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
September 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 September 30, 1996: 3,962,267
<PAGE>
JeffBanks, Inc.
Consolidated Balance Sheet
UNAUDITED
September 30, December 31,
1996 1995
Assets: (in thousands)
Cash and cash equivalents:
Cash and due from banks ........................... $ 38,925 $ 53,309
Federal funds sold ................................ 32,125 37,575
--------- ---------
71,050 90,884
Investment securities available for sale .............. 154,931 141,873
Investment securities held to maturity ................ 1,046 3,889
Mortgages held for sale ............................... 170 484
Loans, net ............................................ 694,479 659,272
Premises and equipment, net ........................... 14,192 12,880
Accrued interest receivable ........................... 6,309 6,004
Other real estate owned ............................... 4,131 3,751
Goodwill .............................................. 9,085 8,978
Other assets .......................................... 12,229 10,991
--------- ---------
Total assets ...................................... $ 967,622 $ 939,006
========= =========
Liabilities and shareholders' equity:
Deposits:
Demand (non-interest bearing) ..................... $ 112,374 $ 145,064
Savings and money market .......................... 272,066 245,234
Time deposits ..................................... 227,982 265,866
Time deposits, $100,000 and over .................. 81,923 68,803
--------- ---------
694,345 724,967
Securities sold under repurchase agreements ........... 74,587 46,549
FHLB advances ......................................... 75,000 75,000
Subordinated notes and debentures ..................... 32,000 9,000
Accrued interest payable .............................. 7,839 6,216
Other liabilities ..................................... 5,825 3,963
--------- ---------
Total liabilities ................................. 889,596 865,695
--------- ---------
Shareholders' equity:
Common Stock - authorized, 10,000,000
shares of $1 par value; issued and outstanding
3,962,267 and 3,946,776 shares respectively ..... 3,962 3,947
Additional paid-in capital ........................ 53,806 53,470
Retained earnings ................................. 20,407 15,427
Net unrealized gain (loss) on investment securities
available for sale ............................... (149) 467
--------- ---------
Total shareholders' equity ........................ 78,026 73,311
--------- ---------
Total liabilities and shareholders' equity ........ $ 967,622 $ 939,006
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Statements of Income
UNAUDITED
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Loans including fees ....................... $ 47,029 $ 41,157 $ 15,985 $ 14,973
Investment securities ...................... 6,792 3,536 2,318 1,393
Federal funds sold ......................... 1,559 1,528 535 613
-------- -------- -------- --------
55,380 46,221 18,838 16,979
-------- -------- -------- --------
Interest expense:
Time deposits, $100,000 and over ........... 3,386 2,862 1,106 1,147
Other deposits ............................. 16,000 14,150 5,056 5,315
FHLB advances .............................. 2,191 1,700 905 661
Subordinated notes and debentures .......... 1,684 641 720 214
Securities sold under repurchase agreements 1,956 628 894 242
-------- -------- -------- --------
25,217 19,981 8,681 7,579
-------- -------- -------- --------
Net interest income ..................... 30,163 26,240 10,157 9,400
Provision for credit losses ..................... 2,115 2,370 786 1,215
-------- -------- -------- --------
Net interest income after provision
for credit losses ...................... 28,048 23,870 9,371 8,185
-------- -------- -------- --------
Non-interest income:
Service fees on deposit accounts ........... 2,268 1,939 774 648
Mortgage servicing fees .................... 624 663 207 214
Gain on sales of residential mortgages and
capitalized mortgage servicing rights .... 310 169 85 44
Gain on sales of investment securities ..... 149 277 71 122
Merchant card fees ......................... 1,107 795 357 272
Other ...................................... 727 765 327 322
-------- -------- -------- --------
5,185 4,608 1,821 1,622
-------- -------- -------- --------
Non-interest expense:
Salaries and employee benefits ............. 10,406 8,872 3,454 3,059
Occupancy expense .......................... 2,379 2,281 787 781
Depreciation ............................... 1,170 1,130 402 372
FDIC expense ............................... 16 667 5 (8)
Data processing expense .................... 811 832 224 288
Legal and auditing ......................... 760 562 306 197
Stationery, printing and supplies .......... 585 471 187 158
Shares tax ................................. 475 348 158 120
Advertising ................................ 901 543 286 204
Other real estate owned maintenance expense 136 280 39 49
Loss on sale and write-downs of other
real estate owned ......................... 36 201 4 170
Amortization of intangibles ................ 942 413 319 225
Merchant expense ........................... 852 635 215 223
Other ...................................... 3,242 2,957 1,230 944
-------- -------- -------- --------
22,711 20,192 7,616 6,782
-------- -------- -------- --------
Income before income taxes ...................... 10,522 8,286 3,576 3,025
Income taxes .................................... 3,779 2,861 1,268 1,081
-------- -------- -------- --------
Net income .............................. $ 6,743 $ 5,425 $ 2,308 $ 1,944
======== ======== ======== ========
Per share data:
Net income applicable to common stock .......... $ 6,743 $ 4,452 $ 2,308 $ 1,624
Average number of common shares and equivalents . 4,076 2,957 4,081 3,048
Net income per common share - primary ........... $ 1.65 $ 1.51 $ 0.57 $ 0.53
Net income per common share - fully diluted ..... $ 1.65 $ 1.39 $ 0.57 $ 0.49
<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)
Additional on securities
Common paid- Retained available
Stock 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 ..................... -- -- 6,743 -- 6,743
Issuance of common stock for ... --
401(K) plan ................... 10 255 -- -- 265
Costs to establish a dividend .. --
reinvestment plan ............. -- (26) -- -- (26)
Issuance of common stock for
dividend reinvestment plan .... 5 107 -- -- 112
Cash dividends on common stock . -- -- (1,763) -- (1,763)
Change in net unrealized loss on --
securities available for sale . -- -- -- (616) (616)
---------- ---------- ---------- ---------- ----------
Balance at September 30, 1996 .. $ 3,962 $ 53,806 $ 20,407 $ (149) $ 78,026
========== ========== ========== ========== ==========
<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)
Additional on securities
Common Preferred paid- Retained available
Stock Stock 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 ....................... -- -- -- 5,425 -- 5,425
Conversion of preferred stock .... 17 (7) (10) -- -- --
Issuance of common stock for
401(K) plan ..................... 9 -- 158 -- -- 167
Costs to acquire minority interest
in JBNJ ......................... -- -- (15) -- -- (15)
Purchase of Constitution Bank .... 106 -- 2,076 -- -- 2,182
Cash dividends on preferred stock
12% -- -- -- (180) -- (180)
11% -- -- -- (155) -- (155)
9.5% -- -- -- (428) -- (428)
8% -- -- -- (209) -- (209)
Cash dividends on common stock ... -- -- -- (1,045) -- (1,045)
Change in net unrealized loss on
securities available for sale ... -- -- -- -- 1,110 1,110
-------- -------- -------- -------- -------- --------
Balance at September 30, 1995 .... $ 2,866 $ 179 $ 49,923 $ 18,409 $ (149) $ 71,228
======== ======== ======== ======== ======== ========
<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
Nine Months Ended September 30,
1996 1995
(in thousands)
<S> <C> <C>
Operating activities:
Net income ......................................................... $ 6,743 $ 5,425
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization ...................................... 2,714 2,179
Provision for credit losses ........................................ 2,115 2,370
Gain on sales of investment securities ............................. (149) (277)
Mortgage loans originated for sale ................................. (16,852) (15,289)
Mortgage loan sales ................................................ 17,166 13,711
Increase in interest receivable .................................... (305) (343)
Increase in interest payable ....................................... 1,623 819
Increase in other assets ........................................... (2,952) (2,296)
Increase in other liabilities ...................................... 1,862 952
-------- --------
Net cash provided by operating activities ....................... 11,965 7,251
-------- --------
Investing activities:
Proceeds from sales of investment securities available for sale .... 6,734 26,963
Proceeds from maturities of investment securities available for sale 53,180 14,829
Proceeds from maturities of investment securities held to maturity . 2,839 4,018
Proceeds from sales of other real estate owned ..................... 1,646 5,424
Purchase of investment securities available for sale ............... (74,355) (57,474)
Net increase in loans .............................................. (39,348) (37,142)
Purchase of premises and equipment ................................. (1,499) (1,472)
-------- --------
Net cash used in investing activities ........................... (50,803) (44,854)
-------- --------
Financing activities:
Net decrease in deposits ........................................... (30,622) (27,948)
Net increase in repurchase agreements .............................. 28,038 18,424
Net proceeds from issuance and redemption of common stock .......... 351 152
Net increase in FHLB advances ...................................... -- 25,000
Proceeds from issuance of subordinated notes ....................... 23,000 --
Dividends paid on preferred stock .................................. -- (972)
Dividends paid on common stock ..................................... (1,763) (1,045)
-------- --------
Net cash provided by (used in) financing activities ............. 19,004 13,611
-------- --------
Net decrease in cash and cash equivalents .............................. (19,834) (23,992)
Cash and cash equivalents at beginning of year ......................... 90,884 98,037
Add: Cash and cash equivalents from Constitution Bank .................. 8,698
-------- --------
Cash and cash equivalents at end of period ............................. $ 71,050 $ 82,743
======== ========
<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 were as follows:
Nine months ended September 30,
1996 1995
(in thousands)
Balance, beginning of period ................. $ 14,032 $ 7,727
Provision charged to operations .............. 2,115 2,370
Loans charged off ............................ (6,300) (3,334)
Recoveries ................................... 946 120
Purchase of Constitution Bank ................ 6,121
-------- --------
Balance, end of period ....................... $ 10,793 $ 13,004
======== ========
The balances of impaired loans were $9,677,000 and $11,911,000
respectively, at September 30, 1996 and 1995. The allowance for credit losses
associated with impaired loans was $2,805,000 and $3,313,000, respectively, at
those dates. Total cash collected on impaired loans during the first nine months
of 1996 and 1995, respectively was $912,000 and $845,000, 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
$758,000 and $602,000. No related interest income was recognized during the
period.
Note 2 - Investment Securities:
The carrying value and approximate market value of investment securities
at September 30, 1996, were 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 ...... $ 57,692 $ 35 $ 61 $ 57,666 $ 57,666
Federal agency obligations .... 76,638 58 361 76,335 76,335
State and municipal obligations 11,865 141 37 11,969 11,969
Other securities .............. 8,961 -- -- 8,961 8,961
---------- ---------- ---------- ---------- ----------
Total ......................... $ 155,156 $ 234 $ 459 $ 154,931 $ 154,931
========== ========== ========== ========== ==========
Held to Maturity:
Federal agency obligations .... $ 357 $ -- $ -- $ 357 $ 357
State and municipal obligations 689 10 -- 699 689
---------- ---------- ---------- ---------- ----------
Total ......................... $ 1,046 $ 10 $ -- $ 1,056 $ 1,046
========== ========== ========== ========== ==========
</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 $6.7 million for
the nine months ended September 30, 1996 as compared to $5.4 million for the
nine months ended September 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 $30.2 million
for the first nine months of 1996, compared to $26.2 million for the first nine
months of 1995, an increase of $4.0 million or 15%. Yields on interest earning
assets decreased to 8.37% for the first nine months of 1996 from 8.65% in the
prior year period, a difference of .28%. The decrease reflected reductions in
commercial loan rates tied to the prime rate, which decreased between the two
periods. In 1996, the impact of reductions in market rates on time deposits and
other funding categories, was offset by the impact of $23 million of 8.75%
subordinated notes issued in first quarter 1996, as well as an increase in the
proportion of higher rate money market balances. Accordingly, the cost of
interest bearing liabilities remained constant at 4.52%. Thus the net yield on
JBI's interest earning assets decreased to 4.56% in 1996 as compared to 4.92% in
the comparable prior year period, a difference of .36%.
Average balances for demand, savings and money market deposits increased
to $367.5 million in 1996 compared to $320.0 million in the comparable 1995
period, an increase of $47.5 million or 15%. Average balances for time deposits
increased to $338.5 million for the first nine months of 1996, compared to
$300.3 million for the comparable year period, an increase of $38.2 million or
13%. The impact on interest expense of the lesser increase in higher cost time
deposits as compared to other deposit categories was, as noted above, partially
offset by the disproportionate increase in higher rate money market balances.
Additionally, average balances for repurchase agreements increased $45.5 million
in 1996 over the prior year. Related interest costs are generally lower than
time deposits, but generally exceed those of other deposit categories. Most of
the increase in repurchase agreements resulted from current customers' legal
requirements to collateralize certain of their balances.
In the first nine months of 1996, average interest earning assets totaled
$881.8 million, an increase of $168 million or 24% over the 1995 comparable
period. Reflected in that net increase was a $94.6 million or 16% increase in
average loans to $687.7 million. In the first nine months of 1996, average
interest bearing liabilities totaled $742 million, an increase of $151.1 million
or 26% over 1995.
Non-Interest Income. Total non-interest income for the first nine months of 1996
was $5.2 million compared to $4.6 million for the first nine months of 1995, an
increase of $577,000 or 13%. Service fees on deposit accounts for 1996 amounted
to $2.3 million, an increase of $329,000 or 17% over the comparable prior year
period. The increase resulted primarily from growth in core deposit accounts
from which most of the fees are generated, including accounts resulting from the
acquisition of Constitution. Gain on sales of residential mortgages and
capitalized mortgage servicing rights increased to $310,000 in 1996, an increase
of $141,000 or 83% over 1995. The increase in 1996 reflected the impact of an
industry wide accounting change which resulted in the required recognition of
income to reflect the estimated current value of future servicing fees to be
earned over the lives of residential loans originated and sold within the
period. Merchant card fees increased to $1.1 million in 1996. Increases
reflected in this total were offset by increases in merchant card expense and
reflected higher volume.
Non-Interest Expense. Total non-interest expense for the first nine months of
1996, was $22.7 million, compared to $20.2 million for the comparable prior year
period, an increase of $2.5 million or 12%. Salaries and employee benefits
amounted to $10.4 million for 1996, an increase of $1.5 million or 17% over the
comparable 1995 period. Of the increase in salaries, $277,000 reflected
expansion of the commercial loan department, and $112,000 reflected expansion of
the consumer loan department. Four new branches and a branch retained from the
Constitution acquisition resulted in $265,000 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 $280,000 increase in the estimated ESOP
contribution.
Occupancy expense increased to $2.4 million for the first nine months of
1996, an increase of $98,000 or 4%. The increase reflected the impact of the
branch retained from the Constitution acquisition and the four new branches.
FDIC expense decreased to $16,000 for the first nine months of 1996, a
decrease of $651,000 or 98%, as a result of decreases in insurance rates.
However, those rates may be increased at any time.
Legal and auditing expense increased to $760,000 for the first nine months
of 1996, an increase of $198,000, or 35% over 1995. The increase reflected legal
fees on several unrelated matters.
Stationary, printing and supplies increased to $585,000 for the first nine
months of 1996, an increase of $114,000 or 24%. The increase reflected the
impact of the acquisitions referred to above and a $32,000 increase in credit
card supplies.
Shares tax increased to $475,000 for the first nine months of 1996, an
increase of $127,000 or 36%. 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 $901,000 for the first nine months of 1996, an
increase of $358,000 or 66% over the comparable 1995 period. Approximately
$125,000 of the increase resulted from a one time advertising campaign for
advertising promotional personal transaction accounts. An additional $125,000
resulted from promotional expense in connection with credit card programs. A
total of $65,000 resulted from introductory advertising of new telephone and
computer banking services.
Amortization of intangibles increased to $942,000 for 1996, an increase of
$529,000 or 128% 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 $39.3 million for the first nine months of 1996
compared to $37.1 million for the 1995 period. Cash outflows required for
mortgage loans originated for sale amounted to $16.9 million for the first nine
months of 1996 compared to $15.3 million for the first nine months of 1995.
At September 30, 1996 JeffBank's 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.
Reductions in the Jefferson NJ September 30, 1996 leverage and tier 1 capital to
risk-weighted asset ratios resulted from intra-company capital transfers to
achieve more consistent capital ratios between both banks.
<TABLE>
<CAPTION>
Tier 1 Capital to Total Capital to
Leverage Risk-Weighted Risk-Weighted
Ratio (1) Assets Ratio Assets Ratio
September 30, December 31, September 30, December 31, September 30, December 31,
1996 1995 1996 1995 1996 1995
Entity:
<S> <C> <C> <C> <C> <C> <C>
JBI .......................... 7.01% 6.54% 9.70% 9.16% 15.62% 11.74%
Jefferson PA ................. 6.85% 6.01% 9.32% 8.26% 15.10% 10.92%
Jefferson NJ ................. 8.34% 12.16% 11.74% 17.56% 17.84% 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 September 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 $ 170
Loans net of unearned discount ....... 301,648 $ 48,783 $ 70,923 $ 110,548 $ 137,666 $ 35,704
Investment securities:
Held to maturity:
Taxable investment securities ... 357
Non-taxable investment securities 268 420
Available for sale:
Taxable investment securities ... 12,716 4,153 39,013 45,036 39,098 2,946
Non-taxable investment securities 310 441 273 948 9,997
Federal funds sold ................ 32,125
--------- --------- --------- --------- --------- ---------
Total interest earning assets ........... 346,659 53,246 110,734 155,857 177,980 49,067
--------- --------- --------- --------- --------- ---------
Interest bearing liabilities:
Savings and money market accounts .... 272,066
Time deposits ........................ 115,717 79,705 81,106 21,530 11,065 782
Securities sold under repurchase
agreements ....................... 74,587
FHLB advances....... ................. 75,000
Subordinated debentures .............. 32,000
--------- --------- --------- --------- --------- ---------
Total interest bearing liabilities ...... 537,370 79,705 81,106 21,530 11,065 32,782
--------- --------- --------- --------- --------- ---------
Gap ..................................... $(190,711) $ (26,459) $ 29,628 $ 134,327 $ 166,915 $ 16,285
========= ========= ========= ========= ========= =========
Cumulative gap .......................... $(190,711) $(217,170) $(187,542) $ (53,215) $ 113,700 $ 129,985
========= ========= ========= ========= ========= =========
Gap to assets ratio ..................... -20% -3% 3% 14% 17% 2%
Cumulative gap to assets ratio .......... -20% -22% -19% -5% 12% 13%
</TABLE>
<PAGE>
Loan Portfolio. The following table summarizes the loan portfolio of JBI by loan
category and amount at September 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 $1.6 million at September 30, 1996. Large loans
as a percentage of total loans at that date were 13%.
Book Value
(in thousands)
Loans secured by real estate:
Construction and land development ....................... $ 57,379
Secured by 1-4 family residential properties ............ 196,090
Secured by multifamily (5 or more) residential properties 20,253
Secured by non-farm non-residential properties .......... 206,734
Commercial and industrial loans:
To U.S. addresses (domicile) ............................ 90,796
Loans to individuals for household, family and other personal
expenditures (consumer):
Credit cards and related plans .......................... 5,152
Other ................................................... 111,109
Tax exempt industrial development obligations ................ 3,459
All other loans .............................................. 1,192
Lease financing receivables, net of unearned income .......... 13,278
--------
Total ................................................... $705,442
========
<PAGE>
Non-Performing Loans. The following table presents the principal amounts of non
accrual and renegotiated loans (1) at September 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 September 30, 1996 the ratio of the allowance for credit losses to total
loans amounted to 1.53%. On an annualized basis, the ratio of net charge-offs to
average loans was 1.04% for the nine month period ended September 30, 1996.
<TABLE>
<CAPTION>
September 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 ....... $ 9,677 $11,911 $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) ................... 9,677 12,661 12,118 8,838 5,216 5,743 6,183
------- ------- ------- ------- ------- ------- -------
Other real estate owned .......................... 4,131 4,956 3,751 4,491 4,918 4,539 2,117
------- ------- ------- ------- ------- ------- -------
Total non-performing assets (1) .................. $13,808 $17,617 $15,869 $13,329 $10,134 $10,282 $ 8,300
======= ======= ======= ======= ======= ======= =======
Non-performing loans/total loans (1) ............. 1.37% 1.91% 1.80% 1.60% 1.14% 1.31% 1.47%
Non-performing assets/total loans and
non-performing assets (1) ................... 1.95% 2.63% 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 ....... $ 3,833 $ 5,800 $ 6,876 $ 5,789 $ 4,560 $ 3,607 $ 9,288
======= ======= ======= ======= ======= ======= =======
</TABLE>
Non-accrual loans(1) decreased to $9.7 million at September 30, 1996 compared to
$12.1 million at December 31, 1995. The decrease reflected approximately $3.9
million of additions, $4.2 million of charge-offs, $599,000 of transfers to
other real estate owned, $912,000 of payments and $656,000 of returns to accrual
status.
Other real estate owned amounted to $4.1 million at September 30, 1996 compared
to $3.8 million at December 31, 1995. Activity in the nine months ended
September 30, 1996 reflected $3.2 million of additions with sales and other
receipts of $1.8 million, and charge-offs and write-downs of $1.1 million.
Interest on Non-Accrual Loans.(1) If interest on non-accrual loans(1) had been
accrued, such income would have been $758,000 and $602,000, respectively for the
first nine months of 1996 and 1995.
Provision for Credit Losses. The provision for credit losses for the first nine
months of 1996 was $2.1 million compared to $2.4 million in 1995.
- --------------------------------------------------------------------------------
(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>
September 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 ............................. 1,517 1,518 1,584 853 183 854 1,085
Construction ........................... 473 -- -- 167 -- 134 160
Real estate mortgage ................... 3,790 1,496 1,588 1,768 1,274 1,209 617
Consumer loans and lease financing ..... 520 320 451 236 243 157 112
------- ------- ------- ------- ------- ------- -------
Total ............................... 6,300 3,334 3,623 3,024 1,700 2,354 1,974
------- ------- ------- ------- ------- ------- -------
Recoveries:
Commercial ............................. 82 8 184 289 -- -- 17
Construction ........................... -- -- -- -- 1 -- --
Real estate mortgage ................... 836 68 437 196 31 41 --
Consumer loans and lease financing ..... 28 44 51 28 28 21 13
------- ------- ------- ------- ------- ------- -------
Total ............................... 946 120 672 513 60 62 30
------- ------- ------- ------- ------- ------- -------
Net charge-offs ............................. 5,354 3,214 2,951 2,511 1,640 2,292 1,944
Acquisitions ................................ -- 6,121 6,121 3,098 -- -- --
Provision charged to operations ............. 2,115 2,370 3,135 1,857 1,829 3,153 2,864
------- ------- ------- ------- ------- ------- -------
Balance in allowance for credit losses at end
of period .............................. $10,793 $13,004 $14,032 $ 7,727 $ 5,283 $ 5,094 $ 4,233
======= ======= ======= ======= ======= ======= =======
Net charge-offs/average loans ............... 1.04% 0.73% 0.48% 0.51% 0.38% 0.54% 0.49%
</TABLE>
An increase in charge-offs in the third quarter of 1996 primarily reflected the
write-off of amounts previously recorded in the Bank's reserve for credit
losses. The determination to charge off these amounts, at that time, was a
judgement that the collection process was more extended than anticipated.
Approximately 83% of the $3.9 million in third quarter charge-offs reduced the
nonaccrual loan category. Recoveries during the third quarter were $770,000.
Thus the current level of the allowance for credit losses, as a percentage of
nonperforming loans, increased to 112% at September 30, 1996 from 105% at June
30, 1996.
<PAGE>
Part II. Other Information
Item 6. Reports on Form 8-K
1. Form 8-K filed October 9, 1996
Item (5) Other material events: proposed acquisition of United Valley
Bancorp, Inc.
<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: October 31, 1996 By /s/ Paul Frenkiel
------------------------------------------
Paul Frenkiel
Chief Financial Officer
Dated: October 31, 1996 By /s/ Patricia DiPietro
------------------------------------------
Patricia DiPietro
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 38925
<INT-BEARING-DEPOSITS> 1106
<FED-FUNDS-SOLD> 32125
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 154931
<INVESTMENTS-CARRYING> 1046
<INVESTMENTS-MARKET> 1056
<LOANS> 705442
<ALLOWANCE> 10793
<TOTAL-ASSETS> 967622
<DEPOSITS> 694345
<SHORT-TERM> 75000
<LIABILITIES-OTHER> 13664
<LONG-TERM> 32000
0
0
<COMMON> 3962
<OTHER-SE> 74064
<TOTAL-LIABILITIES-AND-EQUITY> 967622
<INTEREST-LOAN> 47029
<INTEREST-INVEST> 6792
<INTEREST-OTHER> 1559
<INTEREST-TOTAL> 55380
<INTEREST-DEPOSIT> 19386
<INTEREST-EXPENSE> 25217
<INTEREST-INCOME-NET> 30163
<LOAN-LOSSES> 2115
<SECURITIES-GAINS> 149
<EXPENSE-OTHER> 22711
<INCOME-PRETAX> 10522
<INCOME-PRE-EXTRAORDINARY> 6743
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6743
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.65
<YIELD-ACTUAL> 4.56
<LOANS-NON> 9677
<LOANS-PAST> 3833
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14032
<CHARGE-OFFS> 6300
<RECOVERIES> 946
<ALLOWANCE-CLOSE> 10793
<ALLOWANCE-DOMESTIC> 10793
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
