million for 1996, an increase of $1.1 million or 20% over the
comparable 1995 period. Of the increase in salaries, $277,000 reflected
expansion of the commercial loan department and $75,000 reflected expansion of
the consumer loan department. A de novo branch and a branch retained from the
Constitution acquisition resulted in $130,000 of increases. The increase also
reflected annual merit increases for which most employees are eligible and which
averaged 2 1/2% - 4 1/2% as well as a $200,000 increase in the estimated ESOP
contribution.
Occupancy expense increased to $1.6 million for the first six months of
1996, an increase of $93,000 or 6%. The increase reflected the impact of the
branch retained from the Constitution acquisition and the de novo branch.
FDIC expense decreased to $11,000 for the first six months of 1996, a
decrease of $664,000 or 98%, as a result of decreases in insurance rates.
However, those rates may be increased at any time.
Data processing expense increased to $587,000 for the first six months of
1996, an increase of $43,000 or 8% over the comparable prior year period. The
increase reflected increases in transaction volume which included the
Constitution acquisition.
Legal and auditing expense increased to $454,000 for the first six months
of 1996, an increase of $89,000, or 24% over 1995. The increase reflected legal
fees on several unrelated matters.
Stationary, printing and supplies increased to $398,000 for the first six
months of 1996, an increase of $85,000 or 27%. The increase reflected the impact
of acquisitions and a $21,000 increase in credit card supplies.
Shares tax increased to $317,000 for the first six months of 1996, an
increase of $89,000 or 39%. The increase reflected increases in shareholders'
equity which are utilized in the six year moving average computation on which
the tax is assessed, including increases in equity resulting from acquisitions.
Advertising increased to $615,000 for the first six months of 1996, an
increase of $276,000 or 81% over the comparable 1995 period. Approximately
$125,000 of the increase resulted from a one time advertising campaign
advertising promotional personal transaction accounts. An additional $125,000
resulted from promotional expense in connection with credit card programs.
Decreases in other real estate owned maintenance expense reflected reduced
amounts of other real estate owned.
Amortization of intangibles increased to $637,000 for 1996, an increase of
$370,000 or 146% over 1995. Substantially all of the increase resulted from the
amortization of goodwill and core deposit intangibles from the Constitution
acquisition.
Liquidity and Capital Resources. The major sources of funding for JBI's
investing activities have historically been cash inflows resulting from
increases in deposits. Such increases have been utilized primarily to fund net
increases in loans. FHLB advances have also been utilized, when relative
interest costs were less than those for deposits. Funds not needed for
operations are invested primarily in daily federal funds sold and securities.
Net increases in loans of $29.4 million for the first six months of 1996
compared to $36.9 million for the 1995 period. Cash outflows required for
mortgage loans originated for sale amounted to $12.5 million for the first six
months of 1996 compared to $7.2 million for the first six months of 1995.
At June 30, 1996 JeffBanks and its subsidiaries exceeded "well capitalized"
ratios as determined by the appropriate regulatory authorities. The following
table sets forth the regulatory capital ratios of JBI, Jefferson Bank (Jefferson
PA) and Jefferson Bank of New Jersey (Jefferson NJ) at that date.
<TABLE>
<CAPTION>
Tier 1 Capital to Total Capital to
Leverage Risk-Weighted Risk-Weighted
Ratio (1) Assets Ratio Assets Ratio
June 30, December 31, June 30, December 31, June 30, December 31,
1996 1995 1996 1995 1996 1995
Entity:
<S> <C> <C> <C> <C> <C> <C>
JBI .......................... 6.80% 6.54% 9.37% 9.16% 15.26% 11.74%
Jefferson PA ................. 6.40% 6.01% 8.53% 8.26% 14.03% 10.92%
Jefferson NJ ................. 13.63% 12.16% 20.52% 17.56% 21.14% 18.13%
"Well capitalized" institution
(under FDIC Regulations) . 5.00% 5.00% 6.00% 6.00% 10.00% 10.00%
</TABLE>
(1) The "leverage ratio" is the ratio of tier 1 capital to average quarterly
assets.
<PAGE>
Asset and Liability Management
The following table summarizes repricing intervals for interest earning assets
and interest bearing liabilities as of June 30, 1996 and the difference or "gap"
between them on an actual and cumulative basis for the periods indicated.
<TABLE>
<CAPTION>
One to 90 91 to 180 181 to 364 One to Two Three to Five Over Five
Days Days Days Years Years Years
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Mortgages held for sale .............. $ 499
Loans net of unearned discount ....... 302,972 $ 46,476 $ 76,214 $ 99,874 $ 130,701 $ 42,905
Investment securities:
Held to maturity:
Taxable investment securities ... 357
Non-taxable investment securities 270 420
Available for sale:
Taxable investment securities ... 7,489 6,124 37,425 53,823 39,568 2,941
Non-taxable investment securities 175 301 547 1,236 2,050
Federal funds sold ................ 36,325
--------- --------- --------- --------- --------- ---------
Total interest earning assets ........... 347,285 52,775 114,297 154,244 171,775 48,316
--------- --------- --------- --------- --------- ---------
Interest bearing liabilities:
Savings and money market accounts .... 240,314
Time deposits ........................ 138,316 86,479 85,319 25,259 11,304 792
Securities sold under repurchase
agreements ....................... 83,778
Other funds borrowed ................. 45,000
Subordinated debentures .............. 32,000
--------- --------- --------- --------- --------- ---------
Total interest bearing liabilities ...... 507,408 86,479 85,319 25,259 11,304 32,792
--------- --------- --------- --------- --------- ---------
Gap ..................................... $(160,123) $ (33,704) $ 28,978 $ 128,985 $ 160,471 $ 15,524
========= ========= ========= ========= ========= =========
Cumulative gap .......................... $(160,123) $(193,827) $(164,849) $ (35,864) $ 124,607 $ 140,131
========= ========= ========= ========= ========= =========
Gap to assets ratio ..................... -17% -4% 3% 14% 17% 2%
Cumulative gap to assets ratio .......... -17% -20% -17% -4% 13% 15%
</TABLE>
<PAGE>
Loan Portfolio. The following table summarizes the loan portfolio of JBI by loan
category and amount at June 30, 1996 and corresponds to appropriate regulatory
definitions. Loans with a principal amount in excess of 2% of JBI's equity
capital are generally considered to be large loans. By this standard, large
loans were those exceeding $1.5 million at June 30, 1996. Large loans as a
percentage of total loans at that date were 12%.
Book Value
(dollars in
thousands)
Loans secured by real estate:
Construction and land development ....................... $ 60,916
Secured by 1-4 family residential properties ............ 191,135
Secured by multifamily (5 or more) residential properties 22,667
Secured by non-farm non-residential properties .......... 214,880
Commercial and industrial loans:
To U.S. addresses (domicile) ............................ 86,917
Loans to individuals for household, family and other personal
expenditures (consumer):
Credit cards and related plans .......................... 4,350
Other ................................................... 99,781
Tax exempt industrial development obligations ................ 3,843
All other loans .............................................. 1,521
Lease financing receivables, net of unearned income .......... 13,631
--------
Total ................................................... $699,641
========
<PAGE>
Non-Performing Loans. The following table presents the principal amounts of non
accrual and renegotiated loans (1) at June 30, 1996 in addition to a schedule
presenting loans contractually past due 90 days or more as to interest or
principal still accruing interest.
At June 30, 1996 the ratio of the allowance for credit losses to total loans
amounted to 1.88%. On an annualized basis, the ratio of net charge-offs to
average loans was .65% for the six month period ended June 30, 1996.
<TABLE>
<CAPTION>
June 30, December 31,
------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans accounted for on a non-accrual basis ....... $12,514 $ 8,083 $12,118 $ 8,088 $ 4,419 $ 5,445 $ 6,134
Loans renegotiated to provide a reduction or
deferral of interest or principal ........... -- 750 -- 750 797 298 49
------- ------- ------- ------- ------- ------- -------
Total non-performing loans (1) ................... 12,514 8,833 12,118 8,838 5,216 5,743 6,183
------- ------- ------- ------- ------- ------- -------
Other real estate owned .......................... 3,573 5,481 3,751 4,491 4,918 4,539 2,117
------- ------- ------- ------- ------- ------- -------
Total non-performing assets (1) .................. $16,087 $14,314 $15,869 $13,329 $10,134 $10,282 $ 8,300
======= ======= ======= ======= ======= ======= =======
Non-performing loans/total loans (1) ............. 1.79% 1.51% 1.80% 1.60% 1.14% 1.31% 1.47%
Non-performing assets/total loans and
non-performing assets (1) ................... 2.29% 2.43% 2.34% 2.40% 2.18% 2.32% 1.96%
Loans past due 90 days or more as to interest
or principal payments still accruing interest
and not included in non-accrual loans ....... $ 5,257 $ 4,090 $ 6,876 $ 5,789 $ 4,560 $ 3,607 $ 9,288
======= ======= ======= ======= ======= ======= =======
</TABLE>
The $12.5 million of non-accrual loans(1) at June 30, 1996 compared to
$12.1 million at December 31, 1995. The increase reflected approximately $3.0
million of additions, $869,000 of payments, $599,000 of transfers to other real
estate owned, $934,000 of charge-offs and $181,000 of returns to accrual status.
Other real estate owned amounted to $3.6 million at June 30, 1996 compared to
$3.8 million at December 31, 1995. Activity in the six months ended June 30,
1996 reflected $2 million of additions with sales and other receipts of $1.6
million, and charge-offs of $573,000.
Interest on Non-Accrual Loans.(1) If interest on non-accrual loans(1) had been
accrued, such income would have been $596,000 and $376,000, respectively for the
first six months of 1996 and 1995.
Provision for Credit Losses. The provision for credit losses for the first six
months of 1996 was $1.3 million compared to $1.2 million for the comparable
prior year period.
- - - --------------------------------------------------------------------------------
(1) Excluding loans past due 90 days or more still accruing interest.
<PAGE>
Summary of Credit Loss Experience. The following table summarizes the credit
loss experience of JBI for the periods shown:
<TABLE>
<CAPTION>
June 30, December 31,
---------------- ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance in the allowance for credit losses at
beginning of period .................... $14,032 $ 7,727 $ 7,727 $ 5,283 $ 5,094 $ 4,233 $ 3,313
------- ------- ------- ------- ------- ------- -------
Loans charged-off:
Commercial ............................. 904 756 1,584 853 183 854 1,085
Construction ........................... 59 -- -- 167 -- 134 160
Real estate mortgage ................... 1,120 502 1,588 1,768 1,274 1,209 617
Consumer loans and lease financing ..... 288 152 451 236 243 157 112
------- ------- ------- ------- ------- ------- -------
Total ............................... 2,371 1,410 3,623 3,024 1,700 2,354 1,974
------- ------- ------- ------- ------- ------- -------
Recoveries:
Commercial ............................. 60 2 184 289 -- -- 17
Construction ........................... -- -- -- -- 1 -- --
Real estate mortgage ................... 97 37 437 196 31 41 --
Consumer loans and lease financing .... 19 40 51 28 28 21 13
------- ------- ------- ------- ------- ------- -------
Total ............................... 176 79 672 513 60 62 30
------- ------- ------- ------- ------- ------- -------
Net charge-offs ............................. 2,195 1,331 2,951 2,511 1,640 2,292 1,944
Acquisitions ................................ -- -- 6,121 3,098 -- -- --
Provision charged to operations ............. 1,329 1,155 3,135 1,857 1,829 3,153 2,864
------- ------- ------- ------- ------- ------- -------
Balance in allowance for credit losses at end
of period .............................. $13,166 $ 7,551 $14,032 $ 7,727 $ 5,283 $ 5,094 $ 4,233
======= ======= ======= ======= ======= ======= =======
Net charge-offs/average loans ........... 0.65% 0.47% 0.48% 0.51% 0.38% 0.54% 0.49%
</TABLE>
Charge-offs of $2.4 million for the first six months of 1996 represented a
$961,000 increase over the comparable prior year period. Of that increase,
approximately $625,000 represented increases due to loans resulting from
acquisitions.
<PAGE>
Part II. Other Information
<PAGE>
SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
JEFFBANKS, INC.
(Registrant)
Dated: August 1, 1996 By /s/ Paul Frenkiel
------------------------------------------
Paul Frenkiel
Chief Financial Officer
Dated: August 1, 1996 By /s/ Patricia DiPietro
------------------------------------------
Patricia DiPietro
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> jun-30-1996
<CASH> 31831
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 36325
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 151679
<INVESTMENTS-CARRYING> 1047
<INVESTMENTS-MARKET> 1055
<LOANS> 699641
<ALLOWANCE> 13166
<TOTAL-ASSETS> 950861
<DEPOSITS> 703130
<SHORT-TERM> 128778
<LIABILITIES-OTHER> 11046
<LONG-TERM> 32000
0
0
<COMMON> 3957
<OTHER-SE> 71950
<TOTAL-LIABILITIES-AND-EQUITY> 950861
<INTEREST-LOAN> 31044
<INTEREST-INVEST> 4474
<INTEREST-OTHER> 1024
<INTEREST-TOTAL> 36542
<INTEREST-DEPOSIT> 13224
<INTEREST-EXPENSE> 16536
<INTEREST-INCOME-NET> 20006
<LOAN-LOSSES> 1329
<SECURITIES-GAINS> 78
<EXPENSE-OTHER> 15095
<INCOME-PRETAX> 6946
<INCOME-PRE-EXTRAORDINARY> 6946
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4435
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
<YIELD-ACTUAL> 4.58
<LOANS-NON> 12514
<LOANS-PAST> 5257
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14032
<CHARGE-OFFS> 2371
<RECOVERIES> 176
<ALLOWANCE-CLOSE> 13166
<ALLOWANCE-DOMESTIC> 13166
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 13166
</TABLE>
